By Luo Jun, Jiang Jianguo (China Daily)
Updated: 2007-08-21 14:14

Industrial Bank Co, China's best-performing banking stock, said it plans to raise as much as 50 billion yuan ($6.6 billion) in the nation's biggest bond sale to boost capital and finance loan growth.

The lender will sell the 10-year debt on China's interbank bond market to institutional investors, Industrial Bank said in a statement to the Shanghai Stock Exchange yesterday. The terms and time frame of the sale will be decided before December 31 and are subject to regulatory approval.

"Industrial Bank experienced a sizable deposit migration due to China's heated stock market and its limited branch network. That'll become a bottleneck for its growth," said Wu Yonggang, a Shanghai-based analyst at Guotai Junan Securities Co. "The good news is the bank has placed the issue on top of its agenda and tried to remedy the situation by seeking other funding sources."

With 351 outlets nationwide, Industrial Bank's deposits grew 3 percent in the first half from the end of last year, compared with the nation's average 10.5 percent, leaving it short of funds after loans grew 17 percent. The company also needs money for acquisitions and diversification into wealth management.

The bank, based in the southeastern city of Fuzhou, also said it plans to buy a small rival in Harbin in the country's northeast for no more than 17 million yuan and will set up a fund management venture with Natixis SA, France's fourth-largest bank by market value.

Industrial Bank joins Shenzhen Development Bank Co and China Minsheng Banking Corp in tapping demand for bonds on the country's interbank market, which had 10.6 trillion yuan of debt outstanding at the end of last month. Yields on the benchmark 10-year government bond stood at 4.29 percent on August 17.

The 19-year-old bank, with an average annual profit growth of 31 percent from 2003 to 2005, is benefiting from an economy that grew 11.9 percent in the second quarter, the fastest pace in 12 years. The lender raised $2 billion in an initial public offering in February, bolstering its capital adequacy ratio to 11.24 percent as of June 30, from 8.71 percent in December.

Industrial Bank's stock has more than tripled since its February 2 debut, making it the best performer among the nation's 12 banking stocks.