Money

Chengdu bank plans Shanghai IPO

By Gao Changxin (China Daily)
Updated: 2011-06-28 11:05

SHANGHAI - Bank of Chengdu Co Ltd, a Sichuan-based city commercial bank, is planning an IPO on the Shanghai Stock Exchange's A-share market, as it moves to replenish its capital to boost future growth.

China Business newspaper reported on Monday that the IPO, which will soon be filed with the regulators for approval, aims to issue 800 million shares.

"The A-share IPO was discussed during the latest shareholders meeting, but it's still too early to provide or confirm any details," an official with the bank who refused to be named told China Daily.

A document posted on the bank's website shows that a number of issues surrounding the IPO were discussed during the meeting on June 22, including the allocation of undistributed profits and long-term capital replenishment plan.

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A public listing by Bank of Chengdu will break a three-year IPO hiatus by the nation's city commercial banks, which operate under regional rather than national licenses.

In 2007, three city commercial banks, Bank of Beijing Co Ltd, Bank of Ningbo Co Ltd and Bank of Nanjing Co Ltd, all went public.

But since then none of the nation's 112 city commercial banks has raised capital through a stock market listing, because regulators fear that rapid expansion by the smaller-cap banks, which typically have a higher ratio of non-performing loans and poorer capital-adequacy ratios (CAR), could pose systematic risks.

This year, about a dozen city commercial banks, including Bank of Shanghai Ltd and Bank of Hangzhou Co Ltd, have spoken publicly in favor of a listing.

"We will see a few city commercial banks go public this year. But not too many, as the regulators are still cautious about the move," said Wang Mingfen, a banking industry analyst with Nanjing Securities.

For Bank of Chengdu, the cash raised through an IPO will help raise its CAR, which has declined on the back of strong growth last year, analysts say.

The government-required CAR level for major banks is 11.5 percent. For non-systemically important banks, such as Bank of Chengdu, the requirement is 10.5 percent.

In 2010, Bank of Chengdu's profit jumped 51.45 percent to 1.64 billion yuan ($253 million), with the loan balance growing 33.96 percent to 122.5 billion yuan. By the end of 2010, its CAR was 13.14 percent, down from 14.44 percent a year earlier.

In a sign that shows its appetite for capital, Bank of Chengdu issued 2.4 billion yuan of subordinated 10-year bonds last month at a coupon rate as high as 7 percent.

Bank of Chengdu is among a number of domestic banks involved in a flurry of fund-raising activities this year to boost their CARs.

"Banks are seeing their development increasingly being choked by the CAR requirement, (and are) diving into the financial markets for fund-replenishment," said Wang.

On Monday, mid-cap lender China CITIC Bank Corp launched a road show for its planned A- and H-share rights issues, aiming to raise as much as 26 billion yuan. The fundraising exercise came after its CAR dropped to 11.05 by the end of March, nearing the regulatory limit.