Four Chinese lenders raise 520b yuan via placements

Themis Qi

Four major Chinese state banks announced plans to raise up to 520 billion yuan (HK$556.9 billion) in total by A share placements to the Ministry of Finance and other state-owned entities to boost their core capital.

Bank of China (3988) signed an agreement yesterday with the MOF that the authority will subscribe 10.98 billion new shares to be issued in Shanghai at 6.05 yuan per share, involving 165 billion yuan, according to a stock exchange filing.

The subscription price is 10 percent higher than last Friday's closing price of 5.5 yuan.

China Construction Bank (0939) will issue new shares to the MOF at 9.27 yuan apiece for no more than 105 billion yuan.

The net proceeds will be fully used to replenish the bank's core tier 1 capital after the deduction of relevant issuance costs, the bank said in a statement.

The offer price also shows a premium of 8.8 percent compared with last Friday's close of 8.52 yuan.

Bank of Communications (3328) will pool up to 120 billion yuan, including 112.42 billion yuan from MOF and 7.58 billion yuan from China National Tobacco Corporation and its investment arm China Shuangwei Investment.

Postal Savings Bank of China (1658) will raise 130 billion yuan from the MOF, China Mobile (0941) and China State Shipbuilding Corporation.

The funds subscribed by the MOF total 500 billion yuan, the same as the amount of special treasury bonds issuance mentioned in the work report in March to beef up the capital of the biggest state-owned banks.

The MOF mentioned the support for state lenders via the special treasury bonds in October 2024, after a 270 billion yuan issuance in 1998.

Chinese banks are required to reserve at least 40 percent of their net profit every year for core capital. But the largest state lenders saw their earnings only edge up last year, by no more than 4.7 percent, as their interest income was bit by the decreases in interest rates amid Beijing's push to boost people's demand for housing and manufacturing.

The four banks above all recorded the lowest net interest margin for at least four years, ranging from BoComm's 1.27 percent and PSBC's 1.87 percent.

As of December 2024, BOC, CCB, Bocom and PSBC recorded a core tier-1 capital adequacy ratio of 12.2 percent, 14.48 percent, 10.24 percent and 9.56 percent respectively, all higher than one year ago. The four state banks will have an online briefing today at 4.30pm, answering investors' questions by text.