Tag Archives: China Merchants Bank

2012: Capitial Raising II Year For China Banks 2012：中国银行业的又一个融资年

By newsdoug on December 28, 2011

China banks polish off their beggar's cups I don’t usually like to congratulate myself for making correct predictions, but in this case it does seem my mid-year forecast of a major new round of fund-raising by Chinese banks may soon occur in the new year as many look to repair their stressed-out balance sheets. I made my prediction back in July when China Merchants Bank (HKEx: 3968; Shanghai: 600036), one of the nation’s top regional players, announced plans to raise up to $5.4 billion — its second major capital raising after it and most of the country’s top banks raised hundreds of billions of dollars in 2009. (previous post) Now one of China’s top financial newspapers, citing analysts, is reporting that many of the nation’s other major banks, including big names like Agricultural Bank of China (HKEx: 1288; Shanghai: 601288) and Bank of Communications (HKEx: 3328; Shanghai: 601328) may also have to raise more cash next year to shore up their balance sheets that are coming under pressure after a lending binge in 2009 and 2010 under Beijing’s massive stimulus spending plan to support the economy during the global financial crisis. (English article) The China Securities Journal, considered the most authoritative of China’s major financial dailies, says banks may need to raise more than 100 billion yuan, or nearly $16 billion, collectively next year, and I wouldn’t be surprised if the final number is significantly higher, perhaps 4 or 5 times that amount, as Beijing tries to prepare its major lenders for a coming boom in bad loans resulting from an anemic stock market and a major looming downturn in real estate. In a sign of things to come, Ping An (HKEx: 2318; Shanghai: 601318), China’s second largest insurer and one of its most aggressive financial services companies, earlier this month announced a plan to raise more than $4 billion, after it raised another $2.5 billion earlier this year through a private placement. (previous post) It seems natural that the most aggressive companies like Ping An will have to go to market first for new funds when this kind of downturn happens, but look for lots of similar announcements in the year ahead by both banks and insurers.

Bottom line: 2012 will be a year of major capital raising for Chinese banks and insurers, whose bad debt could balloon as a result of prolonged downturns in the stock and real estate markets.

Record Profits Bolster Banks as Storm Looms 创纪录利润有助银行抵御楼市低迷隐忧

By newsdoug on August 29, 2011

China banks bolster balance sheets with record profits There’s not a lot to say about any one of China’s major state-owned banks for the latest earnings period, except that collectively they all posted record profits as they continue to reap strong revenue from record lending in 2009 and strong margins as China raises interest rates. (English article) ICBC (HKEx: 1398; Shanghai: 601398), the nation’s largest bank and last to report, said its profit jumped 30 percent in the second quarter to $17 billion, in a typical scenario for most banks. If the banks are smart, I hope they’re using all those profits to bolster their capital, which seems to be constantly falling short of Beijing’s ever-rising reserve requirement ratios. Of course all these hikes are designed to brace the banks for an expected shock they will suffer if and when the real estate market corrects, which will severely affect not only their real estate loans, but the debt-repayment ability of local governments that rely heavily on land sales to pay off their loans. We already saw the first signs that a second round of massive capital raising may be coming last month, when China Merchants Bank (HKEx: 3968; Shanghai: 600036) announced plans to raise $5.4 billion through rights offerings. (previous post) China has been so worried about the looming downturn, and forcing its banks to prepare so much, that I’m starting to wonder if perhaps all the panic isn’t a bit overblown. Investors seem to think perhaps Beijing is being a bit too conservative, with ICBC and Agricultural Bank of China (HKEx: 1288; Shanghai: 601288) shares both outperforming the Hang Seng Index this year, though China Construction Bank (HKEx: 939; Shanghai: 601939), which has more exposure to real estate, is faring less well. On the whole, I would say to look for the bank stocks to outperform the market in the months ahead, as investors start to believe that perhaps these troubled lenders have built up a big enough cushion to withstand the coming real estate downturn.

Bottom line: After record profits and massive fund raising two years ago, China’s banks may finally be adequately capitalized to withstand the coming downturn in China’s real estate market.

