Banking News
- Nanjing, Ningbo banks may raise US$1.46b
Date: 12-Jul-2007 Sources: (Shenzhen Daily)
BANK of Nanjing Co. and Bank of Ningbo Co. may raise a combined US$1.46 billion in the first initial public offerings (IPOs) by domestic city lenders, seeking funds to help fend off larger competitors.
Bank of Nanjing, part-owned by BNP Paribas SA, may raise as much as 6.93 billion yuan (US$914 million) selling 630 million shares, a 34.3 percent stake, at 9.80 yuan to 11 yuan each, it said yesterday. Bank of Ningbo will sell 450 million shares at 8 yuan to 9.20 yuan to trade in Shenzhen, raising as much as 4.14 billion yuan, it said in a separate filing to the Shenzhen bourse.
China's 113 city-commercial banks have less capital than the nation's biggest lenders, and most are limited to operating in their own regions. Fewer than a third meet a regulatory minimum for financial strength, hampering their ability to invest in new branches or make acquisitions.
'Only by expanding outside their home base or making acquisitions can they become stronger,'' said Zhang Qi, an analyst at Harvest Fund Management Co., which oversees more than 100 billion yuan. 'Either way, they need capital. Now is probably the best time as investors are willing to pay a premium.''
City banks control 6 percent of China's US$6 trillion of banking assets, compared with 68 percent for the country's two largest types of banks, State-owned and joint-stock, which operate nationwide. Profit at city banks grew an average 49 percent a year between 2003 and 2006, compared with 76 percent for larger rivals, according to the China Banking Regulatory Commission.
City banks had an average bad loan ratio of 4.52 percent as of March 31, compared with 7.02 percent for the larger lenders.
They also face competition from overseas banks that began taking yuan deposits in April. Under China's agreement to join the World Trade Organization, global banks such as HSBC Holdings and Citigroup Inc. were allowed full access in December to a banking market with US$2.2 trillion in household savings.
Bank of Nanjing, with 60 branches in the eastern city of the same name, said profit soared 62 percent last year to 595 million yuan. It had 25.5 billion yuan of loans and 43.9 billion yuan of deposits as of Dec. 31, making it the sixth-largest lender in a city where the economy grew 15 percent last year. Its bad loan ratio stood at 2.47 percent.
BNP Paribas, France's largest bank by market value, agreed in October 2005 to buy 19.2 percent of the bank. International Finance Corp., the World Bank's private investment arm, owns 5 percent.
Bank of Ningbo, with 68 branches in the coastal city of eastern China's Zhejiang Province, said profit rose 34 percent last year. It had 26.8 billion yuan of loans, of which 0.33 percent were nonperforming, and 46.2 billion yuan of deposits at the end of 2006. Overseas-Chinese Banking last year bought 12.2 percent of the Chinese lender.
At the top of the price range, the offering values Nanjing at 34 times its 2006 earnings based on enlarged capital, and Ningbo at 36 times. That compared with an average 39 times price-to-earnings ratio of the nation's 10 publicly traded lenders.
Domestic banks have sold US$11.3 billion of shares this year as the benchmark CSI 300 Index rose 88 percent, making it the world's second-best performer. China Construction Bank Corp., the nation's third-largest, may raise as much as US$5.5 billion in a domestic share sale as it joins others seeking funds to expand in an economy where loan growth has averaged 15 percent over the past five years.
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