ICBC pips BoA in market capitalisation

Mar 29 | Updated: Mar 30 2007, 07:16am hrs
Industrial & Commercial Bank of China Ltd overtook Bank of America Corp as the worlds second-most valuable financial firm, even though the Beijing-based company earns about one-third the profit.

Shares of the bank, known as ICBC, rose 5.5% to 5.59 yuan at the 3 pm close in Shanghai, valuing the company at $228 billion. That trails only Citigroup Inc.s $250 billion.

Chinas 10% growth and its $2 trillion of household savings are attracting foreign banks such as Citigroup, whose chief executive officer Charles Prince today announced plans to double his network in the country. ICBC trades at earnings multiples that are more than double those of Citigroup and Bank of America, while its return on assets trails by at least half.

What does it tell you when the worlds second-biggest bank is Chinese said Klaus Kaldemorgen, head of Deutsche Bank AGs DWS mutual fund unit, which manages the equivalent of $338 billion and is invested in China. I like Chinese companies but the valuations in the financial sector are just ridiculous and incredibly inflated.

A four-year investment boom has powered annual economic expansion of 10%, double the global average, pushing China past the UK as the worlds fourth-largest economy. ICBC, Bank of China, China Construction Bank Corp, Bank of Communications Ltd, and China Merchants Bank Co have raised more than $47 billion from share sales since June 2005.

HSBC Holdings Plc economist Qu Hongbin this week said Chinas gross domestic product may swell more than 11.5% from a year earlier in the first quarter. That would be the fastest growth since 1994.