--Industrial and Commercial Bank of China (ICBC)
Introduction
Established in 1984, ICBC is China’s largest commercial bank. As of the end of 2006, its total assets amounted to RMB 6.45 trillion, accounting for around 17% of China’s banking sector. In the 2006 Fortune 500 list, ICBC was ranked 199th in terms of operating revenue, which is US$29.16 billion, climbing up 30 spots over its 2005 ranking.
On Apr. 21, 2005, the State approved the program for the structural reform of ICBC. In October, ICBC was formally transformed into a joint-stock company, taking one step closer toward its planned market listing. The new company, assuming all business and relevant assets and debts of the former ICBC, was inaugurated with a registered capital of RMB 248 billion (US$30.6 billion). It was sponsored by the Ministry of Finance and Central Huijin Investment Co. Ltd., a central government investment arm that supports China's aggressive financial reform.
Although ICBC started its shareholding reform later than the other two State commercial banks, namely China Construction Bank (CCB) and Bank of China (BOC), it has carried out changes at a relatively rapid pace.
In June 2006, ICBC announced it will restructure its head office to improve corporate governance and operating efficiency. The revamp of the bank's corporate structure will mainly involve three key areas: corporate business, financial affairs and capital transaction. It is generally believed that the corporate restructuring is a deepening of its shares reform, paving the way for its IPO in 2006. New media reports indicate that ICBC is seeking to raise US$21 billion in a simultaneous listing on both the Shanghai and Hong Kong Stock Exchange, and is set to be possibly the world’s largest-ever IPO surpassing Japan’s NTT Mobile Communications’ share sale of US$18.4 billion in 1998.
Since it was founded, ICBC has ranked first in the domestic industry for many indexes such as total assets, total capital, core capital and operating profit. The bank possesses the largest customer base of about 100 million personal clients and 8.1 million corporate clients in China. It has over 20,000 business offices and nearly 390,000 employees.
Business Overview
Corporate Banking
ICBC views corporate customers as its core customers and commits itself to creating innovative financial products and providing comprehensive financial services. Traditional services such as corporate deposits and loans, clearing and settlement, and agency business are still core to the bank. However, ICBC has also introduced and actively developed new businesses such as cash management, Internet banking, custodial businesses and investment banking.
(1) Corporate deposits and loans
By the end of 2005, the balance of corporate deposits stood at RMB 2.54 trillion, making up 44.94 % of all deposits, up by RMB 0.27 trillion or 11.9% year on year. Among them, time deposits received from corporate customers reached RMB 1.79 trillion, up by RMB 0.13 trillion or 7.6%, accounting for 70% of the total corporate deposits.
The outstanding amount of corporate loans stood at RMB 2.28 trillion, decreasing by RMB 0.53 trillion. Of the balance, medium-term loans had the biggest share, accounting for 58.8% of the total corporate loans.
(2) Clearing and Settlement
ICBC’s agency service of payment and settlement for corporate customers has a leading position among its peers. Specifically, it handles all the bank draft payment agent services for the joint-stock banks in China, and has a market share of around 58% in the bullion trading funds clearing agent service market. By the end of September 2005, the number of corporate settlement deposit accounts opened in ICBC reached 3.5 million, the market share of RMB settlement is 45%.
(3) Agency and Trust Service
ICBC Bong Trading is a tailor-made investment financing product provided by ICBC for the bond financing of all corporate clients (financial institutions, governments, enterprises and institutions).
In the bank-assurance market, the bank also outperformed its peers with a market share of 30%. It signed comprehensive cooperation agreements with nine big domestic and overseas insurance companies.
In 2004, its income from securities agency service was RMB 790 million with a growth rate of 44.5%; agency sale of national debt in the whole year was RMB 81.1 billion, accounting for 33.7% in the industry; the sale of agency insurance was RMB 24.4 billion, and the amount of agency funds issued was nearly RMB 30 billion.
(4) Custodial Business
Assets Custody is a service to safeguard customers' assets under their trust, exercise supervising responsibility and provide relative investment services. ICBC has a leading position among the domestic banks in the area of securities investment custodial services.
By the end of December 2005, the assets under custody by ICBC had exceeded RMB 200 billion, and the annual average growth of custody scale reached 73%. The number of securities investment funds under ICBC custody reached 54, accounting for 32.6% of market share in total assets amount.
