Britain's Standard Chartered said today that it would sign up for $500m of shares in Agricultural Bank of China (AgBank) in next month's flotation to become one of the biggest shareholders.
'Agricultural Bank of China is a great bank with a great future,' said Standard Chartered Group CEO Peter Sands in a statement to the London stock exchange.
'This investment is a natural next step in our longstanding relationship and it underpins our recent agreement to develop business together,' he added.
Agricultural Bank of China today kicked off a share offer worth a world-record $23.2 billion as China strives to develop depressed regions in the rural lender's heartland.
AgBank, the last of China's 'big four' state banks to list, plans to float its shares in Hong Kong and Shanghai next month with the monster IPO on track to overtake a previous record of $22 billion set by Industrial and Commercial Bank of China in 2006.
The initial public offering has already won bedrock support from heavyweight investors - including Qatar's sovereign wealth fund, Standard Chartered and US food giant Archer Daniels Midland.
Small-time retail investors today had their first chance to grab a piece of the action and queues were building outside bank branches in Hong Kong where the AgBank prospectus was being handed out.
AgBank chairman Xiang Junbo said yesterday that his company had worked hard to cut its bad-debt load, a major concern for all of China's big banks after a state-sanctioned lending binge during the global financial crunch.
And the rural lender says it is poised to capitalise on Chinese government efforts to boost economic growth in the country's centre and west, which have missed out on the export-driven boom enjoyed by coastal regions.
Some analysts consider AgBank to be the weakest of the country's big banks, owing mainly to its burden of bad loans and the nature of its business lending to less affluent customers in rural China.
Analysts say the return on capital from rural loans is typically 20-30% less than that for loans in urban areas, as the size of the loans is generally smaller and monitoring costs higher.
AgBank said it booked a profit of 65 billion yuan ($9.56 billion) in 2009, up from 51.45 billion yuan in 2008. It forecasts a 2010 profit of 82.9 billion yuan.
