China - China cuts dividend payouts for state banks

BEIJING – China’s Central Huijin Investment Co, the state parent of the country’s “Big Four”state banks, said it would cut the dividend payout ratio for three lenders to help relieve their capital strains.

Huijin will cut the ratio for Industrial and Commercial Bank of China , Bank of China and China Construction Bank by 5 percentage points to 35 percent of their 2011 earnings, it said on its website.

The ratio for Agricultural Bank of China will remain unchanged at 35 percent, it said.

The move followed two successive dividend cuts for the state banks in the previous two years, according to Huijin, a unit of China Investment Corp, the nation’s sovereign wealth fund.

The 21st Century Business Herald has reported that a 5 percentage point dividend cut would allow the banks to retain an estimated 26.4 billion yuan (S$5.22 billion) in profits to replenish capital. That would give them more funds to lend.

Chinese banks have been rushing to raise money from the capital markets in recent years due to rapid expansion and tighter capital requirements from regulators.

China’s banking watchdog has repeatedly urged lenders to widen their financial channels and reduce reliance on equity financing.

Following the rush for share sales in 2010, many lenders have turned to debt financing, with the country’s five biggest lenders, which also include Bank of Communications , raising 186 billion yuan through subordinate bond sales in 2011 alone, the newspaper said.

Reuters

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