Changes Met with Results Steady Growth Continues
(April 28, 2009, Fuzhou) The Industrial Bank Co., Ltd. (Industrial Bank, 601166.SH) released its annual performance report for the year 2008 in Fuzhou today, which coincided with the release of its performance report for the first quarter of 2009. According to the report, the bank maintained stable growth in all areas of business, exhibited increased profits and continued excellence in asset quality in 2008.
In the first quarter of 2009, the industrial Bank adjusted its business strategy to focus on mainstream services and capitalized on new market opportunities therein. Under this strategy, the bank has made remarkable progress in business transformation, structural adjustment and cost control, and performance for the quarter was in line with market expectations. Generally speaking, three things stand out in these reports: First, the bank's assets exceeded the RMB 1,000 billion mark for the first time in 2008 to hit a record RMB 1,020.9 billion; following this, assets increased by RMB 76.3 billion in the first quarter of 2009 to put the total assets of the bank at RMB 1,097.2 billion, representing a quarterly growth of 7.48%. Second, the net profit for 2008 exceeded RMB 1 trillion for the first time, standing at a record RMB 1.1385 trillion. Third, both the balance and ratio of non-performing loans continued to drop. By the end of 2008, the ratio of non-performing loans dropped to less than 1% for the first time to reach 0.83%; moreover, this ratio dropped by another 0.11% in the first quarter of 2009 to reach 0.72%.
Mr. Gao Jianping, the chairman of the board of directors at the IB said, “despite the complicated and rapidly fluctuating economic situation in China and the rest of the world in 2008, the Industrial Bank was able to accurately read the changes in the macro-economic situation and thus withstand the test of the violently fluctuating market to deliver a pleasing performance. Facing new challenges in 2009, the company will implement the various macro-economic regulation policies of the government with a sense of purpose and responsibility to serve the big picture of social and economic development. On the other hand, the company will continue to operate in the framework of commercial banking by ensuring quality, stability and security, aiming to deliver our investors, customers, employees and society with a better performance and make greater contributions to the sustainable and healthy economic development of China.”
Steady Business Growth and Increasing Shareholder Returns
In 2008, IB recorded a total operating revenue of RMB 29.715 billion, representing an increase of RMB 7.66 billion or 34.73% over the previous year. Net profits for the year stood at RMB 11.385 billion, representing an increase of RMB 2.799 billion or 32.6% over the previous year. After the deduction of nonrecurring gains and losses, net profits stood at RMB 11.187 billion, a rise of 40.01% over the previous year. Earnings per share for 2008 were RMB 2.28, representing a rise of RMB 0.5 or 30.29% over the previous year. Shareholder returns continued to rise. The weighted average ROE stood at 26.06%, up 0.72 percent points whereas the ROTA reached 1.22%, up 0.05 percent points. The Industrial Bank continued the dividend distribution policy adopted in the past by providing dividends to shareholders in cash. The dividend yield for 2008 is slightly higher than the previous year, and is one of the higher yield rates among China's commercial banks.
The report for the first quarter of 2009 shows that IB's operating revenue for the quarter was RMB 6.723 billion, representing a decrease of RMB 616 million or 8.39% over the same period of the previous year; net profits were RMB 2.941 billion, a decrease of RMB 147 million or 4.75% over the same period of the previous year; earnings per share were RMB 0.59, representing a decline of 4.75% over the previous year; and weighted average ROE was 5.82%, down 1.81%. The slight decline in profits was mainly due to the reduction of the interest margin, the drop of the ROE rate and the decrease of revenue from intermediary business. The interest margin is expected to stop contracting in the second quarter of the year and remain stable in the second half of the year. The proportion of intermediary business is expected to rise. Profits are expected to meet the targets set at the beginning of 2009.
Raised Debt Size and Optimized Credit Structure
At the end of 2008, the total debts of the Industrial Bank stood at RMB 971.877 billion, representing an increase of RMB 159.439 billion or 19.62% over the beginning of the period. Of this total, customer deposits reached RMB 632.426 billion, representing an increase of RMB 127.055 billion or 25.14% over the beginning of the period and accounting for 65.07% of the total debt, up from 62.20% at the beginning of period. New deposits accounted for 79.86% of the new debts. Savings deposit balance, in particular, increased by RMB 33.247 billion to RMB 88.775 billion (excluding credit card deposit), up 59.72%. In terms of savings deposit balance, IB ranked sixth place among similar banks, up 2 places over the beginning of the year. The rate at which IB's savings deposit balance increased was the fastest among its peers in China . In the first quarter of 2009, IB's total debts stood at RMB 1,045.224 billion, a rise of RMB 73.347 billion or 7.55% over the beginning of the year, of which, customer deposits reached RMB 727.5 billion, a rise of RMB 95 billion or 15.03%. The increase of deposits in the first quarter was close to the growth for the whole year of 2008, and also came out top among the listed banks of its kind.
