HONG KONG: China Merchants Bank (CMB), the
mainland's sixth-largest lender, is expected to launch its US$2-billion Hong
Kong initial public offering (IPO) this month and start trading its shares next
month, according to sources.
The lender, already listed in Shanghai, will face a Hong Kong Stock Exchange
hearing on Thursday. If it gets the green light, the bank would begin marketing
its IPO and launch its roadshow, sources said.
Industry insiders said over the weekend that the China Securities Regulatory
Commission had given the nod last week to CMB's plans for an overseas listing.
The CSRC approved CMB to sell up to 2.53 billion shares in Hong Kong, or 17
per cent of the company's enlarged share capital, which is estimated to be worth
US$2 billion.
Marketing of the IPO is expected to begin in the week of August 21, with the
roadshow due to start early next month. China International Capital and JP
Morgan are the IPO's underwriters.
However, CMB wants to avoid competition with larger rivals. Bank of China
launched its US$9.7-billion deal in June and the Industrial and Commercial Bank
of China is expected to float shares worth US$21 billion in Hong Kong and
Shanghai in October.
"I think CMB will price its shares at 2.4 times its projected earnings," said
Andes Cheng, an analyst with Hong Kong-based South China Research Ltd.
That will be on a par with three Hong Kong-listed mainland banks. They are
now trading on an average price-to-earnings ratio of 2.5 per cent.
CMB currently has 79,000 high-end customers with deposits exceeding 500,000
yuan (US$62,500). The lender has issued 6.5 million credit cards, accounting for
about 30 per cent of the mainland's credit card business.
Citigroup analyst Tracy Yu forecast that the bank's earnings would increase
this year by 46 per cent to 5.47 billion yuan (US$684 million), and rise by a
further 28 per cent to 7 billion yuan (US$875 million) in 2007.
CMB's loans grew 17 per cent year-on-year to 5.165 billion (US$684 million)
in the first half of this year, while its capital adequacy ratio dropped to 8.4
per cent from 9.1 per cent at the end of 2005.
A Hong Kong listing could help CMB boost its capital base, said Yu.
"Merchants Bank is the highest-quality bank on the mainland, with the clearest
strategy, and the strongest combination of a consumer franchise and product
market positioning," said Yu.
Louis Wong, director of Philip Asset Management, added: "The banks' strengths
are its customer services and low gearing ratio."
"But the scale of its business is relatively small, only covering 30 mainland
cities. In addition, it's not that strong in terms of consumer financing. This
lender still has room for improvement."
After CMB and the Industrial and Commercial Bank of China, more mainland
lenders will seek listings in Hong Kong, said Patrick Yiu, associate director of
CASH Asset Management.
"H-share listings have become a trend for mainland banks," he said, adding
that smaller lenders are now expected to follow suit.
"However, they will not flock to the Hong Kong stock exchange overnight. It
takes time for them to get their books in order before submitting applications
to the regulator," said Yiu.
(China Daily 08/15/2006 page9)
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