On Bloomberg, today reported that Shanghai Pudong Bank's shares fall:
Shanghai Pudong Development Bank Co., part-owned by Citigroup Inc., posted its biggest two-day drop since November 1999 after confirming plans to sell shares.
Pudong Bank slumped 6 percent to close at 43.23 yuan in Shanghai after declining by the maximum 10 percent yesterday. The bank plans to sell 1 billion new shares to the public, worth 42 billion yuan ($5.9 billion) at the current price, said fund managers including Fan Dizhao at Guotai Asset Management Co.
A sale of that size would boost Pudong Bank's stock outstanding by almost a quarter at a time when the benchmark CSI 300 Index has lost 17 percent since an Oct. 16 record. Ping An Insurance (Group) Co., the nation's second-largest insurer, has lost about a quarter of its market value since announcing plans to sell stock a month ago.
``Domestic investors have been wary of large offerings in current market conditions,'' Samuel Chen, a Hong Kong-based analyst at JPMorgan Chase & Co., wrote in a note to clients today. While the bank needs capital, selling 1 billion shares would be ``excessive, given the lack of good, major M&A opportunities.''
The potential offering would dilute earnings per share by 5 percent in 2008 and 11 percent in 2009, Chen estimated.
The bank may cut the size of the new share offering by as much as 25 percent after a larger-than-expected market reaction yesterday, Reuters reported, citing an unidentified bank executive.
`Development Needs'
``In light of business development needs, the company is studying a plan to sell shares to the public to boost core capital,'' state-controlled Pudong Bank said in a statement to the Shanghai Stock Exchange late yesterday, adding it will decide on details after a board meeting next week.
Chinese companies have sold almost $6.5 billion of stock in Shanghai and Shenzhen this year, even as at least 78 firms worldwide scrapped or delayed share sales while stock markets fell, according to data compiled by Bloomberg.
Pudong Bank, which has 380 branches nationwide, wants to expand lending 18 percent a year by 2010 from 2006, as rising incomes in China encourage people to borrow to buy cars and homes. The Chinese economy grew 11.4 percent in 2007, the fastest pace in 13 years.
Loan expansion pushed Pudong Bank's capital adequacy ratio to 8.24 percent as of Sept. 30, down from 9.27 percent at the end of 2006, close to China's mandatory 8 percent minimum. Capital adequacy ratio is a measure of a bank's financial strength. The share sale may raise the ratio to more than 15 percent, Deutsche Bank AG estimated.
China's Wall Street
Pudong Bank was established in 1992 by the local government to finance development of Shanghai's Pudong financial district into China's version of Wall Street. The lender posted a 64 percent gain in profit last year to 5.5 billion yuan.
Shanghai International Group Co., the investment arm of the local government, holds 33.87 percent of Pudong Bank. The two firms share the same chairman, Ji Xiaohui. Citigroup, the largest U.S. bank, owns 3.8 percent of Pudong Bank.
Stephen Thomas, a Shanghai-based spokesman at Citigroup, declined to comment.
Pudong Bank slumped 6 percent to close at 43.23 yuan in Shanghai after declining by the maximum 10 percent yesterday. The bank plans to sell 1 billion new shares to the public, worth 42 billion yuan ($5.9 billion) at the current price, said fund managers including Fan Dizhao at Guotai Asset Management Co.
A sale of that size would boost Pudong Bank's stock outstanding by almost a quarter at a time when the benchmark CSI 300 Index has lost 17 percent since an Oct. 16 record. Ping An Insurance (Group) Co., the nation's second-largest insurer, has lost about a quarter of its market value since announcing plans to sell stock a month ago.
``Domestic investors have been wary of large offerings in current market conditions,'' Samuel Chen, a Hong Kong-based analyst at JPMorgan Chase & Co., wrote in a note to clients today. While the bank needs capital, selling 1 billion shares would be ``excessive, given the lack of good, major M&A opportunities.''
The potential offering would dilute earnings per share by 5 percent in 2008 and 11 percent in 2009, Chen estimated.
The bank may cut the size of the new share offering by as much as 25 percent after a larger-than-expected market reaction yesterday, Reuters reported, citing an unidentified bank executive.
`Development Needs'
``In light of business development needs, the company is studying a plan to sell shares to the public to boost core capital,'' state-controlled Pudong Bank said in a statement to the Shanghai Stock Exchange late yesterday, adding it will decide on details after a board meeting next week.
Chinese companies have sold almost $6.5 billion of stock in Shanghai and Shenzhen this year, even as at least 78 firms worldwide scrapped or delayed share sales while stock markets fell, according to data compiled by Bloomberg.
Pudong Bank, which has 380 branches nationwide, wants to expand lending 18 percent a year by 2010 from 2006, as rising incomes in China encourage people to borrow to buy cars and homes. The Chinese economy grew 11.4 percent in 2007, the fastest pace in 13 years.
Loan expansion pushed Pudong Bank's capital adequacy ratio to 8.24 percent as of Sept. 30, down from 9.27 percent at the end of 2006, close to China's mandatory 8 percent minimum. Capital adequacy ratio is a measure of a bank's financial strength. The share sale may raise the ratio to more than 15 percent, Deutsche Bank AG estimated.
China's Wall Street
Pudong Bank was established in 1992 by the local government to finance development of Shanghai's Pudong financial district into China's version of Wall Street. The lender posted a 64 percent gain in profit last year to 5.5 billion yuan.
Shanghai International Group Co., the investment arm of the local government, holds 33.87 percent of Pudong Bank. The two firms share the same chairman, Ji Xiaohui. Citigroup, the largest U.S. bank, owns 3.8 percent of Pudong Bank.
Stephen Thomas, a Shanghai-based spokesman at Citigroup, declined to comment.
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