Private Firms to Buy Minsheng Bank Shares

Five private enterprises will take part in the private share placement of China Minsheng Banking Corp. (Minsheng Bank, 600016.SH,1988.HK), a private lender of China's Mainland.

Pursuant to the announcement of Beijing-based Minsheng Bank, the lender is going to sell not more than 4.7 billion Yuan-denominated A-shares to seven selected institutions at a price of CNY 4.57 per share. Accordingly, the total fundraising is expected to be about CNY 21.5 billion. Still, the plan has to be approved by the shareholders' meeting of the bank, as well as two regulatory departments China Banking Regulatory Commission (CBRC) and China Securities Regulatory Commission (CSRC).

Shanghai Giant Lifetech Co. and China Oceanwide Holdings Group (COHG), both under the wing of Giant Interactive Group Inc., will respectively subscribe for CNY 6.5 billion and CNY 5.4 billion worth of the additional shares of Minsheng Bank, with the lock-up period for three years.

Sichuan South Hope Enterprises Co. will buy CNY 3 billion worth of the lender's additional shares; China Life Insurance Co. will contribute CNY 2.3 billion; China Shipowner Mutual Assurance Association will contribute CNY 700 million; Jiangsu Rongsheng Investment Group Co. will contribute CNY 3 billion; and Hawtai Motor Group Co. is to contribute CNY 1.2 billion.

Among these seven investors, Shanghai Giant Lifetech Co., COHG, Rongsheng Investment Group, Hawtai Motor Group and Sichuan South Hope Enterprises are all private enterprises, right showing their recognition of the current stock price of Minsheng Bank.

Currently, the core capital adequacy ratio of the lender stands at 8.34%; but after the move, its capital adequacy ratio and core capital adequacy ratio are expected to be 12% and 9.32% respectively, to sustain its development in the coming two to three years. Actually, the capital strengthen of the dual-listed bank is on the verge of restraining the business expansion. The Beijing-based lender during recent two years has progressed well in the loan service for small and medium-sized enterprises (SMEs), thus having stronger demand for capital to meet the regulatory requirement.

During the first nine months of 2010, 16 listed lenders of China earned the net profits of CNY 529 billion, a year-on-year rise of 34%. Such a high profitability is attractive to private capital; and commercial banks can provide an investment channel for these private investors to enter the financial sector, according to a financial professor.