China’s Postal Bank Said Poised to Raise $7.4 Billion in IPO

  • Shares said to be priced below midpoint of marketed range
  • Postal Bank IPO is largest since Alibaba’s 2014 offering

Cyclists ride past a Postal Savings Bank of China Co. branch in Shanghai, China, on Monday, July 4, 2016.

Photographer: Qilai Shen/Bloomberg

Postal Savings Bank of China Co. is poised to raise $7.4 billion in a Hong Kong initial public offering that will be the world’s biggest first-time share sale this year, according to people familiar with the matter.

The Beijing-based lender plans to sell 12.1 billion shares at HK$4.76 apiece, below the midpoint of a marketed range, the people said, asking not to be identified as the information is private. The bank offered the shares at HK$4.68 to HK$5.18 each.

The first-time share sale would be the largest globally since Alibaba Group Holding Ltd. priced a $25 billion New York offering in September 2014. Postal Savings Bank would have a market value of $49.5 billion, more than Deutsche Bank AG but less than U.S. banks like Goldman Sachs Group Inc.

The largest IPO so far this year was Danish utility Dong Energy A/S’s $3 billion offering in June, data compiled by Bloomberg show.

A Hong Kong-based external spokeswoman for Postal Savings Bank declined to comment. The Wall Street Journal reported the final pricing earlier Wednesday in Hong Kong, citing unidentified people.

Online Competition

Investors may be deterred by a valuation higher than the bank’s peers, and limits on the gains to be made from having the biggest branch network of any Chinese bank, according to Li Bin, a Shanghai-based analyst at Capital Securities Corp. “Chinese banks are increasing competing online; the value of having an extensive brick and mortar branch network has been diminished significantly compared with 10 years ago,” Li said.

Postal Savings Bank has more than 40,000 outlets, its website shows. The bank reported an 11 percent increase in first-quarter profit as it pared provisions for bad loans, according to pre-listing documents filed with Hong Kong’s stock exchange.

The price range for the share offer valued the lender at 1 to 1.1 times its net assets as of the end of March. Chinese lenders listed in Hong Kong trade at an average 0.87 times book value, data compiled by Bloomberg show.

Postal Savings Bank, ubiquitous in small-town China, joins Bank of Tianjin Co. and China Zheshang Bank Co. in selling shares in Hong Kong to fund expansion. The bank 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.

Bank of America Corp., China International Capital Corp., Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley are joint sponsors of the offering.

— With assistance by Jun Luo

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