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China Merchants Bank may set up more overseas branches

By Zhang Ran (China Daily)
Updated: 2009-08-15 09:27

China Merchants Bank (CMB) will use part of the money to be raised in a share issuing plan at Shanghai and Hong Kong bourses to set up overseas branches and not for overseas merger and acquisition activities, Ma Weihua, president, CMB told China Daily on Friday.

The bank, the country's sixth largest and the flagship of medium-sized commercial lenders, said in a statement on Friday that it expect to raise 15-18 billion yuan via a rights issue of Hong Kong-listed H shares and Shanghai-listed A shares to boost its capital adequacy ratio.

The fund to be raised will be used to open new branches, training employees and improve CMB's IT system, according to Ma, who made the remarks on the annual medium-sized commercial bank summit held in Hailaer, Inner Mongolia autonomous region.

"Part of the money will be used for opening overseas branches, but not for overseas mergers and acquisitions purpose," he said. The president, however, did not elaborate on how many overseas branches it plans to open .

CMB is planning to open a branch in London in the near future after it first set up a representative office in the city last month. CMB's spokeswoman Guo Xiaoli said on Friday that so far there is still no timetable for it. The CMB statement released on Friday said the rights issue is likely be completed between the end of 2009 and early 2010.

The lender aims to raise its core capital adequacy ratio to 8 percent from about 6.5 percent at the end of March 2009.

It said it would issue no more than two shares for every 10 shares held by existing A-share and H-share holders.

CMB's fund-raising plan triggered investors' worry that the market could be damaged by a new fund-raising wave, led by Chinese lenders whose capital adequacy ratios were greatly hit in this round of economic recession.

Chinese stocks slid 3 percent to their lowest close in six weeks on Friday and posted their biggest weekly drop in five months.

Related readings:  CMB-Wing Lung deal: Market still wary nine months later  CMB to raise funds via bond, share sales  Goldman Sachs picks ICBC, CCB & CMB  CMB net profit expect to rise 80% in first 9 months

The Shanghai Composite Index closed at 3,046.97 points, down 6.55 percent for the week after sinking 4.4 percent last week. China Merchants Bank fell 2.38 percent to 17.26 yuan.

China's 12 medium-sized banks posted a net profit of 45 billion yuan in the first half, a drop of around 20 percent from a year earlier as loose monetary policy squeezed interest rate earnings and revenue on intermediary business dropped amid economic recession, an official from China Banking Regulatory Commission (CBRC) said on Friday.

"This was 10.8 billion yuan less compared to last year," Xiao Qiyuan, director of the CBRC's second supervisory division, which is in charge of the country's all medium-sized banks said in the same bank summit.

Return on equity (ROE) and return on asset (ROA) ratio dropped 0.9 and 0.1 percentage points, according to Xiao. Margin on interest rates declined 81 basis points in the first half.

"Non-performing loans at these banks could climb in two to three years," Xiao said.

The 12 banks include CITIC Bank, China Merchants Bank, Minsheng Banking Corp, Huaxia Bank, Shanghai Pudong Development Bank, China Everbright Bank, Shenzhen Development Bank, Guangdong Development Bank, Industrial Bank, Evergrowing Bank, China Zheshang Bank, and China Bohai Bank.