China Everbright to scale back HK IPO

China Everbright Bank will likely reduce the size of its US$6.15 billion share offering in Hong Kong and may request an exemption to allow it to float less than 25% of its issued share capital, the South China Morning Post reported. The mid-sized mainland bank has delayed its road show for what was expected to be the biggest IPO in Hong Kong this year, as investors question the deal’s proposed pricing of 1.5 times book value. Banks of similar size typically trade at 1.2-1.3 times book value in Hong Kong. Mainland bank shares in Hong Kong have declined in recent months on mounting concerns that the Chinese banking sector is over-exposed to risky loans made to local governments. Everbright is trying to raise cash from its IPO to offset the risk of such loans going bad, and plans to issue subordinated debt after the IPO completes. China Everbright has forecast that its profits will rise 32% this year, compared with an average 25% profit by other mainland banks.