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Underwriting fees for CATL's Hong Kong listing below

industry

norm

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Goldman Sachs ( GS ), UBS less willing to take skinny fee,

sources say

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CATL's listing oversubscribed, strong demand from global

investors

By Selena Li and Julie Zhu

HONG KONG, May 13 (Reuters) - Investment banks handling

the world's largest listing so far this year are set to earn

underwriting fees well below the industry norm, with advisers

willing to endure skinny margins to win business following a

prolonged slump in listings.

Nine underwriters of Shenzhen-listed battery giant CATL

are slated to receive a maximum of HK$238.7 million,

the Chinese company said in a securities filing on Monday, with

much of that discretionary, based on the success of the deal.

The fixed commission on what is Hong Kong's biggest listing

so far this year is just 0.2% of the proceeds raised, well below

the industry average.

It's only a third of what home appliance manufacturer

Midea paid banks last year for its near $4.6 billion

listing in Hong Kong, and one-fourth of the 0.8% underwriting

fee awarded by China's largest express delivery company S.F.

Holding in its $792 million Hong Kong secondary

listing last November.

CATL said in the filing it may grant a 0.6%

discretionary fee as an incentive.

The razor-thin fees underscore challenging conditions

for banks in Asia's financial hub, even as a recent surge in

trading volumes and new listings has ignited hopes for a revival

in large Chinese issuances.

"The fee income barely covers the cost, but banks are eyeing

the discretionary fees and hope securing a role will help them

stay on future deals," said one source familiar with the

pitching process.

Banks typically get paid 2% to 2.5% of the total proceeds

raised from a Hong Kong initial public offering, bankers say,

however deals bigger than $500 million could compress the fee to

1%. The commission paid to CATL's underwriters would be 0.76% at

its maximum.

Dealogic ranks Hong Kong as one of the lowest fee-paying

financial centres in the world.

JPMorgan ( JPM ), Bank of America ( BAC ), China

International Capital Corporation (CICC) and China

Securities International are the sponsors of the CATL deal.

Each of the sponsors will earn $300,000 for the role, which

is around half the market average for the last five years,

according to Dealogic data.

FEE SQUEEZE

International and Chinese banks have suffered a multi-year

long deal slump in Hong Kong, but a recent revival in

transactions has fuelled hope of a comeback for large issuances.

CATL's books have been multiple times oversubscribed with

strong demand from sovereign wealth and global long-only

investors since its launch on Monday, according to a book

message sent to investors on Tuesday and reviewed by Reuters.

Some underwriters jostled to win a role in the deal, willing

to accept much slimmer fees than normal thus sacrificing

margins, three sources with knowledge of the pitching process

told Reuters.

Goldman Sachs ( GS ), Morgan Stanley ( MS ) and UBS

are joint global coordinators on the CATL Hong Kong listing,

with BNP Paribas and Guotai Junan in junior roles.

However Goldman Sachs ( GS ) and UBS, both of which have worked on

some of CATL's previous equity deals, decided not to pursue more

senior roles on the new listing partly due to the low fees, said

two sources familiar with the matter.

Goldman and UBS declined to comment.

Both banks worked on CATL's 45 billion yuan share

placement in 2022 and advised the company in an attempt to raise

over $5 billion in Swiss global depository receipts offering in

2023.

($1 = 7.7932 Hong Kong dollars)

($1 = $1.0000)

($1 = 7.2011 Chinese yuan)