INDUSTRIAL & Commercial Bank of China, the country’s largest lender, raised $19 billion (£10.1 billion) in the world’s biggest initial public offering, pricing its shares at the peak of its indicated range.

The offering, the first simultaneous listing in Hong Kong and mainland China, valued ICBC at $129 billion, ranking it seventh among banks in the world, just ahead of Wells Fargo and behind UBS.

The huge bank, the lender of choice to China’s burgeoning industrial and business sector, priced the sale of 35.39 billion H shares at HK$3.07 a share — the top of its price range of HK$2.56-HK$3.07 per share. Record investor demand has given it confidence and the price is expected to go higher when trading begins on October 27.

Y.K. Chan, strategist at Phillip Capital Management (HK), said: “Because of strong liquidity in the Hong Kong stock market, and the massive demand, I expect it can rise more than 10 per cent in the first trading day.”

ICBC sold 13 billion domestic A-shares that will be listed in Shanghai at the top of the range. The IPO represents 14.8 per cent of ICBC’s enlarged share capital.

Investors have clamoured for a share of ICBC, seeing the banking industry as a proxy for China’s 10 per cent-plus economic growth. The economy grew by 10.4 per cent in the third quarter, on track to achieve a fourth straight year of double-digit expansion.

Kelvin Wu, president at Investec Asia, which subscribed for shares, said: “The massive demand for ICBC is mainly due to its low valuation to its peers, and investors want exposure to China’s banking industry.”

Goldman Sachs is tied into retaining its stake of more than 5 per cent for three years, but at that offer price, the investment bank’s holding may be worth more than triple the $2.6 billion dollars it paid.

Investors have ignored the record of bad debts and lending scandals that have dogged China’s banks, betting that government support will limit risks while allowing them to tap into China’s economic boom. Like the two other major state banks that have already sold shares in Hong Kong — Bank of China and China Construction Bank — ICBC has restructured and wiped out billions of dollars in bad debts with government help. The three banks received $60 billion in government bailouts in 2003 and the state has bought billions of dollars of bad loans to strengthen the banks’ balance sheets.

The Hong Kong retail portion of the deal was 78 times covered, soaking up $54.3 billion worth of orders and attracting the largest amount of orders from retail investors. It exceeded Bank of China’s $34.9 billion record set in June and lifted that portion of the deal from 5 per cent to 10 per cent of the Hong Kong shares on offer. As for ICBC’s domestic A-share sale — which accounted for about one quarter of the deal — the institutional portion was 14 times covered and the retail tranche was 49 times covered, a source said.

If, as expected, a 15 per cent over-allotment option is exercised in the market, the deal size will increase to about $21.9 billion.

THE RECORD BREAKERS

Top IPOs worldwide

ICBC (2006) $19bn HK / Shanghai

NTT Mobile (1998) $18.05bn Tokyo

Enel (1999) $16.58bn New York

NTT (1986) $13.7bn Tokyo

Deutsche Telekom (1996) $12.48bn New York

Bank of China (2006) $11.18bn HK

Rosneft (2006) $10.65bn Moscow

Source: Thomson Financial

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