Investors swoop over Everbright IPO
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Strategic investors have made a rush for China Everbright Bank's initial public offering shares, leading to a huge oversubscription and signaling strong demand for its potentially US$2.9 billion float and other offerings in the pipeline as stock markets recover.
Thirty key investors have committed up to 60 billion yuan (US$8.9 billion) for their portion of the 6.1-billion-share offering, or roughly US$1.37 billion of the IPO, China's 11th-biggest bank by assets said yesterday.
It could be the second-largest Chinese offering this year after last month's Agricultural Bank of China's float of more than US$20 billion.
"Everbright Bank is healthier than AgBank by many standards and is selling much fewer shares, so if the pricing is reasonable, it would be natural for the lender to attract more interest from potential strategic investors who are often state-owned and cash-rich," said Ye Yunyan, an analyst at Galaxy Securities in Beijing.
"The recent rebound in the stock market also helps boost demand for the IPO, as investors get less pessimistic about the long-term prospects of the banking sector."
All major state-owned Chinese lenders have announced massive fundraising plans after they lent a record 9.6 trillion yuan last year to support China's economic stimulus and as the banking regulator tightened capital rules to preempt a rise in bad loans.
Everbright Bank's initial public offering is its second major fundraising since August last year. The bank raised 11.5 billion yuan in a private placement then but said it could still face a big capital shortfall without the public offering.
Its 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.
Everbright hopes to price the IPO at between 3 yuan and 3.2 yuan apiece, two people familiar with the deal told Reuters on Monday.
Assuming the shares were sold at 3 yuan apiece, the strategic placement in the IPO was about 6.7 times oversubscribed.
Galaxy Securities' Ye said the ratio was very high compared with previous Chinese IPOs.
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