Time: 2024-3-14 Source: Financial Times
The Central Financial Work Conference pointed out that “finance should provide high-quality services for economic and social development”, drawing the blueprint for the next stage of financial work and providing a guide for action.
“At present, China has entered a new stage of promoting Chinese-style modernization with high-quality development, and accordingly, commercial banks must shift from scale-oriented bank to value-oriented bank, creating and enhancing its own value in serving the high-quality development of the economy and society”, said Chen Xinjian, President of Industrial Bank.
As a domestic systemically important bank, Industrial Bank has transformed “major national concerns” into “key institutional tasks”. By integrating “Three Pillars of Our Businesses”, “Five New Tracks” and “Five Major Areas”, the Bank has continued to promote the restructuring of its balance sheet and the transformation and upgrading of its business model, and has demonstrated a vigorous vitality and broad space for development.
How to thoroughly implement the spirit of the Central Financial Work Conference, and provide a brilliant “IB Answer” for high-quality financial development? Financial Times reporter interviewed Chen Xinjian.
Reporter from the Financial Times: The Central Financial Work Conference proposed that “we should accelerate the construction of a strong financial country”. At present, China has built the world’s largest banking system, as China moves from a large financial country to a strong financial country, what aspects does the Banking industry need to focus on?
Chen Xinjian: General Secretary Xi Jinping pointed out that a financial powerhouse should have six key core financial elements, and a strong financial institution is one of them, which is the micro-foundation for the construction of a financial powerhouse. At present, China has entered a new stage of promoting Chinese-style modernization with high-quality development. Accordingly, commercial banks must shift from scale-oriented banks to value-oriented banks, creating and enhancing its own value in serving the high-quality development of the economy and society. Combined with Industrial Bank’s practice of building a value-oriented bank, I think we should highlight the following five aspects.
First, we should insist on serving the real economy and reshaping the balance sheet. Serving the real economy is the fundamental purpose of finance, and commercial banks must respond to changes in the needs of the real economy and build a balance sheet that matches the structure of the regional economy and the industrial structure. In recent years, in the face of changes in the external environment, we have taken the initiative to seek changes and proposed balance sheet reconstruction, so as to obtain high-quality customers and high-quality assets by enhancing the quality and efficiency of services to the real economy, and to continue to stabilize the return on assets and improve the structure of liabilities in the course of operating customers. Since last year, we have served more than 1.4 million corporate and financial customers, more than 100 million retail customers, and more than 3,700 interbank customers, and the average interest rate of all loans in the first three quarters of last year dropped by 23 basis points year-on-year.
Secondly, we should insist on differentiated development and polish the “Three Pillars of Our Businesses”. Differentiation, specialization and professionalism are the core of value creation. For a long time, Industrial Bank has continued to build “Three Pillars of Our Businesses” of green banking, wealth bank, and investment bank, which are highly compatible with our strategy of “asset-light, capital-light and high-efficiency” development, and also an important hand in serving the real economy and sharing the dividends of development. In terms of green banking, by the end of 2023, the balance of the Group’s green financial financing reached RMB 1.89 trillion, and the scale of green loans remained the first among joint-stock banks. In terms of wealth bank, the Group’s comprehensive wealth management capacity has ranked first in China’s banking industry for 24 quarters, and the scale of wealth management reached RMB 2.26 trillion at the end of last year, which is the second highest in China’s banking industry. In terms of investment bank, the Industrial Banks has created a circle of friends via implementing its “commercial bank + investment bank” strategy. By 2023, it ranked first in the market in terms of underwriting scale of non-golden bonds.
Thirdly, we should insist on following the trend and laying out the “Five New Tracks”. In line with the trend of China’s economic development from the old triangular cycle of “real estate-infrastructure-finance” to the new triangular cycle of “science and technology-industry-finance”. In 2022, Industrial Bank proposed to accelerate the layout of the “Five New Tracks” of inclusive finance, science and innovation finance, energy finance, automotive finance and automobile finance. In 2023, the “Five New Tracks” has witnessed double-digit growth in enterprise finance loans compared to the beginning of the year. In particular, since the implementation of the “technology flow”, the financing demand approved on this basis has exceeded RMB 2.3 trillion, and more than RMB 600 billion has been disbursed.
Fourthly, we should insist on building “Technology-driven Banking” and developing “Digital IB”. Entering the digital era, focusing on the digitalization of service industries and the development of digital industrialization, Industrial Bank has accelerated its digital transformation, pushed forward a series of reforms in the science and technology line, implemented the “Ten-Thousand Talent Plan” for Green Finance, and gained a number of achievements such as the qualification of E-CNY designated operating agency. At the same time, the Industrial Bank has actively built a financial service system that matches the digital economy, promoted the deep integration of the digital economy and the real economy, and served the modernized industrial system. Taking digital inclusive finance as an example, in 2019, with the strong support of the Fujian Provincial Government, Industrial Bank began to build and operate the Fujian Financial Service Cloud Platform, which currently has nearly 400,000 registered users and has provided financing of more than RMB 320 billion in total. At the same time, the innovative “IB Inclusive Finance” platform has realized system and business docking with more than 870 external scenario platforms across the country, involving a financing amount of RMB 269.2 billion, which has effectively solved the problems of difficult and expensive financing for SMEs.
