(Yicai Global) Oct. 18 -- Hua Xia Bank has revealed the disappointing result of its recently completed private placement of shares. But the lender is one of a number facing refinancing difficulties amid low bank stock valuations, analysts said.

Hua Xia Bank was the first listed bank to complete a private placement this year, raising just CNY8 billion (USD1.1 billion), far less than the targeted CNY20 billion. The non-public offering lasted for a year and a half, and only netted two subscribers even though 82 subscription invitations were sent out, according to the results released on Oct. 14.

Hua Xia Bank’s largest shareholder, Beijing-based steelmaker Shougang, and fourth-largest investor Beijing Infrastructure Investment subscribed for CNY5 billion (USD694.3 million) and CNY3 billion of shares, respectively.

Analysts said the disappointing result of the private placement was mainly because the offer price of CNY15.16 (USD2.10) was far higher than the stock price of CNY5.07 on the secondary market.

Chinese banks have been performing poorly on the stock market, with their fundamentals shaken by the Covid-19 pandemic and worries over the real estate sector. Nearly 90 percent of banks in China have recorded market valuations lower than their net assets, and 40 percent had market values of less than half of the net book values. China Minsheng Bank and Hua Xia Bank have long ranked at the bottom with a price-to-book ratio of less than 0.35.

Listed banks will face more funding pressures amid tightening regulations and other factors, with some facing a capital gap of more than CNY2 trillion by 2025 and a tier-1 capital gap of CNY780 billion (USD108.3 billion), according to estimates made by Western Securities.

Banks need to manage market values to improve their equity financing capacity in the context of continued low valuations, said Wang Jian, chief analyst of the financial industry at Guosen Securities.

But listed banks have various tools to replenish their capital, said Dong Ximiao, chief researcher with Merchants Union Consumer Finance, adding that the real concern is for smaller banks, especially unlisted small and mid-sized lenders in difficult situations.

Editor: Tom Litting