Ping An Bank to get $2.4b capital

Ping An Bank Co Ltd will sell 14.8 billion yuan ($2.4 billion) of additional shares to its parent Ping An Insurance (Group) Co of China Ltd in the third-largest capital raising by a Chinese bank this year.

Ping An Bank will sell up to 1.32 billion of new shares to Ping An Insurance at 11.17 yuan each, the bank said in a filing on the Shenzhen Stock Exchange on Monday. That will raise the insurer's stake in the bank to 59 percent from 52.38 percent.

While China's top banks are well capitalized compared to their global peers, the same cannot be said for smaller and mid-tier banks like Ping An. UBS estimates that Chinese banks listed in Hong Kong alone face a capital shortfall of 300 billion yuan.

Shenzhen-listed Ping An will use the proceeds of the sale to replenish its core capital and increase its capital adequacy ratio to meet regulatory requirements. The deal is awaiting regulatory approval, according to its insurer parent.

Lacking the cheap funding that the country's Big Four banks get from their vast depositor bases, smaller banks face big capital shortfalls under tougher new laws that require banks to hold more capital.

Chinese financial institutions looking to raise funds in Hong Kong are expected to sell around $11 billion worth of shares in the city from now to the first half of 2014.

One key obstacle stands in the way for some banks needing cash to plug funding gaps, roll over loans, boost capital positions, or all three.

A Chinese government rule prevents mainland banks from raising funds in the equity markets when their price is below book value.