AgBank's so-so debut
By Zhang Fengming |
July 16, 2010, Friday
|
Print Edition
Print Edition
AGRICULTURAL Bank of China debuted on the Shanghai Stock Exchange yesterday with a mild rise as the world's could-be largest initial public offering hit a sluggish market.
The Beijing-based bank opened at 2.74 yuan (40 US cents) yesterday in Shanghai, up 2.2 percent from its issuing price.
The bank then dropped to an intra-day low of 2.69 yuan before ending at 2.70 yuan, up 0.75 percent. The benchmark Shanghai Composite Index lost 1.87 percent to 2,424.30 yesterday.
"We're relatively satisfied with the bank's opening performance," Zhang Yun, deputy chairman and president of the bank told a media briefing in Shanghai.
The lender had a smaller debut trading gain in Shanghai when compared with its four state-owned rivals, which rose at least 5.1 percent on their first trading day. There's no daily limit on the first trading day.
AgBank raked in US$19.2 billion in its dual-listing in Shanghai and Hong Kong. The bank could take in up to US$22.1 billion to surpass Industrial and Commercial Bank of China as the world's biggest initial public offering if it executes the over-allotment option.
AgBank is the last among the country's big-five state-owned banks to go public, following a three-step path of clearing its balance sheet, attracting overseas shareholders and then getting listed.
The bank will debut in Hong Kong today. Zhang declined to comment on his expectation of the Hong Kong shares performance.
Zhang, seen staring at the bank's pricing board at the Shanghai bourse, said he felt pressure - the pressure to create value for shareholders.
The lender has to book a daily income of 800 million yuan to make profits for the bank, he said.
Zhang said the bank doesn't have "a large-scale" job-cutting plan on its 440,000 head count. The bank has the biggest staff among its public rivals. It is also the biggest bank in China in terms of network.
AgBank's giant share offering is expected to stretch market liquidity, divert money away from stocks of rival banks and put other big listings on hold in the bumpy Shanghai market, analysts said.
The bank's yuan-backed A shares were nearly 10 times oversubscribed by retail investors, a low level when compared with rivals that debuted on a bullish market.
The benchmark Shanghai Composite Index has dropped 22 percent this year - the worst performer of the world's 10 biggest stock markets.
The IPO also coincided with a capital-raising spree by domestic rivals eager to replenish capital after they extended a record 9.6 trillion yuan in yuan-backed loans in 2009.
"A successful launch of AgBank's IPO would be credit positive for the bank," said Zhang Yi, a Moody's Investors Service senior analyst. "Being a public company will pressure the bank to improve its disclosure and increase its accountability."
The bank's core capital ratio is expected to grow to 10 percent with the IPO from 7.74 percent as the end of 2009.
Moody's on July 9 upgraded AgBank's stand-alone bank financial strength rating to D- from E+.
AgBank hopes to sell its vast network in rural areas as its unique competitive feature when compared with bigger rivals. The rural presence provides a potential high-growth driver, stable deposits, and lower funding cost than its peers.
However, rural lending has also been a source of high non-performing loans for the bank in the past, said Moody's Investors Service.
An Asian Banker research note said it sees the bank's deep rural connection as cause for worry because of lower disposable incomes among people there, limiting the bank's growth potential for county-level economies in the near future.
The Beijing-based bank opened at 2.74 yuan (40 US cents) yesterday in Shanghai, up 2.2 percent from its issuing price.
The bank then dropped to an intra-day low of 2.69 yuan before ending at 2.70 yuan, up 0.75 percent. The benchmark Shanghai Composite Index lost 1.87 percent to 2,424.30 yesterday.
"We're relatively satisfied with the bank's opening performance," Zhang Yun, deputy chairman and president of the bank told a media briefing in Shanghai.
The lender had a smaller debut trading gain in Shanghai when compared with its four state-owned rivals, which rose at least 5.1 percent on their first trading day. There's no daily limit on the first trading day.
AgBank raked in US$19.2 billion in its dual-listing in Shanghai and Hong Kong. The bank could take in up to US$22.1 billion to surpass Industrial and Commercial Bank of China as the world's biggest initial public offering if it executes the over-allotment option.
AgBank is the last among the country's big-five state-owned banks to go public, following a three-step path of clearing its balance sheet, attracting overseas shareholders and then getting listed.
The bank will debut in Hong Kong today. Zhang declined to comment on his expectation of the Hong Kong shares performance.
Zhang, seen staring at the bank's pricing board at the Shanghai bourse, said he felt pressure - the pressure to create value for shareholders.
The lender has to book a daily income of 800 million yuan to make profits for the bank, he said.
Zhang said the bank doesn't have "a large-scale" job-cutting plan on its 440,000 head count. The bank has the biggest staff among its public rivals. It is also the biggest bank in China in terms of network.
AgBank's giant share offering is expected to stretch market liquidity, divert money away from stocks of rival banks and put other big listings on hold in the bumpy Shanghai market, analysts said.
The bank's yuan-backed A shares were nearly 10 times oversubscribed by retail investors, a low level when compared with rivals that debuted on a bullish market.
The benchmark Shanghai Composite Index has dropped 22 percent this year - the worst performer of the world's 10 biggest stock markets.
The IPO also coincided with a capital-raising spree by domestic rivals eager to replenish capital after they extended a record 9.6 trillion yuan in yuan-backed loans in 2009.
"A successful launch of AgBank's IPO would be credit positive for the bank," said Zhang Yi, a Moody's Investors Service senior analyst. "Being a public company will pressure the bank to improve its disclosure and increase its accountability."
The bank's core capital ratio is expected to grow to 10 percent with the IPO from 7.74 percent as the end of 2009.
Moody's on July 9 upgraded AgBank's stand-alone bank financial strength rating to D- from E+.
AgBank hopes to sell its vast network in rural areas as its unique competitive feature when compared with bigger rivals. The rural presence provides a potential high-growth driver, stable deposits, and lower funding cost than its peers.
However, rural lending has also been a source of high non-performing loans for the bank in the past, said Moody's Investors Service.
An Asian Banker research note said it sees the bank's deep rural connection as cause for worry because of lower disposable incomes among people there, limiting the bank's growth potential for county-level economies in the near future.
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