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SCMP Reporter

THE International Bank of Asia (IBA), owned by the Arab Banking Corp, will float 25 per cent of its shares to raise $597 million.

  The public offer, which opens today, involves 159 million shares at $3.76 each, representing a prospective price-earnings multiple of 13 times on a pro forma fully-diluted basis.

  Last week, the bank announced that a subsidiary of mainland state-owned Everbright group had agreed to acquire a 20 per cent stake in IBA from Arab Banking.

   After the listing, Arab Banking will maintain a controlling stake of 55 per cent.

   The share offer price gives IBA a market capitalisation of $2.39 billion.

  The bank forecasts profit to rise 16 per cent for this year to $166 million. The relatively slow growth, compared with previous years, was attributed to an extraordinary item of $42 million last year.

   IBA's flotation represents the third banking institution to seek a listing on the stock exchange this year, following Wing Hang Bank and Manhattan Card Co.

    This 20-branch medium-sized bank engages mainly in retail and corporate banking services targeted at the middle market, which constitutes 52 per cent of its income.

  Hire-purchase, leasing and credit card business accounts for a further 28 per cent of its profit income contribution.

  The bank's operating profit after tax has grown at a compound annual rate of 35 per cent over the past five years, from $39.3 million in 1988 to $129.9 million last year.

   At December 31 last year, IBA had a return on total assets of 1.9 per cent and a return on equity before extraordinary items of 15.5 per cent.

  The total loan to deposit ratio stood at 96.9 per cent at July 31 this year, a five-year high. Similarly, its loan to assets ratio was also at a high of 76.8 per cent.

   IBA chief executive Mike Murad said it should be taken into account that the bank's liquidity ratio was as high as 40 per cent, compared with the officially required 25 per cent.

  ''The bank's loans, apart from mortgage loans, are mainly of short-term maturity. A higher loan to deposit ratio is not surprising,'' he said.

  Peregrine Capital is the sole sponsor for IBA's listing and manager of the offer for sale on behalf of Arab Banking. Other underwriters include Jardine Fleming Securities and Standard Chartered Asia.

   The bank also announced yesterday the appointment of Francis Leung Pak-to, managing director of Peregrine Investments Holdings, as a non-executive director.

  Last week, the bank confirmed that two senior officials from the China Everbright group would join the board, following the purchase of a 20 per cent stake in IBA.

   ''Francis has acted as IBA's financial adviser in negotiations with the China Everbright group for the placement of 20 per cent of IBA's shares, signed last week,'' Mr Murad said, adding that Mr Leung's experience and range of contacts would contribute to the bank's expansion in Hong Kong and involvement in China.

   The bank's future strategy for growth focuses on increasing its penetration in the middle market and developing diversified sources of income.

  ''We intend to open at least two branches a year,'' Mr Murad said. ''The major objectives for the branch network will be to expand consumer deposits and serve corporate accounts within the district of the branch, as well as providing securities brokerageservices.''       Expansion in the China market will be facilitated by its alliance with the Everbright group. ''Our expansion will be mainly through the joint-venture bank which will be set up as stipulated in our agreement,'' he said.

   Details of the co-operation and expansion plan could only be mapped out at a later stage, he added.



IBA offers 159m shares in float