Last week, regulators in China approved the IPO for Agricultural Bank of China, one of four big Chinese lenders. The bank has a strong presence in the Chinese rural areas, which houses 50% of the Chinese population. The bank is planning on raising $23 billion, overtaking its Chinese counterpart, Industrial and Commercial Bank of China, as the biggest IPO in the World. The lender is the third largest in China in terms of assets, amassing $1.4 trillion. The bank plans to list in two stock exchanges, listing $11 billion in Shanghai (A-Shares), which restrict ownership to the Chinese, and $12 billion in Hong Kong (H-Shares), which has no restrictions on foreign ownership.
Latest news suggests that players in the Middle East are heavily involved in the IPO, with Qatar pledging $2.8 billion to the IPO. Yesterday, Kuwaiti Minister of Finance announced that the Kuwait Investment Authority will pledge $800 million. However, some analysts are questioning the timing of the IPO and are suggesting that it might be delayed due to unfavorable market conditions. Also recent introduction of regulations on the property market by Chinese officials limiting mortgages will hurt the bank’s profitability. The bank already has the highest non-performing loans ratio among big banks, with a ratio of 2.9% compared to an average of 1.5%.
However, there might be light at the end of the tunnel, as the government has recently announced new tax cuts to the rural lenders, which goes hand in hand with the government’s plans to revive the Western and Central areas of China.
(No Ratings Yet)
Loading ...Tags: ABC, Agricultural Bank of China, Banks, China, IPO, KIA, QIA
Was the Chinese broadening of the Yuan’s trading range a coincidence? I guess it only makes the deal sweeter.
[Reply]
Naser Reply:
June 24th, 2010 at 9:37 am
The deal has to be sweetened, it’s difficult to find $23 billion nowadays.
[Reply]