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Tuesday, September 13, 2016, 11:50

Postal Savings seeks up to US$8.1b in IPO

By Bloomberg

HONG KONG - Postal Savings Bank of China Co is seeking as much as US$8.1 billion in a Hong Kong initial public offering, which could become the world’s biggest share sale this year.

The Beijing-based bank is offering 12.1 billion shares at HK$4.68 to HK$5.18 apiece, according to terms for the deal obtained by Bloomberg on Tuesday. Cornerstone investors, who commit to hold their shares for six months, agreed to buy about US$5.9 billion of stock, accounting for 76 percent of the offering at the midpoint of the marketed range.

The price range values Postal Savings Bank at about 1 to 1.1 times its net assets at the end of March this year, a person with knowledge of the matter said, asking not to be identified as the information is private. Chinese lenders listed in Hong Kong trade at a median 0.88 times their latest book value, data compiled by Bloomberg show.

Postal Savings Bank, ubiquitous in small-town China, joins Bank of Tianjin Co and China Zheshang Bank Co in selling shares in Hong Kong to fund expansion. The bank, which has more outlets than any other Chinese lender, boasts a non-performing loan ratio that was less than half the official industry figure at the end of March.

"Even though there are some positives for Postal Savings Bank, the valuation is not attractive enough,” Edmond Law, an analyst at UOB Kay Hian (Hong Kong) Ltd., said by phone Tuesday. “Investors would still prefer to buy existing SOE banks instead of Postal Savings Bank.”

Paring Provisions

A Hong Kong-based external spokesman for Postal Savings Bank declined to comment on the valuation.

Postal Savings Bank reported an 11 percent increase in first-quarter profit as it pared provisions for bad loans, according to pre-listing documents filed with the exchange. The bank will use the proceeds to strengthen its capital base to support ongoing business growth, Tuesday’s terms show.

The lender’s capital adequacy ratio stood at 10.26 percent at the end of March, with a core tier-1 ratio of 8.35 percent. The China Banking Regulatory Commission requires non-systemically important banks to have minimum capital level of 10.5 percent by the end of 2018, with a core ratio at least 7.5 percent.

State-owned China Shipbuilding Industry Corp will invest about US$2.2 billion in the offering, while Shanghai International Port Group Co agreed to purchase around US$2.1 billion of stock, according to the terms. HNA Group Co, the parent of China’s fourth-largest airline, will buy US$1 billion of shares.

State Grid Corp of China, the world’s largest utility, committed US$300 million, the terms show. State-owned China Chengtong Holdings Group Ltd. and China Great Wall Asset Management Corp. will also purchase stock in the offering.

The lender plans to price the offering Sept 20 US time and begin trading on Sept 28, the terms show. Bank of America Corp, China International Capital Corp, Goldman Sachs Group Inc, JPMorgan Chase & Co and Morgan Stanley are joint sponsors of the offering.

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