Agricultural Bank of China (AgBank) and Industrial and Commercial Bank of China (ICBC), two of China's largest state-owned banks, have unveiled significant capital-raising plans totaling 260 billion yuan ($35.6 billion). AgBank intends to raise up to 160 billion yuan ($21.9 billion) through a private placement of A-shares, as disclosed in a filing with the Shanghai Stock Exchange. ICBC, in a separate Shanghai filing, announced its plan to raise 100 billion yuan ($13.7 billion) to strengthen its capital reserves. Both banks specified that the proceeds, after deducting issuing expenses, will be entirely used to supplement their core tier-1 capital.
The private placements are structured to involve key state-affiliated entities. AgBank's proposal includes issuing shares to the Ministry of Finance of the People's Republic of China, China Tobacco Corp., and its various subsidiaries. Specifically, the Ministry of Finance is slated to subscribe for 130 billion yuan ($17.8 billion), China Tobacco for 10 billion yuan ($1.37 billion), and provincial tobacco entities like Jiangsu, Zhejiang, and Hubei Tobacco for 5 billion yuan ($685 million) each. Beijing Tobacco plans to invest 3 billion yuan ($411 million), and Shuangwei Investment 2 billion yuan ($274 million).
ICBC's capital raise also targets the Ministry of Finance of the People's Republic of China and China Tobacco Corp. along with its related subsidiaries. These capital injections are aimed at enhancing the banks' financial stability and risk resilience, aligning with national arrangements to support large state-owned commercial banks in increasing their core tier-1 capital. The moves are also expected to help the banks fulfill their roles as leading institutions in serving rural revitalization, the real economy, and everyday citizens.
The final size of the fundraising for both banks will be contingent upon regulatory approvals. The announcements come as China's financial sector navigates economic challenges, and these capital boosts are crucial for maintaining the stability and operational capacity of these major institutions. The plans underscore a concerted effort by the Chinese government to shore up the financial health of its banking giants.
