SHENZHEN Development Bank will sell shares to Shanghai Baosteel Group Corp to raise 4.22 billion yuan (US$571 million) to boost its capital.
Baosteel, China's biggest steel maker, will buy 120 million shares at 35.15 yuan apiece and promised not to sell the shares until 36 months after the placement, the Shenzhen-based bank told Shenzhen Stock Exchange yesterday.
Baosteel will hold 5.4 percent stake of the bank after the placement. The capital will be used to boost the lender's capital adequacy ratio, which stood at 4.27 percent at the end of September.
It is the only Chinese listed bank whose capital adequacy ratio falls below the nation's eight percent threshold. This has kept the bank from boosting loan growth and expanding its network.
"The move will act as a shot in the arm to the lender as capital fallout has been an obstacle curbing its growth in recent years," said Qiu Zhicheng, a Haitong Securities Co analyst.
Haitong increased its rating on the bank from "hold" to "add."
China Securities Co said the move is positive for the bank, and it maintains its rating as "add."
The bank passed the plan at its board meeting on Saturday.
TPG Newbridge Capital, which holds a 16.68-percent stake in the bank, now controls the bank based in the southern city in Guangdong Province. Newbridge's stake will be diluted to 15.8 percent after the shares placement.
The bank's lending grew 17 percent to 213.9 billion yuan at the end of September. Its deposits gained 24 percent to 287.9 billion yuan.