In the first half year of 2011, confronted with a complicated and changeable macro economic and financial situation, as well as an increasingly severe business environment, Industrial Bank (IB) carefully implemented macro-control policies and financial regulatory requirements of the state, achieving desired business achievements. Based on solid operations and innovative advancement, the bank continued its stable and healthy development of all businesses, improved its professional competence steadily, and further consolidated its customer foundation. Maintaining excellent asset quality and reaching economic expectations, the bank further strengthened its capital power, boasting a core capital adequacy ratio of 8.24%, and a capital adequacy ratio of 11.22%, the main indices also reach the regulatory requirements.
Profit growth was significantly faster than scale growth and operating efficiency was increased in a sustained manor. By the end of June, the total assets of the whole bank broke through RMB 2 trillion reaching RMB 2.089906 trillion, increasing by RMB 240.233 billion, up 12.99% on the beginning of the year. The balance of all deposits in both domestic and foreign currencies reached RMB 1.222979 trillion, increasing by RMB 90.212 billion, up 7.96% on the beginning of the year. The balance of loans in both domestic and foreign currencies amounted to RMB 929.474 billion, increasing by RMB 75.135 billion, up 8.79% on the beginning of the year. The accumulated realized operating income was RMB 26.246 billion, increasing by RMB 5.888 billion, up 28.92% year on year. The accumulative realized net profits belonging to the shareholders of the parent company amounted to RMB 12.232 billion, increasing by RMB 3.468 billion over the same period last year, up 39.57% year on year, of which the net profits realized in the second quarter amounted to RMB 7.011 billion, increasing by RMB 1.790 billion, up 34.28% over the first quarter. The growth of profits was not only higher than the growth in business scale in the same period, but was also higher than the growth of operating income. With a cost-to-income ratio of 29.40%, down 2.32% year on year, IB continued to keep the cost-to-income ratio at a relatively low level in the banking industry. With an increase of operating expenditure obviously lower than the growth in income during the same period, IB kept improving the operating efficiency.
Pricing management drove interest margins and credit spread to stabilize and pick up, and business strategies were flexible and effective. With limited credit resources, IB intensified the management of loan pricing, thus improving its average return of loans quarter on quarter. In the newly-increased loans, the proportion of loans with a decreased interest rate went down to 2.82% in the second quarter from 10.48% in the first quarter, while the proportion of loans with increased interest rates rose to 66.74% from 52.53%. With the increasing loan pricing level, the interest rate spread between deposits and loans rose steadily, reaching 4.32% in the second quarter, up 24 BPs over the previous quarter. By grasping favorable market opportunities to intensify the allocation of capital and expand income sources in an effective way, in the first half IB increased its daily average scale of redemptory monetary capital for sale by 30% over the same period last year, contributing RMB 700 million in net interest income, more than in the same period last year, and this effectively increased the return of non-credit businesses. With the net credit spread stabilizing and picking up, the bank boasted a net credit spread of 2.49% in the second quarter, increasing by 37 BPs quarter on quarter. The foundation for the growth of profits became stable and sturdy.
The business and income structure were further improved and the business operation transformation experienced the preliminary effects. Pushing forward the transformation of the business model and profit model in an in-depth and sustained manner, IB vigorously developed investment banking, financing product, assets trust, financial leasing, and trusts following the directions of emerging businesses including wealth management, investment banking, assets management, and other such businesses, so as to alleviate the dependency on conventional interest incomes and increase the proportion of intermediate business incomes. In the first half of the year, the bank realized income from handling charges and commission of RMB 4.048 billion, increasing by RMB 1.732 billion, up 74.77% year on year, accounting for 15.42% of total business revenue, up 4.04% on the beginning of the year. Specifically, the income from handling charges for payment settlement and bank cards grew at a fast rate, which reflected the improving capacity of the bank in its fundamental business; they increased 165.67% and 106.23% respectively year on year. Consulting and agency incomes, which reflect the development of emerging businesses, accounted for 43.01% and 19.54% respectively.
Through comprehensively intensifying the internal control management of risk, IB maintained its assets in superior quality. Though the overall non-performing ratio was kept low, the bank continued strictly controlling the entry standards for customers, while tightly controlling the admittance of projects, it kept strengthening risk control over major industries, furthering the restructuring of credit assets, and improving the refined level of risk management. In handling the government financing platform loans, the bank, following the principle of “reducing stock loans and controlling new loans while restricting the total lending scale”, contracted the total amount of platform loans under the requirements of the policies of “guaranteeing projects under construction, compressing projects for reconstruction and prohibiting new projects”, so as to ensure that the limited credit resources were used for completing projects for production and operation and those under construction. Since this year, the bank continuously reduced its scale and proportion of government financing platform loans by taking the following measures: granting new loans prudently, calling in all mature loans, repayment of medium- and clearing long-term loans in installments, recovering loans for risky projects in advance, etc. In this way, the quality of assets based on platform loans were kept in good condition (free of overdue repayments, debit interest and non-performance); risk is under effective control. By the end of June, the non-performing loans and special-mentioned loans across IB kept decreasing. Specifically, the balance of non-performing loans amounted to RMB 3.249 billion, down by RMB 367 million over the beginning of the year; and the non-performing loan rate was 0.35%, down 0.07% over the beginning of the year. The balance of special-mentioned loans amounted to RMB 5.334 billion, decreasing significantly by RMB 1.316 billion over the beginning of the year by a drop of 19.79%; the proportion of special-mentioned loans accounted for 0.57%, down 0.21% over the beginning of the year. The balance of the loan loss provision was RMB 12.345 billion, with provision coverage of 379.96%, maintaining a high level.
Every line of business developed with great momentum and integrated operations were pushed forward steadily. In the corporate finance line, IB steadily boosted the development of all key businesses with the “one body with two wings” model, witnessing fast growth in supply chain finance, investment banking, green finance, and small-sized enterprises, and other such businesses. In the retail business line, the bank highlighted the two focuses, namely the construction of the core customers and business structure, to improve the service level and increase crossover sales, and work hard to improve its earning power while solidifying the business foundation. In the institutional business line, finance market and assets management, the bank effectively responded to the market situation of continuous liquidity pressures, intensifying its development of liabilities, and increasing the return on investment utilization, thus making a great contribution to the liquidity safety, business scale and growth of profits across the bank. In terms of integrated operations, Industrial Bank Financial Leasing and International Trust, fully relying on the platform advantages of the bank group, achieved interaction between bank-leasing and bank-trust in a desired manner achieving good business results. By the end of June, Industrial Bank Financial Leasing had total assets of RMB 19.838 billion, an increase of RMB 9.255 billion over the beginning of the year, realized net business revenue of RMB 311 million and witnessed net profit of RMB 114 million. Industrial International Trust, with total assets of RMB 878 million, registered business revenues of RMB 135 million, up 263.22% over the previous year, and witnessed net profits of RMB 46 million, up 374.28% over the previous year.
In the second half of the year, IB will make efforts to maintain the favorable situation of its business development in the first half and further respond to the internal and external changes in a flexible way. By taking correct business development strategies, IB will intensify its efforts in developing liabilities in a sustained way, strengthen the management of assets allocation, and push its internal management towards specialization, being refined and standardization, in addition to continued solidifying and improving of its competitive edge in the banking market through deepening reform in systems and mechanisms in an active and reliable way.