April 16, 2010
Source: 21st Century Business Herald
At the retail business working conference held by the Industrial Bank in 2005, the bank's management underpinned the basic thought of driving forward the reform of the organizational structure for retail business. Mr. Li Renjie, president of IB, required that employees throughout the entire bank “step up efforts in retail business with resoluteness and momentum”. This was the beginning of IB's major reform of its retail banking business.
The major business indicators of the IB have increased fourfold over the four years from 2006 up until the present. Of the 9 joint-stock banks in the same category, IB's ranking in terms of the balance of retail assets climbed from No.6 to No.2, and its ranking in terms of liability business from No.9 to No.5.
Sources from the Industrial Bank stated that the bank's profitability in retail banking is growing rapidly on the strength of distinguishing services such as retail credit, third party storage management, financial management, agency fund distribution and “Industrial Master”.
By the end of 2009, IB had achieved a total loan interest revenue of RMB 6.640 billion in retail business, accounting for 20.80% of the loan interest revenue of the bank; retail banking also achieved an accumulative intermediary business revenue of RMB 1.011 billion, accounting for 27.73% of intermediary business revenue of the bank. Retail business has become a stable and sustainable area of profit growth.
“This is mainly because all people across the bank are stepping up efforts in developing retail business as top priority and carrying forward retail division reform throughout the bank”, said Zheng Haiqing, VP of the Retail Bank Management Head Office of IB.
Strategic Transformation
As “a strategic business that gathers follow-up momentum, spreads risk and achieves sustainable development”, retail business is destined to assume a role in fulfilling the “two transformations”.
In 2004, IB put forward the key plan to accomplish two “strategic transformations”, namely transforming the business development model and profitability model. As “a strategic business that gathers follow-up momentum, spreads risk and achieves sustainable development”, retail business is destined to assume a role in fulfilling the “two transformations”.
In the past, the retail business of IB was small in scale, weak in foundation, lacking in customer base and insufficient in channel development. Therefore, IB must rely on unconventional development measures if it is to turn this situation around in a short period of time.
“Reforming the organizational management system of retail business and developing a retail division system top-down” was “the unconventional move” proposed by the decision-makers at the Industrial Bank.
In 2005, IB convened a bank-wide retail business working conference, during which the bank confirmed the basic approach of taking “two steps” in pushing forward the reform of retail business organizational structure, and initially proposed that the retail business division is an entity with independent operation and business accounting under the uniform leadership of the head office, operating and managing the retail business and marketing teams of IB top-down and a exercising the matrix management model which combines vertical management by product line and regional management by branch.
Two steps are taken. The first step is to establish retail business management headquarters at the head office in accordance with the division system, meanwhile standardize and optimize the setup of retail business organizations in branches and carry out retail division reform trials in 8 branches.
As to the second step, when conditions are in place, interconnect the retail business management system of the head office with the retail business marketing service system of the branches to conduct vertical operation & management of the division.
With this, the IB's retail division reforms came in quick succession.
In June 2006, IB established its retail bank management headquarters Shanghai, which was the first organization in the bank whose president was a vice president of the head office, as well as the first headquarters among the business departments of IB; in addition, the retail bank management headquarters of the Industrial Bank was the first retail headquarters established by a non-local joint-stock bank in the national financial center of Shanghai.
In 2009, after inspecting the reform trials in selected branches, IB drew on its experiences and developed a retail division reform model to be executed throughout all of the branches. At this juncture, IB has essentially created the supporting mechanisms for retail business operation. With this, the potential of the retail banking sector is ready to be unleashed.
Independent Sector and Vertical Management
The retail bank division should embody four connotations
“Generally speaking, a retail banking division should embody four connotations: independent sector operation; full-time and professional retail teams; supporting systems like accounting, human resources and appraisal and accounting systems; professional operation and refined management. This is the standard for evaluating whether the reform of a retail division has been successful or not, and these things will determine whether the reform will yield actual results”. Mr. Zheng Haiqing told us.
In the words of Mr. Zheng Haiqing, in terms of professional organizational structure, IB's retail bank management headquarters is charged with the operation, management and development of retail business throughout the bank; the branches and affiliated business organizations are provided with independent retail business management departments with built-in professional functional units.
“Standardize the marketing organizational system of the branches, build a professional and dedicated retail team, strengthen centralized operation and management of business sectors at the branch level and elevate the professional level of independent operation.” Mr. Zheng Haiqing said.
Mr. Zheng Haiqing stated that there are two alternatives for the reform of sub-branch operation model: full transition to retail sub-branches that are managed vertically by the branch retail division, or alternatively, implementation of “dual sector operation”, wherein there are two sectors, retail and organization, that operate independently inside the sub-branch. These two sectors are subject to vertical management respectively by the branch retail division and the branch corporate business department in terms of business, personnel, accounting and appraisal.
“Since the branch retail division exercises direct management of the retail business of the sub-branch, the connection is highly smooth.” Mr. Zheng Haiqing said.
