Ping An Insurance (Group) Co of China (2318.HK) plans to inject up to 20 billion yuan ($3.1 billion) in fresh capital into its majority-owned banking unit by subscribing to a share placement, two sources with direct knowledge of the deal said on Wednesday.
This is the second time in less than a month that the world's No.2 insurer by market capitalization would be pumping cash into Shenzhen Development Bank Co Ltd (000001.SZ), which completed a private placement at the end of July.
The cash injections come after a regulatory ruling that could raise capital requirements to as high as 11.5 percent for systemically important banks.
One source earlier told Reuters the total amount being pumped into the bank by Ping An was likely to be about 10 billion yuan but two other sources later clarified it could be double that amount.
The sources declined to be identified because the information was not yet public. Ping An and Shenzhen Development Bank officials declined to comment.
"It's likely for strategic reasons that they're putting more money into the bank," said Olive Xia, a Shanghai-based analyst at Core Pacific Yamaichi.
"I'm also interested in getting more details about how they are going to integrate Ping An's own banking operations with Shenzhen Development Bank's operations."
Trading in shares of Shenzhen Development Bank and Ping An was suspended on Wednesday pending a price-sensitive announcement. Ping An owns 52.4 percent of Shenzhen Development Bank, having completed the purchase last month, and both companies are due to announce their first-half results on Wednesday.
Shenzhen Development Bank had a capital adequacy ratio of 10.13 percent at the end of March. Many banks in China have been fundraising to shore up their capital positions, with the country's so-called "Big Four" state lenders having completed their own general rights issues last year.
AMBITIOUS PLAN
The fund injection would also come after Ping An itself raised $2.5 billion from a private placement deal with Hong Kong billionaire tycoon Cheng Yu-tung in March.
Then, Ping An had said it would use the money raised to shore up Shenzhen Development's capital base. Ping An's insurance business itself has plenty of cash, with a solvency ratio of over 200 percent at the end of last year.
Ping An's move comes as it embarks on an ambitious plan to become a full-service financial services group to facilitate cross-selling between its insurance, banking and securities businesses, modeled after the likes of HSBC (HSBA.L), which owns a 16 percent stake in the Chinese insurer.
Its banking operations contributed about 16 percent of overall profit in 2010. Ping An Chairman Peter Ma has previously said he hopes the company's securities, insurance and banking operations will eventually contribute about a third of the group's profits.
Ping An's Hong Kong-listed shares have fallen about 15 percent in the past month, trailing the benchmark Hang Seng Index's .HSI 6 percent decline.
The insurer is expected by analysts to post on average a 28.2 percent jump in first-half net income to 12.3 billion yuan, thanks to strength in its banking business.
(Editing by Muralikumar Anantharaman)