Capital Market

Banks 'tracking' capital situation

By Wang Bo (China Daily)
Updated: 2009-11-26 07:58

BOC saw its lending growth expand by more than 40 percent this year. [China Daily]

Chinese lenders are regularly keeping tabs on their capital requirements, and the stock market should not be overly concerned about banks' capital adequacy ratios, a senior official at the nation's top banking regulatory body told China Daily yesterday.

"It is a common practice for banks to review their loans position at the end of the year and draft plans to replenish capital over the coming years," the China Banking Regulatory Commission official, who did not wish to be quoted by name, said.

He was referring to market worry that major State-owned banks were mulling big fund raising plans that could strain the bourses through massive new share sales.

The Shanghai Composite Index plunged 3.45 percent on Tuesday, the most in three months, partly on rumors about major listed State-run lenders' potential massive capital raising efforts. Shares of Bank of China (BOC), Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB) all dropped by between 2 and 3 percent on that day.

However, most of the losses were offset yesterday when the index rallied 2.1 percent.

Regulators have been pressing banks to closely watch their capital positions after an unprecedented surge in lending this year, leading some lenders to think of replenishing their capital through share and bond sales.

Although BOC, the nation's largest foreign exchange lender, officially announced it had no specific fund raising plan, a source at the bank confirmed that the lender was mulling schemes to raise more capital.

BOC saw its lending growth expand by more than 40 percent this year, compared with the 22.1 percent posted by ICBC during the same period. BOC's capital adequacy ratio dropped to 11.6 percent at the end of September from the 13.4 percent at the beginning of the year.

She Minhua, a banking analyst at Haitong Securities, said it was reasonable that major listed banks were thinking about raising more capital, as three years had passed since their IPOs.

"Actually, these banks are now making plans for a rainy day, as their current finances are still very healthy and can support their business expansion for at least one year," he said.

ICBC said it had no plan to raise capital in the short term, as its capital adequacy ratio, which was 12.6 percent at the end of September, was still relatively high.