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IPOs: Great China sale nears its end

Will AgriBank be an IPO too far?

For sale: huge creaky bank in China. Lends money at will; consistently loss-making; in need of some repair; one careless owner. The ‘for sale’ sign hanging over the Agricultural Bank of China could justifiably read this way. It should certainly come with a stern wealth warning attached.

The forthcoming IPO of ABC, announced by the government in January, is the deal that everyone, the government included, said would never take place. A woefully managed state-directed lender for years, ABC, with about 31,000 branches and offices and some 500,000 staff, is, by all the most worrying measures, the largest bank in China. It also boasts the highest level of non-performing loans of any state bank, officially standing at 26.17% of total loans.

What lurks beneath...

Agricultural Bank of China loan growth

Source: Company accounts

With a cost to income ratio consistently above 60%, ABC has failed to record an operating profit for years: the operating loss in 2005, the latest date for which audited accounts are publicly available, was more than 1,300% higher than an admittedly small loss in 2004.

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