The Industrial and Commercial Bank of China's (ICBC) capital adequacy ratio had reached 9.12 percent by the end of June, a level well above the internationally accepted standard of 8 percent, the bank said yesterday.

The ratio of non-performing loans nose-dived 4.58 percentage points from 19 percent at the beginning of the year, said China's largest commercial bank.

The improvements are the result of some bold measures that include capital replenishment and massive bad loan disposal.

Better asset quality is crucial for the bank at the moment because it is preparing for share-holding reorganization, an initial public stock offering and is negotiating with some large foreign financial institutions for the latter's strategic investments.

Restructuring "is pushing ahead steadily. We will try to register the Industrial and Commercial Bank of China Co Ltd in September or October," the bank said in a statement.

At least three international financial giants were reported to be in talks with ICBC over their strategic investments. They include the investment banks Credit Suisse First Boston, Goldman Sachs and German financial conglomerate Allianz.

However, the bank made just a brief reference to its work in bringing in strategic investors.

"Relative progress was achieved in the work of introducing strategic investors," it said.

The capital adequacy ratio of ICBC and the other major State banks - Bank of China (BOC), China Construction Bank (CCB), and the Agricultural Bank of China (ABC)- has long been under 8 percent.

Since last year, the country has taken action to bail out BOC and CCB, as it did with ICBC.

Schemes to beef up ABC are reported to be in the works.

ICBC received a US$15 billion capital injection from the central government in April.

After some small deals, the bank sold 246 billion yuan (US$30 billion) in bad assets in May.

At the end of June it transferred another 459 billion yuan (US$55 billion) in non-performing loans to the country's four major asset management companies.

As result, total capital topped 280 billion yuan (US$34 billion) by June 30.

In addition to recapitalization and bad assets sell-out, the banks have also used the issue of subordinate bonds as a way to boost their capital base.

ICBC said yesterday the preparatory work for subordinate bond issuance is progressing smoothly.

The first batch is expected to be floated very soon, it said in the statement.

Proceeds from subordinate bonds, which rank behind other liabilities but before capital in terms of claims on bank assets, are classified as non-core capital.

BOC, CCB and some smaller bank have issued a total of 150 billion yuan (US$18 billion) in subordinate bonds in the past two years.

ICBC posted 41.6 billion yuan (US$5 billion) in profits during the first six months of 2005, compared to 38.8 billion yuan (US$4.7 billion) during the corresponding period of last year.

By the end of June, its outstanding deposits stood at 5,386 billion yuan (US$648 billion). Outstanding loans totalled 3,112 billion yuan (US$375 billion).

External auditing of the bank, which is necessary for talks with strategic investors and for its listing, is expected to be completed next month, the statement said.

(China Daily July 15, 2005)