Postal Savings Bank sets $15bn HK IPO in motion

Postal Savings Bank of China (PSBC) has invited investment banks to pitch for a Hong Kong IPO worth up to $15bn, a person familiar with the matter said, setting the ball rolling for what is likely to be the world’s biggest listing this year.
Despite volatile China share markets, state-owned PSBC has just raised $7bn from a group of investors including UBS Group and JPMorgan, which were attracted to its customer base of 500mn customers – larger than the population of the US.
PSBC is also expected to fare better than others in the Chinese banking sector contending with sharp rises in bad debt as its “mom and pop” customers tend to more diligent in repaying loans than Corps facing diminished demand.
“There will be a lot of excitement around this deal given the size. Postal Bank will be one of the last big IPOs from China banking sector and people would want to be part of it,” the person familiar with the matter said.
PSBC could be looking for a simultaneous Hong Kong and China A share listing, though no final decision has been made, the person added.
At least a dozen banks have been invited to pitch for the planned IPO, and PSBC has given them a deadline of January 22, IFR, a Thomson Reuters publication said. The move puts the initial public offering on track to take place in the second-half of the year, it added.
A PSBC spokesman in Beijing declined to comment on its IPO plans.
PSBC is among the last of China’s big national banks to seek public listing, a process that started in mid-1990s and helped global investment banks to rake billions of dollars in underwriting fees and by exiting the stakes they acquired ahead of the IPOs.
Even at a conservative 1% underwriting fee, the PSBC IPO would generate about $150mn in revenue for the top banks working on the deal.
Amid an economic slowdown, price-to-book valuations for commercial banks have fallen 13% from highs marked in December 2013, according to Thomson Reuters data, but PSBC may be assessed in a more favourable light due to its extensive network and retail base.
The $7bn raised from its sale of a 17% stake in December was the single biggest private fund-raising in China’s financial industry. Other investors included Alibaba’s Ant Financial unit, Tencent Holdings and Canada Pension Plan Investment Board.