Agricultural Bank unlikely to invite strategic partners
Agricultural Bank of China (ABC) is unlikely to seek a foreign strategic investor before choosing to sell shares in Shanghai rather than Hong Kong, according to a mainland media report.
Agricultural Bank is the last of China's four largest state-owned banks to begin reforms that have seen each of the other big lenders receive government rescue funds, sell shares to foreign strategic investors and list in Hong Kong.
The bank would finish its financial restructuring by June and start shareholding reforms later in the year, the Securities Times reported, citing unnamed sources.
It would not invite foreign banks to take pre-listing stakes and would not sell shares in Hong Kong.
Deloitte & Touche was hired last year to conduct an internal audit and is carrying out human resources restructuring, accounting reforms and a review of all fixed-asset investment lending, according to a statement the bank released yesterday.
The statement refers to the bank's plan to 'restructure as a single entity and list publicly at an opportune time', without giving further details.
'If ABC were to list in Hong Kong, they would probably need to find a foreign strategic investor to gain the market's confidence, but it is unlikely any such investors would be interested in buying into this bank,' Moody's analyst May Yan said.
'The reform of ABC is much more complicated than that for the other banks because the government needs to consider it in the context of overall rural credit reform and it is unclear that it should be measured on the same profit model the others are judged by.'
The bank's reform plan was approved at the weekend by China's leaders at the National Finance Working Conference.
In a technical move last week that could set the stage for the bank's reform, the banking regulator removed a previous requirement that banks converting into joint-stock entities must have a foreign strategic investor.
Agricultural Bank is solely owned by the Ministry of Finance, which is likely to cede all or most of the bank to Central Huijin, the investment vehicle that holds the government's shares in all key mainland financial institutions.
The bank said yesterday its non-performing loan ratio fell to 23.55 per cent last year from 30.67 per cent in 2003 and that its bad-loan ratio for loans extended from 2004 onwards was just 1.27 per cent.
Most of the remaining bad loans are expected to be taken out and the bank recapitalised using some of China's more than US$1 trillion of foreign exchange reserves.
The rescue was likely to be of similar magnitude as the one for Industrial and Commercial Bank of China, analysts said.
Industrial and Commercial Bank received about US$80 billion of support from the government before listing in Hong Kong and Shanghai.
