Bank of China said yesterday it sold a 5 per cent stake sale to Singapore-based Temasek Holdings (Private) Limited, moving closer to its final initial public offering (IPO).

Spokesman Wang Zhaowen said the lender had also finished its pre-IPO talks with strategic investors.

Bank of China said late last year that it had signed strategic investment agreements with the Royal Bank of Scotland Group, the Swiss-based bank UBS, Temasek and the Asian Development Bank by October 6, 2005.

The four strategic investors are expected to spend a combined US$6.775 billion to buy a 21.85 per cent stake in Bank of China.

But the parent of the Chinese lender, Central Huijin Investment Co (also known as China SAFE Investments), which controls 100 per cent of the bank, did not approve the entire deal with Temasek.

According to the agreement signed between Bank of China and Temasek last August, the Chinese lender would sell a 10 per cent stake for US$3.1 billion to the Singapore-headquartered firm.

"Central Huijin only agreed to sell a 5 per cent stake to Temasek," Wang said.

Beijing-based Caijing Magazine said the opposition from Central Huijin to sell a larger stake was mainly due to concerns that foreign strategic investors may have too much control and that Chinese lenders are selling assets too cheaply.

Temasek last July invested US$1.5 billion for a 5.1 per cent stake in China Construction Bank, which raised US$9.2 billion from its Hong Kong IPO last year.

It also bought a 4.55 per cent stake in China Minsheng Banking Corp last January.

Eva Ho, spokeswoman for Temasek in Singapore, declined to comment but confirmed the company had finished the 5 per cent deal with Bank of China.

"We are now busy preparing for the finial IPO," Wang said, declining to specify the places and the time of the IPO.

Previous media reports said the bank would list in Hong Kong in the first half of this year and in Shanghai in the second half.

Bank of China already named Goldman Sachs Group Inc, UBS and Bank of China International last August as its financial advisors and lead underwriters for its planned IPO.

The bank received a US$22.5 billion capital injection from the government in late 2003. It was one of the pilot projects for China's reform of State-owned banks.

The bank reorganized itself into a joint-stock company named Bank of China Limited in August, 2004.

So far the bank has not released its financial results from last year.

By the end of last June, the bank's non-performing credit rate declined to 4.38 per cent, from 5.12 per cent at the beginning of the year.

Its capital adequacy ratio stood at 10.04 per cent at the end of 2004

Source: China Daily