Date: May 13, 2010 Source: China Business News Daily
As one of the key initiatives in transforming mode of business and profit-making, the retail banking reforms launched by the Industrial Bank have led to major breakthroughs in the space of just four years. As of March 2010, IB had a loan balance of RMB 187.045 billion in retail lending, registering a rapid growth from 6th place in 2006 to 2nd place in 2010 among China's nine joint-stock banks in this regard. IB has also been the leader in the growth rate of savings for three consecutive years from 2007 to 2009. Moreover, IB also boasts a range of unique products and services that are highly popular among clients, such as foreign and domestic currency wealth management products, precious metal brokerage and low-carbon credit cards.
“The key behind the client trust and substantial development gained in retail banking by the IB is the bank's dedication to innovating financial products and improving financial services for the benefit of the people”. This comment was made by the head of the Retail Banking Headquarters of the IB when talking about the “extraordinary” development of the bank's retail banking business. A look at the development strategy and product system of IB's retail banking in recent years reveals that IB has seized on market opportunities and kept in pace with social and economic developments. Its orientation towards serving the people has not only managed to meet social and economic needs, but has also promoted its own sustainable development.
Retail lending: for the people
When IB made the important decision to transform its business development mode and profit-making mode in 2004, retail banking stood out as an important tool in the realization of this goal due to its nature as a “strategic business that boosts growth, spreads risks and guarantees sustainable development”.
From then on, IB has been aggressively carrying out retail banking reforms. In June 2006 it established a Retail Banking Headquarters in Shanghai, ushering in a period of intense retail development. The intense promotion of retail loans presented itself as both a key initiative in boosting retail business and a major measure in providing services for the people.
As of March 2010, IB had over 410,000 real estate mortgage loan clients representing a loan balance of RMB 164.6 billion. Meanwhile, IB also provides personal consumption loans to support house decoration, tourism, overseas study and the purchase of high-value durable goods among clients. It actively provides small re-employment loans to help unemployed people while they are looking for a new job. Its student loans help excellent yet poor students to complete their courses. After the catastrophic “May 12” earthquake in Sichuan in 2008, IB took numerous measures to help the victims overcome adversity, including delaying repayments of personal loans and providing loans to support the rebuilding of housing.
While offering highly diversified product lines, IB has also continued to innovative products to respond to changes in the market. IB launched a special loan repayment mode amidst the global economic depression in 2009. The mode offers a temporary deferral of principal repayment for up to three years, and is thus able to substantially alleviate the pressure faced by clients at certain phases in their lives and careers. The service immediately gained widespread praise and was named as one of the “Top 10 Financial Products” in an appraisal by the Banker magazine, CBN and SOHU.
IB's considerate product designs are also reflected in its “interest-saving program” which helps clients to save interest by shortening loan periods; “mortgage and wealth management accounts”, which help clients to “offset their mortgage loans with deposit interests”; and a “repayment grace period”, which exempts clients of overdue interest and default interest within a grace period of 10 days without adversely affecting their credit records.
IB has also been considering the introduction of an innovative product recently. With this product, clients can convert the non-mortgaged part of their mortgaged real estate properties or the repaid parts of their mortgage loans into credit, hence maximizing the utilization of mortgaged properties and satisfying other consumption needs.
Product innovations made according to client needs are met with both recognition and returns. The scale of the bank's retail loans grew by 255% in the space of just three years to reach RMB 180 billion as of March 2010. The asset quality thereof has also remained sound, with a bad loan ratio of only 0.16% which is far below the industry average. For that reason, IB has become an outstanding player in the domestic retail lending market.
Xingyetong: comprehensive financial service solution for emerging business owners
In addition to satisfying the needs of retailing clients, IB has also launched Xingyetong, China's first comprehensive financial service solution oriented towards emerging business owners, including self-employed personnel, small industrial and commercial businesses, partners and private business owners.
As a key innovative product of retailing banking in 2010, Xingyetong has integrated IB's major resources in retail banking in the form of its five major features, i.e. financing, payment, wealth management, VIP services and proprietorship. In addition to basic payment and account clearing, Xingyetong also offers loans to emerging business owners to expand their business scale and improve operating conditions. Individualized wealth management services can help clients rationalize their financial planning and realize the stability and growth of their personal and family wealth. VIP services enable clients to focus on their businesses. Through the “one-stop” services of IB, clients can make substantial savings in finance, time, information and living costs.
