BEIJING, April 4 -- The foreign investor-controlled Shenzhen Development Bank (SDB) plans to introduce new global strategic partners and issue secondary debt to boost its financial strength.

    The Shenzhen-listed lender markedly raised its core capital adequacy ratio to 3.71 per cent at the end of 2005 from 2.32 per cent a year ago, according to the newly released annual results.

    "Although it's still below the 4 per cent required by the China Securities Regulatory Commission (CSRC), it's a significant improvement for the bank," Frank Newman, chief executive officer of SDB, said at a press conference Monday. He attributed the increase mainly to the internal capital generation and balance sheet management.

    A new deal with GE Consumer Finance (GECF), the global consumer-lending unit of General Electric, is expected to raise the ratio to the required level once it is approved by the regulatory authorities and the shareholders, said Newman.

    According to the agreement, signed last September, GECF will acquire newly issued shares of SDB valued at US$100 million. The new investor will possibly become the second-largest shareholder of the lender with a 7 per cent share, following the largest shareholder, US private equity firm Newbridge Asia AIV III, which holds 17 per cent.

    The bank will leave no more than 1 per cent of the shares to the third foreign partner, so as not to surpass the 25 per cent cap that foreign firms can hold in financial institutions, as set by the Chinese regulatory authorities, Newman told the media.

    The result of the agreement with GECF will be announced after the bank's share reform, a scheme to turn the roughly 28 per cent of untradable shares into tradable ones. The plan is due to be launched at the end of June.

    The bank later will also consider issuing secondary debt, totalling 3 or 4 billion yuan (US$369.9 million to 493.2 million), to further raise the capital adequacy ratio, Newman said. The ratio stood at 3.7 per cent at the end of last year, which was far lower than the required level of 8 per cent.

    A bank in China can issue secondary debt in the form of private placement only after its core capital adequacy ratio reaches 4 per cent, according to concerning regulations.

    The bank's net profit surged 19 per cent in 2005 to reach 352 million yuan (US$43.4 million), and both lending and deposits jumped more than 20 per cent.

    The bank will focus its business on retailing business, trade financial service and wealth management this year, Newman said.

    SDB shares rose 6.3 per cent to end the trading day at 6.36 yuan (78 US cents) Monday, compared with the broad market's 1.63 per cent growth. Enditem

    (Source: China Daily)