Postal Bank IPO to be the world’s big­gest

China Daily (Canada) - - LIFE - By DUAN TING in Hong Kong tingduan@chi­nadai­lyhk.com

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.

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