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| Agricultural Bank of China set for world’s biggest flotation |
| Shanghai, 04.05.2010 |
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| From The Times May 4, 2010
Banking sources told The Times that the IPO could be unveiled this week and could lead to the stock being listed on both the Hong Kong and Shanghai bourses in late June or early July, far sooner than the September date that had been expected.
The financial scope of the project has also been extended, with the bank believed to be lifting its original target by an extra $5 billion (£3.3 billion) as capital adequacy rules in China tighten — an attempt, one source said, to “squeeze what we can while there is still a chance”.
The IPO plans, which have been rumoured for years and under discussion for months, are understood to have been brought forward amid fears that the Chinese Government is sucking excess liquidity from the economy and that the window for raising capital is closing rapidly.
The move to announce the listing this week, insiders said, was also an attempt to capture market attention before Industrial and Commercial Bank of China’s efforts to seek a mandate for its $12 billion capital-raising plans, due to start within the next few days.
The sheer scale of ABC’s ambitions for its public offering triggered a noisy scramble by investment banks last month. More than 20 international houses, each desperate for a slice of the most lucrative action this year, pitched for the Chinese bank’s business. Goldman Sachs, Deutsche Bank and several Chinese securities houses were selected as advisors. Underwriters include JP Morgan, Morgan Stanley and Macquarie.
“This is the big one and everyone on the street has been waiting for it,” said an executive at a Wall Street firm involved in the deal. “Over the last two years there is not a single head of any international investment bank who has gone to Beijing and not stopped for a cup of tea and a chat about this deal with the Agricultural Bank.”
ABC, historically a lender to farmers and rural borrowers, made profits of 50 billion yuan (£4.8 billion) in the first nine months of last year.
However, investors in Hong Kong said that the success of the IPO was not guaranteed. Despite roaring economic recovery, China’s equity markets have been disappointing so far this year. After the giant January listing of Rusal, the aluminium group, the shares fell by 30 per cent in their first month.
The urgency of the ABC’s move echoes wider concerns about the Chinese banking sector. China’s banks, fresh from a 15-month long, $1.4 trillion spree of unprecedented new-loan creation, are lunging for cash to support their balance sheets. At least one of the big four has a capital adequacy ratio below the legal limit.
Concern in Beijing over property bubbles and excessive bank lending has prompted a series of draconian regulatory moves. In the past fortnight tighter restrictions have been imposed on mortgage applications and on Sunday banks were ordered to raise the amount they have to hold in reserve in the third such diktat this year.
Analysts believe that Sunday’s 0.5 per cent rise in the required reserve ratio will be followed by similar moves.
Lending is over — now for the cash calls
China’s five largest banks are gearing up to rake in more than $75 billion (£49 billion) in total, in capital-raising efforts on the Hong Kong and Shanghai markets. The banks are seeking to offset the strain on their balance sheets caused by last year’s $1.4 trillion lending splurge
Agricultural Bank’s planned flotation, with its target of $30 billion, will be the largest and has the clear backing of Beijing. The bank was given a $19 billion cash injection last year by the Chinese sovereign wealth fund •Industrial and Commercial Bank of China is planning a share placement in Hong Kong of up to $11.7 billion. It said in March that it hoped to raise more than $3.5 billion through convertible bond issuance in China
China Construction Bank said last week that it would try to raise up to $11 billion through a rights issue in Hong Kong and Shanghai
Bank of China is looking to issue nearly $6 billion in convertible bonds in Shanghai and as much as $7 billion in new shares in Hong Kong
Shareholders at Bank of Communications have approved plans for a $6 billion rights issue
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