Commercial lender China Zheshang Bank Co. Ltd. launched on Monday an initial public offering worth up to US$1.75 billion in Hong Kong, the city’s first sizeable new listing this year.
The bank, based in China’s eastern Zhejiang province, is offering 3.3 billion shares in an indicative range of HK$3.92 to HK$4.12 each, Thomson Reuters publication IFR reported, citing a term sheet of the transaction.
The shares are equivalent to 19 percent of Zheshang Bank’s enlarged share capital.
The IPO would be the largest in Hong Kong since a US$1.9 billion listing in December from China Energy Engineering Corp. Ltd. (03996.HK), Reuters said.
Hong Kong, which replaced New York in 2015 as the world’s biggest IPO market by the amount of funds raised, has seen just US$800 million of new listings so far this year.
But activity is expected to pick up in the coming weeks with other offerings including an up to US$1 billion deal from commercial lender Bank of Tianjin.
A jump in bad debts in recent years has pressured banks to raise funds to bolster their balance sheets.
Finance Minister Lou Jiwei said last week that if state-owned banks see profitability fall because of increased levels of non-performing loans, the finance ministry would give them “appropriate help”.
The deals from Zheshang Bank and Bank of Tianjin also come after three other medium-sized lenders – Bank of Jinzhou Co. Ltd. (00416.HK), Bank of Qingdao Co. Ltd. (03866.HK) and Bank of Zhengzhou Co. Ltd. (06196.HK) – raised a combined US$2.3 billion late last year.
Though all three deals priced near or at the bottom of expectations, Bank of Jinzhou shares are up 24 percent, while Bank of Qingdao has climbed 6.3 percent and Bank of Zhengzhou is up 18 percent since their debuts in December, the news agency said.
“The current slowdown in earnings growth will lead to capital issues in Chinese banks and, within the sector, smaller banks will be more constrained in terms of their capital given their worse than average asset quality and earnings headwinds,” said Leon Qi, a banking analyst at Daiwa Capital Markets in Hong Kong.
The IPO secured $963 million in commitments from cornerstone investors including Zhejiang Seaport Group and Alipay (Hong Kong) Investment, which is part of Alibaba Group Holding Ltd.’s Ant Financial Services Group.
The share offering is set to be priced on March 21, with a debut on the Hong Kong stock exchange slated for March 30.
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