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MOF may inject money into BoCom

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Bank of Communications is one of the Chinese lenders that is looking for capital replenishment after a rapid credit expansion last year. [China Daily]

Bank of Communications is one of the Chinese lenders that is looking for capital replenishment after a rapid credit expansion last year. [China Daily]

Bank of Communications (BoCom) is likely to get a capital infusion from the Ministry of Finance through a planned new share issue, sources close to the ministry said Thursday.

"As the largest shareholder in the bank, the ministry may increase its holdings in BoCom by buying new shares issued by the bank after the fundraising plan gets approval from the securities regulator," the source, who declined to be named, told China Daily.

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The fund infusion is expected to bolster BoCom's capital requirements. The bank has of late been plagued by a paucity of funds as it struggles to cope with tighter regulatory requirements.

"If the securities regulator approves BoCom's share float this year, the ministry will purchase a stake to increase its holdings," the source said.

But he said the ministry is yet to decide how much of funds it would inject into the bank, as the bank is yet to announce a timetable for the new share sale.

"It is still premature to get down to the details, as a final decision is likely to be taken only after March 31 when BoCom releases its annual results," the source said.

Capital replenishment

BoCom is among the group of Chinese banks seking capital replenishment after a rapid credit expansion last year. The source indicated that any fundraising plan should be examined and approved by the China Securities Regulatory Commission.

Industry observers expect the ministry to consolidate its position as the largest shareholder through the lender's fundraising plan.

The ministry holds a 26.48 percent stake in BoCom, a little higher than the 19.15 percent stake held by HSBC Holdings, Europe's biggest bank.

"Once HSBC expands its holdings in BoCom, it could become its biggest shareholder," Guo Tianyong, an analyst at China's Central University of Finance and Economics, was quoted by China Business News as saying.

It was also reported that HSBC is considering a bid for a major Chinese bank to reinforce its presence in the country. The reports indicated that HSBC wanted to buy a majority stake in one of China's big three lenders - Industrial and Commercial Bank of China, Bank of China or China Construction Bank.

Chinese investment regulations limit the holdings of overseas banks in domestic lenders to 20 percent. HSBC owns just under 20 percent of BoCom.

"The regulator will not relax the 20 percent stake limit, and there are no discussions on allowing investments above the threshold," a source close to the regulator told China Daily yesterday.

The regulators may allow BoCom to issue new shares in a private placement to the minstry to increase the State's stake in the state control of the lender, the source said.