—— Industrial Bank Aims to Achieve First-Class Modern Commercial Bank
Banker, a magazine of the UK , recently published the latest World Top 1000 Banks. As one of the ten national shareholding commercial banks, Industrial Bank keeps increasing in terms of various rankings. Industrial Bank ranks the 210 th according to total assets, 86 ranks higher than the previous year; and 325 th according to core assets, 109 ranks higher over last year. Boasting strong momentum in development, Industrial Bank has become one of the domestic banks with fastest improvement in international ranking.
As a shareholding commercial bank featured low-key but steadfast operation, Industrial Bank kept gaining extensive interests from the industry in recent years for its sound development, innovative managerial pattern and striking market operations. From regional to national, from margin to focus, Industrial Bank's 17-year development well represents the history of reform and opening up of financial industry in China , and reflects continuous exploration and efforts by China 's shareholding commercial banks to establish the top-ranking modern commercial banks.
Outstanding Achievements with Capability to Create Value
The capability to create value is regarded as the fundamental criterion to evaluate the performance and core competitiveness of an enterprise in market economy. Industrial Bank has been extensively acknowledged by the shareholders, the market and the clients for its excellent capability to create value through 17 years' operation.
The value-creating capability is first reflected on the persistent, fast and sound development of various operations of Industrial Bank. By the end of June 2005, the total assets of Industrial Bank has exceeded RMB 400 billion, a yearly increase of 37%; deposit outstanding of domestic and foreign currencies has reached RMB 299.8 billion, a yearly rise of 54%; loan outstanding of domestic and foreign currencies has amounted to RMB 248.8 billion, going up 36% yearly. According to the general international five-category asset classification approach, the NPL rate came to 2.32%, ranking nearly close to the advanced level of international banks. The capital strength keeps increasing, reaching a net capital amount over RMB 19 billion so far. And the capital adequacy ratio conforms to related standards by legal regulatory authorities. Industrial Bank also maintains profit growth in consecutive 17 years, with an accumulated profits exceeding RMB 8.6 billion. Industrial Bank has achieved a balanced development in terms of scale, speed, quality and benefits, and keeps favorable development tendency among domestic banks.
The value-creating capability is also well reflected in return on investment for shareholders. Financial report of Industrial Bank shows that dividends were distributed in 15 out of 17 years from 1988 to 2004 with a yearly rate over 60%. Meanwhile, shareholders' equity keeps growing rapidly. With only some RMB 400 million of net assets at early stages, now Industrial Bank owns over RMB 11.1 billion, rising 23% yearly. And all of the investors of Industrial Bank have gained rich return from the bank. Take the initial and existing biggest shareholder Fujian Provincial Government as example. Fujian Provincial Government has shares worth RMB 313 million when Industrial Bank founded, however, 17 years later, the shares have exceeded RMB 3 billion, ten times as much as the original investment.
The value-creating capability is also shown as strong support for clients and the economic construction of the country. Based on the operational belief known as "Service Starts with Sincerity" and "Mutual Development and Growth with Clients", Industrial Bank keeps enhancing capital strength, launching innovative financial products, and taking full advantage of financial services, so as to actively support the construction of pillar industries and key projects of the country, covering energy, transportation, communications and urban infrastructure, and established fine business relations with corporation, institutional and individual clients. Merely the latest three years, Industrial Bank has granted loans exceeding RMB 900 billion to various clients, to support state, provincial and municipal level key projects, such as Northeast China Power Grid, Cross-sea Bridge of Hangzhou Bay, Ningbo Beilun Port, Beijing-Fuzhou Express Highway, Ningbo-Shanghai Express Highway, Tongjiang-Sanya Express Highway, Fujian Refinery-Chemical Integration Project, Fuzhou International Airport Express Highway, and Fujian TV and Broadcasting Center, as well as to support leading enterprises and key enterprises, such as China Petrochemicals, China Telecom, China Mobile, Baosteel Group, Soueast Motor, AOC Electronics, Shangdong Luneng, Guangdong Power Group, and Zhengtai Holdings.
