China's second-largest domestically listed bank to focus on selling 700 million A shares before HK float Shanghai Pudong Development Bank, in which Citigroup holds a 4.2 per cent stake, plans to raise at least HK$10 billion from an initial public offering in Hong Kong, market sources said. They want to get their planned secondary A-share sale out of the way 'and then they will start to work on the H-share offering', a source said. The bank, the second-largest domestically listed lender in China, plans to sell 700 million A shares this month, raising 9.5 billion yuan at the current share price. The bank's A shares, which have risen 39 per cent this year, closed at 13.58 yuan yesterday, down from a 52-week high of 14.50 yuan reached on October 27. The shares trade at 16 times next year's projected earnings. Citigroup will raise its holding in the bank to 19.9 per cent after the sale, which is being arranged by China Galaxy Securities and Shenyin & Wanguo Securities. The money raised will help build the bank's capital base and fund expansion. Asked for comment, Shen Si, secretary of the board at Shanghai Pudong, said: 'Currently, we don't have any concrete plan [for an H-share listing].' Larger rival China Merchants Bank raised HK$20.7 billion in a Hong Kong initial public offering in September. Its shares have risen 53.92 per cent since then, closing at HK$13.16 yesterday and outperforming the benchmark Hang Seng Index's 27 per cent gain over the same period. The bank's A shares have climbed 81 per cent this year, closing at 11 yuan yesterday and besting the Shanghai Composite Index's 62 per cent rise. China's financial institutions have become a favourite among investors seeking to bet on the mainland's growing economy and rising incomes. 'Shanghai Pudong is definitely one of the more solid A-share listed banks and I think it would attract good interest,' said Simon Ho, an ABN Amro analyst. Industrial and Commercial Bank of China, the nation's largest lender, raised a record-breaking US$19.1 billion last month, with retail investors subscribing for 78 times more shares than were on offer and institutional investors ordering 50 times the number of shares set aside for them, unseating Bank of China, which had raised funds only four months earlier, as the most popular share sale in Hong Kong history. Shanghai Pudong raised 2.6 billion yuan in July through the sale of 10-year subordinated bonds, after raising three billion yuan in May. The claims of subordinated debt holders fall behind normal bond holders should a company default, and therefore fetch a fatter yield. The bank, which operates 366 branches, expects earnings to rise 25 per cent this year and loans to grow 18 per cent. Total lending jumped 17 per cent to 443 billion yuan as of September 30, compared with the end of last year. Revenues stood at 21.5 billion yuan at the end of last year, up 28 per cent from 16.8 million yuan in the previous year. The bank's non-performing loan ratio fell to 1.89 per cent from 1.97 per cent at the end of last year. Bad loans at China's 12 medium-sized commercial lenders represented 2.9 per cent of all loans in the first nine months of this year.