Time: August 19, 2013 Source: Sina Finance
With 25 years of development, IB has grown from an ordinary joint-stock bank located at a corner of Fujian into a prestigious finance brand with distinctive features at home boasting unique business development model and brimming with constant innovation vitality. By the end of 2012, with its total asset scale breaking through RMB 3.25 trillion, IB has ascended to the Global Top 50 Banks.
Li Renjie, who has served as the President of IB for 12 years, had a dialogue with Sina Finance recently. To run a bank, he said, we must take our own path of development, adopt the business model fitting in with our own characteristics and capability in a practical and down-to-earth manner, and shape our own features and brand. We should never follow what others have said and rush headlong into actions.
“Once having a clear judgment over the general trend and figuring out the direction, we should make great efforts to explore along the set direction in a persistent way, forming distinctive business models and profiting models.”
A basic main line, namely the market-oriented interest rates and exchange rates, exists for future changes in the operating environment for banks. Moreover, the process will become faster and faster. This will have a big influence to the conventional deposit and loan businesses of banks. It will sure drive the narrowing of interest spread, compress the market development rooms and profit rooms. Thus, the speed, benefit and quality of all banks will regress to the normal state.
President Li said that this was unavoidable, and the road of development for a bank would become increasingly narrow should there be no transformation as soon as possible.
As a joint-stock bank that has made strenuous exploration in the market for 25 years, IB has three transformation tactics:
First, in the area of conventional businesses, IB sinks its gravity center of service targets, actively developing the SME business and retailing business.
Second, it brings into the core basic banking function, namely the payment and settlement function, and extends its business fields, including the field of third-party payment, by way of new payment settlement methods and platforms.
Third, IB will concentrate its efforts on developing emerging businesses including wealth management, investment banking, and assets management, etc.
To run a bank well, President Li believed, it should be prospective and direction sensitive and control the business and business rhythm in a desired manner. It should not be pushed ahead too quickly when we are expected to slow down, and vice versa. All opportunities that we should grasp should be seized securely.
Over more than 10 years, he introduced, IB had an institutional arrangement, namely it held the operation and management analysis meeting regularly each month, and the primary task of the meeting was to analyze the situation and nail down the direction.
Sina Finance: In terms of location, IB does not have any advantages over other competitors located at the political center and the economic and financial center, but boasts obvious differentiated business features. In your opinion, in which aspects is such differentiation shown?
Li Renjie: As a bank initiated at a corner of Southeast China, IB, with a poor and blank foundation, not only lacks strong policy background and capital support, but is not based in a key district for the development of Chinese economy. Therefore, to stand out in the market with furious competition, we should adhere to the road of differentiated development and provide in-depth and all-round services to customers in market segments so as to form comparative advantages in competition and improve the core competitive edges.
To be specific, it can be shown in the following five aspects:
First, differentiation of products and services. We have our own characteristic products and services in all the three business lines: corporate finance, retailing finance and financial market. Those businesses well-known to customers include green finance and investment banking in the corporate finance line, “Business Express”, travel loan and agency of precious metal trading in the retailing line, and bank-bank platform and Renminbi market trading in the financial market line.
Second, differentiation of business model. In developing the retailing business, for instance, we did not choose the conventional model of starting from savings, but grasped the opportunities several years ago and made fast breakthroughs under the driving of installment-based assets.
Third, differentiation of asset-liability management and operating tactics. We believe that it is a trend unavoidable for China's financial market to become market-oriented, disintermediated and integrated. Therefore, we lay great stress on cultivating and building the integrated service capability covering multiple markets and products. In terms of asset-liability structure, compared with the mean level of the industry, the conventional deposits and loans account for a lower proportion, but the proportion diversified asset-liabilities is higher. Of course, not all of us have the same view. However, we are full of confidence in it after going through the iterative test of time and market.
Forth, in terms of internal organizational structure, we consider to go nearer to the market and customers. Based on the actual needs, we have established business management headquarters in different areas, i.e. the headquarters for corporate finance line in Beijing, the headquarters for retailing and financial market lines mainly in Shanghai, the back office operation center in Fuzhou, Shanghai and Chengdu, the headquarters for risk and finance management in Fuzhou. Nonetheless, many personnel are embedded into all business lines, a model rarely seen in the banking community.
