China Merchants Bank Co has planned to raise 35 billion yuan ($5.4 billion) in a rights offer to shareholders in China and HongKong, Bloomberg reported.
The  nation’s  sixth-largest lender will offer 2.2 shares for every 10 existing shares held by investors.
The bank will set pricing of the rights offer later.
The share sales are the only viable option as the banks outstanding subordinated debt has already exceeded the limit set by the regulatory commission,  bank said.
Also, China Merchants Bank may need to raise as much as 25 billion yuan of new capital to increase its core capital ratio to 10%.
Timothy Li , a Hong Kong-based analyst at Core Pacific-Yamaichi International(H.K.) Ltd, said, “Short-term doubts over the bank’s capital raising plan have been removed.” He added, “It’s clear now how much it plans to raise and how.”
Besides, local banks are raising capital to meet higher  adequacy requirements from the China Banking Regulatory Commission.
China Banking Regulatory Commission, it said in April it will raise the minimum capital adequacy ratio for systematically important banks and less-crucial lenders to 11.5% and10.5% respectively.
China Merchant Bank’s core capital adequacy ratio is substantially lower than the new regulatory minimum and it capital adequacy ratio was 10.9%.