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Enoch Yiu

Share price surge makes mainland bank world's third-largest by market value

Industrial and Commercial Bank of China (ICBC), which raised US$21.1 billion in the world's biggest initial public offering in October, has overtaken HSBC Holdings to become the world's third-largest bank by market value.

ICBC's shares surged by the daily limit of 9.9 per cent yesterday to close at 5.21 yuan on the Shanghai Stock Exchange, valuing the firm at US$214.2 billion.

HSBC had a market capitalisation of  US$208.4 billion at the close of trading in London on December 22, behind Citigroup, the world's largest financial firm, at US$268 billion and Bank of America Corp at US$239.6 billion.

Shares in the mainland's biggest bank have soared 67 per cent on the domestic stock market since its October debut, while its Hong Kong  H-shares have gained 43 per cent. The Hong Kong market was closed yesterday.

The popularity of the stock is predicted to keep growing by local market watchers as investors show increased interest in mainland financial institutions.

Joseph Tong Tang, executive director and chief operating officer of Sun Hung Kai & Co, said some large international fund houses had created a new category in their investment portfolios this year, which had helped boost the share prices of mainland banks and insurance companies.

Shares of Bank of China gained 7.5 per cent to 4.3 yuan in Shanghai yesterday, catapulting the bank to become the world's sixth-largest lender, with a market capitalisation of US$135.9 billion, overtaking Mitsubishi UFJ Financial Group.

'The strong Chinese economic growth and the potential revaluation prospects of the yuan have resulted in many international fund companies having a positive outlook for mainland financial institutions. This has led them to put aside a specific amount of funds for investing in these institutions,' Mr Tong said.

'Mainland banks and insurance companies such as ICBC and China Life will continue to be the darlings of these international funds over the next few years.'

Three of the big four mainland banks - ICBC, Bank of China, China Construction Bank - and the fifth largest lender, Bank of Communications, are already listed in Hong Kong. ICBC's H-shares closed at HK$4.40 on Friday.

Louis Tse Ming-kwong,  director at VC Brokerage, expects mainland lenders to make further gains, thanks to the robust economy.

'Shares of ICBC will also benefit when it becomes a blue chip in Hong Kong,' Mr Tse said, referring to the bank's expected inclusion in the Hang Seng Index.

Another analyst said that even though HSBC had lost its ranking to ICBC, the London-based giant was still a winner as it has invested heavily in financial institutions. HSBC holds 19.9 per cent of Bank of Communications and 19.9 per cent of Ping An Insurance.

Bank of Communications closed at HK$8.42 in Hong Kong on Friday, a rise of 138.87 per cent this year.

Despite their large market capitalisations, Mr Tong believes mainland banks face much restructuring  before they can consider expanding into international markets by buying stakes in overseas banks.

ICBC was formed in 1984 from the central bank's own lending and deposit-taking operations. It ran up billions of dollars in bad loans to state-owned enterprises and was recapitalised in 1998 and 2005.

BIG LEAGUE

Top 5 listed banks (as at Dec 25)        Market capitalisation (US$b)

Citigroup     268

Bank of America    239.6

Industrial and Commercial Bank of China    214.2

HSBC Holdings     208.4

JP Morgan    166.1



ICBC tops HSBC in global rankings