Huishang Bank Starts Marketing $1.5 Billion Hong Kong IPO

Huishang Bank Corp., a lender in the eastern Chinese province of Anhui, is seeking as much as $1.5 billion from what could be Hong Kong’s biggest banking initial public offering in almost three years.

The bank, based in Hefei city, plans to offer 2.5 billion shares, or about 23 percent of the company, according to a term sheet obtained by Bloomberg News. State-owned shareholders may also sell shares on behalf of China’s National Social Security Fund. Proceeds from the sale, which may raise at least $1 billion, will be used to strengthen Huishang’s core capital base, the terms show.

“Huishang is a city commercial bank facing less capital pressure because its scale is smaller than the other larger national players,” Chen Xingyu, a Shanghai-based analyst at Phillip Securities Group, said by phone today. “This could be a selling point to investors.”

A $1.5 billion deal would be the largest banking IPO in Hong Kong since Chongqing Rural Commercial Bank (3618) Co. raised $1.7 billion in December 2010, according to data compiled by Bloomberg. China Everbright Bank Co. (601818), which is listed in Shanghai, said Oct. 16 it won regulatory approval to sell as many as 12 billion shares overseas, paving the way for a first-time stock sale in Hong Kong.

Huishang started gauging investor demand today and will take orders from Oct. 28, according to the terms. It plans to set a final price for the offering on Nov. 2.

Share Performance

Companies have raised $8.5 billion in Hong Kong IPOs this year, more than double the amount for the same period of 2012, data compiled by Bloomberg show.

Founded in December 2005, Huishang had about 5,500 employees and 190 outlets at the end of last year, according to the lender’s website.

The Hang Seng China H-Financial Index, which tracks shares of Chinese banks and insurers traded in Hong Kong, has fallen 5 percent this year, compared with the benchmark Hang Seng Index’s 3.6 percent gain. The financials gauge trades for 6.8 times 12-month projected profit, a 35 percent discount to the Hang Seng Index’s valuation, data compiled by Bloomberg show.

“Chinese banks’ valuations are relatively low in Hong Kong right now,” Wang Er Hong, director general manager at Guoyuan Securities (HK) Ltd., said in an e-mailed reply to questions today. “This will not be good for Huishang’s pricing.”

To contact the reporters on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net; Fox Hu in Hong Kong at fhu7@bloomberg.net; Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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