China steps up with $71.6bn bank recapitalisation plan

In a bid to strengthen the financial sector, Bank of China, China Construction Bank, Bank of Communications and Postal Savings Bank of China have announced plans to raise a combined 520bn yuan ($71.6bn) in private placements.

Source: Linkedin

The fundraising, which includes participation from the Ministry of Finance, aims to enhance the banks’ core tier-1 capital. This move follows Beijing's recent pledge to recapitalise key banks to support the country’s real economy amid ongoing economic challenges.

The Bank of China plans to raise up to 165bn yuan, while China Construction Bank aims for private placements of up to 105bn yuan. Meanwhile, Bank of Communications intends to sell shares worth up to 120bn yuan, and Postal Savings Bank of China will raise up to 130bn yuan.

According to the filings, China’s finance ministry, a key shareholder in all four banks, will participate in each of the capital raises.

The bank's filing reveals that the ministry will become the controlling shareholder of Bank of Communications following the share issuance.

China’s largest banks have reported flat annual profits and shrinking margins, as a slowing economy and a troubled property sector have impacted their earnings.