ACGBY Agricultural Bank of China (PK)

By Kane Wu 

Chinese state lender Postal Savings Bank of China Co. tapped five investment banks to lead its up to $10 billion initial public offering, which is expected to be the largest such deal in Hong Kong this year, according to people with knowledge of the matter.

China's sixth-largest lender by assets has picked Bank of America Merrill Lynch, China International Capital Corp., Goldman Sachs Group Inc., J.P. Morgan & Chase Co. and Morgan Stanley to lead the IPO, the people said. UBS Group AG, which is an investor in Postal Savings Bank, will serve as a financial adviser on the deal, they said.

The Chinese bank's initial public offering would make it the latest of China's big state banks to debut overseas. China's "big four" banks-- Agricultural Bank of China Ltd., Bank of China Ltd., China Construction Bank Corp. and Industrial & Commercial Bank of China Ltd.--are all listed in both Shanghai and Hong Kong. Postal Savings Bank of China has more than 40,000 branches across the country, twice the size of ICBC, the largest bank in China by assets.

The bank raised $7 billion last month from a star-studded roster of investors ahead of the IPO. It sold a nearly 17% stake to a group including foreign investors UBS Group AG, J.P. Morgan Chase & Co., International Finance Corp., Canada Pension Plan Investment Board, and Singapore firms DBS Bank Ltd. and Temasek Holdings Pte. Ltd.

Postal Savings Bank of China is also debating over a potential listing in Shanghai this year, according to people with knowledge of the discussions. It might however prove difficult given the current IPO logjam in China, the people added.

China's domestic stock market is hovering at its lowest level in more than a year. The benchmark Shanghai Composite Index is down more than 23% so far this year.

Regulators suspended domestic IPOs after the stock market downturn in June last year and have only recently allowed a trickle of new offerings. There are still more than 700 companies waiting to get onshore IPO approvals.

Chinese banks aren't faring well in the volatile market as investors fret about slowing Chinese growth and the potential for their loans to sour. That could make pricing the Postal Savings Bank IPO challenging. Postal Savings Bank's peers such as Bank of China Ltd. are trading below book value, while Beijing typically requires its state-owned firms to price their IPOs above book value.

The Hang Seng China H-Financials Index that tracks the valuation of Chinese banks and insurers is down 18% this year, underperforming the overall Hong Kong market, which has dropped about 13%.

Banks face tighter profit margins as China liberalizes its deposit and lending rates. Nonperforming loans are expected to rise further as the economy slows and Chinese companies and local governments work through a mountain of debt.

Moody's Investors Service said on Monday that banks in China will face a higher degree of uncertainty--and therefore risk--amid increased volatility in interest rates, exchange rates, stock prices and fund flows.

China's Postal Savings Bank has a much smaller book of loans compared with its rivals. The bank has traditionally served as a savings vehicle for China's rural population and doesn't have as much experience making loans as its peers.

Postal Savings Bank of China's nonperforming-loan ratio was 0.82% by the end of September, much lower than the average NPL ratio of Chinese commercial banks, which stood at 1.59% at the end of the third quarter, according to China Banking Regulatory Commission data. The bank's total assets reached 6.8 trillion yuan ($1.03 trillion) at the end of September.

Ant Financial Services Group, the financial affiliate of Alibaba Group Holding Ltd.; Tencent Holdings Ltd.; China Life Insurance Co. and China Telecom Corp are among the bank's Chinese strategic investors.

Write to Kane Wu at kane.wu@wsj.com

(END) Dow Jones Newswires

January 27, 2016 06:00 ET (11:00 GMT)

Grafico Azioni Agricultural Bank of China (PK) (USOTC:ACGBY)
Storico
Da Apr 2024 a Mag 2024

Grafico Azioni Agricultural Bank of China (PK) (USOTC:ACGBY)
Storico
Da Mag 2023 a Mag 2024