Reuters: Regulatory News: UPDATE 1-Smaller Chinese banks turn to HK IPOs to raise funds

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UPDATE 1-Smaller Chinese banks turn to HK IPOs to raise funds Jun 26th 2012, 07:26 Tue Jun 26, 2012 3:26am EDT * Bank of Shanghai pushes ahead with HK IPO-report * Bank of Shanghai to choose underwriters this month-report * Regulators have not approved city bank IPOs since 2007 By Kazunori Takada and Samuel Shen SHANGHAI, June 26 (Reuters) - Bank of Shanghai's push to sell shares in Hong Kong is spearheading the efforts of small and medium-sized Chinese banks to raise much-needed capital in the city after waiting for years to get regulatory clearance for a mainland listing. Stock offerings by the banks may help support the sluggish IPO market in Hong Kong, where initial share sales have seen their slowest start in four years because of plunging global equities. Bank of Shanghai, 8 percent owned by HSBC Holdings Plc , will select underwriters for its Hong Kong IPO by the end of this month, the China Business News reported on Tuesday, citing sources that it did not identify. "For city commercial banks, listing in Hong Kong would be much faster since they don't need to stand in a long queue and there would be less regulatory uncertainty," said Zhang Jixiu, a Tianjin-based analyst at Hongyuan Securities. Longjiang Bank, based in the northeastern province of Heilongjiang, is also planning to raise $500 million through a Hong Kong IPO in the second half of the year, according to IFR, a Thomson Reuters publication, earlier this month. Many of the country's 185 city and rural commercial banks are in desperate need of capital to fend off rising competition from rivals and meet tougher capital requirement rules. Chinese regulators have not approved any mainland IPO plans by smaller banks since 2007, when Bank of Ningbo, Bank of Beijing and Bank of Nanjing were listed, seen partly due to worries that additional supply of IPOs may hurt the stock markets in Shenzhen and Shanghai. Officials at Bank of Shanghai could not be reached for comment while a Longjiang Bank official declined to comment. LICENCES City and rural commercial banks in China, unlike top lenders such as the Industrial and Commercial Bank of China , do not hold licenses to operate nationwide and are restricted to their respective provinces or neighbouring regions. As of the end of the first quarter, city commercial banks had total assets of 10.33 trillion yuan ($1.62 trillion), up 28 percent from a year earlier. Their assets accounted for 8.7 percent of the total held by China's financial institutions. "Most of these are regional, or local banks, where if there is a good story backing up the regional growth, then it will be an easier sell," said Alexander Lee, a banking analyst at DBS Vickers in Hong Kong. Bank of Shanghai, which announced in 2008 its plan to list in Shanghai, said in April it was looking to sell up to 1.2 billion shares in Hong Kong while continuing to wait for regulatory approval for its long-delayed Shanghai listing. Eighteen investment banks, including Goldman Sachs, HSBC, Citigroup Inc, China International Capital Corp and CITIC Securities Co, have taken part in the Bank of Shanghai contest, according to the China Business News report. In April, state media reported that the securities regulator had drafted rules on small and medium-sized commercial banks planning to list, seeking to allow only one in five to go public over the next few years. The China Securities Regulatory Commission said 15 city or rural commercial banks, including Bank of Shanghai, Bank of Dalian and Bank of Chongqing, have applied for a domestic listing. Harbin Bank is also planning a $1.5 billion dual-listing in Shanghai and Hong Kong, according to IFR. Link this Share this Digg this Email Reprints

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