China to Recapitalize Four Big Banks With $69 Billion

China’s finance ministry will inject $69 billion into four of the nation’s largest state banks via their share placements, following through on Beijing’s earlier pledge to beef up the lenders’ capital buffers.

Bank of Communications Co.,Ltd., Bank of China, Postal Savings Bank of China Co., Ltd. and China Construction Bank plan to raise up to a combined 520 billion yuan ($72 billion) through additional offerings of mainland-traded stocks, according to filings on Sunday. The Ministry of Finance of the People’s Republic of China will be the top investor in all the proposed private placements, subscribing to 500 billion yuan worth of shares in total.

The announcements follow Chinese authorities’ pledge in early March to issue 500 billion yuan in special sovereign bonds to replenish capital at the nation’s biggest state-owned banks. The plan to help out the lenders was first flagged as far back as September and the government later said it would tap the notes to fund the injections.

China is beefing up the strength of its banking system — even though the top six lenders have capital levels that exceed requirements — after enacting a string of stimulus policies including cuts to mortgage and policy rates.

Stronger capital buffers will allow lenders to potentially provide more loans as Beijing vowed greater support for sectors from property to consumer and technology to achieve a growth target of about 5% this year. It’ll also serve China’s purpose to maintain financial stability and keep risks in check, while it contends with both domestic woes and tariff shocks from the US.

Source: Bloomberg