【金融市场】China’s Postal Savings Bank Presses Ahead With Over $7 Billion IPO

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收藏 2016-06-16

source from:WSJ
MARKETS STOCKS IPOS
China’s Postal Savings Bank Presses Ahead With Over 7 Billion dollars IPO
Chinese state lender’s IPO in Hong Kong could be the biggest in the world so far this year

By ALEC MACFARLANE and JULIE STEINBERG
June 16, 2016 7:03 a.m. ET
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HONG KONG—Postal Savings Bank of China Corp. is gearing up for what could be the biggest initial public offering in the world so far this year at more than 7 billion dollars, at a time when the market for new listings is in its slowest period since the global financial crisis.

The Chinese state lender is planning to file its listing application with the Hong Kong stock exchange in the next two weeks, according to people familiar with the matter. If the process goes smoothly, the bank could list shares as soon as September or October, they said.

The biggest IPO so far this year was in May, when Danish utility Dong Energy raised 2.61 billion dollars.

New share deals have dried up because of an uncertain economic outlook and doubts about valuations in the technology industry globally. Just 41.8 billion dollars has been raised from new listings so far this year, according to Dealogic, the lowest year-to-date amount raised since 2009 and less than half the amount raised during the same period last year.

Postal Savings Bank’s plan to raise between 7 billion dollars and 10 billion dollars by selling up to one-fifth of its shares to investors would top the Dong Energy deal by a wide margin. The Beijing-based lender will likely be able to count on support from other state shareholders to buy into the listing, but its bankers will also court global investors who have been lukewarm on China share offerings.

Investors from George Soros to Jim Chanos have warned about the risks to the global economy from mounting bad debt in China’s banking system. While nonperforming loans haven’t increased dramatically, many analysts believe risks are building up in off-balance-sheet structured products.

Postal Savings Bank, the country’s sixth-largest lender by assets, has some advantages over its Chinese peers. The bank’s main service is taking deposits through a network of more than 40,000 branches, mostly located at post offices across the country. Many of the bank’s customers live in smaller towns, cities and rural areas—places that rivals have shunned but the Chinese government is looking to develop.

The bank has mostly invested those funds in the bond market rather than making loans. Investors and analysts say that insulates it more from a potential bad-loan crisis. Postal Savings Bank said in December its ratio of nonperforming loans stood at 0.22%, far lower than its peers.

Bankers working on the deal have begun reaching out to potential cornerstone investors, one of the people said. A formal marketing process will begin after the application form is filed.

Postal Savings Bank raised 7 billion dollars in pre-IPO financing in December after selling a 17% stake of itself to high-profile investors including UBS Group AG, J.P. Morgan Chase & Co. and Singapore state investment firm Temasek Holdings Pte. Ltd.

Alibaba Group Holding Ltd.’s financial affiliate and Tencent Holdings Ltd., both eager to expand in online lending and payments, also put money into Postal Savings Bank as part of that deal, which was billed as the largest private fundraising ever in China.

The bank isn’t without its challenges. Analysts cite the relatively high cost of staffing and maintaining its extensive network of branches, as well as its ambitions to increase lending at a low point in the credit cycle, especially in poorer parts of the country.

Still, Dragon Tang, an associate professor of finance at the University of Hong Kong, said the bank could shift away from serving less developed parts of China.

“It aspires to be a modern bank like everyone else, so it engages in securitization and interbank transactions,” said Mr. Tang. “It may shift away from its rural base.”

A spokeswoman for Postal Savings Bank didn’t return requests for comment.

The pricing of the deal could also be challenging. China’s state-owned enterprises follow an unwritten rule that they should price their IPOs at or above book value. That could make Postal Savings a tough sell to some investors, as its Hong Kong-listed peers trade below their book value. For example, Industrial & Commercial Bank of China Ltd. trades at trades at two-thirds of its book value.

Moody’s Investors Service said in May the outlook for the country’s banking system remains negative, as rising leverage and worsening credit conditions pressure banks’ profitability and asset quality.

Appetite for Chinese bank stocks has also waned. The Hang Seng China H-Financials Index, which tracks the valuations of Hong Kong-listed banks and insurers, is down 16% this year, underperforming the overall Hong Kong market, which has fallen by 8.6%.

Postal Savings Bank’s IPO will be a big test for the Hong Kong market, where just two companies have raised more than 1 billion dollars so far this year. Both are trading below their listing prices.

The last listing in the city to command significant attention from global investors was aircraft-leasing company BOC Aviation Ltd., which attracted cornerstone backers including Boeing Co. ahead of its 1.1 billion dollars IPO in May. BOC Aviation shares are now trading below their offering price.

Bank of America Merrill Lynch, China International Capital Corp., Goldman Sachs Group Inc., J.P. Morgan Chase and Morgan Stanley are leading Postal Savings Bank’s IPO. UBS is the financial adviser on the deal.