Mainland lender's promised dividends beat those of China Construction Bank and Bank of China Industrial and Commercial Bank of China (ICBC), the mainland's largest lender, has promised a higher dividend payout ratio next year than either of its two listed state-owned peers to woo investors to its record-breaking US$19 billion dual listing in Shanghai and Hong Kong next month. The Beijing-based bank will pay out 45 per cent to 60 per cent of its earnings next year and in 2008 as dividends to all shareholders, according to a preliminary prospectus posted on the China Securities Regulatory Commission website. ICBC is poised to become the fifth mainland bank to sell shares publicly in the international market and the seventh domestically listed lender. Its simultaneous A-share and H-share offerings are being launched at a time when mainland banks' earnings growth and asset quality are under pressure from a domestic macroeconomic tightening campaign designed to cool pockets of overheating and dry up excess liquidity in certain sectors. ICBC forecast full-year net profit of 47.2 billion yuan, or 14 fen per share, which is a 26.2 per cent jump over the previous 12 months according to domestic accounting standards and roughly on par with Bank of China's per share earnings. In addition, ICBC has pledged to maintain annual earnings growth of 20 per cent to 30 per cent in coming years, a market source said. The promised payout ratio compares with the 35 per cent to 45 per cent range pledged by China Construction Bank, the fourth-largest lender by consolidated total assets and the first of the Big Four state banks to list offshore. Bank of China, the third-largest bank by consolidated total assets, has also promised a payout ratio of 35 per cent to 45 per cent in each of the next two years. Today, ICBC will begin marketing an initial 35.4 billion shares or 10.8 per cent of its enlarged share capital to international institutional and Hong Kong retail investors. Another 13 billion shares, or 4 per cent of its enlarged share capital, will be pre-marketed to domestic public investors from Wednesday. Combined, the offering could mark the largest global initial public offering to date. At the very least, the A share sale should set a new domestic public share sale record. The bank, whose capital adequacy ratio was 10.74 per cent at the end of June, comfortably over the regulatory minimum of 8 per cent, is raising capital to support expansion. ICBC has approved an 18.59 billion yuan interim dividend payment to its pre-IPO shareholders, including the Ministry of Finance, China SAFE Investments, Goldman Sachs, Allianz Group, American Express and the National Social Security Fund. It also plans a special dividend estimated at 9.56 billion yuan to the same shareholders for the period of the second half before its simultaneous share offerings. The Ministry of Finance and China SAFE stand to be the biggest beneficiaries from the high dividend payout. The two will see their stakes in the bank diluted from 43.28 per cent to 36.24 per cent each as a result of the floats, before ICBC sells 15 per cent more shares to cover excess demand for the offerings. The combined interest of Goldman Sachs, Allianz and American Express will fall from 8.45 per cent to 7.37 per cent. Holdings by the National Social Security Fund will rise from just under 5 per cent to 5.39 per cent. ICBC has signed up more than 10 corporate investors, including Singapore government-backed GIC Direct Investments, Kuwait Investment Authority, Qatar Investment Authority, China Life Insurance, Citic Pacific, Cheung Kong (Holdings), Hutchison Whampoa, the Kuok Group, Chow Tai Fook, Lee Shau-kee, Nan Fung Group, Sun Hung Kai Properties and United Overseas Bank. The amount of H shares to be allocated to those investors, who are subject to a 12-month lock-up period, has yet to be determined but is said to be worth about US$3.5 billion. The A shares in the hands of the finance ministry and China SAFE will be subject to a trading ban of three years, calculated from the time of ICBC's Shanghai stock exchange debut due on October 27, unless the mainland regulator approves their conversion into H shares. Goldman Sachs, Allianz and American Express have committed themselves not to sell down their holdings before April 28, 2009, while the National Social Security Fund agreed not to sell down its stake before June 29, 2009. ICBC employs 355,312 people in more than 18,000 domestic branches, serving 2.5 million corporate customers and 150 million retail clients. The bank accounted for 16.8 per cent of the mainland banking sector's total assets, 15.4 per cent of loans and 19.4 per cent of deposits at the end of last year. It derived about 89.3 per cent of its interim total operating income of 85.72 billion yuan from net interest income. Its net interest income grew 11.4 per cent year on year in the first half. It reduced its outstanding non-performing loans by 8 per cent over the first six months to 142.03 billion yuan at the end of June. The ratio of non-performing to outstanding loans fell 0.59 percentage point to 4.1 per cent in the same period.