China Everbright Bank

Everbright can meet China capital rules

Mainland bank says HK listing this month will help it meet tighter funding requirements before 2018 Basel III stricter supervision deadline

PUBLISHED : Tuesday, 10 December, 2013, 2:56am
UPDATED : Tuesday, 10 December, 2013, 2:39pm

China Everbright Bank, a Beijing-based lender making its third tilt at a Hong Kong flotation, says it will be able to meet more stringent mainland capital requirements within two years after raising fresh equity capital.

The medium-sized lender said it was also considering other fundraising plans, including the issuance of preferred shares, to replenish its capital base.

"We expect to meet the official capital requirements ahead of 2018, when all the commercial banks are required to comply with Basel III's stricter capital supervision rules," executive vice-president Lin Li said in Hong Kong yesterday. "After the IPO, we should be able to comply with the official capital requirement in two years."

Lin said the freshly raised capital could lift Everbright Bank's core capital adequacy ratio by 1 percentage point and boost its lending capacity by about 200 billion yuan (HK$254 billion).

Beijing has ordered the mainland's biggest banks to have capital adequacy ratios of 9.5 per cent by the end of this month, and 11.5 per cent by the end of 2018.

All the proceeds from Everbright Bank's initial public offering will go to replenishing its capital base. Its capital adequacy ratio stood at 9.67 per cent in June and its core capital adequacy ratio at 8.34 per cent.

Everbright Bank plans to raise as much as HK$21.7 billion in its Hong Kong float, with an indicative price range between HK$3.83 and HK$4.27 a share, representing a price-book ratio of up to one times this year's expected book value.

Bankers said the institutional tranche of the offer had been well covered after strong support from more than 10 cornerstone investors which committed US$1.6 billion, or 57 per cent of the entire deal, including HK$780 million from Joseph Lau Luen-hung's Hong Kong-listed developer Chinese Estates, US$800 million from China Shipping and US$100 million from New York-based hedge fund DE Shaw.

It will take orders from retail investors from today until Thursday.

Pricing is scheduled for Friday, with trading of the shares due to start on December 20.

Market participants will be closely watching Thursday's trading debut of mainland bad-asset manager China Cinda Asset Management for an indication of the listing prospects of other financial firms.

Joining the end-of-year listing rush, two private companies - a mainland property developer and a manufacturer of electric fireplaces - are looking to raise a combined HK$2.5 billion.

Guangdong-based Logan Property has offered an indicative price range of between HK$2.10 and HK$2.50 a share, while China Creative Home Group has given an indicative price range of between HK$1.80 and HK$2.35.

Meanwhile, Italian plastic bottle maker M&G Chemicals has postponed its Hong Kong listing, citing poor market conditions.