China Banks: More Trouble Signs
Just a week after a leading Chinese newspaper predicted a new wave of capital raising by China’s banks this year, the latest trouble sign is emerging for the overstretched sector with news that Beijing will delay implementing tougher new capital requirements. The China Daily is citing a Bank of China (HKEx: 3988; Shanghai: 601398) official saying the banking regulator will postpone tougher new requirements, which were supposed to take effect on January 1, to the second half of the year instead. The news comes as signs mount that balance sheets at China’s banks are coming under growing pressure as the real estate market shows early signs of a major correction and the stock market fell 20 percent in 2011, both of which point to a big rise in souring loans this year. Last week, ICBC (HKEx: 1398; Shanghai: 601398) launched a nearly $8 billion subordinated bond offering to raise its capital adequacy ratio in anticipation of the new requirement, looking to the debt market to boost its capital. (English article) That came after the China Securities Journal wrote last week that many lenders, including Agricultural Bank of China (HKEx: 1288; Shanghai: 601288), one of China’s top 4 state lenders, and Bank of Communications (HKEx: 3328; Shanghai: 601328), a top regional lender, will need to replenish their capital this year, following a lending binge in 2009 and 2010 under orders from Beijing to boost the economy during the global downturn. (previous post) This new recapitalization will come only 2 years after a similar exercise that saw banks raise more than $100 billion collectively, again prompted by their overzealous lending during the global downturn. China Merchants Bank (HKEx: 3968; Shanghai: 600036), another major regional lender, kicked off the drive in the middle of last year with a plan to raise $5.4 billion. The contagion this time has shown signs of spreading to the insurance sector, with Ping An (HKEx: 2318; Shanghai: 601318), China’s second largest insurer, also announcing a plan in December to raise more than $4 billion. No matter how you look at it, 2012 will be a challenging year for Chinese banks and perhaps even tougher for their investors.
Bottom line: The delay of new tougher capital requirements is the latest sign of trouble among China’s banks, which will soon launch a major new capital raising drive.
Related postings 相关文章:
◙ 2012: Capital Raising II Year For China Banks
◙ Ping An Returns to Market With Second Big Fund Request 中国平安拟发大规模可转债
◙ Message to Beijing: Privatize the Big 4 Banks 对中国政府说：将四大银行退市吧
