Banking

Citic Bank sees capital adequacy challenges ahead

By Li Xiang (China Daily)
Updated: 2010-08-13 10:53

BEIJING - China Citic Bank Corp said on Thursday that keeping its capital adequacy ratio above the minimum level set by the country's banking regulator will continue to be a challenge in the second half of the year.

The medium-sized lender, in which Spain's second-largest bank Banco Bilbao Vizcaya Argentaria SA (BBVA) has a 15 percent stake, has announced a plan to raise 26 billion ($3.8 billion) through a rights offering in the first quarter of next year to strengthen its capital base.

As of the end of June, the bank's capital adequacy ratio was 10.95 percent, slightly above the 10 percent minimum set by the country's banking regulator for medium-sized banks.

"Before the rights offering, maintaining the capital adequacy ratio above the regulatory minimum will continue to be a challenge for us," Chen Xiaoxian, the bank's president, said at a press briefing in Beijing.

Citic Bank, China's seventh-largest lender by market value, will offer up to 2.2 shares for every 10 held, for a total of 8.59 billion shares in Shanghai and Hong Kong.

The lender's Spanish partner BBVA has agreed to spend $580 million on the rights offer, according to Spanish media reports.

Zhao Xiaofan, the bank's vice-president, said the lender will raise 17 percent of the total rights offering from the domestic A-share market and he expects the liquidity-draining effect to be limited.

Citic Bank reported a 45 percent surge in its first-half net profit to 10.7 billion yuan, a better-than-expected result boosted by growing demand for its loans and fee-based services.

Related readings:  CITIC Bank planning $3.8b rights offer  CITIC Bank H1 profit rises 45% to $1.6b on growth in loans  Citic Group to raise 80b yuan from HK float  BBVA may boost CITIC Bank stake

The lender advanced 127.2 billion yuan in new loans in the first half, taking the total amount to 1.19 trillion yuan, according to its first-half earnings statement.

Non-performing loans accounted for 0.81 percent of its total loans as of the end of June, down from 0.84 percent three months earlier.

Zhao said that the bank's non-performing loan ratio will continue to drop in the second half but uncertainty remains over the overall amount of those loans as they depend on Beijing's macro-economic adjustment and the lender's risk appetite.

When asked about the risks in local government debts, Zhao said that the bank has collected all its loans to local government financing vehicles in the first half and there are no overdue loans.

He added that the bank has exited from troubled government debts accounting for less than 1 percent of the total amount.