I.How does the Bank view its core competitiveness?
IB always adheres to its original aspiration and foundational mission of "exploring paths for financial reforms and contributing more to economic development." Guided by the vision of becoming a "top-tier bank with a century-long legacy," IB aims to build an outstanding comprehensive financial service group. We inherit and uphold our core values of innovation and dedication towards success, continuously cultivating our distinctive business features and professional advantages. Focusing on high-quality development, we are determined to shift our business philosophy from being product-driven to customer-centric, from prioritizing rapid growth to emphasizing quality, and from being a scale-focused bank to a value-oriented one. All these efforts solidify the foundation for our long-term healthy development, enhancing our competitiveness in the market.
Our strategic objectives are clear. IB consistently emphasizes "serving the real economy and preventing financial risks" as its fundamental starting point. We accurately capture the trends of financial market liberalization, integration, and diversification, planning our moves based on our inherent resources. From focusing on "large-scale investment banking, asset management, and wealth management" to building a bank that emphasizes "settlement, investment, and trading," and then to our "1234" strategic framework, we firmly establish and promote our “Three Pillars of Businesses”: green banking, wealth banking, and investment banking. Our development philosophy of "customer-first, commercial banking as the main body, investment banking as the tool" has been consistent throughout, following a "single blueprint to the end". We maintain the strategic focus with a clear and mature implementation path, resulting in even more pronounced operational outcomes.
Our operational characteristics are distinct. Centered around our customers and their needs, and empowered by technology, IB strives for innovation, creating new products and services in various niche business segments, thus carving out our own blue ocean with unique operational features. Among domestic peers, we were pioneers in venturing into the capital market, exploring innovations in financing tools such as bonds, trusts, financial leasing, and asset securitization, and leading the development of emerging businesses like FICC, investment banking, asset management, and asset custody. As the first domestic Equator Principles bank, IB was also at the forefront of elevating sustainable development to our corporate strategy and governance level. We've made green finance a core business of our group strategy, gradually building a collectivized, multi-layered, comprehensive system of green financial products and services. This has led to our unique model of practicing social responsibility that “balances both profit and responsibility”, and we have been awarded the MSCI Global ESG Rating of 'A' for four consecutive years.
Our service functions are full-featured. IB persists in pursuing a multi-market and integrated development path, extending from banking operations and spanning across various industries. We steadily advance the process of integration and collectivization, establishing a modern comprehensive financial services group led by banking and encompassing trust, financial leasing, funds, futures, asset management, consumer finance, wealth management, digital finance, and research consulting. Each subsidiary deeply integrates into the "1234" strategic framework, focusing on core businesses, honing professional skills, complementing functions, and developing distinctively. Together, we build a high-quality, efficient, and professional integrated financial services system.
Our operations are standardized and efficient. IB always adheres to enhancing internal operational efficiency through standardized, professional, and scientific management. We continuously perfect the corporate governance mechanism that involves "Party Committee leadership, Board of Directors' strategic decisions, senior management execution, and Supervisory Board legal oversight." In line with national policy guidance and market environment changes, we continuously adjust our organizational structure, optimize systems and mechanisms, and pioneer the establishment of an inclusive financial business system in the industry. We've set up a management structure that relatively separates customer departments from product departments and traditional business from new types of business, refining supporting mechanisms and processes to strengthen the intrinsic momentum for transformation and development.
We possess a profound cultural heritage. IB adheres to the core values of rationality, innovation, people orientation, and sharing, inheriting and promoting the excellent cultural genes formed in the long-term development process, creating a cultural heritage with IB characteristics. We actively promote a dedicated culture of due diligence, a competitive culture of daring to fight and win, a practical culture of responsibility and collaboration, and a homely culture of concerted progress. These converge into a common value orientation and behavioral norm for the entire group, ensuring the Bank's steady and long-lasting foundation.
II.What was your overall operational situation in 2022?
We achieved growth in both scale and efficiency. The group's size witnessed steady growth, while its structure continued to optimize. By the end of the reporting period, the group's total assets exceeded 9 trillion and stood at 9.27 trillion yuan, marking an increase of 7.71% from the end of the previous year. The balance of all loans grew by 12.53% compared to the end of the previous year, amounting to 4.98 trillion yuan. Notably, during the reporting period, the incremental loans to strategic emerging industries, the manufacturing sector, and the infrastructure sector accounted for 51.63% of the total increase in corporate loans. Total deposits rose by 9.88% compared to the previous year's end, totaling 4.74 trillion yuan, with personal deposits surpassing 1 trillion yuan for the first time, increasing by 36.76% from the previous year to 1.09 trillion yuan. Operational performance remained stable, with operating revenue growing by 0.51% year-on-year to 222.374 billion yuan. Non-interest net income accounted for 34.67% of the operating revenue, a rise of 0.52 percentage points from the end of the previous year. Net profit attributable to the shareholders of the parent company saw a year-on-year increase of 10.52%, reaching 91.377 billion yuan.
Our customer base has been strengthened continually. IB continued to enhance its customer segmentation and management system, leading to a gradual improvement in customer scale and quality. The number of corporate finance clients exceeded 1.20 million, an increase of 14.30% from the previous year, totaling 1,237,200, with the number of active and above clients growing by 14.79% from the end of the previous year and reaching 511,300, which constituted a steady increase to 41.33% of the corporate finance client base. Green finance clients rose by 30.29% from the previous year to 49,500, while fintech clients grew by 29.28% to 51,700. Retail clients increased by 15.82% from the previous year, totaling 91,752,000. Within this group, premium clients grew by 9.58% to 4,053,100, and private banking clients increased by 8.16% to 63,000. The coverage rate for interbank finance clients remained above 95%.