Fifth, Difference in corporate culture. The corporate culture of IB is generally low-pitched, practical, and aggressive, and leading team members and employees, which boast a great pioneering spirit, are relatively stable, unitive, and daring to take on responsibilities. With simple international relations, strong market mechanism, and sensitive market nose, IB has formed the culture of “developing market”. Just for this reason, the sustainable development and innovation concepts of our bank can be transmitted from top down effectively and implemented in actions practically.
Sina Finance: At present, it is an important task for each bank to consider how to serve the real economy, develop together with the real economy, and accelerate its own transformation during the process of development. In your opinion, what roles a bank should play in serving the real economy?
Li Renjie: From the interactive relation between economy and finance, “economy determines finance, and finance serves economy”. This is a basic judgment. On the one hand, finance plays an important role in stabilizing growth, adjusting structure and facilitating transformation. On the other hand, the contradictions in the process of economic structure adjustment, transformation and upgrading will unavoidably be refracted and reflected into the area of finance, as the saying goes “finance becomes prosperous when all industries are flourishing, and it becomes stable when all industries remain in steady development”.
IB has always attached great importance to the development trend of economy and finance. Based on the national economic development strategies and industrial policies, we, focusing on the development needs of the real economy, adjusts and improves the business structure and credit orientation, and provides financial services and support to the real economy in a desired manner, so as to have sound interaction with the real economy, complement each other and grow side by side.
Sina Finance: Recently, Premier Li Keqiang proposed to improve the allocation of financial resources, use the incremental in a desired manner, and revitalize the stock. How do think of this? What actions will IB take?
Li Renjie: It is a general idea to “use the incremental in a desired manner and revitalize the stock”. Since the beginning of this year, the economic operation of China has generally kept stable. However, the real economy still faces considerable difficulties, and against the protruding structural contradiction, the economy is still confronted with downward pressure. Under such circumstance, the State Council issued the “10 State Guidelines for Finance” in a timely manner, setting down specific requirements and measures for the adjustment, transformation and upgrading of economic structure. These guidelines catch the key issues for the finance to serve the development of real economy.
Centering on the macroeconomic objectives of stabilizing growth, adjusting structure, facilitating transformation, IB will make vigorous efforts to do the work well in the following three aspects:
First, in accordance with the requirements of the “10 State Guidelines for Finance”, we will intensify our efforts in adjusting the asset structure. On the one hand, we will intensify the risk investigation over and structural adjustment for assets in stock, and exit from those industries and projects involving big risks and seriously excessive capacities in a timely manner. On the other hand, we will control the investment orientation of newly-increased assets, continue furthering the credit support to those industries and areas that conform to the national economy and livelihood of people, tally with the guidance of national policies and meet the requirements of market development, and meanwhile drive the adjustment of stock structure.
Second, we will combine the implementation of the “10 State Guidelines for Finance” with our own strategic transformation in a more organic manner. Considering the specific measures put forward in the “10 State Guidelines for Finance”, many of them coincide with the transformation strategies of our bank. For instance, to support small- and mini-sized enterprises and retailing enterprises to “go out” is an important direction of our bank in pushing forward the business transformation in recent years. Next, we will combine the implementation of the “10 State Guidelines for Finance” with our own business transformation in a more organic way so as to further specify the transformation orientation, define the transformation focus, and improve the effect of transformation.
Third, we will combine the implementation of the “10 State Guidelines for Finance” with our further innovation in banking businesses in a more organic way. Under the general requirements of “using the incremental in a desired manner, and revitalizing the stock”, the “10 State Guidelines for Finance” point out a new direction for innovation in banking businesses. For instance, encouraging asset securitization, merger and reorganization of enterprises, cross-border investment and transfer of non-performing loans are all important rooms for the future innovation of banks.
Sina Finance: With regard to services to the small- and mini-sized enterprises, what should a commercial bank do in your opinion?
Li Renjie: Small- and mini-sized enterprises are the most active participants in our market economy. Financial institutions should transform from purely providing financing services to providing integrated services, and create customized comprehensive financial services integrating financing, settlement, wealth management and consulting according to the characteristics of financial demands at the different stages in the life cycle of small- and mini-sized enterprises, so as to lend all-course support for their development and growth.
