The Bank of Communications (BoCom), the nation's fifth-largest lender, is set to launch its HK$14.9 billion (US$1.9 billion) initial public offering (IPO) today in Hong Kong's H-share market.

The Shanghai-based and nation's first shareholding bank is aiming to sell 5.856 billion shares for HK$1.95 (25 US cents) to HK$2.55 (32 US cents) apiece. Ninety-five percent of the shares will be initially offered internationally with the remaining 5 percent put up for subscription in Hong Kong.

The minimum subscription with 1,000 shares per lot is approximately HK$2,600 (US$334).

The bank announced earlier that its net profit for 2005 would be no less than 7.8 billion yuan (US$940 million). BoCom's 2004 profit fell 63 percent to 1.6 billion yuan (US$193.2 million) from 4.38 billion yuan (US$5.3 million) in 2003 after the Ministry of Finance cancelled a 9.67 billion yuan (US$1.17 billion) tax credit.

Co-underwritten by Goldman Sachs and HSBC, the price range represents 1.3 to 1.6 times the estimated 2005 book value and 11.1 to 14.5 times its 2005 profit forecast which is cheaper than Hong Kong-traded banks including HSBC Holdings Plc and Standard Chartered Plc.

The bank's capital adequacy ratio climbed to 9.72 percent in 2004, higher than the 8 percent international standard, after the central government pumped funds into the bank to prepare for its listing.

The subscription offer ends on June 16 with the trading debut set for June 23. The IPO of BoCom, one of the nation's most profitable banks, is seen by the market as the first step in a rush of mainland banks to list in Hong Kong.

The bank has brought HSBC on board as its strategic investor, letting go a 19.99 percent stake, in a bid to enhance the quality of its corporate governance as well as impose more stringent credit control practices.

Following BoCom, China Construction Bank, the nation's third-biggest lender, and China Minsheng Banking Corp, the first privately-owned bank, are both slated to go public in Hong Kong this year as the race heats up to restructure to take on the full scale entry of foreign banks to the Chinese mainland at the end of 2006.

(China Daily June 13, 2005)