Agricultural Bank of China’s $19.3bn IPO crossed the finish line on July 16 after a hectic three-month sprint, notching up modest gains in its Hong Kong debut amid concerns about valuations and glut of bank share sales.

Industrial & Commercial Bank of China and Bank of China both soared 15 percent on their Hong Kong openings after listing in 2006. Founded in 1951 by Mao Zedong as the rural unit of the central bank, AgBank is the last of China’s “Big Four” state-owned lenders to list its shares.

“Even though the response from the retail side was a bit disappointing, it was well received by institutions, so this was expected,” said Ben Kwong, the chief operating officer of securities firm KGI Asia Limited. “The chances of further upside will be relatively small.”

Kwong’s view on lack of upside was shared by several analysts and traders, aware that AgBank, historically the weakest of China’s top four banks, is going public during a sliding stock market.

Still, the lender pushed ahead in a down market, published figures that forecast a profit and a pared down bad loan book.

Hong Kong’s Hang Seng is down about eight percent in the three months since the AgBank IPO kicked off, while the Shanghai Composite has shed almost a quarter.

AgBank’s IPO could still rise to a world record $22.1bn if additional shares set aside in an over-allotment option are sold in the coming weeks. Should the stock come under pressure in Shanghai and Hong Kong, underwriters are expected to purchase shares to help stabilise the price.

Its soft debut bodes ill for upcoming fundraisings by peers including ICBC and BoC, who are returning to capital markets to raise tens of billions of dollars to supplement their capital.

Who’s who
Top executives at the Beijing-based bank gave a crystal model of the company’s headquarters to the Hong Kong Stock Exchange.

Hong Kong’s top legislators, including CEO Donald Tsang, were on hand to watch, along with CICC investment banking head honcho Levin Zhu, Deutsche Bank CEO Josef Ackermann and other top executives at the companies involved.

Also present were the top investment bankers involved in the three-month process of selling the offering to mutual funds and arranging the cornerstone investors which accounted for $5.45bn of the Hong Kong IPO.

According to the bankers involved, the deal was remarkably quick but gruelling.

AgBank’s Vice President Pan Gongsheng is the man credited with leading the IPO process, having led ICBC in its record $21.9bn float in 2006.

Pan is known for running a rigorous deal, and he didn’t disappoint this time around. His team kept attendance records and daily reports on the performance of the 10 banks handling the IPO.

Valuation concerns
AgBank’s Chairman Xiang Junbo, a war hero and award winning script writer, was relaxed in the morning, eating breakfast alone at Hong Kong’s Shangri-La hotel before the listing.

Wearing a red tie, he only took three questions from the reporters at the listing ceremony, which disappointed the local media gathered there.

“After this listing, the bank will enhance its competitiveness in the market and its risk management,” he said.

 The timid start to AgBank’s life as a public company is attributed to several factors.

One is that AgBank’s IPO price was set at a slight premium to Bank of China in terms of price to book value. That may allow AgBank to raise the most money ever through the IPO, but some fund managers viewed the stock expensive, given that the bank was historically the weakest of China’s top four lenders.

With almost 24,000 branches and some 441,000 employees, AgBank has almost double the staff and twice as many outlets as BoC, but a similar asset base.

The offering price represents 1.65 times AgBank’s forward book value, just above BoC, but below that of ICBC and China Construction Bank.

China International Capital Corp (CICC), Deutsche Bank, Goldman Sachs, JPMorgan, Macquarie and Morgan Stanley are the banks handling the Hong Kong offering, along with AgBank’s own securities unit. CICC, Goldman and Morgan Stanley held the top role.

CICC, Citic Securities, Galaxy and Guotai Junan Securities handled the Shanghai portion.

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