Agricultural Bank of China Ltd. boosted the size of its initial public offering to about $20.8 billion after selling more stock in Hong Kong, taking it closer to becoming the largest first-time share sale.
China’s largest lender by customers sold a further 3.81 billion shares at the IPO price of HK$3.20, raising HK$12.2 billion ($1.57 billion), it said in a statement today. The IPO raised $19.2 billion in Shanghai and Hong Kong before the over allotment.
The sale may overtake Industrial & Commercial Bank of China Ltd.’s $21.9 billion IPO in 2006 if Agricultural Bank exercises an option to expand the Shanghai offering. China’s five-largest banks are raising more than $60 billion to boost capital after record lending in 2009, with ICBC announcing plans for a $6.6 billion rights offering yesterday.
Chinese banks “are required by regulators to replenish capital probably because of last year’s big push to extend credit to stimulate the economy,” said Francis Lun, general manager at Fulbright Securities Ltd. “Compared to European banks, Chinese lenders are actually very well capitalized.”
In Hong Kong, Agricultural Bank shares fell as much as 1.4 percent to HK$3.53. Including today, the stock has climbed 8.9 percent since its July 16 debut, while in Shanghai, where the shares started trading a day earlier, it has gained 4.8 percent.
Agricultural Bank is the last major Chinese bank to go public, wrapping up a decade-long overhaul of the nation’s banking industry that cost an estimated $650 billion.
Chinese Farmers
The IPO of Agricultural Bank, once the weakest lender in China, makes the nation home to four of the world’s 10 biggest banks by market value, half a decade after the country’s first major state-owned lender went public.
Agricultural Bank, established to serve the country’s farmers and less affluent rural areas, boosted profit by 26 percent to 65 billion yuan ($9.6 billion) last year, and forecasts net income will rise to at least 82.9 billion yuan in 2010, according to its prospectus.
ICBC, the world’s largest lender by market value, said yesterday it plans to raise as much as 45 billion yuan to replenish capital in a rights offer. The bank will sell as many as 0.6 shares for every 10 held, or up to 15.06 billion shares in Shanghai and 4.98 billion in Hong Kong.
ICBC’s offer adds to plans from other banks to raise funds after a record $1.4 trillion in lending last year put pressure on capital levels.
Facing Pressure
ICBC, China Construction Bank Corp., Bank of China Ltd. and Bank of Communications Ltd. will face a capital shortfall of 480 billion yuan following new requirements for financial strength, ICBC President Yang Kaisheng wrote in an article published in the 21st Century Business Herald in April.
“Chinese banks may start to face some real pressure from rising non-performing loans as early as August and September,” said James Liu, a Shanghai-based analyst at Sinopac Financial Holdings Co. “Raising capital now may also be a preparation for that.”
Construction Bank, the world’s second-largest lender by market value, last month won shareholder approval for a plan to raise as much as 75 billion yuan in a rights offer.
China Everbright Bank Co., which has been planning an IPO since 2008, said last week it plans to sell as many as 6.1 billion shares in Shanghai in an initial public offering that analysts have estimated may raise as much as 18 billion yuan.
AgriBank Debut
Agricultural Bank rose 2.2 percent on its debut in Hong Kong on July 16, after posting the smallest first-day gain among major rivals in Shanghai a day earlier.
The debut followed a drop in Hong Kong’s benchmark index this year. That contrasts with the earlier IPOs of its four- largest local rivals, which went public in Hong Kong in 2005 and 2006 amid a five-year bull market. The lender also had to contend with investor concern that a slowdown in China’s property market might saddle banks with bad loans.
China’s economic growth slowed to 10.3 percent in the second quarter from 11.9 percent in the previous three months. The country’s policy makers are grappling with the risks posed by last year’s credit boom that fueled the nation’s comeback from the global recession.
China International Capital Corp., Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Macquarie Group Ltd. and Morgan Stanley were hired to arrange the Hong Kong portion of the IPO, along with Agricultural Bank’s investment- banking unit.
CICC, Citic Securities Co., China Galaxy Securities Co. and Guotai Junan Securities Co. are managing Agricultural Bank’s yuan-denominated A-share offering.
--Luo Jun, Dingmin Zhang, with assistance from Judy Chen in Shanghai. Editors: Joost Akkermans, Andreea Papuc
To contact Bloomberg News staff of this story: Luo Jun in Shanghai at +8621-6104-7021 or jluo6@bloomberg.net.