Banking News
- Minsheng scales down share sale plan
Date: 8-Feb-2007 Sources: (Shenzhen Daily)
CHINA Minsheng Banking Corp. plans to raise as much as 23.8 billion yuan (US$3.1 billion) by selling shares to select investors to strengthen capital as loans soar.
Minsheng will sell 2 billion shares to no more than 10 existing and new institutional investors next week, it said in a statement yesterday. It has trimmed an initial plan to sell 3.5 billion shares as the stock surged since the sale was first announced in July.
Domestic banks are taking advantage of soaring stock prices to raise money, allowing them to extend a lending boom that helped fuel economic growth of 10.7 percent last year. Minsheng, whose loans quintupled between 2001 and 2005, is seeking to raise its capital adequacy ratio to comply with a regulatory minimum and avoid having to slow lending.
'We are buying Minsheng's growth,'' said Xu Xiang, who manages 1.5 billion yuan at Yinhua Fund Management Co. in Shenzhen, which held 29 million Minsheng shares as of June 30. Xu said he's considering applying for more stock.
Minsheng's stock will be priced at no less than 3.825 yuan, or 90 percent of the 20-day average price before July 17, when the sale was first approved. The placement will be completed Feb. 17, the bank said.
Any single investor can order a maximum of 600 million shares and those who commit to holding the stock for a longer period will have priority in purchasing shares. Under Chinese rules, buyers will be required to hold the shares for one to three years.
Minsheng's capital adequacy ratio, a key measure of financial strength, fell to 7.46 percent at June 30 from 8.26 percent six months earlier. A bank which slips below the 8 percent regulatory minimum can be forced by the central bank to restrict lending.
The company estimates it needs to raise at least 10 billion yuan to bring its capital adequacy ratio above that threshold, Liu Minwen, director of Minsheng Bank's corporate finance department, said.
'The proceeds will be used to beef up capital and sustain loan growth,'' he said.
Temasek, a US$65 billion Singapore Government fund, is interested in raising its stake in Minsheng by buying some of the new shares, Tow Heng Tan, a senior managing director in Temasek's strategic development department, said last year.
Sichuan New Hope Investment Co., the largest shareholder in Minsheng Bank, said in a statement yesterday it is actively seeking to buy into the placement.
Minsheng, founded by 59 private corporate investors who each own less than 10 percent, has carved out a niche by lending to small and medium-sized private companies. The 10-year-old bank has had fewer problems with bad loans and fraud than rivals.
The bank said Jan. 21 that 2006 profit increased about 40 percent, citing preliminary figures. Minsheng had 2.7 billion yuan in net income in 2005.
Domestic banks including Minsheng and Industrial Bank Co. are raising funds to comply with a government requirement to bolster their finances and to help fend off overseas competitors, which in December were allowed to begin taking yuan deposits. Six banks have sold a combined US$51 billion of shares in initial public offerings since June 2005.
The influx of money may put lenders on a collision course with the central bank, which wants them to rein in lending to industries such as steel and cement to help cool an investment boom that threatens to leave China with idle factories.
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