Lender prices stock at top of the range after taking HK$423.7b in retail orders Industrial and Commercial Bank of China, the nation's largest bank, raised a record-breaking US$19.1 billion in the first initial public offering by a mainland company sold simultaneously on the Hong Kong and Shanghai exchanges, market sources said. The bank sold 35.49 billion H shares, or 10.8 per cent of its enlarged share capital, for HK$3.07 each, and 13 billion A shares in Shanghai for 3.12 yuan. The Hong Kong sale attracted US$350 billion from institutional investors, or more than 50 times the shares available. Retail investors subscribed for 78 times more shares than were on offer, placing orders worth HK$423.7 billion. The retail demand triggered an automatic increase in the size of the retail tranche to 10 per cent of the offering from the original 5 per cent. It also unseated Bank of China, which attracted HK$286 billion in retail orders, from the No1 spot for most-popular IPO in Hong Kong. 'You might say ICBC is the deal of the century because six months ago there were doubts the market could absorb US$20 billion of a bank without a balance sheet to speak of,' said a fund manager who asked not to be identified. 'It may be a better indicator of the massive liquidity, and not just mainland liquidity, and that we remain in some kind of bull market.' The pricing values the bank at 2.23 times this year's book value and two times next year's book. That is 15 per cent cheaper than China Construction Bank, which raised US$9 billion in an IPO last year, and 4 per cent cheaper than BOC, which sold shares in June. ICBC is likely to sell an additional 5.31 billion H shares and another 1.95 billion A shares, taking the total to US$21.9 billion. The world's largest IPO had been the US$18.3 billion share sale in 1998 by Japanese mobile phone operator NTT DoCoMo. ICBC shares will begin trading Friday. The lender will pay out 45 to 60 per cent of its earnings in dividends next year and in 2008. 'That's almost double the competition and something we haven't seen from mainland banks,' the fund manager said. 'One of the hallmarks of good corporate governance is to return cash they aren't using.' China Construction Bank plans to pay out 35 per cent of its net profit in dividends while BOC proposes to pay 45 per cent over the same period. ICBC expects its net profit to increase 26 per cent to 47 billion yuan this year and forecasts annual earnings growth of 20 per cent to 30 per cent. Merrill Lynch, Deutsche Bank, Credit Suisse, ICEA and CICC are arranging the Hong Kong IPO. China International Capital Corp, Citic Securities, Guotai Junan Securities and Shenyin Wanguo Securities are handling the mainland sale. The deal puts Merrill Lynch top of the investment banking league tables for Asia outside Japan with imputed fees of US$120.9 million earned so far this year from 13 IPOs, according to Thomson Financial data. Credit Suisse will take the No2 position with US$99.4 million from seven sales while Goldman Sachs, which had held the No1 slot before the ICBC sale, will be third with US$99.3 million from 11 deals.
