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Jamil Anderlini

Mainland lender under pressure to value shares at top of price range for US$19b dual IPO  to beat peers

Industrial and Commercial Bank of China (ICBC), the country's largest bank, has won the final  approval for what is expected to be the world's largest initial public offering.

The China Securities Regulatory Commission (CSRC) approved the mainland portion of the US$19 billion Hong Kong and Shanghai dual listings, clearing the way for the bank and its underwriters - Shenyin & Wanguo, China International Capital Corp, Guotai Junan and Citic Securities - to begin pre-marketing with mainland institutional investors today.

The bank will publish its prospectus and begin its mainland IPO roadshow immediately after the end of the week-long National Day holiday that begins on Sunday.

Pricing will begin on October 13 and the stock is expected to start trading  in Shanghai and Hong Kong on October 27, market sources said.

The  approval  for the sale of up to 13 billion yuan-denominated A shares came after Hong Kong's regulator approved the sale of 35.4 billion Hong Kong dollar-denominated H shares on Thursday.

'Mainland investor interest in this IPO will depend on the pricing,' said a fund manager who will meet  bank officials today.  'This bank's selling point is it's the largest and it has a relatively good IT structure,  but it's not the best bank and I don't expect investors to hold this stock after the listing.'

ICBC is under  pressure to value its shares higher than the other state-owned banks that have preceded it, one  Chinese banker said.

Each listed state-owned bank has had a higher price-to-book ratio than the last one, with Bank of Communications (Bocom)  at 1.7 times its book value, China Construction Bank (CCB) at 1.9 times, Bank of China (BOC)  at about two  times and China Merchants Bank  at 2.4 times.

ICBC's fair value should be between 2.4 times and 2.9 times this year's book value, according to Deutsche Bank, one of the Hong Kong sale arrangers.

That would value the bank at as high as US$178 billion, making it the world's fourth-largest after Citigroup, Bank of America and HSBC Holdings.

The government is pushing  state-owned banks to list abroad not only to raise money but also as a way of forcing them to reform their management structures and lending practices, which have led to massive build-ups of bad loans and rampant corruption in the past.

So far,  the IPOs by the state-owned banks have provided  handsome gains for shareholders, with BOC and Merchants Bank  rising more than 25 per cent on their first-day trading.

Shares of CCB have gained 40.9 per cent since it listed on October 27 last year while Bocom's stock has surged 114 per cent since its debut on June 23 last year.

'There are a lot of short-term investors who are not looking at the fundamentals and that's driving up the prices of these banks,' Fitch banking analyst Charlene Chu said.

ICBC was set up in 1984 to service state-owned industrial manufacturers and now has more than 18,000 branches and 150 million customers.

Meanwhile, ICBC officials yesterday denied reports that the bank has signed a memorandum of understanding for a major purchase in Indonesia.

'I have never heard anything about this,' ICBC spokesman Xie Taifeng said.



ICBC cleared for mega-listing