Economy

Markets

Industries

Insights

Reports

Events

Listed banks may need 300b yuan in capital, says BNP Paribas

(China Daily/Agencies)
Updated: 2009-11-21 08:53

China's 11 largest publicly-traded banks may need to raise about 300 billion yuan by selling shares and bonds to ensure they have adequate capital for credit growth, according to BNP Paribas.

The lenders would need as much as 368 billion yuan to keep their capital ratio at 12 percent, BNP said in a note to clients on Friday. Bank of China Ltd, the nation's third-largest by market value, would need 137 billion yuan.

The government has encouraged a $1.3 trillion credit boom this year to complement its monetary and fiscal stimulus plans, propelling the economy last quarter to its fastest pace of growth in a year.

China Minsheng Banking Corp on Thursday raised HK$30.1 billion to plug a shortfall, and China Merchants Bank Co aims to sell shares by year end.

With expectations of "fast loan growth and balance sheet expansion in 2009/10, banks will likely need to raise new capital to meet regulator's higher capital-adequacy standards", analysts led by Dorris Chen wrote.

Related readings:  BNP Paribas profit up 6.6%  14 listed banks net profit up 2.15% in first nine months  Central bank stresses inflation management amid credit boom  China's bank loan total exceeds full-year target

"Potential equity/hybrid debt raising could pose a sector overhang in 2010/11."

The China Banking Regulatory Commission said in September it plans to tighten capital requirements for banks by capping cross holdings of subordinated bonds. The regulator also tightened lending requirements on loans for fixed-asset investments and mortgages to avoid misuse of funds.

China Minsheng, the nation's first privately owned lender, raised funds in Hong Kong's biggest public share sale since April 2007. China Merchants aims to sell as much as 22 billion yuan in shares in a rights offer by the end of the year, President Ma Weihua said last week.

The credit expansion has led housing prices to post their biggest gains in more than a year and aided an 82 percent climb in the Shanghai Composite Index of stocks.

China may need to rein in credit growth to tame inflationary pressures and keep asset bubbles from emerging as growth accelerates, the Organization for Economic Cooperation and Development said on Thursday.

New loans are expected to be 7 trillion yuan in 2010, BNP estimated, after climbing to 8.9 trillion yuan in the first 10 months of this year.