UPDATE 2-China Everbright Bank gets nod for Shanghai IPO-sources

* Everbright Bank Shanghai IPO could raise about $2.9 bln

* Part of IPO to be sold to strategic investors – spokesman

* No immediate plan for a Hong Kong listing – spokesman

* To sell up to 6.1 bln shrs; overallotment ups it to 7 bln

* China Jianyin, Shenyin & Wanguo, CICC are lead
(Adds analyst comment, more details)

By Coco Li and Soo Ai Peng

SHANGHAI, July 26 (BestGrowthStock) – China Everbright Bank’s plan
to raise up to $2.9 billion in a Shanghai IPO has been approved
by the securities regulator, two sources said, in what will be
the latest Chinese bank to try and tap markets for funds when
conditions are still favourable.

Everbright Bank, China’s 11th biggest bank by assets, would
sell up to 6.1 billion shares in the initial public offering,
said the sources. Both had direct knowledge of the matter but
spoke on condition of anonymity because they were not
authorised to comment publicly.

The China Securities Regulatory Commission gave the nod to
the IPO on Monday, the sources said.

This month, China witnessed the world’s second-biggest IPO
when Agricultural Bank of China (601288.SS: ) (1288.HK: ) completed
its $19 billion dual-listing in Shanghai and Hong Kong.

“The Everbright Bank IPO is far smaller than Agbank’s and
fundraising pressure from the banking sector has largely been
digested,” said Victor Feng, analyst with Everbright Securities
in Shanghai. “The IPO will have limited impact on the market.”

Most Chinese lenders are experiencing a serious capital
squeeze after a lending binge last year to support the
government’s 4 trillion yuan ($590 billion) economic stimulus
and as the banking regulator tightened capital rules.

Top state-controlled lenders, such as Industrial and
Commercial Bank of China (ICBC) (601398.SS: )(1398.HK: ), Bank of
China (3988.HK: )(601988.SS: ) and China Construction Bank
(0939.HK: ) (601939.SS: ), have said they will ask shareholders for
billions of dollars to replenish their capital.

Like their larger rivals, smaller regional banks such as
Bank of Shanghai and Guangdong Development Bank, are also
eyeing a listing this year.

Bank of Shanghai plans to sell up to 1.2 billion shares in
an IPO but the bank has yet to submit its application to the
CSRC, local media reported in May.[ID:nTOE64U00M]

In April, Guangdong Development Bank, in which Citigroup
(C.N: ) owns a stake, launched a 15 billion yuan private
placement. The bank, based in the southern manufacturing hub of
Guangdong, has said it would list itself by


Spooked by a flurry of giant share offerings, the Shanghai
Stock market fell nearly one-third in the first half of the
year, making it one of the worst performers globally.

In a move to reduce its impact on the domestic stock
market, Everbright Bank will place out about half of the IPO to
strategic investors, the official Securities Times reported
over the weekend, citing unidentified sources.[ID:nTOE66N008]

The bank’s Beijing-based spokesman Shen Chunhua confirmed
that it would place out part of the IPO to strategic investors.
He added it had no immediate plan for a listing in Hong Kong.

“For now, we will focus on the Shanghai IPO,” Shen said.
“The strategic placement is part of arrangements under the IPO.
We are still working on it; it’s too early for us to name any
potential investors,” he added.

Controlled by Central Huijin, the investment arm of China’s
sovereign wealth fund, Everbright Bank could face a big capital
shortfall in the next three years without the IPO, the bank
said in a draft prospectus issued on Thursday.

The bank’s capital adequacy ratio, a key measure of
lenders’ ability to absorb potential losses, stood at 10.39
percent at the end of last year, compared with the 11 percent
minimum required for mid-sized listed lenders.

If it exercises an an over-allotment option, the offering
would potentially be expanded by 15 percent to 7 billion
shares, the bank said.

Based on its net assets per share of 1.44 yuan at the end
of 2009, if it sells shares at a price-to-book ratio of around
two times, which is typical for mid-sized Chinese banks’ IPOs,
it would be able to raise about 20 billion yuan after the

The lead underwriters for the Everbright Bank IPO are China
Jianyin Investment Securities, Shenyin & Wanguo Securities Co,
and China International Capital Corp (CICC), in which Morgan
Stanley (MS.N: ) holds a stake that it is planning to sell.
($1=6.780 Yuan)

Stock Investing
(Editing by Muralikumar Anantharaman)

UPDATE 2-China Everbright Bank gets nod for Shanghai IPO-sources