KUALA LUMPUR/SINGAPORE (REUTERS) - Hong Leong Bank Bhd is planning to raise up to 3 billion ringgit (S$1.04 billion) in rights issues this year to strengthen its capital, two sources with direct knowledge of the matter said on Tuesday.
The bank, Malaysia's fifth largest by assets, is the last of its peers to bolster its capital to meet more stringent central bank requirements under the global Basel III framework, the sources said.
Analysts had earlier said Hong Leong Bank's core capital, measured by its common equity tier 1 ratio, was one of the lowest among local banks at 8.1 per cent and that the bank was seeking to increase that level to at least 10 per cent.
A Hong Leong spokesman did not respond to repeated requests for comment. The sources declined to be identified as the matter remained confidential.
The bank's parent, Hong Leong Financial Group, would be the issues' main subscriber and would raise up to 2 billion ringgit through a separate rights issue this year, the sources said.
Malaysia's central bank has set a 2019 deadline for local banks to comply with the Basel III requirements.
In April, fourth largest lender RHB Capital Bhd announced plan to raise 2.5 billion ringgit in a rights issue, which is expected to be completed year-end. Larger peers CIMB Group Holdings Bhd and Public Bank Bhd have also raised capital since last year.
A slowing economy and weaker currency are pressuring profit growth at Malaysian banks, reducing loans and consumer spending. Analysts said this pressure on profits was likely to continue, as the outlook for the economy remains weak.
"I think the moderating trend will continue," said Julian Chua at Nomura Holdings Inc. "It will gradually trend lower because I think business and consumer sentiment are still pretty weak."