Debt fears weigh on HK debuts of mid-sized China banks (updated)

Bank of Tianjin Co

30/03/2016 04:37

* Weak retail demand for both IPOs 
    * Rising China bank NPLs worry for investors 
 
 (Updates share price, adds details on retail demand) 
    By Elzio Barreto 
    HONG KONG, March 30 (Reuters) - Shares of two mid-sized 
Chinese lenders traded lower on their Hong Kong debuts on 
Wednesday in the face of tepid investor demand after they raised 
a combined $2.6 billion last week in the world's two largest 
IPOs so far in 2016. 
    The cold reception underscores rising concerns about 
earnings growth at financial firms in China as non-performing 
loans soar to the highest in a decade.  
    China Zheshang Bank Co Ltd  2016.HK  traded at HK$3.94 
compared with the HK$3.96 IPO price, while Bank of Tianjin Co 
Ltd  1578.HK  fell to HK$7.36 versus its offer price of HK$7.39. 
The benchmark Hang Seng index  .HSI  was up 1.6 percent in 
late-morning trade. 
    Zheshang Bank's initial public offering raised about $1.7 
billion and Bank of Tianjin's deal another $950 million, with 
both offerings pricing near the bottom of expectations. 
 urn:newsml:reuters.com:*:nL3N16T3YK  urn:newsml:reuters.com:*:nH9N0V8013 
    Demand from retail investors - key to the success of IPOs in 
the island city - accounted for just 2.8 percent of the shares 
on offer, Zheshang Bank said in a filing on Tuesday. Bank of 
Tianjin said mom and pop investors subscribed for 0.6 percent of 
the retail portion, underscoring weak appetite for the deals. 
    The institutional tranche for both IPOs was slightly 
over-subscribed, the banks said. 
     
    BAD DEBTS RISING 
    Underscoring investors' worries, China's fifth-largest 
lender said late on Tuesday maintaining even a timid 1 percent 
profit growth in 2016 would be a stretch because of a slump in 
corporate banking as bad debts mount.  urn:newsml:reuters.com:*:nL3N1712RD 
    The Zheshang Bank and Bank of Tianjin deals come after three 
other medium-sized lenders raised a combined $2.3 billion late 
last year. Though all three deals priced near or at the bottom 
of expectations, Bank of Jinzhou Co Ltd's  0416.HK  shares are 
up 30 percent, while Bank of Qingdao Co Ltd  3866.HK  has 
climbed 3.8 percent and Bank of Zhengzhou Co Ltd  6196.HK  is up 
18 percent since their debuts in December. 
    China's non-performing loans (NPLs) reached a 10-year high 
of 1.27 trillion yuan at the end of 2015, while special mention 
loans, or debts that could potentially turn sour, rose to 2.89 
trillion yuan. 
    Zheshang Bank is among the 12 so-called nationwide joint 
stock commercial banks, whose assets accounted for 18 percent of 
China's banking industry. China has 133 so-called city 
commercial banks similar to Bank of Tianjin, which are growing 
faster than their larger peers but have assets worth only 10.5 
percent of the industry. 
    By contrast, the country's top five banks, including 
Industrial and Commercial Bank of China (ICBC)  1398.HK  
 601398.SS  and Bank of Communications Co Ltd  601328.SS  
 3328.HK , made up about 41 percent of total industry assets, 
according to China's banking regulator. 
 
 (Reporting by Elzio Barreto; Editing by Stephen Coates) 
 ((elzio.barreto@thomsonreuters.com;)(852)(2843-1608; Reuters 
Messaging: elzio.barreto.thomsonreuters.com@reuters.net)) 
 
Keywords: CHINA BANKS/DEBUT