Through empowerment, our risk has been mitigated significantly. By strengthening risk control in key areas, optimizing interconnected risk resolution mechanisms, establishing specialized working groups, and enhancing special asset management mechanisms, IB maintains the stability of asset quality. We have continually reinforced the integration of risk management and business development, established a "chief-in-charge" system, and implemented "one city, one policy" guidelines for differentiated credit in industries with regional features. Considering the "light-assets, heavy-intelligence" characteristics of tech-innovation enterprises, we've innovated the "technology flow" evaluation system and application model. During the reporting period, the "technology flow" was applied to 7,182 entities, with a total balance of 200.492 billion yuan. As of the end of the reporting period, the bank's non-performing loan ratio was 1.09%, a decrease of 0.01 percentage points from the end of the previous year; the provision coverage ratio was 236.44%, and the provision ratio was 2.59%, maintaining a good level. During the reporting period, the group wrote off 37.959 billion yuan of non-performing loans and recovered a total of 31.552 billion yuan of bad assets, including 11.188 billion yuan of already written-off non-performing assets.
IB’s overall strength has been elevated unceasingly. In The Banker's "Top 1000 World Banks 2022," IB ranked 16th in terms of Tier 1 capital, up three places from the previous year. We were among the first to receive qualifications to start personal pension insurance business and became the 10th designated digital RMB operating institution nationwide. Additionally, MSCI's global ESG ratings have maintained the highest A-level rating in the domestic banking industry for four consecutive years.
III. How were your strategies implemented in 2022?
During the reporting period, IB adhered to the main course of serving the high-quality development of the real economy, resolutely implemented the "1234" strategy, and followed the "four stabilities and four advancements" policy. We intensified efforts to consolidate our foundational business, strategized for new avenues, and firmly established and enhanced our reputation in green banking, wealth banking, and investment banking—IB’s “Three Pillars of Businesses”. We've further promoted digital transformation, ensuring steady and effective strategic execution.
(I) Continuous Enhancement of the "Three Features of IB"
Throughout the reporting period, IB steadily advanced the construction of its "three features," continually strengthening group coordination, optimizing organizational operational mechanisms, enhancing specialized and integrated service capabilities, and achieving synchronous improvements in quality and quantity.
The "full green" transformation is accelerating across the board. Decision-makers proactively assume responsibility for green development, injecting a new concept of "group-wide full green transformation" for the Bank's green finance development and propelling the rapid development of green financial business. During the reporting period, various types of green investment banking business financing scaled to 129.473 billion yuan, a year-on-year increase of 12.00%. Green supply chain finance has made positive progress, with a green supply chain finance balance of 40.448 billion yuan at the end of the reporting period, covering 95 green-exclusive industries. The combined balance of green leasing, green trusts, green funds, ESG and green financial products, and green private equity investments totaled 185.07 billion yuan.
The carbon finance service system is sound and comprehensive. IB has perfected a professional product system for green finance that includes carbon reduction, pollution reduction, and carbon finance, strengthened basic financial services for the carbon market, completed technical interfacing with the national carbon emission trading system, and constructed a carbon finance product system centered on "carbon rights + carbon sinks". During the reporting period, the bank secured 460 million yuan in national carbon quota pledge financing business, with a pledged quota of 6.294 million tons, secured loans linked to carbon reduction and carbon footprint totaling 2.532 billion yuan, cumulatively secured 280 "environmental protection loans" with a total amount of 11.75 billion yuan, and achieved innovative business landings such as carbon reduction loan financing guarantees.
Professional support capabilities continue to improve. The IB Carbon Finance Research Institute has been launched and is operational, focusing on research in key areas such as green finance, climate change and environmental economics, and low-carbon transformation of energy and industries, thereby strengthening the group's professional support for green operations. The bank is advancing the Green Finance Talent Ten Thousand Plan, undertaking cultivation, training, and certification work, and constructing a tiered and categorized portrait of green finance talent.
The group-wide product spectrum is further enhanced. IB Trust delves deep into services such as family service trusts, family trusts, insurance trusts, and deferred compensation, fortifying its wealth management offerings. It actively crafts distinctive and differentiated boutique investment banking services alongside fixed-income+ and TOF private asset product lines; IB Fund primarily focuses on economic transformation, industrial upgrades, and technological innovations, thereby bolstering its equity fund layout. It introduced a digital economy-themed A+H fund, established a core broad-based CSI 300 ETF feeder fund, and launched the pioneering CSI 500 Index Enhanced Fund. With a rich and diverse range of product categories, it has set up a multi-tiered sales system and reinforced its customer engagement strategy; Meanwhile, IB Futures emphasizes active management of fixed income and CTA products, rapidly expanding its futures and derivatives asset management product scale. Its performance consistently outpaces market peers with similar strategies. By the end of the reporting period, active management products created by IB Trust, IB Fund, and IB Futures had a combined balance of 429.527 billion yuan.
