China Merchants Bank sees tough environment ahead
China Merchants Bank expects big challenges ahead as it revealed first-half profit of 26.2 billion yuan (HK$33.2 billion), a day after it won approval to sell shares in Hong Kong in what could be the world's second-biggest stock offering this year.
China Merchants Bank expects big challenges ahead as it revealed first-half profit of 26.2 billion yuan (HK$33.2 billion), a day after it won approval to sell shares in Hong Kong in what could be the world's second-biggest stock offering this year.
The regulatory permission to sell about 680 million shares in Hong Kong and 3.07 billion shares in Shanghai clears the way for a 35 billion yuan offering to the bank's shareholders.
Banks will be more actively seeking fundraising in capital markets after the securities regulator opened the door for Merchants Bank
Analysts expect more lenders to follow suit.
"Banks will be more actively seeking fundraising in capital markets after the securities regulator opened the door for Merchants Bank," said Deng Mao, an analyst with Dongguan Securities.
The bank has postponed the sale twice because of approval delays. The China Securities Regulatory Commission has since 2010 repeatedly suggested banks minimise the impact on the market by replenishing capital from retained earnings, rather than by tapping equity markets.
"Banks are caught between the ambition to grow their capital-consuming loan busi- ness and the pressure to meet regulatory capital adequacy requirements, which makes them thirsty for equity capital," Deng said.
Merchants Bank, the nation's sixth-largest by assets, said tier-1 capital adequacy ratio dropped 0.34 percentage point to 8 per cent in the first half while capital adequacy ratio fell 0.69 point to 10.72 per cent.
