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China's AgBank to raise up to $15.8 billion via private placement

Reuters  |  BEIJING 

(Reuters) - of (AgBank), the country's third-largest bank, said on Monday it would raise as much as 100 billion yuan ($15.81 billion) in the biggest A-share private placement by a listed Chinese commercial

The will use the money to replenish its common equity tier 1 capital and boost capital adequacy of the bank, said in a securities filing.

The fundraising comes as China's large state step up efforts to speed up write-offs and boost bad loan buffers as part of a nationwide campaign to de-risk and de-leverage the commercial industry, where non-performing loans are at 12-year highs.

China's financial regulators have come up with rules to broaden banks' and relax loan provisioning requirements to give greater scope to sell-off bad loans and move off-the-balance sheet on to their loan books.

The Regulatory Commission (CBRC) has cut the provision coverage ratio for commercial to 120-150 percent from 150 percent, a move that will give more capital so they can lend more to support economic activity, reported last week citing sources.

The CBRC is also amending rules for commercial to issue perpetual bonds, convertible capital instruments, and other innovative loss-absorbing debt instruments to replenish their capital, it said on Monday.

The CBRC requires systemically important such as to have a minimum core tier-1 ratio capital adequacy ratio of 8.5 percent by the end of 2018 and a minimum tier-1 level of 9.5 percent.

are responding to the tighter regulation by reviewing their capital planning and implementing measures, including access to capital markets, said Nicholas Zhu, a with

analysts estimated in January that Chinese had already raised 861 billion yuan in new capital between 2014 and 2017 - most via private placements by unlisted

In October, issued 40 billion yuan worth of tier-2 capital bonds, with coupon rate of 4.45 percent.

"Currently, most have adequate capital levels and there isn't a general need for refinancing via common equity issuance given the circumstances of slowing growth of risk assets," Ma Kunpeng, a with Shenwan Hongyuan Securities, said.

After the private placement, AgBank's core tier 1 capital adequacy ratio will increase to 11.23 percent from 10.38 percent and its tier 1 capital adequacy will increase to 11.90 percent from 11.06 percent

Central Huijin Investment Co, the Ministry of Finance, National Tobacco Corp, Shanghai Haiyan Investment Management Co, Zhongwei Capital, National Tobacco Corporation and NCI will be the subscribers to AgBank's private placement, the said.

State-owned investment company Central Huijin has proposed an investment of 40.03 billion yuan in AgBank, while the ministry has proposed a 39.21 billion yuan investment, according to the filing.

In a separate statement, reported a 4.90 percent rise in net profit to 192.96 billion yuan for 2017, while its non-performing loan ratio declined to 1.81 percent from 2.37 percent a year earlier.

Net interest margins stabilised at 2.28 percent in 2017, representing an increase of 0.03 percentage points from 2016.Basic earnings per share increased to 0.58 yuan in 2017 from 0.55 yuan a year earlier.

"We expect AgBank's non-performing loans, net interest margins and other performance indicators to continue to improve," Ma added.

($1 = 6.3233 Chinese yuan renminbi)

(Reporting By Shu Zhang and Matthew Miller; Editing by and Jane Merriman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, March 13 2018. 10:29 IST