BEIJING, May 29 -- Bnak of China's US$9.7 billion initial public offering (IPO) has drawn keen interest among stock market investors hoping to buy into China's rip-roaring growth despite the risks.

    The IPO, the world's biggest in six years, brings to the international market China's second-largest and its oldest bank.

    With shares representing a 10.5 percent stake in the company priced at HK$2.95 (38 U.S. cents) each, Bank of China (BOC) has an initial market capitalization of about US$96 billion. That ranks between Germany's Deutsche Bank AG and Switzerland's UBS AG but well behind the U.S. banking companies Citigroup Inc. and Bank of America Corp.

    The bank's shares will begin trading June 1 in Hong Kong. So far, response has been enthusiastic despite recent declines in Hong Kong's benchmark Hang Seng Index. There were more offers to buy shares than shares available and the IPO has attracted strong support from major international investors such as Hong Kong tycoon Li Ka-shing's Cheung Kong Holdings, Japan's Bank of Tokyo-Mitsubishi UFJ Ltd. and Saudi Prince Alwaleed's company Al Azizia Commercial Investment Co.

    Long lines formed on Hong Kong sidewalks after the bank began offering local investors 1.28 billion shares in the IPO.

    Founded in 1912, Bank of China is the country's most international bank, with branches in 25 countries. Its Hong Kong unit, BOC Hong Kong (Holdings) issues currency in the territory and contributes nearly a quarter of the parent bank's profit.

    The bank's 4.7 trillion yuan (US$586 billion) in assets makes it the mainland's second biggest after the Industrial and Commercial Bank of China, which plans an IPO later this year. ICBC has assets worth more than 6 trillion yuan.

    Its balance sheet is relatively clean following a restructuring and a US$22.5 billion government bailout.

    Bank of China's ratio of nonperforming loans to total lending is reported at 4.4 percent in mid-2005, down from more than 33 percent in 2003. The China Banking Regulatory Commission and other industry experts have warned repeatedly that all domestic banks risk a rebound in bad debt if they don't improve control over branch management, where most of the problems occur.

    As part of its effort to bring in outside expertise and reassure investors, Bank of China has sold stakes worth a total of US$5.1 billion to UBS, Singapore's Temasek Holdings and a consortium led by the Royal Bank of Scotland Group PLC.

    It also recruited a veteran banker in March 2005 from London-based HSBC Corp., Lonnie Dounn, to serve as its credit officer, a pioneering move for a State financial institution.

    While allowing the banks to sell billions of dollars worth of equity to foreign banks and other institutional investors, the Central Government has stressed its determination to maintain State control over the strategically important industry, limiting the foreigners' say in management.

    Bank of China is selling only 10.5 percent of its equity, and even if it exercises an option to sell another 3.84 billion shares, raising the IPO's proceeds to US$11.2 billion, it will be listing only 11.9 percent of its total capital.

    (Source: Shenzhen Daily/Agencies)