Bank Of China Drops New York Listing

by Mary Swire, Tax-News.com, Hong Kong

11 March 2002

The Bank of China (BOC), which merged its ten Hong Kong operating units last October to form Bank of China (Hong Kong), in anticipation of a joint New York and Hong Kong listing, may scrap plans for a full New York listing to reduce regulatory complexity, according to an underwriting source.

"We are not working with the idea of dual listing in Hong Kong and New York anymore," said the anonymous source. It's possible that the long-running investigation into the BOC's New York branch, which led to the replacement of Wang Xuebing, BOC's President, by new intendant Liu Mingkang, and a fine of US$20m from US and Hong Kong authorities in January, has complicated the BOC's listing preparations in New York.

BOC wants the initial public offering of its Hong Kong operations, a deal estimated to be worth US$4 billion to US$5 billion, to be completed this year; but to meet its schedule, Bank of China (Hong Kong) may have to confine the stock sale to investors willing to take shares denominated in Hong Kong dollars.

Liu Mingkang said yesterday: "The Bank of China (HK) is preparing its listing by dealing with non-performing assets, co-ordinating internal and external management and inviting strategic investors." Unlike his predecessor, Mr Liu is said to have been energetic in addressing corporate governance issues inside the bank. Four of the 13 directors of the new banks's board are independent, and two Western board-level advisers attend meetings, which are said to be held in English. One of the new directors is Chee-chen Tung, brother of the SAR's Chief Executive.

Investors however may be concerned about how Bank of China (Hong Kong) will reduce its non-performing loan ratio and maintain strong credit quality. Non-performing loans stood at 9.9% of total advances to customers at the end of October, more than double the Hong Kong average.

The merger between the Hong Kong branch of the BOC and nine other BOC units created Hong Kong's second largest bank, with HK$820 billion (US$105 billion) in assets putting it in second place behind HSBC with HK$1.71 trillion. Pretax profit at the units rose to HK$5.05bn (US$647m) in the six months through June 30 2001. The bank said about 10.5%, or $36.9bn of loans were bad at the end of June, down from 15.3% a year earlier.

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