In up-to-$10 billion IPO, China's PSBC eyes ticket to online financial services boom

Wed Jul 6, 2016 7:18am EDT
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By Sumeet Chatterjee and Elzio Barreto

HONG KONG (Reuters) - As part of plans for an up-to-$10 billion initial public offering, Postal Savings Bank of China (PSBC) aims to transform itself from a brick-and-mortar lender into a digital player, helped by its investors Ant Financial and Tencent Holdings.

According to both the state-owned bank's IPO prospectus and people familiar with its plans, PSBC plans to work with online services firm Tencent and Ant, an online payments affiliate of e-commerce giant Alibaba Group Holding, to launch a range of internet-based consumer finance services.

In the document, made public this week, the bank with a network of 40,000 branches across China said it wanted to deepen cooperation with Ant and Tencent's online finance arm, WeBank, in internet and mobile finance.

PSBC said it plans to "actively explore" the setting up of a mobile payment system and speed up the development of mobile phone-based services. The 843-page prospectus officially started the countdown towards an IPO as early as September that is expected to be the world's biggest new listing in about two years.

Both Ant and Tencent, China's biggest social network, came on board as PSBC shareholders as part of a nearly $7 billion pre-IPO investment round late last year.

PSBC, which has reported a very low level of bad loans compared to peers, is trying to leverage its vast physical network across the country to support online financial services development, said a person familiar with the bank's plans.

"Because it's so clean and there's the advent of the new economy that they can leverage, this will be one of the big surprises of the year," said the person, who declined to be named as he was not authorized to talk to the media in the run-up to the IPO.

PSBC acknowledged in the prospectus that it faced challenges in plans to offer personal loans and wealth management products online and on mobile. "If we are unable to successfully respond to these challenges, our business, financial condition and results of operations could be materially and adversely affected," it said.   Continued...

People walk past a sign outside a branch of Postal Savings Bank of China (PSBC) in downtown Beijing, China, November 12, 2015. REUTERS/Kim Kyung-Hoon/File Photo