SHANGHA: Industrial and Commercial Bank of China (ICBC) plans to raise 45 billion yuan ($6.8 billion) through a rights share offering this month, capping an $80 billion fundraising boom by Chinese lenders to replenish capital depleted by last year's lending spree, according to a Reuters report on Thursday, Nov 11.
ICBC, which first unveiled its rights issue plan in July, will now be selling fewer rights shares in Hong Kong and Shanghai because of a rise in their stock market value since then.
Investors will be entitled to 0.45 shares for every 10 held, meaning it could issue up to 15.03 billion new shares, compared with its earlier plan to issue up to 0.6 shares for every 10 held, or 20.04 billion shares. ICBC's Shanghai shares are up 8 percent since July and its Hong Kong shares are up 15 percent.
The world's most valuable lender priced the issue at 2.99 yuan per share in Shanghai, and the equivalent price of HK$3.49 in Hong Kong, representing a discount to the market price of 37 percent and 47 percent, respectively.
The discounts are more-or-less in line with those offered by smaller rivals China CONSTRUCTION [] Bank Ltd (CCB) and Bank of China (BOC), which are raising a combined $18.2 billion.
CCB priced its offer at a 27-43 percent discount to market price, while BOC priced it a 34-41 percent discount.
The steep discount to market prices would give ICBC shareholders more of an incentive to participate in the rights issue, according to Jin Lin, analyst at Orient Securities.
"It will give investors the impression that participating in the rights issue would be a bargain," Jin said, adding that eventually, the overall wealth of investors would not change as the new issuance should drag down ICBC's share prices.
Investors generally welcomed the move, but ICBC's shares were overshadowed to some extent by the central bank's increasing banks' required reserves amid inflation worries.
ICBC's Hong Kong-listed shares rose 2.3 percent as of 0350 GMT to HK$6.78, while its Shanghai shares fell 1.7 percent to 4.66 yuan on the potential impact of the reserve requirement hike.
ENOUGH CASH FOR NOW
Most other listed banks in China, such as Bank of Communications and China Merchants Bank, completed fundraisings earlier this year, as regulators toughened capital rules after 2009's record $1.4 trillion lending threatened banks' asset quality.
ICBC has previously said the rights issue would fulfil its capital needs over the next three years, and Alexander Lee, analyst at DBS Vickers in Hong Kong, said he thought that was a reasonable estimate.
"Bear in mind that loan growth was exceptionally fast in 2009 and this year. I think loan growth will normalise going forward, so demand for capital will not be as great as before," he said.
ICBC's state parent, Central Huijin, a unit of China's sovereign wealth fund, has said it would fully participate in the rights issue.
Goldman Sachs, which owns about a 3 percent stake in ICBC, declined to comment on whether it would participate.
MORE TIGHTENING AHEAD
ICBC is the last among China's "Big Four" state lenders to detail fundraising plans.
CCB, China's second-biggest lender, announced earlier this month that it would raise up to $9.2 billion in Asia's biggest rights issue outside Japan.
Singapore state investor Temasek said on Thursday it will take up Bank of America's entire entitlement in CCB's rights issue.
Bank of China, the country's fourth-largest lender, said on Thursday that its $9 billion rights issue had been 99.57 percent subscribed.
In July, Agricultural Bank of China, the No. 3 lender, raised $22.1 billion in the world's biggest initial public offering.
ICBC's rights issue comes after the bank reported a 27 percent jump in third-quarter earnings, and unveiled plans to expand into the insurance business by buying control of French insurer AXA's Chinese joint venture.
However, a government tightening campaign could cloud the horizon.
ICBC Chairman Jiang Jianqing told Reuters on Thursday that the central bank was likely to tighten policy further to fight a flood of liquidity.
Asked whether monetary policy would be tightened further in 2011, Jiang said on the sidelines of a business summit organised in conjunction with this week's Group of 20 Summit: "Looking at things as they are now, there is a problem of abundant liquidity, or excess liquidity.
