China's Postal Bank Raises $7 Billion From Stake Sale

  • UBS, JPMorgan, Temasek among 10 investors who bought shares
  • Lender sells 17% stake ahead of planned initial public offer

Postal Savings Bank of China Co., which has the most branches of any Chinese lender, raised 45 billion yuan ($7 billion) selling about 17 percent of itself in what it called the biggest private fundraising ever undertaken in the nation’s financial industry.

The stake sale ahead of a planned initial public offering by the Chinese lender lured 10 firms including UBS Group AG, the Canada Pension Plan Investment Board and Temasek Holdings Pte, Postal Savings Bank said in a statement Wednesday. Canada Pension invested 3.2 billion yuan, it said in a separate statement.

Postal Savings Bank, an arm of state-owned China Post Group Co., is raising capital at a time when Chinese lenders are feeling the squeeze of shrinking profit margins and rising defaults in a slowing economy. Figures from the banking regulator show that the postal bank’s bad-debt ratio at the end of 2014 was lower than any of the listed lenders in China, where troubled loans had risen to more than $620 billion by September.

“In the downward economic cycle we’re in, the bank’s asset quality risk is the lowest,” which is among factors that make it attractive to investors, Yuan Lin, a Beijing-based analyst at BOC International Holdings Ltd., said by phone. “People are optimistic about its future.”

JPMorgan Chase & Co., DBS Group Holdings Ltd. and the World Bank’s private investment arm, International Finance Corp., were among the other investors that bought shares in the placement. China Life Insurance Co., Tencent Holdings Ltd., China Telecommunications Corp. and Alibaba Group Holding Ltd.’s finance affiliate, Zhejiang Ant Small & Micro Financial Services Group Co., also participated.

Rural Finance

Postal Savings Bank wants to work with some of its investors to help it build out businesses including investment banking, wealth management and micro-finance, people familiar with the matter told Bloomberg in September. The lender had 500 million customers and more than 40,000 outlets nationwide, according to figures provided by JPMorgan in a separate statement.

The U.S. bank will provide “support and expertise to PSBC as it invests in and introduces new distribution capabilities while further strengthening its risk-management processes,” JPMorgan said. Ant Financial’s partnership with Postal Savings Bank will explore opportunities for rural finance, the Alibaba affiliate said in a press release.

Capital Ratio

Canada Pension viewed its investment as a chance to benefit from rising consumption in China, Chief Executive Officer Mark Wiseman said in his firm’s statement.

Postal Savings Bank had about 6.8 trillion yuan of assets at the end of September, according to the statement. That would make it the nation’s sixth-largest bank, after Bank of Communications Co.

The lender’s capital adequacy ratio was 9.56 percent as of last December, according to its 2014 annual report. The China Banking Regulatory Commission requires non-systemically important banks to have a minimum ratio of 10.5 percent by the end of 2018. Its bad-loan ratio stood at 0.64 percent at the end of 2014, lower than any of China’s listed banks and the sector average of 1.59 percent as of the end of September, CBRC data show.

— With assistance by Jun Luo, Dingmin Zhang, and Joyce Koh

Before it's here, it's on the Bloomberg Terminal.