Bank of Communications (BoCom) has raised US$1.88 billion in a hotly-anticipated initial public offering (IPO) in Hong Kong that will set the tone for future flotations by the mainland's big lenders.

The pricing of the IPO, announced Saturday, was at the high end of expectations.

BoCom, China's fifth-largest lender, is the first mainland bank to list on an overseas market, preceding multi-billion dollar listings from State-run China Construction Bank and Bank of China.

BoCom priced 5.86 billion shares, or 13 percent of its enlarged share capital, at HK$2.50 (US$0.32) each, Goldman Sachs, one of the sponsors of the deal said.

That was near the top of an indicated price range of HK$1.95-2.55 and 1.6 times its estimated book value at the end of this year. The counter is expected to begin trading Thursday.

The valuation is at a discount to mainland-listed banks such as China Merchants Bank Co. Ltd., Minsheng Banking Corp. and Shanghai Pudong Development Bank, which trade between 1.7 and 2.4 times 2005 book value.

On average, most Asian banks trade at around 1.6 times book value. HSBC, which last year paid US$1.75 billion for 19.9 percent of BoCom, trades at 2.1 times forward book value.

In terms of price-earnings ratio, BoCom is priced at 14.8 times 2005 earnings per share of HK$0.169.

By comparison, its mainland peers are trading between 12 and 18 times forward earnings. HSBC trades at 13 times P/E.

BoCom received retail orders worth HK$150 billion, or 205 times the shares initially allocated to individual investors in Hong Kong, making it the fourth-most popular IPO in the city since China Life's listing in late 2003.

The institutional part of the offering was covered 20 times, sources close to the deal said.

This year, BoCom's return on assets is expected to rise to 0.65 percent, compared with just 0.15 percent last year — still a far cry from the 1-2 percent level of Hong Kong banks.

(Xinhua News Agency June 20, 2005)