National Expansion with Skillful Operation
As a rising commercial bank, the case of Industrial Bank's successful transfer from a regional to a national bank has become a hot topic for people.
The successful transfer finds direct expression in a dramatic expansion of service networks of Industrial Bank. After the first branch was established in 1996 in Shanghai as the first step out of regional operation, CIB took every opportunity to practice a unique way of national development. So far 27 branches and 315 branch offices have been established in Beijing , Shanghai , Guangzhou Shenzhen, Hangzhou , Nanjing , Chongqing , Jinan , Wuhan , Shenyang , Tianjin , Chengdu , Zhengzhou , Xi'an , Changsha , Dongguan, Foshan and cities in Fujian Province . An online banking system and a telephone banking system were also set up. Therefore, service networks of Industrial Bank now base on southeast coastal cities, cover major capital cities, and link to foreign services. Especially in recent years, Industrial Bank took the advantage of deepening financial reform conducted by the government to start the merger of city credit unions as well as city commercial banks, and created market-driven merging mode in domestic banking industry. Industrial Bank successfully merged Zhejiang Yiwu City Credit Union, Wenzhou Oubei City Credit Union, Taizhou Xunda City Credit Union and Foshan City Commercial Bank. Thus Industrial Bank created an entirely new way of fast expansion for shareholding commercial banks. For these reasons, Industrial Bank was honored as "Successful Case" and "Significant Pattern" in banking industrials by domestic regulatory authorities and major media.
Compared with external expansion of service networks, the internal improvement of operational pattern, capital structure, system & mechanism, and competitive strength may provide better evidence. Viewing form the operational pattern, Industrial Bank has only 32 branches outside Fujian Province by the end of 2000, contributing proportions of 48%, 49%, and 60% in savings, loans and profits respectively. By the first half of 2005, however, the outside branches have reached 199, and the proportions in savings, loans and profits rose to 79%, 84% and 88% of the whole system. At the same time, several sectors of parent bank that are closely related to the market, such as Financial Market Center, Product R&D Center, Credit Card Center, VIC Department and Asset Trusteeship Department have moved to Shanghai or Beijing, marking the establishment of the national operation pattern. When it comes to capital structure, after three times of capital increase and shares expansion in 1997, 2000 and 2003, registered capital of Industrial Bank grew rapidly from original some 400 million shares to present 3.999 billion. Domestic reputable enterprises, such as China Electronic Information Group Corporation, Baosteel Group, State Foreign Investment Promotion Bureau and Ping An Insurance (Group) Company, and famous international companies or institutions, such as Hang Seng Bank, International Finance Corporation, and the Government of Singapore Investment Corporation Pte Ltd. joined Industrial Bank as new shareholders. And the shareholder structure becomes "national", even "international". From the perspective of system and mechanism, considering the organizations and operation should be nationalized, Industrial Bank divided all the organizations into four categories according to regional economic development and applied diversified management and policies for each category so as to optimize the resource allocation through out nationwide market. Meanwhile, Industrial Bank strengthened technical innovation and set up first Office and Communication Network, which incorporates OA system, Video conferencing system and bank IP telephone, to ensure distance and real-time management for the whole bank. Looking at the competitive strength, recent years saw innovative products that based on modern IT technology came into being continuously from Industrial Bank and help greatly enhance professional financial service. Among the services, agent trade and settlement of securities funds and bonds, inter-bank borrowing, bank-security connection, online banking feature greater strength over counterpart banks. The agent trade and settlement of securities funds has ranked top 3 in the country for many years. Volume of online banking, inter-bank borrowing and transaction of cash and bonds also keep high ranks in the country. In 2004 online banking platform CIB Online was awarded "Top 100 Business Websites in China " and "Website of Fastest Growth". Innovative products, such as product portfolio – Wise Fortune, main wealth management products for domestic and foreign currencies – "WLB" & "WHT" , CIB Credit Card promoted jointly with Hang Seng Bank, the system of personal spot FX transaction promoted jointly with Citibank— "WHB", as well as bank-bank platform for small or medium-sized financial institutions, have won great popularity among the market because of their distinctive features, powerful functions and appropriate pricing.
