Dec 23 - ICBC drew the successful close for its fund raising program through rights issue as payment for the H rights shares finished smoothly. The successful close of ICBC rights issue was a result of the overwhelming response from the investors. Subscriptions for ICBC H shares and A shares were both historic new records.
The 99.72% of ICBC A shares validly subscribed was the highest placement rate by underwriting, while ICBC H shares oversubscribed by 6.7 times represented the highest level of oversubscription among the listed banks in Shanghai Stock Exchange and Hong Kong Stock Exchange. Industry insiders said that it was not easy for such a large cap blue chip stock as ICBC to reach such a high subscription rate given its more than a 1.
4 million of shareholders. It was also a confirmation of ICBC investment value from all the investors and their confidence on ICBC's sustainable development in the days ahead.
Worthy of note is that ICBC's capital adequacy ratio is further improved after the rights issue. The increased capital strength lays the solid ground for the bank's future growth. ICBC's capital adequacy ratio and core capital adequacy ratio are expected to reach over 12% and 10% respectively after this rights issue.
This should let ICBC have substantial capital to encounter the changes taking place in the external environment and withstand potential risk from outside. This is significant for ICBC to maintain its continual, stable and healthy growth and continue to create more value for the investors.
Counting the first factor in explaining the success of this re-financing program of ICBC is the recognition from all the investors on ICBC's fundamentals, said an executive with ICBC. Since going public, ICBC has built up a system of modern financial firm and scaled up its corporate governance framework.
Conscious efforts have been spent on the strategic re-orientation in asset structure and growth model. ICBC achieves new milestones in business performance and maintains market leading position in almost all commercial banking businesses in China. Over the course of five years the annual average loan growth rate of 15% helps the bank boost earnings of around 34%.
ICBC is one of the fastest growing among the big banks in the world. In 2009, ICBC maintained a growth of 16.3% in profit despite the global financial crisis during which many large international banks experienced a negative growth in profit. The Bank's 27.1% year-on-year growth in profit after tax to RMB 127.
8 billion during the first three quarters sailed far above the international peers. Return on assets, return on capital ranking among top international banks fully underscores the relatively strong ability of ICBC's business model to withstand periodic economic downturn and maintain sustainable development.
Despite the complex business and economic conditions, ICBC still demonstrates its outstanding risk management and control with bad loan balance and ratio "both decline" in its eleventh year. The provision coverage ratio at the end of the third quarter reached 210.16% and will be further improved within the year, showing the increased capability of the bank to withstand risk.
Meanwhile, the rights issue scheme which has gained wide support from the shareholders has been designed based on ICBC's equity structure and market conditions, taking the interests of all the investors into full consideration. The biggest benefit of raising funds via rights issue is to offer equal opportunity to all the existing shareholders to subscribe.
The impact is relatively small both to the equity structure and market. Net proceeds can be applied directly to supplement the capital. All shareholders have the right to enjoy the income brought by the future growth of the bank. This is a win-win solution and fair to all shareholders. The fund-raising scheme won the great support from the shareholders and was adopted at the Extraordinary General Meeting held on September 21 by 99.
94%. During the rights issue, ICBC's controlling shareholders, Ministry of Finance and Central Huijin Investment Ltd., subscribed to all the rights shares to be offered by ICBC in cash in proportion to the stake they held. This paves the success of the rights issues.
Besides, ICBC's reasonable pricing also wins the market consensus, taking into consideration various factors as fund-raising efficiency, regulatory requirements, market influence and shareholder interests. One reason is the lower cost for shareholders to hold shares since the rights issue is priced at reasonable discounts relative to the market price. Another reason is the relative small contribution amount by each shareholder. Rational pricing not only ensures attractive stock valuation, but also balance the pressure of the former shareholders to contribute capital.
ICBC always takes retained earnings as the main option to supplement the capital since the bank going public, said the ICBC executive. Over the last few years the Bank maintains sufficient capital for its business growth due to its effort in business re-orientation, management on the total risk-weighted assets to lower capital consumption.
This year, main purpose of the Bank's rights issue is to raise the capital adequacy ratio as required by the regulatory authority on commercial banks after the global financial crisis. In the next step, ICBC remains committed to be highly responsible to the investors and promises to deliver top-of-the-class results to all shareholders by focusing on capital management to properly use the net proceeds.