For instance, at the initial stage of small- and mini-sized enterprises, commercial banks should, by making use of the channel financing such as, stock market, publicly offered fund, privately offered fund and venture capital fund, bring into play their intermediary role and exert their capability in integrating advantageous social resources to establish a platform for exchange and interaction between small- and mini-sized enterprises and equity investment institutions as well as securities intermediaries and solve the problem of information asymmetry between the small- and mini-sized enterprises and outstanding institutions as a result of the factors such as regional difference, so as to help the small- and mini-sized enterprises to introduce equity investment of low cost and high stability at a faster rate and achieve frog-leap development. In this way, they can push solving the problems in the conventional debt financing for small- and mini-sized enterprises due to strict admittance including “unavailable, unaffordable and insufficient loan term”.
Sina Finance: In the eyes of outsiders, IB is the forerunner of green finance in China and serves as a banner. It is of no exaggeration to say that green finance is the concentrated embodiment of IB's differentiated business concept and also serves as a signboard for IB's businesses. Could you give a specific introduction to the features?
Li Renjie: Let's look back at the evolution of IB in the field of green finance. We first released the energy conservation and emission reduction loan in 2006, became the first Equator Bank in China in 2008, set up the first institution specialized in sustainable finance in 2009, extended “green finance” from the field of enterprise project to personal consumption in 2010, granted the first carbon assets pledged loan in 2011, and launched a range of green finance activities themed “Beautiful China Tour” across China in 2013. We have always spared no effort to explore innovation in green finance.
Now, our green finance has covered three major fields: low-carbon economy, recycling economy and ecological economy, involving a variety of projects such as improvement of energy efficiency, development and utilization of new energy and renewable energy, carbon emission reduction, sewage treatment and water area control, reduction of sulfur dioxide emission, and recycling of solid wastes in the mainstream sectors covering energy, construction, transport and industry, etc.
Taking a leading position in the industry in the aspects such as market concept, social influence, product development, technical regulations, service fields and organizational guarantee, IB becomes the bank with the broadest green finance product family and the most diversified products.
By the end of June 2013, our bank has accumulatively granted nearly RMB 286.2 billion of green finance based financing loans to over 1,000 enterprises, with the financing balance of green finance exceeding RMB 155.3 billion, and the balance of green loans accounted for nearly 10% of the corporate credit balance. The projects supported with such loans could save 23.2948 million tons of coal equivalent across China each year, reduce 67.157 million tons of CO 2 , and save 255.7906 million tons of water, and it is equivalent to shutting off 154 thermal power plants of 100 MW or stopping running the 100,000 taxis for 32 years.
With our practice and pushing efforts, an increasing number of domestic banks and enterprises have got involved in the business field of green finance, and the state of accelerated development and the positive effect will further expand and emerge.
Sina Finance: What new actions will IB take in the aspect of green finance?
Li Renjie: Green finance is not merely an unavoidable trend, but a market of great potential. IB will take it as an objective to become an all-course professional financial service supplier covering a wide range in China's green finance market, and focus efforts on the following aspects:
First, IB will integrate market resources to improve the assets management capability. In collaboration with professional institutions in all areas, based on the common ideas of all parties, IB will actively initiate, participate or influence the formulation of market rules, push the transmission and development of green finance concept and business model in China, and endeavor to keep the leading position in the business area of green finance in the Chinese banking industry.
Second, IB will make sustained innovation to keep a leading position in the market. We will gradually improve the coordinated pushing system for integration of head office and branches to continue consolidating the business operation and management functions of specialized institutions; keep increasing the proportion of green financial assets to push the large-scale development of green finance; construct a rich product family, well-established business chain and diversified business model.
Third, we will improve the process to build up competitive edges. We will integrated our internal service process to improve the capabilities to quickly respond to and fulfill market demands; extend our businesses to cover the mainstream areas and typical projects of green economy, expand and enrich our businesses in an orderly manner.
Under the guidance of this objective, our bank further releases the program of “Green Finance • Tactics” this year, which is a special multi-layered service program covering products, financing models and solutions.
At the layer of product, besides the conventional banking products, it also includes characteristic products such as financing for energy performance contracting (EPC) by using the future usufruct as the pledge, contract environmental service based financing, carbon assets pledge based financing, emission right pledge-based financing, and energy conservation and emission reduction (CHUEE) financing, etc;
In terms of model, it provides five service models including financing for the production increase of energy-conserving and emission-reducing equipment manufacturers, financing for utilities service suppliers, financing for franchised projects, financing for energy management companies (EMCs) and financing for financing lease companies;
In addition, it provides customers with seven integrated solutions including carbon trading, emission right trading, conserved energy trading, utilization and protection of water resources, integrated services for industrial chain, industrial consolidation, and financing for special projects.
