GE's US$749m bank sale marks top Czech IPO since 2008

[PRAGUE] General Electric Co raised US$749 million selling shares of its Czech banking unit in the nation's biggest initial public offering in almost a decade.

The US company priced the 51 per cent stake in Moneta Money Bank AS, previously known as GE Money Bank AS, at 68 koruna per share, according to an e-mailed statement on Friday. That values the lender at 34.75 billion koruna (S$1.97 billion) and compares with GE's initial target range of between 68 koruna and 85 koruna. The stock rose as much as 5.1 per cent in the first trading day, before dropping back to the IPO price as of 2:55 pm in Prague.

"GE's main objective was to divest the business, and price wasn't necessarily the main factor," said Milan Vanicek, chief equity analyst at J&T Banka AS in Prague. "The arrival of a new company is good news for the Czech bourse, brokers and investors."

GE is placing the unit's shares as part of a year-old plan to sell most of its financial assets worldwide and focus on its industrial business. The floating of Moneta is a boost for the Prague Stock Exchange, where delistings, tumbling stock prices and dollar appreciation have reduced the total market capitalization to US$24.9 billion from a peak of US$86.7 billion in 2008, data compiled by Bloomberg show.

The Prague's PX index of 13 equities fell 1.9 per cent on Friday, making it the third-worst performer worldwide among 93 major indexes tracked by Bloomberg, after Shanghai SE Composite Index and Russia's RTS Index.

Patria Finance AS set its price projection for Moneta shares at 83 koruna. The fact that the IPO was priced at the bottom of its target range makes the shares "quite attractive" for potential buyers, the Prague-based brokerage said on its website.

The IPO benefited from record-low Czech interest rates that are pushing investors into higher-yielding assets. The pace of economic growth is one of the fastest in Europe, driving bank profits and demand for new loans.

The seller has provided an over-allotment option of up to 15 per cent of the shares, which can be exercised in the next 30 days. GE will keep a "significant" minority stake for 180 days or longer and will support Moneta for at least two years, Tomas Spurny, the Czech lender's chief executive officer, said last month. The lender plans to have a dividend payout ratio of at least 70 per cent in the future, according to Spurny.

Moneta has a network of 229 branches, the fourth-largest in the country of 10.5 million. Its common equity tier 1 ratio, a measure of financial strength, stood at 17.7 per cent on Dec 31, while the return on average assets was 3.2 per cent last year.

"The IPO is a significant moment in our history and marks an important step toward full independence," Mr Spurny said in the statement about IPO pricing on Friday. "We have seen strong investor interest in Moneta."

BLOOMBERG