In 2015, in response to the “New Normal” state of China’s economy, which features a painful phase of transformation and unrelenting downward pressure, Industrial Bank (IB) has persisted in its efforts to carry through structural reform with a sharper focus on standards and utility. By means of a flexible business strategy, IB has acquired a new market and attained an extensive development of its business transaction. All these have completed its development programme during the “Twelfth Five-Year Plan” (2012–2017) period.
According to the 2015 annual report and the first quarter report 2016 released in the evening of April 27 by IB, by the end of 2015, the total assets of IB has reached 5298.88 yuan, up by 20.25% compared with the beginning of the year; the net profit has reached 50.207 billion yuan, up by 6.51% on a year on year basis. For the first quarter of 2016, the total assets ahs reached 5470.783 billion yuan and the net profit has reached 15.7 billion yuan, with an increase of 6.15% over the same period of last year.
The Voyage of a Banking Flagship, with a New Escort of Subsidiary Companies
In 2015, IB embarked on aggressive expansion: Industrial Economic Research and Consulting Co., Ltd. (IERCC), the first banking institution that also serves as a research institute with independent legal personality at home, commenced operation in Shanghai. The same year also saw the establishment of Industrial Digital Financial Services Co., Ltd. (IB Digital Financial) – the first banking subsidiary specializing in digital finance service.
After years of development, IB has become one of the commercial banks with the best qualifications in China. With 9 categories of business licenses, IB has a direct controlling stake in 4 (wholly-owned) subsidiaries, an indirect controlling stake in 6 subsidiaries, and holds shares in 5 companies, which has demonstrated IB’s transformation from a banking institution with unit banking system to a modern banking group engaged in trust business, finance lease, fund management, consumer finance, futures, assets management, Internet finance, research consultancy and digital finance.
By virtue of various licenses and platform resources, IB has actively fulfilled different business functions in the group and combined the advantages of strategic coordination and business linkage among different legal entities, thus developing into a group-based business from a single-handed business. Last year, the business linkage amounts between IB and IB Trust exceeded 850 billion yuan, accounting for 78% of total business amounts of the company. The amount of linkage marketing project between the bank and leasing companies was 52.4 billion yuan, accounting for 90% of the sum of IB Lease in those days. Banking-leasing projects grew to the value of 301.8 billion yuan, accounting for 73% of assets management scale in IB Fund.
Benefited from the brand effect of IB, shared resources and business linkage, all subsidiaries have built up a steady and prosperous business, with rising industry status and soaring profits to the Group. In 2015, IB’s subsidiaries achieved a net profit of 2.548 billion yuan, up 18.08% year on year. The business scale of IB Trust hit 908.5 billion yuan, up by 40.92% compared with the beginning of the year, while its net profit has increased by 15%. Balance of assets in IB Financial Leasing was 105.2 billion yuan, up by 16% compared with the beginning of the year. The balance of IB fund management portfolios has increased 111.86% to 412.7 billion yuan, compared with the beginning of the year. And IB Consumer Finance Company has also cut a striking figure in the small-loan consumer credit market.
The Transformation of “Light Capital, High Efficiency” was on Track
Now an another “new normal” state is now challenging all commercial banks, which characterizes narrowed interest spreads, increasing debt cost, a slow rate of increase in revenue, and unrelenting pressure on asset quality. Nevertheless, IB has faced down all these challenges and blazed a trail of “light asset and high efficiency” in its efforts to achieve the transformation to a customer-oriented bank.
From the aspect of asset-liability ratio, with proper regard to RORWA, IB has managed to decrease the percentage of risk assets. Accordingly, all categories of investment have increased by a handsome portion of 1.24 trillion yuan, or an increase by 91.04% compared with the beginning of the year. The overall asset risk weight has been reduced by 1.38%. In terms of deposit liabilities, IB has actively increased its deposit liabilities through various channels while maintained a safe lead in the interbank deposit market. Consequently, the ending balance of the year has increased by 197.5 billion yuan and deposits liabilities from non-deposit financial institutions have increased by 441.1 billion yuan compared with the beginning of the year. Thanks to proper asset-liability management, net interest income has risen by 25.4% on a year-on-year basis and revenue receipts has grown by 154.348 billion yuan, representing an annual increase of 23.58% in spite of narrow interest spreads. It is, therefore, not surprising that IB has ranked second among comparable joint stock banks.
