UPDATE: BoCom: No More Fund-Raising Plans After Rights Issue

Bank of Communications Co. (3328.HK), China's fifth-largest lender by assets, said Monday it has no more fund-raising plans in the short term after its CNY33.1 billion (US$4.8 billion) rights issue.

The bank, 19%-owned by HSBC Holdings PLC (HBC), said Sunday it will raise CNY33.1 billion from a rights issue in Shanghai and Hong Kong, 21% lower than the maximum CNY42 billion it originally planned to raise amid weak stock market conditions and Agricultural Bank of China Ltd.'s huge initial public offering.

"The proceeds from the CNY33.1 billion rights issue are sufficient to satisfy the bank's need for capital in the coming three years at least," said Qian Wenhui, a vice president of the bank. "After the rights issue, the bank has no plan to raise more funds from the capital market in the short term."

Qian said the original CNY42 billion fund-raising target was a top-line estimate.

"It doesn't mean we will always raise funds at the top end," he said. "When we plan fund-raising, we must consider market conditions, the bank's need for business expansion and shareholders' interest."

The Chinese and Hong Kong stock markets have fallen sharply recently because of concerns about Europe's sovereign-debt crisis and worries China's efforts to cool its property market could result in a double dip for the economy.

China's benchmark Shanghai Composite Index has dropped 20% since the middle of April, while Hong Kong's Hang Seng Index has fallen 10%.

Qian said BoCom's rights issue will help the bank boost its core capital adequacy ratio--equity and retained earnings as a proportion of assets--by 1.6 percentage points. Its core capital-adequacy ratio is the lowest among China's publicly traded major banks. At the end of last year, the ratio was 8.15%, close to the regulatory minimum of 7%.

Qian also said HSBC will fully subscribe to the rights issue. To maintain its level of ownership, the U.K. lender will spend around US$900 million on the issue, according to a calculation by Dow Jones Newswires.

Bank of Communications said it will offer 3.89 billion yuan-denominated A shares in Shanghai at CNY4.50 each, and 3.46 billion Hong Kong dollar-denominated shares in Hong Kong at HK$5.14 each.

Around 0540 GMT, the bank's shares were down 3.1% at CNY6.19 in Shanghai, and down 1.6% at HK$8.06 in Hong Kong. The Shanghai Composite Index was down 2.0% at 2502.56, and the Hang Seng Index was down 2.4% at 19,313.05.

-Rose Yu contributed to the article, Dow Jones Newswires; (86-21) 6120-1200; [e-mail]