With the improvement of the comprehensive strength, Industrial Bank developed fast from a regional bank to one of the "Top Ten National Shareholding Banks" and occupied an important position in China 's financial system. At present China 's commercial banks could be divided into three categories on the supervision list by financial institutions of China Banking Regulatory Commission. The first category includes four state-owned commercial banks: Industrial and Commercial Bank of China, Agriculture Bank of China , Bank of China and China Construction Bank. The second category includes 11 national shareholding commercial banks. And the third includes city commercial banks, urban and rural credit unions. Industrial Bank is an important member of the second category. A domestic index of competitiveness of domestic commercial banks this year, published by Banker Magazine of China and China Research Center of Competitiveness of Commercial Banks, proved the importance of Industrial Bank from another perspective. According to the index, the overall competitiveness of Industrial Bank ranked 6 th among 14 major domestic commercial banks. Industrial Bank ranked even higher regarding to quality and security of assets, earning capacity, and internal control system. When it comes to approval for operational qualifications, Industrial Bank is among the first ones that receive approval in the application for innovative business, such as agent trade and settlement of bonds, online banking, capital verification for new-share application, agent sale of Open-end Fund and FX d er ivatives transactions. This shows the positive response and confirmation of regulatory authorities for Industrial Bank in a long term. China People's Bank approved that Fujian Industrial Bank to rename as Industrial Bank in December 2002. This is the first successful case that domestic regional commercial bank upgraded to national commercial bank. At the end of 2003, China Banking Regulatory Commission approved Industrial Bank to issue long-term fixed subordinated debt firstly, marking the initiation of a new way of capital replenishment for domestic commercial banks. Again, at the beginning of 2005, China Banking Regulatory Commission approved Financial Market Center of Industrial Bank for the first time in the country of receiving the Finance License, which made the center one of the professional and comprehensive organizations of financial operation.
The extensive focus from society and media reflects Industrial Bank's increasingly stable position among national banks and the market influence from another perspective. Although Industrial Bank featured low-key and stable development, domestic media and all circles of the society pay great attention to Industrial Bank along with its successful expansion in national market. A rough statistics shows that since 2002 Industrial Bank has been reported over one thousand times by domestic and overseas media. Among them, Wall Street Journal, Financial Times of the UK, Reuters, Dow Jones Newswire, the Associated Press, Zaobao of Singapore, Ta Kung Pao and Wen Wei Po of Hong Kong, Commercial Times of Taiwan and Hong Kong Phoenix TV covered CIB for about one hundred times, and CCTV, People's Daily , Financial News, The Securities Times , Xinhua News Online, Sina.com and Sohu.com reported Industrial Bank for over 500 times. Industrial Bank was mentioned even more times on regional media. Since branches of Industrial Bank outside Fujian Province always are successful and make positive contribution to local economic development, many regional governments, including those of eastern coastal areas and Midwest areas, has given invitation to Industrial Bank, asking to establish branches in local areas to support local economic and social development.
Outstanding in the International Market
Going global and joining international competition is the requirement of WTO for domestic enterprises, as well as the only way for Industrial Bank to achieve a top modern commercial bank. Industrial Bank accelerated integration with international market in recent years, along with further opening-up in finance and growing strength of its own.
