China Ever­bright’s IPO ex­pected to net 17b yuan

China Daily (Hong Kong) - - BUSINESS COMPANIES - By LI TAO in Hong Kong EMMA DAI


China Ever­bright Bank Co, the lend­ing arm of the State-con­trolled China Ever­bright Group, hopes to raise as much as 17.1 bil­lion yuan ($2.8 bil­lion) through an ini­tial pub­lic of­fer­ing in Hong Kong to build a big­ger cof­fer as the lender’s bad loans con­tinue to rise and reg­u­la­tors are set to lift cap­i­tal re­quire­ments for banks.

Ever­bright is of­fer­ing 5.08 bil­lion new shares at HK$3.83 to HK$4.27 apiece to raise up to HK$21.7 bil­lion ($2.8 bil­lion) in the IPO this week, the bank an­nounced in Hong Kong on Mon­day.

The new IPO is likely to eclipse that of China Cinda As­set Man­age­ment Co, which raised $2.5 bil­lion on the Hong Kong ex­change last week, which was the Hong Kong’s big­gest IPO in 2013.

“As the Chi­nese econ­omy changes to a model driven by con­sump­tion, we are also, cor­re­spond­ingly, shift­ing our fo­cus to re­tail busi­nesses, small and medium- sized en­ter­prises and mi­cro- cus­tomers, all cap­i­tal- ef­fi­cient busi­nesses,” said Guo You, ex­ec­u­tive di­rec­tor and the pres­i­dent of Ever­bright Bank.

Loans to in­di­vid­u­als and SMEs have ac­counted for 54 per­cent of Ever­bright’s to­tal loans. SMEs and mi­cro-en­ter­prise busi­ness have con­tin­ued to show great mo­men­tum, Guo told re­porters in Hong Kong on Mon­day.

The bank is ded­i­cated to in­vest­ing in new tech­nol­o­gyre­lated ser­vices such as e- bank­ing, Guo said. Ever­bright’s mo­bile bank­ing, in par­tic­u­lar, has be­come a mar­ket leader on the main­land.

Al­though Ever­bright is ex­pected to have the largest IPO in Hong Kong this year, the mar­ket is nev­er­the­less con­cerned about its lag­ging cap­i­tal ad­e­quacy, as well as its in­creas­ing num­ber of bad loans in re­cent months.

In late 2012, the China Bank­ing Reg­u­la­tory Com­mis­sion lifted cap­i­tal re­quire­ments to con­trol bank­ing risks and set spe­cific re­quire­ments for cap­i­tal ad­e­quacy ra­tios and Tier 1 cap­i­tal ad­e­quacy ra­tios for main­land lenders by the end of 2013, be­cause liq­uid­ity re­mains a big con­cern in the sec­tor.

Bank of Chongqing Co and Huis­hang Bank Corp, two smaller in­sti­tu­tions on the main­land, both com­pleted IPOs in Hong Kong in Novem­ber, lur­ing $546 mil­lion and $1.2 bil­lion, re­spec­tively, ahead of the higher liq­uid­ity re­quire­ments.

Data from the bank­ing reg­u­la­tor showed that the av­er­age CAR and TCAR among main­land banks were 12.18 per­cent and 9.87 per­cent by the end of Septem­ber in 2013, while Ever­bright’s CAR and TCAR were reg­is­tered at 9.65 per­cent and 7.89 per­cent, re­spec­tively, sec­ond- low­est among the 16 listed banks.

“If the fundrais­ing tar­get is met this time, both our cap­i­tal ad­e­quacy ra­tio and Tier 1 cap­i­tal ad­e­quacy ra­tio will rise by about 1 per­cent­age point,” said Lin Li, se­nior ex­ec­u­tive vice-pres­i­dent of the bank.

“The cap­i­tal will be used to ex­pand our cap­i­tal base and carry the fur­ther re­struc­tur­ing of the busi­ness in the long run. We are con­fi­dent we will meet the reg­u­la­tion in the com­ing two years,” he said.

The CBRC’s rules re­quire banks such as Ever­bright to have a min­i­mum cap­i­tal buf­fer of 10.5 per­cent by the end of 2018.

Chen Xingyu, an an­a­lyst with Phillip Se­cu­ri­ties (Hong Kong) Ltd, said that reg­u­la­tors are tak­ing a pru­dent ap­proach on banks as bad loans are in­creas­ing among most lenders on the main­land.

The banks’ to­tal bad loans in­creased by 24.1 bil­lion yuan in the third quar­ter, ris­ing for an eighth straight quar­ter, to 563.6 bil­lion yuan, the CBRC said last month.

The non­per­form­ing loan bal­ance at Ever­bright Bank to­taled 9.36 bil­lion yuan at the end of Septem­ber, with an non­per­form­ing loan ra­tio of 0.82 per­cent of to­tal lend­ing, 23 per­cent higher than at the end of 2012, the bank said in a fil­ing to the Shang­hai stock ex­change on Oct 28.

“In ad­di­tion, it is Ever­bright’s third at­tempt to list in the city,” Chen added. “All the twists and turns will in­evitably af­fect in­vestors’ con­fi­dence.”

Bei­jing- based Ever­bright planned to raise $6 bil­lion by kick­ing off an IPO in Hong Kong in 2011 but aban­doned the plan the same year, cit­ing the “slug­gish econ­omy”.

In May 2012, it filed another IPO plan in Hong Kong but ended up post­pon­ing it again for the same rea­son.

This time, how­ever, Ever­bright man­agers have low­ered their ex­pec­ta­tions and set a prac­ti­cal tar­get.

The fundrais­ing goal should not be a prob­lem given its na­tional scale and siz­able in­ter­est in­come, Chen said. Con­tact the writ­ers at li­tao@ chi­nadai­ and em­madai@chi­nadai­


A China Ever­bright Bank branch in Jin­jiang, Fujian prov­ince. The bank will of­fer 5.08 bil­lion new shares to raise up to $2.8 bil­lion in an ini­tial pub­lic of­fer­ing this week in Hong Kong.

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