In 2008, the company proactively implemented the macro-economic regulatory policies of the national government, adjusted and optimized its credit structure and strictly controlled the amount of loans issued and the pace thereof. The balance of loans at the end of the year was RMB 499.4 billion, representing an increase of RMB 99.244 billion or 24.08% over that at the beginning of 2008, of which. Personal loans were RMB 129.8 billion, a slight decline of 2.61%. Corporate loans stood at RMB 310.368 billion, up 20.64% from the beginning of 2008. Corporate loans for real estate represented 11.81% of the total loans, down 2.2 percentage points from the beginning of the year. In the first quarter of 2009, total loans stood at RMB 585.2 billion, representing an increase of RMB 85.8 billion or 17.18% from the beginning of the year. The growth for the quarter was close to the growth for all of 2008. Of the total loans, personal loans totaled RMB 125.3 billion, down 4.4%, while corporate loans totaled RMB 390.9 billion, up 4.65% from the beginning of the year. Loans were granted to core areas in the local economy and to infrastructure construction projects that can boost domestic demand as the bank aggressively developed high-quality loan projects. Loans for governmental infrastructure projects and state-owned large enterprise projects in three major areas, including management of water conservancy, environmental and public facilities, transportation, storage and post as well as lease and commercial services, accounted for 50% of the total increase of bank loans.
Improved Asset Quality and Promoted Risk Control
In 2008, both the balance and proportion of non-performing loans (NPL) decreased – the balance was RMB 4.149 billion, a decline of RMB 434 million from the beginning of the year. The proportion was 0.83%, representing a decline of 0.32% over the beginning of the year. Based on the principle of being prudential, the company raised the provisions against multiple kinds of risks by withdrawing RMB 3.238 billion as the loan loss reserve, representing an increase of 16.47 or 103% over the year before. NPL provision coverage was 226.58%, up 71.37 percentage points over the beginning of the period. A dequacy ratio of loan loss provision was 253.6%, up 111.34 percentage points over the beginning of 2008. In the first quarter of 2009, the NPL balance of the bank stood at RMB 4.239 billion, a slight increase of RMB 90 million. The NPL ratio was 0.72%, down 0.11 percentage points from the beginning of the year and the provision coverage was 229.82%, up 3.24 percentage points from the beginning of the year. The bank further enhanced its capability to guard against risks.
During the period that the report covers, the Industrial Bank continued to improve its risk management mechanism and enhance the foundations of its risk management, thereby substantially improving its capacities in risk management and control. The company strictly controlled the term structure and industry distribution of its loans, enhanced risk investigations and analysis, issued risk warnings on a prompt basis, improved its retail banking risk management system and successfully carried out mortgage loan pressure testing for retail banking.
Innovated Product System and Distinct Business Development
As the first domestic bank to adopt the Equator Principles, the Industrial Bank advocates Green Credit. It has been making major efforts to expand credit for energy conservation and emissions reduction projects and develop “carbon finance”. By the end of March 2009, loan services for energy conservation and emissions reduction projects were available at all of the bank's 34 branches. Support to 91 such projects has already been given, the amount of finance granted increasing from the RMB 3.304 billion at the beginning of the year to RMB 3.534 billion. In inter-bank business, emphasis has been given to key areas such as the bank-bank cooperation platform so as to promote marketing and further enhance cooperation. By leveraging on the advantages that the bank has as a comprehensive service provider, it provides clients with tailor-made cooperative strategies and diversified cooperative solutions. The bank has improved the standard of its professional services, and its scientific management output service is becoming increasingly mature. By the end of March 2009, the number of small and medium banks that had signed inter-bank cooperation agreements with the bank had increased from 138 at the beginning of the year to 206, of which, 143 banks have had their systems networked with IB systems.
IB also attaches a great deal of significance to the innovation of systems and mechanisms. The bank has carried out SME financial service pilot projects as an important initiative in the aim of driving on the transformation of banking development and profit modes, the expansion of customer bases and the fostering of core clients. Recently, the company carried out SME financial service pilot projects, established a professional operation organ for this purpose and continued to make efforts to achieve the professional operation and standardized management of services for small enterprises.
Vision
In accordance with its comprehensive operation plan and business transformation strategy, the company will endeavor to promote its comprehensive service standard and enhance its management and execution in strategic planning, business instruction, process and system improvement, product support, incentive and restraint mechanisms, risk management and system and mechanism reform. It will seek to effectively facilitate the transformation of its business.
“In an increasingly complicated economic climate, the Industrial Bank will, guided by Scientific Outlook on Development, continue to carry out the macro-economic policies and financial regulation requirements of the government, strictly follow the operation policies determined by the board of directors, constantly enhance profitability and risk control ability and improve the way that it serves its customers. The bank will seek the comprehensive, coordinated, stable and healthy development of its business as it takes solid steps to counter risks,” said Mr. Li Renjie, the president of the Industrial Bank.