Mr. Zheng said, in terms of staffing, IB has established a retail team supported by retail business core teams, business center service teams and retail business product marketing center teams. Furthermore, in terms of operation mechanisms, on one hand, the bank had intensified comprehensive appraisal and resources investment in retail business at the head office level to encourage operation organizations to expand retail business vigorously. On the other hand, the branches have placed greater emphasis and afforded more support to retail sectors in terms of resources allocation, performance appraisal and business linkage, and certain authorization has been granted to branch retail divisions in terms of finance resource allocation, HR management and performance appraisal.
On the public platform, stress has been placed on the buildup of tangible channels and intangible networks, which involves strengthening the renovation of business outlets, furnishing exclusive VIP Financial Management Rooms and separating cash transaction areas from non-cash transaction areas. The bank has launched the redesign of counter processes so as to improve service efficiency and increase the valid service time of the counters by means of process improvement. By the end of 2009, IB had 501 business outlets, forming a nationwide service network covering the Yangtze River Delta Region, Pearl River Delta Region, the Western Taiwan Straits Economic Zone, Bohai Sea Region and West Central Region.
In recent years, IB has continued to invest in resources and has stepped up the installment of self-service machines. By the end of 2009, the number of ATMs and CRSs operated by the bank totaled at 3,500 units. IB has also launched a cross-bank online payment platform, industrial e-commerce service platform and “IB E-Mall” in a bid to develop e-commerce.
“Tighten outlet service management, designate Lobby Assistant Managers, run counter service skill contests and service standard contests across the bank, elect service star branches and service stars, spread service experience, develop a sound service culture and elevate counter service skills and service quality. Create a service standard supervisory team, stress the analysis and management of complaint cases in customer service, proceed with the customer service quality rating system and reinforce the external restraint of services. These are the priorities for advancing our work”, said Mr. Zheng Haiqing.
Mr. Zheng said that division reform not only improves professional management and service competence, but also spawns a highly efficient marketing model. Over the past few years, IB has tried introducing event-based marketing, developed data models and conducted database-based precision marketing, which have significantly stimulated the multi-level needs of clients. This has helped to preserve regular clients and develop new ones as well as effectively raising the comprehensive benefits of IB's retail business.
Organic Growth
IB proposed a new approach of spurring on the development of liability and intermediary business beginning from assets business and centering around core clients.
It has been reported that at the onset of the bank's retail business reform, a number of people did not believe that the bank would be able to achieve a leap forward and profit within a short period of time because the foundations were so weak. Despite this, the management of the bank quickly proposed a new approach of spurring on the development of liability and intermediary business beginning from assets business and centering around core clients, thus shaping the new development model of facilitating organic growth through strategic transformation.
Guided by this thought, IB took the initiative to develop retail credit business by debuting a wide range of retail credit product lines, including personal new housing and pre-owned housing loans, personal new and pre-owned commercial housing loans, personal comprehensive consumption loans, personal automobile consumption loans, personal mortgage loans, personal business operation loans as well as services providing convenience to clients such as “Mortgage Financial Management Account”, “Grace Period for Monthly Installment”, “Installment Payment at Ease”, etc.
By the end of 2009, the retail credit balance of IB was RMB 162.616 billion, up 334.80% compared to four years ago. The proportion of retail loans in the loan balance of the bank was 23.17%. Of the 9 joint-stock commercial banks, IB climbed from No.6 to No.2 in terms of retail credit balance. While achieving a great-leap-forward in scale, IB still managed to maintain good asset quality, with a bad debt rate of only 0.15%, much lower than the industry average.
In 2007, IB launched a third party storage management service platform, and developed more than 1 million clients in third party storage management in the same year, thus assuming the leading position in the industry. In April 2009, a unique saving deposit variety came to the limelight——“Easy Gain” (Intelligent Saving Deposit Notification), in which the system intelligently chooses the most appropriate saving period according to the time of savings deposit so as to increase the gains of clients. Apart from that, IB also unveiled “IB Prestigious Products”——Wan Li Bao, UnionPay Fund Mall, Agency Trading of Personal Clients' Precious Metals, etc.
By the end of 2009, the balance of IB's saving deposits was close to RMB 150 billion. In the space of three years from 2007 to 2009, the savings deposit growth rate of IB remained the highest among the 9 joint-stock commercial banks, with an annual composite growth rate exceeding 51%, twice as much as the industry average.
In March this year, IB debuted the integrated financial service solution——“Industrial Master”, the first solution in the country tailor-made for “growth business owners” such as self-employed people, small businesses, business partners and private business owners, and allocated special funds to meet the financing needs of “Industrial Master” clients in order to boost the development of the private sector.
Fact has shown that the retail division reform strategy implemented in stages and trials by the Industrial Bank has not dealt a blow to the existing business of IB. On the contrary, it has smoothed out the mechanisms of the system.
“The organic growth mechanism has spawned new retail development momentum”, Mr. Zheng Haiqing said.