According to a written notice received on 15 Aug 2008, from the China Securities Regulatory Commission, the securities regulator in China has approved Hua Xia Bank Co., Ltd. (600015) to place yuan-denominated A-shares with three existing shareholders, namely Shougang Group Co., Ltd., State Grid Corporation and Deutsche Bank, with a six-month period of validity beginning from the date that the notice was issued.

Hua Xia Bank’s private placement scheme indicates that, to supplement core capital, the company plans to raise RMB 11.558 bln by issuing new shares, of which the Shougang Group will subscribe to RMB 3.942 bln, the State Grid will subscribe to RMB 3.706 bln and the Deutsche Bank will subscribe to RMB 3.909 bln.

Investors have not favored Hua Xia Bank due to its low capital adequacy ratio (CAR). As of the end of 2007, the bank's CAR was 8.27%, which was only higher than that of Shenzhen Development Bank among 14 domestic publicly listed banks. Meanwhile, its core CAR was merely 4.3%, precariously only slightly higher than the 4% minimum required by regulatory authorities. According to analysts from Huatai Securities, the RMB 11.56 bln private placement will lift Hua Xia Bank's CAR and core CAR to approximately 12% and 8% respectively, which will fuel its business expansion in the future.

According to statistics in the 2007 Annual Report of Hua Xia Bank, Shougang Group was its largest shareholder with a 10.19% stake, State Grid was its second-largest shareholder with an 8.15% stake, and Deutsche Bank was its fourth-largest shareholder with a 7.02% stake. All three shareholders have committed to a 36-month lock up period which will commence upon completion of the private placement, showing great confidence in its future performance.

In addition, the company's total asset value as of 30 Jun 2008 was RMB 628.1 bln, a 30.6% increase YOY, of which loans were RMB 334.2 bln, a 14.9% increase YOY, liabilities were RMB 613.7 bln, a 30.8% increase YOY, including deposits of RMB 457.3 bln, a 20.2% increase YOY.

CN01/FL/SW/BT/KM