The Bank of China and the China Construction Bank, two of the country's largest four state-owned commercial banks, are planning for public listing at overseas stock exchanges.
The China Construction Bank hopes to be listed at the Hong Kong and New York bourses in 2004, garnering up to US$10 billion and becoming the largest listed company in the world for the year, the China News Service reported on Thursday.
The Bank of China planned to get listed in 2005, its governor Xiao Gang told the Shanghai Securities Post.
At the end of 2003, the Chinese central government injected US$45 billion of foreign reserve into the two banks, US$22.5 billion apiece, to activate the business performance of the two state banks.
Fund inflow from the state coffers will enable the capital adequacy ratio of the two banks to rise to accord with the 8 percent standard, set by the International Clearing Bank. And the NPL (non-performing loan) ratio will drop to below 5 percent, economists said.
Xiao Gang said that the Bank of China will go public listed as a whole, which will guarantee business transparency, and at the same time, decrease the relative procedure and bookwork that may erupt from spin-off.
Xiao announced that the US$22.5 billion fund his bank received last December won't be changed into RMB and won't be used for canceling bad debts. The bank will use parts of the fund to purchase some bonds that have higher value in the world market and get reasonable market repayments while ensuring the fund's safety.
The China Construction Bank indicated that its listed subsidiary would leave most of its bad debt and US$22.5 billion capital injection in the hands of parent company. A bank official said that the funds generated from listing will mainly be used to replenish the bank's capital reserve and speed up its business scope.
Sources said that the construction bank will invite the China International Finance, Morgan Stanley and Citigroup Global Markets Limited as its stock listing sponsors, while HSBC may act as its financial consultant.
The bank would use part of a recent injection of US$22.5 billion from the government's foreign reserves to buy international bonds with relatively higher credit ratings, to gain reasonable returns to ensure this portion of funds was secure, said Xiao.
For years, money in China's state banks was used to prop up failing state companies, leaving institutions like the Bank of China with a mountain of bad loans. China's commitment to the World Trade Organization to open its banking sector to foreign competition by 2006 has put new urgency into bank reform.
The State Council has selected the Bank of China (BOC) and the China Construction Bank for pilot reform as joint-stock banks. After the reform, the two banks would become modern banking companies, with sufficient capital, strict internal controls, safe operations, good service and good economic returns.
In 2003, the BOC reported a profit of over 57 billion yuan (US$6.89 billion), a rise of about 4.76 billion yuan (US$576 million) or 9.11 percent over the previous year.
Last year, the asset quality of the BOC greatly improved and the ratio of non-performing loans fell by 6.45 percentage points over the end of 2002, to 15.92 percent.
(China Daily January 31, 2004)