Industrial Bank Announces 2023 Annual Report: Total Assets Exceed RMB 10 Trillion, Continual Optimization of Asset-Liability Structure

On the evening of March 28, IB released its 2023 annual performance report. According to the report, by the end of 2023, IB’s total assets exceeded RMB 10 trillion for the first time, marking a 9.62% increase to RMB 10.16 trillion compared to the end of the previous year; both deposits and loans surpassed RMB 5 trillion; the Bank achieved operating income of RMB 210.83 billion, with net interest income growing positively to RMB 1465.03 billion, a year-on-year increase of 0.85%; the non-performing loan ratio was 1.07%, a decrease of 0.02 percentage points from the end of the previous year; the provision coverage ratio reached 245%, an 8.77 percentage points rise from the previous year end, further enhancing risk compensation capability.

The year 2023 marked the 35th anniversary of Industrial Bank. Embracing “major national concerns,” IB maintained strategic focus, aligned with China’s economic recovery and development, and continued to forge its unique value-driven banking model. The Bank took solid steps in its high-quality development, consistently ranking in the top 20 of The Banker’s global top 1000 banks and Fortune’s Global 500. It was honored with The Banker magazine’s “Bank of The Year in China” award for 2023. IB’s MSCI ESG rating was upgraded from A to AA, becoming the only bank to sustain the highest rating in the domestic banking industry for 5 consecutive years.

Restructuring of the Balance Sheet

Both Deposits and Loans Exceed RMB 5 Trillion

Over the past year, Industrial Bank continued to drive the restructuring of its balance sheet, enhancing the alignment of its asset and liability structure with the economic framework, and more effectively supporting high-quality economic and social development. The annual report indicates that both deposits and loans of IB exceeded RMB 5 trillion. Specifically, the deposit balance increased by 8.45% to RMB 5.14 trillion compared to the end of the previous year, and the loan balance rose by 9.59% to RMB 5.46 trillion, with the growth in both deposits and loans leading among joint-stock commercial banks.

— On the asset side, IB remained committed to consolidating its foundational sectors and exploring new avenues, ensuring that its asset allocation was highly aligned with the transformation direction of the real economy. Within its foundational sectors, loans in new real estate areas such as housing rentals, urban renewal, and industrial parks grew by 84.65% compared to the end of the previous year. In the new tracks, loans in fields such as technology innovation, inclusive finance, energy, automotive, and industrial parks increased by 31.88%, 23.95%, 16.16%, 26.14%, and 27.40%, respectively, compared to the end of the previous year.

— On the liability side, IB focused on controlling the cost of liabilities as a key approach to stabilizing net interest margin, diligently building its ecological scenarios, advancing its network project, and intensively expanding settlement deposits. The interest payout rate for domestic RMB deposits decreased by 11 BPs year-on-year, further mitigating the impact of narrowing interest margin, with the net interest margin decreasing by 17 BPs year-on-year, a reduction of 2 BPs compared to the previous year.

The continuous optimization of the asset-liability structure has enhanced the resilience of the Bank’s operational performance. Excluding the impact of the one-time income recognition from the old wealth management products in 2022, the Bank’s operating income remained stable on a comparable basis, and its net interest income achieved positive growth, reaching RMB 1465.03 billion, a 0.85% increase year-on-year. Other non-interest income saw robust growth, reaching RMB 36.57 billion, a 14.08% increase year-on-year.

Deeply practicing the “customer-business-benefit” operational logic, IB leveraged its strengths to enrich its financial product offerings, meet diverse customer needs, and strive to maximize value for both customers and the Bank itself. By the end of 2023, the number of corporate finance customers exceeded 1.4 million, a 13.27% increase year-on-year, while retail finance customers surpassed 100 million, up by 10.38% compared to the previous year. Cooperation with over 3300 institutional clients was achieved, with a coverage rate of over 97% for key types of institutional clients.

