Japan's Seven Bank Jumps 24 Percent on Debut
(Updates stock price, valuations)
By Nathan Layne and David Dolan
TOKYO (Reuters) - Japan's Seven Bank Ltd (8410.Q) jumped 24 percent in its market debut on Friday following a $501 million IPO as investors embraced a bank that makes its money from cash machine fees, instead of lending.
As major banks report subprime losses in the billions of dollars, Seven Bank's low risk business of collecting fees from customers of other banks using 13,000 ATMs mainly at its parent's 7-Eleven convenience stores caught the eye of investors.
The initial public offering, Japan's biggest since Sony Financial Holdings Inc's (8729.T) $3 billion offer in October, comes as the global credit crisis has hurt demand for new listings.
"Seven Bank is completely unrelated to the subprime issue, and from that perspective it is easy for investment trusts and pension funds to chose this stock," said Shigemi Nonaka, a special adviser at Polestar Investment Management.
Nonaka said Seven Bank still had room to grow its customer base through the group's expanding retail network and by installing more ATMs in train stations and department stores.
"It should be able to grow steadily over the long term."
Shares of Seven Bank, which raised 52.3 billion yen in the IPO including an overallotment, jumped to 174,000 yen on Friday, up from the pre-market price of 140,000 and bucking a 0.1 percent fall in the Nikkei Jasdaq index .NOTC.
Seven Bank, which is owned 48 percent by Japanese retailing group Seven & I Holdings Co Ltd (3382.T), generates about 96 percent of its revenues from its ATM network, leaving its business vulnerable to any downturn in consumer spending.
But Seven Bank President Takashi Anzai said the bank had no plans to drastically change its business model, and would take a cautious approach to building up new businesses such as lending to customers on its own account.
Anzai told a news conference there was still potential to grow along with the 7-Eleven chain and by putting its ATMs in airports and other spots where people need cash. It recently placed 340 machines in broker Nomura Holdings (8604.T) outlets.
"We are not done yet," said Anzai, a former executive director at the Bank of Japan.
WEAK IPO MARKET
Seven & I Holdings did not sell any of its shares for the listing. Seven Bank sold 53,350 of its existing shares, raising about 7 billion yen to stock its ATMs with cash, but it did not issue new shares.
Top shareholders, including a fund and major insurers, banks and electronics firms, parted with 310,400 shares while 10,000 were allocated in an overallotment. All told, the IPO put about 30 percent of the company in new hands.
The successful listing came as an encouraging sign for the sluggish share market. Last year, the money raised in Japanese IPOs fell by about 70 percent, Thomson Financial data showed.
But Ken Masuda, senior dealer at Shinko Securities, said it was too early to say the IPO market was on a recovery path.
"The bank was forced to price the IPO at a reasonable level. That explains a lot of it," he said.
Seven Bank priced its IPO at the top of its pre-set range of 120,000-140,000 yen, with investors drawn by its relatively stable, fee-based business model and its lack of exposure to lending or investments in the U.S. subprime mortgage market.
The current stock price values the entire bank at 212 billion yen and gives it a price-to-earnings ratio of about 16, which compares with a PE ratio of 15 at Juroku Bank (8356.T) and 22 at 77 Bank (8341.T), both regional lenders of similar market value.
Nonaka said fair value was around 170,000-180,000 yen.
Seven Bank is forecasting the revenues will increase 10.5 percent to 83.4 billion yen in the current business year to March, but net profit is expected only to grow by 3 percent to 13.1 billion yen, slowed down by heavy depreciation costs.
The IPO was overseen by lead managers Nomura Securities, Nikko Citigroup and Morgan Stanley (MS.N).
(Reporting by David Dolan and Nathan Layne; Editing by Eric Burroughs and Rodney Joyce)
