The Industrial Bank Co Ltd is expected to be one of the first banks to issue A shares in the domestic securities market after the government lifted the year-long ban on initial public offerings (IPOs).

 

Li Renjie, president of the joint stock commercial bank, said yesterday it is likely to be among the first batch of banks to launch IPOs in the domestic bourse since the government resumed IPOs last week.

 

He gave no details of when shares might be issued but said the bank passed IPO application materials to the China Securities Regulatory Commission at the end of last year. Li was speaking yesterday at the 2006 Financial Summit organized by the Ninth China Beijing Hi-tech Expo.

 

Li did not mention how many A shares could be issued, but when asked whether the figure would exceed 10 billon yuan (US$1.25 billion), he said "probably". The bank, based in Fuzhou, the capital city of East China's Fujian Province, is a joint venture between the Fujian government and several shareholders. It had total equity of 12.115 billion yuan (US$1.514 billion) and an 8.18 percent capital adequacy ratio at the end of 2005.

 

China already has five commercial banks which have issued A shares on the domestic bourse China Merchants Bank, China Minsheng Banking Corp, China Huaxia Bank, Shanghai Pudong Development Bank and Shenzhen Development Bank.

 

Their annual financial reports showed net profits rose well in 2005.

 

Statistics from domestic financial magazine the Banker showed that until the third quarter of 2005, 10 of China's 14 commercial banks' capital adequacy ratios had reached the 8 percent minimum requirement. (Four of the 14 are State-owned; the other 10 are joint venture commercial banks, of which the Industrial Bank is one.)

 

However, the statistics also showed that although the capital adequacy ratio of two banks had reached 11.2 percent and 13.57 percent respectively, other banks' ratios were only just above 8 percent.

 

Even though joint venture banks tend to show better financial results and are more competitive, they may face more problems than State-owned banks due to a lack of capital sources, the Banker said.

 

According to Li, the bank thought about issuing H shares in Hong Kong. He also said the bank would cooperate with small financial institutions.

 

The Industrial Bank is one of the 10 major national joint stock commercial banks in China. Formerly named the Fujian Industrial Bank, it was founded in 1998. It reported outstanding deposits of 350 billion yuan (US$43.75 billion) and outstanding loans of 243 billion yuan (US$30.37 billion) at the end of 2005.

 

The Industrial Bank doubled its gross assets to 474 billion yuan (US$59.25 billion) in late 2003 when it introduced three foreign strategic investors Hang Seng Bank of Hong Kong, International Finance Corporation and the Government of Singapore Investment Corporation involving an equity expansion of up to 2.697 billion yuan (US$337.1 million).

 

(China Daily May 25, 2006)