China Everbright Bank Set For $2 Billion Hong Kong IPO Next Week

HONG KONG — China Everbright Bank Co. is planning to start selling shares in an up to $2 billion initial public offering Dec. 10, the midtier Beijing bank’s third attempt at going public.

Everbright Bank, which last tried to relaunch the deal in Hong Kong in May 2012, will be the third Chinese bank to list in Hong Kong in the past month, tapping investors at a time when concerns about rising bad debt levels are growing in the country. Should it go ahead with order-taking next week, Everbright Bank’s IPO will also be Hong Kong’s second biggest IPO this year after China Cinda Asset Management Co., currently in the market for an up to $2.46 billion deal. Cinda, which buys bad loans from banks and is a debt-clearing agency, is set to list on Dec. 12.

Shanghai-listed Everbright Bank has told some investors it is seeking to raise between $1.5 billion and $2 billion, with plans to list in Hong Kong on Dec. 20, said the people, who added the IPO would hinge on market conditions.

China Everbright BankIn Everbright Bank’s two previous attempts at listing, volatile stock markets led to the deals being pulled. China Everbright, the country’s 11th largest by assets, has sought to list in Hong Kong twice before. In 2011 it hoped to raise as much as $6 billion before pulling the deal. It tried again in May last year, securing $1.2 billion worth of commitments from cornerstone and anchor investors before postponing the deal due to market conditions.

Everbright Bank’s Hong Kong listing would be the latest by a Chinese lender seeking to raise funds to meet stricter capital requirements in China. Under China’s version of the Basel III global capital rules, midsize lenders like China Everbright Bank will need a Tier 1 capital—which mainly comprises common equity—of at least 8.5% of assets by 2018, 0.6 percentage points higher than its standing at the end of September.

Raising money would also help as bad debt grows across the Chinese banking industry. The nonperforming loan ratio of the whole Chinese banking industry at the end of September this year was just 0.97%, but absolute bad loans surged 18% to 564 billion Chinese Yuan ($92.5 billion) from CNY479 billion a year earlier, according to data from China Banking Regulatory Commission, China’s banking regulator.

Last month, midtier Chinese lender Bank of Chongqing Co. 1963.HK -1.02% raised $546 million in its Hong Kong IPO and its peer, Huishang Bank Corp. 3698.HK +0.28% , raised $1.2 billion. Those two IPOs were the first by Chinese banks in three years.

The offering comes as the benchmark Hang Seng 0011.HK +0.87% Index closed Monday up 0.7% at 24,038.55, above the psychologically important 24,000 level for the first time since April 2011, helped by hopes for more financial reforms in China.

Everbright Bank, which has its headquarters in Beijing, had 806 branches in China as of the end of June, and is both a retail and corporate bank. It recorded a net profit of 21.7 billion yuan ($3.56 billion) for the nine months ended September, up 14% from a year earlier.

China International Capital Corp Ltd., Morgan Stanley, China Everbright Securities Co, UBS AG UBSN.VX +0.06% and BNP Paribas and BOC International Holdings Ltd. are handling the transaction, the people said. J.P. Morgan Chase & Co had been an adviser on the deal but the U.S. investment bank pulled out, as it faces a number of investigations by U.S. regulators, people familiar with the matter said then. One of those investigations is linked to the hiring of relatives of high-ranking Chinese officials, known as princelings.


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