Banking

Everbright Bank gets IPO nod

By Coco Li and Soo Ai Peng (China Daily)
Updated: 2010-07-27 10:08

In April, Guangdong Development Bank, in which Citigroup owns a stake, launched a 15 billion yuan private placement. The bank, based in the southern manufacturing hub of Guangdong, has said it would list itself by 2010.

Spooked by a flurry of giant share offerings, the Shanghai Stock market fell nearly one-third in the first half of the year, making it one of the worst performers globally.

In a move to reduce its impact on the domestic stock market, Everbright Bank will place out about half of the IPO to strategic investors, the official Securities Times reported over the weekend, citing unidentified sources.

The bank's Beijing-based spokesman Shen Chunhua confirmed that it would place out part of the IPO to strategic investors. He added it had no immediate plan for a listing in Hong Kong.

"For now, we will focus on the Shanghai IPO," Shen said. "The strategic placement is part of arrangements under the IPO. We are still working on it; it's too early for us to name any potential investors," he added.

Controlled by Central Huijin, the investment arm of China's sovereign wealth fund, Everbright Bank could face a big capital shortfall in the next three years without the IPO, the bank said in a draft prospectus issued on Thursday.

The bank's capital adequacy ratio - a key measure of lenders' ability to absorb potential losses - stood at 10.39 percent at the end of last year, compared with the 11 percent minimum required for mid-sized listed lenders.

Related readings:  Everbright Bank's IPO application approved  China Everbright Bank eyes strategic investors  Everbright Bank plans Shanghai share float  Everbright Bank plans 6.1 billion share IPO

If it exercises an over-allotment option, the offering would potentially be expanded by 15 percent to 7 billion shares, the bank said.

Based on its net assets per share of 1.44 yuan at the end of 2009, if it sells shares at a price-to-book ratio of around two times, which is typical for mid-sized Chinese banks' IPOs, it would be able to raise about 20 billion yuan after the overallotment.

The lead underwriters for the Everbright Bank IPO are China Jianyin Investment Securities, Shenyin & Wanguo Securities Co and China International Capital Corp (CICC), in which Morgan Stanley holds a stake that it is planning to sell.