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In the News

Bank's HK share offer off again

CHINA Everbright Bank will again delay its Hong Kong share offering because of weak market conditions.

The lender undertook the decision amid a global economic slowdown and a prolonged European debt crisis, while sluggish capital markets kept valuations of banking shares relatively low. The H-share offering may be re-initiated when the market improves, the bank said.

The mid-sized bank had initially planned to raise up to US$6 billion in August 2011, but later cut the size by half, according to earlier media reports.

Despite its decision to shelve the offering, its shares rose 0.36 percent to 2.75 yuan (44 US cents) in Shanghai yesterday amid a 1.74 percent decline to 2.055.71 in the Shanghai Composite Index.

On Saturday, the bank unveiled a new profit distribution policy under which cash dividend paid to shareholders should be over 10 percent of annual distributable profits instead of between 30 percent and 40 percent of net profit in 2011 to 2013 under a previous policy.

The lender posted an annual 40.3 percent jump in net profit to 12.9 billion yuan in the first half year, said its mid-year report published last Friday.

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China's Bank of Communications Raises $4.67 Billion

SHANGHAI—Bank of Communications Co. 601328.SH -0.45%said Friday it raised 29.7 billion yuan ($4.67 billion) by selling Shanghai-listed A-shares via a private placement, a move aimed at helping China's fifth-largest bank meet the country's stricter capital requirements.

The fundraising comes after Bank of China Ltd. 601988.SH 0.00%kicked off a likely disappointing earnings season for Chinese banks, amid lingering concerns about their weakening balance sheets as the world's second-largest economy slows further.

The near-term outlook for China's banks remains weak, with net interest margins—the difference between interest rates received and paid—being squeezed. Slower growth of fee income and falling asset quality, which would require banks to set aside more money for collateral, also weigh on growth.

BoCom issued 6.5 billion A-shares at 4.55 yuan per share, which will increase the bank's core capital adequacy ratio to 10.31%, according to a statement on the Hong Kong Stock Exchange website.

Major state-owned banks like BoCom are required to have a minimum 9.5% core capital adequacy ratio by 2013 in order to contain risks from certain assets such as mortgage loans following a lending binge to stimulate the economy during the global financial crisis. BoCom had a core capital adequacy ratio of 9.24% at the end of the third quarter last year, down from 9.37% as of the end of 2010.

The bank said in early August that it will try to raise a total of 56.6 billion yuan. It got approval from China's securities regulator to issue 5.8 billion H-shares at 5.63 Hong Kong dollars (73 U.S. cents) each in addition to an A-shares issuance.

High-profile investors in the latest nonpublic A-share offering include China's Ministry of Finance, the National Social Security Fund, Ping An Asset Management Co. and China First Automobile Works Group Corporation.

The Ministry of Finance bought 2.5 billion A-shares via the placement.

The state social security fund invested a total of 15 billion yuan, buying 1.9 billion of BoCom's A-shares and 1.4 billion of its Hong Kong-listed H-shares at HK$5.36 each, according to a statement on its website. It now has a 13.88% stake in BoCom, up from 11.36% previously.

"[The private placement] will help BoCom supplement its core capital, increase its capital adequacy and promote the long-term sustainability of its various businesses," the NSSF said in the statement.

BoCom first said in March it was planning a share placement of both A- and H-shares. Analysts at the time said they expected the bank to raise as much as 40 billion yuan on a combined basis.

BoCom's statement doesn't offer details on the progress of its H-share placement.

The lender's shares ended down 0.2% at 4.37 yuan on Friday in Shanghai.

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Edward Lehman 雷曼法学博士
Managing Director 董事长

LEHMAN, LEE & XU China Lawyers
Founder of LehmanBrown

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