Agricultural Bank of China Sets IPO Record as Size Raised to $22.1 Billion

Agricultural Bank of China Ltd. boosted the size of its initial public offering to $22.1 billion after selling more stock in Shanghai, making it the world’s largest first-time share sale.

China’s biggest lender by customers sold a further 3.34 billion shares at the IPO price of 2.68 yuan apiece, it said in a stock exchange filing yesterday. That increased the Shanghai portion of the lender’s IPO to 68.5 billion yuan ($10 billion).

The expansion propels Agricultural Bank’s IPO past Industrial and Commercial Bank of China Ltd.’s $21.9 billion sale in 2006 to become the world’s largest. The bank raised $20.8 billion selling shares in Hong Kong and Shanghai last month as Chairman Xiang Junbo braved a stock-market rout that drove the Chinese benchmark index to a 15-month low.

“In hindsight, I would say this IPO was completed smoothly in a very turbulent market, so management and underwriters deserve a pat on the back,” said She Minhua, a Shanghai-based analyst at Haitong Securities Co. “Going forward, concerns of slowing economy and asset quality may weigh on banking stocks.”

Agricultural Bank rose 0.7 percent to 2.71 yuan at 10:18 a.m. in Shanghai. The stock posted the smallest first-day on its July 15 debut among the nine lenders that have sold shares in the city in the past four years. In Hong Kong, where the bank started trading a day later, the shares have advanced 5.9 percent from the IPO price of HK$3.20. Domestic investors in China ordered more than 10 times the stock available to them.

Photographer: Jerome Favre/Bloomberg

Agricultural Bank of China Chairman Xiang Junbo. Close

Agricultural Bank of China Chairman Xiang Junbo.

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Photographer: Jerome Favre/Bloomberg

Agricultural Bank of China Chairman Xiang Junbo.

Banks’ Fundraising

The Beijing-based lender is the last major Chinese bank to sell shares to the public, wrapping up a decade-long overhaul of the nation’s banking industry that cost the government an estimated $650 billion in bailouts and restructuring programs.

China’s five biggest banks intend to raise a total of $63 billion this year by selling bonds and shares to replenish capital eroded by a record $1.4 trillion of new loans last year.

China, home to the worst-performing benchmark Asian stock index this year, may be the world’s biggest IPO market in 2010 as companies are likely to raise 500 billion yuan in Shanghai and Shenzhen, PricewaterhouseCoopers forecast last month.

Companies raised 215.3 billion yuan from IPOs in the first half, the highest in a decade for China, according to data compiled by Bloomberg.

Agricultural Bank is the second company to exercise a so- called greenshoe option in its China IPO, after bigger rival ICBC. The greenshoe option is an over-allotment provision that allows an underwriter to increase the number of shares issued within 30 days of the start of trading when there is excess demand for the offering.

Rural Roots

China Everbright Bank Co., which raised 18.9 billion yuan in its first-time sale last week, also authorized underwriters to exercise the option. Shares of Everbright Bank are scheduled to debut in Shanghai on Aug. 18.

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 last year, and forecasts net income will rise to at least 82.9 billion yuan in 2010, according to its prospectus.

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, which fueled the nation’s recovery from the global recession.

Agricultural Bank’s initial share sale raised $19.2 billion in Shanghai and Hong Kong last month. The lender on July 29 exercised the full over-allotment option on the Hong Kong portion of the IPO, raising a further $1.57 billion.

China International Capital Corp., Citic Securities Co., China Galaxy Securities Co. and Guotai Junan Securities Co. managed Agricultural Bank’s yuan-denominated A-share offering.

--Luo Jun, Eva Woo, Chua Kong Ho, with assistance from Tom Kohn in Hong Kong. Editors: Mark McCord, Dick Schumacher.

To contact Bloomberg News staff of this story: Luo Jun in Shanghai at +8621-6104-7021 or jluo6@bloomberg.net.

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