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UPDATE 1-China's AgBank plans to issue preferred shares to boost capital
August 29, 2013 / 7:52 AM / 4 years ago

UPDATE 1-China's AgBank plans to issue preferred shares to boost capital

* AgBank says work underway to issue preferred shares

* New plan adds to previous plan to sell subordinate debt

* AgBank has lowest capital adequacy among Big 4 banks

* Unclear if shares will be tier-1 or tier-2 capital (Adds bank confirmation)

SHANGHAI/HONG KONG, Aug 29 (Reuters) - Agricultural Bank of China Ltd, the country’s third-largest bank, is working on plans to raise capital by issuing preferred shares, the bank said on Thursday.

AgBank issued earnings on Wednesday, disclosing a quarterly profit that beat expectations, though the bank warned of a challenging climate ahead. It did not mention raising capital in its earnings report.

But analyst reports issued after the results referenced the capital raising from a briefing the bank held with the analysts that cover the company.

A spokesman for AgBank confirmed the plans to Reuters on Thursday.

“AgBank is also eagerly pushing forward preparatory work for the issuance of preferred shares,” said Beijing-based spokesman Zhou Yuan.

The plan for preferred shares comes on top of plans announced in late June for the bank to issue up to 50 billion yuan ($8.2 billion) in subordinate bonds.

Such bonds, which contain write-down provisions, will qualify as tier-2 capital under new regulations that China issued to conform with the global Basel III standards on bank capital. Those regulations took effect at the beginning of this year.

AgBank’s core tier-1 capital adequacy ratio - a measure used to value the strength of a bank’s cash position - stood at 9.1 percent at the end of the first half. That was the lowest among China’s Big Four banks.

Its overall capital adequacy ratio was 11.81 percent at the end of the first half. It is not clear whether the preferred shares will count as tier-1 or tier-2 capital. Under Basel III, preferred shares can count as either tier-1 or tier-2, depending on structure. ($1 = 6.1202 Chinese yuan) (Reporting by Gabriel Wildau and Michael Flaherty; Editing by Chris Gallagher)

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