CMB to complete $3.2b rights offer before year-end

China Merchants Bank announced December 12 that it is completing its rights offer of shares worth 22 billion yuan ($3.2 billion) before the end of the year, to curb a potential capital shortage of more than 20 billion yuan in the next three years.

The financial institution said in a statement Dec 12 that it aims to maintain its capital adequacy ratio at between 10 and 12 percent, with the capital asset ratio above 8 percent, which will generate a capital shortage of more than 20 billion yuan during next three years. "The first step to meet the goal is to complete the rights offer before the end of 2009," the bank said in the statement.

On Aug. 14, the bank decided to sell shares worth as much as 22 billion yuan through the allotment of A-shares and H-shares.

In addition, China Merchants said it will explore ways to sell subordinated bonds and hybrid bonds at home and overseas to boost capital after completing the offer. It also said it won't need additional equity financing in the next three years unless a "major" event weakens its balance sheet.

According to analysts, the move to maintain the bank's capital adequacy ratio at between 10 and 12 percent not only makes it easier for the bank to raise money next year, but also it is a way to meet the new guidelines on the capital adequacy ratio issued from the China Banking Regulatory Commission (CBRC) to avoid credit risks.

Source: Global Times