IB's Wealth Sales Channels have undergone a transformative upgrade. The Bank has accelerated its shift from "single product sales" to a more comprehensive "asset allocation" strategy, expanding its wealth ecosystem. This strategy includes strengthening both online and offline operations, broadening sales networks within and outside the Bank, and enhancing connectivity across different scenarios. It also involves directing traffic and fostering ecological co-construction. With the aim of building an advanced online platform for wealth sales, IB has hastened the integration and interconnectivity among various online channels. These channels include Money Manager, IB Mobile Banking APP, IB Life, IB Butler, and IB Platform for Integrated Banking. During the reporting period, Money Manager saw its average monthly MAU (Monthly Active Users) increase by 307,400 households, a surge of 153.24% from the end of the previous year. Additionally, IB Platform for Integrated Banking successfully sold wealth management products to retail customers from state-owned banks, joint-stock banks, regional banks, and rural financial institutions, achieving a total wealth management scale of 510.512 billion yuan. This figure represents a substantial growth of 186.25% compared to the end of the previous year.
Asset custody has played a significant role in driving comprehensive revenue contributions. The scale of the asset custody business has been growing steadily, with continuous optimization of product structures and notable comprehensive benefits. By fully utilizing the asset custody business platform and closely linking various group operations, the Bank established a complete business chain encompassing “investment, underwriting, sales, and custody”. This strategy satisfies customers' demands for comprehensive financial services throughout their entire lifecycle and industrial chain, thereby fostering the synergistic development of various businesses. By the end of the reporting period, the Bank's asset custody scale reached 15.26 trillion yuan, an increase of 8.13% from the end of the previous year. Moreover, the average daily balance of deposits related to custody business stood at 335.431 billion yuan, growing by 16.91% from the end of the previous year.
By the end of the reporting period, the group's retail AUM (Assets Under Management) hit 3.37 trillion yuan, up by 18.33% from the end of the previous year, with off-balance-sheet assets accounting for 67.70% of the total. The wealth management sector of the Bank witnessed robust growth, realizing a light-capital, weak-cycle operation with fee income from wealth management services reaching 25.814 billion yuan, a year-on-year increase of 10.35%. Income from wealth management services alone totaled 15.565 billion yuan, up by 26.89% year-on-year.
Asset construction capability continued to increase across the market. IB maintains market leadership in bond underwriting and continues to innovate and break new ground. During the reporting period, the non-financial bond underwriting volume reached 686.083 billion yuan, ranking second in the market; Overseas debt underwriting amounted to 7.767 billion US dollars, marking a year-on-year increase of 4.44%, which places IB first among Chinese-funded joint-stock banks. Green bond underwriting totaled 35.45 billion yuan, a year-on-year growth of 15.32%, positioning IB second among joint-stock banks; Keeping pace with the market, IB successfully executed multiple first-to-market businesses, including the inaugural batch of technology and innovation bills, the first green panda bond issued by a private enterprise, and the inaugural social responsibility bond. IB has deepened customer collaboration in areas such as quasi-REITs, technology and innovation bills, rural revitalization bonds, and the special bond for affordable rental housing; Diversified financing remains robust. M&A financing reached 162.135 billion yuan, surpassing 100 billion yuan within the year for the first time, reflecting a year-on-year growth of 77.01%; Capital market business transactions stood at 27.772 billion yuan, with a year-on-year surge of 83.06%; Syndicated financing transactions amounted to 271.407 billion yuan, growing by 61.06% year-on-year; For equity investments, there were collaborations with 171 "Loan for Invested Companies" partner institutions, of which 62 were ranked among the top 50 in the 2022 China Equity Investment by Zero2IPO Research and the top 30 in niche industry investments; During the reporting period, the Bank generated 4.454 billion yuan in investment banking revenue. The number of key group clients for investment banking exceeded 606, which spurred the average daily settlement deposit from key group clients to reach 586.094 billion yuan, an increase of 107.729 billion yuan from the end of the previous year. Investment banking supplied 313.392 billion yuan worth of assets to relevant departments and subsidiaries within the group, marking a year-on-year growth of 33.98%. Additionally, the effect of IB's "Commercial Banking + Investment Banking" (ComIn Bank) became pronounced, as reflected by the acquisition of over 40,000 payroll payment clients and more than 230 new private banking clients.
IB's "Commercial Banking + Investment Banking" (ComIn Bank) model has been rejuvenated and upgraded to version 2.0. By fortifying strengths and addressing weaknesses, the Bank further unleashes the operational efficacy of the "ComIn Bank" strategy. Through the integration of group licensing capabilities, the focus has been on developing key "marquee" products in capital markets, fixed income-like products, and equity investments. Customer resource integration allows for the exploration and marketing of diverse wealth management needs, creating seamless connections among large-scale investment banking, asset management, and wealth management sectors. Comprehensive support systems enhance the "ComIn Bank" implementation effectiveness, covering aspects such as risk systems, assessment mechanisms, team development, and digital transformation. Relying on "ComIn Bank" 2.0, the Bank aims to provide clients with deeper and more integrated package financial services.
Capabilities in FICC (Fixed Income, Currencies, and Commodities) and bond banking have been strengthened. Underwriting of rate bonds has grown by 25.50% year-on-year, reaching 838.841 billion yuan. By aligning bond investment trading with client demands, the Bank has executed bond bidding and spot bond trading deals worth 307.225 billion yuan with 342 trading counterparts during the reporting period. The bank maintains a leading position in the market across bonds, interest rates, foreign exchange rates, and precious metals, continuously intensifying market-making, trading, and sales efforts to foster an enabling trading ecosystem. The Bank has facilitated clients in hedging foreign exchange risks, handling foreign exchange transactions worth 764.364 billion yuan, and generating income of 3.38 billion yuan from FICC transactions on behalf of clients.
