CITIC Bank readies $5.7 billion HK/Shanghai IPO: sources
By Daisy Ku
HONG KONG (Reuters) - China CITIC Bank Corp., the country's No. 7 commercial lender, will begin taking orders from institutional investors on Tuesday to raise as much as US$5.7 billion in the world's biggest IPO so far this year, people familiar with the matter said on Monday.
CITIC Bank, in which Spain's Banco Bilbao Vizcaya Argentaria (BBVA.MC: Quote, Profile, Research) owns 4.83 percent, will offer shares between 2.48 and 2.81 times 2007 book value in what will be the second simultaneous listing in Hong Kong and Shanghai, after last year's listing of Industrial and Commercial Bank of China (ICBC) (1398.HK: Quote, Profile, Research)(601398.SS: Quote, Profile, Research), the sources said, valuing the Beijing-based bank at a discount to some of its bigger rivals.
"The range looks reasonable given China's robust economic growth and the benign market conditions," said Tat Au Yeung, managing director of Apex Capital Management.
The offer, the biggest since top Chinese lender ICBC raised a world record US$21.9 billion in October, will close on April 19, with a trading debut set for April 27.
The issuer will sell 2.3 billion shares, or 6 percent of its enlarged share capital, at 4.66 yuan to 6.1 yuan apiece on the Shanghai exchange, while offering 4.89 billion shares, or 12.8 percent of the total, between HK$4.72 and HK$6.17 each on the Hong Kong exchange, the sources said.
By comparison, ICBC trades at 2.82 times 2007 book value, China Construction Bank (0939.HK: Quote, Profile, Research) and Bank of China (3988.HK: Quote, Profile, Research) trade at 2.89 times and 2.2 times, respectively, while Bank of Communications (3328.HK: Quote, Profile, Research) and China Merchants Bank (3968.HK: Quote, Profile, Research) trade at between 3.28 times and 4 times.
"Chinese financial stocks are expensive, but their valuations have came down a bit. With the current market sentiment, it's likely that CITIC Bank could trade up 15 to 20 percent in the secondary market," said Clive Zhang, a fund manager at Hong Kong-based Vision Finance Asset Management.
PROXY ON CHINA'S GROWTH
Despite Beijing's cooling measures to curb breakneck lending growth, five of China's six major banks have raised over US$50 billion through initial public offerings since mid-2005 as investors flocked to take a share in China's vigorous economic growth.
China's economy grew annually at 14.9 percent from 2002 to 2006 to become the world's fourth-largest economy with total GDP of nearly 21 trillion yuan (US$2.7 trillion) and a GDP per capita of 15,931 yuan at the end of last year.
Established in 1987, CITIC Bank, a subsidiary of the country's biggest investment firm CITIC Group, saw its loan book expand 25 percent last year, out-performing an industry average of 15.7 percent.
Its non-performing loan ratio declined to 2.5 percent in 2006 from 9.02 percent in 2003, thanks to parent firm CITIC Group's injection of 18.5 billion yuan in capital and efforts in strengthening credit controls.
Its corporate non-performing loan ratio declined from 11.7 percent in 2003 to 3 percent in 2006, while the personal non-performing loan ratio stood at 0.86 percent last year, down from 1.9 percent in 2003.
The lender expects its profit to jump 53 percent this year to 5.69 billion yuan, while underwriters expect that to grow another 50 percent in 2008 and some 30 percent in 2009, driven by wider net interest margins and expansions in fee income.
China International Capital Corp. (CICC), Citigroup (C.N: Quote, Profile, Research), CITIC Securities (600030.SS: Quote, Profile, Research), HSBC (0005.HK: Quote, Profile, Research)(HSBA.: Quote, Profile, Research) and Lehman Brothers (LEH.N: Quote, Profile, Research) are sponsors of the listing.
Shares have been earmarked for BBVA, Spain's No. 2 lender, and CITIC International Financial Holdings Ltd. (CIFH) (0183.HK: Quote, Profile, Research) in order to maintain their respective holdings.