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China Post Bank raising US$7.3b via preferred shares to shore up capital
[HONG KONG] Postal Savings Bank of China Co (PSBC) is raising US$7.25 billion through an issue of preferred shares to shore up its capital buffer and boost lending, becoming the latest Chinese bank to raise funds through the hybrid securities.
State-run PSBC's fundraising comes a year after it garnered US$7.63 billion in a Hong Kong IPO. The lender also unveiled plans in August for a share listing in Shanghai to raise US$785 million.
The deal will help PSBC "to enhance the overall competitiveness of the Bank, improve the capital structure and to achieve sustainable development," it said in a statement on Friday.
The proceeds will be used to increase its so-called additional tier 1 Capital and support future business development, it said. PSBC's preferred shares will yield 4.5 per cent a year and have a par value of 100 yuan each, it added.
Preferred shares have the characteristics of both debt and equity, and typically don't trade on the open market or carry any voting rights.
Listed companies can sell preferred shares to raise capital with minimal dilution in the value of shares held by existing stakeholders. China's regulator had previously stipulated that preferred share issues to the public must not contain provisions that allow these shares to be converted to common equity.
Chinese regulators implemented rules in 2014 that opened the door for banks to issue preferred shares in a bid to bolster the lenders' finances against an expected rise in bad loans as the economy slowed down. Banks also needed funds to comply with stricter capital adequacy requirements under the global Basel III rules.
Since then, several major lenders, including Shanghai Pudong Development Bank Co and Bank of China, have raised funds that way. China Citic Bank Corp said in November it plans to raise US$5.31 billion via a preferred share sale.