Bank of China sets $3.2 billion stock sale


The bank is the second-largest by assets in Hong Kong, and is selling a strategic stake to a rival

By Alex Frew McMillan

HONG KONG, China -- The Bank of China Hong Kong will attempt to sell up to $3.2 billion in stock with its initial public offering.

British bank Standard Chartered will take a $50 million strategic stake in the Bank of China Hong Kong.

The Bank of China (BOC) is selling 25 percent of itself, assuming the sale is oversubscribed. It is the second-largest bank in Hong Kong, after HSBC.

Standard Chartered and the BOC are competitors in Hong Kong. But the stake could lead to cooperation between the two banks as China's banking industry opens up.

Price less than expected

China must allow overseas banks to do business with Chinese companies within two years, according to the terms of its entry into the World Trade Organization.

The BOC said Sunday it will sell up to 2.64 billion shares to the public at HK$6.93 to HK$9.50 per share. The stock is due to start trading on the Hong Kong stock exchange on July 25.

Outside estimates had suggested the offering could sell for as much as HK$11 per share. But the low price will likely guarantee a rise in the stock at its initial public offering.

Other investors suggest the stock is still not attractively priced.

"It is going to be for guys that have to own it but hate it," Brook McConnell, president of South Ocean Management, told the South China Morning Post.

Marketing is already underway. The offering is being headed by the bank's investment-bank wing, the Bank of China International, with Goldman Sachs and UBS Warburg (full story).

It is likely to gain solid retail interest because of its strong branding in Hong Kong.

No plans for U.S. listing

The Hong Kong branch of the Bank of China is the first unit of one of China's four largest banks to sell stock to the public.

Beijing-based Bank of China is the country's main foreign-exchange bank.


The bank has no plans to list in the United States due to paperwork, but a series of scandals also dented its image

Chairman Liu Mingkang of the Hong Kong bank said it currently has no plans to list in the United States. It scrapped earlier intentions to file a joint listing because of the paperwork involved.

Liu said preparing a U.S. listing would have delayed the Hong Kong sale. He denied that the bank had scrapped the U.S. sale because of a series of scandals that saw it fined $10 million by U.S. authorities (full story).

One report in Hong Kong suggested the bank may in fact seek a U.S. listing as early as September.

The Bank of China in June reported a 47 percent plummet in its net profits for 2001.

Standard Chartered is also looking at a Hong Kong listing of its stock later this year. Goldman Sachs is likely to manage the offering.