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Pudong Development Bank plans US$1b share sale

(Bloomberg)
Updated: 2007-05-22 17:11

Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup Inc., said it plans to raise about 8 billion yuan (US$1 billion) selling shares this year to bolster capital for expansion.

The bank may use the local stock market or tap investors in overseas markets including Hong Kong and Frankfurt, Jin Yun, chairman of the Shanghai-based lender, said at a shareholder meeting today.

"Selling shares overseas is part of our five-year strategy and will enable us to meet future capital needs, such as adding outlets overseas," Jin said.

Pudong Bank is targeting 18 percent annual loan growth for the next four years as rising incomes in China encourage people to borrow money to buy cars and homes.

Loan expansion has pushed the bank's capital adequacy ratio down to 9.02 percent as of March 31, compared with the mandated 8 percent minimum. The bank plans to raise the ratio above 10 percent this year.

New York-based Citigroup, which owns 3.78 percent of Pudong Bank, is yet to begin "official negotiations" with the Chinese partner about raising its stake to 19.9 percent, the maximum allowed under Chinese law, Jin said. It may cost Citigroup more than 10 billion yuan to do this, he said.

"Citigroup has expressed its intention to raise the stake several times this year and we are also keen to further our cooperation," Jin said.

Pudong Bank was established in 1992 by the local government to finance development of Shanghai's Pudong financial district into China's Wall Street. The lender now has 370 branches nationwide.

Shares of Pudong Bank have gained 29 percent this year, lagging behind the 89 percent rally of the benchmark CSI 300 Index. Pudong Bank forecast a 30 percent increase in profit to 4.35 billion yuan this year.