CCB embarks on mission to replenish capital

Lender may consider raising funds in Hong Kong, Shanghai markets

BEIJING - China Construction Bank (CCB), the nation's second-largest lender, may consider raising funds in Hong Kong and Shanghai this year to bolster its financial strength, but details of the fundraising plan are still under discussion, its president said on Monday.

"We had a thorough discussion of capital raising plans during the board meeting last Friday, but did not vote on it," Zhang Jianguo, president of the bank, told reporters in Beijing.

Sources indicate that the Beijing-based lender originally planned to replenish capital through a private placement in Shanghai as well as a new share offering in Hong Kong, but the plan has been delayed as the bank is trying to muster participation by major shareholders.

CCB's capital-adequacy ratio, a key measure of financial health, dropped to 11.7 percent at the end of 2009, compared with 12.17 percent a year earlier.

Chen Zuofu, vice-president of the bank admitted that the banking regulator - China Banking Regulatory Commission - has asked the State-owned lender to maintain its capital-adequacy ratio at above 11.5 percent.

Both of the banks main domestic rivals have recently announced plans to issue convertible bonds - 25 billion yuan ($3.66 billion) for Industrial and Commercial Bank of China, and 40 billion yuan for Bank of China.

The bank saw its net profit grow 15.3 percent to 106.8 billion yuan last year, with the fourth quarter seeing its earnings surging 147 percent to 20.7 billion yuan from 8.4 billion yuan a year earlier.

As the nation's largest mortgage lender, CCB expanded its mortgage-lending rate to a record 41 percent last year, with 247 billion yuan in mortgages being advanced. That compares to a 26.4 percent credit expansion in 2009.

"Mortgages are scheduled to account for one third of the bank's total lending this year, " Chen said.

The bank hopes to expand its yuan-denominated credit business at 17 percent this year, which is largely the same as peer banks of a similar size.

The banks non-performing loan ratio declined to 1.5 percent as of the end of 2009, compared with 2.21 percent the year prior.

However, the bank reported non-performing overseas loans jumped by 6.8 billion yuan at the end of last year from six months prior, largely due to lending to Dubai World last year by its Hong Kong branch, Zhang said.

"The problem has been solved now, as we have set aside sufficient provisions," Zhang said, adding that CCB's overseas assets now total $38 billion.

CHINA DAILY

(China Daily 03/30/2010 page15)