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AgBank to raise around USD 15.8bn in cash call
Posted on Tuesday, 13 March 2018 08:05
Agricultural Bank of China (AgBank), the country’s third largest lender, issued a securities statement announcing its intent to raise up to CNY 100.00 billion (USD 15.79 billion) in an A-stock placement.

The bank is selling 27.50 billion shares to seven entities including the country’s finance ministry, Central Huijin Investment, China National Tobacco and Zhongwei Capital.

AgBank said it will use the cash raised to fill its common equity tier 1 capital and enhance its capital adequacy.

The move comes as China has been exploring ways to de-leverage and cut risk of the commercial banking industry as non-performing loans are at a 12-year high, with financial regulators coming up with rules to give lenders a larger platform to offload bad debts.

Last week, Reuters cited sources as saying the China Banking Regulatory Commission (CBRC) has cut provision coverage ratio of commercial banks to 120.0 per cent to 150.0 per cent from the current 150.0 per cent, which is expected to give companies operating in the industry more capital so they can support economic activity.

According to the news provider, the regulator requires AgBank to have a core tier-1 ratio capital adequacy of 8.5 per cent and a minimum tier-1 level of 9.5 per cent by the end of 2018.

The group’s capital adequacy ratio currently stands at 13.4 per cent as of 30th September 2017, which is above the minimum set out by the CBRC.

In the year ended 31st December 2017, AgBank recorded net profit of CNY 192.96 billion and a non-performing loan ratio of 1.8 per cent.

The lender’s net interest margins stood at 2.3 per cent in 2017, while its earnings per share increased to 0.58 in the 12 month period.

According to Zephyr, the M&A database published by Bureau van Dijk, there have been 173 deal targeting banking, insurance and financial services companies based in China announced in 2018 to date.

The largest such deal by someway is AgBank’s CNY 100.00 billion capital increase.

Bank of Jiangsu is the nearest competitor as the lender agreed to raise over CNY 20.00 billion in a convertible bond issue due in 6 years from the date of issue on 3rd February 2018.

© Zephus Ltd