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Daily Dispatches – Chinese banks’ Rmb100 billion equity bonanza

Billions and biliions

Billions and biliions

China’s smaller banks are planning more than Rmb100bn ($16.8bn) in equity sales to boost their capital in the face of changes in regulation and rising bad loans, reports the Financial Times.
China Minsheng Bank raised US$3.2 billion in a convertible bond in March but has one of the weakest capital bases in China, and analysts expect it will be forced to raise equity soon. “I would expect Minsheng to be next to launch a rights issue and perhaps Citic [a rival lender] soon after that,” one Hong Kong-based analyst told the FT.
Mid-sized China Merchants Bank will launch its long-awaited Rmb34.9 billion (US$5.7 billion) rights issue in Shanghai and Hong Kong today. It will be the world’s second-biggest equity market deal this year, according to Dealogic, after Japan Tobacco’s US$7.8 billion share sale in March.
The rights issue, which will also be the fourth-largest by a Chinese bank on record, will give China Merchants Bank a much-needed boost to its capital base after it reported a jump in overdue loans in its half-year results last week.
The latest official figures show non-performing loans at Chinese banks rose for a seventh straight quarter to hit Rmb540 billion in the second quarter, and analysts expect the number of problem loans to continue to rise as a result of a credit boom on the mainland since 2008.
Rupee carnage continues 
India’s financial sector problems continue unabated, with Bloomberg reporting that profitability at the country’s banks – already at their lowest level since 2009 – is set for further declines after measures to stem the rupee’s record slump drove up borrowing costs and exacerbated rising bad loans and slowing loan growth.
Return on equity, which measures profit generated with shareholders’ funds, may fall below 10% in the year to March for banks from last year’s 12.8%, according to said Vibha Batra, co-head of financial-sector ratings in New Delhi at a unit of Moody’s Investors Service.  
India’s banking index, which tracks lenders including State Bank of India, has lost 20% since July 15 following liquidity tightening measures from the central bank, which caused interbank rates to surge to a 17-month high last week. Those steps may drive up the risk of defaults in an economy that expanded last year at the weakest pace in a decade.
Goldman four put on ‘administrative leave’
The Financial Times reports that Goldman Sachs has put four senior technology specialists on leave after a trading glitch last week, that sent markets into turmoil, is likely to cost the bank tens of millions of dollars.
The trading problem has been blamed on a systems upgrade going awry. 
Foreign banks review hiring in China
Finance Asia says that at least two foreign banks have started reviewing their hiring policies following the Securities and Exchange Commission’s probe into JPMorgan’s hiring of two employees from powerful Chinese families.
Two Europe-based banks, not named by Finance Asia, are drawing up lists of staff who may have significant connections following a request from top management.
New SocGen sukuk for Malaysia
Societe Generale is planning a 1-billion ringgit (US$300 million) Islamic bond program in Malaysia, according to a Reuters report published by Ahram Online. The first tranche of the sukuk is set to be issued by the year end. 
Global sukuk issuance grew 54% to US$131.2 billion last year, with Malaysia accounting for 74% of primary market issuances. 
New capital markets head for OCBC
The Asset says that OCBC Bank has appointed Tan Kee Phong as head of capital markets.
Prior to joining OCBC Bank, he was the head of capital markets, Singapore, at Standard Chartered Bank. He also worked at Citicorp Investment Bank (Singapore) for 16 years providing debt capital market and corporate finance advice and solutions.

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