Distinctive Features in Differentiated Operations

“Three Features of IB” Achieve New Breakthroughs

Over the past year, IB focused on its primary task of pursuing high-quality development, integrating the “Three Features of IB” with the strategy of exploring “Five New Tracks” and excelling in the “Five Major Areas” of finance, maintaining its differentiated competitive edge in the fierce market competition.

— IB emphasis on Green Banking is evident. By the end of 2023, the number of green finance customers increased by 17.83% to 58,300 compared to the previous year. The balance of green financing grew by 16.14% to RMB 1.89 trillion, with the “carbon reduction” sector’s green financing balance rising by 34.81% to RMB 1.06 trillion, accounting for 56.26% of the total. The balance of green loans, as defined by the People’s Bank of China, reached RMB 809.019 billion, maintaining a leading position among joint-stock banks. The interest rate on existing green loans was broadly in line with general corporate loans, with a non-performing loan ratio of only 0.41%, indicating stable returns and risk control. Moreover, services like green wealth management, green bonds, green leasing, green trusts, and green funds are gaining momentum, effectively enhancing the management scale of on- and off-balance sheet assets and driving revenue from light capital businesses. This “green bridge” promotes a sustainable development model that synergizes with “comprehensive profit creation”.

— The Wealth Bank aspect of IB is showing steady progress. By the end of 2023, the Group’s retail Assets Under Management (AUM) reached RMB 4.79 trillion, including third-party custodial market value, a 15.42% increase from the previous year, with wealth AUM accounting for over 70%. Continuously enriching the product lineup, IB Wealth Management’s AUM grew by 8.18% year-on-year to RMB 2.26 trillion, securing the second spot in the market. Additionally, leveraging the interbank network, IB has established consignment cooperation with 289 institutions, offering over ten thousand products for sale. The year-on-year growth for consigned third-party wealth management products, funds, insurance, and physical precious metals were 191%, 54%, 31%, and 67%, respectively. Notably, the IB Platform for Integrated Banking connects state-owned banks, joint-stock banks, and 470 regional and rural financial institutions, with IB Wealth Management’s off-balance sheet sales maintaining a scale of RMB 869.5 billion, a 70.32% increase from the previous year.

— IB Investment Bank division has made significant strides. By the end of 2023, the big investment bank’s FPA balance reached RMB 4.3 trillion, a 6.51% increase from the previous year. IB continued to maintain its leadership in bond underwriting, investment trading, and asset matchmaking. The Bank underwrote debt financing instruments for non-financial corporations amounting to RMB 730.573 billion, ranking first in the market; underwrote foreign bonds worth RMB 5.451 billion US dollars, leading among Chinese joint-stock banks; underwrote green debt financing instruments for non-financial corporations totaling 21.806 billion, ranking second among joint-stock banks; and underwrote REITs-like instruments worth 4.04 billion, also second in the market. Mergers and acquisitions, syndications, and capital market operations continued to show positive development trends. The Bank maintained its leading position in market-making for bonds, interest rates, and precious metals, with a consolidated advantage in client FICC (fixed income, currencies, and commodities) services.

Steady and Rapid Steps in Digital Transformation

The “1+5+N” Digital IB System Gradually Taking Shape

In 2023, Industrial Bank accelerated its digital transformation, continuously optimizing its technology system and mechanisms. The establishment of a digital operations department, increased investment in technology resources, implementation of the Ten-Thousand Talent Plan for tech talents, and an RMB 83.98 billion investment in technology (up 1.78% year-over-year) accounting for 3.98% of the revenue, illustrate this commitment. The number of tech talents grew to 7,828, a 16.85% increase from the previous year, with tech personnel now representing 13.91% of the workforce, up 2.04 percentage points.

