Bank steps up investor selection procedure
By Xu Dashan (China Daily)
Updated: 2004-04-15 08:41

The Bank of China revealed yesterday it is speeding up the process of selecting company investors to take a stake in its initial public offering, and will choose all of them by the end of June.

Wang Zhaowen, a spokesman for the nation's biggest foreign exchange bank, said it was in discussions "with a number of overseas investors about the sale."

Strategic investors would be expected to both contribute advanced management experience and improve the bank's corporate governance, Wang said.

The Bank of China and the China Construction Bank, which won a US$45 billion bail-out from the government in late December, were chosen by the central government for a pilot project to turn them into joint stock banks.

The China Construction Bank plans to go public before the end of this year, while the Bank of China will make its market debut in 2005.

China Construction Bank President Zhang Enzhao said his bank intended to list its shares simultaneously on the mainland, Hong Kong and New York.

But Bank of China spokesman Wang said it had not yet decided where it would be listed.

"Work has proceeded smoothly so far this year on the Bank of China's shareholding reform," Wang said.

The  bank's  business, organizational structure, management procedures, information technology and human resources are currently undergoing  major restructuring.

The focus is to ensure that both the market and consumers are more satisfied with the bank's services.

The Bank of China notched up an operating profit of 17.4 billion yuan (US$2.1 billion) in the first quarter of this year, a 3.8 billion yuan (US$457 million) or 28 per cent year-on-year rise, said spokeswoman Zhou Ning.

The bank earned an operating profit of 57 billion yuan (US$6.9 billion) last year, before setting aside provisions for bad assets, an increase of 4.8 billion yuan (US$573.4 million) or 9.11 per cent compared with 2002.

The bank's outstanding amount of non-performing credit stood at 342.4 billion yuan (US$41.3 billion) by the end of March, a 9.4 billion yuan (US$1.1 billion) decrease from the end of last year, Zhou added.

The bank's non-performing credit ratio was 14.84 per cent by that time, a fall of 1.44 percentage points.

Experts commented that the Bank of China's increased operating profits and lower non-performing credit ratio were good news for the State-owned lender.

China's four largest State-owned banks will have to sharpen their competitive edge before the end of 2005, when foreign banks will have unfettered market access under China's World Trade Organization commitments.

Wang Zhao, a researcher at the State Council Development Research Centre, said the banks "will have to lower the rate of non-performing loans (NPLs), get rid of historical financial burdens and raise their capital adequacy to international standards."

Commercial banks' capital adequacy ratio will have to reach 8 per cent, the minimum required by the Basel Capital Accord reached by international banking managers, according to the nation's commercial bank law.

Wang stressed that this goal will have to be achieved before China's commercial banks, especially the big four, get listed.

Chinese banks usually write off their NPLs by using bad loan reserves taken from their profits.

And increased profits mean they can write off those NPLs more quickly, Wang pointed out.