Banking News
- City banks allowed to float shares
Date: 21-Jun-2007 Sources: (Shenzhen Daily)
THE government will allow the country's city commercial banks to float shares for the first time, a move that will boost the competitiveness of the domestic banking industry after the sector opened fully to foreign competition last year.
The stock market regulator said Monday it will review Friday applications from Bank of Nanjing and Bank of Ningbo to launch initial public equity offers that analysts expect to raise a combined US$1.8 billion.
The China Securities Regulatory Commission made the announcement on its Web site, putting the Nanjing and Ningbo banks on track to become the country's first city commercial banks to float shares.
'The listing of the third-tier banks will complete a process in which most major local banks will operate in a market-oriented way, greatly boosting their competitiveness,'said banking analyst Wu Yonggang at Guotai Junan Securities.
The government fully opened the banking sector to foreign lenders in late 2006 to meet commitments it made on joining the World Trade Organization in 2001.
To prepare domestic banks for fierce foreign competition, the government has already pushed most of the big State-owned banks and medium-sized commercial banks to go public, including the biggest, Industrial and Commercial Bank of China, and top foreign exchange lender, Bank of China.
Now is the turn of the smaller city banks.
Nanjing bank, partly owned by top French lender BNP Paribas, will issue up to 700 million A shares, or 36.72 percent of its enlarged capital after the initial public offering (IPO), for a listing on the Shanghai Stock Exchange, it said in a preliminary share issue prospectus published on the regulator's Web site.
Its 2006 net profit rose 62 percent to 595 million yuan (US$78 million), with total assets of 57.9 billion yuan at the end of 2006. Based on 2006 earnings of 0.49 yuan per share and net asset value of 2.16 yuan per share, analysts expect its IPO to raise about 10 billion yuan.
Ningbo bank, partly owned by Singapore's Oversea-Chinese Banking Corp., plans to float as many as 450 million A shares, or 18 percent of its enlarged capital, for a listing on the Shenzhen Stock Exchange, it said in a separate prospectus.
Its 2006 net profit rose 34 percent to 632 million yuan, with total assets of 56.5 billion yuan at end-2006. Analysts expected it to raise about 6 billion yuan based on 2006 earnings of 0.33 yuan and net asset value of 1.66 yuan per share.
Ningbo bank will be the first major IPO on the Shenzhen bourse since the early 2000s, when regulators suspended IPOs larger than 50 million shares in Shenzhen with the aim of building up the main board in Shanghai.
Shenzhen is designed to build China's NASDAQ-style second board, a goal it has yet to reach despite years of preparation.
TCL Corp. is the only large company to list in Shenzhen over the past few years, but its listing in 2004 was the result of a buyout and delisting of one of its units.
Analysts expect the government to allow more large firms to float shares soon to help cool the country's overheated stock market.
The Shanghai Composite Index has risen nearly 60 percent since the start of this year after 130 percent last year, despite official steps to cool it, including tripling stock trading stamp duty in late May.
The stamp duty hike initially dragged the benchmark index down as much as 21 percent in less than a week, but it has rebounded to approach its record high again.
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