China Construction Bank Corp., part-owned by Bank of America Corp., plans to sell shares to raise about 75 billion yuan ($11 billion) of capital this year, said two people with direct knowledge of the matter.
The Beijing bank may raise as much as 45 billion yuan in a private placement on the share market in Shanghai and 30 billion yuan in a rights offer in Hong Kong, said the people, declining to be named because the plans are not public.
Construction Bank, the nation's second largest lender, is joining rivals Industrial and Commercial Bank of China Ltd., Bank of China Ltd. and Bank of Communications Ltd., which have announced plans to raise a combined 107 billion yuan after a credit boom drained capital. Chinese lenders doled out a record 9.59 trillion yuan in 2009, helping fuel a recovery in the world's third-largest economy.
"The plan should be well received by the market," said Liu Yinghua, an analyst in Shenzhen for Ping An Securities Co. who has a "buy" rating on Chinese banks. "The amount and the methods are within expectation. China's banks are set for a rebound after the dust settles from capital-raising concerns."
The State Council, or China's cabinet, approved the fund-raising plan, which is subject to revision according to market conditions, the people said.
Construction Bank's president, Zhang Jianguo, said last month that it plans to raise capital "this winter or next spring," without giving details. Yu Baoyue, a press officer in Beijing for the company, declined to comment Tuesday.
Construction Bank's capital adequacy ratio dropped by almost 1 percentage point last year to 11.7% at Dec. 31, close to the 11.5% that Chairman Guo Shuqing cited as the banking regulator's minimum requirement for the lender.
ICBC, the world's most profitable bank, said last month it would to sell as much as 25 billion yuan of convertible bonds, and seek shareholder approval to issue stock equivalent to as much as 20% of equity capital in Hong Kong.
Bank of China, the nation's third biggest, won shareholder approval for a 40 billion yuan convertible bond sale on March 19. Bank of Communications said in February it would raise as much as 42 billion yuan in a rights offer.
Construction Bank more than doubled profit in the fourth quarter as bad loans declined and lending surged.
The state-controlled lender extended 1 trillion yuan of new credit last year, double the figure in 2008, taking its outstanding loans at the end of the year to 4.69 trillion yuan.
"CCB remains our top pick among the large banks, as the bank has a more defensive balance sheet than large peers," Samsung Securities Co. said in a March 30 report, citing the company's high bad-loan coverage and relatively to low exposure to local government funding vehicles. "The bank should also benefit most among large banks if interest rates rise."
Consumer price gains in China accelerated to 2.7% in February, the fastest in 16 months, raising the likelihood of interest rate increases. Economic growth rebounded to 10.7% in the fourth quarter, the quickest pace since 2007.
