Guangdong Development Bank to Finance CNY10-15bn Before IPO

Guangdong Development Bank, which is busy making preparation for an IPO on the Mainland China stock market, is said to be weighing a plan to raise CNY 10 billion to CNY 15 billion via issuing additional shares to existing shareholders.

The plan has gained approval from its board and is expected to be completed in the first half of this year, revealed people close to the bank. The proceeds will be mainly used to replenish core capital and after the financing, it will continue work with the IPO. Provided that everything goes on well, it will submit application for the IPO to concerned authorities including the China Banking Regulatory Commission (CBRC), the top Chinese banking regulator, at the end of this year at earliest.

The additional share issue is a strategic move the bank takes to boost the IPO and so far, all of its top four shareholders, including Citibank, China Life Insurance Co., Ltd. (SHSE: 601628 and SEHK: 2628), State Grid Corp. of China and CITIC Trust Co., Ltd., have agreed to take part in it in a bid to remain 20 percent stake they each controls in the bank unchanged after the financing. It has been unknown whether its other shareholders including Guangdong Finance Investment (Holding) Corp. Ltd. will participate in the additional share issue. If all of its shareholders will take part in the financing, the top four will each spend CNY 2 billion to CNY 3 billion.

Guangdong Development Bank's net assets reached CNY 32.07 billion as at the end of 2008, with core capital of CNY 18.39 billion. Capital adequacy ratio and core capital adequacy ratio stood at 11.6 percent and 6.7 percent, respectively. After the financing, its core capital will surge by about 100 percent, with capital adequacy ratio and core capital adequacy ratio to be raised to a large extent. In addition to preparation for the IPO, the bank is launching large-scale internal adjustments and personnel changes in the middle level is the first step.

Available statistics show that as at the end of 2009, the bank's total assets hit CNY 666.9 billion, with owner's equity rising 13 percent year on year to CNY 22.2 billion. Pre-tax profit and net profit each rose 63 percent and 22.3 percent. Provision coverage touched 156 percent. Deposit outstanding and loan outstanding reached CNY 559.5 billion and CNY 381.3 billion, each.