By the end of the reporting period, the group's finance product aggregate (FPA) stood at 7.84 trillion yuan, a 12.01% increase from the end of the previous year. The non-traditional off-balance-sheet financing balance representing off-balance-sheet investment banking was 3.07 trillion yuan, growing by 13.27% and outpacing on-balance-sheet financing growth. The traditional off-balance-sheet financing balance was 1.20 trillion yuan, up by 6.79% from the end of the previous year.
(II) Accelerated Advancement in Digital Transformation
(III) Institutional Reform Unleashes Dynamism
The Bank's structural reform, encapsulated by the "Four Beams and Eight Pillars," has essentially taken shape. It advances institutional reforms in technology, retail, corporate finance, the Fujian region, and middle/back-office operations, thoroughly optimizing customer segmentation, integrated public-private business operations, and specialized management systems for key industries. This step-by-step enhancement encompasses capabilities such as tech management, R&D, data governance, operational maintenance, digital security, and foundational tech research, making the organizational framework and business systems more scientifically sound and rational. The "leadership strategic division + departmental responsibilities cross-setup" division mechanism is being implemented, promoting the widespread application of agile and flexible work mechanisms. The consciousness of "leading, being responsible, participating, and cooperating" is continuously strengthened, effectively enhancing strategic planning, transmission, implementation, and synergy. Further improvements are being made in evaluation and assessment, resource allocation, and incentive and constraint mechanisms. The reform of the post-rank salary system has been initiated, making business mechanisms more refined and standardized. We have been strengthening group consolidated management, optimizing and standardizing subsidiary management models, and intensively enhancing the coordinated use of multiple financial licenses. Ciit Asset Management Co., Ltd. has been upgraded to first-level subsidiary management, propelling the reforms in IB's research systems and mechanisms, and enhancing the synergy of the "Commercial Banking + Investment Banking" strategy. The internationalization development has steadily initiated, with the orderly advancement of the preparatory work for the London representative office.
IV.How were your assets managed in 2022 and what is your outlook for 2023?
In terms of credit business, IB adheres to a general tone of stability and seeks progress within this stable framework, thoroughly implementing various financial regulatory requirements, deepening strategic transformation, and optimizing asset structure. The Bank's loan growth and rate of increase are among the forefront of joint-stock banks. Regarding credit allocation, the Bank accelerates the business layout in new areas in line with national macro-control policies and industrial development directions. As of the end of the reporting period, the balance of medium-to-long-term loans in the manufacturing industry increased by 120.662 billion yuan, a 76.65% growth compared to the end of the previous year; the balance of PBOC statistics dimension green loans increased by 183.132 billion yuan, up 40.34%; the balance of PBOC statistics dimension loans to science and technology enterprises increased by 124.196 billion yuan, a 56.59% increase; and the balance of inclusive small- and micro-loans increased by 105.389 billion yuan, up 35.27%. The growth rate of these loans all exceeded the overall loan growth rate, significantly enhancing the ability to serve the real economy.
In terms of investment business, IB enhances market situation analysis, combined with interest rate change trends, intensifies the turnover of bond assets, and realizes spread earnings, while moderately opening positions of foreign currency debt assets, reducing the scale of non-standard businesses, and further optimizing investment structure.
Looking forward to 2023, the Bank will maintain the stability of credit growth, accelerate structural adjustments, and enhance the alignment of business layout with the real economy; scientifically arrange the pace of investment positions, and actively seize trading opportunities. The "Administrative Measures for the Capital of Commercial Banks (for Trial Implementation)" released in 2023 also aims to encourage banks to improve their risk management levels and the quality and efficiency of serving the real economy. In the future, small- and medium-sized enterprises, credit card loans, and high-rated investment varieties, which have capital-saving properties, are highly consistent with the Bank's current focus on promoting the reconfiguration of the balance sheet. This consistency is conducive to the adjustment and operational optimization of the Bank's client group structure and asset structure. In the next phase, the Bank will continue to advance the optimization of credit structure, serve the high-quality development of the economy, and the people's aspirations for a better life, increasing the asset proportion of small- and medium-sized enterprises and retail businesses.
V.How were your liabilities managed in 2022 and what is your outlook for 2023?
During the reporting period, IB remained steadfast in its strategic direction, reinforced the execution of its strategies, accelerated its digital transformation, and continuously optimized its liability structure, aiming to increase the proportion of deposits within the liabilities. By the end of the reporting period, the Bank's total deposits had increased by 425.941 billion yuan, a growth of 9.88%, which surpassed the overall growth rate of total liabilities and was 157.794 billion yuan higher than the same period of the previous year. Specifically, personal deposits amounted to 1,089.028 billion yuan, accounting for 22.99% of all deposits, marking an increase of 4.52 percentage points compared to the end of the previous year. Additionally, IB proactively assessed market interest rate trends and, in conjunction with asset allocation and liquidity management requirements, took a cost-control-oriented approach to systematically plan for market-driven active liability absorption. As a result, the overall cost of the Bank's liabilities decreased by 3 basis points (BP) year-on-year.
Looking forward to 2023, IB's liability business will prioritize cost control and stability. By managing the balance between volume and price, the Bank aims to solidify its deposit foundation and optimize its deposit structure through measures such as strengthening customer management, enhancing product coverage, and refining performance assessments. Simultaneously, considering the macroeconomic environment and market liquidity fluctuations, the Bank will strategically align its financial market liability business to ensure liquidity safety.
