Banking

ABC to launch $11.4 billion HK IPO

(China Daily HK Edition)
Updated: 2010-06-30 10:08

Agricultural Bank of China Vice-Chairman and Executive Director Zhang Yun (left) and Executive Vice-President Zhu Hongbo attend a news conference in Hong Kong Tuesday to announce the lender's initial public offering here next month. Edmond Tang / Chna Daily

Agricultural Bank of China (ABC) announced Tuesday in Hong Kong it hopes that a total of over 25.4 billion Hong Kong shares in its Hong Kong public offering, scheduled to commence today, will raise $11.4 billion.

ABC has set the price range for its Hong Kong IPO at HK$2.88 to HK$3.48 apiece, the bank's top executives said at a press conference held in Hong Kong.

The Hong Kong public offering is expected to close at noon on July 6, 2010. Trading of the bank's Hong Kong shares on the main board of the Hong Kong Stock Exchange is expected to begin on July 16, 2010.

As indicated by the bank, the net proceeds from the global offering will be used to strengthen its capital base to support the ongoing growth of its business.

ABC Chairman Xiang Junbo said via a video connection from New York that he was confident about the prospects for rural finance on the mainland. With the massive urbanization drive being one of the core issues in the future, the bank has an advantage over others with its extensive rural networks, said Xiang.

About 15 percent of ABC's total lending went to local governments as of the end of 2009, the bank said on Tuesday, which it claimed was lower than that of its peers.

ABC had lent about 533 billion yuan ($78 billion) to local governments as of the end of last year, ABC Vice-Chairman Zhang Yun told reporters at a news conference ahead of its listing next month.

The non-performing loan (NPL) ratio for its overall local government loan portfolio was 0.61 percent, Zhang said. By comparison, rival Industrial and Commercial Bank of China (ICBC) said in May its NPL ratio for local government lending was 0.02 percent.

ABC will pay underwriters 1.96 percent of the proceeds from the Hong Kong public portion of its initial public offering, the bank said Tuesday.

Expenses, including aggregate commissions and fees, were estimated at HK$1.3 billion, ABC said in its prospectus.

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China's third largest bank, with $1.4 trillion in assets, addressed cost-to-income ratios, future profits and its loan book at the Tuesday press conference.

The Beijing-based lender said it would see its cost-to-income ratio fall by 5 to 8 percentage points after its public offering, as it tries to ease investor concerns about its high cost base.

"If we cut our cost-to-income ratio by 1 percentage point, we expect it to help our net profit grow by 2 billion yuan ($295 million)," Zhang told reporters.

ABC's cost-to-income ratio in 2009 was 43.4 percent, compared with 33 percent at ICBC and 39 percent at China Construction Bank. The government-run company has 24,000 branches, 441,000 employees and 320 million customers.

Agencies