CDB may beat Agricultural Bank to listing

Market rumour has it that Agricultural Bank of China is ready to release its long-delayed reform plan - but it seems that China Development Bank is likely to beat it to the finish line.

Mainland media reported yesterday that CDB's plan to transform itself from a state-directed policy lender into a fully fledged commercial bank had been approved by the State Council and that the policy lender would seek a public listing once shareholding and corporate governance reforms had been completed.

'CDB could conceivably list this year, if that is its aim. You would be surprised how fast some of these mainland banks go to market,' said Charlene Chu, a China banking analyst at Fitch Ratings.

'Listing CDB would certainly be much easier than listing Agricultural Bank, as CDB is already one of the better-performing lenders and doesn't need a lot of deep reform.'

CDB, which provides low-interest loans to domestic infrastructure projects and financial support for mainland firms investing in projects overseas, announced its plan to commercialise a year ago. In December, it received US$20 billion from China Investment Corp, the first step towards restructuring.

The challenge for CDB remains convincing potential investors it can be a genuine commercial player.

As a fund source for infrastructure projects, CDB is a major competitor to state commercial lenders such as China Construction Bank Corp. Last year's US$3 billion deal for a 3.1 per cent stake in Barclays was also designed to bolster its commercial expertise, with the British lender believed to be helping CDB with its fledgling investment banking unit.

But CDB's unique ties with Beijing will make it hard to convince sceptics it can put commercial goals ahead of policy matters.

Wholly owned by the Ministry of Finance, CDB is the only non-regulatory financial institution with ministerial status, reporting directly to the State Council and getting unconditional liquidity support from the central bank.

'Why would the government want to turn a policy bank into a listed vehicle? It already has plenty of capital from the state and there are a host of other big banks which already focus on genuinely commercial activities,' said Dominic Chan, a banking analyst at brokerage CLSA.