Integration to international market first requires the conformity of managerial and technical approaches. Industrial Bank took the initiative, to promote new Financial Accounting Standards among domestic commercial banks, so as to accelerate the process to internationalize the accounting standards and information disclosure standard; to fully apply general international five-category asset classification approach, to promote international quality management of credit assets; to explore restructuring of the bank according to advanced organizational structure of international banks for improvement of competitiveness; to introduce Economic Value-Added (EVA) approach, Total Quality Management (TQM) system, and Internal Ratings-- Based (IRB) approach to improve assessment, incentive and internal control level to international standards. In the first half of 2005, international settlement and bills trading of Industrial Bank obtained ISO9001 Certificate issued by United Kingdom Accreditation Service (UKAS), marking the operation of quality management in Industrial Bank has reached international top standards. In terms of technical approaches, Industrial Bank aims at international advanced levels and launched cooperative projects with domestic and foreign IT enterprises. Industrial Bank narrowed the gap between international advanced banks by converging data for the whole bank, developing the core system and various management & information systems of next generation. At present, Industrial Bank is the sole bank in China providing uninterrupted services round the clock. In 2005, the Data Processing Methodology and System for Uninterrupted Service was given patent of invention by State Intellectual Property Office (SIPO). Industrial Bank has become the first commercial bank received the patent for invention in the name of operation system and methodology. According to International Data Co. and CEO & CIO China , "the construction of information systems of Industrial Bank has achieved excellence from ordinary in recent three years".
The integration to international market is shown in competition against international counterpart banks as well. Banker of the UK started to include Industrial Bank into World Top 1000 Banks in 2001. According to the index released in July 2001, Industrial Bank ranked 568 th in terms of Tier 1 Capital and 413th on Total Assets. Year 2005 saw the rises to 325th and 210th respectively of the ranking. Industrial Bank improved the ranking by 243 and 203 respectively in a short period of 4 years, reflecting a dramatic improvement of Industrial Bank in international position.
The integration to international market also expressed by the connection with foreign investors. By the end of 2003, after rounds of in-depth negotiations with a dozen of notable international financial institutions and financial groups, Industrial Bank finally reached an investment and share purchase agreement with Hang Seng Bank, International Finance Corporation, and the Government of Singapore Investment Corporation Pte Ltd.. The agreement promised a total investment of RMB 2.7 billion and a share proportion of 24.98%. The transaction has become the one with the largest number of shareholders introduced at one time, the highest proportion of purchased shares and the greatest amount of capital involved in domestic banking industry. International authoritative media commented that "this marked the acceleration of opening-up in financial industry of Chinese Government". The successful introduction of international strategic investors provided Industrial Bank with a favorable platform to introduce market experiences, managerial technique and innovative products of international advanced banks, so as to achieve a top modern commercial bank. After the foreign funds arrived last year, Industrial Bank started improving corporation governance of the bank according to rules of international advanced bank roundly. Industrial Bank reorganized the Board of Directors and Board of Supervisors, inviting 3 directors of foreign shareholders, 4 independent directors and 2 outside supervisors. The reorganization brought with better structure of personnel, knowledge and quality to the Board of Directors and Board of Supervisors. An expert with Finance Research Center of Chinese Academy of Social Sciences commented after an in-depth investigation of Industrial Bank that Industrial Bank was among the best commercial banks in terms of corporation governance. Financial News also gave such messages: "Viewing from current corporation governance of Industrial Bank, the basics for building the core system and upper structure have been erected. Industrial Bank has left its counterparts behind." Moreover, Industrial Bank initiated practice in taking advantages from foreign shareholders, following international trend of development and enhancing R&D for products. Last year saw a sound cooperation between Industrial Bank and Hang Seng Bank, which promoted popular services such as Dual-currency credit cards that meet international standards with Co-brand of both Industrial Bank and Hang Seng Bank. By the cooperation with Hang Seng Bank, The Industrial Bank successfully brought in resources of talent, management, techniques and networks and obtained good response from customers.
“Striving to build a top-ranking bank with a history of centuries” is the grand objective for Industrial Bank. Industrial Bank have been through 17 years of development, which just is a beginning compared with centuries, however, with the movements to achieve first-class level, we have full reason to believe that the future for Industrial Bank will be brighter and brighter.