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City bank sells NPLs, eyes IPO
19/12/2005 11:57

Shanghai Daily news

Bank of Shanghai is on track to dispose bad loans as it prepares for an overseas listing and is in preliminary talks with several city commercial banks for ownership investment, top executives said on Friday.
The Shanghai-based lender, 8 percent owned by HSBC Holdings Plc, has gained "strong support" from the banking regulator and the city government for an initial public offering, said Chairman Fu Jianhua. A plan will be made public soon, he said.
The city bank is working with state assets management companies to sell down part of its 5.5 billion yuan (US$680 million) nonperforming loan and will finish the work "in a short time," said Chen Xin, its president.
The lender's bad-loan ratio, which was 4.88 percent as of June 30, may dip to 4 percent by the end of the year and to nearly 3 percent next year, said Chen. Its capital adequacy ratio was 11.28 percent as of September 30, compared with 8 percent required by the banking regulator.
The bank, also 7 percent held by International Finance Corp, a unit of the World Bank, plans to wait until the right time before selling shares to ensure its IPO is warmly received. The bank will currently focus on improving corporate governance and shoring up asset quality, according to Fu.
"We won't invite domestic investment banks to advise on our stock sale," said Fu, "It's fine to count on our strategic investors and consultancy agencies."
The remark indicated the bank won't seek a listing on Chinese mainland bourses as domestic regulations require candidates to have homegrown securities companies as advisers before any equity issuance in Shanghai or Shenzhen.
HSBC in August 2004 bought a 19.9 per cent stake in Bank of Communications for US$1.75 billion. Earlier media reports said the purchase had raised market concerns about the relationship between HSBC and Bank of Shanghai.
"HSBC told us they won't forget old friends when they've got a new friend," said Fu. "And they did so by giving us technical aid and other support as much as possible."
The bank is still pondering whether to attract other overseas investors, said Chen, noting any possible target should bring in required expertise.
The bank may invest in other mainland city commercial banks as stronger players are encouraged to acquire smaller ones to boost industry competitiveness.
"We are in discussions with several targets," said Fu, "But we surely won't sacrifice shareholders' interest by making irrational bids."
Bank of Shanghai announced yesterday it became China's first city commercial lender allowed to open branches outside its home base, preparing to start operations in nearby Ningbo in Zhejiang Province.