Learn Mandarin online - IPOs set trend for listing by city banks

?  ?

BIZCHINA / News

IPOs set trend for listing by city banks

By Zhang Lu (China Daily)
Updated: 2007-07-12 07:50

The initial public offering of two lenders - Bank of Nanjing and Bank of
Ningbo - this week will spur a new round of bank listings on the domestic
stock markets.

The major players in this listing rush will be qualified city commercial
banks as most State-owned and joint-stock banks have already gone public.

Bank of Nanjing, partly owned by top French lender BNP Paribas, plans to
sell up to 700 million A shares, or 36.72 percent of its enlarged capital
after the initial public offering (IPO), for a listing on the Shanghai
stock market.

Bank of Ningbo, partly owned by Singapore's Oversea-Chinese Banking Corp,
will issue 450 million A shares, or 18 percent of its enlarged capital,
for a listing on the small and medium-sized enterprises (SME) board of
the Shenzhen stock market.

Apart from the two banks, Bank of Beijing has also completed its
application for a simultaneous IPO in Hong Kong and Shanghai.

A few other city commercial lenders with overseas strategic investors,
including those in Hangzhou, Chongqing and Shanghai, are next in line.

These lenders, the top ones among the country's 114 city commercial
banks, are comparable to their bigger counterparts regarding business
performance and asset quality.

Statistics from the China Banking Regulatory Commission shows the average
non-performing loan (NPL) ratio of city commercial banks stood at 4.8
percent at the end of 2006, against an average of 7.51 percent for big
State banks.

By the end of 2006, total assets of China's 114 city commercial banks
were 2.6 trillion yuan, or 6 percent of the country's total banking
assets of 44 trillion yuan.

Bank of Nanjing, with 58 branches in Jiangsu Province, reported gross
assets worth 57.9 billion yuan and net profits of 595 million yuan in
2006. Its NPL rate was 2.47 percent.

With 68 branches in Zhejiang Province, Bank of Ningbo had 56.6 billion
yuan in total assets, with a NPL rate of only 0.33 percent last year.

"Tens of city commercial lenders with good performance may be eligible to
list in the next year or two," said Zhang Qi, an analyst from Haitong
Securities.

Some of them are now in the process of seeking strategic partners. IPOs
of the two lenders, especially Ningbo, are a good sign for other listing
hopefuls, Zhang said.

According to him, Bank of Ningbo, the first financial share on the SME
Board, paves the way for others, whose listings will be limited to a much
smaller scale compared with State banks.

"Their listing will offer diversified options for investors," said She
Minhua, analyst from CITIC China Securities.

An obvious reason for city commercial banks' IPO enthusiasm is to boost
capital strength to meet the requirements of the New Basel Capital
Accord, a framework for standards in international banking, She said.

"It will be a trend for city commercial lenders with good assets to
establish a long-term capital-supply mechanism through public listings,"
said Li Xiaohui, an analyst with CITIC Securities.

They are also using proceeds from public offerings to expand and improve
their businesses as they move to fend off foreign competitors, which were
allowed to offer renminbi retail services in December.

These banks' operations will be further improved through enhanced
shareholding structure, corporate governance, risk control, information
disclosure and management, after public listings, She said.

"But the prime reason for their listing rush might be the need for
geographic expansion," he said.

An earlier report from Standard & Poor's said city commercial banks in
major cities are likely to be affected by the opening up of the banking
sector more than State-owned and joint-stock banks because of their lack
of geographic reach.

Last year, Bank of Beijing and Bank of Shanghai started to expand beyond
their hometowns, followed by Bank of Ningbo this year.

However, "it is not an easy task", She said, as they have always been
restricted to their home market. "Public listing will help boost their
reputation and brand image, and help their business expansion as well as
improve their performance in their home markets."

(China Daily 07/12/2007 page15)

(For more biz stories, please visit Industry Updates)

Learn Mandarin online