VI.How did your net interest margin perform in 2022 and what is your outlook for 2023?
During the reporting period, IB recorded a net interest margin (NIM) of 2.10%, a year-on-year decrease of 19 BPs, primarily due to factors such as the Loan Prime Rate (LPR) reduction, downward loan pricing, and fierce competition for deposits, with costs maintaining relative rigidity. To alleviate the pressure of narrowing interest margins, the Bank continually optimized its asset-liability structure.
On the asset side, the emphasis was on serving the real economy, increasing support for physical entities, and accelerating structural transformation and adjustment. The average daily scale of loans during the reporting period rose to 59.37% of interest-bearing assets. On the liabilities side, the focus was on customer operations, adapting to adjustments in the deposit pricing mechanism and changes in customer risk preferences, maintaining the expansion intensity of settlement deposits, and orderly guiding the reduction of medium-to-long-term deposit pricing through listed interest rate reductions, with the cost of time deposits decreasing by 7 BPs year-on-year. Capitalizing on the favorable environment of reasonable market liquidity, the Bank promoted the optimization of market-driven liability structure and cost reduction through refined management. In the fourth quarter, the Bank's NIM increased by 9 BPs quarter-on-quarter, and net interest income grew by 5.92%, demonstrating the effective results of asset and liability management policies.
Looking ahead to 2023, IB will drive a further reconfiguration of the balance sheet, optimize asset structure, increase the proportion of relatively high-yield credit assets, gradually enhance risk pricing capabilities, control liability costs, intensify the expansion of low-cost settlement deposits, and strengthen the management of medium-to-long-term deposit pricing, ensuring that the interest margin remains at an acceptable level.
VII. How did your non-interest income perform in 2022 and what is your outlook for 2023?
During the reporting period, the Bank deepened its strategic transformation, and further optimized its revenue structure, achieving a net non-interest income of 77.101 billion yuan, a year-on-year increase of 2.04%, with the proportion of net non-interest income in operating income reaching 34.67%, up by 0.52 percentage points year-on-year. Of this, net fee and commission income was 45.041 billion yuan, up 5.53% year-on-year; other non-interest net income was 32.060 billion yuan, down 2.49% year-on-year. The decline in other non-interest net income was primarily due to elevated economic recovery expectations since November, with market interest rates trending upward in stages and the bond market undergoing certain adjustments, leading to a retreat in the net value of the Bank's trading financial investments.
Regarding fee and commission income, the wealth management business saw robust growth, achieving light-capital, weak-cycle wealth management business fee income of 25.814 billion yuan, up 10.35% year-on-year. Within this, the wealth management business accelerated its transformation and upgrade, generating revenue of 15.565 billion yuan, a 26.89% increase year-on-year. The investment banking business maintained a stable market position, achieving investment banking revenue of 4.454 billion yuan, a decrease of 1.66% year-on-year, primarily due to a slight decline in bond underwriting fees. In response to customer financial needs and mobile payment development trends, bank card and payment settlement income was 16.159 billion yuan, up 4.59% year-on-year.
In 2023, IB will continue to deepen its strategic transformation, intensify customer management, accelerate the forging of core competencies, enhance revenue-generating capabilities, and strengthen the diversification and stability of non-interest income. The Bank will polish its image as a wealth management institution by deepening customer relationships, focusing on acquiring new customers, enhancing value, and controlling attrition to establish a growth mechanism for mid-to-high-end valued customers. It will optimize the wealth management product and portfolio manager selection systems, improve product supply and ongoing management capabilities, and meet clients' diverse asset allocation needs. The Bank will advance the construction of a unified, open, and shared wealth management platform, reinforce technology and data empowerment, and achieve rapid production capacity enhancement. Custody services will firmly position themselves in publicly offered funds, keep up with trust business innovations, delve into off-balance-sheet wealth management, and explore opportunities in private equity. In the investment banking sector, while consolidating advantages in bond underwriting, the Bank will seize business opportunities through product innovation, enhancing its service and competitive capabilities in areas such as REITs, private replacement of debt, syndicated financing, merger and acquisition financing, and capital markets. Capitalizing on its traditional strengths in capital operations, the Bank will intensify research-driven strategies, proactively capture market rhythms, optimize its bond investment portfolio, continuously elevate the trading and strategic layout capabilities for bond operations, and boost comprehensive income. It will maintain its market-making leading position in interest rate bonds, interest rate derivatives, and currency derivatives, enhance its FICC core competitiveness, and meet clients' growing needs for wealth appreciation and hedging. The bank card business will focus on payment issuing and acquiring services to streamline customer access, continuously execute the "networking project," deepen cooperative marketing with leading platform scenarios, create a comprehensive, multi-tiered consumer reward system, and promote growth in online bank card transactions.
VIII. How was the quality of assets in 2022 and what is your outlook for 2023?
During the reporting period, IB actively integrated and served the new development paradigm, optimized various risk policies, and accelerated digital transformation to strengthen risk empowerment for consolidating the foundational business and strategizing new competitive tracks, thereby aiding high-quality development.
