Everbright Bank prices IPO at top of range

A woman rides an electric bike past a branch of China Everbright Bank in Hefei, Anhui province August 6, 2010.

SHANGHAI (Reuters) - China Everbright Bank has set the price for its Shanghai initial public offering at 3.10 yuan ($0.46) per share, the top of an indicative range, putting it on course to raise up to $3.2 billion.

A warm welcome by investors for the bank's IPO would bode well for their appetite for other planned fundraisings by China's major lenders, looking to raise tens of billions of dollars in the coming months after a 2009 lending binge dented their balance sheets.

The Everbright IPO's retail portion was 28 times oversubscribed, while institutional investors bid for about 10 times the shares available to them, the lender said in a statement to the Shanghai Stock Exchange.

Analysts said a strong performance when China's 11th biggest bank debuts in Shanghai on Aug 18 would also encourage smaller rivals hoping to raise funds to speed up their reform process to win official approval for listings.

Everbright's pricing level, at a lower valuation to many of its peers, would likely lead to share price gains when it starts to trade on the Shanghai market, analysts said.

"Our fair value for the bank is at about 1.7-1.9 times book value, that translates into a per share price of about 3.20-3.60 yuan. At 3.10 yuan a share, I would say it's reasonable, there will be some upside," said Guo Min, analyst at Shanghai Securities.

Everbright's price range itself, at 2.85-3.10 yuan, was set at a steep discount to some of its peers traded on the secondary market despite overwhelming subscriptions in pre-marketing, given some concern over fundamentals such as its relatively narrow net interest rate margin.

"Everbright Bank's interest margins were very low, probably among the lowest," said Wang Mingfei, analyst at Orient Securities in Shanghai.

"However, with the non-performing loan ratio now at less than 2 percent, we think the bank will have a higher risk tolerance level and interest margins will likely rebound," Wang said.

By setting the price at the top of the range, as is very common for Chinese companies holding IPOs, Everbright will be able to raise 21.7 billion yuan if it exercises an over-allotment option.

RECORD OFFERINGS

Everbright's IPO would be China's second-biggest this year after Agricultural Bank of China's more than $20 billion share offering in Shanghai and Hong Kong last month.

The bank's listing marks the culmination of a three-year toil by Chairman Tang Shuangning -- also a respected calligrapher -- to transform it from a mismanaged lender saddled with billions in bad debts to a healthy institution.

Several smaller regional banks, such as Bank of Shanghai and Guangdong Development Bank, in which Citigroup (C.N) has a stake, have said they plan to seek a listing as soon as this year.

Mid-sized lender Citic Bank (0998.HK) (601998.SS) said on Wednesday it planned to raise up to 26 billion yuan ($3.8 billion) through a rights issue to replenish its capital.

That follows moves by top lenders including Bank of China (601988.SS)(3988.HK), China Construction Bank (0939.HK)(601939.SS) and Industrial and Commercial Bank of China (1398.HK)(601398.SS) to raise additional funds from the market.

However, continuing uncertainty on Beijing's policy stance over banks could complicate their efforts.

China's bank regulator on Tuesday ordered banks to bring loans to trust companies back onto to their balance sheets in an effort to control risks in the banking system.

"Though the new rule has limited impact on earnings and capital strength, it could depress market sentiment," Mao Junhua and Luo Jing, analysts at Beijing-based China International Capital Corp, said in a research note published on Wednesday.

Everbright Bank said on Monday it could return to raise funds in the debt market eventually after the Shanghai offering, which could meet its capital needs for the next two years.

Controlled by Central Huijin, the investment arm of China's $300 billion sovereign wealth fund, Everbright Bank will sell 6.1 billion yuan-denominated A shares in the IPO and could expand it by 15 percent to 7 billion shares with the over-allotment option.

The yuan-denominated A shares are traditionally available to domestic Chinese investors only. Since 2002, qualified foreign institutional investors, such as big banks, funds and securities firms, can also invest, with certain quotas, in the shares on the domestic stock exchanges.

Everbright Bank had said it has no immediate plans for a Hong Kong listing, a route usually taken by Chinese companies hoping to raise their international profiles and achieve a more diversified shareholder base.

(Writing by Jason Subler; additional reporting by Coco Li in Beijing; Editing by Valerie Lee and Louise Heavens)