The largest IPO from the Middle Kingdom

Industrial and Commercial Bank of China aims to become world leader in initial public offerings

Industrial and Commercial Bank of China (ICBC) is poised to break the all-time record for initial public offering (IPO) value. One of the largest state-owned banks in the Celestial Empire plans to put up for sale shares totaling $21 billion. Until now, the IPO record belonged to the Japanese corporation NTT Mobile Communications - in 1998 it placed shares worth $18.41 billion.

The public offering of ICBC securities will take place on the Hong Kong and Shanghai stock exchanges in October, Reuters reports, citing a source close to the matter. In total, the bank will place 18% of its authorized capital, the majority of which (12%) will be listed on the Hong Kong Stock Exchange. "It is hoped that ICBC will begin pre-marketing in September," the source said. He claims that the application for an IPO in Hong Kong will be filed this week.

The organizers of the placement are global investment banks - Credit Suisse, Deutsche Bank, Merrill Lynch, ICEA, as well as a consortium of Chinese financial institutions led by China International Capital Corp.

Experts have no doubt about the success of the event. As a result of the announced IPO, the bank's value will be $116 billion, which will automatically place it among the world's leading banks - it will take sixth place (the American JP Morgan Chase & Co. is in fifth place). “The market always likes big companies because of their high liquidity,” said Hu Yanping, director of management company Ginger Capital Management.

ICBC is the only credit institution among the four largest Chinese state-owned banks whose shares are not yet in free circulation. As you know, the securities of Bank of Communications, China Construction Bank and Bank of China are currently traded on exchanges. The latter's IPO took place in early June; in a month and a half, its shares rose in price by 19%. Shares of Bank of Communications and China Construction Bank have risen in price since the start of trading by 44 and 94%, respectively. All three banks were able to raise $22.6 billion from the public offering.

The demand for Chinese banking assets is very high, since at the beginning of next year this country, according to WTO requirements, must open access to the financial market to foreign investors. Western players are already trying to buy shares in Chinese banks, realizing that in this way it will be much easier for them to work in the local market than to create a business from scratch. The Chinese authorities expect that the emergence of foreign shareholders will allow local banks to improve management and develop market methods of doing business. It is also for these reasons that ICBC, which is now preparing for an initial offering, attracted Western investors at the beginning of this year. A consortium of three global financial corporations - Goldman Sachs, Allianz and American Express - acquired a 9% stake in the bank in January for $3.78 billion. And shortly before that, at the end of last year, the Chinese government increased the capital by $15 billion bank in order to smooth out the consequences of the not very successful policy of the top management of the credit institution in providing loans.

Denis UVAROV