PSBC invites bids for jumbo IPO
Postal Savings Bank of China, the country’s sixth-largest bank by assets, has kicked off preparations for what could be the largest IPO globally in 2016, with a Hong Kong listing on track for the second half of this year.
China’s biggest lender by branches and number of customers has sent a request for proposals to banks inviting them to pitch for a sponsor role for the transaction, according to several people familiar with the situation. The deadline for submissions is January 22.
The listing could raise between US$12bn and US$15bn, depending on whether existing shareholders offload their shares, the people said.
Last month, PSBC sold a 16.92% stake to 10 strategic international and domestic investors in a pre-IPO investment of Rmb45.1bn (US$6.86bn). The investors were UBS, JP Morgan, DBS, Temasek, International Finance Corp, Canada Pension Plan Investment Board, China Life Insurance, Alibaba’s Ant Financial unit, Tencent Holdings and China Telecom.
The pre-IPO investment values PSBC at US$40.5bn. The shares were sold flat to historical book value and at a slight discount to end-2015 book value, according to people close to the transaction.
Bankers are expecting the lender’s valuation to increase significantly before listing in the second half of 2016. They argue PSBC should enjoy a premium valuation to peers given it has better loan quality and a network that positions it well to capture growth in the sector.
Chinese banks cannot sell equity at less than one times historical book value.
CICC and Morgan Stanley, advisers on the pre-IPO financing, are expected to play key roles in the IPO.
PSBC is expected to list in Hong Kong, joining a crowded market for Chinese bank stocks. China’s big four lenders are already listed in Hong Kong and many other city commercial banks have listed or are in the process of doing so in the city.
PSBC has more than 40,000 branches nationwide and nearly 500m customers. It was set up as a deposit-taking bank in 2007, and bankers pitching for the transaction reckon PSBC has its own selling points.
“Compared with other lenders, PSBC has higher exposure to less-developed rural areas and it focuses more on consumer lending,” said one of the bankers. “The mounting corporate debt problem in China has less impact on PSBC and its level of non-performing loans is very low compared with the country’s big lenders.”
At the end of September, PSBC’s NPL ratio stood at 0.82%, compared with the 1.59% average for commercial banks in China, according to data from China Banking Regulatory Commission.
The sprawling branch network of PSBC also adds to its equity story. According to the bankers, the lender could actually be positioned as something more than just a bank.
“The lender has an extensive network; it can also be seen as a logistics play,” said another banker.