Earnings result to power Everbright's debut
China Everbright Bank shares are expected to edge higher in their Shanghai debut today following the lender's announcement that first-half profits nearly doubled from a year ago, analysts said.
Everbright Bank, the 11th-largest mainland lender by assets, raised 18.9 billion yuan (HK$21.62 billion) in the country's second-biggest initial public offering this year by selling 6.1 billon shares. The price is about 1.6 times estimated price-book ratio, lower than the 1.8 times average of joint-stock banks.
'The bank's pricing is reasonable. Because of the robust profit increase in the first half, the possibility is low of the share price falling below the IPO price on the debut day,' said Zheng Ning, an analyst with Founder Securities.
Everbright Bank, which operates more than 400 branches across the country, yesterday said first-half net profit rose to 6.83 billion yuan on improved net interest margin, booming intermediary business and better asset quality.
The shares will probably climb to as high as 3.25 yuan on the first day of trading, against the stock offering price of 3.10 yuan, according to the median forecast of six analysts polled by Reuters.
'Considering the lack of interest in bank shares these days, the increase in Everbright shares is unlikely to be large,' Zheng said.
Interest in bank shares has been lacklustre because of concerns over massive fund-raising and the banks' asset quality because of last year's lending spree.
Banks extended an unprecedented 9.6 trillion yuan in new loans last year to help fund the nation's stimulus package. Many of the loans went to developers and local government-backed financing vehicles that face the possibility of turning sour in coming few years. To cushion against any rise in bad loans, the banking regulator has raised the requirement for capital adequacy ratio.
The largest lenders - Industrial and Commercial Bank of China, China Construction Bank Corp, Bank of China and Bank of Communications - have announced they will raise a total of 287 billion yuan to shore up their capital base.
China Minsheng Banking Corp, the seventh-largest lender, is considering a 15 billion yuan subordinated bond issue to replenish second-tier capital, vice-president Zhao Pinzhang said yesterday.
The bond issue will be on top of the 5.6 billion yuan subordinated bond sale plan announced earlier this year.
Minsheng will also consider replenishing core capital when the regulator and the lender's management deem fit, Zhao said.
The China Banking Regulatory Commission recently asked banks to conduct tough stress tests involving mortgage lending, renew a probe into local government infrastructure financing and examine loans more carefully.
China Everbright Bank says net profit almost doubled in the first half
The amount the bank raised in its initial public offering to make it the country's second-biggest this year, in yuan: 18.9b yuan