Citibank Korea to raise US$800 mln for capital base

SEOUL, Dec. 29 (Yonhap) -- Citibank Korea Inc. said Monday it will raise US$800
million by issuing new shares and selling subordinated bonds to increase its
capital base.
The bank will raise $480 million or 60 percent of the amount of the capital
increase via the issuance of new shares with the rest to be funded by floating
rate subordinated bonds, the local unit of Citigroup Inc. said.
The new shares and the dollar-denominated bonds will be purchased by parent bank
Citigroup by the end of this year, the local unit said.
The capital increase will push up its tier-1 capital ratio up to 11 percent from
9.74 percent under the current standard of the Basel I or Switzerland-based Bank
for International Settlements (BIS), which advises lenders to maintain a capital
adequacy ratio of 8 percent or higher.
It will also boost Citibank Korea's capital adequacy ratio above 13 percent from
10.8 percent now, according to the bank.
Capital adequacy ratio, a key barometer of financial soundness, measures the
percentage of a bank's capital to its risk-weighted credit.
All local lenders will be obliged to abide by the New Basel Capital Accord, also
known as Basel II, which calls for more rigorous risk and capital management
requirements, starting 2010.
In recent weeks, South Korean lenders have been selling preferred shares and
issuing subordinated and hybrid bonds to increase their capital bases amid
swelling delinquencies.
The average capital adequacy ratio of 18 commercial and state banks stood at
10.86 percent as of the end of September, down 0.5 percentage point from three
months earlier, according to the nation's regulator Financial Supervisory
Service.
The government pledged earlier this month to set up a 20 trillion won (US$15.6
billion) fund in January to help local lenders increase their capital bases by
purchasing their shares and bonds.
pbr@yna.co.kr
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