China Bank readies P15-B new shares offer

The Philippine Stock Exchange (PSE) has approved a stock rights offering worth as much as P15 billion planned by Sy family-led China Banking Corp. this April.

China Bank planned to sell to existing shareholders as much as 497.97 million in new shares, which would come from the unissued portion of its authorized capital stock, according to an offering circular posted by the PSE on Friday.

The offer shares will be priced on April 6. The offering will run from April 24 to May 5 this year.

Tentative listing date will then be on May 10.

Proceeds from the offering would be used for China Bank’s expansion program while improving its stock trading liquidity.

Ricardo Chua, the bank’s president and CEO, said: “With a strong foundation, China Bank is in a good position to pursue further its strategic direction of becoming an even more significant player in key market segments and a stronger partner for our customers, as we continue to deliver better returns to our shareholders. This capital raising will give us the ammunition to execute our strategy.”

He said this year marked, among others, the 10th anniversary of the acquisition of Manila Bank to become China Bank Savings (CBS). It would later acquire Plantersbank in 2014, before fully integrating it in CBS the following year. CBS returned to full-year profitability in 2016.

China Bank’s core strategy is aimed at expanding its market position by growing risk-weighted assets with a focus on small and medium enterprise and consumer segments while also extending the depth and breadth of its retail distribution.

The offering is also seen to increase the visibility of China Bank with investors and improve the trading liquidity of its common shares in the exchange.

The major shareholder of the bank, the Sy family which also controls the largest conglomerate SM Investments Corp., has expressed support for the stock rights offer.

China Bank is an old commercial bank with a rich history, having helped many Filipino-Chinese businessmen—including the SM group patriarch Henry Sy—when they were just jump-starting their businesses. Many of the Filipino-Chinese tycoons of today have, at some point, obtained crucial credit line from China Bank, which was set up in Binondo in 1920 by a group led by Dee Chuan to help struggling businessmen who could not access the leading banks at that time. It became the country’s first privately-owned commercial bank.

Leading online stock brokerage COL Financial said China Bank should benefit from the planned capital raising activity.

Assuming that China Bank could raise the entire P15 billion, COL estimated the bank’s core or tier 1 capital would expand by 300 basis points to 15.5 percent—significantly above the estimated 10 percent minimum requirement set by the Bangko Sentral ng Pilipinas by 2019.
This is seen enough to support China Bank’s growth in the next two to three years.

China Bank Capital Corp. is the lead underwriter for this exercise. The joint global coordinators and bookrunners are Citigroup and JP Morgan Securities.