Fifth, we should adhere to safe development and stabilize asset quality. The bottom line of the Bank’s operation is to guard the risk, reduce the erosion of risk costs on operational efficiency, and form a more “resilient” value creation ability. Since last year, Industrial Bank has set up special teams for key risk areas, strengthened source control, and increased collection efforts, with good results. In the first three quarters of 2023, new non-performing assets in the real estate and government financing fields dropped 73% and 84% year-on-year respectively, and the forward-looking indicators of new non-performing assets in the credit card field have also declined, so the overall quality of assets is stable and controllable.
Reporter from Financial Times: The Central Financial Work Conference proposed that finance should provide high-quality services for economic and social development. Compared with large state-owned banks, what unique advantages can joint-stock banks play and what services can they do well in helping the real economy develop at a high quality?
Chen Xinjian: Building a financial system with Chinese characteristics requires focusing on both large enterprises and small and micro enterprises. Each bank has different resource endowments and characteristics and advantages, so it is necessary to divide the work and complement each other’s strengths, so as to form a synergy that serves the high-quality development of the real economy. Since its inception, joint-stock banks have been tasked with the mission of exploring the way for financial reform and pioneering, with flexible mechanisms, strong innovation and other characteristics. After more than 30 years of reform and development, most of them have formed their own differentiated characteristics.
Industrial Bank is known in the industry for its differentiated operations. It has always grasped the trend of the times, planning and acting in response to the situation, and creating distinctive businesses such as green finance, interbank and financial market business, investment bank, etc., in the midst of the tides of green economic development, urbanization, and financial marketization. On the new journey of serving Chinese modernization, what we need to do is to accurately grasp the changing situation, give full play to our differentiated strengths, look for certain opportunities in uncertainties, and grasp and serve the “Three Main Lines”.
The first line is to serve the new urbanization construction. The urbanization rate of China’s resident population has exceeded 65%, but the urbanization rate of household population is only 45%, so the urbanization process is far from over. The real estate industry will remain an important pillar of the national economy, and at the same time, the “Three Major Projects” have opened up a new space for urbanization construction. Industrial Bank’s branches are mainly located in cities, and they have accumulated rich experience in serving the urbanization process, enabling them to have both wide space and great potential in serving urban builders, residents and industries.
The second line is to serve the construction of modernized industrial system. The Central Economic Work Conference has made “leading the construction of a modernized industrial system through scientific and technological innovation” the first key task this year. Since last year, China’s new technologies and new industries have flourished, the digital economy and green economy have continued to grow, and new energy vehicles, lithium batteries and photovoltaic products have been selling well all over the world, accelerating the formation of new productivity. Industrial Bank has put forward the strategy of “commercial bank + investment bank”, promoted the operation of “region + industry”, and pre-empted the layout of “Five New Tracks. With its innovative service models such as “technology flow” and “Chain Leader Institution”, it is expected to create new advantages in serving the new quality of productivity.
The third line is to serve the cause of common prosperity. The 20th National Congress of the Communist Party of China has made systematic arrangements for realizing common wealth, increasing residents’ income, improving the income distribution system, and developing education and pension services, etc. The Central Financial Work Conference has included pension finance in “Five Major Areas”, which has brought more policy opportunities for the development of wealth business. Industrial Bank has built a “Grand Wealth” business pattern earlier than other banks in the industry, and wealth bank is one of the “Three Pillars of Our Businesses” that Industrial Bank has been focusing on. We will give full play to our advantages in asset management and interbank channels to enhance the core competitiveness of our wealth management and to provide strong services for the common wealth.
Reporter from the Financial Times: The Central Financial Work Conference has proposed to do a good job in “Five Major Areas” in Techfin, green finance, inclusive finance, pension finance and digital finance. These Five Major Areas are also the key direction of Industrial Bank’s business transformation for a long time. How does Industrial Bank integrate Five Major Areas with its own layout of “Five New Tracks” to shape a new advantage in high-quality development?
Chen Xinjian: The “Five Major Areas” proposed by the Central Financial Work Conference pointed out the direction for the financial industry to deepen the supply-side structural reform and serve the high-quality development of the economy and society. In recent years, Industrial Bank has responded to the general trend of economic and social development, refined its strategic focus, deepened its “regional + industry” operation, accelerated the layout of the “Five New Tracks” of science and innovation finance, energy finance, automotive finance, inclusive finance, and park finance, and continued to push forward the restructuring of its assets and balance sheet, and transformation and upgrading of its business model. Our strategic approach not only aligns closely with the requirements of enhancing the “Five Major Areas” but also demonstrates vigorous vitality and vast development potential in practical implementation.