As shown in the annual report, the operating costs of IB in 2015 have attested to the early success of the transformation. It was understood that IB has been trying to improve the production and operation efficiency through a centralized “credit factory” and a background` operation center. Meanwhile, informationization, automation and intelligence in internal management have achieved the highest level ever, which began to tell on administrative costs and operational efficiency. In 2015, the business and management expense of IB has increased by 11.54% over the same period of last year, 12.4% below the growth rate of revenue; the cost-to-income ratio (21.59%) has decreased by 2.19%, representing the most favorable performance among listed joint-stock banks.
In terms of business strategy, positive efforts have been made to spur on four categories of light capitals or light-asset business, i.e. “Big investment bank”, “Big fortune”, “Big capital management” and “Transaction banking”. Though genuine effort, this mode of “four-wheel drive” is now well on track.
The business setup of “Big investment bank, big fortune and big capital management” is strongly reinforced. Underwritten debt financing instruments of non-Financial Enterprises have soared to 384.245 billion yuan, an increase of 22.1% over the same period of last year, which enables IB to rank first among joint-stock banks four year in a row. Asset management portfolios designed for corporations have increased to the value of 3859.604 billion yuan, up by 76.4% compared with the beginning of the year. Financial product balance of the Bank was 1438.558 billion yuan, up by 72.26%; commission charges on financial services were 9.528 billion yuan, up by 22.37% over the same period last year, the second highest in the home, whether in terms of value or revenue.
In terms of transaction banking, the number of clients in cash administration by the end of 2015 has increased 46.87% to the number of 17597 compared with the beginning of the year. Daily account balance per account has averaged 835 billion yuan, up by 32.06% compared with the beginning of the year while market turnover of the “Three Fast Tracks” portfolios (Fast Payment, Fast Financing and Fast Asset Management) has risen to 150 billion yuan. Cross-border settlement in local and foreign currency has amounted to a record high of USD 122.394 billion.
Differentiated Operation Makes a Featured Bank
“The interbank business of IB is abundant in innovation and pioneering advantages, which enable IB to effectively deal with the insufficiency of credit demands. What’s more, it has higher market-priced interbank D/A ratio, thus suffering less by the policy of Interest Rate Liberalization,” a securities analyst said.
By the end of 2015, interbank assets of IB have a significant increase of 44.83%, and its interbank debts have grown by 42.56%, its percentage of stable liabilities, such as non-bank financial institution and interbank deposit receipts, have a significant increase, and asset-liability matchingcontinues to be enhanced.
As a market-oriented and innovative commercial bank, the Industrial Bank has been pursuing innovation and differentiated development for years. And it takes full advantage of its sensitivity for market, its strong capability to innovate and its flexible system and mechanism. Seizing the opportunity in market development, IB has pioneered the path of new “Blue Ocean” and ushered a featured and unique road of development, and consequently it has remained competitive in many fields.
Green finance is one of the most eye-catching portfolios of IB. With a decade of exploration, IB has a complete green products and service system for groups, offering consistent and personalized green finance solutions which cover green financing, green leasing, green trust, green fund, green investment and green consumption. By the end of 2015, IB has accumulatively extended nearly RMB 804.6 billion yuan of green finance loans to over 6000 enterprises, and its balance of green finance reached RMB 394.2 billion yuan, with an increase of 33.18% compared with the beginning of this year.
Bank-bank cooperation of IB stands out. By the end of 2015, the number of IB’s clients on the interbank platform has reached 653 while the number of linked outlets of OTC agency settlement has reached 36200. The totals of interbank settlements were 41.6308 million, representing an annual growth of 56.77%. The total amount of settlements was 2904.144 billion yuan, up by 42.22% over the same period of last year.
Internet finance has ushered in a new and unique path. IB has accumulated great financial technological strength and solid cooperation platform for financial institutions. Harnessing the strength of Internet Plus, IB has further innovated its products and channels and exerted great efforts on business platform and service setting construction, promoting offline and online service featuring closeness and convenience to enhance client’s experience. Take the “Good Manager” portfolio, an open-ended wealth management platform, as an example. By the end of 2015, the number of individual clients of Good Manager has reached 3.4 million, an increase of 215% compared with the initial period. The financial products sold to end clients have reached 774 billion yuan, up by 42.43% over the same period of last year. The Manager’s Wallet has shot up to the value of 67.5 billion yuan, representing a safe lead in the monetary fund portfolios.
The year of 2016 is the initial year of the “Thirteenth Five Year Plan”. With a particular emphasis on system and institution reform and delicate management, IB has persisted in its efforts to build a market-oriented, comprehensive and international bank. Under the slogan “Stability, innovation and coordination” ， IB aims to improve quality and performance through a new way of development and intensify its efforts to better serve the real economy, guard the risk bottom line and deepen administrative reform. And one thing is sure: the Bank will deliver a stronger performance in a new year.