China's top three banks, with combined deposits of more than 5.5 trillion yuan (US$664 billion), plan to go public by 2005 in order to raise money to cover bad credit that soared up to one yuan of every four loaned.
Industrial and Commercial Bank of China, Bank of China, and China Construction Bank must comply with a central bank directive requiring them to hold in reserve sufficient funds to cover more than an aggregate 1 trillion yuan (US$121 billion) in non-performing loans, the presidents of the three banks told Bloomberg News.
The three state-owned lenders, together with No.4, Agricultural Bank of China, must reduce their ratio of bad loans to 15 percent from 25 percent by 2005, with all bad debt fully provisioned for by reserves. The four banks had 1.77 trillion yuan (US$214 billion) in bad loans as of September, according to the People's Bank of China.
Bank of China's Liu Mingkang, Industrial and Commercial's Jiang Jianqing, and China Construction's Zhang Enzhao told Bloomberg News during the ongoing 16th CPC National Congress that the banks will sell shares both domestically and overseas.
"Bank of China will be ready for a public listing in three years," said Liu, whose Hong Kong unit sold shares overseas in July. "We will use the successful listing of our Hong Kong unit as the model for restructuring the rest of the bank, improve management and enhance governance."
Global offerings would mean business for investment banks who are increasingly looking to China as corporate financing slumps elsewhere in Asia. Goldman Sachs Group, Inc. and UBS Warburg LLC helped Bank of China with its Hong Kong sale; Morgan Stanley runs a Chinese investment bank with China Construction.
Overseas commercial banks, including HSBC Holdings Plc and Citibank NA, may also have a role to play in helping recapitalize their Chinese counterparts. Zhang said China Construction Bank is in talks with several large global lenders about a possible stake sale. He said it is also considering a bond sale to raise funds.
"We are looking at many ways of raising capital," Zhang said. Direct foreign investment is "an unavoidable trend."
(Eastday.com November 11, 2002)
