Industrial and Commercial Bank of China Ltd. (ICBC), the country's largest lender by market value, said Saturday it plans to issue preferred stocks worth up to 80 billion yuan (about 13 billion U.S. dollars) to replenish its capital.
Up to 45 billion yuan in preferred shares will be issued in the domestic market and another 35 billion yuan in preferred shares are planned for the overseas market, ICBC said in a filing on the Shanghai Stock Exchange.
According to the plan approved by ICBC's board, the bank will issue the preferred shares to no more than 200 qualified investors through a private offering in the domestic market.
The issuance of preference shares overseas will be carried out independently from the domestic offering, according to ICBC.
Voting rights for the planned preferred stocks will be restricted, ICBC said.
As bad loans build up, other Chinese lenders, such as Agricultural Bank of China Ltd. and Bank of China Ltd., said earlier this year they planned to issue preferred shares worth billions of dollars.
The non-performing loan ratio climbed to 1.08 percent for Chinese commercial banks by the end of June this year, according to the China Banking Regulatory Commission.
To help banks meet new global capital rules known as Basel III, the China Securities Regulatory Commission announced in March this year new rules of the pilot program allowing eligible companies to issue preference shares.
Preference shares, along with common shares, are two primary types of stocks that companies offer to investors. Preference shareholders have priority rights over ordinary shareholders in distribution of profits and residual assets.
Unlike common shares, preference shares function more like a bond. They are rated by major credit-rating companies and their prices are affected by changes in interest rates.