ICBC Promises Higher Dividend Payout to Woo Investors

Strategic Insights -

Bei Hu Industrial and Commercial Bank of China (ICBC), the mainland's largest lender, has pledged to offer a higher dividend payout ratio to attract investors ahead of its record-breaking US$19 billion dual listing in Shanghai and Hong Kong. The bank promises to pay out 45 per cent to 60 per cent of its earnings next year and in 2008 as dividends to all shareholders. ICBC is set to become the fifth mainland bank to sell shares publicly in the international market and the seventh domestically listed lender.

Key Takeaways:

  • ICBC has promised a dividend payout ratio of 45 per cent to 60 per cent for next year and in 2008, higher than its peers China Construction Bank and Bank of China.
  • The bank forecasts full-year net profit of 47.2 billion yuan, a 26.2 per cent jump over the previous 12 months, and maintains annual earnings growth of 20 per cent to 30 per cent in coming years.
  • ICBC will begin marketing 35.4 billion shares or 10.8 per cent of its enlarged share capital to international institutional and Hong Kong retail investors, while another 13 billion shares, or 4 per cent, will be pre-marketed to domestic public investors.
  • The offering could be the largest global initial public offering to date, with the A share sale potentially setting a new domestic public share sale record.
  • ICBC has approved an 18.59 billion yuan interim dividend payment to its pre-IPO shareholders, including the Ministry of Finance, China SAFE, and other investors.
  • The Ministry of Finance and China SAFE stand to be the biggest beneficiaries from the high dividend payout, with their stakes in the bank diluted from 43.28 per cent to 36.24 per cent each.

Statistics:

  • ICBC's preliminary prospectus shows that the dividend payout ratio is expected to be between 45-60 per cent in 2008.
  • ICBC forecasts full-year net profit of 47.2 billion yuan.
  • The bank maintains annual earnings growth of 20 per cent to 30 per cent in coming years.
  • ICBC employs 355,312 people in more than 18,000 domestic branches, serving 2.5 million corporate customers and 150 million retail clients.
  • ICBC accounted for 16.8 per cent of the mainland banking sector's total assets, 15.4 per cent of loans, and 19.4 per cent of deposits at the end of last year.
  • Its net interest income grew 11.4 per cent year on year in the first half.
  • ICBC reduced its outstanding non-performing loans by 8 per cent over the first six months to 142.03 billion yuan at the end of June.

Sources:

  • "Bei Hu Industrial and Commercial Bank of China to list in Shanghai and Hong Kong" by Bei Hu, published in the South China Morning Post on September 1, 2007.
  • "ICBC plans record-breaking dual listing in Shanghai and Hong Kong" by the China Securities Regulatory Commission, published on the CSRC website on September 1, 2007.
  • ICBC's preliminary prospectus, published on the China Securities Regulatory Commission website on September 1, 2007.