Financial frenzy

Banks and insurers have driven Chinese equity issuance to record levels in recent years, with IPOs from China Construction Bank , Research and Industrial and Commercial Bank of China (ICBC) raising a combined US$45 billion in the past two years.

China Postal's deal will be hotly contested as there are fewer big bank deals on the horizon since those state lenders have listed. The only mainland lenders expected to list this year are Bank of Beijing and Chongqing City Commercial Bank, which promise to be smaller deals.

Agricultural Bank of China, the weakest of the Big Four state lenders, is undergoing a restructuring that is planned to be completed at the end of the year, with a potential share listing in 2008.

Nearly every large global securities house has a Chinese bank listing under its belt after Citigroup and Lehman Brothers joined the club from their roles on CITIC Bank's deal.

Wall Street titans Goldman Sachs and Morgan Stanley have long histories privatising State assets, while Credit Suisse, Deutsche Bank and Merrill Lynch were all part of ICBC underwriting team.

The winning bankers will have their work cut out for them.

China Postal needs to figure out how to scale back its branch network and completely transform itself into a bank focused on serving retail customers. It must also build a loan book.

However, the last challenge could be a blessing in disguise, given China's mountain of bad debt, which has lingered in the system for years.

"It doesn't have any loans. But that could be a good thing, as it doesn't have any non-performing loans either," one banker said, half jokingly.

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