Sina Finance: Has IB established the philosophy of “obtaining reasonable profits while bringing benefits to the stakeholders” for performance of social responsibility and the concept of sustainable development in connection with the practice of green finance?
Li Renjie: According to our understanding, the social responsibility of a bank is not merely limited to creating profits, paying taxes and making donation. Moreover, the profounder meaning lies in that it should incorporate the pursuit of harmonious unification of economy, society and environment into its own development objectives on its own initiative, form a sustainable commercial model, learn and timely handle the questions that the stakeholders are concerned with by way of operating businesses in a correct way, and drive other enterprises and even the whole industry to perform social responsibilities actively by making full use of its special positions and influence in the economic and social development as a bank, so as to extend the effect of social responsibility performance.
In recent years, in confrontation with the increasingly protruding environmental problems, our bank constantly considered the relationship between the performance of social responsibility and our own sustainable development as a bank. Putting forward the way to perform social responsibility by “obtaining reasonable profits while bringing benefits to the stakeholders”, IB explored to perform social responsibility through making innovation in the business mode and to integrate the performance of social responsibilities into the process that the bank provides products and services to the outside, so as to achieve the commercial interests of our bank and social environment benefits in a harmonious way. In this way, we tamped the base for the sustainable development of our bank from the source and ran the concept through all aspects of our banking operation.
With the deepening practice in exploring green finance, sustainable finance and sustainable development was gradually elevated into a core value concept of our corporate governance and corporate culture, and we further transmitted and implanted the concept of sustainable finance into all aspects including our bank's regulations and rules, organizational structure, business flow and product innovation.
Specifically, it is represented by changes in the following three aspects:
First, it has become a consensus for corporate governance. It has become a common consensus of the entire bank, top to the board of director and down to the operation layer, to implement Scientific Outlook on Development, actively explore different ways to promote the Bank to practice social responsibilities and construct a good relationship where human being coexists with the nature, environment and society harmoniously.
The second change is to seek commercial opportunities proactively instead of accepting restriction passively. IB has changed from accepting external restrictions passively to taking it as a favorable tool for creating differentiated advantages and developing new business opportunities to serve energy conservation and emission reduction and observe the Equator Principles.
The third change is the process from the development and promotion of single green finance product to overall reconstruction of commercial models and business process.
Sina Finance: IB has made a great stride in the integrated business operation, with subsidiaries engaging in trust, financial lease and fund. With regard to integrated business operation, what objective have you planned?
Li Renjie: Integration has become an inevitable direction and tendency for modern banks, especially large and medium-sized banks. To grasp the tendency, we have always taken integrated and group-based business operation as an important direction in the recent ten years, and make sustained efforts in the direction.
In the recent three years, our bank made great breakthroughs in integrated business operation in succession: in 2010, we established Industrial Financial Leasing Co., LTD, a solely-owned subsidiary; in 2011, we controlled China Industrial International Trust Limited by purchasing its shares with the consent of the State Council and approval of the China Banking Regulatory Commission (CBRC); in the first half of this year, Industrial Fund Management Co., Ltd., another subsidiary controlled by IB, was established with the approval of the China Securities Regulatory Commission (CSRC).
In addition, China Industrial Asset Management Limited, a subsidiary controlled by Industrial Trust, and China Industrial Wealth Management Limited, a subsidiary controlled by Industrial Fund, has been approved in succession recently. A comprehensive financial service group has been established gradually, focusing on the principal banking businesses and covering trust, lease, fund, and assets management.
With increasingly complete financial license resources, in the future our bank will, focusing on consolidation of resources, business linkage and crossed sale, push forward and further group-based and integrated business operation and exert ourselves to improve the effect of group-based and integrated business operation.
On the one hand, we will, standing on the core strengths of the parent banking company and all subsidiaries, strengthen specialized labor division and define different service focuses. While cultivating our capacity to provide multi-market services, we will strive for forming relative competitiveness in many markets.
On the other hand, we will make constant exploration to improve the business linking mechanism, benefits distribution mechanism and risk isolation mechanism compliant with integrated and group-based business operation, encourage resource sharing, complementing the respective advantages, and linked development among different entities in the group, and isolate risks effectively.