The Bank of China Tower (center) stands in Central, Hong Kong. The Chinese lender's stock was suspended from trading Friday pending an announcement of a 60 billion yuan rights offer. Paul Hilton / Bloomberg News

Bank of China (BOC) shares were suspended from trading in Shanghai and Hong Kong on Friday before it announced a rights offer plan for mainland and Hong Kong investors to raise up to 60 billion yuan ($8.9 million) according to its filing on the Hong Kong Stock Exchange website in the same day.

The bank proposed a 1.1-for-10 rights issue for both existing mainland and Hong Kong shareholders, the statement added.

The move by BOC, which raised about $5.9 billion via convertible bonds last month, is the latest of a series of massive fund-raising plans announced by mainland banks to shore up their capital base.

The new fundraising plan was approved by the bank's board on June 30, the statement said.

The bank won shareholder approval in March to sell up to 20 percent of its existing shares as part of a broader plan to beef up its capital base.

Central Huijin Investment Co, the domestic investment arm of China's sovereign wealth fund, which owns 67.53 percent stake of the bank, will buy the new shares, according to Caijing magazine, citing an unnamed source. The firm said in April that it will take part in fundraising by BOC, along with Industrial & Commercial Bank of China Ltd (ICBC) and China Construction Bank Corp (CCB), another two of the four largest state-controlled mainland banks.

Since the start of this year, the Central Government has stepped up efforts to fend off an asset bubble that may result from last year's credit boom. In response to a general mandate from the Central Government, mainland banks have to set aside more capital reserves on concerns that the credit boom of 2009 could cause the economy to overheat or create a severe bad loan crisis.

BOC was the largest issuer of new loans in the credit exploration last year. The lender's capital adequacy ratio fell to 11.09 percent as of March 2010, below the minimum 11.5 percent required by the China Banking Regulatory Commission.

Apart from BOC, other major banks, including ICBC, CCB and Agricultural Bank of China (ABC), have been racing to replenish capital reserves following the record lending in 2009 in support of the 4 trillion yuan ($590 billion) government-led stimulus plan at the height of the global economic downturn.

ICBC is expected to sell 25 billion yuan of convertible bonds in August and CCB last week obtained investor approval to raise up to 75 billion yuan through a share rights offer. ABC is raising more than $20 billion via a dual listing in Hong Kong and Shanghai.

Chinese media reported in May that the State Council has approved a combined 287 billion yuan ($42 billion) fund-raising quota for the country's four biggest lenders.

The BOC H-share price was HK$3.97 before trading suspension on Friday. The BOC H-share will resume trading on July 5, 2010.

Agencies

China Daily

(HK Edition 07/03/2010 page3)