It comes to something when a bank – in most of the world, public enemy number one – attracts the biggest cash haul of all time. But yesterday Agricultural Bank of China claimed its trophy; assuming follow-on issuance is taken up, the lender will raise a record-busting $22.1bn when it lists on Hong Kong and Shanghai later this month.
In many ways it is a fitting coup. AgBank itself is nothing if not big, with 24,000 branches, assets worth more than the entire economic output of India, and more customers than the US has people. Its somewhat old-fashioned profile, with branches in far-flung parts of China, plays to the new zeitgeist. With the country's legions of domestic migrant workers getting shirty over pay and conditions, the theory goes, more Chinese will stay home to work. And not just down on the farm either: AgBank's loan book is heavily corporate.
AgBank can also boast a supersized price tag. At HK$3.20 a share (and a shade lower for the Shanghai-listed scrip), the last of China's big lenders to come to market is priced at around 1.7 times this year's book value. Given its 20 per cent return, that is broadly in line with the peer group at the time of pricing. But it is generous in global terms: the more diversified JPMorgan trades on 0.9 times. The discrepancy is odd when you consider that Chinese banks have yet to pay the price for years of heavy lending. More bad loans beckon, as do lending constraints. AgBank was able to claim the mantle of biggest IPO in part because of demand from Middle Eastern sovereign wealth funds. The latter have taken some horrid hits on their past banking investments. This one, regardless of size, may be no different.