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Banking & Finance

China's postal bank moves toward $8bn IPO

SHANGHAI -- The Postal Savings Bank of China has applied recently to list on Hong Kong's stock exchange, setting in motion what could be 2016's largest initial public offering.

The banking unit of state-owned China Post Group, which runs the country's postal service, has received permission from Beijing to issue as many as 13.9 billion new shares. Strategic investors such as UBS previously purchased shares for 3.89 yuan each, indicating that the bank could raise the equivalent of 54 billion yuan ($8.09 billion) from the listing. The offer likely will top the debut of Denmark's Dong Energy to become the world's largest IPO this year, research firm Dealogic said.

The Postal Savings Bank was China's fifth-largest commercial bank by assets at the end of March, with 7.7 trillion yuan. The institution has around 40,000 branches, many of which share space with post offices, as well as more than 500 million retail customers.

Mounting bad debt in China is less of a problem for the postal bank than for many of its peers. Bad loans made up just 0.81% of the institution's portfolio at the end of March, compared with the average of 1.73% for China's large commercial banks. The postal bank has been in the lending business only since 2009 and extends nearly half of its financing to individual borrowers. Beijing likely aims to demonstrate progress on financial system reform and privatization overall by having the comparatively healthy bank go public.

The bank brought the 10 strategic investors on board in December ahead of its planned IPO. UBS took a 4.99% stake in the institution, with China Life Insurance snapping up a 4.87% interest and China Telecom picking up 1.66%. China Post Group retains control of more than 83% of the bank's stock.

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