Lenders' IPOs may offer debut bonanza
Retail investors are set to reap handsome gains from initial public offerings of two mainland city commercial banks, as analysts expect the shares to trade at a substantial premium on the first day.
Brokerages say Bank of Nanjing's and Bank of Ningbo's share offers would be priced lower than those of their listed peers, giving investors new darlings in the current sluggish market.
'Their shares will skyrocket on the first trading day,' said Qiu Zhicheng, a banking analyst at Haitong Securities. 'Subscribers may see a more than 50 per cent gain if they cash out during the trading debut.'
Bank of Nanjing, 19.2 per cent owned by BNP Paribas, will sell the shares at between 9.8 yuan and 11 yuan each on the Shanghai Stock Exchange.
Bank of Ningbo, partly owned by Oversea Chinese Banking Corp, is offering its shares at between eight yuan and 9.2 yuan on the Shenzhen bourse.
Subscriptions for their shares open today and the fund will be tied up until Monday, when the final prices are set and the bid winners are decided through a lottery.
Assuming Bank of Nanjing sets the price at 10 yuan, its book value will be 5.30 yuan each. The shares would trade at 18.50 yuan, based on an average 3.5 times price jump among the 10 mainland-listed banks, analysts said.
Analysts believe Bank of Ningbo, the smaller of the two, will be more popular because of the lender's higher quality.
'The Ningbo bank is better in quality,' said Dorris Chen, an analyst at BNP Paribas Peregrine. 'But it makes no difference to investors during [share launches] because only lucky subscribers will be able to get shares of either bank.'
Bank of Ningbo, the mainland's best city commercial lender in terms of financial strength, reported that profit last year grew 34 per cent to 632 million yuan.
Its non-performing loan ratio at the end of last year was just 0.34 per cent.
In comparison, Bank of Nanjing eked out a profit of 595 million yuan, up 62 per cent from a year earlier.
The lender's non-performing loan ratio stood at 2.47 per cent as of December.
Ping An Securities estimates that Bank of Nanjing's shares will rise as high as 16.50 yuan, or 5.5 times the stock's book value after the offering, based on the offer price of nine yuan per share.
'In terms of fundamentals, the two banks will be above the average among the listed banks,' said China Securities analyst She Minhua.