Bank of China raises $75.4b in world's biggest IPO in six years Bank of China raised $75.4 billion in the world's largest initial public offering in six years, after pricing its shares just short of the highest point in the indicative range, market sources said. The bank sold 25.57 billion shares at $2.95 each, after approaching investors with a price range of $2.50 to $3 a share. Institutional investors applied for 20 times the number of shares on offer while retail investors subscribed to buy 77 times the number of shares available to them. 'The company could have priced it at the top [of the indicative range] but wanted to say to investors, that with this kind of responsible pricing, they wanted a long-term relationship,' said a person familiar with the company. 'This kind of thing is designed to create goodwill.' It was a gesture worth making given the ugly market conditions that the deal priced into, market observers said. The Hang Seng Index fell to 15,822.64 points yesterday, down 8.54 per cent from an almost five-year high of 17,301.79 on May 8 on fears of further interest rate rises. The strong retail demand, which set a record for IPOs in Hong Kong, forced bookrunners to increase that portion of the sale to 10 per cent of shares on offer from the original 5 per cent. Investors are hoping the mainland's second-largest lender can capitalise on the growing consumption of China's middle class while at the same time put a long history of bad lending behind it. The bank's bad loan ratio fell to 4.9 per cent at the end of last year from 5.5 per cent the year before. Special mention loans, lending which could be written off as a loss in the future, totalled 284 billion yuan at the end of last year and represented 13 per cent of all loans. 'With Chinese banks you just have to cover your eyes and strap yourself in for the ride,' said a fund manager who bought into the deal. The final price values BOC at 2.18 times this year's forecast book value. That comes in cheaper than the 2.82 times forecast book value of Bank of Communications and the 2.71 times China Construction Bank Corp trades at. Goldman Sachs, UBS and BOCI arranged the sale, which represented 10.5 per cent of the bank's enlarged share capital. BOC shares begin trading on June 1. Some market observers do not expect a roaring start to BOC's life as a public company given the current sell-off and past experience with CCB, which was heavily stabilised by bookrunners before standing on its own after more than a week of secondary trading. The BOC share sale topped the $71.8 billion CCB raised and should the 15 per cent overallotment be exercised, the IPO will increase to $86.6 billion.
