The Pit - IMI Trust

On Friday, the largest IPO the world has seen will occur on the Hong Kong and Shanghai Stock Exchanges.

The company is the Industrial and Commercial Bank of China (ICBC). As China’s largest lender, institutional and retail investors are scrambling to become a part of the world’s largest IPO, especially with all the hype surrounding the stunning economic growth of China.

Here’s some impressive statistics…

• The ICBC has 18,000 branches (Australia’s largest banking corporation, NAB has under 800)
• Accounts for 15.4% of all loans in Chinese banks
• More than US$1 trillion in assets.

The ICBC has also admitted to some other impressive statistics…

• The ICBC has publicly admitted to over 50 substantial fraud cases per year over the last few years.
• Its critical default loans total sit around 10% of their portfolio.
• 80% of its loans are to the corporate sector which is dominated by state-owned companies
• Of the 80%, 40% of those companies are in the red.
• The Bank is rapidly increasing its loans to this sector by almost 25% a year (as reported in The Australian - Oct 23).

If an Australian bank admitted to this level of imprudent banking it would be under serious investigation and would have few investors risking their money. 

New Target Market With Growth Potential Identified

However, more astonishingly… 

• The float is now 270x over subscribed for the retail portion (as an informal guide, bankers are normally happy with 20x oversubscription or above).
• Investors have placed orders for over US$500bn dollars of ICBC stock.
• Goldman Sachs who invested $2.6bn 6 months ago, now stand to make nearly $4bn from the IPO. This is the largest profit from a transaction since the company was formed in 1869.

From every angle, this IPO is spectacular. Keep an eye out for the listing on Friday. At current value they will be among the largest banks on the planet. You can be assured that investors around the world will have their attention focused on Hong Kong and Shanghai.

Either that, or it may just end up being a deal which is hype over substance, however, we very much doubt it.