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Asia: China - Mission Accomplished - Sophie Roell In New York And Beijing Explains The Story Of A Seemingly Mission Impossible, The Successful Part- flotation Of CCB, One Of China's Huge State Banks.

Article Excerpt
By the time the management reached New York it was all over. China Construction Bank (CCB) - formerly People's Construction Bank of China, set up to lend to large-scale government infrastructure projects - had successfully raised $8bn from selling just 10% of its shares in the largest initial public offering (IPO) in five years, the largest bank IPO since 1980 and the largest ever IPO out of China.

Over lunch at the Palace Hotel on Madison Avenue, Guo Shuqing, a high-ranking central bank official appointed chairman just seven months before, makes his final presentation to investors. It is largely a formality, as the IPO book has already closed.

Unusually for a Chinese official, the presentation is in English: learnt from a year Mr Guo spent at Oxford as a visiting scholar in the 1980s. Among the diners are some of the US's top banking executives, tripping over each other to give the Chinese bank 'face'. There is Brady Dougan, CEO of CSFB - the bank brought in just two months earlier to help underwrite the deal. And there is Ken Lewis, CEO of Bank of America, which in June gave the IPO a huge fillip by taking a strategic stake in the state-owned bank.

Lucrative work

For the investment banks in particular, Chinese IPOs spell huge business: Morgan Stanley, joint book-runner on the CCB IPO, will receive some $80m in fees for its work on the deal. CSFB, also a book-runner, but appointed 15 months later, will receive around $20m.

One hedge fund manager in the audience says he has bought shares. "It's a hot IPO," he says by telephone. "China's a humungous market and the bank's scale is just enormous." With more than 14,000 branches, he is not exaggerating. But he also likes the improvements CCB has made to its cost to income ratio: the branches closed and employees laid off. "It's impressive," he says. "That's always a concern when you invest in China - that the headcount tends to be enormous." In the corridor, a member of the syndicate chats informally to an investor. "People are excited about the deal, almost too excited," he says.

The lunch over, CCB's management relax Chinese style, having a cigarette standing outside in the street. It has been a gruelling few weeks for them, explaining themselves to investors in Japan, Hong Kong (where the stock will be listed)and across Europe, as well as in the US.

German investors gave them a particularly hard time, while in Edinburgh, one sceptical fund manager asked Fan Yifei, the bank's Columbia-educated deputy president, if he could put his hand on his heart and swear that the figures he had presented were true. Mr Fan replied "yes".

They have done a good job: the IPO is 10 times over-subscribed. Three weeks later, after CCB shares have already started trading, a green-shoe is exercised to fulfil lingering investor demand and...

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