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Last updated: August 6, 2004 9:28 am

BoCom aims for Hong Kong listing

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BoCom aims for Hong Kong listingBy Alexandra Harney in BeijingChina?s Bank of Communications is aiming for an initial public offering in Hong Kong in the first half of next year that would make it the first major Chinese bank to list outside the mainland.

The move would put BoCom, which on Friday agreed a landmark $1.75bn alliance with HSBC, the global financial group, ahead of larger rivals China Construction Bank and Bank of China. Complex financial restructurings have delayed their listings until at least the middle of 2005. At a joint ceremony with HSBC in the Great Hall of the People on Beijing?s Tiananmen Square, Jiang Chaoliang, BoCom chairman, said: ?We are thinking of having a quick IPO.?

HSBC?s investment in BoCom is the largest by a foreign financial institution in a Chinese bank. It gives HSBC a 19.9 per cent stake just below the 20 per cent ceiling on foreign investment in Chinese banks and probably two seats on the board, although that needs Mr Jiang?s approval. HSBC will be the second largest shareholder in BoCom after the Ministry of Finance, pending approval.

The deal gives HSBC the biggest footprint of any foreign bank on the Chinese mainland and offers BoCom international management expertise. John Bond, chairman of HSBC Holdings, said the deal would be ?the final investment that we will makein the name of HSBC in China?.

HSBC and BoCom aimed to offer a joint credit card and would work on improving BoCom?s risk management and corporate governance, executives said.

BoCom said that in the wake of its financial restructuring, which ended on June 30, it had non-performing loans worth Rmb19.8bn ($2.39bn) and an NPL ratio of 3.43 per cent. Shanghai-based BoCom, China?s fifth largest lender, has faced the same problems as many other Chinese banks: high levels of non-performing loans and loan officers unused to risk pricing.

Like its peers, BoCom has also been under-capitalised. It disclosed on Friday that China?s Social Security Fund had injected Rmb10bn into the bank, the Ministry of Finance Rmb5bn, and Central Huijin Investment Company, an arm of the State Administration of Foreign Exchange, Rmb3bn as part of the restructuring. Shareholders also increase their investments by Rmb1.1bn.

The capital injection was one of the conditions of HSBC?s investment in BoCom, said Fred Hu, managing director for China at Goldman Sachs, which advised the Chinese bank on the deal.

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