关于中国各大国有银行最新财报，并没有过多可谈论之处。除了一点：在2009年贷款额创新高及中国加息所带来的利润推动下，各家银行均发布了创纪录的收益。工商银行(1398.HK; 601398.SS)称，该行第二季度利润增加30%，至170亿美元，多数银行都取得了类似增长。如果各大银行聪明的话，我希望他们会利用所有利润充实资金，由于中国政府不断提高存款准备金率门槛，各家银行资金一再告急。当然，如果房地产市场降温，银行料将受到冲击，不仅是房贷严重减少，地方政府还贷能力也将降低，因为其主要依赖卖地还债。上月初步迹象显示，中国银行业或将掀起新一轮大规模融资，中国招商银行(3968.HK; 600036.SS)宣布，将在香港和上海发行权利股，筹集54亿美元。中国政府担忧经济低迷隐现，敦促各大银行提高存准率，我不禁猜想，这一切是否有些过度惊慌。投资者似乎认为，中国似乎有点过于保守，尽管中国建设银行(0939.HK; 601939.SS)受房地产影响较大，股价表现平平，但今年工行和农业银行(1288.HK; 601288.SS)股价均跑赢?生指数。整体而言，由于投资者开始相信，各大银行已搭建起足够大的“软垫”，预防楼市或将出现的低迷情况，我预计，未来几个月银行股将跑赢大盘。

一句话：鉴于中国银行业利润创新高，并在两年前大规模融资，中国银行业或终能保持资本充足，抵御中国楼市或现低迷的隐忧。

China Merchants Bank Kicks Off “Capital Raising II” 招商银行掀起第二轮融资热潮

By newsdoug on July 19, 2011

China Merchants' new money grab Move over, QE II. Chinese banks, unsatisfied with the hundreds of billions of dollars they raised to bolster their balance sheets just two years ago, appear to be gearing up for Capital Raising II, with China Merchants Bank’s (HKEx: 3968 Shanghai: 600036) announcement that it will raise up to $5.4 billion through simultaneous rights offers in Hong Kong and Shanghai. (company announcement; English article) China Merchants is no doubt counting on the short memories of many investors, hoping they will forget that it announced a similar program almost exactly two years ago to raise a more modest $2.6 billion. So if my math is correct, China Merchants will have raised about $8 billion through these two offerings — a staggering amount when you consider its market cap in Hong Kong is only about $9 billion. Analysts will tell you this new round of CR II, which will undoubtedly be followed by more similar announcements from other major Chinese banks, is designed to meet Beijing’s ever rising capital adequacy ratio requirements as it tries to cool a racing economy that got that way in large part due to excessive state-ordered lending at the height of the global financial crisis. But this latest capital raising by China Merchants is starting to looking increasingly like an outright recapitalization of Chinese banks, which are no doubt woefully unprepared for the economic downturn and resulting piles of bad debt that many believe are coming. The small bit of good news in this is that Beijing, as the majority shareholder of all the major banks, will ultimately foot most of the bill for this ongoing recapitalization. The bad news is that the banks’ minority shareholders will also have to pay part of the bill, and that these stocks are likely to take a beating in the months ahead.

Bottom line: China Merchants announcement of its second major fund-raising in just two years looks like an outright recapitalization, and underscores the shaky position of all Chinese banks.

新一轮量化宽松来了。中国银行业不满足於两年前数千亿美元的集资规模，如今似乎将再次进行融资。中国招商银行<600036.SS><3968.HK>宣布，将在香港和上海发行权利股，筹集54亿美元。招行无疑是寄望於许多投资者健忘，希望他们记不起该行在两年前曾宣布过类似计划，集资26亿美元。所以，如果我计算正确的话，招行两次筹集资金总额约为80亿美元–鉴於招行在香港市值仅约为90亿美元，上述募资规模确实惊人。分析师会告诉你，本次新一轮融资是为满足中国政府不断提高的资本充足率要求，中国其他大型银行无疑亦将宣布类似举措。中国正试图为其经济降温，中国出现这种局面很大程度是因为全球金融危机最严重时，中国政府要求增发贷款过多。但招行本次筹资日益像是中国银行业一次资本重组，中国银行业显然未对经济低迷做好充足准备，许多人认为，大量坏账即将出现。好消息是，中国政府和各银行大股东终将为此次资本重组埋单。坏消息是，银行小股东也将不得不承担一部分费用，这些银行股未来数月或遭重创。

一句话：时隔两年，中国招商银行再次宣布大规模融资，看似一次彻头彻尾的资本重组，凸显中国各银行的问题。

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