Agricultural Bank steps closer to IPO

By He Shan
0 CommentsPrint E-mail, May 24, 2010
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Despite a weak market, Agricultural Bank of China, the smallest of China's big four state-owned lenders, will hold an assessment meeting Tuesday on what analysts believe could be the largest initial public offering ever, China Business News reported.

The bank, the last of the big four banks to attempt a listing, is pushing ahead with a long-expected listing on the Shanghai and Hong Kong exchanges, possibly before the end of the third quarter.

The assessment meeting will decide when to submit a plan to the China Securities Regulatory Commission. According to people close to the matter, the bank will submit a plan Friday if things go smoothly.

"We are working on the offering prospectus," said Pan Gongsheng, vice governor of the bank handling the IPO, adding that it will be out soon. He declined to reveal the exact time.

At the same time, the bank is studying the sentiment and appetite of investors in poor market conditions.

Analysts say the bank will likely pass the regulator's assessment but its main challenge is the weak market. An IPO now would result in a much lower valuation than forecasts.

"If it delays the IPO, there will be more uncertainties because it is still not sure when the market will turn good," said Li Yongsen, a professor at Renmin University. "Since the bank has been seeking an IPO for many years, it is really eager to be listed as soon as possible."

The lender is rumored to set the price-to-book ratio, a measure of bank valuations, at around 2, which analysts say is a little overpriced. Most listed banks' current price-to-book ratio is less than 2.

But considering that the rural lending ABC focuses on will become a profitable venture with the economic development of rural areas, the P/B ratio can be considered reasonable, other analysts say.

By September last year, ABC had total assets of 8.6 trillion yuan and made a net profit of 49.7 billion yuan, according to its quarterly report.

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