Citigroup pumps $800m into South Korea unit

SEOUL: Citigroup Inc is injecting $800m of new capital into its South Korean banking arm, Citibank Korea said on Monday, joining other banks in efforts to shore up their financial bases.

Sixty per cent of the injection will be used to issue new shares while the remaining 40 per cent will be for subordinated debt, both to be acquired by the New York-based banking giant, Citi said.

"The first 60 per cent has already been provided and converted into Korean won," said Lee Yong-shik, a spokesman for Citibank Korea.

"The remaining 40 per cent will be received over the next few days, before the end of the year." Banks across the region have been rushing to raise new capital as the deepening economic slump is expected to snowball bad loans and cut into profits.

"With the capital injection, the bank's BIS capital ratio at Basel I is expected to exceed 13 per cent from 10.8 per cent and Tier 1 ratio is expected to exceed 11 per cent from 9.74 per cent," Citi said, referring to the Bank For International Settlement capital ratio.

South Korean banks pledged in November to raise their capital ratios, mostly by selling subordinated debt. South Korean regulators have further advised domestic banks to push their capital ratios above the pledged levels to secure room to lend more to cash-strapped companies.

The country's top four lenders, led by Kookmin and Shinhan, plan to raise a combined 8 trillion won ($6.22 billion) by the end of this month via issues of subordinated debt and new share sales to their parent groups, according to Reuters calculation.

"Our Tier 1 ratio was much higher than other banks even before the recapitalisation," Citibank Korea CEO YK Ha said in a statement. "Citigroup's investment this time will further strengthen our capital position, making us the strongest bank in terms of capital base."