Source: Fujian Daily
On March 28, IB's 2010 annual report, which was reputed as the most brilliant annual report in China's banking industry, was officially released. According to the annual report, in 2010, IB's operating revenue reached RMB 43.456 billion, up by 37.18% as compared with the previous year; its total profit reached RMB 24.005 billion, up by 39.33% year on year; IB accomplished a total net profit of RMB 18.521 billion, rising 39.44% from the previous year and its earnings per share was RMB 3.28, increasing by 31.09% over the previous year and staying ahead of other industry peers.
As the leading financial enterprise in Fujian province, IB has, in recent years, established itself through sustainable “high returns on capital” as “the Most Profitable Bank” in the domestic market. At the end of 2010, at the “Annual Meeting of the 21st Century Asian Finance and Asian Banks Competitiveness Ranking”, which was organized by the 21st Century Business Herald and the 21st Century Institute Financial Research Center in association with the Chinese University of Hong Kong, IB distinguished itself from among numerous financial institutions (including those from Japan) and was honored with the 2010 “Most Profitable Bank in Asia” award and made its way into the top ten most competitive Asian commercial banks.
“Over the last four years, the weighted average ROE of IB exceeded 24%. IB's profitability has remained sound and highly steady, whether in the midst of the fierce financial storm or under the great scheme of economic rejuvenation”, thus commented the organizer on IB's sustainable profitability. It is also the objective evaluation of IB by the market.
IB fully deserves the reputation of “the Most Profitable Bank” as it has ranked among the top for five consecutive years in terms of ROE
ROA and ROE are the two most important indicators for measuring a bank's operating achievements and competitiveness.
For the past five years, IB has performed outstandingly in these two indicators, particularly since IB successfully issued A shares in the Shanghai Stock Exchange in 2007. Since then, IB has always outdone other national listed banks in terms of proceeds and has been regarded as the unquestioned “Most Profitable Bank”.
According to statistics, from 2007 to 2010, IB's weighted average ROA had stayed above 1%, being at 1.17%, 1.22%, 1.13% and 1.16% respectively over the four years; its weighted average ROE had maintained at above 24%, being at 25.34%, 26.06%, 24.54% and 24.64% respectively. IB ranked 2nd in 2007 and 2008 and 1st in 2009 in the market in terms of ROA; it ranked 2nd in 2007 in the market and 3rd in 2008 and 2009 in terms of ROE and ranked 1st in terms of the sustainability and soundness of proceeds.
In terms of profitability, IB's annual total profit has been rising by a wide margin and brought about generous returns for shareholders.
From 2006 to 2010, IB realized a before-tax profit of RMB 5.046 billion, RMB 10.91 billion, RMB 14.037 billion, RMB 17.229 billion and RMB 24.005 billion respectively each year, increasing by 46.79% in compound growth year on year; IB's after-tax profit over the past five years reached RMB 3.798 billion, RMB 8.586 billion, RMB 11.385 billion, RMB 13.282 billion and RMB 18.521 billion respectively, rising by 49.81% in compound growth year on year.
In the last five years, IB realized RMB 71.266 billion in before-tax profit and RMB 55.577 in after-tax profit respectively in an accumulative total. IB's accumulated cash dividends from 2006 to 2009 reached RMB 7.389 billion.
With sustainable profitability, IB has established itself as a stable source of taxes for Fujian province and has remained for many consecutive years among the top taxpayers in the province. According to the list of 2010 top 100 tax-paying enterprises released by Fujian Province on March 31, IB's tax payment amounted to RMB 2.906 billion in 2010, making IB the forth largest taxpayer of the year in Fujian province. Over the past five years, various taxes paid by IB added up to RMB 11.383 billion, of which RMB 1.467 billion were paid as business taxes and surcharges, RMB 8.965 billion as corporate income tax, RMB 826 million as individual income tax and RMB 125 million as other taxes.
Thanks to its remarkable profit performance, IB has been highly spoken of by the market and recognized by most investors. Over the past four years since it was listed, IB had received one honor after another in various appraisal activities, including “No.1 of the Top 10 Companies Worthy of Investment”, “No.1 of the Top 10 Companies With the Best Growth Prospect”, “Investors' Favorite Company in China's Securities Market in the Last 20 Years”, etc.
Emerging Business Growing by Leaps and Bounds, Continued Optimization of Business Structure and Income Structure
Before it was listed, IB was unknown to the public in the domestic market; after it was listed, IB remained uncompetitive against other national listed banks in terms of business foundation, shareholders' background, administrative resources and location of headquarters, despite remarkable improvement in market recognition.
In such case, how did IB manage to prevail over so many powerful competitors and became the “Most Profitable Bank of Asia”?
IB's secret lies in its acute market sensitiveness to seize opportunities for transformation.
