Bank of Beijing Plans $4bn Hong Kong Flotation

Bank of Beijing, a medium-sized Chinese lender, is eyeing a flotation in Hong Kong to meet international capital-adequacy ratio requirements and the planned stock sale could raise over $4bn.

The Shanghai-listed lender proposes to float a maximum of 3.4 billion H-shares on the Hong Kong Stock Exchange's main board, the company said in a filing to the Shanghai Stock Exchange on 28 April.

That means Bank of Beijing could raise some 25.8bn yuan ($4.1bn) based on the lender's share value in Shanghai on 28 April.

The Hong Kong offering is subject to shareholder and regulatory approval.

City-Based Banks

There are over 110 city-based banks in China and they are all in need of funds to take on larger rivals.

Banks the world over have to meet higher capital-adequacy ratios by 2018, to fulfill Basel III international standards.

China's banking regulator wants non-systemically important banks to have a minimum common equity Tier-1 ratio of 7.5% by the end of 2018 and total adequacy ratio of 10.5%.

Bank of Beijing said, on 28 April, that it had logged a first-quarter profit growth of 9.5% to 4.5bn yuan.

China Slowdown

A credit bubble in the world's second largest economy is deflating, leading to weaker growth momentum, an independent economist, Andy Xie, told CNBC Asia earlier in the month.

A strong services sector will not prevent China's economy from slowing by the middle of the year, analysts said on 3 April, a day after Beijing rolled out modest stimulus measures designed to support growth and the reforms drive.

On 2 April, the Chinese government said it would expedite construction of rail projects and cut taxes for small companies, the first real action this year to boost activity.

Together, the city-based banks controlled 13% of China's $20tn of commercial-banking assets as of March 2014.

By comparison, China's state-owned and joint-stock banks, which operate nationwide, controlled 77% of that $20tn, according to official data.

Bank Runs

Two small rural lenders in China suffered bank runs late last month following speculation that one of them was going bankrupt. The panic was sparked by alleged failures to allow customer withdrawals.

The incidents, though isolated, won national airplay.

Earlier in March, China's financial system saw its first onshore default, despite assumptions that Beijing would always intervene to prevent institutions from collapsing.

Analysts described the Shanghai Chaori default as China's "Bear Stearns moment" - possibly a slight exaggeration.

China's economy expanded by 7.7% in the fourth quarter of 2013, from a year ago, after expanding 7.8% in the third quarter.