China Crisis Highlights: China Construction Bank
US and China
China holds 23% of US Treasury debt and in the near future may also add from the 21% held by Japan, safe in its aspiration to be US’s banker (China) Thus China would not likely do anything to tipple the Dollar from its perch as it by policy likes the US whe it plans to expand in the West despite other political aspirations.
It was a slow crisis
Back in January when by tradition, the Big 4 in China opened the floodgates they quickly notched up more than the $550 m in new loans at the end of the month. Bank of China, covered earlier, led with $135bn or $800bn Renminbi(CNY) in loans. In the same period china Mobile suffered at the bourse for spending $3 bn to pick up 20% of the tiny Shanghai Pudong Bank, and it came three months after the Chinese added a large amount of Yuan in float at the Hong kong markets for preparing for the inevitable. The crisis is currently panning out in a slow expansion of derelict inventory and falling consumption in pockets of the economy. Do go back to all these stories at http://china.advantages.us
This year, we will have more half-drawn swords to show faith in the demands made by the Western World and as the natural sequence of credit dries up, China will look more and more like us. In that light we coevr the other three banks from the mainland held by the Huijin for the PRC. In just October 2008, even as the lemmings sold themselves upstream for the TBTF failures of July and September, ken Lewis paid $7bn for 6.8% of CCB at a substantial discount with the TARP cash. Eventually in 2009 BofA was rid of both Lewis and CCB, CCB sold to a local PE fun, Hopu Invest Management for $3 bn for the 3bn shares coming to 7% of CCB it held. BofA’s 17% netted $7.3 billion for 54 cents a share. Hopu is funded by Temasek of Singapore and the Golden Goldman Sachs. Temasek also pad USD 600MM for a direct stake in CCB.
The Bank
Like other Huijin banks, CCB started global push outs with 3 fund management JVs by 2005, with Credit Suisse, COSCO and Schroeders in the last one in 2005. It’s post IPO hare holders included China Life and Temasek (5.7%) when the government stake through Huijin came to below 50% It established resources in Hong Kong with the acquisition of BofA(Asia) the Bank of Canton successor in the territory in 2006
Currently the Central Huijin has reinvested in CCB with 78.4 moillion H-shares and the S-shares repurchased in six month long market operations and from China Jianyin(Jianyin=Bank) another of its own investment companies in 2009 to 57%
Current CCB Capital Adequacy at 11% is a might lower than 11.5% required by the China Bank Regulatory Commission but has denied rumors of further consolidation by Huijin or new shares issuance to boost the TCE
Huijin is also injecting $12 billion in China EXIM Bank and $4 billion in Sinosure as a CIC subsidiary. China’s banking system liquidity reserves are also lower than the internationally accepted 15% though the regulaors have raised such reserve requirements in 2009.
many of those smaller banks are believed to need new capital to boost their adequacy ratios.
China CITIC Bank (0998.HK)(601998.SS) is actively exploring raising capital [ID:nBJC002509], and China Merchants Bank (3968.HK)(600036.SS) is launching a $3.2 billion rights issue, but this week said it should require no further capital raising for at least the next three years. [ID:nBJB003703]
Bank of Communications (BoCom) (3328.HK) (601328.SS), China’s fifth-largest lender, said last month that it planned to raise as much as 42 billion yuan via a rights issue in Shanghai and Hong Kong to bolster capital.
Strictly Bank Business
CCB October 2009 reported more than $4.52 bn in profits ( 6.7 RMB= 1 USD) growing 18% y-o-y by bank’s IFRS interpretation, $12.86 bn for the 9 months of 2009. It has recently attempted a $730 million Healthcare Fund. At a total of 234 bn shares outstanding, CCB is worth $196 bn as of March 2010. In line with the crises of plenty, it has recently increased down payments on retail mortgages and second homes, designed to step with CBRC’s plans to protect the economy from a property bubble. he bank is opening 100 rural branches with Banco Santander as also a $100mn auo financing unit with them. The Banco Santander JV has a capital of RMB 3 bn. It has also recently bought a 50% stake in Antai Life from ING. It’s last capital raising was thru subordinated bonds worth $15 bn in December
CCB is expected to close 2010 with $40 billion in Sales and has its share of exposure to real estate groups ( $10 bn contract with leading developer) and local bodies though the new debt is mostly from smaller banks
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