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Posts Tagged ‘AgBank’

AgBank makes lacklustre China debut

In Uncategorized on July 15, 2010 at 12:56 pm

Agricultural Bank of China made a lacklustre stock market debut in Shanghai Thursday, with its shares rising only slightly, in what is still shaping up to be the world’s largest initial public offering.

The last of China’s “Big Four” state banks to go public is on track to raise a record 22.1 billion dollars in a dual listing in Shanghai and Hong Kong that has put a spotlight on investor confidence in the world’s number three economy.

AgBank chairman Xiang Junbo called the IPO an “important step” towards the bank becoming a “global, first-class commercial” institution, before striking a gong for the start of trade with Shanghai Communist party chief Yu Zhensheng.

“We are relatively satisfied with today’s stock prices, which reflect investors’ positive views on AgBank’s current status and outlook,” the bank’s president Zhang Yun told reporters shortly after trading began.

Tourists are seen outside a building housing the key Shanghai branch of the Agricultural Bank of China located on the historic Bund, in the coastal city.

AgBank makes its Hong Kong debut on Friday.

The opening days of trade could signal whether the bank will maximise the number of additional shares it can offer to make IPO history, beating Industrial and Commercial Bank of China’s 21.9-billion-dollar offering in 2006.

But after some analysts predicted a major jump in prices after the debut, shares ended the morning session at 2.70 yuan — up just 0.80 percent from the IPO price of 2.68 yuan, but lower than the opening price of 2.74.

“The performance is weaker than expected,” Shen Jun, a strategist at BOC International (China) Ltd, told Dow Jones Newswires.

Yan Li, a Beijing-based analyst with Southwest Securities, agreed AgBank was unlikely to soar.

“We didn?t expect it to shine on the first day,” Yan told AFP.

“It will end the day roughly flat, the same as the opening level, because the lender and regulators cannot afford the embarrassment of it falling below the IPO price on the first day,” she predicted.

China is on track to be the world’s biggest IPO market this year with up to 300 companies expected to raise 500 billion yuan (close to 74 billion dollars) this year, according to PricewaterhouseCoopers.

The total number of AgBank’s IPO shares is not yet known and will be determined by its market performance.

A strong start will mean AgBank will fully exercise its over-allotment options by selling an additional portion of up to 15 percent of the number of shares initially issued for the IPO — making it the world’s largest.

AgBank said Thursday the Hong Kong portion of its IPO was nearly six times oversubscribed, but did not indicate if it would fully exercise the over-allotment option.

The bank was founded two years after Mao Zedong’s 1949 communist revolution, with a mission to lend money to China’s poor farmers and distribute state money in rural areas.

But heavy exposure to China’s poverty-stricken interior meant that mission was frustrated by decades of chaotic policies, leaving it awash with bad debt.

Despite Beijing’s efforts to salvage AgBank by wiping more than 345.8 billion yuan from its books, it remains the weakest of China’s big banks and it remains to be seen whether it can shift from policy bank to profit-oriented company.

Zhang told reporters on Thursday he expected AgBank’s full-year profit for 2010 to rise 30 percent on year and hinted at the bank’s future ambitions by saying it would build a strong international network.

AgBank’s stock market debut came after Fitch credit ratings agency warned of growing risks in China’s banking system.

The agency warned in a report that complex deals were obscuring hundreds of billions in loans and possibly concealing a new batch of bad property and infrastructure lending.

AgBank’s Hong Kong sale nevertheless drew almost a dozen heavyweight investors, including Qatar’s sovereign investment fund, British bank Standard Chartered and Hong Kong’s richest tycoon, Li Ka-shing.

The biggest investor in the mainland issue was China Life, the nation’s biggest life insurer by premium income.

A total of 40 percent of the mainland shares went to 27 cornerstone investors — mostly state-owned entities ranging from Cofco Ltd, China?s main grain producer, to China Aerospace Science and Industry Corp to the operators of the Three Gorges Dam.

Source: SGGP

China’s AgBank starts world-record IPO

In Uncategorized on July 1, 2010 at 2:30 pm

 Agricultural Bank of China on Wednesday kicked off a share offer worth a world-record 23.2 billion dollars as China strives to develop depressed regions in the rural lender’s heartland.

AgBank, the last of China’s “big four” state banks to list, plans to float its shares in Hong Kong and Shanghai next month with the monster IPO appearing set to overtake a previous record of 22 billion dollars set in 2006 by Industrial and Commercial Bank of China.

Zhang Yun, Vice Chairman and President of the Agricultural Bank of China speaks at a press conference in Hong Kong on June 29, 2010

The initial public offering has already won bedrock support from heavyweight investors — including Qatar’s sovereign wealth fund, British bank Standard Chartered and US food giant Archer Daniels Midland.

On Wednesday, small-time retail investors had their first chance to grab a piece of the action and orderly queues were building outside bank branches in Hong Kong where the AgBank prospectus was being handed out.

AgBank chairman Xiang Junbo said late Tuesday that his company had worked hard to cut its bad-debt load, a major concern for all of China’s big banks after a state-sanctioned lending binge during the global financial crunch.

And the rural lender says it is poised to capitalise on Chinese government efforts to boost economic growth in the country’s centre and west, which have missed out on the export-driven boom enjoyed by coastal regions.

“The county area business will be one of our key profit drivers,” Xiang told a news conference in Hong Kong. “(AgBank) is well positioned to capitalise on China’s next wave of growth.”

On Tuesday, AgBank said it planned to raise 13.1 billion US dollars from its Hong Kong IPO, with a price range of 2.88-3.48 Hong Kong dollars (37-44 US cents) a share.

The lender plans to raise 10.1 billion dollars from the Shanghai portion of the share sale, with a range of 2.52-2.68 yuan (37-39 US cents) a share.

The lower price in Shanghai has fostered doubts about mainland demand for the huge IPO after recent spasms of market volatility.

Some analysts consider AgBank to be the weakest of the country’s big banks, owing mainly to its burden of bad loans and the nature of its business lending to less affluent customers in rural China.

Analysts say the return on capital from rural loans is typically 20-30 percent less than that for loans in urban areas, as the size of the loans is generally smaller and monitoring costs higher.

Agbank’s prospectus said its bad debt ratio dropped from 4.32 percent in 2008 to 2.91 percent in 2009.

AgBank said it booked a profit of 65 billion yuan (9.56 billion US dollars) in 2009, up from 51.45 billion yuan in 2008. It forecasts a 2010 profit of 82.9 billion yuan.

Source: SGGP