UPDATE 2-CIMB in $1.1 bln cash call to boost capital base, take on rivals

* Shares suspended pending an announcement

* CIMB offering new shares at up to 2.7 pct discount to Friday close

* CIMB common tier 1 ratio is below larger banks

* Capital raising could boost tier 1 by 1-1.5 pct pts-UBS

(adds CIMB's core tier 1, analyst quotes on fund raising, context)

By Denny Thomas and Al-Zaquan Amer Hamzah

HONG KONG/KUALA LUMPUR, Jan 13 (Reuters) - Malaysian bank CIMB Group Holdings Bhd CIMB.KL is raising as much as $1.1 billion through new shares to boost its core capital as Southeast Asia's fifth largest lender takes on its rivals in credit and equity markets at home and abroad.

CIMB is bracing for more credit demand on the back of rapid economic growth in Malaysia and a pipeline of large initial public offerings in the country this year.

Its consumer and corporate loan businesses have also been growing at double-digit rates, fuelled by strong economic growth in Southeast Asia, where it counts Singapore, Indonesia and Thailand as its major overseas markets.

"They are taking a dual direction, to invest in their home market as well as the overseas growth drivers. In order to continue both ways, the capital required is quite high," said Chan Ken Yew, head of research at Kenanga Research in Kuala Lumpur.

CIMB's core capital has lagged larger regional peers. Its common equity tier 1 ratio was 8.2 percent at the end of September, below local rival Maybank's MBBM.KL 10.79 percent. DBS Group Holdings' DBSM.SI , Southeast Asia's biggest lender, had a common equity tier 1 ratio of 13.3 percent at the end of September.

The capital raising would boost CIMB's common equity ratio by 1.0 to 1.5 percentage points, UBS said in a research note.

"We view the increase in capital as positive as it removes the overhang on its challenging capital position," said UBS analyst Khairul Rifaie in the note.

CIMB has under CEO Nazir Razak boosted regional operations over the past decade. Nazir also expanded CIMB's investment banking capabilities by acquiring parts of the Royal Bank of Scotland Plc's RBS.L Asia operations outside Japan.

Last year, CIMB became the only Asian bank to win a mandate to advise Warrnambool Cheese and Butter Factory Co WCB.AX , the target of a multi-billion three-way global takeover battle in Australia. News Search ID:nL4N0J31GO

MAJOR MALAYSIAN SHARE SALE

The CIMB share sale is the biggest in Malaysia since Malayan Banking Bhd, or Maybank, tapped equity markets with a $1.2 billion offering in October 2012, Thomson Reuters data showed.

CIMB is selling 400 million new shares for 7.10 ringgit to 7.25 ringgit each, representing a discount of 2.7 percent to CIMB's Friday closing price, according to a term sheet of the deal seen by Reuters on Monday.

Underwriters of the offering have the option to increase the deal by up to $222 million to meet additional demand, taking the total deal size to $1.1 billion.

"The base deal size shares is covered at the wide end of the range. Large orders from existing shareholders, key local institutions and international investors," said a person with direct knowledge of the matter who declined to be named due as they were not authorised to talk to the media.

The bank will use the proceeds to fund growth in subsidiaries, reduce debt and for working capital needs, the term sheet said.

Trading in CIMB, which has a market value of $17.3 billion, was suspended on Monday pending an announcement.

Bank of America BAC.N , CIMB Investment Bank and Credit Suisse are joint book runners of the share sale.

(Additional reporting by Elzio Barreto and Umesh Desai in HONG KONG, Yantoultra Ngui in KUALA LUMPUR and Saeed Azhar in SINGAPORE; Editing by Miral Fahmy)

((denny.thomas@thomsonreuters.com)(+852 2843 6358)(Reuters Messaging: denny.thomas.thomsonreuters.com@reuters.net))

Keywords: CIMB FUNDRAISING/