Adhering to an “enterprise-level, standardized” methodology, IB completed the construction of “Five Major Enterprise Framework Projects” in marketing, wealth management, investment banking, risk control, and operations. It advanced standardization in processes, data, models, development, and operations, and conducted comprehensive reviews of products, processes, systems, and regulations, achieving preliminary results. In 2023, IB released its first enterprise-level data dictionary, establishing 28,000 enterprise-level data dictionary standards. Throughout the year, 45 enterprise standards were issued, with 3 recognized by the People’s Bank of China as the first enterprise standards in the financial industry’s relevant fields.

IB has made rapid and steady progress in its digital transformation, evolving from laying foundational elements to a phase of comprehensive advancement and accumulation of results. The Bank has preliminarily established a “Digital IB” ecosystem encompassing “1 (Mobile Banking) + 5 (IB Inclusive Finance, IB Butler, IB Life, Money Manager, IB Platform for Integrated Banking) + N (Various Scenario Ecosystems).” Monthly active users for mobile banking increased by 7.52% year-over-year to 22.526 million; IB Inclusive Finance’s certified corporate accounts grew by 26.48%, with a 167.66% increase in the cumulative amount of financing needs addressed compared to the previous year. IB Butler’s average monthly active users (MAU) and customer numbers rose by 22.16% and 20.08%, respectively, with a 16.34% increase in transaction numbers. IB Life saw a registration increase of 10.7291 million customers; Money Manager’s MAU and registered customer count increased by 26.40% and 23.86%, respectively. The IB Platform for Integrated Banking’s institutional investment scale grew by 68.74% to RMB 366.3 billion.

Through technology empowerment, IB actively advances the construction of scenario ecosystems, continuously integrates into various ecological scenes, and deepens the fusion of Digital IB with the real economy. The Bank has expanded its open banking API interfaces to 1,941, a 28.54% increase, covering 8,734 institutions. Additionally, the Bank has upgraded its E-CNY product system, established 5.0561 million IB Wallets, expanded to 168,600 digital currency merchants, and signed agreements with 123 small and medium-sized banks at the 2.5-tier level.

Stable and Improving Asset Quality

Decreasing Risks in Real Estate, Local Platforms, and Credit Card Sectors

The report indicates that by the end of 2023, IB’s key risk indicators improved steadily, with the non-performing loan ratio at 1.07%, a 0.02 percentage point decrease from the previous year, and the overdue loan ratio at 1.36%, down by 0.31 percentage points. Asset quality has been further solidified, with the ratios of loans overdue for more than 90 days and loans overdue for more than 60 days to non-performing loans at 68.30% and 77.33%, respectively, the best levels in nearly three years.

In the realm of real estate risk, IB domestic self-operated loans, bonds, and non-standard investments directed towards the real estate sector had a balance of RMB 1.766 trillion with a non-performing asset rate of 1.53%. Notably, the new non-performing assets in the corporate real estate sector saw a year-over-year decrease of 54%; meanwhile, the collateral for personal housing mortgage loans was sufficiently valued.

Regarding local financing platform risks, the debt balance of local government financing platforms stood at RMB 161.591 billion, a reduction of RMB 59.287 billion from the end of the previous year, with new non-performing assets decreasing by 55% year-over-year, indicating a convergence in risk exposure.

In terms of credit card risks, risk indicators have retreated from their peaks. The balance of credit card loans was RMB 401.633 billion, with a non-performing loan rate of 3.93%, a decrease of 0.08 percentage points from the previous year; the overdue rate was 6.75%, down by 0.59 percentage points year-over-year.

For emerging track risks, IB continuously strengthens research and leverages technology, closely adhering to the market-specific “one city, one policy” approach to formulate differentiated credit policies. This builds a “research + business + risk” integrated mechanism, enhancing the specificity and forward-looking nature of risk policies. Concurrently, IB is advancing the digital transformation of risk control, accelerating the upgrade and iteration of the “tech-stream” evaluation system, with the approved amount under the “tech-stream” exceeding RMB 1 trillion during the reporting period.