The Shanghai Pudong Development Bank (SPDB), a joint-stock commercial bank headquartered in Shanghai, said it will issue 439.88 million new shares today at 13.64 yuan (US$1.7) apiece for subscription by shareholders to raise a total of 5.9 billion yuan (US$737.5 million).

The cash infusion would boost the bank's capital adequacy ratio to 9 percent from 8.01 percent, which is only slightly above the minimum required by the China Securities Regulatory Commission.

The bank's shares closed yesterday at 15.93 yuan (US$2) each, a slight premium over the issue price of the new shares.

"The issuance of new shares is important for the bank's expansion by increasing the company's capital adequacy rate," said Shen Si, secretary of the Board of Directors of SPDB.

SPDB, with its registered capital of 3.915 billion yuan (US$489.38 million), launched its first A-share offering in 1999.

This is the second time for the bank to increase its capital since January 2003.

"We will control the venture capital risk and develop the low-risk bank businesses to maintain the adequacy rate at a higher level," said Shen.

SPDB keeps and controls its capital adequacy rate in five ways, including raising money through listed companies, issuing bonds, gaining profits from banking business, doing intermediate business and lowering the venture capital amount.

SPDB has issued one A-share stock and three junior bonds in the stock market. Its intermediate business amount has increased 70 to 80 percent from last year, accounting for 5 percent of total business in SPDB.

Intermediate business in banks includes giving consultation and offering guarantees to companies. "The new issuance amount will make it difficult to cover the bank's loan expenses after one year of operation according to the current development speed," said Qian Kun, an analyst from Chang Jiang Securities.

"SPDB may issue new shares next year to maintain its capital adequacy rate," she added.

SPDB's major holder, Shanghai International Group (SIG), with its subsidiary Shanghai International Trust & Investment Co Ltd, will account for 30.85 percent of shares of SPDB after issuance. Citibank will account for 3.78 percent while Ping An Insurance will make up 4.47 percent.

(China Daily November 30, 2006)