As far back as in the early beginning of 2004, IB took the lead to make layout and speed up the transformation of its development mode. By rebuilding business structure and reconstructing the management system through transformation, IB's operation and management efficiency have been constantly improved, laying a solid foundation for attaining the objective of “making IB a top-rate and time-honored bank”.
For a long time, the banking industry has unduly depended on deposits and savings. The single business structure not only consumed a tremendous amount of capital but also impeded the speed of development. To implement transformation, IB started from business expansion by seizing market opportunities, developing retailing and funds business by leaps and bounds and devoting major efforts to develop emerging businesses, including wealth management, investment banking, assets custody and futures settlement. As a result, IB's business and income structures have undergone dramatic changes.
IB's transformation is traceable by the changes of data.
In early 2004, in IB's business structure, the ratio of deposits to debts exceeded 82% and the ratio of loans to total assets exceeded 60%; in IB's deposit and loan structure, corporate deposits accounted for nearly 80% of the total and corporate loans accounted for over 95% of the total, both of which holding an absolutely dominant position. In IB's income structure, the income from intermediate business accounted for less than 2%. Most of IB's income was from interest spread and investment.
At the end of 2010, in IB's business structure, the ratio of deposits to debts was reduced to around 60%, down by as much as 22% while the ratio of loans to total assets was lowered to around 45%, down by nearly 15%. The proportion of other assets-liability businesses, including inter-bank debts, active debts, principal investment, buying back the sale of financial assets, etc, was improved remarkably and the business structure became more diversified. In the structure of deposit and loan, the ratio of corporate deposits came down by nearly 20% to around 60% while the ratio of saving deposits rose nearly by 12% to around 20%; the ratio of corporate loans decreased by nearly 20% to around 75% while the ratio of personal loans rose by nearly 20% to around 25%. The ratio between corporate finance and retailing finance is more balanced. In the income structure, the ratio of income from intermediate business was improved by nearly 10% to around 12%. The income sources became increasingly diverse and reasonable.
Looking at the Market in Prospective Strategic Perspectives and Grasping the Opportunities Brought About by Urbanization and Energy-Saving and Emission Reduction
Urbanization and energy-saving & emission reduction are two important strategies for the development of China's economy and society. IB looked at the market in prospective strategic perspectives, made the best of the trend and seized opportunities to speed up transformation. IB also took an active part in contributing to urbanization and energy-saving & emission reduction. As a result, IB has not only attained remarkable operation benefits, but also promoted its own transformation and upgrading.
Centering on urbanization, IB devotes major efforts to developing infrastructure and people's livelihood projects that are closely related to urbanization, such as personal housing mortgage loan, real estate development loan, etc.
Take Xiamen Special Economic Zone for example, in 2010, projects initiated to integrate areas inside and outside Xiamen Island attracted wide attention. After carefully analyzing the overall situation and financial demand and financial services of the project, IB carefully studied countermeasures and came up with the plan to serve the project and established a service mode involving the headquarters, branches and sub-branches to create a green channel to provide services for the key parts of the project.
Well-designed plans and heart-to-heart services have brought about good returns. IB played an important role in the project of integrating areas inside and outside Xiamen Island. In addition to being the exclusive loan provider for Xiamen Bridge, phase 3 construction of Island Ring Road, renovation of the old urban area in Lianban, Xiamen Software Park and Tong'an Industrial Park, IB also provided RMB 1.8 billion to support the construction of Jimei Bridge. It also provided financial support for other important projects, including the supporting facility project for areas surrounding new Xiamen railway station and the communication hub, comprehensive improvement and development of Hubian Reservoir, bus rapid transit system and the urbanization renovation of Xinglin Bay Business Operation Center.
According to statistics, in 2010, IB provided an accumulative total of RMB 5.5 billion in credit line to the project of integrating areas inside and outside Xiamen Island and about RMB 1.89 billion in additional loans, making its due contribution to the project of integrating areas inside and outside Xiamen Island.
With a view to save energy and reduce emission, IB took the lead in China to provide and vigorously promote “green finance” services. By the end of 2010, IB had provided 1012 loans involving RMB 47.868 billion in an accumulative total for energy saving and emission reduction. Of the 1012 loans provided, 789 loans were granted in 2010, involving an amount of RMB 31.285 billion. On a yearly basis, the loans helped save 18.7141 million tons of standard coal, reduce the emission of 51.6508 million tons of carbon dioxide, 768400 tons of COD and 20100 tons of sulphur dioxides, and utilize 6.7376 million tons of solid wastes and save 43.891 million tons of water.
