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Debt Issue to Boost Bank's Capital Base
2005-8-10 8:55:31      China Daily
Shanghai Pudong Development Bank Co Ltd said on Friday it had got regulatory approval to issue 12 billion yuan (US$1.48 billion) of bonds to boost its capital base.

The bank, the Chinese partner of Citigroup, said in a statement that the debt issue, to be traded on the inter-bank market, has been approved by the central bank and the China Banking Regulatory Commission.

The first batch of bonds, valued at 7 billion yuan (US$863 million) with a term of three years, will go on sale on August 12.

Proceeds will be invested in low risk and good quality projects, the bank said.

No further details of the bond issue were given, but when the bank originally announced the plan in May, it said yields of the three-to-five-year bonds would be capped at 1.5 percentage points below the prevailing bank lending rate.

Li Xianlin, an analyst from Haitong Securities, said the bond issue will be a significant chance for the Shanghai bank to expand scale amid fierce competition.

Chinese banks are increasingly using bonds to replenish their capital base as part of efforts to face up to ever-fiercer foreign competition.

The majority of Chinese banks currently fall short of the adequacy ratio of 8 per cent.

The banks must reach the standard as of December 31 or their lending and geographic expansion will be restricted.

The Shanghai bank's capital adequacy ratio stood at 8.03 per cent at the end of 2004, barely above the regulatory minimum.

The Shanghai-listed bank had been approved to raise up to 6 billion yuan (US$724.64 million) by selling new shares.

But the new share offering had to be delayed until May 31, 2006, because China's securities regulator has suspended new share sales while seeking to make all shares in the nation's 1,564 listed companies tradable.

The Shanghai bank is the first commercial bank to issue bonds after the People's Bank of China, China's central bank, promulgated regulations in May governing bond issuance by financial institutions in the inter-bank market.

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