China's largest commercial bank said on February 24 it plans to complete its joint-stock restructuring and get ready for an initial public offering by the end of 2006.

"The Industrial and Commercial Bank of China (ICBC) is stepping up comprehensive reform... (and) aims to complete joint-stock restructuring and meet listing requirements in 2006," an ICBC spokesperson said.

The spokesperson refuted some media reports that the bank plans to list only part of its assets, insisting that the bank's goals for listing as a whole "remain unchanged."

ICBC's reform plan is still being reviewed by relevant authorities, he added, declining to give details.

The bank is widely expected to be the third of the four largest State-owned commercial banks, also known as the Big Four which own more than half of the nation's banking assets, to be listed on the stock market.

The Bank of China and China Construction Bank were chosen late last year for a pilot reform package designed for the Big Four, and received a total of US$45 billion in funding to boost their capital adequacy ratios.

The two plan to list no later than next year, while the Agricultural Bank of China, the last of the Big Four, has scheduled its listing for post 2006.

ICBC is currently grappling with two major problems hindering its reforms high non-performing loans (NPLs) and poor corporate governance, the spokesperson said.

The bank aims to achieve 240 billion yuan (US$28.9 billion) in operating profits in three years, and dispose of 300 billion yuan (US$36 billion) worth of NPLs during the same period.

This would bring its NPL ratio down to below 10 per cent, and the ratio of all non-performing assets to around 6 per cent at the end of 2006, he said.

The NPL ratio is expected to be reduced to 18 per cent at the end of this year.

ICBC, after years of reform, has entered a new phase with high profit growth and rapid decline of non-performing assets, the spokesperson said.

The bank earned a total of more than 150 billion yuan (US$18 billion) in operating profits over the past four years, he said. Its operating profits jumped by an annualized 40 per cent last year to 62.1 billion yuan (US$7.5 billion).

Nearly 90 per cent of the profits from that four-year period were used to write off bad loans in a bid to strengthen the base for future development, the spokesperson said. The NPL ratio was slashed to 21.3 per cent at the end of last year.

ICBC's NPL ratio peaked at 47.5 per cent in June, 1999, shortly before four asset management companies were set up and took over a total of 1.4 trillion yuan (US$169 billion) worth of NPLs from the Big Four.

Out of the 2.1 trillion yuan (US$253 billion) worth of loans the bank lent after 1999, or 64 per cent of its total outstanding loans, the non-performing part accounts for a healthy 1.55 per cent.

Non-performing loans created after 2000 totalled 17.4 billion yuan (US$2 billion), or 0.86 per cent of the total lending during the same period.

"This demonstrated that the Industrial and Commercial Bank of China has fundamentally strengthened the embankment protecting the quality of new loans," the spokesperson said.

In three years, the bank aims to build a corporate governance structure and operational mechanism, which a modern commercial bank should have, he said.

Among the planned measures, it will try to build a better performance evaluation system, improve its internal control mechanisms, and establish a comprehensive risk management system.