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Banking industry

Agricultural Bank of China's Record-Breaking $23.2bn Share Sale

Strategic Insights

— 1 min read

The Agricultural Bank of China, the last of the country's "big four" banks to go public, has kicked off a share sale worth a world-record $23.2bn as China seeks to foster economic growth in its rural regions. The bank plans to list its shares in Hong Kong and Shanghai next month, with initial public offering (IPO) expected to surpass the $22bn record set by Industrial and Commercial Bank of China in 2006. Backed by investors such as Qatar's sovereign wealth fund and US food giant Archer Daniels Midland, AgBank aims to capitalize on Chinese government efforts to boost economic growth in the country's centre and west.

Key Takeaways:

  • AgBank seeks to raise $23.2bn from its record-breaking share sale, with $13.1bn from the Hong Kong IPO and $10.1bn from the Shanghai portion.
  • The bank has worked to cut its bad-debt load, reducing its ratio from 4.32% in 2008 to 2.91% in 2009.
  • AgBank's rural lending model faces challenges, with a typical return on capital 20-30% lower than urban loan returns, due to smaller loan sizes and higher monitoring costs.
  • The bank made a profit of 65 billion yuan in 2009, up from 51.45 billion yuan in 2008, and forecasts a 2010 profit of 82.9 billion yuan.
  • AgBank's initial public offering (IPO) is expected to surpass the $22bn record set by Industrial and Commercial Bank of China in 2006.
  • The bank has secured support from investors such as Qatar's sovereign wealth fund, Standard Chartered bank, and US food giant Archer Daniels Midland.
  • AgBank's share sale includes a price range of 37-44 US cents a share for the Hong Kong IPO and 37-39 US cents a share for the Shanghai portion.

Statistics:

  • $23.2bn: The world-record amount raised from AgBank's share sale.
  • $13.1bn: The amount AgBank seeks to raise from the Hong Kong IPO.
  • $10.1bn: The amount AgBank seeks to raise from the Shanghai portion of the share sale.
  • 2.91%: AgBank's bad-debt ratio in 2009, down from 4.32% in 2008.
  • 65 billion yuan: AgBank's profit in 2009.
  • 51.45 billion yuan: AgBank's profit in 2008.
  • 82.9 billion yuan: AgBank's forecasted 2010 profit.

Sources:

  • Aljazeera.net (no date provided)
  • Syndigate.info (no date provided)

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