Beijing-based Huaxia Bank announced on Friday it will become China's fifth bank to be listed next month.

The bank published the prospectus of its 1 billion A-share initial public offering (IPO) on Friday, after getting the approval from the China Securities Regulatory Commission (CSRC) for the listing.

The issue is priced at 5.60 yuan (68 US cents) per share, with the price/earnings ratio at 19.86. The proceeds will be used to increase the bank's capital adequacy and finance the construction of its network, e-banking facilities, personnel training and fixed assets purchases, the prospectus said.

China Southern Securities and Bank of China International are the lead underwriters.

"We will start the online roadshow next Monday. And investors can start subscription next week too," a Huaxia Bank spokesman told China Daily on Friday. "The formal listing should be realized in two or three weeks' time, which is around the middle of September."

What makes this IPO different from most IPOs over the past year is that Huaxia Bank will combine the primary market issuance with the secondary market issuance together.

About 450 million shares of the bank will flow to the primary market, facing a limited group of big retail and institutional investors. Subscription starts next Tuesday. The remaining 550 million shares can be subscribed by secondary market investors on Thursday.

A shareholding commercial bank based in the Chinese capital, Huaxia Bank had about 203.7 billion yuan (US$24.6 billion) of assets by the end of June, with outstanding loans of 124.3 billion yuan (US$15 billion). Its non-performing loan ratio was 4.79 percent by then according to the five-category classification.

Before the IPO, as much as 90 percent of the bank's holdings are still controlled by State-owned enterprise groups. Its biggest shareholder is currently the Capital Iron and Steel Corp, which holds 20 percent. After the offering, general public investors will hold about 29 percent in the bank.

Going public can help a bank upgrade its shareholding structure, strain exterior supervision and build up its capital strength, said Liu Haiyan, the newly appointed chairman of Huaxia Bank and a former vice-mayor of Beijing.

He said the bank aims to increase its asset scale to more than 300 billion yuan (US$36.2 billion) by 2005 and more than double its branches.

It will also recruit some foreign bankers and financial experts for its managerial team or as independent directors.

Four other shareholding commercial banks in China had already been listed before Huaxia, which were seen as the pioneers in the banking reform before the State-owned banks go public.

Huaxia's price is regarded as comparatively cheap in the banking sector, analysts said. As a result, investors have adjusted their holdings portfolio to prepare for the IPO. But as the market liquidity is already tight, Huaxia's IPO will also further challenge the market capacity.

(China Daily August 23, 2003)