BANK of Nanjing and Bank of Ningbo are expected to raise a combined 11.07 billion yuan (US$1.46 billion) in the first batch of initial pubic offerings by China's city lenders, the two banks said yesterday.
Bank of Nanjing has set a price range between 9.8 yuan and 11 yuan for each of its shares in an offering to net up to 6.93 billion yuan by selling 630 million stocks, it said in a statement to the Shanghai Stock Exchange.
Bank of Ningbo, based in Zhejiang Province, may raise as much as 4.14 billion yuan by issuing 450 million shares at between eight yuan and 9.2 yuan apiece, the lender said in a filing to the Shenzhen bourse.
"The two banks have faster growth in assets than bigger joint-stock commercial lenders and have strong competitiveness," said He Sheng, a Changjiang Securities Co analyst. "We advise investors subscribe to the offerings."
China's 100-odd city lenders have been striving to boost capital and expand beyond their hometown territory as part of efforts to counter stiff competition from their domestic and overseas rivals.
However, city commercial banks feature better asset quality than large state-owned lenders, which can make their shares attractive, analysts said. The average bad loan ratio of these lenders was 4.8 percent at the end of 2006, against 7.51 percent for big state banks.
Bank of Nanjing, 19.2 percent held by France's BNP Paribas, posted a profit growth of 62 percent last year to 595 million yuan. The lender's bad loan ratio stood at 2.47 percent by the end of last year.
International Finance Corp, the investment arm of the World Bank, also owns a five-percent stake in the Nanjing lender, which has 60 branches in the city of Nanjing, capital of eastern Jiangsu Province.
Profit at Bank of Ningbo, in which Singapore's Overseas Chinese Banking Corp holds a 12.2-percent stake, jumped 34 percent in 2006. Its non-performing loan ratio was only 0.33 percent as of the end of last year.
Changjiang's He said he expected Bank of Nanjing to trade between 15 yuan and 17 yuan and Bank of Ningbo between 11.3 yuan and 13.6 yuan on their trading debuts.
The prices can be translated into 22 times to 24 times the two banks' estimated 2008 earnings, compared with a market average of nearly 23 times, according to Changjiang Securities.