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UPDATE: China Construction Bank Eyes Fund-Raising This Year

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(Adds quotes from the bank's executives about fund-raising and rural banking venture with Spain's Banco Santander.)

 
   By Terence Poon, Aries Poon and Rose Yu 
   Of DOW JONES NEWSWIRES 
 

BEIJING -(Dow Jones)- China Construction Bank Corp. (0939.HK), the country's second-largest lender by assets, said Monday it plans to raise funds on Shanghai and Hong Kong's securities markets this year, as part of efforts to keep its capital adequacy ratio above 11.5% in the coming five years.

Analysts said 2010 could be the biggest year for fund raising in China since the country's largest banks launched initial public offerings four years ago, as a massive lending binge--the key platform of China's stimulus spending last year--reduced their capital buffers.

"Through a period of preparation, we hope the bank can implement an overall refinancing plan in Shanghai and Hong Kong this year," China Construction Bank President Zhang Jianguo told reporters at a press conference after the lender's 2009 results.

"But we are still in the process of tweaking the proposal. That's why the recent board meeting didn't formally review and vote on it," he added.

On Friday, when the bank's board of directors met to discuss its 2009 results, a person familiar with the matter told Dow Jones Newswires that China Construction Bank was considering a plan to place more than CNY40 billion worth of yuan-denominated shares in Shanghai and may also consider a rights issue in Hong Kong.

The person said at that time there were still different views within the bank regarding how to shore up capital. Central Huijin Investment Ltd., the domestic investment arm of China's sovereign wealth fund, may inject more capital into the lender so that its holding isn't diluted, the person added.

Pang Xiusheng, a vice president of China Construction Bank, said at the same press conference Monday that the company is still drafting the details of the fund-raising proposal based on its business growth projection and a plan to keep the capital adequacy ratio at 11.5% or above in the coming five years.

He added that Central Huijin, the largest shareholder of China Construction Bank with a 57% stake, will back up any fund-raising plan by the lender.

China Construction Bank's capital adequacy ratio, which measures the amount of money banks hold against their assets, stood at 11.7% as of Dec. 31, down from 12.16% at the end of 2008 but above the required minimum of 11% for big lenders in China.

Beijing raised the ratio by one percentage point to the current level in the second half of 2009 to rein in exuberant credit growth amid concerns about the resurgence of bad assets. Analysts have said more hikes in the capital-adequacy ratio are likely in the coming months.

On Thursday, Industrial & Commercial Bank of China Ltd., the nation's largest lender by assets and the best-capitalized, disclosed a massive fund-raising plan. The bank, whose capital-adequacy ratio stood at 12.36% at the end of 2009, said it intends to raise as much as CNY25 billion via a convertible-bond issue in Shanghai, and also plans to seek shareholders' approval to sell additional shares in Hong Kong.

Prior to ICBC's fund-raising plan, Bank of China Ltd. said it will sell up to CNY40 billion worth of convertible bonds on the domestic market and aims to raise an additional $7.9 billion in a follow-on stock sale in Hong Kong. Bank of Communications Co., a smaller state-run lender, said it would raise as much as CNY42 billion via a rights issue.

Analysts said the fund-raising plans by ICBC and China Construction Bank, are more likely to be a pre-emptive move to build up ammunition for future business expansion, because their capital-adequacy ratios meet the regulator's requirement and are at relatively high levels.

"It has been a trend for banks in China to raise funds, regardless of their actual capital bases," said Wang Qian, an analyst at China Merchants Securities. "It seems these banks would feel regretful if they missed the boom this year," she said.

Also at Monday's press conference, China Construction Bank's president said the state-run lender is planning to set up a rural banking joint venture with Spain's Banco Santander SA (STD) in China with 100 outlets, capitalizing on Beijing's effort to raise living standards in the country's urban areas.

China Daily reported in January that China Construction Bank would control 60% of the planned venture, and Santander the rest. Spain bank confirmed in February it was in talks with the Chinese bank, but didn't give any details.

 

-By Terence Poon in Beijing, Aries Poon in Hong Kong and Rose Yu in Shanghai, Dow Jones Newswires, 8610-8400-7799, terence.poon@dowjones.com

 

(END) Dow Jones Newswires

March 29, 2010 08:12 ET (12:12 GMT)

Copyright (c) 2010 Dow Jones & Company, Inc.

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