Pushing Business Transformation for Steady Development; Increasing Strength Based on Integrated Business Operation

-- Industrial Bank released its performance in 2013

Industrial Bank Co., Ltd. (IB) issued its 2013 annual report on April 1. As revealed in the report, in confrontation with the complicated and austere economic and financial situation and increasingly changing market environment, the Company proceeded with reform and innovation, maintained steady operation, served the real economy, and pushed forward differentiated development, with all businesses witnessing steady, coordinated and sound development. Based on substantial provision and accrual, the net profits attributable to the parent company realized by IB accumulatively across the year amounted to RMB 41.211 billion, a YoY increase of 18.70%, over fulfilling the annual plan. The basic earnings per share hit RMB 2.16, and the net asset value per share RMB 10.49.

I. following the changes reasonably and making timely adjustments to business tactics, with all businesses witnessing steady, coordinated and sound development. The Company reasonably grasped the situation of macroeconomic operation and made timely adjustments to business tactics, attaching greater importance to benefit growth and capital conservation. It intensified analysis and research of changes in monetary policies, market liquidity and regulatory requirements, laid high store by the management of liquidity and interest rate risks, and made great efforts to achieve a harmony between liquidity, security and benefit.

Steady Growth of Business Scale. By the end of 2013, the total assets of the group hit RMB 3,677.435 billion, up by 13.12% over the beginning of the year; the equity belonging to the shareholders of the parent company reached RMB 199.769 billion, up by 17.80%; the balance of deposits in both home and foreign currencies reached RMB 2,170.345 billion, up by 19.69%; and the balance of all loans in both home and foreign currencies reached RMB 1,357.057 billion, up by 10.40%. The net capital of the group reached RMB 250.183 billion, capital sufficiency 10.83%, and the core capital sufficiency 8.68%, meeting the new regulation on capital. With a good asset-liability ratio, all main indexes of IB conformed to the regulatory requirements.

Market outperform of profit level. The operating incomes registered by the group across the year hit RMB 109.287 billion, increasing 24.73% YoY, of which the incomes of handling charges and commissions hit RMB 24.736 billion, up by 57.75% over the previous year, and their proportion in all the operating incomes rose 4.73% YoY to 22.63%. The year-round operating expenditure reached RMB 55.209 billion, increasing 32.87% YoY, of which the assets depreciation loss reached RMB 18.188 billion, increasing 46.89% YoY. The cost/income ratio was 26.71%, remaining at a low level in the industry. The pre-provision profits registered by the group hit RMB 72.266 billion, up 23.64% YoY; the net profits attributable to the parent company reached RMB 41.211 billion, up 18.70%. The return on total assets and the weighted average return on equity registered by the group was 1.20%, 22.39% respectively.

Risk resistance further reinforced. Under the influence of factors including slowdown of economic growth, adjustment of industrial structure, and private lending, the credit risks in some regions and industries increased to some extent. Adhering to the risk management thought to be more prospective, systematic and inclusive, the Company managed risks in the perspectives of asset combination, industrial chain and risk infectivity, responding to the rising tendency of non-performing assets. By the end of 2013, the non-performing loan balance of the entire bank reached RMB 10.331 billion and the non-performing loan ratio hit 0.76%, generally remaining at a good level in the industry. On the principle of compliance and prudence, IB increased the non-performing provision significantly. The balance of loan loss provision hit RMB 36.375 billion, with the provision coverage reaching 352.10% and the LLR/loan ratio rising to 2.68%.

Market position and brand influence kept rising. IB successfully made its presence in the Global Top 50 Banks (ranking of the British magazine, The Banker), and Fortune Global 500 (ranking of the US magazine, Fortune), and the global top 500 of listed companies (the ranking of US magazine, Forbes). In the appraisals organized by various authoritative organizations both at home and abroad across the year, IB was honored a number of awards successively, including the “Asian Bank Offering the Greatest Returns to Shareholders 2013”, the “Annual Best Joint-stock Commercial Bank”, the “Commercial Bank with the Best Performance of Social Responsibilities”, the “Bank with the Greatest Innovative Power”, and the “Best Green Bank”.

II. Improving and completing the specialized operation system, pushing in-depth business transformation constantly, and building more solid business foundation. The operation system based on business line specialization which principally consists of corporate finance, retail finance and financial market was further established, and saw increasingly improved management mechanism. In particular, the matrix-based management systems and mechanisms for financial planning, risk compliance, and human resources that combine centralization and decentralization were improved continuously, and the business planning, resource distribution, assessment and evaluation, risk management, and team building matching the specialized operation of business lines witnessed constantly improved sensitivity, reasonability and effectiveness. The group-based and integrated business operation and management stepped on to a new level, and the business coordination effect further showcased itself.

