China Construction Bank, which is preparing a $5 billion initial public offering this year, has dropped Citigroup Inc as its underwriter, people familiar with the deal said on June 02. The bank picked Citigroup as an underwriter in 2004 over rivals such as Deutsche Bank, Credit Suisse, J.P Morgan and Merrill Lynch after the New York-based global banking giant signalled it would invest $1 billion and provide operating expertise.
Recently named Chairman Guo Shuqing told Reuters last week that Construction Bank, China's third-largest lender and a "Big Four" state bank, was eyeing a listing in November in what could be the world's biggest IPO this year.
Bank of America Corp and Temasek Holdings Pte. Ltd are in advanced talks to buy about 5 percent of the bank for around $1.5 billion, sources close to the situation said.
China International Capital Corp, which has been working on the deal for more than five years, and Morgan Stanley will remain as underwriters, people close to the deal said.
Morgan Stanley and Construction Bank set up CICC in the mid-1990s and the Wall Street firm still owns 34.3 percent.
Margaret Ren, former head of Citigroup's China business and the daughter-in-law of former Chinese Premier Zhao Ziyang, helped the investment bank win the mandate. But Ren, 47, resigned in July 2004 and was replaced by Wei Christianson.
Zhang Enzhao, who was involved in the Citigroup negotiations, was removed as Construction Bank's chairman in March amid allegations of corruption.
The 48-year-old Guo, who used to be the country's top foreign exchange regulator, said the bank had hired KPMG as its external auditor and had chosen its law firm but still had to decide on underwriters and where to issue the shares.
China Construction Bank, the nation's top property lender, received a $22.5 billion injection of government capital in late 2003. The bank's non-performing loans stood at around 3.9 percent of its total lending as of the end of 2004.
Its capital adequacy ratio, calculated according to international accounting standards, had been close to 12 percent and its return on equity had been around 16.88 percent. Bank of China, the country's second-largest lender, plans to sell shares in 2006 and Industrial & Commercial Bank of China, the top lender of the country, may seek a listing as early as 2007.
China is scrambling to recapitalise and modernise its banking system before the sector opens to foreign competition in late 2006 under Beining's WTO obligations.
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