Shenzhen Development Bank will sell shares to Shanghai Baosteel
Group Corp to raise 4.22 billion yuan (US$571 million).
Baosteel, China's biggest steel maker, will buy 120 million
shares at 35.15 yuan each and agreed not to sell the shares for 36
months after the placement, the Shenzhen-based bank said today in a
statement to the Shenzhen Stock Exchange.
Baosteel will hold a 5.4 percent stake in the bank after the
placement.
The money will be used to boost the lender's capital, which sat
at 4.27 percent at the end of September.
It is the only listed bank whose capital adequacy ratio falls
below the regulator's threshold. The issue prevented the bank from
boosting loan growth and expanding its network.
“The move will act as a shot in the arm to the lender as capital
fallout has been an obstacle that has slowed its growth,'' said Qiu
Zhicheng, a Haitong Securities Co analyst.
Haitong increased its rating on the bank from "hold'' to
"add.''
China Securities Co said the move is positive and it maintains
its rating on the bank at "add.''
The bank passed the plan at a board meeting on Saturday. The
price was based on a 10 percent discount on the average trading
price 20 days before the board meeting announced the share
sale.
The plan requires approval at a shareholder meeting on December
19. It also needs regulatory approval from the China Securities
Regulatory Commission and China Banking Regulatory Commission.
The bank in October said it canceled a plan to sell a seven
percent stake to General Electric Co due to a "relevant
regulation,'' indicating the deal failed to win approval from
regulators.
GE's lending unit, GE Consumer Finance, agreed in 2005 to
cooperate with the bank to develop its consumer credit sector and
buy US$100 million in shares. The regulator's decision didn't
change the two parties' cooperation on consumer finance.
TPG Newbridge Capital, which holds a 16.68 percent stake in the
bank, now controls the bank based in the southern city in Guangdong
Province. Newbridge's stake will be diluted to 15.8 percent after
the share placement.
Shenzhen Development Bank's lending grew 17 percent to 213.9
billion yuan at the end of September. Deposits jumped 24 percent to
287.9 billion yuan.
(Shanghai Daily December 3, 2007)
