Bank of China (BOC), the mainland's second-largest lender, said its imminent Hong Kong listing will help enhance its efficiency and transparency and improve its profit margin.

 

Calling it a milestone step in the bank's history, the BOC expects the listing will help it grow comprehensively, said Xiao Gang, chairman of the BOC, at a video conference in Hong Kong yesterday.

 

He also said the bank's tax rate would fall after the listing, without explaining at length.

 

Saying the listing of the bank in Hong Kong opens another exciting chapter of the bank's hundred-year history, he expects the BOC's tax rate to slide down to 35 percent or even lower after its listing in June, from 40 percent in 2005.

 

"We currently have a higher tax rate than other top banks on the mainland, but after the listing our tax rate should fall to 35 percent or even lower."

 

"As the oldest and one of the best-known commercial banks in China, we have an extensive overseas branch network, a solid customer base and a universal banking platform," Xiao said. "We are a leader in non-interest income and foreign exchange business with strong product innovation capabilities."

 

The BOC, the top foreign exchange lender on the mainland, is selling 25.57 billion shares, or 10.5 percent of its enlarged share capital, at a price range between HK$2.5 (30 US cents) and HK$3 (37.5 US cents) per share.

 

The deal could amount to as much as US$9.8 billion. The figure would be bigger if an over-allotment option is considered.

 

The BOC plans to start trading its shares in Hong Kong on June 1 after pricing the deal on May 24.

 

After the Hong Kong listing, it will seek a domestic float on the yuan-dominated A-share market "as soon as possible."

 

The mainland recently resumed share sales in its bourses after a one-year ban.

 

Despite the recent dramatic fluctuations in Hong Kong's stock market, the bank said investors would rush to buy its shares, which have already received an overwhelming response from institutional investors.

 

Top executives from the BOC have gone to Europe and the west coast of the United States to conduct roadshows for the IPO, which could be the biggest IPO in six years globally.

 

The BOC received institutional orders worth at least HK$72.86 billion on May 11, the first day it opened its orders book.

 

And the public offering for retail investors, which kicks off today, is expected to receive orders worth HK$200 billion (US$25 billion).

 

Mainland lenders have been in eager pursuit of going public in Hong Kong, in part demonstrating their improvement in corporate governance and a lift in overall strength.

 

The mainland's third- and fifth-largest lenders, the China Construction Bank and the Bank of Communications, floated their shares in Hong Kong last year. Their shares have grown about 53 per cent and 108 per cent respectively.

 

Another giant, the Industrial and Commercial Bank of China, the mainland's top bank, will offer US$12 billion worth of shares later this year.

 

Other smaller players such as Minsheng Bank, the Industrial Bank and the China CITIC Bank are reported to be busy with their Hong Kong listing processes.

 

(China Daily May 18, 2006)