ICBC debut pays dividends for bank's stakeholders
CHINA'S government agencies and overseas banks saw the value of their stakes in the mainland's largest bank jump by more than US$80 billion after the lender went public yesterday.
The handsome returns will likely give fresh support to a frantic investment spree by foreign investors in mainland financial institutions but further strides might need more patience, analysts said.
Hong Kong-traded stock of Industrial & Commercial Bank of China closed up 14.7 percent yesterday at HK$3.52 (45 US cents), making its two biggest state investors own shares valued at US$107.2 billion.
The amount compared with 248 billion yuan (US$31.4 billion) Central Huijin Investment Co and the Ministry of Finance paid for control of the bank last October when it was revamped into a shareholding venture.
Before the trading, the duo, which collectively holds 72.4 percent of ICBC, had already charted a profit of 11 billion yuan by selling 10.4 billion of their shares to the public.
"The bank's listing has rewarded state shareholders with hefty gains," said Wu Ke, a Zhongtian Investment Consulting Co analyst.
"But the profits were justified as the government has spent billions of yuan to bail out the lender and wipe off its bad debt."
The central government has dished out a one-time bailout of US$15 billion to ICBC, written off its bad assets of 246 billion yuan and helped it dispose of bad loans of 459 billion yuan, according to industry data.
Elsewhere, Goldman Sachs Group Inc, Allianz AG and American Express Co, which in May paid a collective US$3.78 billion for 8.89 percent of ICBC, logged a gain of US$4.73 billion in their stock face value.
Goldman, which holds less than six percent, had the value of its holding propped up to US$5.81 billion based on yesterday's close, compared with its investment of US$2.58 billion.
Allianz gained US$1.25 billion in stake value in ICBC while American Express saw a rise of US$250 million.
The mainland's social-security fund, which bought a 4.99 percent stake the bank for 18.03 billion yuan in June, saw the value of its holdings boosted to HK$50.4 billion.
Five mainland banks, including ICBC, the second-ranked Bank of China and the third biggest China Construction Bank, have listed shares in Hong Kong in the past two years.
The central government expects public listings can equip the once-shaky lenders with overseas expertise and help them reap much-needed capital to expand as the sector is set to be fully opened to foreign rivals by the year's end.
Lenders' strong stock performance has not only benefited government investors with rosy returns but also continued to spur overseas interest to tap the mainland's financial sector.
But as most of the biggest lenders have already taken on foreigners as strategic investors, few chances were left for deals with huge potential profits as the nation still limits overseas involvement in the capital market.
"It has been proved that investing in banks was right for overseas financial firms seeking to expand in the mainland," said Wu Zhiguo, a Guohai Securities Co analyst.
"For those failing to seize the banking chance, grabbing a slice of the securities industry is one they can't afford to miss although the way seems tougher."