Agricultural Bank of China Is Said to Aim for Initial Public Offer by July

Agricultural Bank of China Ltd., the nation’s third-largest lender by assets plans to attempt what could be the biggest initial public offering in history by July, three people with knowledge of the matter said.

The company this week picked 10 banks, including China International Capital Corp., Deutsche Bank AG and Goldman Sachs Group Inc., to manage stock sales in Hong Kong and Shanghai. CICC will oversee coordination between banks involved in both parts of the IPO, the people said, declining to be identified as the information is private.

Agricultural Bank will raise no less than $30 billion, the Beijing Times said today, citing Vice President Pan Gongsheng. The lender will compete for capital with its four largest local rivals, which are planning to garner about a combined 180 billion yuan ($26 billion) through share and bond sales.

“It really could be just the tip of the iceberg as far as what other potential growth initiatives are going to be done in the Chinese market,” said David Menlow, president of Millburn, New Jersey-based IPOfinancial.com. “Getting into this market has always been a primary directive for any of the investment banks here.”

JPMorgan Chase & Co., Macquarie Group Ltd. and Morgan Stanley are also helping manage the Hong Kong portion of the IPO. CICC, Citic Securities Co., China Galaxy Securities Co. and Guotai Junan Securities Co. will manage the bank’s yuan- denominated A-share offering. Agricultural Bank’s investment- banking unit will also help with the Hong Kong sale.

Topping ICBC?

The IPO underscores the growing importance to investment banks of the China and Hong Kong bourses, which together accounted for 16 percent of the world’s equity offerings last year, according to data compiled by Bloomberg.

At $30 billion, it would be the world’s biggest IPO, topping the $22 billion raised by Industrial & Commercial Bank of China Ltd. in 2006.

Agricultural Bank, with more than 24,000 branches nationwide and serving some 350 million customers, is the last of the nation’s four biggest banks to go through a state-led restructuring. It received a $19 billion cash injection from the government and removed 800 billion yuan of non-performing loans from its balance sheet in 2008.

Agricultural Bank’s restructuring was complicated by its focus on China’s rural areas, where development and improvements in living standards have lagged behind coastal regions since the government introduced economic reforms three decades ago.

Capital Needs

ICBC, Bank of China Ltd. and Bank of Communications Ltd. have announced plans to raise a combined 107 billion yuan this year after a credit boom drained capital, according to data compiled by Bloomberg. China Construction Bank Corp. plans to raise about 75 billion yuan of capital through share sales this year, two people with direct knowledge of the matter said earlier this month.

China’s four biggest publicly traded banks need at least 480 billion yuan of capital to fund loan growth and comply with regulatory requirements for financial strength over the next five years, ICBC President Yang Kaisheng wrote in an article published in the 21st Century Business Herald on April 13.

Agricultural Bank was the first commercial bank established in the People’s Republic of China in 1951 and the first specialized bank set up after the reform and opening-up of the country in February 1979, according to its English-language Web site.

The bank raised 50 billion yuan last year in the nation’s biggest corporate bond sale to boost capital.

For Related News and Information: Hong Kong IPOs: TNI HK INI <GO> List of equity offerings: ECDR <GO> Top corporate finance news: DTOP <GO>

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