China Banks Said to Submit Capital Raising Plans To Regulator after Record Lending

Discussion in 'Wall St. News' started by ASusilovic, Nov 24, 2009.

  1. Nov. 24 (Bloomberg) -- China’s five largest banks submitted plans to regulators for raising money after unprecedented lending eroded their capital, according to four people with knowledge of the matter.

    Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd., Agricultural Bank of China and Bank of Communications Ltd. told the China Banking Regulatory Commission how they can bolster capital ratios after the watchdog evaluated their finances last week, the people said. Lenders were told to estimate potential deficits in 2010 based on their own loan forecasts and capital ratio targets, they said.

    Bank shares fell in Hong Kong trading today after Bank of China said it’s studying “various options” to replenish capital. The five lenders extended a record 4.7 trillion yuan ($688 billion) of loans in the first nine months, driving China’s economic growth to an annual 8.9 percent rate in the third quarter even as rivals worldwide reined in credit.

    “With China’s pace of credit growth, banks’ capital will be drained very quickly and that leaves little room for cushioning if asset quality worsens,” said Sheng Nan, a Shanghai-based analyst at UOB-Kayhian Investment Co.

    Bank of China shares fell 4 percent in Hong Kong, the biggest drop in two months. Construction Bank slipped 3.4 percent, the steepest decline since May 13. ICBC and Bank of Communications also slipped. Agricultural Bank isn’t publicly traded.


    The fundraising plans submitted by banks are informal and may change, the people said. Spokespeople at China Construction Bank and Bank of Communications declined to comment. Officials at Agricultural Bank and ICBC weren’t immediately available.

    Lenders from Japan to the U.K. are raising money after $1.72 trillion of writedowns and credit looses prompted calls from regulators for tougher capital requirements. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, said last week it may seek as much as 1 trillion yen ($11.3 billion) selling common stock.

    Lloyds Banking Group Plc, the biggest U.K. mortgage lender, plans to raise a record 13.5 billion pounds ($22.3 billion) in the country’s largest rights offering.

    About half of bank losses from the global financial crisis has yet to be revealed, International Monetary Fund Managing Director Dominique Strauss-Kahn said yesterday. Banking systems “remain undercapitalized” in many advanced economies, he said.

    Concerns that more banks will sell shares depressed stock markets today. The Nikkei 225 Stock Average fell for a fifth day, losing 1 percent in Tokyo. Hong Kong’s benchmark Hang Seng Index slipped 1.5 percent for the biggest decline in three weeks. The Shanghai Composite Index slumped 3.5 percent.
  2. Every "dollar" raised for capital by a Chinese bank is one less "dollar" available for the US gov't to borrow to support the US deficit. Result...misery!

  3. Lethn


    lol at irrational fear.

    It's your own retarded system that did this to the economy not the Chinese.