It is noteworthy that IB also plans to allocate 10% of the year's new credit loans to support clients of Xingyetong with an aim to resolve the difficulties that they face in fundraising, which fully demonstrates the firm determination of IB considering the increasingly strict policies on credit loans this year.
IB's support for individual private businesses are also directly reflected by its efforts to simplify loan application procedures, increase loan application efficiency and introduce innovative guarantee modes. As a response to the “fast, urgent, frequent and small-scale” needs of emerging businesses for funds, IB has also established a priority loan channel in its Xingyetong program: loan applications are approved within 2 to 5 working days provided that the loan conditions are satisfied and full and complete application documents are provided, and a basic credit line between RMB 50,000 and RMB 3,000,000 is available for the turnover of clients.
As a solution to the generally poor financial management systems of various small-size and mini-size enterprises, IB has developed an innovative pre-lending investigation system to simplify loan application procedures. For the assessment of the borrower's debt service ability, IB's client manager will comprehensively consider the family conditions, place of operation and operating conditions of the borrower instead of relying fully and stubbornly on a complete set of financial statements. That not only eliminates the business owners' reluctance to borrow money, but has also substantially simplified the loan application procedures.
In addition, various flexible guarantee modes, including professional institution guarantees, mutual guarantees, joint guarantees and combinational guarantees, have also been launched under the Xingyetong program in a bid to remove the obstacles that many business owner face, i.e. lack of collateral or insufficient value of collateral. For instance, IB collaborated with Yiwu China Commodity Market (20.93, 0.00, 0.00%) to launch store use right pledge loans in the second half of 2008. As of 2009, this pledge loan program had provided strong financial support to a multitude of medium and small-size businesses, with total lending of over RMB 115,000,000.
As stated by head of the Retail Banking Headquarters of IB, individual private businesses constitute an important part in China's national social and economic development and play an important role in “maintaining robust growth, increasing domestic demand and promoting employment”. Under a backdrop in which financial institutions need to further improve their services to business owners and small-size and mini-size enterprises are facing universal difficulties in fundraising, IB's launching of the Xingyetong service is intended to support the growth of business owners, fulfill the bank's social responsibilities and satisfy the national goal of backing the development of SMEs and the individual private sector.
Wealth management services: professionalism and rich experience for a better life
With the constant growth of disposable incomes and gradually increasing awareness of wealth management, investors are now demanding a more diverse investment portfolio. With an aim to serving investors, IB has gradually put together a comprehensive wealth management service system that comprises four major services, i.e. cash management, asset counseling, investment and wealth management as well as risk guarantee. It is also considering the introduction of customized private banking services for high-end clients that satisfy certain standards. The bank is committed to satisfying the wealth management needs of investors who have different risk preferences.
After years of development, IB boasts many wealth management products which have distinctive features and competitive edges in the market.
For instance, “Intelligent Notified Deposits” is characterized by three advantages, i.e. “intelligent selection of deposit period”, “compound interests for every seven days” and “current savings convenience”. It offers income as high as 3.77 times the interest on current savings, and is therefore is particularly suited to clients with a large short-term cash position and frequent turnover of working capital. The “Yinliantong” online fund supermarket includes 300-plus products from nearly 50 fund companies with preferential rates. “Daily Wanlibao”, an RMB wealth management product issued regularly on a monthly basis, is characterized by controllable risks and high yields, and is therefore favored by clients who tend to avoid high risk investments. The “Suixintou” regular fund investment program offers a new option for the maintenance and appreciation of clients' assets by providing a discount of 60% in fund rates.
In the last four years, IB has launched over 200 billion Yuan in retail wealth management products, and the annual sales revenues have increased from just RMB 15 billion in 2005 to nearly RMB 70 billion in 2009. IB's third-party depository service is characterized by an advanced collective processing mode, and hence offers safe, convenient and flexible cash transfer services for clients. IB has established partnerships with 80-plus securities brokers and has over 1.55 million third-party depository clients.
Precious metal brokerage: leading the way in China
In addition to providing diversified fund, wealth management and investment products, IB has also been able to satisfy the continuously-growing demand for investment in precious metals by introducing innovative products and optimizing client services according to market demands. For that reason, IB has rapidly overtaken other commercial banks in terms of range of trading products, trading volume and number of individual clients on the Shanghai Gold Exchange. Its recognition among a multitude of investors has solidified its leading position in the market.
