UBS has released a research report indicating that China's plan to inject 360 billion yuan into eight major state-owned financial institutions will serve as a positive catalyst. The capital replenishment scheme, which includes ICBC (01398) and ABC (01288) planning private placements to raise up to 100 billion yuan and 160 billion yuan respectively, is expected to eliminate uncertainties surrounding these state-owned banks.
Regarding equity dilution, UBS notes that ICBC will be less affected by direct dilution compared to ABC. Based on an assumed issuance price of 7.82 yuan per share for ICBC, a net profit growth rate of 3.6% or higher would fully offset the earnings per share dilution. For ABC, at an assumed price of 6.72 yuan per share, the expected earnings per share dilution is more significant, estimated at approximately 6.8%.
UBS further highlights that ICBC and ABC reported net profit growth of 3.3% and 5.4% year-on-year respectively in the first half of the year. Both banks also increased their dividend payout ratios by 1 percentage point to 31%. The combination of earnings growth and higher dividend payouts is projected to offset the direct dilution resulting from the capital injection.
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UBS Sees Capital Injection as Catalyst for Major Chinese Banks
Stock News09-08 16:50
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