Investment bankers target new year listings after a tough 2012

Investment bankers look forward to a strong pipeline of IPOs in Hong Kong next year, after poor market conditions kill many 2012 deals

PUBLISHED : Wednesday, 07 November, 2012, 12:00am
UPDATED : Wednesday, 07 November, 2012, 3:36am

After a difficult year, investment bankers are already looking ahead to a brighter new year when a number of mainland banks are expected to list in Hong Kong.

With less than two months left this year, bankers have already reached out to clients wanting to issue stocks or bonds next year.

Competition in the investment banking industry for big deals has particularly intensified in the past few weeks.

"It has been a very bad year so you need to move on and see what you can do next year," a veteran investment banker at a European firm said.

"People understand you'd better keep your 2013 deal pipeline strong before you head off for a nice holiday."

China Everbright Bank, Bank of Shanghai and China Guangfa Bank, formerly known as Guangdong Development Bank, are all expected to list in Hong Kong next year, most likely in the first half, according to industry sources.

They were all victims of the weak market environment this year, which forced them to delay their plans to launch initial public offerings.

Beijing-based Everbright Bank had planned to raise about US$1.4 billion but its share offer - originally for a much more ambitious and bigger fundraising plan - was delayed at least twice this year. Bankers say the lender wants to try again in the first half of next year.

About 10 investment banks, including BNP Paribas and China International Capital Corp, secured a role in the handling of the offering, but the delay could mean potential last-minute changes or additional roles for some banks when Everbright Bank returns to the Hong Kong market next year.

Shanghai Fosun Pharmaceutical raised US$512 million last week, the first major initial public offering for the Hong Kong market in the second half of this year.

"Some people say the listing of Fosun Pharmaceutical is a strong indicator and could perhaps mean a turning point for IPO sentiment in Hong Kong, and I agree on that," said Zhao Ju, a co-head of UBS' China investment banking business, at a recent listing ceremony. "Now people naturally expect more to come after Fosun Pharma."

In addition to the three major bank offerings, some smaller banks are also trying their luck at listings. For example, Longjiang Bank and Harbin Bank, both based in the north of the mainland, are hiring investment banks to handle their Hong Kong offerings that are expected to be launched next year.

Bank of America Merrill Lynch, which recently hired Margaret Ren, one of the most well-connected and powerful female bankers on the mainland, from BNP Paribas to head its China business, is believed to be leading the deal for Longjiang Bank's US$500 million Hong Kong listing. CICC is expected to lead Harbin Bank's US$1.5 billion dual listing in Shanghai and Hong Kong late next year.

Two major mainland brokerages - China Merchants Securities and China Galaxy Securities - are also mulling share sales in Hong Kong although underwriters have not yet been officially appointed, according to industry sources.

Other heavyweights include XCMG Construction Machinery (Xugong), which delayed a Hong Kong offering worth more than US$1 billion this year but is still keen to launch a listing next year.

Despite the weak market environment this year, some banks such as UBS and JPMorgan still landed some significant equity fundraising and merger and acquisition deals for their clients in Asia, and saw a double-digit percentage increase in fees from investment banking.

Such rare success stories also means staff at those banks may still be anticipating a year-end bonus, in contrast to nothing for their industry peers, including a handful of banks that have not secured any listing deals this year.

"Next year will likely be a year of changes," another veteran banker said. "Competition is the best way to see who is a winner or loser. Think about it … everybody can blame the bad market but your bosses in New York or London will ask you why other people can get deals and not you. At that moment, you know your job is insecure."