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UPDATE 1-Guangzhou Rural Bank HK IPO priced near middle of range, raises $1 bln -source
June 14, 2017 / 3:47 AM / 3 months ago

UPDATE 1-Guangzhou Rural Bank HK IPO priced near middle of range, raises $1 bln -source

* IPO priced at HK$5.10/shr, just below middle of indicative range

* Guangzhou Rural Bank shares to debut in Hong Kong on June 20

* Tepid demand from retail investors on valuation, NPL concerns (Adds details on demand for GRCB deal, comments, upcoming bank IPOs)

By Elzio Barreto and Julie Zhu

HONG KONG, June 14 (Reuters) - Guangzhou Rural Commercial Bank Co Ltd (GRCB) priced its Hong Kong IPO slightly below the middle of expectations, a source said on Wednesday, underscoring tepid demand for the $1 billion deal amid concerns over rising non-performing loans in China.

China’s No.5 rural commercial bank by assets priced the deal at HK$5.10 per share, after marketing it in a HK$4.99-HK$5.27 indicative range, said a person with direct knowledge of the deal, who did not want to be identified as details of the transaction were not public.

The initial public offering consisted of 1.58 billion shares, with 91 percent new shares and the remainder existing stock from a group of 13 state-owned shareholders. It was the largest IPO in Hong Kong this year, surpassing the $511 million raised by WuXi Biologics (Cayman) Inc last week.

GRCB declined to comment on the IPO pricing. The shares are slated to debut on the Hong Kong stock exchange on June 20.

Chinese lenders are barred from selling new shares below book value, making some IPOs less appealing to investors since several banks already listed on the Hong Kong stock exchange trade at lower valuations.

Hong Kong brokerage Phillip Securities, which offers margin loans for retail investors to buy into share offerings in the city, said demand from retail investors for the GRCB deal amounted to just HK$30 million worth of stock.

“That was quite a small amount, given the size of the IPO,” said Jasper Chan, assistant manager of corporate finance at Phillip Securities. “Retail investors don’t really want to buy it because they can get similar stocks in the secondary market and they’re cheaper than buying into IPOs.”

Worries about rising bad debt in China also dragged on investor sentiment.

Non-performing loans at Chinese commercial banks rose to 1.58 trillion yuan ($232.4 billion) at the end of March, from 1.51 trillion yuan in December, regulatory data showed.

With the world’s No.2 economy growing at a slower pace, that figure is expected to grow further, analysts said.

The benchmark index for financial firms listed in Hong Kong is up 10.8 percent this year, well below the 17.1 percent gain in the broader market index.

GRCB’s deal comes ahead of other expected listings from medium-sized Chinese lenders in Hong Kong, including Zhongyuan Bank and Bank of Gansu, which plan to raise about $1 billion and $700 million respectively.

Jilin Jiutai Rural Commercial Bank Corp raised $446 million in an IPO in January, with its shares up 7.5 percent since the lender went public.

$1 = 6.7974 Chinese yuan renminbi Reporting by Julie Zhu, writing by Elzio Barreto; Editing by Himani Sarkar

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