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SCMP Reporter

Analysts are unimpressed by the poor profit growth shown by listing candidate Kwong On Bank, which is seeking to raise between $656 million and $750 million.

  The bank told banking analysts at a meeting yesterday that it expected net profit growth this year of less than 1 per cent, but profit would reach $445 million at least.

  Its net profit last year was $444.35 million.

  The bank plans to issue 75 million new shares, split between 60 million for a placement and 15 million for public offer.

  About 10 per cent of the public offer will be for the bank's employees.

  The new shares would represent 20 per cent of the bank's enlarged issued share capital.

  The price had yet to be fixed, but would fall within the range of $8.75 to $10.

   Price-earning multiples would hover around 7.1 times to 8.1 times. Forecast earnings per share were $1.31.

  The scanty increase in profit this year was due to the $54 million expense of redeveloping its head office.

   Out of that amount, $46 million was for renting temporary premises and there was $14 million net loss on the disposal of fixed assets in the head office.

  Analysts said they found the bank's past profit increases slower than other banks of similar size.

  Its net profit grew at a compound rate of about 12.5 per cent over the four years to December 1995.

  In boom years such as 1993 and 1994 when bank profits soared, Kwong On Bank's profit went up by 17.25 per cent the first year and 11.29 per cent in the second.

   Kwong On has a relatively small loan book for the lucrative residential mortgage market, about 16.2 per cent.

  Since 1994, the bank has started to curb growth in residential mortgages. Efforts were spent on the trade finance sector instead.

  Fuji Bank, which owned 55 per cent of the bank, would see its stake go down to 50.1 per cent after the offer.

  Directors and their associates would have about 16.8 per cent after the listing.

  The bank's shares were to start trading on June 24.

  Its return on assets was 1.93 per cent and its return on shareholders' funds was 18.4 per cent last year.



Kwong On forecast leaves analysts cold