CITIC banking on bond boost ( 2003-12-08 23:15) (China Daily)
Officials from CITIC Industrial Bank said Monday the institution would use
part of proceeds from a bond issue scheduled later this week to replenish its
capital base, in its latest bid to prepare for an initial public offering.
"Six billion yuan (US$720 million) of the proceeds will be used to increase
our capital,'' CITIC President Dou Jianzhong told reporters.
The CITIC Group, one of China's largest financial conglomerates and the
Industrial Bank's parent firm, said Monday it plans to issue 10 billion yuan
(US$1.2 billion) of bonds on Friday. It includes a 6 billion yuan 20-year
tranche, and a 4 billion yuan (US$480 million) 10-year tranche.
Its prospectus said part of the proceeds will be used for recapitalizing the
wholly-owned banking subsidiary, and the rest will be used to pay off its
foreign debts.
The capital injection will bring the bank's capital adequacy ratio up to
regulatory standards, said CITIC Executive Vice-President Liu Zhiqiang. The
bank's capital adequacy ratio currently stands at 5.85 per cent, far below a
regulatory minimum requirement of 8 per cent.
Still, Liu said the bank would have to come up with more ways to keep its
capital adequacy ratio above the line as its rapidly expanding assets continue
to dilute the ratio.
According to statistics, the bank's assets totalled 350 billion yuan (US$42
billion) at the end of June.
Rating company Moody's Investors earlier this year downgraded the outlook for
CITIC Group to negative from stable, citing the low capital adequacy ratio of
the bank, which is a major subsidiary. Bank officials said earlier that the
group had injected more than 1 billion yuan (US$120 million) of bank profits
last year back into its capital base.
The bank's listing plan was stymied earlier this year as the Hong Kong
Monetary Authority killed a restructuring plan which involved one of the group's
Hong Kong-based subsidiary bank.
Bank officials said the listing plan is facing a new situation now after the
signing of the Closer Economic Partnership Arrangement between the special
administrative region and the mainland in the middle of the year.
"We are considering what we can do next,'' said Liu. "As for the timing of
the listing, we'll be moving as fast as we can.''
The bank will have to go through a joint-stock restructuring to meet listing
requirements.
Liu said the group has made substantial progress in the direction of becoming
a comprehensive financial conglomerate. CITIC Holdings, established by the CITIC
Group in late 1991 under a special regulatory approval to manage its financial
operations from banking to securities, has "done a lot of work'' in improving
its risk control mechanisms, he said.
China still separates the banking, securities and insurance sectors from each
other mainly due to risk concerns.
And the group plans to launch a new product later this month in Shanghai that
encompasses banking, insurance, and trusts as well as investment fund functions,
Liu said.
In a bid to beef up its presence in the retail banking sector, the bank
issued its first credit card in Beijing Monday.
