IPOs set trend for listing by city banks
Updated: 2007-07-12 14:16
Some of them are now in the process of seeking strategic partners. IPOs of the two lenders, especially Ningbo, are a good sign for other listing hopefuls, Zhang said.
According to him, Bank of Ningbo, the first financial share on the SME Board, paves the way for others, whose listings will be limited to a much smaller scale compared with State banks.
"Their listing will offer diversified options for investors," said She Minhua, analyst from CITIC China Securities.
An obvious reason for city commercial banks' IPO enthusiasm is to boost capital strength to meet the requirements of the New Basel Capital Accord, a framework for standards in international banking, She said.
"It will be a trend for city commercial lenders with good assets to establish a long-term capital-supply mechanism through public listings," said Li Xiaohui, an analyst with CITIC Securities.
They are also using proceeds from public offerings to expand and improve their businesses as they move to fend off foreign competitors, which were allowed to offer renminbi retail services in December.
These banks' operations will be further improved through enhanced shareholding structure, corporate governance, risk control, information disclosure and management, after public listings, She said.
"But the prime reason for their listing rush might be the need for geographic expansion," he said.
An earlier report from Standard & Poor's said city commercial banks in major cities are likely to be affected by the opening up of the banking sector more than State-owned and joint-stock banks because of their lack of geographic reach.
Last year, Bank of Beijing and Bank of Shanghai started to expand beyond their hometowns, followed by Bank of Ningbo this year.
However, "it is not an easy task", She said, as they have always been restricted to their home market. "Public listing will help boost their reputation and brand image, and help their business expansion as well as improve their performance in their home markets."
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