Bank of China Limited (BOC) is a commercial bank owned by the state. With its value estimated at £586 billion in assets, it ranks as the second-largest bank in China after the Industrial and Commercial bank of China. It was integrated in 1912. This makes it the oldest in the country. The bank witnessed tremendous growth since its establishment. The same bank made a thriving endeavor in reforming its shareholder base by making the right deployments and consistent progression since it was founded. Nonetheless, the 2006 listing was considered a milestone achievement, which came after several years of toiling. The bank’s headquarters is located in Beijing, Xicheng District. That said the objective of my effort is to present a report on the Bank of China’s IPO of 2006.
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The IPO Process
ICBC concurrently performed an A-share offer in SHSE (RMB) and an H-share (global) offer in HKSE (HKD). To be specific, the H shares were offered both internationally and locally. The official listing of the bank’s H-shares on the Hong Kong stock exchange took place on 1 June 2006. The over HKD 75.4 billion finances raised from the public offer issued is considered the largest ever stock to be issued in China and Asia. However, the exemption of Japan was noted. This is confirmed by the fact that data from other parts of the world ranked this IPO as the fourth largest IPO in history. This was accredited to the fact the company’s shares were high in demand as Chinese nationals had enough confidence in their bank. In fact, it is reported that many people began queuing on Hong Kong’s pavements early in the morning targeting to subscribe for the bank’s stock.
The bank of China’s A-share also got a listing on the Shanghai Stock Exchange on July 5, 2006. This listing was exceptional since it was the only bank of China that had managed to list its A-shares in their stock exchange. In fact, the prices of BOC’s A-share began trading on a positive note striking RMB 3.99 and increasing rapidly due to high demand for the shares. It should be considered that the IPO issue helped in improving the company’s overall performance in terms of sales and profits. At the end of trading, it was reported that over 6.49 billion A-shares were issued which broke Shanghais domestic record. For instance, in 2005 just before this public offer was made, the company operating income was only RMB 12, 5082, which rose to RMB 148,424 in the year ended 31 December 2012. The report also reveals that the operating profit of the bank rose from RMB 53,636 in 2005 to RMB 67, 305 in 2006.
Since the estimated Beta and the intercept are approaching 1 i.e. 0.059807981 and 0.073956315 respectively, then they are significant. The beta coefficient implies that the stock is more volatile than the market price. Evidently, the bank of China’s success was a result of effective management practices. This is illustrated by the fact that it became the first local company to come up with negotiable instruments. That said what lingers in the minds of many analysts is whether a different company from the country will ever break the Bank of China’s historical record. This is to be seen as several banks in the area are surely resolute of improving their performance. One day, another company may emerge at the top.