Why BEA does not need to raise equity capital in the near term

It recently placed 111.6m new shares to Sumitomo Mitsui Bank.

According to Maybank Kim Eng, on 4th Dec 2012, BEA placed 111.6m new shares to Sumitomo Mitsui Bank Corporation (SMBC), at HKD29.59 per share, and raised HKD3.3b of new capital. We believe  that the new share placement was not totally unexpected.

Here's more from Maybank Kim Eng:

CAR enhanced by 75bps, no short term fund raising risk. Under BEA’s management guidance, the new share placement would enhance BEA’s core and total CAR by 75bps each. We believe that BEA does not have to raise equity capital in short term.

Updates on China operating trends. 1) There is some pressure on net interest margin (NIM). Loan yields are stable, or even rising, but falling yield of other assets (interbank placement, discounted bills, etc) dragged down NIM. There is some pressure on funding costs as well.

2) NPL ratio rose slightly, but still below market average, or even below average of foreign banks. The NPLs are mainly limited to some troubled regions (e.g. Zhejiang province), and the worsthas already gone.

3)  BEA reviewed its strategy on mainland China, and re-organized its branches, to focus more on corporate banking side. This may improve the cost to income ratio.

HK NIM satisfactory, asset qualities stable. For HK operations: 1) Whole year loan growth should be single digit. 2) Overall NIM trend is satisfactory. Cost of fund on CNY rose, due to competitions, but costs of funds on HKD and USD remain stable. There were some pick up in loan pricing. 3) Asset qualities remain stable, though provisions charges may still rise.