China bank share sales caught in fund scam
Tim LeeMaster and Nevin Nie
Pudong Bank and Bank of Shanghai offerings not expected until year-end
Investigations related to the pension fund scandal in Shanghai have delayed the initial public offering plans of Shanghai Pudong Development Bank and Bank of Shanghai, sources said.
'The municipal government has very close relations with Pudong Bank and Bank of Shanghai, so both banks are under investigation,' a source said.
Possible management changes at both banks were under discussion, the sources said.
Pudong Bank president Fu Jianhua, who took control in the middle of last year, had previously been the chairman of Bank of Shanghai.
Bank of Shanghai declined to comment, while Shen Si, the secretary of the board of directors at Pudong Bank, could not be reached for comment.
No progress was expected to be made on the listing plans of either bank until the annual meeting of the National People's Congress in March, sources said.
Bankers had expected a mandate on Bank of Shanghai's US$500 million offering as early as this month. Pudong Bank, the second-largest domestically listed lender, planned to raise at least US$1.3 billion in its Hong Kong float.
Any offering from the two banks would come towards the end of the year at the earliest, the sources said.
Shanghai's top political officials and business leaders became the subject of a central government investigation last year over allegations that money from the city's pension fund was siphoned to individuals, companies and projects that they had close personal ties to.
Pudong Bank acted as the custodian bank of the 10 billion yuan pension fund.
The pension fund scandal led to the sacking and removal of Shanghai party secretary Chen Liangyu from the 24-member Politburo in September last year for his alleged involvement, followed by the dismissals of three other officials. Shanghai mayor Han Zheng has been appointed acting secretary.
Three state-owned company executives were expected to face prosecution for their part in the scandal, a mainland newspaper reported in November last year.
Huaan Fund Management general manager Han Fanghe; Xu Wei, the former deputy chairman of Shanghai Electric Group's asset management company; and Wang Guoxiong, the former president of Shanghai Industrial Investment Group, were under investigation, the 21st Century Business Herald said.
Mainland banks are hoping to use initial public offerings as a means to strengthen their capital for expansion after the full opening of the sector allowed the entry of foreign rivals. Many also brought in foreign banks as strategic investors to improve operations and corporate governance.
Citigroup, the largest bank in the United States, has a 4.6 per cent stake in Pudong Bank and plans to raise that to 19.9 per cent. HSBC Holdings, the largest bank in Europe, has a 9.9 per cent stake in the Bank of Shanghai.
Citigroup and HSBC declined to comment yesterday.
Pudong Bank, the mainland's eighth-largest bank with 366 branches, raised six billion yuan from a secondary A-share offering in November last year.