China’s State Banks Plan $72 Billion in Private Placements to Bolster Capital

Four of China’s largest state-owned banks plan to raise up to $72 billion through private placements to strengthen their core Tier-1 capital, following Beijing’s push for stronger financial buffers to support the economy, Twinnie Siu reported for Bloomberg News.

These announcements follow the Chinese government’s pledge in early March to issue 500 billion yuan in special sovereign bonds to replenish capital at the country’s largest state-owned banks. I Photo: Ferox Seneca Wikimedia Commons

Bank of Communications Co. will sell up to 120 billion yuan ($16.5 billion) in A shares through a private placement to investors, including the Ministry of Finance, according to a recent filing.

Meanwhile, Bank of China Ltd., Postal Savings Bank of China Ltd., and China Construction Bank Corp. plan to issue A shares worth 165 billion yuan, 130 billion yuan, and 105 billion yuan, respectively, to the finance ministry and other investors, according to separate filings.

China’s finance ministry is expected to take up the majority of the newly issued shares or subscribe to all of them, the filings indicated. The shares will be sold at a premium of between 8.8% and 21.5% above their Friday closing prices in Shanghai.

These announcements follow the Chinese government’s pledge in early March to issue 500 billion yuan in special sovereign bonds to replenish capital at the country’s largest state-owned banks.

The plan to support these lenders was first proposed as early as September, with the government later confirming that it would use these bonds to finance the capital injections.

Despite China’s top six banks already exceeding capital requirements, authorities are reinforcing the banking system following a series of stimulus measures, including mortgage and policy rate cuts.