UPDATE 4-AgBank closes $19.3 bln IPO with tepid HK debut

* 2 pct rise in HK comes after weak debut in Shanghai

* Removes big overhang from poor-performing China markets

* With over-allotment would raise $22.1 bln, largest IPO

* Four of six largest banks in the world are now Chinese

* Three-month process closes; last of Big 4 banks to list
(Adds Pan, investment banker quotes; details)

By Kennix Chim and Michael Wei

HONG KONG, July 16 (BestGrowthStock) – Agricultural Bank of China’s
(1288.HK: ) $19.3 billion IPO limped across the finish line on
Friday after a three-month sprint, its modest Hong Kong debut
reflecting concerns over valuations and investor cautiousness.

The near-record deal, kicked-off by surprise just ahead of
a long Easter weekend, marks the final step in Beijing’s effort
to list its top four banks and removes a giant overhang for
China’s stock markets that are braced for more share sales.

AgBank’s main rivals plan multi-billion-dollar offerings in
the coming months to bolster their capital ratios after a
lending binge last year, while sources say American
International Group (AIG.N: ) plans to spin-off its Asian unit in
a Hong Kong IPO that could raise $15 billion. [ID:nTOE66F018]

Shares in AgBank hit a high of HK$3.31 versus an issue
price of HK$3.20 and closed up 2 percent at HK$3.27 in trading
volume one-sixth of the overall Hong Kong market on Friday.

Though the IPO lacked the pop of its rivals, it came to
market at a difficult time, as it pushed through the deal while
global jitters loomed.

“You can’t really compare it with the sterling performance
of ICBC and other banks as those happened in a different market
backdrop,” said Alfred Chan, chief dealer at Cheer Pearl
Investment. “At HK$3.30, (AgBank) reflects full value so there
is no rush among retail investors to jump in and buy.”

Industrial & Commercial Bank of China (1398.HK: ) and Bank of
China (3988.HK: ) both soared 15 percent on their Hong Kong
openings after listing at the start of a bull market in 2006.

This year, Hong Kong’s Hang Seng index (.HSI: ) is down about
8 percent, while the Shanghai Composite (.SSEC: ) has shed more
than a quarter, battling Greece (.ATG: ) for the dubious honour
of the world’s worst performing market.

AgBank’s Shanghai-listed shares (601288.SS: ) rose less than
1 percent on their first day’s trade on Thursday.


For TAKE A LOOK on AgBank [ID:nSGE65307X]

For SPECIAL REPORT on the deal: [ID:nSGE66E0L7]

StarMine comparative data http://r.reuters.com/jan46m

For BREAKINGVIEWS on AgBank’s debut [ID:nLDE66E0KB]

Insider video on indicator of future IPOs:


For graphic on China bank IPO performances:




Founded in 1951 by Mao Zedong as the rural unit of the
central bank, AgBank is the last China’s “Big Four” state-owned
lenders to list its shares.

With almost 24,000 branches and some 441,000 employees,
AgBank has almost double the staff and twice as many outlets as
Bank of China, and a slightly smaller asset base. ICBC, the
world’s largest bank by market capitalisation, has 16,000
branches and 386,000 employees.

The underwriters worked hard to beef up the deal size with
early investors, while giving top treatment to mutual funds who
agreed to early commitments on the order book.

But the IPO generated lacklustre demand from Hong Kongers,
with the retail portion of its deal only 5.9 times covered,
making it the worst among the state banks’ IPOs to appeal Hong
Kong investors interests.

“Certainly the performance of (AgBank) will impede demand
for the likes of Bank of China or ICBC’s funding,” Ben Collett,
Head of Equities at Louis Capital Markets, said in a Reuters
Insider television interview, citing waning appetite for bank

AgBank’s IPO could still rise to a world record $22.1
billion if additional shares set aside in an over-allotment
option are sold in the coming weeks. Its $128 billion market
capitalisation ranks it the sixth largest bank in the world,
with its main China rivals occupying three of the five spots
above it.


Executives at the Beijing-based bank gave a crystal model
of the company’s headquarters to the Hong Kong Stock Exchange.

Hong Kong legislators including CEO Donald Tsang were on
hand to watch, as were CICC banking head Levin Zhu and Deutsche
Bank CEO Josef Ackermann.

Also present were the investment bankers tasked with
selling the offering to mutual funds and arranging the
cornerstone investors which accounted for $5.45 billion of the
Hong Kong IPO.

The banks worked for months without knowing who would be
the top coordinator, nor what fee they’d earn. In the end, the
earned 1.4 percent for the Hong Kong portion, the lowest IPO
fee among China’s top four banks. For both Hong Kong and
Shanghai, the total payout to investment bankers was around
$250 million.

“To be honest, we’re all exhausted,” said a banker involved
in the deal but who did not want to be named. The three months
involved meetings at all hours, morning attendance records and
daily report cards, a process run by Pan Gongsheng.

Pan, AgBank’s vice president, is the man credited with
being the driving force behind the IPO process, having led ICBC
in its record $21.9 billion float in 2006.

In an interview with Reuters on Friday, Pan said he was
confident that 2010 net profit will exceed its previously
announced target of $12.2 billion, citing net interest margins
widenening, higher intermediate business income, and low credit
costs. [ID:nTOE66F06A]

“The economic growth in China’s rural areas is faster than
that of cities,” the 46-year-old executive said. “With the
development of China’s rural economy, the key indications of
our rural business will see a gradual increase among all”.


AgBank’s Chairman Xiang Junbo, a war hero and award winning
script writer, was relaxed in the morning, eating breakfast
alone at Hong Kong’s Shangri-La hotel before the listing.

“After this listing, the bank will enhance its
competitiveness in the market and its risk management,” he said
at the ceremony, sporting a red tie.

One factor weighing on AgBank’s IPO is the slight premium
to Bank of China in terms of price to book value, leading some
fund managers to view the stock expensive.

The bank was historically the weakest of China’s top four
lenders, though a capital injection and a hive-off of bad loans
have brought the company back to health.

The offering price represents 1.65 times AgBank’s forward
book value, just above BoC, but below that of ICBC (601398.SS: )
and CCB (601939.SS: ).

CICC, Goldman Sachs (GS.N: ), and Morgan Stanley (MS.N: ) (Read more about the money market today. ) led
the Hong Kong offering, with JPMorgan (JPM.N: ), Macquarie
(MQG.AX: ), Deutsche Bank (DBKGn.DE: ) and AgBank’s own securities
unit also involved. CICC, Citic Securities, Galaxy and Guotai
Junan Securities handled the Shanghai portion.
(Additional reporting by Denny Thomas, Donny Kwok and Kei
Okamura; Writing by Michael Flaherty; Editing by Lincoln

UPDATE 4-AgBank closes $19.3 bln IPO with tepid HK debut