China banks boosting capital as bad loans soar

Hong Kong

CHINA'S banks, which dialled down fund-raising efforts this year even as bad debts swelled, are making up for lost time. Both lenders and the companies set up to acquire their delinquent assets are bolstering their finances. China Citic Bank Corp last month announced plans to raise as much as 40 billion yuan (S$8 billion), while Agricultural Bank of China, Industrial Bank and China Zheshang Bank are also boosting capital. China Cinda Asset Management and China Huarong Asset Management are poised to tap investors.

"Chinese banks are preemptively raising capital while pricing remains favourable in order to tackle higher loan impairments," said Nicholas Yap, a credit analyst at Mitsubishi UFJ Securities HK in Hong Kong. A rule change in April that requires lenders to make full provisions for shadow lending recorded in their receivables books is also encouraging the fund-raising, he said.