Money
ABC IPO may raise $20b on Shanghai price
(Agencies)
Updated: 2010-06-28 13:43
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Agricultural Bank of China Ltd set a price range for the Shanghai part of its initial public offering that will allow it to raise as much as $20.1 billion, according to three people with knowledge of the matter.
The Beijing-based bank may offer 22.2 billion shares in Shanghai at 2.52 yuan to 2.68 yuan apiece, the people said, declining to be identified before an official announcement. Agricultural Bank, China's largest by customers, last week priced shares in the Hong Kong part of its IPO at HK$2.88 to HK$3.48 each.
Chairman Xiang Junbo, 53, is taking the country's largest fully State-owned bank public after the benchmark Shanghai Composite Index slumped 22 percent this year and Fitch Ratings warned that record lending in 2009 may saddle lenders with bad debt. Agricultural Bank's IPO marks the last chapter of a decade-long restructuring of China's banking industry that has cost the government an estimated $650 billion.
"This could be a booster for banking shares and the broad market," said Leo Gao, who helps oversee about $600 million at APS Asset Management Ltd in Shanghai. "You'd rather price the shares low to give it room for a rally on the debut than have it fallen from grace."
Defying global drop
Chinese IPOs have this year defied the drop in the global market, where more than 30 companies have postponed or withdrawn first-time sales since the start of May, according to data compiled by Bloomberg. Shares of companies that have gone public in Shanghai and Shenzhen gained an average 29 percent in their first month of trading through June 1, Bloomberg data shows.
Agricultural Bank board secretary Li Zhenjiang wasn't immediately available to comment. The Shanghai pricing needs approval from the China Securities Regulatory Commission.
The price range means Agricultural Bank must exercise a so- called overallotment option to expand the sale to surpass rival Industrial & Commercial Bank of China Ltd's $21.9 billion IPO in October 2006 to become the world's largest.
Agricultural Bank would raise about $23.1 billion if it boosts the size of the sale by the maximum 15 percent, according to data compiled by Bloomberg.
Qatar, Kuwait
Agricultural Bank set aside $5.45 billion of the Hong Kong part of the IPO for corporate investors, according to a June 25 filing. Qatar Investment Authority agreed to invest $2.8 billion and Kuwait Investment Authority said it would buy $800 million.
Corporate, or cornerstone, investors are guaranteed shares in IPOs in exchange for a pledge to hold the stock for a period of time.
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Bank of China Ltd, the nation's third-largest by assets as of March 31 and Agricultural Bank's closest rival in profitability, trades at 1.53 times estimated book value.
Loan growth
Agricultural Bank, with 320 million customers and 23,624 outlets in China at the end of last year, advanced about 1 trillion yuan of new loans last year, more than the gross domestic economy of New Zealand. Its non-performing loan ratio stood at 2.91 percent as of Dec 31.
The lender had a capital adequacy ratio of 10.07 percent at the end of 2009, the lowest among China's largest state- controlled banks. It targets a minimum ratio of 11.5 percent from 2010 through 2012.
CICC, Citic Securities Co, China Galaxy Securities Co and Guotai Junan Securities Co are managing the bank's yuan- denominated A-share offering.
China International Capital Corp, Deutsche Bank AG, Goldman Sachs Group Inc, JPMorgan Chase & Co, Macquarie Group Ltd and Morgan Stanley were hired to arrange the Hong Kong portion of Agricultural Bank's IPO, along with its own investment unit.