BEIJING • Postal Savings Bank of China is seeking as much as US$8.1 billion (S$11 billion) in a Hong Kong initial public offering (IPO), which could become the world's biggest share sale this year.
The bank is offering 12.1 billion shares from HK$4.68 to HK$5.18 apiece, according to terms for the deal obtained by Bloomberg yesterday.
Cornerstone investors, who have committed to hold their shares for six months, agreed to buy about US$5.9 billion of stock, accounting for 76 per cent of the offering at the midpoint of the marketed range.
The price range values Postal Savings Bank at 1 to 1.1 times its net assets at the end of March, a person with knowledge of the matter said, asking not to be identified as the information is private. Chinese lenders listed in Hong Kong trade at a median 0.88 times their latest book value, data compiled by Bloomberg shows.
Postal Savings Bank, ubiquitous in rural China, joins Bank of Tianjin and China Zheshang Bank in selling shares in Hong Kong to fund expansion. The bank, which has more outlets than any other Chinese lender, boasts a non-performing loan ratio that was less than half the official industry figure at the end of March, and has the potential to use a strong deposit base to grow lending faster than its peers.
"Even though there are some positives for Postal Savings Bank, the valuation is not attractive enough," Mr Edmond Law, an analyst at UOB Kay Hian (Hong Kong), said by phone.
Investors may prefer the shares of other listed state-owned banks due to their more attractive price-to-book ratios, he said.
A Hong Kong-based spokesman for Postal Savings Bank declined to comment on the valuation.
Even at the bottom end of the price range, the bank's first-time share sale would be the largest globally this year, surpassing the US$3 billion offering from Danish utility Dong Energy in June, according to data compiled by Bloomberg.
The IPO is set to be the largest globally since e-commerce billionaire Jack Ma's Alibaba Group Holding priced its US$25 billion New York share sale in September 2014, the data shows.
Postal Savings Bank also does not have a lot of bad debt, and has room to grow. According to Bernstein Research, its 39 per cent loan-to-deposit ratio is well below the more than 70 per cent average of its peers.
However, the lender is inordinately exposed to wealth-management products, Bloomberg Gadfly column reported, and has relatively weak capital buffers, high costs and a heightened vulnerability to fraud.
The bank, however, has far fewer loss-making state-run legacy clients, and a sticky deposit base of customers in rural areas where it is typically the only bank around.
The weight of cornerstone investors, which include China Shipbuilding, Shanghai Port and HNA Group, should propel this big IPO over the line.