China’s Ministry of Finance and HSBC Holdings Plc (HSBA), the Shanghai-based bank’s twolargest shareholders, will take part in the private placement, according to a filing to the Hong Kong Stock Exchange yesterday. The lender’s board approved selling new Shanghai- and Hong Kong-listed shares.

BoCom joins local rivals including Industrial Bank Co. (601166)in seeking funds after a two-year, $2.7 trillion lending spree sapped their finances. China’s banking regulator is planning tougher capital requirements for the biggest lenders to fend off rising credit risks.

“BoCom will become the most-capitalized bank among big lenders in China,” said Sheng Nan, a Hong Kong-based analyst at CCB International Securities Ltd., who estimated the sale will boost its core capital adequacy ratio by about 2 percentage points. “Participation of the government shareholder and HSBC ensures this is a long-term investment and there will be no additional stock supply to depress the market.”

Shares (3328) of BoCom rose 2.8 percent to HK$6.36 as of 9:59 a.m., extending this year’s gain to 17 percent. The stock traded at 5.96 times its estimated earnings in 2012 and 1.02 times estimated book value for the year, according to data compiled by Bloomberg.

Shanghai, Hong Kong

The lender will sell 6.54 billion new Shanghai-traded shares to seven investors including theFinance Ministry and China’s National Council for Social Security Fund at 4.55 yuan apiece, and 5.56 billion new Hong Kong-traded shares for HK$5.63 each to buyers such as HSBC, BoCom said. The company will also place 275.7 million shares in Hong Kong on a fully underwritten basis at the same price, it said.

HSBC will pay about $1.71 billion for 2.36 billion Hong Kong-listed shares, keeping its stake at no less than the current 19.03 percent, the London-based lender said in an e- mailed statement yesterday. The bank will pay for the shares with cash from internal resources, it said.

China’s Finance Ministry will increase its stake to 26.53 percent from 26.52 percent following its purchase of shares listed in both Shanghai and Hong Kong, BoCom said in its regulatory statement.

The China Banking Regulatory Commission said in August that it will require the country’s largest, or so-called systemically important, lenders to have a minimum capital adequacy ratioof 11.5 percent by the end of 2013. Smaller banks will be required to have at least 10.5 percent under “normal conditions” by the end of 2016, the CBRC said.

Capital Adequacy Declines

“The main purpose of the proposed placing is to increase the capital adequacy ratio by replenishing core capital,” BoCom said in the filing yesterday.

BoCom’s capital adequacy ratio fell to 11.89 percent as of Sept. 30 from 12.36 percent at the beginning of 2011, according to its third-quarter earnings report. The bank’s core capital adequacy ratio dropped to 9.24 percent, lower than the 9.5 percent mandatory minimum under the new capital plan.

At $8.9 billion, BoCom’s share sale would be the largest since Glencore International Plc raised $9.9 billion in an initial public offering in May, according to data compiled by Bloomberg.

BoCom may report later this month a record profit of 48.3 billion yuan for 2011, an increase of 24 percent from a year earlier, according to the average estimate of 18 analysts in a Bloomberg survey.

Industrial Bank, a Chinese lender part-owned by Hang Seng Bank Co., said earlier this month it will raise as much as 26.4 billion yuan in a private placement.

Standard & Poor’s warned this week that China’s banks could face a slump in 2012 as the economy slows, property prices fall and “sizable” local government debt requires refinancing.

To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

http://www.bloomberg.com/news/2012-03-15/bocom-to-raise-8-9-billion-in-shanghai-hong-kong-sales.html

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