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Agricultural Bank of China expected to announce record IPO

by Staff Writers
Hong Kong (AFP) July 9, 2010
Agricultural Bank of China is expected to announce Friday a new world record IPO worth about 22.1 billion US dollars, underscoring investors' confidence in the Chinese economy.

AgBank -- the last of China's Big Four banks to list its shares -- on Wednesday said it had raised 68.5 billion yuan (10.1 billion US dollars) from the Shanghai portion of its monster initial public offering.

The rural lender, which is set for a dual listing in Hong Kong and Shanghai next week, has yet to confirm how much it raised in Hong Kong although reports said the whole offering could raise about 22.1 billion US dollars if over-allotment options are exercised in both markets.

The bank is to announce the numbers on Friday, with the listing likely to trump Industrial & Commercial Bank of China's 21.9 billion dollar IPO in 2006.

The AgBank sale drew almost a dozen heavyweight investors, including Qatar's sovereign investment fund, British bank Standard Chartered and Hong Kong's richest tycoon Li Ka-shing.

"If you need any evidence where the future of capital markets" lies, "it is the Agricultural Bank of China set to announce a record amount raised in an IPO," Royal Bank of Scotland said in a research note.

"European banks could only dream of raising this much capital at the moment."

AgBank in recent weeks scaled back its original 30-billion-dollar IPO target amid market volatility tied to concerns about the global economy and questions about a balance sheet dented by bad loans.

Some analysts consider the rural lender to be the weakest of China's big banks owing mainly to its bad-loan burden and a mandate to loan money to poor farmers instead of focusing on higher-profit areas.

Francis Lun, general manager of Fulbright Securities in Hong Kong, said AgBank may ditch the rural lending mandate when it becomes a public company, adding that rival ICBC cleaned up its troubled balance sheet after listing.

I think (AgBank) will junk that policy and become more like a commercial bank," he told AFP.

But AgBank chairman Xiang Junbo said last month the company was poised to capitalise on Chinese government efforts to boost economic growth in the country's centre and west, which have missed out on the export-driven boom enjoyed by coastal regions.

"The county area business will be one of our key profit drivers," Xiang said. "(AgBank) is well positioned to capitalise on China's next wave of growth."

The lender's stock is set to begin trading in Shanghai on July 15, and in Hong Kong a day later.

AgBank will also offer Japanese investors a portion of its shares ahead of its listing, Nomura Securities, one of the two lead underwriters in Japan, said this week.

Citing an unnamed source, the Nikkei business daily reported that AgBank hoped to raise up to 50 billion yen (570 million dollars) in Japan, where many wealthy investors are also following the growth outlook of the Chinese market.

Agbank aims to float 15 percent of its enlarged share capital. But if it fully exercises its over-allotment options, it could float 16.87 percent, according to its prospectus.

The lender, which was set up in 1951, two years after Mao Zedong's communist revolution in China, said it booked a profit last year of 65 billion yuan (9.56 billion US dollars), up from 51.45 billion yuan in 2008.



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