Lender's IPO priced below midpoint

Bank of Chongqing has priced its Hong Kong initial public offering at HK$6 a share, slightly below the midpoint of a marketing range, underscoring cautious investor sentiment for new listings in Asia and challenges faced by mainland lenders.

It is kicking off what is expected to be a busy year for stock sales by mainland lenders as they bolster their capital. An estimated US$11 billion worth of stock sales by mainland lenders are expected between now and the middle of next year, according to Thomson Reuters data.

"I don't think the valuation is attractive," Sun Hung Kai Financial analyst Hannah Li said. Bank of Chongqing would trade at a higher forecast price-earnings multiple than peers such as Chongqing Rural Commercial Bank, she added.

Bank of Chongqing's pricing follows the launch of a Hong Kong IPO worth up to US$1.3 billion earlier this week by another mainland lender, Huishang Bank. Almost half that offer was taken up by cornerstone investors, easing the pressure on underwriters to canvas demand from institutional and retail investors. The Huishang IPO is expected to price on Wednesday.

The latest batch of bank earnings from the mainland this week showed the Big Four were hit by thinning loan margins from rising competition, encouraging banks to diversify from their main lending business.

Bank of Chongqing, which has a 32 per cent return on equity, is using unique financial instruments like "trust beneficiary rights" to boost profits.