ICBC taps Merrill, Suisse, Deutsche for IPO
Merrill Lynch, Credit Suisse and Deutsche Bank are among the winners for an underwriting role on the $12 bn IPO of ICBC.india Updated: Mar 09, 2006 17:11 IST
Merrill Lynch, Credit Suisse and Deutsche Bank are among the winners in a fierce battle for an underwriting role on the $12 billion IPO of Industrial & Commercial Bank of China.
ICBC said on Thursday it had also picked China International Capital Corp and its own ICEA Finance Holdings investment banking arm to work on the deal, which could generate more than $300 million in underwriting fees.
Goldman Sachs, which is part of a consortium investing $3.78 billion in ICBC, was considered a frontrunner, but it failed to add the mainland's top lender to its long list of China bank mandates.
ICBC is expected to sell roughly 10-15 per cent of its equity in a Hong Kong listing that will probably be the last mega-China IPO for the foreseeable future.
The IPO, on track to be the world's largest since AT&T Wireless raised $10.6 billion in April 2000, is expected to follow rival Bank of China, which aims to raise $8 billion in a Hong Kong listing in the first half of this year.
The path for both deals has been smoothed by last year's $9.2 billion IPO by China Construction Bank, which was the world's largest in four years.
Construction Bank shares have jumped 49 per cent since its October listing.
ICBC hopes to list by the end of the year but preparatory work and market conditions may push the offering into 2007.
"Technically, the bank is ready to list in September, but it will depend on other factors," a banking source said.
Agricultural Bank of China, the last of the Big Four state-run lenders, is viewed as a much longer-term listing candidate since it is the weakest bank of the group, with some $90 billion in bad loans.
Beijing has bailed out its banks and encouraged offshore stock listings to strengthen a sector weighed down by a mountain of bad loans.
The government in April 2005 said it was injecting $15 billion into ICBC to help clean its bad loan-riddled balance sheet. The bank received further support when Goldman, Germany's Allianz AG and American Express pledged their investment in January.
Goldman, which is working on the Bank of China IPO with Switzerland's UBS and China's BOC International, is putting up $2.58 billion for a 7 per cent stake in ICBC through its principal investment arm.
Allianz is paying $1 billion for a 2.5 per cent stake, while American Express is investing about $200 million.
Foreign investors such as Goldman, HSBC, Citigroup Inc and others are flocking to China's flawed but potentially lucrative banking sector, flush with over $1.7 trillion in personal savings and audit culture that is only emerging.
ICBC has around 18,000 branches and offices serving more than 100 million retail customers and 4 million corporate clients.
The bank's operating profit jumped 21 per cent to $11.2 billion in 2005, and its non-performing loan ratio fell to 4.43 per cent from 4.6 per cent at the end of September.
To capture the burgeoning ranks of wealthy consumers being created by China's economic boom, ICBC has cut its reliance on lending operations.
Interest income fell to 53 per cent of 2005 revenues, compared with 70 per cent in 2000, while investment income and fees from the likes of credit cards and handling accounts for corporate clients made up 47 per cent of last year's revenues.