UPDATE 3-Japan's Seven Bank to list stock, bucking trend

(Updates with fund manager and analyst comments, details)

By Nathan Layne and David Dolan

TOKYO Jan 22 (Reuters) - Seven Bank, the banking arm of Japanese retail group Seven & I Holdings (3382.T), plans to list its shares on the Jasdaq market next month, allowing shareholders to unload about $490 million worth of stock on a shaky market.

Seven Bank, which offers banking services through almost 13,000 automated teller machines (ATMs) at the group's 7-Eleven convenience stores, said it will list on the country's largest market for startups on Feb. 29.

The announcement, flagged by media earlier this month, came after the benchmark Nikkei average .N225 plunged 5.6 percent to a 28-month closing low amid fears the U.S. economy is heading for recession.

It also comes after share offerings have dwindled in the midst of the global credit crisis. The value of initial public offerings in Japan dropped by about 70 percent to $5.8 billion in 2007, according to Thomson Financial.

But the underwriters could find it difficult to persuade some fund managers to invest if the market does not recover.

"The bank ... may be attractive but it might be difficult to participate in such an offering under these market conditions," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

Seven & I Holdings companies hold a little under 50 percent of Seven Bank but will not sell their shares for the listing, a spokesman for the retailer said.

Seven Bank will not issue stock but will sell 53,350 shares while top shareholders, including a fund and major insurers, banks and electronics firms, part with 310,400 shares ahead of the listing.

Another 10,000 shares could form an over-allottment scheme, if there is demand.

The bank gave a reference price for the shares of 140,000 yen. That would value an about 30 percent stake, to be floated, at about 52 billion yen ($490 million) and the bank at 170 billion yen.

That would put Seven Bank in the same ballpark as regional lenders Keiyo Bank (8544.T) and Shiga Bank (8366.T).

The pre-market price is to be decided on Feb. 21 after a book-building from Feb. 8-20, overseen by lead managers Nomura Securities, Nikko Citigroup and Morgan Stanley (MS.N).

Seven Bank opened in 2001 after deregulation allowed outsiders to enter the banking sector.

The bank is forecasting net profit will increase 3 percent to 13.1 billion yen this business year, or earnings per share of 10,737.7 yen.

Based on that forecast and the reference price, Seven Bank would trade at a price-earnings ratio (PER) of 13, compared with about 16 for Japan's banking sector, according to Reuters data.

Graeme Knowd, banking analyst at CLSA Asia-Pacific Markets, said Seven Bank is more of a service company as it does not offer loans, avoiding the lending risks of a regular bank.

Seven & I trades at a PER of about 20 while the stock of convenience store Lawson Inc (2651.T) trades about 18.

"All of their revenue comes from ATMs, so you value them as a service company, as an ATM provider," Knowd said.

Banks allowing their customers free access to Seven Bank ATMs have to pay charges to Seven Bank, but save money in the long term by avoiding more expensive fees by setting up and managing their own 24-hour ATMs, Knowd said.

"It's a great business model. They have the locations. They have people 24 hours a day to look after the machines," he said.

Seven Bank said that it would use about 7.1 billion yen in proceeds it expects from the sale of shares as a source of cash for its ATMs. (Reporting by Nathan Layne; Editing by Hugh Lawson and Suzy Valentine)