Postal Bank IPO to be the world’s biggest
State-owned lender Postal Savings Bank of China raised about HK$ 58 billion ($7.4 billion) in its initial public listing offering and is set to go public in Hong Kong on Sept 28 — making it the world’s biggest IPO since Alibaba Group went public raising $25 billion in September 2014.
PSBC plans to price its sale of 12.1 billion shares at HK$4.76 per share, below the midpoint of a marketed range from HK$ 4.68 to HK$5.18 a share, according to a report in TheWall Street Journal.
Clarence Kwok, chief investment consultant at Bluestone Securities, said that PSBC had priced itself near the bottom of analyst expectations, reflecting the market’s low response to purchase the H shares, and said the bank’s oversubscription rate might be less than 1.6 times.
He said that usually companies lowered the stock price to improve an issue’s popularity — and the subscription rate during the good times for the mainland bank shares could reach five to six times.
Kwok added, however, that currently the market fears that Chinese mainland banks are suffering from bad debt and shrinking profits under a slowing economy. Additionally, the fact that the company’s 1.22 price to book ratio and 9.52 price to earnings ratio were higher than the respective sector average of 0.9 and 5.6 also was dragging on market sentiment.
According to the PSBC prospectus, the nonperforming loan ratio of the company reached 0.78 percent as of June 30 this year and the company’s allowance coverage ratio was 286.71 percent as ofMarch 31 this year.
Kwok said the nonperforming ratio was lower than the average 1.73 percent of the big commercial banks and the allowance coverage ratio was higher than the other large commercial banks’ average of 154.73 percent, which was an advantage.
Chris FengShijie, director of the capital market department at Qianhai Securities, said he was optimistic about the H shares as the company had numerous branches and a broad and solid customers base. As well, the company’s relatively conservative business strategy ensured it to be less effected by market and industry risks.
The State-owned retail bank has over 40,000 outlets and over 500 million retail customers and its official website says that it provides financial services to communities, small and mediumsized companies and “agriculture, rural areas and farmers.”
According to the prospectus, six cornerstone investors have subscribed more than 70 percent of the H-shares. These are CSIC Investment One Ltd, Shanghai International Port Group (HK) Co Ltd, Victory Global Group Ltd and State Grid Overseas Investment Ltd, China Chengtong Holdings Group Ltd, as well as GreatWall Pan Asia International Investment Co Ltd.
Financial commentator Dennis Huang said this year the large State-owned listing corporations were mostly supported by “national team” investors and so was Postal Savings Bank of China. He also pointed out that in recent years, the stock market usually moved to higher ground close to October, enabling the large State-owned companies to go public.
Looking at expectations for its stock market trading debut, Kwok said he saw the share price topping the offer price and then remaining flat initially. But in three to four months the big State-owned stock would be probably included in the China Enterprises Indices and the share price would bounce back, he said.