In terms of Techfin, the Industrial Bank has deeply cultivated strategic emerging industries, continuously improved the product system of “equity-debt-loan-insurance”, and provided customers with comprehensive service solutions in the whole life cycle. It also innovatively launched the “technology flow” credit evaluation system, built a circle of investment friends, and promoted the virtuous cycle of “science and technology-industry-finance”. By the end of 2023, the number of customers of the cooperative Techfin enterprises was about 160,000, and balance of Techfin loans was more than RMB 820 billion, achieving an increase of 30%, 28% respectively compared with the end of the previous year.
In terms of green finance, it has improved the green banking system, taken the lead in the industry to establish the Carbon Finance Research Institute, implemented the “Ten-Thousand Talent Plan” for Green Finance, focused on carbon reduction and pollution reduction synergies, improved carbon financial services such as carbon certification and carbon consulting, and pushed forward the integration and development of carbon and E-CNY accounts, so as to continue to consolidate its position as a leader in green finance. In 2023, its MSCI ESG rating has been upgraded from A to AA, making the Bank become the only one to have received the highest rating in the domestic banking sector for five consecutive years.
In terms of inclusive finance, the Industrial Bank has continued to improve the institutional mechanism of inclusive finance, optimized product services, and built a new model of inclusive financial services driven by digitization. It has continued to improve its data application capability, product innovation capability, customer operation capability, intelligent risk control capability, and promoted the integration with green finance and Techfin. By the end of 2023, the balance of inclusive small and micro loans exceeded RMB 500 billion, an increase of about 24% from the end of the previous year.
In terms of pension finance, the Industrial Bank has taken the lead in launching the comprehensive pension finance service program “Elderly Bliss Life”, and become one of the first to obtain the qualification to start personal pension business. It has made efforts to improve the comprehensive pension finance service system including pension finance, pension industry finance, and pension service finance, serving more than 24 million elderly customers, and opening more than 4.2 million personal pension account, maintaining a leading market position.
In terms of digital finance, the Industrial Bank has deepened the reform of institutions and mechanisms, increased investment in scientific and technological resources, implemented the Ten-Thousand Talent Plan for Scientific And Technological Development, accelerated the digital transformation of products and services, deepened the integration of science and technology, data, and business, and accelerated the construction of platforms and ecological construction in the field of industrial finance. These efforts have greatly promoted the deep integration of the digital economy and the real economy, and provided better services for the digital industrialization and the digitalization of industry.
Reporter from Financial Times: The Central Financial Work Conference emphasized the need to comprehensively strengthen financial supervision and effectively prevent and resolve financial risks. In terms of integrating development and security, what are the key areas around which Industrial Bank will continue to do a good job of risk prevention?
Chen Xinjian: Preventing and resolving financial risks is the eternal theme of financial work. At present, the Banking industry has entered an era of steady development, and the control of asset quality faces greater challenges. Specifically for Industrial Bank, we earnestly follow the decision-making and deployment of the CPC Central Committee and the State Council and the requirements of regulatory work, coordinate development and security, do a good job of inventory risk resolution and incremental risk prevention, and orderly push forward the prevention and resolution of key risks such as real estate, local debt, etc. Meanwhile, we also constantly improve the forward-looking identification of various types of risks and preventive capabilities, so as to ensure that the quality of assets is stable and improving.
In terms of real estate, we have earnestly implemented the “16 Financial Articles” policy, set up a leading group for the healthy development of real estate headed by the Bank’s leaders, issued action plans, and made every effort to promote the implementation of the coordination mechanism for urban real estate financing. The Bank has actively cooperated with local governments to provide “guaranteed building delivery” supporting financial services, met the reasonable financing needs of real estate enterprises of different ownerships without discrimination, seized the policy window period, actively promoted the resumption of project construction and production, and strengthened support for the “Three Major Projects” such as the construction of guaranteed housing, and promoted the construction of a new model of real estate development. As of the end of September 2023, Industrial Bank’s on-balance sheet full-caliber real estate financing totaled RMB 1.74 trillion, of which the balance of personal housing and commercial mortgage loans was RMB 1.07 trillion, with a non-performing rate of 0.56%, and the asset quality remained stable.
In terms of local government debt, we have strictly implemented the spirit of the central government’s debt policy, and in accordance with the principles of marketization and rule of law, we have supported the resolution of local government debt risks through inventory asset revitalization, reasonable rollover and orderly suppression and reduction, and assisted in the transformation and development of local financing platforms. As of the end of September 2023, the balance of local government financing debt amounted to RMB 197.745 billion, a decrease of RMB 23.132 billion from the beginning of the year, and the balance of non-performing assets amounted to RMB 3.279 billion.
