Chinese city banks in talks with key investors

PUBLISHED : Saturday, 31 August, 2013, 12:00am
UPDATED : Saturday, 31 August, 2013, 4:18am

Two city-level lenders, Huishang Bank and Bank of Chongqing, are in advanced stages of negotiations with cornerstone investors as they prepare to raise a combined US$2.5 billion through Hong Kong flotations by the end of the year, two sources said.

Based in Hefei city in Anhui province, Huishang Bank, which is partly owned by the provincial government, has submitted its listing application and aims for a hearing as early as October as it is banking on a market recovery in the last quarter. The initial public offering may come early next year if the market weakness persists, the sources added.

"The balance between proposed valuations for listing hopefuls in the banking sector and investors' concerns over shadow banking, deteriorating asset quality and additional provision and write-offs has been awfully difficult and challenging for any banking IPOs this year," said a senior banker with a US investment bank who preferred not to be identified.

Bank of Chongqing, 20 per cent owned by Hong Kong-listed Dah Sing Bank, plans to raise US$1 billion in its Hong Kong float, hoping to offer investors the exposure to the mainland city with the fastest-growing number of millionaires.

Bank of Chongqing had originally planned to raise capital in the A-share market and has been waiting for approval from the mainland regulators for five years.

Following Huishang's decision to list in Hong Kong, it also decided on the city for a flotation, and may highlight its strength in wealth management products, a source said.

All IPO hopefuls among mainland banks are struggling to find big-ticket cornerstone investors . Sovereign wealth funds, including China's own CIC and Singapore's Temasek and GIC, as well as Middle Eastern sovereign funds, are the most sought after.

Meanwhile, battered by a high-profile regulatory probe after trading glitches by its sister firm Everbright Securities in Shanghai, China Everbright Bank has halted its talks with underwriters for what was supposed to be its third listing attempt.

Observers believe this indicates the bank has put its capital-raising plan on hold, after the China Securities Regulatory Commission yesterday fined the brokerage 523.3 million yuan (HK$658.2 million), confiscating 87.2 million yuan in profit from the erroneous trades.