First, IB is steadfastly helping branches in crucial areas in developing industries within distinctive regional characteristics. Guided by the "one city, one policy" principle, it offers branches nuanced and tailored policy support and encourages them to “thoroughly cultivate and expand” business within their regional industries. Second, the Bank is championing the adoption of a "technology flow" credit assessment system, uniquely designed around the needs of tech enterprises. This involves utilizing digital resources such as data, systems, and models to innovate customer admission, credit granting process, authorization management, credit granting policies, duration management, evaluation, and responsibility identification, effectively distinguishing it from the traditional "capital flow" credit control paradigm, thus pragmatically facilitating business transformation. Third, IB is intensifying risk management in key areas by instituting agile teams focusing on real estate, local government financing, credit card risk mitigation, and critical risk project resolution, integrating expertise group-wide for synergistic, top-down problem-solving for the mitigation of risk projects in key sectors, and maintaining pivotal asset quality metrics. Fourth, the push for digitization, procedural, and standardized operations continues, leveraging model algorithms and property-related big data to enhance recovery processes, bolstering the innovation of specialized asset disposal products, refining resource allocation for write-offs, and substantially boosting the performance quality and efficiency of special asset management.
At the end of the reporting period, the Bank's balance of non-performing loans stood at 54.488 billion yuan, an increase of 5.774 billion yuan from the end of the previous year. The non-performing loan ratio was 1.09%, a decrease of 0.01 percentage points from the end of the previous year, maintaining a relatively optimal level in recent years. At the same time, the loan provision coverage ratio was 236.44%, and the provision ratio was 2.59%, with the ability to offset risks still at a good level.
At the end of the reporting period, the bank's overdue loan indicators rose slightly compared to the end of the previous year, primarily due to a significant increase in credit card overdue payments. During the reporting period, some credit cardholders experienced a decline in income levels and repayment abilities, while collection operations were severely limited in manpower and methods, significantly impacting collection effectiveness and leading to an increase in overdue and non-performing credit card businesses. The Bank has adopted a series of effective measures, perfected the joint risk prevention and control mechanism for retail credit businesses, strengthened credit card risk control, and carried out "three enhancements" in the management of credit card risk asset quality: strategy optimization, data application, and collection improvement.
Looking forward to 2023, with the domestic economy steadily rebounding, the cash flow of enterprises and residents will gradually recover. Additionally, the banking industry's active support for the recovery of the real economy and the resolution of financial risks in recent years has also provided solid assurance for its stable operation and risk prevention. The instances of overdue payments due to short-term cash flow strains among credit clients will be effectively alleviated, and the pressure on asset quality control will diminish.
Since the public solicitation of opinions in 2019 on the Measures for the Risk Classification of Financial Assets of Commercial Banks, IB has proactively deployed related tasks in anticipation. Adhering to the new regulatory standards, the Bank has enhanced the prudent classification management of existing credit assets. With strict standards for non-performing identification based on dimensions like changes in customer creditworthiness, cross default, and restructuring circumstances, IB has made additional provisions for potential risks, gradually buffering the impact of the new regulations on asset quality. Moving forward, in line with the regulatory transition period arrangements, IB will devise a detailed work plan to systematically and progressively complete the classification of existing businesses by the end of 2025, maintaining asset quality stability.
IX.What was your asset quality in key areas for 2022 and what’s your outlook for 2023?
(1) Credit Card Business Risk Control
During the reporting period, the overall asset quality in the credit card industry faced pressures, with IB's credit card default amounts growing beyond expectations. By the end of the reporting period, the outstanding balance of the Bank's credit card loans stood at 452.772 billion yuan, with a non-performing rate of 4.01%, an increase of 1.72 percentage points from the end of the previous year.
In response to the rising risks associated with credit cards, IB actively adjusted to the changing business environment. Prioritizing the long-term development of its credit card business, the Bank strengthened its risk management while balancing risk prevention and control and business growth in the following phases: 1. Pre-loan phase: Continuously optimized and calibrated application scoring models, increased the proportion of high-growth young customers, and improved the customer group structure. 2. During-loan phase: Integrated information across the customer's card lifecycle, refined customer risk labels, established an integrated in-loan control system, and bolstered identification and management capabilities for high-risk groups. 3. Post-loan phase: Leveraged local management advantages of branches, intensified judicial handling, reinforced the management of external collection agencies, and enhanced the effectiveness of credit card risk disposal. 4. Digitalization: Perfected the holistic customer persona, optimized case assignment strategies, collection strategies, and account write-off case management strategies, promoting the full implementation of digitalization in the entire risk management process.
Looking ahead to 2023, with the Bank's risk control measures progressively implemented and taking effect, it is anticipated that the quality of credit card assets will remain stable, with the overall risk being stable and manageable.
(2) Real Estate Business Risk Control
During the reporting period, the central government introduced a series of policies supporting the healthy development of the real estate sector, playing a positive role in mitigating real estate business risks, stabilizing market sentiment, and promoting the sector's healthy growth. IB actively implemented these policies, differentiating between real estate corporate group risks and individual project risks. In line with the "three-category" risk resolution strategy and based on the actual circumstances of the projects, the bank facilitated risk mitigation in the real estate business through measures such as promoting smooth project development and sales, mergers and acquisitions, reorganizations, and preservation of special assets. To enhance policy implementation, IB established an agile team specializing in real estate risk resolution, fully mobilizing the professional resources of the entire group. Through innovative methods like corporate mergers and acquisitions, proxy construction and sales, joint construction and management, and sales resolution, the Bank revitalized real estate risk projects, advancing the resolution and disposal of a batch of risk projects.
