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Bank of China IPO set to be biggest in six years

Bank of China has announced the launch of its much anticipated $9.8 billion IPO, set to be the world's biggest since 2000, on the Hong Kong stock market.

China’s second biggest lender is following state-owned banks China Construction Bank and Bank of Communications in offering shares to the public. The flotation has already generated a frenzy of interest among retail investors, who are hoping that the strong performance of these other banks will be repeated.

Institutional investors have also been keen to invest in Bank of China and the deal has attracted over $30 billion in orders since the book opened last week, according to Reuters. A consortium led by Royal Bank of Scotland already has a 10% stake in the lender.

Although foreign and domestic investors alike are scrambling for stakes in Chinese financial institutions, the industry is still undergoing an overhaul to bring them up to international standards of corporate governance. A recent Ernst & Young report – heavily criticized by Beijing and subsequently withdrawn by the accounting firm – highlighted China’s bad debt problem.

In the past 18 years, the Chinese government has spent nearly $283 billion to clear non-performing loans at state-owned banks and some analysts claim that official Chinese figures play down the true level of bad loans.