In a move to take liquidity pressure off the market, the bank scaled back the share-sale plan by 30 percent and spread out nearly half of the IPO to 30 strategic investors, including shareholders and long-term customers. In terms of the IPO price, the bank's tradable shares will be worth barely 7.6 billion yuan ($1.1 billion), the smallest among all banks listed in Shanghai.

Beside this, the "green shoe" system has also helped stabilize investor sentiment and pave the way for the IPO. If demand for the bank's shares becomes lackluster, the underwriters are allowed not to exercise the option and instead buy back the extra shares from the market. China Everbright Bank picked China Jianyin Investment Securities Co. Ltd., Shenyin & Wanguo Securities Co. Ltd. and China International Capital Corp. Ltd. as its lead underwriters for the IPO.

Capital thirst

China Everbright Bank is just one of the Chinese banks in a rush for cash after a significant lending surge last year. As part of the government's stimulus program, Chinese banks directed a jaw-dropping 9.6 trillion yuan ($1.4 trillion) of credit into the economy last year. The lending spree effectively lifted the economy, but has also put a squeeze on the balance sheets of the banks.

China Everbright Bank, for example, witnessed its capital adequacy ratio, a key measure of a lender's ability to absorb potential losses, decline to 9.36 percent in June from 10.39 percent at the end of 2009.

To preempt a potential increase in bad loans, the China Banking Regulatory Commission tightened it capital rules, requiring a capital adequacy ratio of at least 10 percent. Without the IPO, the bank would face a capital shortfall in the next three years, said China Everbright Bank.

Meanwhile, a flurry of Chinese banks are following suit. While big state-owned banks like the Industrial and Commercial Bank of China have unveiled plans to issue additional shares, smaller regional lenders such as Guangdong Development Bank are also eyeing an IPO this year.

The success of China Everbright Bank's IPO indicates bright prospects for other fundraising in the pipeline, said Guo Tianyong, Director of the Research Center of China's Banking Industry under the Central University of Finance and Economics.

But it is still necessary for regulators to slow the pace of IPOs and leave some breathing space for the market, he said.

Bright promise

Looking ahead, hopes are building that China Everbright Bank is braced for a bright future.

With the public float replenishing its capital reserves, the bank is in a better financial position to step up expansion and firm up its market foothold, said Zhu Yunlai, CEO of the China International Capital Corp. Ltd.

More specifically, heavy investments will be pumped to widen the banking network in big cities and build 80-100 new branches annually in the next three years, said Lin Li, the bank's chief audit executive.

Vigorous efforts will also be made to wean itself off a reliance on the housing mortgage business and diversify into credit card services and loans to medium and small-sized enterprises, said Lin.

The mid-term goal is to double the total assets in four years and double its profit in two years, said Tang, the bank's chairman.

But daunting challenges will remain, including fierce market competition and risk control, he said.

"It's part of our strategy to seek a listing in Hong Kong, but that is less likely to happen in the near future," said Tang.