China Citic May Raise $5.7 Billion in public offer

China Citic May Raise $5.7 Billion in public offer
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First Published: Mon, Apr 09 2007. 05 59 AM IST
Updated: Mon, Apr 09 2007. 05 59 AM IST
By Bei Hu/Bloomberg
Hong Kong: China Citic Bank Corp. may raise as much as $5.7 billion in a simultaneous Hong Kong and Shanghai initial public offering, the world’s largest stock sale so far this year, three people with knowledge of the details said.
The bank, based in Beijing, plans to offer 2.3 billion new shares in Shanghai at 4.66 yuan to 6.1 yuan to raise up to 14.03 billion yuan ($1.82 billion), the people said. The company may raise a further HK$30.17 billion ($3.86 billion) selling 4.89 billion shares in Hong Kong at HK$4.72 to HK$6.17, they said.
Mainland banks and insurers have sold $61.1 billion of shares in Hong Kong and Shanghai since June 2005, when Bank of Communications Co. became the first domestic bank to go public in Hong Kong. They have been encouraged by high valuations as investors seek to benefit from China’s rapid economic growth.
“This is not a bargain price” for stock in China’s eighth-largest bank by assets, said Wu Xuan, a Shenzhen-based analyst at Penghua Fund Management Co. It “leaves little room for future upside gains if it’s priced at the top end.”
At the upper end, Citic Bank’s sale could be the world’s largest stock sale so far this year, according to data compiled by Bloomberg. It could trump a $5.5 billion closed-end fund launch in the U.S. and a secondary share sale by Ping An Insurance (Group) Co., China’s No. 2 insurer, which raised slightly more than $5 billion in February.
Regulatory Approval
The price ranges value Citic Bank at 2.48 times to 2.81 times its estimated book value this year, according to the three people, who declined to be identified before an official statement. The price ranges have yet to be approved by the China Securities Regulatory Commission.
The new shares to be listed in Shanghai represent a 6% stake in the bank, while those in Hong Kong are equivalent to 12.8%. The stock may start trading on April 27, Citic Bank said in a statement on April 4.
China International Capital Corp., Citigroup Inc., Citic Securities Co., HSBC Holdings Plc and Lehman Brothers Holdings Inc. are arranging the sale. Ma Zhuangchun, a Beijing-based spokesman for Citic Bank, and Tan Ning, board secretary of Citic Securities in Beijing, could not be reached at the weekend. Spokesmen for the other investment banks declined to comment.
Bank Stocks
China has the most expensive bank stocks in Asia’s emerging markets, trading at about 3.2 times estimated book value in 2007, compared with 1.7 times for peers in India and 1.4 times for Korea, according to a Morgan Stanley report on March 23.
The Industrial & Commercial Bank of China Ltd., the nation’s largest, traded at 2.79 times the consensus book value estimate for 2007 in Hong Kong, higher than 1.7 times for HSBC and 1.94 times for Citigroup.
Citic Bank was China’s seventh-largest by total assets at the end of 2005, according to a preliminary share sale document posted on the Web site of Hong Kong Exchanges and Clearing Ltd. The company fell to eighth last month after the Postal Savings Bank of China was established.
Profit at Citic Bank this year was expected to gain 53% to 5.69 billion yuan, according to an April 4 statement.
The company may achieve loan growth of 20 to 21% this year and in 2008, Bear Stearns Asia Ltd. analysts including Steven Chan wrote in a March 2 report. They cited the bank’s “strong position” in corporate loans and trade finance, and planned expansion in residential mortgages and credit cards.
Bad-Loan Ratio
Citic Bank had 453.4 billion yuan of loans outstanding and 618.4 billion yuan of deposits as of Dec. 31, according to the prospectus for the share sale. The bad-loan ratio was 2.5% at the end of last year. The capital-adequacy ratio, a measure of financial health, stood at 9.41%, above the regulatory requirement of 8%.
The bank intends to sell shares in Hong Kong and Shanghai at the same price after adjusting for the exchange rate between the two currencies, the April 4 statement said.
The size of the Hong Kong stock offering may be expanded by as much as 15% to cover excess demand from the public.
Citic Bank is controlled by Citic Group, China’s biggest state-run investment company, which was formerly called China International Trust & Investment Corp.
China’s economy, the world’s fourth-largest, expanded 10.7% last year, the fastest pace in 11 years. It may grow as much as 11% in the first quarter, the State Information Center, a government research center, said last month.
—With reporting by Luo Jun in Shanghai
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First Published: Mon, Apr 09 2007. 05 59 AM IST
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