ICBC share sale world's top offering at US$19b

Mainland lender to sell 16 per cent of enlarged share capital in listing in Hong Kong and Shanghai

The Industrial and Commercial Bank of China, the mainland's biggest lender, plans to sell 16 per cent of its enlarged share capital in what is likely to be the world's largest initial public offering, sources said.

The Beijing-based bank would sell 53.1 billion shares, or 16 per cent of its enlarged share capital, to raise US$19 billion in one of the first simultaneous offerings of Hong Kong-quoted H shares and Shanghai-listed A shares, the sources said.

ICBC's offering will challenge the US$18.4 billion share sale by NTT DoCoMo in 1998 as the largest initial share offering.

Due for completion next month, the sale will have to brave the effect of domestic economic tightening and a tailing off of the novelty factor concerning mainland bank offerings, following international share sales by smaller domestic rivals Bank of Communications, China Construction Bank, Bank of China and China Merchants Bank.

ICBC has earmarked 35.4 billion shares for the H-share offering, representing 10.6 per cent of its enlarged share capital. Twenty per cent of the H shares will be existing shares while the remaining 80 per cent will be newly issued shares.

Five per cent of the H-share offering was reserved for Hong Kong retail investors, a source said, with the rest for subscription by international institutions. A standard 15 per cent overallotment option could boost the H-share offering to 40.7 billion shares or about 12 per cent of its enlarged share capital.

ICBC also plans to sell 17.7 billion yuan-denominated A shares, or 5.3 per cent of its share capital, to be listed on the Shanghai stock exchange. This offering will consist entirely of newly issued shares.

The ICBC offerings will seek to replicate what is shaping up to be the success of the much smaller H-share listing of Shenzhen-based Merchants Bank, the mainland's sixth-largest commercial lender, whose sale may be worth up to HK$20.69 billion.

Merchants Bank's institutional tranche of 2.09 billion shares, representing 95 per cent of the IPO shares, was eight times covered on Monday when the book opened and more than 10 times subscribed as of yesterday, sources said.

Merchants Bank and its book-runners, China International Capital Corp, UBS and JP Morgan, were discussing capping each order at US$100 million last night.

The positive institutional reaction further prompted a market practitioner to predict 200 times subscription of the Hong Kong retail offering when orders start to be accepted on Friday.

However, market observers attributed the heated response to the bank's smaller deal size and stronger asset and management quality.

'If you talk about ownership, management quality, asset quality, size and growth, [ICBC and Merchants Bank] are different,' said a source. 'The only common thing is they are in the same market.'

Nineteen-year-old Merchants Bank billed itself as the mainland's first bank completely owned by corporate shareholders, while ICBC was wholly state-owned until it sold a combined 8.45 per cent strategic stake to Goldman Sachs, Allianz Group and American Express for US$3.78 billion this year.

ICBC had a 0.59 per cent return on assets last year, stronger than Merchants Bank's 0.51 per cent but weaker than Construction Bank's 1.11 per cent.

However, its non-performing loan ratio of 4.69 per cent at the end of last year was bigger than Merchants Bank's 2.58 per cent and Construction Bank's 3.84 per cent.