China Postal eyed for next big bank IPO
Investment bankers hunting for the newest big game in China’s financial services market are circling the reborn China Postal Savings Bank, the mainland’s fifth-largest lender by deposits.
China Postal was relaunched as a retail-focused bank in March with 1.6 trillion yuan (USD 208 billion) in deposits. Its predecessor, the postal savings bureau, could not lend and most of those deposits wound up with the central bank.
Armed with a new mandate and a plan to restructure its 36,000-branch network, China Postal has been talking to investment bankers about a 2008 IPO in the range of USD 2-USD 3 billion, sources have said.
Some bankers call that kind of talk premature, saying China Postal is more likely to hire advisers on a further restructuring as a precursor to an IPO, perhaps also bringing on strategic investors.
Bankers agreed that any deal would not happen until 2008, at the earliest.
But the draw of the public market is compelling: CITIC Bank Corp., China’s No.7 lender, raised USD 6 billion in a simultaneous Hong Kong-Shanghai offering last month.
Its domestic A shares are up 75 percent from the 5.80 yuan offer price, while its Hong Kong H shares are up 8 percent.
The disparity in performance prompted one foreign investor to call one of the underwriters and jokingly request that his allocation be made in A shares rather than H shares.
China Postal would also be keen on a simultaneous listing, one source said. Such listings are becoming more popular now that two have been achieved, and Beijing is keen to develop the mainland capital markets.
“When it does happen, it’s going to be huge,” said one banker who has spoken with China Postal management about a deal. “But this is going to be a long gestation period.”
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Banks and insurers have driven Chinese equity issuance to record levels in recent years, with IPOs from China Construction Bank and Industrial & Commercial Bank of China raising a combined USD 45 billion in the past two years.
China Postal’s deal will be hotly contested as there are fewer big bank deals on the horizon since those state lenders have listed. The only mainland lenders expected to list this year are Bank of Beijing and Chongqing City Commercial Bank, which promise to be smaller deals.
Agricultural Bank of China the weakest of the Big Four state lenders, is undergoing a restructuring that is planned to be completed at the end of the year, with a potential share listing in 2008.
Nearly every large global securities house has a Chinese bank listing under its belt after Citigroup and Lehman Brothers joined the club from their roles on CITIC Bank’s deal.
Wall Street titans Goldman Sachs and Morgan Stanley have long histories privatising state assets, while Credit Suisse, Deutsche Bank and Merrill Lynch were all part of the ICBC underwriting team.
The winning bankers will have their work cut out for them.
China Postal needs to figure out how to scale back its branch network and completely transform itself into a bank focused on serving retail customers. It must also build a loan book.
However, the last challenge could be a blessing in disguise, given China’s mountain of bad debt, which has lingered in the system for years.
“It doesn’t have any loans. But that could be a good thing, as it doesn’t have any non-performing loans either,” one banker said, half jokingly. (USUSD =7.6975 yuan)