As of the end of the reporting period, the Bank's balance of domestic self-operated loans, bonds, and non-standard businesses in the real estate sector totaled 1650.89 billion yuan, with a non-performing loan (NPL) ratio of 1.48%, an increase of 0.14 percentage points from the end of the previous year. This balance includes:
Personal real estate mortgage loans amounted to 1,097.324 billion yuan, accounting for 66.47% of the balance. Currently, IB's personal real estate mortgage loans are primarily distributed in first- and second-tier cities, the Pearl River Delta, the Yangtze River Delta, and main urban areas of certain economically developed cities in central regions, making up 86% of the total. The Loan-To-Value (LTV) ratio for personal housing mortgages (the ratio of the balance of personal housing mortgage loans to the total value of the mortgaged properties) stood at 44.04%, indicating ample collateral value.
The balance of corporate real estate financing was 553.567 billion yuan, representing 33.53% of the total. In IB's corporate real estate financing business, besides bond investments of 80.953 billion yuan (including 15.375 billion yuan invested in bonds issued primarily by high-quality real estate enterprises and 65.578 billion yuan directed towards residential mortgage-backed securities), the remaining 472.614 billion yuan was all backed by corresponding real estate projects and collateral. Furthermore, the balance of projects located in first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen, as well as provincial capitals and cities with a GDP exceeding one trillion yuan, economically developed, and stable real estate markets, accounted for over 80% of the total. The remaining projects were also concentrated in the main urban areas of economically developed cities in the Pearl River and Yangtze River Deltas, with promising development prospects and sufficient collateral.
The Bank's involvement in off-balance-sheet operations that do not assume credit risk remains relatively limited in scale. As of the end of the reporting period, IB's domestic non-principal-guaranteed wealth management, commission, and bond underwriting businesses directed towards the real estate sector totaled 124.469 billion yuan. This included bond underwriting of 62.759 billion yuan, wealth management fund investments of 49.095 billion yuan, and wealth management consignment sales of 12.615 billion yuan. The issuers or underlying asset financiers were primarily central enterprises, local state-owned enterprises, and leading real estate companies with stable operations. The Bank has established a stringent suitability review system for wealth management products. The underlying financiers of these products are mainly credit clients of the bank, all listed within the white list of real estate enterprises eligible for the bank's self-operated business, and the financiers primarily consist of state-owned real estate enterprises with high qualifications.
Looking ahead to 2023, IB, building on the implementation of the "three-category" risk resolution strategy, will actively ensure timely deliveries of presold homes, strengthen the synergy between retail finance and corporate finance, push for the completion of risky properties, and expedite risk resolution in the real estate business domain. Simultaneously, grounded in the "livelihood industry" function positioning of the real estate sector, and while maintaining stability in traditional real estate, the Bank will fully implement the "dual-track" approach of house purchase and renting, continuously and vigorously drive initiatives in the housing rental market, and build a comprehensive housing rental ecosystem. IB will actively expand into urban renewal and the revitalization of underutilized land, vigorously promoting the structural transformation of its real estate business. Furthermore, the Bank will continue its efforts in the field of green, low-carbon construction, contributing to the national "dual carbon" strategy. Currently, China continues to experience a rapid stage of urbanization, and the immense potential demand will also provide robust support for the development of the real estate business, offering room for the resolution of financial risks in real estate.
(3) Local Government Financing Platform Credit Risk Control
During the reporting period, IB focused on serving high-quality regional economic development, facilitating orderly management of local government debt risks. For specific high-risk areas, the Bank reinforced the implementation of resolution policies, leading to substantial progress in resolving several longstanding challenging risk projects and an improvement in asset quality compared to the previous year. Firstly, IB leveraged its comprehensive financial advantages to support high-quality regional economic development, jointly maintaining regional economic and fiscal stability, and ensuring the sustainability of local government debt repayment sources. Secondly, in line with the central government's policies and timing for local government debt risk resolution, IB actively communicated with local governments, utilizing its "commercial bank + investment bank" advantages, proactively connecting with various repayment sources, and steadily reducing the scale of existing business. Thirdly, the Bank intensified risk screening and anticipatory resolutions, securing repayment sources for local government financing platform debts in advance, formulating risk prevention and resolution plans on a case-by-case basis, and effectively controlling default risks. Fourthly, IB established an agile task force for risk prevention and control related to local government financing operations, liaising with regional governments, focusing on critical issues, and promoting substantial progress in risk resolution for key areas and projects.
By the end of the reporting period, IB's local government financing platform debt balance stood at 220.878 billion yuan (including actual and contingent credit loans, bond investments, proprietary and wealth management fund investments, etc.), a decrease of 86.837 billion yuan from the end of the previous year; the non-performing asset ratio was 1.23%, a drop of 0.74 percentage points from the end of the previous year, with non-performing assets totaling 2.723 billion yuan, a reduction of 3.339 billion yuan from the end of the previous year.
Looking ahead to 2023, as profound changes occur in the local government investment and financing system, local governments are progressively transitioning towards industrial finance by promoting a virtuous cycle of technology-industry-finance, providing new development opportunities for public credit business. IB will continue to adhere to compliance and market-oriented principles, promote business transformation, and resolve existing business risks, maintaining stable asset quality in local government financing platform operations. With a commitment to serving high-quality regional economic development, IB will proactively increase credit allocations to the green economy, housing rentals, rural revitalization, new urbanization, and local high-quality industries and advantageous sectors, promoting transformative development and asset revitalization. Moreover, the bank will further refine the agile team's working mechanism, prevent default risks on local government financing platforms, and strengthen control over the quality of existing business assets. Considering the central government's explicit requirements for political discipline, systematic policy support, and reasonable timelines for local government debt risk resolution, and supported by various policy measures such as real estate support, existing asset revitalization, "steady growth" measures, and proactive fiscal policies, it is anticipated that the financial pressure on local governments will ease compared to the previous year, and risks associated with local government financing platforms will gradually diminish.
