The Hong Kong-listed Bank of Communications plans to issue 4.5 billion A-shares and list on the Shanghai Stock Exchange in 2007.
The bank, the first domestic lender to list in Hong Kong, has decided to return to the yuan-denominated A-share market as its businesses and clients are mostly on the mainland, reported Wednesday's Shanghai Securities News.
By issuing A-shares, the Shanghai-based bank will replenish its score capital, strengthen corporate governance and enjoy a "new platform for capital raising", said Jiang Chaoliang, board chairman of the bank.
Jiang did not disclose the schedule for the listing.
But Goldman Sachs, Gao Hua Securities, China Galaxy Securities, CITIC Securities and Haitong Securities have been chosen as underwriters and the initial public offering (IPO) will begin in the second quarter of this year, raising 20 billion yuan (US$2.56 billion), the newspaper quoted an anonymous source close to the bank as saying.
The bank also plans to issue subordinated bonds, worth a total of 25 billion yuan and with terms of at least 10 years, in the hope of replenishing its supplementary capital and improving its capital adequacy.
However, the bank has said its planned issue of A-shares and subordinated bonds is subject to the approval of the China Securities Regulatory Commission, the country's securities market watchdog.
The bank's capital adequacy ratio (CAR), the measure of its own capital in proportion to its outstanding loans, declined to 11.09 percent in September 2006 from 11.2 percent at the end of 2005, according to the bank's report for the third quarter last year.
As a strategic investor, the Hong Kong and Shanghai Banking Corp. (HSBC), currently possessing a 19.9 percent stake in the bank, may expand investment to maintain its stake once A-shares are issued, said analysts.
The Bank of Communications, established in 1908, became China's first joint-stock commercial bank in 1987 and listed on the Hong Kong stock market in 2005.
The bank had 1.4 trillion yuan in assets at the end of 2005, with after-tax profits reaching 9.25 billion yuan in the year.
The booming Chinese stock market is expected to lure the country's overseas-listed companies to return to the mainland this year, according to analysts.
Major Hong Kong-listed companies are on the waiting list to return, including petroleum giant Petro China and insurance heavyweight Ping An Insurance.
Guangshen Railway, originally listed in Hong Kong, made its debut on the Shanghai Stock Exchange at the end of last year.
The overseas-listed China Life, the country's largest life insurer, listed its shares on the Shanghai Stock Exchange on Jan. 9.
(Xinhua News Agency January 11, 2007)