Steady expansion of customer groups. By the end of 2013, the number of corporate financial customers of the entire bank hit 342,100, increasing 54,100 over the beginning of this year, up 18.78%. The number of core retail customers reached 3,337,100, increasing 1,037,800 over the beginning of this year, up 45.13%. Specifically, the number of private banking customers hit 15,353, with 4,698 new ones in this year, and the number of “elite” electronic banking customers hit 1,898,100, with 910,900 new ones in this year. The number of core institutional customers reached 356, increasing 130 over the beginning of this year.

Concerted and sound development of various businesses. In the aspect of corporate finance, accustomed to the trend of financial disintermediation, the investment banking businesses kept growing at a fast rate. Specifically, IB ranked No. 3 in the market with regard to the underwritten value and market share of debt financing tools of non-financial enterprises, and No. 1 in terms of number of enterprises for which the Bank serves as the lead underwriter. It fully drove forward the business of trade financing, and created new highs in terms of supply chain financing volume and international settlement volume; the business of green finance was upgraded constantly, witnessing further expanded brand influence; cash management, small-sized enterprise business, and institutional banking saw steady growth, with foundations being reinforced constantly. In the aspect of retail banking, the scale of retail synthetic financial assets kept growing at a fast rate; businesses such as travel finance and pension finance witnessed desired development momentum and kept extending their market influence; the operating benefits of credit card businesses witnessed significant improvement, and the business development and internal management of private banking were both reinforced; the construction of community banking outlets and “retail credit plants” was carried out at big stride, driven forward and operated in a desired manner. In the aspect of financial market businesses, institutional asset-liabilities witnessed significant increase in scale and continued rise in contribution; the scale effect of the bank-bank platform became increasingly prominent, further opening its development room; debt investment, proprietary trading and brokerage businesses developed in a sturdy manner, further reinforcing their role to serve and support the entire bank. Based on active implementation of regulatory requirements, the assets management witnessed steady growth in business scale, and obvious improvement in the level of business compliance and sturdiness; the variety of assets custody businesses become more balanced, and assets custody scale broke through RMB 3 trillion; the futures custody made a smooth start.

The group-based and integrated business operation made new breakthroughs. The third subsidiary of the Bank, Industrial Fund Management Co., Ltd., was approved and opened successfully and smoothly. By the end of 2013, the scale of assets under the management of Industrial Trust reached RMB 563.286 billion, up 68.07% over the beginning of 2013, ranking among the top 3 in the industry. The net profits registered by the company in the year totaled RMB 1,106 million, witnessing a YoY increase of 43.26%. The asset scale of Industrial Financial Leasing hit RMB 53.695 billion, up by 33.19% over the beginning of this year, and the net profits registered across 2013 hit RMB 873 million, a YoY increase of 30.88%. The asset scale of Industrial Fund Management hit RMB 49.979 billion, and it registered a total of net profits of RMB 12.81 million in the year, making a good start.

III. Taking initiative to strengthen business management and improve operation support and safeguarding level by centering on transformation for development and following market changes. Adhering to the capital-intensive orientation, the Company improved the assessment and evaluation and management of resource allocation; established and completed the new liquidity management system, to respond to the impact of great fluctuations in market liquidity appropriately; sped up the building of a refined interest rate pricing system to respond to the challenges of market-oriented interest rate in an active way; specified the unified credit extension principle and enforced the total risk control requirements, stressed on intensifying risks management of emerging businesses, completing the institutional system, improve classification of risks, making reasonable accrual and provision, and strengthening monitoring analysis; improved the authorization and credit extension policies, enhanced the management of risk tolerance, industrial limit and customer limit, and intensified the implementation of risk strategies; enhanced risk screening and disposal effectively in multiple channels, and ensured the general stability of asset quality; push forward data control steadily, and improved the data quality and information service efficiency vigorously with a view to meet the external and internal management requirements in a more effective manner.

In 2014, IB will stick to the principle of steady and stable progress, control business growth speed in a reasonable manner, and focus on structural adjustment to improve return on capital and quality of business operation. Centering on the basic trend of “market-oriented, disintermediated, networked, and customized” finance, IB will further accelerate transformation and innovation, and cultivate new business and profit growth points. In combination with transformation and innovation, IB will complete the organizational system, improve the management mechanism, and keep enhancing the operation specialization and management refinement level.