ICBC eyes wealth mgt, Internet after $19 bln IPO

HONG KONG, Oct 15 (Reuters) Industrial&Commercial Bank of China, whose IPO of up to billion is set to be the world's biggest, will swiftly grow its fee-based business and cut costs by promoting Internet banking, an executive said on Sunday.

China's largest lender, with US0 billion of assets and more than 18,000 branches, is expected to draw huge demand from investors for its dual Hong Kong and Shanghai offering, which is set to begin on Monday.

Chinese bank stocks have surged in the last year thanks to a booming economy, the rise of consumer credit and confidence the industry is tackling its bad loan problems.

ICBC Chairman Jiang Jianqing said he was keen to further develop the bank's fee-based businesses, such as personal wealth management, remittance services and credit cards.

''We will maintain steady growth of our loan business, enhance profitability from investment and trading activities, and will rapidly grow fee-based business,'' Jiang told reporters via a video link in the United States, where he was on an IPO marketing roadshow.

ICBC's net fee and commission income for the first half of 2006 was 7.9 billion yuan (US billion), up 61.6 percent from a year earlier. That accounted for 9.2 percent of operating income, while rival China Construction Bank garners about 8.9 percent of its income from fees.

Government-controlled ICBC also plans to expand its Internet banking services, close unprofitable branches and open new ones in more promising locations. ICBC has 360,000 employees.

''Currently, the transaction volume of Internet banking has already accounted for 28 percent of the bank's total, which enhances the operating efficiency of our branch network,'' said Yang Kaisheng, president of ICBC, via videolink from London.

The bank's Internet business was equivalent to having an extra 5,000 branches, Yang said.

BAD LOANS Trying to soothe investor fears about ICBC's non-performing loan (NPL) rate, the bank executives said the vast majority of its bad loans were made before 1999, and recent lending had been much less problematic.

Some analysts believe economic cooling measures imposed by Beijing will reduce loan refinancing for some industries, which could result in more defaults.

ICBC's bad loan ratio is around 4.1 percent, compared with Bank of China's 4.2 percent and 3.51 percent for Construction Bank. But the NPL rate is 1.86 percent for loans since 1999, which account for 95.2 percent of outstanding loans.

ICBC, the third of China's ''Big Four'' state banks to go public, is offering 35.4 billion Hong Kong-listed shares and 13 billion Shanghai-listed shares, which cumulatively represent 14.8 percent of its enlarged share capital.

At an IPO price of HK HONG KONG, Oct 15 (Reuters) Industrial&Commercial Bank of China, whose IPO of up to $19 billion is set to be the world's biggest, will swiftly grow its fee-based business and cut costs by promoting Internet banking, an executive said on Sunday.

China's largest lender, with US$890 billion of assets and more than 18,000 branches, is expected to draw huge demand from investors for its dual Hong Kong and Shanghai offering, which is set to begin on Monday.

Chinese bank stocks have surged in the last year thanks to a booming economy, the rise of consumer credit and confidence the industry is tackling its bad loan problems.

ICBC Chairman Jiang Jianqing said he was keen to further develop the bank's fee-based businesses, such as personal wealth management, remittance services and credit cards.

''We will maintain steady growth of our loan business, enhance profitability from investment and trading activities, and will rapidly grow fee-based business,'' Jiang told reporters via a video link in the United States, where he was on an IPO marketing roadshow.

ICBC's net fee and commission income for the first half of 2006 was 7.9 billion yuan (US$1 billion), up 61.6 percent from a year earlier. That accounted for 9.2 percent of operating income, while rival China Construction Bank garners about 8.9 percent of its income from fees.

Government-controlled ICBC also plans to expand its Internet banking services, close unprofitable branches and open new ones in more promising locations. ICBC has 360,000 employees.

''Currently, the transaction volume of Internet banking has already accounted for 28 percent of the bank's total, which enhances the operating efficiency of our branch network,'' said Yang Kaisheng, president of ICBC, via videolink from London.

The bank's Internet business was equivalent to having an extra 5,000 branches, Yang said.

BAD LOANS Trying to soothe investor fears about ICBC's non-performing loan (NPL) rate, the bank executives said the vast majority of its bad loans were made before 1999, and recent lending had been much less problematic.

Some analysts believe economic cooling measures imposed by Beijing will reduce loan refinancing for some industries, which could result in more defaults.

ICBC's bad loan ratio is around 4.1 percent, compared with Bank of China's 4.2 percent and 3.51 percent for Construction Bank. But the NPL rate is 1.86 percent for loans since 1999, which account for 95.2 percent of outstanding loans.

ICBC, the third of China's ''Big Four'' state banks to go public, is offering 35.4 billion Hong Kong-listed shares and 13 billion Shanghai-listed shares, which cumulatively represent 14.8 percent of its enlarged share capital.

At an IPO price of HK$2.56-HK$3.07, the company would be worth 1.96 to 2.23 of its prospective book value in 2006. Other Chinese banks are trading at 2.4 to 3.2 times net asset value.

The lender will earmark 5 percent of its Hong Kong-listed shares to retail investors, but that could climb to 20 percent if the local portion of the deal is more than 100 times subscribed.

Founded in 1984, ICBC was transformed into a commercial bank after China's 1994 financial reforms. It received an 85 billion yuan capital injection from Beijing in 1998, and transferred 407.7 billion yuan of bad loans to a government asset management company in 1999-2000, to help smooth an IPO.

Goldman Sachs, Allianz Group and American Express, who have bought stakes in ICBC, will see their combined share of the firm drop to 7.38 percent after the IPO, from 8.45 percent.

ICBC is set for a trading debut in Hong Kong and Shanghai on Oct 27 under the symbol ''1398''.

Its deal is being arranged by Merrill Lynch, China International Capital Corp. (CICC), ICEA, Deutsche Bank and Credit Suisse REUTERS DKS VV1711 .56-HK.07, the company would be worth 1.96 to 2.23 of its prospective book value in 2006. Other Chinese banks are trading at 2.4 to 3.2 times net asset value.

The lender will earmark 5 percent of its Hong Kong-listed shares to retail investors, but that could climb to 20 percent if the local portion of the deal is more than 100 times subscribed.

Founded in 1984, ICBC was transformed into a commercial bank after China's 1994 financial reforms. It received an 85 billion yuan capital injection from Beijing in 1998, and transferred 407.7 billion yuan of bad loans to a government asset management company in 1999-2000, to help smooth an IPO.

Goldman Sachs, Allianz Group and American Express, who have bought stakes in ICBC, will see their combined share of the firm drop to 7.38 percent after the IPO, from 8.45 percent.

ICBC is set for a trading debut in Hong Kong and Shanghai on Oct 27 under the symbol ''1398''.

Its deal is being arranged by Merrill Lynch, China International Capital Corp. (CICC), ICEA, Deutsche Bank and Credit Suisse REUTERS DKS VV1711