ICBC May Set IPO Record

Posted 05 September 2006 @ 09:46 am EET     Print     Reprint     E-Mail     Comments

BEIJING (AP) - China's biggest commercial bank plans to raise up to $19 billion with an initial public offering this year, possibly breaking the record for the world's biggest IPO, a news report said Tuesday.

Industrial & Commercial Bank of China Ltd. plans to sell shares simultaneously on the Hong Kong and Shanghai exchanges before the end of October, Dow Jones Newswires said, citing documents submitted to Chinese securities regulators.An ICBC spokesman who would give only his surname, Xie, wouldn't confirm the report or give other information.

The China Banking Regulatory Commission said in July that ICBC was approved for an IPO but didn't say when or how large it would be. Phone calls to the commission weren't answered.
Earlier reports by Hong Kong newspapers put the size of the planned ICBC offering in the $14-$18 billion range. The mainland offering would raise up to $7.5 billion, with the rest coming from Hong Kong, Dow Jones said.

The biggest IPO to date is the $18.4 billion raised by Japan's NTT Mobile Communications Network Inc. in 1998.China's state-owned commercial banks are in the midst of a flurry of IPOs on foreign stock exchanges. They are raising billions of dollars to modernize operations as Beijing prepares to meet a December deadline for fully opening their market to foreign competitors under its World Trade Organization commitments.The country's second-biggest lender, Bank of China, raised $11.2 billion in May with an IPO in Hong Kong that was the fourth-largest ever in the world. No. 3 China Construction Bank raised $8 billion in October 2005.

Bank profits from lending have been cut recently by government efforts to rein in an economic boom by clamping down on double-digit credit growth that it worries could ignite inflation.ICBC had assets of 6.5 trillion yuan ($800 billion) as of the end of 2005.The bank plans to sell up to 40.7 billion shares in Hong Kong, accounting for 12 percent of its enlarged share base, Dow Jones said, citing documents submitted to the China Securities Regulatory Commission. It said the bank would sell 20.4 billion shares on the mainland, accounting for 6 percent of its share base.

China's state-owned banks are trying to clear their balance sheets of billions of dollars in unpaid loans after decades of being treated as a source of finance to keep state companies afloat.ICBC and other banks have shifted loans to newly created asset management companies that try to recover money from borrowers by seizing assets or taking ownership stakes.They also have linked up with strategic partners from the United States, Europe and elsewhere, receiving capital injections and help in launching credit cards and other products.

The government has given its banks tens of billions of dollars to replenish reserves and meet minimum capital requirements in an effort to turn them into independent, profit-driven competitors.ICBC received $15 billion from the government in April, 2005, while two other banks also each received $22.5 billion. The bank also has received commitments worth about $6 billion from outside investors.

In June, China's social security fund agreed to invest more than 18 billion yuan ($2.25 billion) in the bank.That came after a foreign investment group linking Goldman Sachs Group Inc., American Express Co. and Germany's Allianz AG agreed in January to invest $3.78 billion in the bank.Plans for an IPO by the remaining member of the "big four" state-owned commercial banks, Agricultural Bank of China, have been delayed due to the bank's unusually large amount of bad loans.