CHASE Manhattan Bank is to spin off its credit card division to raise more than $500 million, according to industry sources. It would be the first credit card business flotation in Hongkong. Before the public offering, the bank may place 10 per cent of the new shares to a mainland-related company in an attempt to cultivate the China market. It is believed the bank has held discussions with the Hongkong arm of China International Trust and Investment Corp (CITIC) over a placement. Twenty-five per cent of the new shares will be offered to the public, while the bank and the mainland-related company together will hold a majority 75 per cent stake in the new company. Chase's application to list on the stock exchange has yet to be considered by the listing committee. It plans to launch a public offering in June this year. The price earnings (P/E) ratio will be set at about 11 to 12 times, which is very attractive compared with other banks listed on the Hongkong stock exchange, according to sources. But a direct comparison is inappropriate as the only operation of the division is credit card services, which include customers' fees and interest. It is expected that the P/E ratio of Chase's credit card division will go up to 16 times if it is set at 11. Sources suggested the issue would be 80 times oversubscribed. Mr James Brew, senior vice-president of Chase Manhattan Bank, said it was ''premature to comment''. The credit card division has consistently made a profit since it was set up in 1989. Only a certain amount of loss was registered for that year, which was the setting up cost. In the past four years, the division has grown rapidly. In 1990, the division registered profit of about US$2 million, rising to $8 million in 1991. Last year alone, it posted a 75 per cent growth to $14 million profit. Profit of $30 million is forecast for 1993. Chase's credit card business is believed to have grown by well over 30 per cent per annum for the past two years, pushing the division from number six into the top three in the business in Hongkong. ''It has been growing like gang-busters, it is extremely good business,'' said one source at the bank. The firm's strategy has been to target specific niche segments. One marketing strategy used was Chase Advantage Points, which awarded Visa card users points for every dollar spent that could be redeemed for household products. Unofficial estimates put the number of credit cards issued by Chase Manhattan Bank at about 340,000, likely to be the third biggest in Hongkong. Hongkong Bank has issued about 800,000 credit cards and Citibank 500,000. The figures include Mastercard and Visa cards. Before deciding on the listing route, the bank considered a number of options for raising funds to fuel growth, including the securitisation of credit card debt. Chase decided that the local market was not ready for this, despite the bank's success in being the first to securitise mortgage debt in Hongkong. Within the bank, the flotation plan is seen as providing funds to fuel growth and also spreading risk ahead of 1997. Despite the huge growth in the credit card market, it is estimated that fewer than 48 per cent of adults in the territory hold a card and comparatively few hold multiple cards.