Huishang Bank seeks $1.3 bln in HK's biggest bank IPO since 2010

October 29, 2013

* Industrial firm Jiangsu Huijin becomes 6th key investor

* Cornerstone buyers to take nearly half of shares

* Offer to be priced on Nov. 6, stock to debut on Nov. 12

By Elzio Barreto

HONG KONG, Oct 29 (Reuters) - Provincial Chinese lender Huishang Bank Corp Ltd has set the final cornerstone in place for what could be the biggest initial public offering in Hong Kong by a bank in over three years.

Based in the booming industrial heartland of Anhui province, Huishang wants to sell up to $1.3 billion of shares in a litmus test for bank IPOs as financial sector shares recover from a first-half slump.

A term sheet for the deal seen by Reuters on Tuesday showed Huishang has added little-known privately held industrial company Jiangsu Huijin to a core of investors who are now committed to taking nearly half the stock.

Mainland Chinese banks like Huishang, whose home city of Hefei has been described by The Economist magazine as having the fastest-growing metropolitan economy in the world, are waiting in line to tap capital markets. They could raise around $11 billion through Hong Kong IPOs between now and the first half of next year, according to Thomson Reuters estimates.

The deal to sell shares in Huishang, with 374.1 billion yuan ($61.6 billion) in total assets at the end of September, is the biggest Hong Kong listing by a bank since Chongqing Rural Commercial Bank raised $1.7 billion in its IPO in September 2010, according to Reuters data.

It will come hard on the heels of an IPO by Bank of Chongqing, another small-sized city commercial bank, that is seeking to raise up to $593 million in a Hong Kong offer that will price on Thursday.

Huishang will used the funds to bolster its capital base, with the deal due to be priced on Nov. 6 and a debut on the Hong Kong stock exchange slated for Nov. 12.

Jiangsu Huijin has businesses ranging from construction machinery to hotels, according to a source familiar with the IPO. It joins Chow Tai Fook, the conglomerate behind listed jeweler Chow Tai Fook Jewellery Group Ltd., Chinese property group China Vanke Co Ltd and three other cornerstone investors.


CORNERSTONE COMMITMENT

Together the six investors have pledged to buy up to $639 million worth of shares in the IPO. At nearly 50 percent, the commitment from the cornerstone buyers is well above the average of 30 percent for Hong Kong IPOs, indicating underwriters' determination to guarantee enough demand to make the deal take off.

The Hong Kong exchange's Hang Seng H Financial index is down about 9.1 percent year-to-date, though it has soared nearly 17 percent since reaching a low for the year in early July, raising hopes over the valuations for banks looking to go public.

Huishang is selling 2.61 billion shares, according to the term sheet. Some 95.7 percent of the stock is in the form of new shares, offered in an indicative range of HK$3.47 ($0.45) to HK$3.88 each.

At those prices, the stock is being sold at an equivalent to a 2013 full-year forecast price-to-book value of 0.93 to 1.01. Chongqing Rural Commercial Bank, with a market value of $4.5 billion, trades at 12-month forward P/B value of 0.67, while its peers trade at 0.85 P/B, according to Thomson Reuters data.

BOC International, Citic Securities International , JPMorgan, Morgan Stanley and UBS AG were hired as sponsors of the IPO.