ABC eyes cutting outlets to speed up bailout - ResearchInChina
Date:2007-10-12
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AGRICULTURAL Bank of China, saddled with US$100 billion of bad loans, may move some of its 14,500 rural branches to independent companies to speed up a government bailout and sell shares for the first time.
The nation's fourth-largest bank, established in 1979 to serve China's 800 million farmers, plans to reduce its ownership in unprofitable offices to trim delinquent debt, according to a draft of a government proposal obtained by Bloomberg News.
China has spent about US$500 billion bailing out its biggest lenders over the past decade. The three largest - Industrial & Commercial Bank of China Ltd (stock code: 601398), Bank of China Ltd (stock code: 601988), , and China Construction Bank Corp - raised a combined US$53 billion selling shares in the past two years. Agricultural Bank's cleanup has been delayed because 23 percent of its loans aren't getting paid, according to its latest annual report.
"It allows the restructuring to proceed quickly to the next stage," said Liao Qiang, a Beijing-based analyst at Standard & Poor's. "There are still uncertainties about any responsibility to aid subsidiaries suffering difficulties."
The Ministry of Finance and China Investment Co, an agency set up last month to manage US$200 billion of the nation's foreign exchange reserves, would each own a third of Agricultural Bank, the document said. Another 20 percent would be sold to foreign investors who have experience with rural lending, and about five percent to local corporate investors, according to the document. The remainder would be offered to the public.
The 15-page draft proposal, which is being reviewed by the State Council, China's Cabinet, and was translated by Bloomberg News, didn't say who will take stakes in the new companies that own the branches. Agricultural Bank spokesman Liu Hengbao said he's unaware of the document. Lou Xiaohui, a spokeswoman for the finance ministry, declined to comment.
Agricultural Bank had almost 500,000 employees and 25,000 branches at the end of last year. That compares with 351,000 workers and 18,000 outlets for ICBC, the country's third-largest company by market value, whose assets are 42 percent bigger than those of Agricultural Bank.
Construction Bank became the first of the nation's four largest to go public in October 2005, raising US$9.2 billion. Bank of China followed with an US$11.2 billion IPO in June 2006 and ICBC set a world record with its US$22 billion sale a year ago.
Shares of Construction Bank tripled from their IPO price, while ICBC stock more than doubled and Bank of China rose 57 percent. The Beijing-based lenders are now among the six largest globally by market value. ICBC's market capitalization of US$328 billion exceeds Citigroup Inc's US$235 billion.
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