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Chinese mid-sized lender, Industrial Bank, wins record IPO subscriptions

Chinese mid-sized lender, Industrial Bank, wins record IPO subscriptions

Chinese mid-sized lender Industrial Bank attracted a record 1.16 trillion yuan (about US$150 billion; euro116 billion) in subscriptions to its Shanghai initial public offering, reflecting the current mania for Chinese stocks.
The 16 billion yuan (US$2 billion;euro1.5 billion) Industrial Bank raised in its IPO falls far short of the amounts raised by other, larger financial institutions such as China Life Insurance and ICBC. But the amount of funds chasing the shares on offer well exceeded those bigger IPOs thanks to strong demand.
The bank said Friday that it priced its shares at 15.98 yuan (US$2.05;euro1.58) per share, the upper end of its IPO range, drawing 1.16 trillion yuan in subscriptions. The shares begin trading next month.
"It shows continuing enthusiasm for the stock market," said May Yan, banking analyst at Moody's Investors Service in Hong Kong. "On the other hand, the bank is in relatively good shape," she said.
China Life's December IPO drew 832.5 billion yuan (US$107 billion; euro82 billion) in subscriptions and raised 28 billion yuan (US$3.6 billion; euro2.8 billion). ICBC, or Industrial and Commercial Bank of China, the country's biggest lender, raised US$5.9 billion in the Shanghai segment of a dual offering with Hong Kong that raised a record total of US$21.9 billion in October.
China's key Shanghai Composite Index rose 0.9 percent Friday on expectations of further gains in the banking sector once funds flow back into the market after the subscription lockup for Industrial Bank ends on Jan. 29.
The massive amount of funds seeking investment opportunities is inflating demand relative to supply, said Peng Yunliang, an analyst at Shanghai Securities.
Industrial Bank, based in the southeastern coastal city of Fuzhou, was founded in 1998 as the Fujian Industrial Bank. It is a joint venture controlled by the Fujian provincial government, which holds a 25.5 percent stake.
Hang Seng Bank, a unit of British banking giant HSBC Holdings PLC, will see its 16 percent stake in the bank fall to 13 percent after the IPO. The International Financial Corp., a private lending arm of the World Bank, holds a 4 percent stake and the Government of Singapore Investment Corp. 5 percent.
The IPO represents a quarter of the bank's capital. Funds raised are intended to boost its capital adequacy ratio, improve risk controls and support its business growth and profitability. The bank, which has 338 branches in the mainland, plans to focus on expanding its retail banking business.
Like other joint-stock banks, it is considered relatively innovative and lacks the so-called legacy problems of debts caused by policy-driven lending faced by bigger state banks, Yan said.
Industrial Bank is dwarfed by ICBC and other larger rivals, with total assets reported at 532.6 billion yuan (US$68.5 billion;euro52.8 billion) at the end of 2005, compared with ICBC's 6.45 trillion yuan (US$829.3 billion;euro639 billion).
Still, investors have seen hefty gains from previous bank IPOs: ICBC's shares closed at 5.26 yuan on Friday, compared with its Oct. 27 IPO price of 3.12 yuan. The lender's shares fell 0.4 percent ahead of an influx of 2.35 billion ICBC shares held by institutions due to begin trading Monday.
"People have seen the good performance of financial stocks like ICBC and Bank of China and that has built up investors' confidence," Peng said.


Updated : 2021-06-19 09:35 GMT+08:00