HONG KONG, Oct 20 (Reuters) - China Construction Bank raised US$8 billion in the world's largest IPO this year, sources close to the deal said on Thursday, as solid investor demand put the issue near the top end of expectations.
The initial public offering by China's third-largest lender was the country's largest to date and surpassed the previous largest IPO this year -- US$5.5 billion raised in July by Gaz de France (GAZ.PA: Quote, Profile, Research) .
CCB, which operates China's second-largest branch network and has 145 million active retail accounts, attracted about 9.5 times more shares than offered as investors clamoured for a piece of China's nine-plus percent economic growth.
CCB shares will start trading in Hong Kong on Oct. 27.
CCB sold 26.486 billion shares, or 12 percent of its enlarged share capital, at HK$2.35 a share. The IPO price was near the top of an indicated price range of between HK$1.90 and HK$2.40.
The IPO values the country's top property lender at US$66.5 billion, making it the third-most valuable bank in Asia after Japan's Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research) and Mizuho Financial Group (8411.T: Quote, Profile, Research) .
The IPO price represents 1.96 times China Construction's book value and 13 times expected earnings per share of HK$0.18. By comparison, smaller mainland rival Bank of Communications (3328.HK: Quote, Profile, Research) trades at 2.2 times book and 19.4 times 2005 earnings. On average, Asian banks excluding those in China and Japan trade at 1.67 times 2005 book.
Chinese banks are plagued by bad debts accumulated over decades of state-directed lending, but Beijing has injected about 3.3 trillion yuan ($408 billion) to clean up CCB and its rivals including Bank of China [BOC.UL] and Industrial and Commercial Bank of China [ICBC.UL], which plans to list in 2006.
SOLID DEMAND
The retail portion of the IPO was lifted to 7.5 percent from 5 percent as small investors applied for about 42 times the shares initially earmarked, sources close to the deal said.
Institutional investors, including Hong Kong tycoons and Chinese insurers, placed orders about US$59 billion.
Bank of America (BAC.N: Quote, Profile, Research) and Singapore government investment agency Temasek Holdings [TEM.UL] bought a combined $1.5 billion worth of CCB shares in the IPO.
In June, CCB sold a 9 percent stake to Bank of America, the second-largest U.S. bank, at 1.15 times 2004 book value. Bank of America has the option to increase its stake in CCB to 19.9 percent.
Morgan Stanley (MWD.N: Quote, Profile, Research) , China International Capital Corp. and Credit Suisse First Boston (CSGN.VX: Quote, Profile, Research) were the deal's joint bookrunners.
CCB, led by former foreign exchange head Guo Shuqing, has cut a quarter of its staff and a third of its branches since 2002 to improve efficiency. The bank is also tightening control over its 14,250 branches.
Guo had said personal banking and fee-based business would be the main growth drivers for the bank.
CCB's cost-to-income has declined 11 percentage points to 39 percent and its return on assets was boosted to 1.3 percent in 2004, the highest among Chinese banks.
The lender's non-performing loan (NPL) ratio has fallen to 3.9 percent versus the average 4.4 percent for mainland-listed banks.
(US$1=HK$7.8=8.09 yuan)
AI
