In China, fakery knows few limits — as Goldman Sachs has found out. Wary of this, perhaps, China International Capital Corporation (CICC) lists brand appropriation as one of near 50 risks in its initial public offering prospectus. It also mentions staff misconduct — more pertinent, perhaps, since it is investigating one of its Hong Kong employees for irregular dealing in client accounts.
The Chinese investment bank hopes to raise as much as $933m, nine-tenths of which will be new shares. Its market capitalisation will be about $3bn. As with many recent Hong Kong deals, this one is already half sold: $465m will be taken up by 10 investors, including parents of Hong Kong-listed China Mobile and Baosteel Group, as well as subsidiaries of Hong Kong-listed Value Partners and the US’s Prudential.
The rest is likely to attract interest. CICC has been growing quickly; profits grew nearly fourfold between 2012 and 2014. At the same time, return on equity nearly trebled, to 14 per cent; by June 2015 it had jumped higher yet, to 24 per cent. And while the stock is no steal at 18 times 2014 earnings, on annualised first half 2015 earnings that drops to 9 times (although bear in mind that investment bank earnings are rarely smooth through the year). Goldman Sachs is on just 10 times — if for weaker growth and returns.