IPO for the 'Big Four' commercial banks slated

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Last updated at: (Beijing Time) Saturday, January 17, 2004

IPO for the 'Big Four' commercial banks slated

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Sources from China Banking Regulatory Commission showed that the timetable for IPO of the four big state-owned commercial banks has been initially scheduled. They will be listed at the overseas market fist and then the domestic market.

China Business Post reported that the timetable for the share offering of the "big four" is as follows. In 2004, China Construction Bank (CCB) goes public and Bank of China (BOC) completes its restructuring process. Bank of China is to be listed In 2005 and the Industrial and Commercial Bank of China (ICBC) is to be reformed. In 2006, the ICBC is going to be listed and Agriculture Bank of China (ABC) bring to an end of its restructuring. In 2007, the ABC goes public.

The Construction Bank of China is likely the first state-owned commercial bank to be listed, which is expected to issue its stocks no later than the end of 2004 in Hong Kong. The offering is to raise about USD6b. The Bank of China may choose to be listed at New York.

As learned it is basically sure that the Construction Bank of China Co., Ltd., in its planning stage, will be the forerunner in 2004. But it may be out of expectation that its IPO will be likely only to involve its five quality branches' assets, namely Shanghai, Zhejiang, Ningbo, Jiangsu, and Suzhou, instead of its whole assets. This means that there is a possibility for the Construction Bank to follow the same way of China Mobile by getting its good assets listed first and the rest of its assets purchased by the listed companies gradually.

Source inside the Construction Bank disclosed that the Bank would release the underwriters and plan for its overseas listing within the month. Bidders include Citibank, HSBC, JP Morgan, Morgan Stanley, and China International Capital Corporation Limited (CICC) whose participation is of no doubt to anyone. But finally only two foreign-funded investment banks plus CICC may underwrite the share offering of the Construction Bank.

Confirmed underwriters and reform plan for the Bank of China are to be announced around July. A person from an investment bank bidding for the underwriting claimed that BOC International, Golden Sachs, and Swissbank seem to stand the best chance.

To pave the way for the listing, the Construction Bank has set up a restructuring team headed by Mr. Zhang En'zhao, governor of the Bank and include Zhao Lin, the chief auditor, Fan Yifei, assistant to governor, and vice chairmen of 7 commissions and concurrently general managers of various sectors. A special office for the restructuring and reform has been established under the team for its daily operation. Similar organizations are built in its branches.

As learned the Construction Bank has submitted to the State Council three plans for its restructuring and listing. One is to get its whole assets restructured and listed, another to have it restructured and listed as a group and the third, also the last to be submitted, is to make its five branches in Shanghai, Zhejiang, Ningbo, Jiangsu, and Suzhou go public first because they, stretching along the coast in southeast China, comprise its good quality assets. The rest assets will be cleaved apart and reformed and then emerged into the listed assets.

Sources released that Erns & Young commissioned by the Construction Bank of China is auditing the mortgaged real estate under the branches of Shanghai, Jiangsu and Zhejiang. They will be sold to the overseas market at the beginning of the year.

An insider in China's central bank told China Business Post that a capital equivalent to USD120b would be earmarked to re-package the "Big Four" according to the strategy set by the State Council. The fund injection declared recently was just the first step. As learned that the USD120b capital package covers a wide rang of plans from capital assets pump-in to the ICBC and ABC to bond issuing.

There is also news that although ICBC and ABC are still waiting for the approval of their shareholding and listing plans, the decision making level has reached consensus to complete ICBC's reform in 2006 and listing in 2006 and to get the ABC restructured in 2006 and listed in 2007. But there is also report that the reform of the ABC may be put under the overall planning of the reform of the Post Deposit, China Agricultural Development Bank.

The successful offering of BoC and CCB as scheduled mainly depends on their large-scale restructuring. A financial mixed corporation or financial holding company will be the result no matter which way is to be followed, having part of its assets listed to pave the way for the listing of the whole assets or re-creating them into corporations. This is the best model that the state-owned commercial banks can have as a result of their reform, restructuring, and listing.

Available information now indicates that it is a foregone conclusion that Bank of China will be changed into Bank of China Co., Ltd. This can be proved by the latest speech of Wang Zhaowen, spokesperson for BOC. It is called a mixed financial group because it has an investment bank BOC International and other financial assets.

There are some pending issues for the Construction Bank of China. If it chooses the way to get its fives branches in the coastal provinces and cities listed first, it will be turned into a mixed financial institution too. It will have a public commercial bank and a holding investment bank by then. Even if the public bank include its 38 domestic branches, 5 overseas branches and its head office business into its assets, the non-commercial banks left over after the restructuring will be its subsidiaries like the assets management company or China Finance Company. The parent company will actually act as a financial holding entity.

In fact, it is a trend that the Big Four are all transformed to be corporations through different ways. As learned if a risk assets management company is set up according to the initial scheme by separating the bad assets and at the same time a commercial bank with good assets is created, at least these two subsidiaries will be controlled by the corporation. In the fullness of time, joint ventures will be set up, covering securities brokerage and insurance brokerage, to re-arrange its staff.

By People's Daily Online

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