Problems arisen from development can only be solved in development, and the risks we are currently facing can only be effectively prevented and resolved by promoting business transformation and development. In this regard, we put forward the development strategy of consolidating the fundamentals and laying out the new track. On the one hand, we have promoted the real estate business to accelerate the transformation towards the new development mode, and strived to promote the transformation and development of the local government financing business. On the other hand, we have organically integrated and advanced the “Five Major Areas” with the “Three Pillars of Our Businesses” and “Five New Tracks”, and promoted the balance sheet reconstruction in the new development mode, so as to seize the opportunity in the new economic cycle, and constantly consolidate the “ballast stone” of asset quality.
Reporter from Financial Times: Looking ahead to 2024, what are the plans and initiatives of Industrial Bank to solidly promote the implementation and realization of the deployment of the Central Financial Work Conference?
Chen Xinjian: To implement the spirit of the Central Financial Work Conference, the key is to consciously position and plan the Bank’s own development in the overall process of building financial power and promoting high-quality financial development and to serve the high-quality economic and social development with its own strengths. Combined with Industrial Bank’s 2024 bank-wide work conference deployment, we will insist on seeking progress while maintaining stability, promoting stability with progress, and establishing the new before abolishing the old, and focusing on strengthening “One Leadership” and enhancing “Five Capabilities”. We will also actively make progress in mode transformation, structure adjustment, quality improvement and efficiency enhancement, strengthen the foundation of development, and accelerate transformation and upgrading, to create a value-oriented bank with IB characteristics.
Strengthening “One Leadership”. It means strengthening “political leadership” and enhancing the Party’s construction. We will continue to study and implement the spirit of the 20th CPC National Congress, the spirit of the Central Financial Work Conference, the spirit of the Central Economic Work Conference, as well as the spirit of General Secretary Xi Jinping’s important speech at the opening ceremony of A Study Session on Boosting the High-Quality Development of the Financial Sector attended by principal officials at the provincial and ministerial levels. We will also promote the implementation of the Action Plan for the Conscientious Study, Publicity, and Implementation of the Spirit of the Central Financial Work Conference, consolidate and expand the results of thematic education, deepen the promotion of dual assessment of party building and operation, and continuously improve the quality and efficiency of party building work. By doing so, we aim to better play the role of political leadership and political guarantee under strict governance over the Party, and enhance the purity, professionalism and battle effectiveness of the cadres.
In addition, it is necessary to improve the “Five Capabilities”. The first is to improve the capability to implement strategies. We will adhere to the path of asset-light, capital-light and high-efficiency development, focus on improving retail business, promote the synergistic development of the three major business sectors of retail, corporate finance, and interbank and financial markets, build a balance sheet that better matches the regional economic and industrial structure, and serve the economic and social high-quality development in a more powerful way.
Secondly, we will enhance our customer service capability. We will implement the people-centered development philosophy into the customer-centered operation philosophy, make intensive efforts, continue to improve the customer operation system, grasp the profound changes in the way of reaching customers and their needs in the digital era, and continuously improve the effectiveness of the operation of the online platform. We will also deeply participate in the production and life scenarios of the enterprises and the residents, build a diversified scenario ecosystem, continue to optimize the customer experience, and accelerate the transformation of development mode from product-led to customer-led business.
Thirdly, we will enhance our investment and trading capabilities. We will give full play to the strengths of our financial market business, actively integrate into the construction of the multi-level financial market, strengthen research and empowerment, optimize the allocation of broad asset classes and investment portfolios, effectively grasp market opportunities, and help the market enhance pricing efficiency and trading activity, thus greatly exerting the market’s decisive role in the allocation of financial resources.
Fourth, we will enhance our overall risk control capabilities. We will set up the concept of “managing risks before doing business”, adhere to the principle of “making compromise on profit rather than risk”, strengthen policy research and judgment, prospectively make checks on market access, make a comprehensive risk management system, do a good job in the key areas of credit risk management and control, and continue to fight the battle of key projects with special funds. In addition, we will also will enhance the ability of the “Three Lines of Defense” to perform our duties, improve the level of online business risk control, and ensure that the transformation and development will be stable and far-reaching.
Fifth, we will improve our capacity to promote management. We will continue to take talents as the first resource, introduce, train and make good use of talents in all aspects, improve the system for selecting and training cadres, continue to improve the “5+N” training system, and activate the momentum of talent. We will also comprehensively enhance our science and technology production capacity, establish a science and technology input-output evaluation system, and optimize the layout of talent structure, continue to promote data governance, enrich data assets, empower digital operations, risk management and business decision-making, and build a strong scientific and technological security defense line.