BoCom shares dip after news on rights offer

INVESTMENT BANKING | BoCom shares dip after news on rights offer

Following a newspaper article saying the lender may raise more than 20 billion yuan, or $2.9 billion, in a rights offer, Bank of Communications Co. shares dropped to their lowest in more than three months in Hong Kong trading.

In a Bloomberg report, BoCom shares fell 4.6 percent to HK$7.54 as of 11:46 a.m. on Friday, after dropping earlier as much as 4.9 percent. Shares also dropped 1.6 percent in Shanghai.

Set to take part in a rights offer planned in Shanghai and Hong Kong is China’s Ministry of Finance, the bank's largest shareholder, according to a 21st Century Business Herald report, which had for its source an unidentified investment banker.

BoCom President Niu Ximing, however, said in Beijing he has yet to hear about any plan by the ministry to raise its ownership in the lender.

Capital weakened and the regulator raised requirements for financial buffers following a record 9.59 trillion yuan, or $1.4 trillion, of new loans, putting Chinese banks under tremendous pressure to raise money.

According to estimates from BNP Paribas SA, the nation's 11 largest publicly traded banks may have to raise as much as a combined 368 billion yuan to keep their capital adequacy ratios at 12 percent.

BoCom's Tier 1 capital adequacy ratio, a key measure of a lender's financial strength, dipped to 6.61 percent as of Sept. 30 last year, registering the lowest among the nation's six largest publicly traded banks.

As this developed, bigger rival Bank of China Ltd. revealed last month it is planning to issue as much as 40 billion yuan of bonds convertible into new shares and may raise more capital by selling stock in Hong Kong.