In October 2008, IB pledged in Beijing to adopt the Equator Principles and became the first Equator bank in China to adopt advanced international practices to manage project environment and social risks and practice green credit in order to achieve sustainable development. In December 2009, Fujian Huadian Yong'an Power Generation 2×300MW Expansion Project, IB's first project to which the Equator principles were applicable, officially settled down. The loan amount for the project was RMB 730 million, which was earmarked to the 2×300MW “set-up the large units & shut down the small units” (before large power generating units can be installed, small power generating units should be shut down) expansion project. After completion, the project will help reduce the emission of soot by 1530 tons and sulphur dioxide by 12,245 tons on a yearly basis.
After many years of exploration and practices, IB has become the leader and initiator of “Green Finance” in China and has gradually blazed a trail to achieve all-win situation for enterprises, the society and itself through green finance projects.
Sticking to Differentiation and Develop Distinctive Features in Niche Markets
Due to the homogeneity of products, the competition in the banking industry is always intense.
In the face of competition, IB took the initiative to break away from convention and blaze a distinctive trail in assets-liability management, inter-bank finance, retailing and financial market business. Besides, IB has also established leading edges in niche segments, such as inter-bank cooperation, green finance and brokerage of precious metals, which forcefully promoted the fast growth of IB's business and profit.
The bank-bank platform is a distinctive product of IB, which has already gained a competitive advantage in the banking industry. The bank-bank platform is created primarily to serve urban commercial banks, urban and rural credit cooperatives, rural commercial banks, rural cooperative banks, village and township banks, and to carry out cooperation with industry peers in payment settlement, wealth management, output of science and technology, financing service, agency of foreign exchange, optimization of capital and assets-liability structures, fund utilization, training and exchange, etc.
On May 13, 2010, a signing ceremony for the comprehensive strategic cooperation agreement and the agreement for cooperation in counter exchange and wealth management portal was held in Yantai between IB and Evergrowing Bank Co., Ltd., which is the first national joint-stock commercial bank to sign up on IB's bank-bank platform. According to the agreement, both banks will carry out full cooperation in agency business, settlement, financing credit, assets management, investment banking, etc.
For instance, when it comes to counter exchange, Evergrowing Bank may make use of the counter resources of IB and all nationwide outlets of other banks in the network of the bank-bank platform to process for its personal customer cash deposit and withdrawal from bank cards (passbooks) and transfer and balance inquiry. In the meanwhile, IB and customers of member banks of the bank-bank platform are also able to process services over the counter of Evergrowing Bank. The cooperation has not only brought about mutual benefits but has also further expanded the network layout of the bank-bank platform, creating a better platform for the mutual survival, mutual benefits and mutual development of member banks.
At present, IB has carried out cooperation in counter exchange with over 50 small and medium-sized banks and boasts of over 12000 outlets in the network. The bank-bank platform has effectively made it possible for customers of member banks to process banking services in different places and has also helped member banks fulfill their dream of going national.
Brokerage of precious metals is another distinctive product of IB. As inflation is expected to deteriorate in recent years, there is a strong demand on risk hedging. IB is acutely aware of the business opportunity and takes the lead to branch out into brokerage of precious metals by successively introducing physical gold, gold T+D, silver T+D, etc. IB boasts of the most complete range of metal products listed in Shanghai Gold Exchange. At present, IB's annual transaction volume in brokerage of precious metals exceeds RMB 230 billion, ranking first in China in terms of the transaction volume and number of customers in brokerage of precious metals.
Restructuring management system through transformation and demonstrating outstanding management capabilities in risk cost and operating cost
An advanced management system is a prerequisite for the development of modern banks.
In recent years, IB has devoted itself to constantly improving corporate governance and its competence in scientific decision-making by following advanced international and domestic governance philosophies and modes.
By reforming its organization structure, IB has strengthened the organizational guarantee for the diverse, group and comprehensive development of its business operations; by restructuring the business process, IB has improve its efficiency in operation and management; by introducing advanced management practices and tools, IB has improved the scientific management of its business operations.
An advanced management system plays a critical role in effectively controlling risks and costs. For a bank, operation costs mainly consist of risk cost, which is mainly represented by losses resulting from non-performing assets, and operation cost, which is mainly represented by various operating expenses.
In recent years, IB has demonstrated outstanding capabilities in controlling risk cost and operation cost and substantially boosted the high growth of the bank's profit.
In terms of risk cost, IB has achieved “double reductions” in non-performing assets for four consecutive years. By the end of 2010, the balance of IB's non-performing loans was RMB 3.616 billion, decreasing by RMB 1.364 billion as compared with that of the beginning of 2007 and the ratio of non-performing loans was 0.42%, down by 1.11% as compared with that of the beginning of 2007. In three out of four years, IB ranked first among major national banks in the control of non-performing loans and reached advanced world level.
In terms of operation cost, in recent years, IB's cost-to-income ratio has been held constant at around 35%, lower by 2 to 4 percentage points than the average industry level. In 2010, IB's cost-to-income ratio was further reduced to 32.66%, ahead of other major national banks.