Bank of China public issue opens today

It's the nation's biggest ever public offering.

HONG KONG: One of the world's biggest initial public offerings (IPO) in over five years opens in Hong Kong on Thursday from Bank of China, the country's oldest commercial bank. The IPO is also China's biggest ever.

The offering, expected to raise up to $9.9 billion, also marks a decisive moment in the opening up of China's financial sector, which is burdened by a mountain of bad loans and corruption scandals.

Proceeds from the IPO will be used to strengthen the bank's capital base it prepares for fierce competition from foreign banks later this year. Under the terms of China's accession to the World Trade Organisation, restrictions on the operations of foreign banks are to be lifted in December.

At least one other mega IPO from another of China's ‘Big Four' banks is expected before then as the Industrial and Commercial Bank of China (ICBC) plans to come out with a $10 billion offering in the coming months.

Bank of China will offer over 25 billion shares - or about 10% stake - at HK$ 2.50-3.00 ($1 = HK$ 7.76), at a book value of about 1.9-2.2. The shares will be listed on June 1.

In the run-up to the IPO, Ernst & Young pulled out one of its audit report that had presented an alarming picture of the extent of non-performing loans in China's Big Four banks. The report had come in for criticism from the central bank, the People's Bank of China, and E&Y said later that it was "factually inaccurate".