OCBC

OCBC is proposing to raise net proceeds of up to $3.32b via the issuance of 440.m rights shares, on the basis of one right share for every eight shares held, at a rights price of $7.65. The issue price represents a discount of 25% to the group’s latest trading price on 15th Aug ’14, and a 22.9% discount to the theoretical ex-rights price of $9.92. The rights issue will enable the company to strengthen its balance sheet and enhance the flexibility of the group, following its successful acquisition of Wing Hang Bank. We highlight that the latest rights issue does not come as a surprise, as market watchers have been guiding for the bank to carry out a round of equity raising, following the group’s recent successful acquisition of Wing Hang Bank for $6.23b. The $3.32b raised by the rights issue, indicates that 55% of the Wing Hang acquisition would be funded by equity, with the remaining 45% by debt and/or internal cash reserves. The latest equity raising would raise OCBC’s Common Equity Tier 1 (CET 1) capital to 13.0%, up from 10.8%, assuming full payment of Wing Hang.