Bank of China to issue convertible A-H preference shares

They'll be at CNY100 per share.

According to Maybank Kim Eng, Bank of China (BOC) proposed to issue 600m of A-share and 400m of H-share preference shares at CNY100 per share. Both issues will be conducted through a private placement to not more than 200 subscribers each.

Here's more:

The A-share preference shares will be traded on the Shanghai Stock Exchange but the trading arrangement of H-share preference shares has not been announced. If BOC’s CET1 CAR falls to 5.125% (or below), these preference shares will be converted into ordinary shares. The conversion price is the average trading price in the 20 trading days prior to the preference share issuance.

Limited EPS and ROE dilution. We expect BOC to issue 500m preference shares in 2H14 and the remaining 500m shares in mid-2015. BOC has issued 4 tranches of 15-year subordinated notes with a coupon rate of 4-5.3% during 2005-12.

Meanwhile, its 2013 ordinary share dividend yield is 7.1% at the current share price. We project a preference share dividend yield of 6.2% for BOC. Assuming the new capital is used to invest in 0% risk-weight assets (1-year government bond with coupon rate of 3.5%), we estimate that the EPS and ROE dilution will be 2% and 30bps for 2015.

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