In July 2007, IB was the first in the industry to launch the two tangible gold products Au99.99 and Au 100g for individual clients on the Shanghai Gold Exchange, hence ushering in the brokerage of precious metals in the banking industry.
However, IB believed that tangible gold products were not enough to satisfy the diversified demands of investors. Therefore, IB rapidly started and completed the development of a new system following the People's Bank of China's approval allowing the Shanghai Gold Exchange to grant individual clients access to delayed delivery products against deposits. In January 2009, IB became the first in the industry to launch brokerage services for delayed delivery products of gold on the Shanghai Gold Exchange nationwide, which was then followed by the launch of silver delayed delivery products, which stirred up a new round of frenzy in precious metal investments. These services have helped to establish IB as an innovative leader in this sector, further consolidated IB's status in the market and boosted an exponential growth in client base and trading scale for many years running.
As of March 2010, IB had an individual client base of 458,000 for precious metal brokerage services. IB has achieved an annual growth of 100% in the trading volume of precious metals for many years running and its trading volume of gold by individual clients accounts for over 70% of the total agency trading volume by individual clients of Shanghai Gold Exchange. As a result, IB has become an acclaimed professional supplier of precious metal brokerage services in the market.
IB is aware that precious metal investment is a new investment sector for most domestic investors, and that t operating features, analytical methods and trading rules are substantially different from those of the stock market, with which most investors are familiar. In particular, delayed delivery products are traded against deposits and clients conduct buys and sells simultaneously. While bringing in more profits, these transactions also magnify the trading risks in a proportionate manner.
For that reason, IB has established a professional team consisting of headquarters personnel, market analytical personnel and product managers and client managers of precious metal services from various branches in order to guide the clients' rational investments and reduce trading risks. This team can effectively guarantee client service quality, and has also substantially improved the investment analysis, risk control and profit making capacity of over 20,000 clients by organizing several hundred promotional meetings, training sessions and professional counseling services each year.
Credit card business: economic benefits and environment benefits
As an important part of IB's retail banking development strategy, credit card services have also taken a leading position in the domestic industry.
Following the issue of the Garfield Card in 2005, the first cartoon credit card in China, the 2007 launch of the VIP for family concept for platinum credit card holders and the 2008 issue of the You platinum credit card series oriented towards VIP clients, IB collaborated with the Beijing Environment Exchange to launch the China Low-card Credit Card in early 2010, the first low-carbon credit card in China, with an aim to increasing public awareness and support for environmental protection and establishing a practical channel for individual carbon transactions.
As introduced by Mr. Yan Xuewang, general manager of the IB Credit Card Center, the China Low-carbon Credit Car has two major features: firstly, it provides the first bank trading platform for individuals to engage in carbon emissions trading through a partnership with the Beijing Environment Exchange, the first authoritative environment right and interest exchange facility in China. Secondly, it enables individuals to trace and check their low-carbon transactions thanks to the establishment of the first “individual green files” system in China in collaboration with the Beijing Environment Exchange, hence encouraging individuals to actively engage in carbon emission reduction and lead a low-carbon life.
In addition to this, IB also provides a copy of its complimentary Guidelines to Low-carbon Life to card holders to help them reduce their carbon emissions in daily life. IB has also established a dedicated website for card holders to help card holders measure their carbon emissions and purchase carbon emission reductions to realize carbon neutralization.
In order to advocate the concept of green spending, IB has also established a carbon fund. The client automatically donates 0.01 Yuan to this account each time that the card is swiped. The donations will be used to collectively buy carbon emission reductions on April 22 (Earth Day) each year, so that each swipe of the card can effectively reduce carbon emissions. This move demonstrates that IB, as the first equator bank of China, has extended the concept of sustainable finance from corporate credit to cover individual finance.
IB has issued a total of 5.5499 million cards. The total transaction value was RMB 45.964 billion and total revenues were RMB 839 million in 2009, registering a year-over-year growth of 28% and 37.34% respectively. The profits totaled at RMB 144 million in book value.
As further stated by head of Retail Banking Division of IB, IB has further enhanced its comprehensive capability in retail banking after nearly five years of explorations and practices, and it has a clearer understanding how to convey policies, distribute resources and fulfill its social responsibilities.
As he went on to state, “IB is committed to further developing retail banking by carefully implementing relevant national policies and financial guidelines, carrying out reforms and making innovations courageously in order to improve people's living conditions, fully promote economic development and increase domestic consumption".