Bank of China

Everbright Bank lines up big guns for HK listing

PUBLISHED : Wednesday, 01 June, 2011, 12:00am
UPDATED : Wednesday, 01 June, 2011, 12:00am

China Everbright Bank has hired nine investment banks including Morgan Stanley, China International Capital Corp and UBS to manage its share offering in Hong Kong next month.

The Beijing-based bank, the mainland's 11th-largest, yesterday said its big-ticket underwriters would ensure a smooth H-share sale, which is expected to spearhead a wave of fund-raising activities by mid-sized mainland banks.

Apart from the three lead managers for the offering, JP Morgan, BNP Paribas, HSBC Holdings, Bank of China International, Shenyin & Wanguo Securities and China Everbright have been hired to underwrite Everbright's offering of 12 billion shares.

Everbright Bank's Hong Kong offering will come ahead of China Guangfa Bank's planned dual listing in Shanghai and Hong Kong, which reportedly looks to raise a combined 20 billion yuan (HK$23.95 billion).

Bank of America Merrill Lynch, which was previously included in the list of Everbright Bank's underwriters, quit the deal since it chose to focus on the dual IPO by Guangfa, an Everbright statement said yesterday.

Everbright Bank netted 21.7 billion yuan on the Shanghai Stock Exchange in August when it floated seven billion A shares. Its H-share offering comes much earlier than analysts had expected amid increasing demand by Chinese banks for additional funds.

Based on its A shares' closing price of 3.54 yuan yesterday, Everbright could raise HK$51 billion in its Hong Kong offering.

'The price would be close to its A shares,' said Zhong De Securities analyst She Minhua. 'In Hong Kong, investors are more welcoming towards large mainland lenders while mid-sized banks won't be able to price shares very high.'

Nearly all dual-listed Chinese banks currently have their A shares trading at a discount to their Hong Kong counterparts.

Mainland banks face an uphill task in controlling bad loans following a lending spree during the past two years. Standard & Poor's estimates the non-performing loan ratio will reach 8 to 10 per cent in the next three years, up from 1.14 per cent at the end of last year.

Chinese banks issued a total 9.6 trillion yuan of credit in 2009, nearly double the minimum target of five trillion yuan. They granted new loans of eight trillion yuan last year, exceeding Beijing's initial quota of 7.5 trillion yuan despite the government pursuing a tighter monetary policy.

Raising extra funds would help the banks ward off potential hazards since they will have adequate capital to cover rising bad debts.

In April, Everbright Bank received the China Banking Regulatory Commission's approval to launch its Hong Kong offering. It has filed applications with the mainland's securities regulator and the Hong Kong stock exchange for the H-share sale, its statement said.

Beijing last year set raising funds as a priority for the country's biggest lenders, following which the Big Four banks completed mega fundraising deals to replenish capital.

Bank of Shanghai, the mainland's second-largest city commercial bank, is also expected to launch an A-share IPO in Shanghai this year.