Postal Savings Bank of China (PSBC), the country’s largest lender by number of branches, has raised Rmb45.1 billion ($7 billion) in its latest pre-IPO funding round, selling a 17% stake to a group of 10 investors.
The stake sale represents the largest private fundraising by a Chinese institution to date and comes ahead of an initial public offering in Hong Kong that could raise around $15 billion and materialise as early as next year.
A number of the bank’s new shareholders will also no doubt be hoping their investment positions them to gain one of the coveted slots as joint global co-ordinators in what could turn out to be the world’s largest IPO of the year.
Some six of the 10 investors are international groups led by DBS, JP Morgan and UBS, plus Singapore’s sovereign wealth fund Temasek, the International Finance Corp (IFC) and the Canada Pension Plan Investment Board (CPPIB).
From China itself comes Alibaba’s financial affiliate Ant Financial, Tencent, China Telecom and China Life.
CPPIB announced that it had invested Rmb3.2 billion ($500 million) in the Chinese lender, while a filing to the Hong Kong Stock Exchange showed that China Life had invested $2 billion for a stake of not more than 5%, implying an overall valuation of $41 billion.
In a statement, CPPIB president and CEO, Mark Wiseman, said he views the investment as a route to participate in rising consumption on the mainland.
FinanceAsia also previously reported that UBS and some of its investors including Hong Kong tycoon Li Ka-shing and a group of private equity firms have pledged a combined $2 billion.
JP Morgan is investing $400 million on its own behalf, a source also told FinanceAsia last November.
After a month-long discussion with investors, PSBC set the final price for the divestment at Rmb3.89 per share.
At a press briefing in Beijing, PSBC president Lu Jiajin, said: “The strategic partnerships with UBS and JP Morgan should speed up PSBC’s own wholesale banking and wealth management business, while the cooperation with Ant Financial and Tencent will strengthen our presence in internet finance.”
Crimped margins
PSBC, the country’s sixth-largest lender by assets, is raising capital at a time when the profitability of China’s banking sector has started to come under pressure thanks to slowing economic growth and rising bad debts. Official figures from China Banking Regulatory Commission (CBRC) show that PSBC’s non-performing loan (NPL) ratio of 0.82% at the end of September ranks lower than its listed peers.
According to the CBRC, the sector average stood at 1.5% at the end of September, a figure well below most foreign analysts’ expectations. CLSA said the true figure could be as high as 8.1%, six times higher than the official figure.
PSBC is controlled by state-owned postal service China Post Group Corp and has about 500 million clients and more than 40,000 outlets across the country, according to its website. Its assets topped Rmb6.8 trillion ($1.07 trillion) at the end of September.
By contrast, Industrial & Commercial Bank of China, the country’s largest lender by assets, had 17,122 outlets at the end of 2014 and 465 million retail customers.
PSBC’s planned IPO is but the latest in a string of national postal service flotations, as debt-burdened countries sell assets. Japan Post Holdings and its two financial units went public in November after investors flocked to the group $12 billion initial public offering.
Likewise, Italy raised about $3.8 billion from the sale of a 40% stake in Poste Italiane last month.
