Analysts raise questions about lack of edge compared with other listed lenders
Huaxia Bank's 5.6 billion yuan (HK$5.25 billion) A-share initial public offering (IPO) next week before a September 12 debut on the Shanghai Stock Exchange will give it the distinction of being only the fifth mainland-listed lender.
While there was a dire need for domestic banks to tap the market to boost their capital base, which has been stretched thin by rapid loan growth, analysts said the Beijing-based lender was not much of a star even in China's generally sickly banking industry.
Huaxia Bank is set to put on the block one billion new shares, or 28.57 per cent of its enlarged share capital, at 5.6 yuan.
As with the Shenzhen-listed Shenzhen Development Bank, Shanghai-quoted Shanghai Pudong Development Bank, China Minsheng Banking Corp and China Merchants Bank, Huaxia - which ranked as China's 11th largest commercial lender by total assets in 2001 - is raising funds to boost its capital base.
That is a prime reason behind China's encouragement of its banks to tap the capital market in recent years, as their ballooning loan books have diluted their historically high non-performing loan ratios but stretched their capital bases. 'The bank is severely under-capitalised, mainly because of the rapid loan growth,' said Arthur Lau, an analyst at the international ratings agency, Fitch.
Employing about 6,000 in a network of more than 199 outlets nationally, Huaxia Bank saw its outstanding loans more than double from 56.5 billion yuan at the end of 2000 to 124.3 billion yuan at the end of June this year.
