Investment BankingMerrill Lynch

ICBC in IPO

Financial Institution in HKECON 310s4g4

Introduction to investment Bank

Best known in the world

Help companies to raise money in primary market

Intermediaries

Differ from commercial bank & brokerages Commerical Bank: Take deposits and make commercial and

retail loans

Brokerages:Assist in the purchase and sale of stocks, bonds, and mutual funds

Background of Merrill Lynch

Established in 1914

Owner: Charles E. Merrill & Edmund C. Lynch

Place: Wall street in New York City

In 1959 become 1st member firms of the New York Stock Exchange

Go public in 1971

CEO President & Chairman of

the Board

Industry: Finance & Insurance

Main Products Financial Services Investment Banking Investment Management

Background of Merrill Lynch (con’t)

Stan O’ Neal

I’m Stan O’ NealI’m Stan O’ Neal

Responsibilities of Merrill Lynch

Underwriting

Researching & provide advice

Pricing

Year Events

1980 Started the underwriting business

2001 E. Stanley O’ Neal became president and COOMerrill Lynch, Citigroup and Goldman Sachs

advised AT&T on its IPO

2002 E. Stanley O’ Neal became CEO

2003 7.1% market shares of the dealsE. Stanley O’ Neal became the first African-

America chairman of Merrill

2004 Won the advisory on the sale of AT&T Wireless Group

2006 Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, a 2006 Supreme Court case involving security fraud claims

Multicultural Marketing of Merrill Lynch

African American Marketing Hispanic American Marketing LGBT (Lesbian, Gay, Bisexual and Transgender)

Marketing Native American Marketing South Asian Marketing Special Needs Marketing Women’s Marketing

Major Locations of Merrill Lynch

New York City, New York, U.S., global headquarters

Jacksonville, Florida, U.S., corporate center, supporting North America operations

Hopewell, New Jersey U.S., corporate center, supporting North America operations

Jersey City, New Jersey U.S., corporate center, supporting North America operations

Major Locations of Merrill Lynch (Con’t)

Princeton, New Jersey, U.S., corporate center, GPC Home Office

Singapore, corporate center, supporting Asian Pacific Rim (APR) operations, namely Hong Kong & Tokyo

London, UK, European headquarters

Hong Kong, PRC Tokyo, Japan

Financial performance

Ranking of Merrill Lynch

Best at Proving IPOs and services

0

10

20

30

40

50

60

70

80

Merrill Lynch Goldman,

Sachs

Alex. Brown

& Sons

CS First

Boston

Morgan

Stanley

Investment bank

Points

Best Service in EquityUnderwriting

0

20

40

60

80

100

120

140

160

Goldman,Sachs

MerrillLynch

CS FirstBoston

SalomonBrothers

MorganStanley

Inves tment Bank

P oints

Business Groups of Merrill Lynch

Big 3 Groups: GMI: Global Markets &

Investment Banking Group

GPC:

Global Private Client

MLIM:

Merrill Lynch Investment Managers/ BlackRock, Inc.

Highlights achieved in the markets

No. 1 trader of U.S. Stocks (NYSE) since 1989 2005

No. 1 Private Banking Assets, fifth consecutive year, Leading Player Best Investment Bank of the Year by The Banker. Top European Equity House by International Financing Revie

w Top China Equity House by International Financing Review As

ia.

2006 Best Investment Bank by Euromoney Barron's Best 100 Brokers Top Full-Service Brokerage House

Background of ICBC

Established in 1 Jan 1984

One of the big four commercial bank

Decided to restructure

Financial structure :

IPO Procedure

2005

Financial restructure

2006

9 Mar Investment banks were chosen

12 Jul ICBC decided Issue A and H-share simultaneously

20 Jul Formal application

9 Oct International Road Show

16 – 19 Oct Subscription for the Public

20 Oct prices $3.07 (upper limit) 23 Oct Oversubscribed 76 times

977,000 people involved

US$543 billions was frozen

27 Oct made public, price @ $3. 60 ( 17%)

Listing information

Specialty of ICBC IPO

Raise US$21.9 billion

Break the record made by NTT DoCoMo Inc (J

apanese mobile phone company)

Which raise $18.4 billion in 1998

The biggest IPO in the world

Source:The Wall Street Journal Briefing (http://www.tdctrade.com/econforum/dj/wsj061001.htm)

First time issue A and H-shares simultaneously

Landmark of the stock history

the Chief Executive

Mayor of Shanghai

Good example for other enterprises

Specialty of ICBC IPO(con’t)

attended the ICBC’s IPO ceremony in Hong Kong and Shanghai respectively

Biggest white form eIPO application

~10% investors using eIPO (~ 83,000 people)

Protect the environment

Convenient to investors

Saving the transaction fee to investors

Receive allotment result by email

Specialty of ICBC IPO(con’t)

The highest capital was frozen in A share

$800 billion was frozen

break the record of the Bank of China.

Specialty of ICBC IPO(con’t)

Other new records

Most retailer investors apply ( 997,000 people)

First day HK$37.4 billion

No. of bank collect form 7 Banks, 88 branches

Issue Warrant and Share simultaneously

Specialty of ICBC IPO(con’t)

Influence in HK

Ensure the international financial position in HK

2004 world 3rd largest fund raised market After New York and Madrid

2006 HK has good banking system & listing requirement ICBC & BoC IPO → the largest fund raised market

Influence in HK (con’t)

Issue H-share → improve corporate governance → internationalization

Going public in HK → Trend in the foreseeable future

Comment

Playing an important role on adjusting the initial price of stock

advice: not to issue so many warrants

to stabilize the initial price

Setting of initial price

a gain for all the subscribers in the market

underwriting fee: 2.5% per book runner

Merrill Lynch itself earned $50M

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Comment (Con’t)

Position has been raised

Exposure of a variety of risks

e.g. market risk, Liquidity Risk, Competitive Environment

caused by the unpredictable factors

Suggestion: paying more attention + identifying the risks + solutions

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Conclusion

Merrill Lynch had played an important role on the success of ICBC stock issuing

giving contributable advice

gaining satisfactory earnings + growth

being one of the most famous investment banks in the world

affecting other companies’ ranking

somehow a promotion of a stock with the invitation of large book runner

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tHe EnD

Joint Coordinator & Joint Sponsors CICC ICEA Merrill Lynch

Joint Bookrunners Merrill Lynch CICC Credit Suisse Deutsche Bank ICEA Back