BoCom to replenish depleted funds

Shanghai-based Bank of Communications intends to offer the world’s largest share sale since May 2011.

BoCom intends to sell US$8.9 billion private placement after a US$2.7 billion lending spree over the past two years depleted its finances. China’s Ministry of Finance and HSBC Holdings Plc, BoCom’s two largest shareholders, will take part in the placement, according to a filing at the Hong Kong Stock Exchange.

One analyst believes the share sale will make BoCom one of the most-capitalized among China’s leading banks and could boost its core capital adequacy ratio by about two percentage points. BoCom is China’s fifth largest lender.

HSBC will pay about US$1.7 billion for 2.36 billion Hong Kong-listed shares to keep its stake at the existing 19.03%.

On the other hand, China’s Ministry of Finance will increase its stake to 26.5% from 26.5% following its purchase of shares listed in both Shanghai and Hong Kong.

The China Banking Regulatory Commission last August said it will require the country’s largest lenders to have a minimum capital adequacy ratio of 11.5% by the end of 2013. BoCom’s capital adequacy ratio fell to 11.9% as of Sept. 30 from 12.4% at the beginning of 2011

Its core capital adequacy ratio dropped to 9.2%, lower than the 9.5% mandatory minimum under the new capital plan.