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IPO of China’s largest commercial bank looks set to be a success

ICBC listing might set a new record but investors should tread with caution.

Bingeing on China’s banking IPOs

The IPO of China’s largest commercial bank, Industrial and Commercial Bank of China (ICBC), looks set to be a runaway success if demand for the simultaneous offering in Hong Kong and Shanghai is a reliable gauge.

The issue is being deluged with cash from every conceivable direction: local Hong Kong tycoons, strategic investors from Asia and the Middle East, domestic and international institutions and, of course, Hong Kong’s redoubtable retail investors, who have been clamouring for application forms and financing loans to stag the issue. As application lists closed, the offer had already generated demand exceeding $500 billion for the estimated $22 billion offering.

The sums are staggering and it might be tempting to get carried along with the collective euphoria. But a little circumspection is due. ICBC, like its competitors that are already listed (Bank of China and China Construction Bank), was little more than a zombie lender a few years ago, with a huge capital deficit, rampant non-performing loans and non-existent risk management controls. Is it really credible that such a basket case could have been turned into one of the world’s largest financial institutions, peddling its shares at eyebrow-raising valuations, in just three years?

Perhaps is the answer.

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