Chinese banks under pressure to raise cash next year: source

Mon Dec 26, 2011 8:33pm EST
 
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SHANGHAI (Reuters) - China's listed banks are expected to raise over 100 billion yuan ($15.78 billion) through equity financing next year as they face pressure to replenish capital due to rapid loan growth and tighter regulation, the China Securities Journal reported on Tuesday.

Citing analysts, the official paper said banks facing such pressure included Agricultural Bank of China (601288.SS: Quote) (1288.HK: Quote), Industrial Bank Co Ltd 601166.SS and Bank of Communications (601328.SS: Quote) (3328.HK: Quote).

Banks are also expected tap the debt market for funding, it said.

The bulk of the expected equity financing would be funded by government shareholders, the paper said. Listed banks raised more than 270 billion yuan via equity financing in 2010 and nearly 290 billion yuan worth of debt this year, according to the article.

Chinese banks will be under fundraising pressure because new lending next year is expected to exceed 8 trillion yuan -- a level necessary to support economic expansion -- potentially weakening lenders' balance sheets, the newspaper said.

Major Chinese banks, or systematically important ones, would be required to have minimum capital adequacy ratio (CAR) of 11.5 percent, while smaller banks must have at least 10.5 percent, according to rules published by the banking regulator in August.

However it is still unclear when they will be implemented.

China International Capital Corp estimates banks' assets to expand by around 14 percent next year and that would reduce the average CAR of listed domestic banks to around 10.7 percent, meaning some lenders would be under pressure to raise money, the paper said.

(Reporting by Samuel Shen and Kazunori Takada)