Bank of China (BOC), the mainland's second-largest lender, said its imminent Hong Kong listing will help enhance its efficiency and transparency and improve its profit margin.

Calling it a milestone step in the bank's history, the BOC expects the listing will help it grow comprehensively, said Xiao Gang, chairman of the BOC, at a video conference in Hong Kong yesterday.

He also said the bank's tax rate would fall after the listing, without explaining at length.

Saying the listing of the bank in Hong Kong opens another exciting chapter of the bank's hundred-year history, he expects the BOC's tax rate to slide down to 35 per cent or even lower after its listing in June, from 40 per cent in 2005.

"We currently have a higher tax rate than other top banks on the mainland, but after the listing our tax rate should fall to 35 per cent or even lower."

"As the oldest and one of the best-known commercial banks in China, we have an extensive overseas branch network, a solid customer base and a universal banking platform," Xiao said. "We are a leader in non-interest income and foreign exchange business with strong product innovation capabilities."

The BOC, the top foreign exchange lender on the mainland, is selling 25.57 billion shares, or 10.5 per cent of its enlarged share capital, at a price range between HK$2.5 (30 US cents) and HK$3 (37.5 US cents) per share.

The deal could amount to as much as US$9.8 billion. The figure would be bigger if an over-allotment option is considered.

The BOC plans to start trading its shares in Hong Kong on June 1 after pricing the deal on May 24.

After the Hong Kong listing, it will seek a domestic float on the yuan-dominated A-share market "as soon as possible."

The mainland recently resumed share sales in its bourses after a one-year ban.

Despite the recent dramatic fluctuations in Hong Kong's stock market, the bank said investors would rush to buy its shares, which have already received an overwhelming response from institutional investors.

Top executives from the BOC have gone to Europe and the west coast of the United States to conduct road shows for the IPO, which could be the biggest IPO in six years globally.

The BOC received institutional orders worth at least HK$72.86 billion on May 11, the first day it opened its orders book.

And the public offering for retail investors, which kicks off today, is expected to receive orders worth HK$200 billion (US$25 billion).

Mainland lenders have been in eager pursuit of going public in Hong Kong, in part demonstrating their improvement in corporate governance and a lift in overall strength.

The mainland's third- and fifth-largest lenders, the China Construction Bank and the Bank of Communications, floated their shares in Hong Kong last year. Their shares have grown about 53 per cent and 108 per cent respectively.

Another giant, the Industrial and Commercial Bank of China, the mainland's top bank, will offer US$12 billion worth of shares later this year.

Other smaller players such as Minsheng Bank, the Industrial Bank and the China CITIC Bank are reported to be busy with their Hong Kong listing processes.  

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Bank's IPO expects huge interest

Bank of China (BOC), which is expected to launch the world's largest initial public offering (IPO) in the last six years, will attract a great deal of individual investors with the opening of its retail tranche, analysts said.

That signals overseas investors' increasing confidence in the mainland's banking sector.

"Hong Kong residents now favour mainland banks," said Andes Cheng, an analyst with South China Research Ltd.

"BOC (Hong Kong), Bank of Communications (BoCom) and China Construction Bank (CCB) all generated a lot of buzz when they floated their shares. BOC will not be an exception," said Cheng. He said he would personally buy some shares.

Hordes of locals are expected to rush to securities houses and banks to subscribe to BOC shares, investing an estimated amount of more than HK$200 billion (US$25 billion) over four days, said Kingston Lin, Prudential Brokerage's associate director.

Four years ago, local investors liked to talk about the huge amount of non-performing loans in mainland banks. But now they are willing to invest in these lenders for higher profits.

This is because the banks have improved a lot since the introduction of overseas strategic investors, shareholding reforms and listing efforts, Cheng said.

Citing BOC's cheap prices and high dividend payout ratio, some analysts said the largest-ever IPO launched by a mainland firm will attract more subscriptions than that of CCB's. CCB's US$9.2-billion deal was oversubscribed by 42 times last year, while BoCom's was oversubscribed by 204 times.

BOC is selling 25.57 billion H shares, or 10.5 per cent of its enlarged share capital, for between HK$2.5 (30 US cents) and HK$3 (37.5 US cents) per share.

The price values the lender at 1.9 times to 2.2 times its book value, which is at least 15 per cent cheaper than rivals CCB and BoCom.

"It's pretty attractive," said Louis Wong, a director at Philip Asset Management.

Even the recent setback of Hong Kong's stock market will not dampen investors' buying enthusiasm, Wong said.

"Mainland banking stocks are relatively insulated from the recent market lull," he said.

Hong Kong's benchmark Hang Seng index experienced the biggest one-day decline in nearly two years on Monday, dropping 2.41 per cent to 16,494.84.

It continued to sink by 0.62 per cent the following day.

Indeed, the lure of BOC's IPO has been on show even before the opening of its public offering; some analysts say it led to the lukewarm response to other IPOs.