X.What is your development strategy for 2023?
In 2023, IB will adhere to the guidance of Xi Jinping's thoughts on Socialism with Chinese Characteristics for a New Era, thoroughly implement the spirits of the 20th National Congress of the Communist Party of China and the Central Economic Work Conference, maintain the primary tone of "Prioritize economic stability and pursue progress while ensuring stability", enhance confidence in development, maintain strategic focus, and persist in the long-term implementation of the "1234" strategy. The focus will be on optimizing structure, customer development, digital transformation, risk management, and collaborative development in five key areas. Unremitting efforts will be made to strengthen research, technology, risk, and collaboration—the "four empowerments"—to better coordinate the effective enhancement of quality and reasonable growth in quantity, solidify the foundation for sustainable operations, and lay a deep foundation for high-quality development.
First, we will continue to increase financial supply. IB actively implements a comprehensive set of policies for economic stability and follow-up policies, allocating more resources to key areas and weak links of the real economy, striving to be a main force in the main channel of high-quality development. Concentrating on the main track of the real economy, the Bank seizes the key strategic pivot of expanding domestic demand, significantly improving the alignment between business layouts and the real economy. Persisting in accelerating and exerting efforts in new tracks, IB grasps opportunities in the transformation and upgrading of manufacturing, high-tech industries, and the development of the digital economy, actively serving the modern industrial system, and enhancing its proportion in and contribution to new tracks. It continues to consolidate and innovate traditional strengths, promotes accelerated development and structural optimization of retail, and enhances developmental stability and balance. The Bank continuously strengthens advantages in investment banking, asset management, wealth management, financial markets, interbank finance, asset custody, and other financial market businesses, forging new capabilities and stimulating new momentum around services to build a new development pattern; it persists in green transformational development, using "green bridges" to drive "comprehensive profit creation," solidifying its leading position in green finance.
Secondly, we will enhance our service quality and efficiency significantly. Adhering to the "customer-business-benefit" operational logic, IB treats customer development as a critical task that must be upheld in the long term, continuously strengthening customer management awareness and enhancing customer management capabilities. Insisting on detailed customer profiling and integrating the new standard method of Basel III with a capital-intensive approach, the Bank conducts comprehensive value analyses on customers. It provides comprehensive financial services, optimizing business structure driven by changes in customer structure. It maintains a customer group linkage operation, innovates mechanisms for breakthroughs, and persistently promotes integrated customer expansion, engagement, and retention in corporate banking, retail, and interbank businesses, improving the quality and efficiency of comprehensive customer services.
Thirdly, we will hold fast to innovation through the power of technology. Upholding that technology is the primary productive force, IB vigorously promotes the transformation of information technology from a support role to a leading one in innovation. Adhering to architecture leadership, the Bank integrates enterprise-level architectural thinking into group-wide operations, constructs, and exports group-level public capabilities. It establishes an architecture control system, research and development system, and service system with clear levels and defined responsibilities, efficiently responding to market demands. Adhering to the principle that talent is fundamental, IB actively advocates management philosophies driven by data-oriented processes and decisions, continuously enhancing employees' digital awareness, literacy, and skills. Committing to data empowerment, the bank uses data applications to drive data governance, accelerates the integration of internal and external data, effectively enhances data service capabilities, and unleashes the value of data.
Fourthly, strict adherence to the bottom line of risk and compliance is essential. IB persists in viewing risk prevention as the perpetual theme of financial work. This approach not only reinforces baseline awareness and enhances the foresight and predictability of risks to effectively prevent and resolve significant risks, preparing for "battles with ample preparation," but it also breaks through conventional thinking and innovates tool concepts to effectively empower business development. Regarding existing assets, the focus is on deriving benefits from asset disposition, continuously waging a battle against non-performing assets. Concerning new assets, the emphasis is on adapting to business structure adjustments and accelerating transformations in emerging tracks, shifting risk management from a "collateral-focused" model to a "credit-focused" model, and acquiring risk premiums through differentiated and refined risk management. By focusing on institutional construction, IB is expanding compliance management and risk prevention, advancing consumer rights protection, anti-money laundering, and counter-terrorism financing to new levels, and ensuring steady and long-term progress through compliant operations.
Fifthly, we will strengthen group coordination and linkage. Adhering to the goal of creating a "strong head office, agile branches, and professional subsidiaries," IB fosters linkage development for the group from a higher starting point, achieving substantial breakthroughs in mechanisms such as integrated linkage of corporate banking, retail, and interbank businesses, and integrated linkage of commercial and investment operations. The bank persists in regional collaborative development, continuously optimizing regional business layouts. It puts forward higher requirements for key regional branches by allocating more resources and requiring their performance metrics to be at a relatively high position in the company. Non-key branches must accurately identify regional characteristics, target mainstream markets in their regions, and build differentiated advantages. The Bank also emphasizes strengthening the functional positioning of subsidiaries, focusing on core businesses to gain market precedence, as well as effectively nourishing the group by serving the group's strategy, thus forming a synergy for high-quality development.