Analysts said yesterday that China Merchants Bank's shares may rise by as much as 12 percent on their trading debut in Hong Kong on Friday.

 

The prediction, made by eight Hong Kong-based analysts surveyed by China Daily, comes after reports over the weekend that the retail portion of the lender's H-share offering had been oversubscribed 266 times.

 

The retail portion accounts for 20 percent of the total new shares. Subscriptions from international institutional investors exceeded US$60 billion 35 times oversubscribed. Both outperformed earlier H-share offerings by other mainland banks, including China Construction Bank, Bank of Communications and Bank of China.

 

The Shenzhen-based lender, which is already listed in Shanghai, has priced its Hong Kong initial public offering shares at HK$8.55 (US$1.1).

 

"We expect a 10 percent to 15 percent increase in the shares, because so many people have subscribed to them," said Ricky Cheung, a fund manager at Phillip Capital Management in Hong Kong.

 

Hong Kong investors are keen on mainland banks, said Cheung, adding that local demand for new shares is high. Moreover, China Merchants Bank, with a much smaller non-performing loan (NPL) ratio than its bigger rivals, has long been regarded as the mainland's best retail bank.

 

According to its interim report for 2006, its NPL ratio by the end of June was 2.3 percent, down from 2.58 percent at the end of last year, while its capital adequacy was 8.36 percent by June.

 

It realized net profit of 2.8 billion yuan (US$350 million) in the first half of 2006, a year-on-year rise of 31 percent, and it forecast net profit of no less than 5.5 billion yuan (US$687.5 million) for the whole year, with this growth being driven largely by intermediary services, instead of the traditional lending business.

 

That compared with a rise in net profit of 15.7 percent for the Bank of China over the same period, while China Construction Bank's net profit increased 13.3 percent in the first half of this year. Their NPL ratios were 4.19 percent and 3.51 percent respectively.

 

(China Daily September 19, 2006)