China Merchants Bank, which is seeking to become the first mainland bank to be listed both at home and overseas, plans to raise more than HK$10 billion through an initial public offering in Hong Kong, possibly before June, market sources said.
The IPO, to be arranged by Merrill Lynch, will likely come between the two much larger and higher profile listings of the much larger Bank of China and Industrial and Commercial Bank of China, they said.
China Merchants, which has 400 outlets in 30 cities compared with ICBC's 20,000 branches, may win investors' favor based on its record of growth in the rapidly expanding consumer market, including the credit card business, where its branded-card partners include Air China, department store operator Parkson, and online travel agent Ctrip.
The bank, which many acknowledge as one of the best-managed companies in the mainland, may also be preferred to its gigantic sister banks because its smaller size makes it a more nimble company.
"Of course, it comes down to price," said one analyst who asked not to be identified. "But China Merchants, qualitatively, has a lot going for it."
The bank, the country's largest publicly-traded lender, targets both the wealthiest mainlanders and highest- margin businesses while avoiding overheated sectors such as property.
The bank's capital adequacy ratio was 9.27 percent at the end of June last year, down from 9.55 percent at the end of 2004, against a minimum requirement of 8 percent.
Its nonperforming loans stood at 11.8 billion yuan (HK$ 11.36 billion) at the end of September, or 2.6 percent of 454 billion yuan in total loans.
Net profit jumped 48 percent in the first nine months of 2005 to 3.2 billion yuan, on a 40 percent profit margin, from 2.5 billion yuan the year before.
Revenue leaped to 17.7 billion yuan from 14.4 billion.
China Merchants plans to use the proceeds from the IPO to boost capital and expand, according to bank officials.
Bank of China's IPO of US$10 billion (HK$78 billion) is slated for this quarter, while ICBC plans a similar- sized offering by the end of the year.
Bank of Communications, China's fifth-largest lender and the first to list overseas, sold shares in
Hong Kong in June.
That was followed by China Construction Bank, which raised HK$70 billion on a deal priced at the high end of a raised indicative range. The sales bolstered Beijing's resolve to press ahead with the sale of shares in other big state-controlled banks.
China Merchants trades at 24.5 times forecast earnings in Shanghai, while Bank of Communications trades at 75 times forward earnings. China Merchants shareholders voted in December to write off more than 900 million yuan of nonperforming loans, triple the 300 million yuan written off in 2004. The bank also sweetened its A-share reform program by increasing the number of free shares given out to investors to 2.51 free shares and six put- option warrants for every 10 tradable shares held.
Both Shenhua Energy and Bank of Communications scrapped dual listings last year, as domestic markets hit six- year lows, while rival Shanghai-listed China Minsheng Bank has long planned to list in Hong Kong.
