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Seven Bank Shares Up 17% in Market Debut

Shares of Japan's Seven Bank jumped 17 percent in their market debut on Friday following a $483 million IPO as subprime-rattled investors embraced the firm's low-risk model of earning fees from cash machines.

Shares of Seven Bank, which raised 50.9 billion yen in an initial public offering this month, were at 164,000 yen on the Jasdaq market for start-ups, compared with a pre-market price of 140,000 yen and first trade at 168,000 yen.

The Nikkei Jasdaq Index was down 0.4 percent.

The banking arm of Japanese retail group Seven & I Holdings, Seven Bank operates about 13,000 automated teller machines (ATMs) through the group's network of 7-Eleven convenience stores but has no branches.

Seven Bank draws the bulk of its revenue from ATM fees and therefore avoids the lending risk of a traditional bank. It has also avoided investing in securities linked to the crumbling U.S. subprime mortgage market.

"Seven Bank is completely unrelated to the subprime issue, and from that perspective it is easy for investment trusts and pension funds to chose this stock," said Shigemi Nonaka, a special adviser at Polestar Investment Management. "It should be able to grow steadily over the long-term."

The initial public offering is Japan's biggest since Sony Financial's $3 billion offer in October and comes as the global credit crisis has hurt demand for new listings.

The value of IPOs in Japan fell by about 70 percent in 2007 from the previous year, according to Thomson Financial.

Earlier this month, Seven Bank priced the IPO at the top of its pre-set range of 120,000-140,000, indicating that investors were drawn by its relatively stable, fee-based business model.

Top shareholders including Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group parted with 310,400 shares ahead of the listing. Seven Bank sold 53,350 of its existing shares.

An additional 10,000 shares were on offer through an over-allotment scheme.

The current stock price values the entire bank at 200 billion yen and gives it a price-to-earnings ratio of about 15, which compares with a PE ratio of 15 at Juroku Bank and 21 at 77 Bank, both regional lenders of similar market value.

The IPO was overseen by lead managers Nomura Securities, Nikko Citigroup and Morgan Stanley. Underwriters included Mito Securities and Kyokuto Securities.