CCB to raise $9.2 billion through rights issue

By Daisy Ku and Samuel Shen

HONG KONG/SHANGHAI (BestGrowthStock) – China Construction Bank (CCB) (0939.HK: ) (601939.SS: ), the country’s No. 2 lender plans to raise up to 61.62 billion yuan ($9.2 billion) through a rights issue this month, less than expected, to shore up its balance sheet after a 2009 lending binge.

Its plans for a rights issue in Hong Kong and Shanghai follow Friday’s announcement by Bank of China (3988.HK: ) (601398.SS: ) for a rights issue to raise up to $9 billion.

Both banks announced plans for massive capital raisings earlier this year to meet tighter regulatory requirements.

Chinese banks have raised $10.5 billion so far this year through rights issues, according to Thomson Reuters data.

Under CCB’s plan, every 10 existing shares in the bank would be entitled to subscribe to 0.7 rights shares at 3.77 yuan per A-share and HK$4.38 per H-share.

The rights issue, first proposed in April, comes at a 43 percent discount to its market price. The size of the deal is smaller than an expected 75 billion yuan under its previously announced plans.

This reflects less urgent capital needs due to cautious lending by CCB, and is also aimed at giving investors higher long-term returns, the official China Securities Journal reported, citing unidentified investment bankers involved in the deal.

CCB’s H-shares closed on Monday at HK$7.64, while its A-shares closed at 5.16 yuan.

CCB International, China International Capital Corp., Morgan Stanley (MS.N: ) (Read more about the money market today. ) are the joint global coordinators, other underwriters include CITIC Securities (600030.SS: ), Merrill Lynch Far East, Credit Suisse (CSGN.VX: ) and BOCI Asia.

Bank of America (BAC.N: ), which owns a 10.95 percent stake in CCB, declined to comment on whether the bank would participate in the CCB rights offer.

Bank of China meanwhile unveiled the terms for its rights issue in Shanghai and Hong Kong.

The bank will sell one share for every 10 existing shares and will start taking subscriptions on Nov 3, it said in a statement to the Shanghai stock exchange.

The new shares are priced at 2.36 yuan a piece or HK$2.74, compared with a Monday close of 3.61 yuan for Bank of China’s A-shares, and $4.79 yuan for its H-shares.

Chinese banks are looking to raise a total of some $70 billion to help meet tighter regulatory capital requirements implemented by regulators to pre-empt a rise in bad loans.

(Editing by Doug Young and Dhara Ranasinghe)

CCB to raise $9.2 billion through rights issue