A Tip for Eliot Spitzer
China Construction Bank (CCB) and Bank of China (BoC) are said to be pursuing IPO’s this year. A Mr. Guo has just been made the new chief of CCB, after the old one was, um, arrested. Good luck (Economist):
Mr Guo, then at the central bank, told the official media this month that CCB had disciplined 40,000 employees and BoC at least 18,000 for misappropriating funds and making unauthorised loans. Signs of widespread corruption are likely to set back the next stage in the banks’ ambitious reform plans. The government plans to list three banks on the Hong Kong, Shanghai or possibly New York stockmarkets this year. Bank of Communications (BoCom), the fifth-biggest, is set to raise $2 billion, followed by a $5 billion-10 billion flotation of CCB and a $4 billion-5 billion offer from BoC.
But investors, particularly foreigners, may now demand a delay, a lower price or both. Mr Zhang’s case “has an enormous impact,” says one senior banker in China. “How do you convince foreign investors that this is a one-off?” People close to CCB were adamant that its listing would go ahead this year, perhaps at a lower price, if Mr Zhang was replaced quickly…..
It is significant that, despite courting by the Chinese, no big international bank has yet bought a stake in CCB or BoC, though HSBC owns 19.9% of BoCom. Much therefore hangs on the next few months. The government has an incentive to rush the banks to market—partly to maintain the momentum of reform but largely to outpace an economic slowdown. Even a soft landing is expected to produce a new wave of non-performing loans that could make the banks look less attractive to investors.
You will recall from a post below that bad loans were estimated a year ago to be $420 billion. How many of those are reserved for?
Here’s our tip: Mr. Spitzer, if they list CCB or BoC in New York, they might be a juicier target than Martha Stewart, AIG, Enron, and Tyco combined. And PS: Go after their accountants too. But you already knew that.