AGRICULTURAL Bank of China may struggle to get the kind of valuation it wants as it gears up to launch the world’s biggest IPO into a market that has slumped by a fifth in just six weeks.
China’s market drop is one of several factors prompting potential investors to query whether AgBank, China’s fourth-biggest lender by assets, is worth the 1.6 times book value being bandied around in the market.
The bank, whose 350m customer base is bigger than the population of the United States, is expected to open pre-marketing of its roughly $30bn initial public offering within the next week, aiming to list its A-shares in Shanghai on 15 July, and its Hong Kong H-shares a day later, according to sources, one of whom said the bank would seek Hong Kong listing committee approval on 10 June. Hong Kong’s market is down 11 per cent since mid-April.
It is thought AgBank could cut the size of the IPO if markets remain volatile, citing a source close to the bank. Beijing-based AgBank’s big domestic rivals trade at near or above 1.6 times book value.
AgBank has been seen as the weakest of China’s Big Four lenders, with limited growth potential and big exposure to risky assets such as local government infrastructure projects.
The company is going public to complete Beijing’s mission of listing its top banks, and to raise money at a time when China’s major financial groups are boosting capital ratios after a lending spree.
Chinese media have said AgBank plans to sell 12-18 per cent of itself, a fairly normal chunk given the size of the offering.
City A.M. Reporter