Beijing-based Industrial and Commercial Bank of China opened for subscription in Hong Kong on Monday drawing throngs of retail investors.
HONG KONG: The mother of all IPOs - from the Beijing-based Industrial and Commercial Bank of China (ICBC), China’s largest lender - opened for subscription in Hong Kong on Monday, drawing throngs of retail investors.
The big-money IPO from mainland China is expected to raise over $19 billion, and perhaps as much as $21.9 billion, which would top the previous IPO record of $18.4 billion, from Japanese telecom operator NTT DoCoMo in 1998. Until Monday, the institutional tranche of ICBC’s global offering had been oversubscribed 17 times, attracting orders worth $170 billion.
The IPO also recorded another first, being the first simultaneous offering in Hong Kong (the so-called ‘H’ shares) and Shanghai (the so-called ‘A’ shares), but retail investors in Shanghai can begin subscribing only on Thursday, by when the issue would have closed in Hong Kong.
ICBC is offering some 35.39 billion H shares and 13 billion A shares, with the option to raise them to 40.7 billion and 14.95 billion, respectively. The H shares are being offered in the HK$2.56-3.07 price range, and the A shares in the 2.60-3.12 yuan range.
The ICBC issue caps a glorious year of successful share sales by mainland Chinese banks, including Bank of China, China Construction Bank, Bank of Communications and China Merchants Bank. Bank of China’s IPO offer of $11.2 billion earlier this year was oversubscribed about 75 times, despite concerns about its level of non-performing assets (NPAs).
These share sales are part of a process to infuse capital into China’s creaking banking system, and subject the sector to the stern glare of scrutiny from shareholders and regulators alike.
According to the offer document, ICBC’s non-performing loans (NPL) ratio (a measure of its bad debts) was 4.1% in June 2006, against 4.7% in December 2005. But even a year earlier, before the government bailed out state-owned banks with a $60 billion page, ICBC’s books were in bad shape. Its NPL ratio in December 2003 was 21.16%.
ICBC officials are at pains to emphasise that the bank is today on stronger ground and is in the throes of a sweeping restructuring process. It has $890 billion in assets, and projects earnings of 47.2 billion yuan. It plans to grow its fee-based business and cut costs by promoting Net banking in a big way.
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