China Construction Bank, the PRC's third-biggest lender, hired China International Capital Corp, Citigroup Inc and Morgan Stanley to arrange a US$5 billion initial public offering by the fourth quarter, a banker said.
Construction Bank will notify the investment banks after the Lunar New Year holiday finishes tomorrow, the banker, who asked not to be identified, said.
Handling the offer may make it easier for Citigroup, the world's biggest financial services company, and Morgan Stanley, which owns a third of China International, to win other business from China.
Investment banks are seeking to underwrite more than US$10 billion of share sales planned this year from China's state-owned banks, airlines and telecommunications companies.
"They've got a good chance of winning more mandates from second or third-tier banks because helping on the first state-owned bank's IPO will boost their reputation,"said Preston Ko, who helps manage US$120 million at Bank of Communications in Hong Kong.
"Citigroup was probably chosen because they've done a better job at managing risks," he said.
Citigroup won the mandate after agreeing to invest in Construction Bank and pledging not to seek to arrange share sales by China's other three biggest lenders until the IPO is completed, the banker said.
Morgan Stanley and China International were expected to win the mandate because of their relationship with Construction Bank.
Morgan Stanley owns a one-third stake in China International, an investment banking venture that Construction Bank controls.
Feng Danyun, a spokeswoman for China International, declined to comment.
Yu Baoyue, a spokesman at Construction Bank, wasn't reachable for comment because it's a public holiday in China.
Katherine D'arcy, a spokeswoman for Citigroup, and Nick Footitt, a spokesman at Morgan Stanley, both declined to comment.
Construction Bank plans to include assets from across the country in the listed company as part of reorganization to centralize credit controls and asset management, the banker said.
The IPO may be completed early next year, depending on the progress on the reorganization, the banker said.
The People's Bank of China and China Banking Regulatory Commission approved the appointments, the banker said.
The State Council, China's Cabinet, has in principle approved Construction Bank's restructuring plan.
Construction Bank's sale will be the biggest IPO in Asia outside Japan since China Unicom Ltd raised US$5.65 billion in June 2000.
Former US treasury secretary Robert Rubin helped host a Citigroup seminar for Construction Bank in Beijing, while German Chancellor Gerhard Schroeder asked China to give Deutsche Bank a role in the sale.
Former US secretary of state Henry Kissinger accompanied J.P. Morgan chief executive William Harrison on a November trip to Beijing.
Citigroup agreed to invest in Construction Bank to help the lender tighten credit controls and reduce its non-performing loans. The US bank may buy less than 5 percent of the shares Construction Bank sells, said the banker.
The Chinese lender earlier received a US$22.5 billion government bailout last month to help pave the way for its public share sale. China also provided funds to Bank of China.
A successful sale would pave the way for initial public offerings by Bank of China, Industrial & Commercial Bank of China and Agricultural Bank of China. The four state-owned lenders control about 70 percent of the nation's banking assets.
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