"If this trend continues, I'm afraid the central bank will have to keep taking corresponding measures." - Reuters
ICBC, which first unveiled its rights issue plan in July, will now be selling fewer rights shares in Hong Kong and Shanghai because of a rise in their stock market value since then.
Investors will be entitled to 0.45 shares for every 10 held, meaning it could issue up to 15.03 billion new shares, compared with its earlier plan to issue up to 0.6 shares for every 10 held, or 20.04 billion shares. ICBC's Shanghai shares are up 8 percent since July and its Hong Kong shares are up 15 percent.
The world's most valuable lender priced the issue at 2.99 yuan per share in Shanghai, and the equivalent price of HK$3.49 in Hong Kong, representing a discount to the market price of 37 percent and 47 percent, respectively.
The discounts are more-or-less in line with those offered by smaller rivals China CONSTRUCTION [] Bank Ltd (CCB) and Bank of China (BOC), which are raising a combined $18.2 billion.
CCB priced its offer at a 27-43 percent discount to market price, while BOC priced it a 34-41 percent discount.
The steep discount to market prices would give ICBC shareholders more of an incentive to participate in the rights issue, according to Jin Lin, analyst at Orient Securities.
"It will give investors the impression that participating in the rights issue would be a bargain," Jin said, adding that eventually, the overall wealth of investors would not change as the new issuance should drag down ICBC's share prices.
Investors generally welcomed the move, but ICBC's shares were overshadowed to some extent by the central bank's increasing banks' required reserves amid inflation worries.
ICBC's Hong Kong-listed shares rose 2.3 percent as of 0350 GMT to HK$6.78, while its Shanghai shares fell 1.7 percent to 4.66 yuan on the potential impact of the reserve requirement hike.
ENOUGH CASH FOR NOW
Most other listed banks in China, such as Bank of Communications and China Merchants Bank, completed fundraisings earlier this year, as regulators toughened capital rules after 2009's record $1.4 trillion lending threatened banks' asset quality.
ICBC has previously said the rights issue would fulfil its capital needs over the next three years, and Alexander Lee, analyst at DBS Vickers in Hong Kong, said he thought that was a reasonable estimate.
"Bear in mind that loan growth was exceptionally fast in 2009 and this year. I think loan growth will normalise going forward, so demand for capital will not be as great as before," he said.
ICBC's state parent, Central Huijin, a unit of China's sovereign wealth fund, has said it would fully participate in the rights issue.
Goldman Sachs, which owns about a 3 percent stake in ICBC, declined to comment on whether it would participate.
MORE TIGHTENING AHEAD
ICBC is the last among China's "Big Four" state lenders to detail fundraising plans.
CCB, China's second-biggest lender, announced earlier this month that it would raise up to $9.2 billion in Asia's biggest rights issue outside Japan.
Singapore state investor Temasek said on Thursday it will take up Bank of America's entire entitlement in CCB's rights issue.
Bank of China, the country's fourth-largest lender, said on Thursday that its $9 billion rights issue had been 99.57 percent subscribed.
In July, Agricultural Bank of China, the No. 3 lender, raised $22.1 billion in the world's biggest initial public offering.
ICBC's rights issue comes after the bank reported a 27 percent jump in third-quarter earnings, and unveiled plans to expand into the insurance business by buying control of French insurer AXA's Chinese joint venture.
However, a government tightening campaign could cloud the horizon.
ICBC Chairman Jiang Jianqing told Reuters on Thursday that the central bank was likely to tighten policy further to fight a flood of liquidity.
Asked whether monetary policy would be tightened further in 2011, Jiang said on the sidelines of a business summit organised in conjunction with this week's Group of 20 Summit: "Looking at things as they are now, there is a problem of abundant liquidity, or excess liquidity.
"If this trend continues, I'm afraid the central bank will have to keep taking corresponding measures." - Reuters
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