The Agricultural Bank of China (ABC) will get a US$19 billion capital injection from a unit of the country's Sovereign Wealth Fund, according to a vice president with the lender on Wednesday.
Central Huijin Investment Ltd., a unit of the US$200 billion China Investment Corp., will inject into the bank US dollars equal to 130 billion yuan (US$19.01 billion), ABC vice president Pan Gongsheng told a press conference.
Central Huijin Investment and the Ministry of Finance will each hold a 50 percent stake in ABC, the least profitable of the four biggest state-owned commercial banks.
Technical preparation for the lender's initial public offering (IP0) would be finished in the second half of 2009. He added a specific timetable and place for the IPO hadn't been decided, but the Shanghai and the Hong Kong markets would be favored candidates.
A total of 817.97 billion yuan of bad loans would be put into a fund, jointly managed by the Ministry of Finance and ABC, which was estimated to take five years to dispose of the non-performing assets.
The bank's non-performing loans (NPLs) ratio stood at 23.5 percent through 2007. Pan said the figure was expected to be lowered to 4.1 percent after the reform, and the capital-adequacy ratio would reach 8 percent, which would meet the China Banking Regulatory Commission's requirement.
Pan said the bank was still considering whether to bring in strategic investors. The investment value of state-owned banks had been recognized worldwide.
He noted the bank intended to issue 20 billion yuan of subordinated bonds at the end of the year or early next year to strengthen its balance sheet. More subordinated bond sales would follow.
The announcement came one day after the State Council, China's Cabinet, approved in principle ABC's restructuring, which would pave the way for the last of the country's big four state owned commercial banks to go public.
"The bank should become a modern commercial lender known for its adequate capital, sound governance, strict internal control, safe operation, quality service, good profitability and strong global competitiveness," according to the executive meeting of the State Council, presided over by Premier Wen Jiabao on Tuesday.
The bank should also expand networks in rural areas and increase credit to focus on supporting farmers, agriculture and the countryside, according to the meeting.
Pan said ABC had accumulative and obvious competitiveness in rural banking as it never stopped its rural expansion in the past few years. The bank vowed to continue to explore sustainable and stable business models and facilitate banking service for farmers.
China had always urged its commercial lenders to go public and introduce foreign strategic investors to press them to meet international standards and improve competitiveness.
China Construction Bank was the first among the "Big Four" to get listed in Hong Kong in October 2005, which was followed by the Bank of China in June 2006. The Industrial and Commercial Bank of China raised a record US$22 billion in its A-share sales in October the same year.
The three banks were among the 10 largest lenders by market value after the effective government recapitalization and public listings.
(Xinhua News Agency October 23, 2008)
