labels: rex mathew, finance - general, banks & institutions, markets - general
Chinese bank raises $19.1 billion in biggest ever IPOnews
Rex Mathew
20 October 2006

Industrial and Commercial Bank of China Limited (ICBC), China's largest commercial bank, has completed its IPO to raise $19.1 billion. This is the biggest ever IPO globally, beating the record held by Japanese telecom company NTT, which raised close to $18.5 billion in 1998.

Investor interest in Chinese banks is very strong on expectations that rising consumer spending in China would sustain growth rates for many years. Earlier this year, another Chinese bank — Bank of China — had raised over $11-billion in an IPO. Chinese Construction Bank — the third largest Chinese bank after ICBC and Bank of China — had raised more than $9 billion last year.

The ICBC IPO saw unprecedented demand from investors across the world with total bids exceeding a phenomenal $500 billion. Bids from foreign investors were close to $350 billion. At the offer price, around 2.2 times current book value of ICBC, the bank is valued at nearly $130 billion. When listed, ICBC would be one of the top-6 banks globally in market capitalisation.

ICBC is controlled by the Chinese government, which holds more than 72 per cent of the bank - directly and indirectly through investment companies. Global investment bank Goldman Sachs had acquired more than 7 per cent of ICBC in recent years.

Chinese banks are believed to have very high bad assets, but exact estimates are hard to come by. Official estimates put them at between 10 to 15 per cent of total assets for the industry as a whole, while some foreign analysts believe it to be as high as 40 per cent. Recently, the Chinese government had pumped in huge amounts into these banks - ICBC received $15 billion - to help them write off bad loans.

ICBC currently has a network of more than 18,700 branches in China and over a 100 abroad. It has a retail customer base of over 150 million and more than 2.5 million corporate or business customers. It has an asset base of over $800 billion.

In comparison, Indian banks are significantly smaller. SBI, the largest Indian commercial bank has assets of less than $85 billion — or only about a tenth of ICBC. The most valuable Indian bank — ICICI — has a market cap of less than $14 billion - again around a tenth of ICBC.

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Chinese bank raises $19.1 billion in biggest ever IPO