Agricultural Bank Plans to Raise $12 Billion Over Three Years

(Bloomberg) -- Agricultural Bank of China Ltd. said it will sell as much as 80 billion yuan ($12 billion) of Tier-2 securities over three years, joining the latest wave of fundraising by Chinese lenders.

The bank needs to strengthen its capital buffers, President Zhao Huan told reporters in Beijing on Friday, adding that the lender aims to maintain a stable dividend payout. It currently has no plan to raise equity, Zhao said.

The announcement came after the bank eked out a 0.5 percent increase in second-quarter profit from a year earlier, and a mid-sized Chinese lender, China Citic Bank Corp., on Thursday announced plans to raise as much as 40 billion yuan by selling convertible bonds.

Fundraising also includes a planned $8 billion initial public offering in Hong Kong by Postal Savings Bank of China Co. Besides the convertible bonds, Citic Bank has previously disclosed plans to sell as much as 35 billion yuan of preferred shares, while Industrial Bank Co. may raise up to 26 billion yuan in a private stock placement.

Chinese lenders are grappling with their weakest profit growth in more than a decade and a pileup of bad debt, after flooding the financial system with cheap credit for years to prop up economic growth.

Capital Adequacy

Agricultural Bank’s capital-adequacy ratio fell to 12.81 percent in June from 13.11 percent three months earlier. China’s banking regulator requires systemically important banks to have a minimum ratio of 11.5 percent by the end of 2018, with the ability to add an additional 2.5 percentage point counter-cyclical buffer if needed.

Agricultural Bank was added to a global list of systemically important lenders in 2014, making it subject to more stringent capital requirements.

Citic Bank plans to sell bonds convertible into yuan-denominated shares. The money will fund growth and, after conversion, will replenish the bank’s core Tier-1 capital, the Beijing-based lender said Thursday, after its core Tier-1 ratio fell to 8.89 percent as of June 30 from 9.12 percent six months earlier.

It will be the first convertible bond sale in the onshore market by a Chinese lender in more than three years.

--With assistance from Judy Chen To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net, Heng Xie in Beijing at hxie34@bloomberg.net. To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Paul Panckhurst

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