(5) Cash Management
Cash management service is a multi-function financial service developed by ICBC, including collection and payment, accounts management, investment and financing, after consolidating its existing products and services. By the end of 2004, the number of signing clients of cash management with ICBC had exceeded 3700, and altogether 19,600 upstream and downstream units or affiliated units of these clients had been provided the service of cash management from ICBC.
Personal Banking
(1) Savings Deposits
ICBC’s savings deposits business has seen steady growth in recent years based on accelerated adjustment on savings outlet layout and improvement of customer service. At the end of 2005, its total savings deposits amounted to RMB 3.12 trillion, up 10% or RMB 0.28 trillion year-on-year. Among them, time deposits were RMB 1.01 trillion, and fixed-deposits were 2.11 trillion.
(2) Consumer Credits
At the end of 2005, the outstanding balance of ICBC’s consumer loans amounted to RMB 515 billion, up 5.8% or RMB 28.2 billion compared to year 2004. Of the balance, RMB 447 billion was residential housing mortgage loans, up 8.5% or RMB 34.9 billion year on year, affirming the bank‘s reputation as China’s leading mortgage lender.
(3) Wealth Management
ICBC develops its wealth management services to high-end individual customers through the “Elite Club” brand. It offers the club members preferable and preferential services through professional customer managers in 95% of all its business offices’ special VIP counters and more than 3,000 wealth management centers. By the end of 2004, the total number of Elite clients exceeded 1.24 million.
(4) Bank Card
ICBC carries out specialized operations and centralized management in its bank card business. At present, it possesses a series of products such as the International Card, Credit Card, Debit Card, and Money Link Card. In 2004, the total number of issued cards by ICBC exceeded 110 million pieces and the income from these bank cards was RMB 3.06 billion.
E-Banking Business
ICBC’s E-banking service is the leader in the domestic market. It has a vertical service system including Internet banking, self-service banking, telephone banking, mobile banking and enterprise banking. The trading volume of ICBC’s E-banking has seen rapid growth - from RMB 1.93 trillion in 2000 to RMB 38.4 trillion in 2004, increasing by almost 20 times. In 2004, ICBC’s income from E-banking was RMB 235 million with RMB 5.7 billion worth of on-line payment, making ICBC the largest provider of on-line payment services in China’s e-commerce.
Investment Banking
In April 2004, ICBC established its investment banking unit, making it the first bank to do so in the domestic market. ICBC’s investment banking businesses mainly include syndicated loan business and financial advisory services. Despite occupying a small share in the bank’s catalogue of products, the investment banking businesses serve to facilitate the competition for quality customers and to dispose non-performing assets. In 2004, the income from investment banking was RMB 1.24 billion.
Financial Statement
2005 ICBC Financial Statement (abstract) (Billion RMB)
Financial Items
Operating Results
Net Interest Income
2005: 137.86
2004: 117.74
Non-Interest Income
2005: 12.69
2004: 10.97
Operating Profit
2005: 89.26
2004: 81.65
Profit before Provision
2005: 78.06
2004: 74.55
Profit before Tax
2005: 59.35
2004: 52.88
Net Profit
2005: 33.7
2004: 29.99
Balance Sheet Items
Total Assets
2005: 6,454.11
2004: 5,041.94
Loans
2005: 3,289.55
2004: 3,707.74
Investments
2005: 2,059.37
2004: 1,202.01
Total Liabilities
2005: 6,196.63
2004: 5,574.12
Deposits
2005: 5,660.46
2004: 5,109.2
Owner’s Equity
2005: 253.44
2004: (535.84)
Ratios (%)
Profit-Asset Ratio
2005: 0.59
2004: N/A
Profit-Equity Ratio
2005: 13.3
2004: -
NPL Ratio
2005: 4.69
2004: 21.26
NPL Coverage Ratio
2005: 54.2
2004: N/A
Cost-income Ratio
2005: 40.71
2004: 36.57
Capital Adequacy Ratio
2005: 9.89
2004: -
Source: 2005 annual report of ICBC
Note1: Profit-Asset Ratio= net profit/ [(total assets in the beginning of the year total assets in the end of the year)/2]
Note2: NPL Coverage Ratio= bad loan provision/NPL
Note: Cost-income ratio=non-interest expenses / (net interest income + non-interest income). Non-interest expenses include fee and commission expense, operating expenses, business tax and surcharges, revaluation loss of buildings and investment properties of Overseas Operations. Non-interest income includes investment income, fee and commission income, net income from treasury activities and other income.