Rock Solid Fortune

Third para from the end interesting. Hasn't Deutsche Bank just increased their stake in FTO?

Times, January 01, 2005

Battle looms for US float of Chinese banking giant
By Caroline Merrell, Banking Correspondent

WESTERN investment banks desperate for a slice of the booming Chinese economy are queueing up to advise the country’s biggest state-owned bank on its New York flotation.

In the coming weeks, the Industrial and Commercial Bank of China (ICBC), will hold a beauty parade of likely candidates.

Goldman Sachs, Merrill Lynch, UBS and JP Morgan Chase are all expected to compete aggressively.

ICBC, a commercial bank which already has partial listing in Hong Kong, is expected to float on the New York Stock Exchange next year. ICBC has more than 100 million personal customers, 8.1 million corporate clients, 20,000 branches and 390,000 staff. It is expected to make an operating profit of around 75 billion yuan (£4.4 billion) for 2004, a rise of 20 per cent on 2003.

Before ICBC can list, however, it has to strengthen its capital base. In common with the other three state-owned banks, it has a large number of non-performing loans. China’s State Council has already injected a total of $45 billion (£23 billion) into two other state owned banks — the Bank of China and the China Construction Bank. Chinese banks racked up huge sums in bad debts after funding the construction of China’s cities, such as Shanghai and Shenzhen.

Commentators, however, believe that recapitalising ICBC could cost about $45 billion. An announcement about the restructuring is expected early this year, after Wen Jiabao, the Prime Minister, urged the Bank of China and the China Construction Bank to speed up their restructuring. Although the Prime Minister made no mention of ICBC, analysts widely predict that it will be recapitalised this year.

ICBC’s dominant position in its domestic markets is expected to come under pressure as China opens up to foreign investment.

Already, leading foreign banks, such as HSBC and Standard Chartered, are opening branches in mainland China as well as taking stakes in domestic Chinese banks.

ICBC, however, has begun to respond and yesterday confirmed that its Hong Kong-based division would buy the Chinese Mercantile Bank.

ICBC (Asia) is the sixth-largest lender in Hong Kong and plans to expand lending and other financial services to Hong Kong companies doing business on the mainland and to Hong Kong people who work or live there.

The state-owned banks have been trying to attract foreign investors in recent months. The Bank of China, for example, is thought to have selected its foreign strategic investors already. They are believed to include JP Morgan and Deutsche Bank.

The China Construction Bank is also finalising its decision on foreign partnerships after holding talks with Citigroup, GE Capital, ING and two other unidentified big financial institutions.

HSBC has already bought 19.9 per cent of Bank of Communications, China’s fifthlargest commercial bank.