The biggest initial public offering this year got off to a subdued start Wednesday after shares in Postal Savings Bank of China priced near the bottom of their range then stayed there.
State-controlled PSBC raised HK$56.6 billion ($7.3 billion) selling a 16.9% stake at HK$4.76 per share, making it the largest IPO since the $25 billion listing of Internet giant Alibaba (BABA) - Get Report in Sept. 2014. The sale values the lender at about $40.6 billion.
PSPC shares were the most traded stock on the Hong Kong exchange on Wednesday, but that brisk turnover failed to translate into gains as the shares closed at HK$4.77, up just one cent. The bank had announced an IPO price range of HK$4.68 to HK$5.18 per share.
The flat performance was of little surprise, and the bank perhaps did well to hold onto its IPO price, given that it was pitched at about one times book value, a premium to the average for Chinese lenders of closer to 0.75 times book value. Chinese regulations preclude the sale of state-owned enterprises at less than their book value.
Analysts had shown little enthusiasm for the float, questioning management's ability to grow the banks assets given its focus on rural and smaller-city retail savers, and the willingness to pursue cost cutting by rationalizing a massive network of 40,100 branches that are owned by state-owned China Post. On the plus side the bank has a relatively stable loan book, with non-performing loans accounting for just 0.81% of its total loan book, less than half the average of its Chinese bank competitors.
Cornerstone investors bought 77% of the IPO, led by Chinese-state controlled China Shipbuilding Industry Corp., which agreed to buy $2.5 billion of shares, and Shanghai International Port Co., which signed up for $2 billion. The cornerstone investors agreed a lock up period of six-months.
Retail investor demand for the IPO was relatively subdued with subscriptions coming in at a relatively modest 2.6 times the amount of shares set aside for general sale, according to a filing.
A massive 26 banks, including financial adviser UBS AG and joint sponsors China International Capital Corp., Goldman Sachs, JP Morgan, Morgan Stanley and Merrill Lynch managed the IPO. The advisers, book runners and sponsors will share as much as $118.4 million in fees, according to PSBC's prospectus.
PSBC's Hong Kong ticker is 1658.HK