Since the Bank of Jiangsu (600919.SH) launched the allotment fundraising at the end of last year, A-share banks have set off a round of allotment fundraising. Since the beginning of this year, Bank of Qingdao (002948.SZ, 03866.HK), Bank of Ningbo (002142.SZ), and China Zheshang Bank (601916.SH) have announced that they will raise capital through allotment. On November 18, the allotment plan of Bank of Ningbo was implemented.
The last round of A-share bank allotment fundraising also dates back to China Merchants Bank (600036.SH) in 2013 implemented 27.5 billion yuan of allotment financing. Allotment refers to the financing behavior in which the original stock shareholders allot a certain amount of newly issued shares at a certain price lower than the market price according to their shareholding ratio.
Discount allotment
Since last year, the rights issue prices of the two banks that landed the rights issue, Bank of Jiangsu and Bank of Ningbo, have been on the basis of market prices. 7.7 fold and 5.2 fold.
On November 18, Bank of Ningbo issued a share allotment prospectus, showing that Bank of Ningbo’s share allotment will be issued after the closing date of the Shenzhen Stock Exchange on November 23, 2021. The total number of A shares of the issuer is 6.008 billion shares as the base, and the total number of shares available for allotment is 601 million shares based on the proportion of 1 share for every 10 shares allotment. The total amount of funds raised by Bank of Ningbo in this allotment does not exceed 12 billion yuan (including 12 billion yuan). After deducting related issuance costs, all funds will be used to supplement the core tier 1 capital of Bank of Ningbo, increase the level of capital adequacy, and enhance the ability to withstand risks.
The price of the rights issue of Bank of Ningbo is 19.97 yuan per share. As of the close of trading on November 18, 2021, the stock price of Bank of Ningbo is 38.12 yuan per share, and the placement price is equivalent to a 52% discount.
On December 8th last year, Bank of Jiangsu issued a “Reminder Announcement on Allotment”, which showed that Bank of Jiangsu’s current allotment was based on the equity registration date after the closing of the Shanghai Stock Exchange on December 8, 2020. The total number of A-shares of Bank of Jiangsu is 11.545 billion shares. It will be allotted to all A-share shareholders at a ratio of 3 shares for every 10 shares, and the total amount of allotable shares is 3.463 billion shares.
According to the allotment price of 4.59 yuan per share, Jiangsu Bank will raise 15.895 billion yuan from the allotment. As of December 8, 2020, the closing price of Bank of Jiangsu was 5.93 yuan per share, and the placement price was equivalent to a 30% discount.
Supplement of core Tier 1 capital
The allotment of shares of Bank of Jiangsu and Bank of Ningbo has been implemented. Bank of Qingdao and China Zheshang Bank also released plans for allotment this year.
On February 26 this year, the Bank of Qingdao issued the “Public Issuance of Securities by Allotment Plan”, which proposed to use the method of allotment of shares to original shareholders to raise funds of no more than 5 billion yuan. All are used to supplement core Tier 1 capital. The A-share allotment is planned to be based on the total number of A-shares after the close of the market on the registration day of the A-share allotment, and to be allotted to all A-share shareholders at a ratio of no more than 3 shares for every 10 shares. The H-share allotment is planned to be based on the total number of all H shares determined on the registration date of the H-share allotment rights, and to be allotted to all H-share shareholders at a ratio of not more than 3 shares for every 10 shares allotment.
If calculated based on the total share capital of Bank of Qingdao of 4.510 billion shares as of December 31, 2020, the number of shares placed this time will not exceed 1.353 billion shares, of which A shares The number of allotment shares does not exceed 824 million shares, and the number of allotment shares for H shares does not exceed 529 million shares.
On October 28, Zheshang Bank issued a rights issue plan, intending to allot no more than 3 shares for every 10 shareholders of the original A shares, and the total amount of funds raised by the placement should not exceed 18 billion Yuan, used to supplement core Tier 1 capital and support the steady development of various businesses in the future.
How do you view the frequent occurrence of bank allotment since the end of last year?
Since the end of last year, bank allotments have frequently appeared. How do you view this phenomenon? Wang Yifeng, chief analyst of the financial industry of Everbright Securities, said in a news interview that allotment is a quicker way for banks to replenish core Tier 1 capital. Since last year, in order to fight the epidemic, bank loans have been issued relatively quickly. Since 2021, banks in Jiangsu and Zhejiang have maintained a relatively good business climate, credit is also relatively fast, and capital has also been consumed to a certain extent. Under this circumstance, it is normal for banks to start allotment to supplement core Tier 1 capital.
Liao Zhiming, chief banking analyst of China Merchants Securities, said in a news interview that the frequency of allotments is related to the generally low valuation of banks in the past two years.
” Among these banks, Bank of Ningbo has a relatively high valuation, with relatively exceptions. Most A-share listed banksThe valuation of the bank is relatively low. Banks supplement core Tier 1 capital mainly through fixed increase, allotment, and convertible bonds. There is a requirement for fixed growth to be no less than the most recent audited net assets per share, which makes fixed growth participating institutions need to purchase bank shares at a premium. Compared with fixed increase, the allotment of shares can break through the 1x PB (price-to-book ratio) limit, and all shareholders of the bank can participate in the allotment. Replenishing capital with convertible bonds may be time-consuming. “Liao Zhiming said.
In addition, Liao Zhiming believes that the current pressure on banks to supplement core Tier 1 capital is relatively large, especially the additional capital of domestic systemically important banks. “Additional capital needs to be met by core tier one capital, so some banks with greater pressure on core tier one capital will choose the way of allotment to supplement. “Liao Zhiming said.
How does the allotment affect the stock price?
What impact will allotment have on the stock price of bank stocks? Liao Zhiming believes that in the short term, the allotment will have a negative impact on bank stock prices. “Generally speaking, the rights issue price will be a 30% discount to the market price or less, so that existing shareholders have to participate. If they do not participate, they need to sell the shares before the implementation of the rights issue. Therefore, for the stock price, the rights issue is negative in the short term. Influence.” Liao Zhiming explained.
Wang Yifeng believes that the ROE will be evenly diluted after the bank allotment. If the proportion of allotment is not large, the impact on the stock price will not be particularly large, but more capital increase. After that, support the next stage of development of the bank.