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SHANGHAI - China Everbright Bank's plan to raise up to $2.9 billion in a Shanghai IPO has been approved by the securities regulator, two sources said, in what will be the latest Chinese bank to try and tap markets for funds.
Everbright Bank, China's 11th biggest bank by assets, would sell up to 6.1 billion shares in the initial public offering, said the sources. Both had direct knowledge of the matter but spoke on condition of anonymity because they were not authorized to comment publicly.
The China Securities Regulatory Commission gave the nod to the IPO on Monday, the sources said.
This month, China witnessed the world's second-biggest IPO when Agricultural Bank of China (ABC) completed its $19 billion dual-listing in Shanghai and Hong Kong.
"The Everbright Bank IPO is far smaller than ABC's and fundraising pressure from the banking sector has largely been digested," said Victor Feng, an analyst with Everbright Securities in Shanghai. "The IPO will have limited impact on the market." Most Chinese lenders are experiencing a serious capital squeeze after a lending binge last year to support the government's 4 trillion yuan ($590 billion) economic stimulus and as the banking regulator tightened capital rules.
Top State-owned lenders, such as Industrial and Commercial Bank of China (ICBC), Bank of China and China Construction Bank, have said they will ask shareholders for billions of dollars to replenish capital.
Like their larger rivals, smaller regional banks such as Bank of Shanghai and Guangdong Development Bank, are also eyeing a listing this year. Bank of Shanghai plans to sell up to 1.2 billion shares in an IPO but the bank has yet to submit its application to the CSRC, local media reported in May.
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.
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.
Reuters
