Everbright Bank IPO could be held up by rival offering

It's been nearly two years since China Everbright Bank filed an application with the securities regulators for an initial public offering (IPO) in Shanghai, and while there is still no sign of approval from Beijing, the lender is not just biding its time. It has replenished its capital reserve via a private placement last year and is said to have managed to clear all the odds against a new share sale.

However, while there are no more technical problems blocking a listing, a new barrier has arisen that appears to be critical enough for the deal to remain on hold -- timing. The bank aims to go public by June or July this year, which would coincide with the most talked about Chinese IPO this year -- Agriculture Bank of China's (ABC) massive dual-listing in Hong Kong and Shanghai.

Beijing's top priority, observers believe, is for ABC to be the first among the Chinese lenders to tap the capital markets this year, because the fundraising plans by China's major banks is turning into a dash for cash as they muscle to take advantage of investor appetite. There are concerns, however, that the market could quickly tire of the country's needy lenders -- hence the importance of being one of the first out the gate. 

"We want to go public as soon as possible. June and July is an ideal time and we have been trying hard for that," an unidentified source involved in the China Everbright Bank deal was quoted as saying by the 21st Century Business Herald, a Chinese newspaper.

The bank is seeking to raise up to Rmb15 billion ($2.2 billion) from a Shanghai IPO by selling 15% of its share capital, according to the paper. "There are no technical problems, we are only waiting for the regulatory approval," the source said, noting that the bank hopes to go public ahead of ABC.   

In theory, that would be reasonable, given that China Everbright Bank started moving towards an IPO nearly a decade ago and filed the listing application in June 2008. By comparison, ABC didn't have the urge to go public until the other state-run banks started to line up high-profile listings in Hong Kong from 2005 onwards, and it only filed its application earlier this month.

ABC is pushing its mandated bookrunners at a frantic pace, however, and is now widely expected to go public as soon as July. It is aiming to raise up to $30 billion, which would make it the largest IPO on record, globally.

And in a highly regulated market such as China, the country's lenders have to comply with government priorities. As the last of China's major banks to go public, "ABC is at the top of the regulators' priority list and the bank is likely to be the first to tap the market," said May Yan, an analyst at Nomura International. However, "the government would want all banks to replenish their capital as soon as possible to improve asset quality", she added.

"Even though most of China's major banks are publicly traded companies and are supposed to operate like commercial entities, the fact that their biggest shareholder is still the government makes them obliged to follow Beijing's command," said Tony Tang, a banking analyst at China Everbright Research.

The state-owned Assets Supervision and Administration Commission, which is a government entity under the State Council (China's cabinet), has the controlling stake in all state-run firms in the country.