April 10, 2009 / 6:12 AM / 9 years ago

UPDATE 3-China's Pudong Bank plans $4.4 bln fund raising

* To raise as much as 30 bln yuan via share and bond sales

* Analyst doubts Citi will take part in share placement

* Pudong’s profit growth may slow to 10 percent in 2009

* Shares rise 0.9 pct, underperform Shanghai gains (Adds Citi stake, other banks’ fund-raising plans)

By Samuel Shen

SHANGHAI, April 10 (Reuters) - Shanghai Pudong Development Bank (600000.SS), part-owned by Citigroup Inc (C.N), said on Friday it planned to raise up to $4.4 billion in share and bond sales, joining other Chinese lenders in tapping ample liquidity and heeding Beijing’s call to boost lending.

The government has been encouraging banks to lend freely to support its 4 trillion yuan ($585 billion) stimulus package to support a slowing economy, but has also been pushing lenders to improve their balance sheets. [ID:nPEK265709]

Mid-sized Pudong Bank plans to sell up to 15 billion yuan in domestic A shares to select institutional investors. It will also issue up to 15 billion yuan in subordinated debt, the bank said in a statement.

Larger rivals Bank of Communications (3328.HK)(601328.SS), China Construction Bank (0939.HK)(601939.SS) and China Minsheng Banking Corp (600016.SS) have unveiled plans recently to issue up to a total of 125 billion yuan worth of bonds to boost their capital.

“Banks want to take advantage of the low rates and are rushing to raise money cheaply,” said Jin Lin, analyst at Everbright Securities Co. “Fund-raising could help them to support future growth and meet tougher capital requirements.”

He doubted that Citigroup, which has been selling off assets worldwide after incurring massive losses on toxic securities and securing a U.S. government bailout, would participate in the share placement.

Citigroup had held talks with Pudong Bank about a possible sale of its 3.78 percent stake in the Chinese lender, Pudong Bank Chairman Ji Xiaohui told Reuters in March.

A Pudong Bank spokesman said it was up to shareholders whether to participate in the private placement, while Citigroup was not immediately available to comment.

Shares in Pudong closed up 0.9 percent in a Shanghai market .SSEC up 2.7 percent. The stock has risen by two-thirds this year, giving it a market capitalisation of around $18 billion.

China’s stock market has rebounded 30 percent in the first quarter, which would help Pudong Bank’s planned share sale, analysts said.

Other banks in the region have also been rolling out plans to raise funds, spooking financial markets about their capital strength. Japan’s lenders have been battered by declines in their stock portfolios and higher bad-loan costs.

Sumitomo Mitsui Financial Group (8316.T), Japan’s third-largest bank, said on Thursday it might issue up to $8 billion in new shares, bringing total capital raisings of Japan’s three largest banks to up to $33 billion. [ID:nT318023]

ASSET QUALITY CONCERNS

Although Chinese banks have been largely immune from the global financial crisis that damaged overseas rivals, worries have mounted over their asset quality as China’s economic growth slows and corporate defaults rise.

China’s banking watchdog has urged medium-sized listed lenders to strengthen capital and keep the adequacy ratio above 10 percent, part of efforts to strengthen risk-control in an economic down cycle. Pudong’s capital adequacy ration stood at 9.06 percent at the end of 2008.

The government has also urged banks to pump money into China’s ailing economy, crippled by sharply slowing exports.

Total new loans are estimated to have surged to about 4 trillion yuan in the first quarter, state media have reported, causing concern that bad loans may rebound in coming years.

Pudong Bank and other Chinese lenders have forecast slower profit growth due to the weakening economy.

Pudong Bank, whose 2008 net profit surged 127.6 percent from a year earlier to 12.5 billion yuan, said on Friday its profit growth may slow to 10 percent in 2009.

The lender said its fund-raising plans are pending shareholder approval. The new shares will be priced at no less than 90 percent of the average price over the last 20 trading days. ($1=6.834 Yuan) (Editing by Jacqueline Wong and Lincoln Feast)

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