Everbright bank revives listing plan

China Everbright Bank has dusted off its application plan to list in Hong Kong after shelving its HK$48.4 billion share sale in August, market sources said yesterday.

But the Beijing-based, medium-sized lender had yet to decide whether to list by the end of this year or in the first half of next year, according to a source who asked not to be named.

He also said the bank had a pressing need to raise funds in order to prepare for the Basel III framework that required banks to increase their capital.

In June, the bank put off its initial public offering of 10.5 billion shares to raise HK$48.4 billion. The plan was revived but was shelved again in August when the market fell on concerns over souring mainland bank loans and the euro-zone crisis.

The market expects the bank to cut the size of its offering because of the choppy market conditions. Everbright Bank refused to comment on its listing plans.

The bank's stock closed 0.66 per cent higher at 3.03 yuan (HK$2.48) in Shanghai yesterday.

Stanley Li, a banking analyst at Mirae Asset Securities, said the bank would be a 'tough sell' because of its unfavourable loan book mix.

The key drivers of the stock's performance would be credit quality and changes in mainland monetary policy, Li said.

According to Mirae's research, corporate lending accounted for 75 per cent of Everbright's loan book last year, with lending to property development and construction making up 12 per cent of the book.

Lending to small and medium-sized businesses comprised 14 per cent of the loan book, trailing behind China Minsheng Banking Corp, where small business loans took a 23 per cent slice, Mirae said.

This would not play out well on the mainland, where the authorities are selectively easing credit for small and medium-sized businesses while continuing the squeeze on property loans.

Li said mainland bank earnings could drop 20 to 30 per cent in the next two years because the bad news on non-performing loans and property sector problems had only just begun to emerge.

But Kenny Tang Sing-hing, a general manager at AMTD Financial Planning, said the market had already priced in these negative factors.

The Hang Seng Index yesterday closed 1.88 per cent higher at 19,733.71 points. It has rebounded 21 per cent from its 52-week low reached early last month, although it is still off a high of 24,964.37 reached in November last year.

Tang said mainland banking stocks had performed well in the past few days after the central government announced measures to support small and medium-sized enterprises.

He expects Everbright Bank and other mainland companies to seek to list in Hong Kong by the end of this year as the market recovers.

Mainland financial stocks outperformed the market yesterday, with the Hang Seng China H-Financials Index gaining 2.89 per cent.

China Construction Bank Corp and Industrial and Commercial Bank of China were the two most actively traded stocks in value terms. Construction Bank rose 3 per cent to close at HK$5.83 while ICBC gained 4 per cent to HK$4.94.

Both stocks have recovered more than one-third from their year lows early last month, when the market was hammered by news of the bad loans and the debt crisis in Europe.