Watch VideoPlay Video
China Everbright Bank soared on its Shanghai stock market debut today, trumping forecasts. The listing is the second largest this year, after the Agricultural Bank of China. The strong debut is a good sign for other banks' listing or financing plans on the domestic stock market.
China Everbright Bank ended its first trading day up 18 percent at 3.66 yuan. It opened at 3.37 yuan, up 8.7 percent from its IPO price. The performance is slightly stronger than market expectations.
The share price gains easily beat those made by the Agricultural Bank of China, the world's biggest IPO. The state-owned lender's Shanghai shares rose less than 1 percent on its debut in mid-July.
The positive result also bodes well for other lenders that are lining up to ask investors for tens of billions of dollars, to shore up their balance sheets.
Everbright Bank Chairman Tang Shuanging reiterated its ambitious goal at the debut.
Tang Shuangning, Chairman of China Everbright Bank said "We have disclosed all management indices and the development outlook of Everbright Bank to the public before. In short, that is to double our assets in four years and to double our profit in two years. To leave some leeway, we say we would aim for two to three years."
Analysts attribute the strong rise to investor optimism about smaller Chinese banks and their strong earnings reports.
Doris Chan, BNP Paribas Analyst said "Smaller banks have higher financial leverage, and given their size is much smaller, they have a lot more operational flexibility to change into new strategy."
But analysts also say the lender may not be able to sustain its gains over the next few weeks, because the Shanghai market could turn less favorable and the banking sector's earnings growth may decline in the second half.
It only took the nation's 11th largest lender less than a month to get listed, setting a record for an A-share listing. If over-allotment options are exercised, Everbright could increase the offering to seven billion shares and raise 21.7 billion yuan.
- Everbright Bank says no HK listing plans 2010-08-19
- China Everbright Bank makes debut on A-share market 2010-08-18