The Agricultural Bank of China (ABC) is likely to issue up to 51.4 million shares in its much-awaited initial public offering (IPO), accounting for 16 percent of its total capitalization, a source close to the bank said on Tuesday.

The bank set the proportion of its new share sale at a range between 12 to 18 percent of its total capitalization and it might scale down the IPO size if the market conditions remain volatile, the source said.

The recent fluctuations in the domestic capital market have cast a shadow on the lender's offer price, which is yet to be decided amid investors' uncertainties about the overall economic outlook.

Earlier reports said the bank lowered the price-to-book ratio to 1.6, which would mean an IPO price of 2.5 yuan ($0.37) per share. Bank officials, however, denied the report and said the final offer price is yet to be decided.

ABC, the last of the big four State lenders to list, is speeding up the IPO process to march ahead of its rivals in the fundraising campaign.

Other lenders such as Bank of China, Industrial and Commercial Bank of China and China Construction Bank also plan to raise funds this year.

It has been widely anticipated that ABC's float, likely to be the world's largest, would raise between $20 billion and $30 billion.

Several Middle Eastern sovereign wealth funds have expressed interest in becoming strategic investors.

The Kuwait Investment Authority intends to invest about $1 billion in ABC's IPO while institutional investors from the United Arab Emirates are also in talks with the lender for potential investment opportunities.

China's national pension fund has invested $2.2 billion and is one of the bank's strategic investors for the IPO, according to Ji Guoqiang, head of the fund's equity investment department. PetroChina, the country's biggest oil and gas producer, could also be roped in as a major investor.

To improve the prospects of ABC's float, Beijing unveiled tax cuts for rural lenders last week. That in turn is expected to boost profitability of the bank's relatively weak rural operations.

The bank received a capital injection of $19 million from Central Huijin, the investment arm of China's sovereign wealth fund in 2008 and managed to write off $118 million of non-performing loans from its balance sheet during 2008.

The bank posted a net profit of 65 billion yuan in 2009, up 26.3 percent from a year earlier. The capital adequacy and bad-loan ratio stood at 10.07 percent and 2.91 percent respectively by the end of last year, the bank's Chairman Xiang Junbo told China Daily in an earlier interview.