The year 2008 was featured with complex and changeable macroeconomic financial situation both at home and abroad, as well as the sprawling financial crisis and the sudden attack of serious natural disaster, all of which had brought unprecedented difficulties and challenges to the financial industry. Confronting the grim situation, the Industrial and Commercial Bank of China Ltd. (hereinafter referred to as ICBC) actively took corresponding measures, such as the continuous promotion of business transformation, the acceleration of business innovation, the optimization of revenue structure, the strict control of cost, etc. As a result, ICBC effectively reduced the negative impact on its management brought by the global financial crisis and the slowdown of China's economy, realized remarkable increase of profit and significantly enhanced the company's governance capacity.
［Business Overview］By the end of 2008, ICBC had altogether 385,609 employees and 16,386 domestic and overseas branches, providing extensive and high-quality financial products and services to 190 million personal clients and 3.1 million corporate clients.
ICBC stuck to the concept of scientific development for obtaining new driving force for growth, striving to ameliorate its operational structure, and strengthening the internal management and promoting innovative development, and hence it maintained a sound development under the rigorous and complicated circumstance and realized a relatively high profit growth. By the end of the year, the total asset of ICBC reached RMB 9757.654 billion, up 12.4% compared to the year before; its total debt amounted to RMB 9150.516 billion, also increasing 12.4%. Meanwhile, at the end of the year, its total market value was USD 173.918 billion, ahead of all the other listed banks in the world. Moreover, the bank's full-year after-tax profit achieved RMB 111.151 billion, a growth of 35.6% compared to the year before, thus becoming the world's most profitable bank. The revenue of the year was RMB 54.202 billion over the last year, up 21.2%, among which the non-interest revenue increased RMB 15.630 billion, up 50.3%; and its earnings per share was RMB 0.33, which grew 37.5%. Since the bank's introduction of the international audit in 2003, the after-tax compound annual growth rate reached 37.6%; its cost revenue ratio was 29.54%, which was kept within the reasonable scope.
ICBC also actively promoted its international and comprehensive development strategy. In 2008, it has successfully completed the transaction of the acquiring of 20% stake of Standard Bank of South Africa and 79.9333% stake of Seng Heng Bank, as well as the transaction and option exercise of purchasing the common stock and warrants of ICBC Asia. Moreover, the ICBC Sydney Branch, New York Branch, Middle East and Doha Branch were established successively. In addition, the bank also registered "ICBC International Holdings Limited" in Hong Kong with an investment banking license issued by Hong Kong SFC, thus owning an overseas investment banking platform. By the end of 2008, ICBC had already established 21 business institutions and 134 branches in 15 countries and regions outside China, as well as the agency relations with 1358 overseas banks in 122 countries and regions, forging a large-scale network.
［Corporate Financial Business］In 2008, ICBC further consolidated its status as China's best credit bank. By the end of the year, ICBC's corporate loan and deposit balance were both rated No. 1 in the industry, taking the market share of 12.7% and 15.3% respectively. In detail, the domestic corporate loan balance reached RMB 3232.102 billion, up 10.9%, while the domestic corporate deposit balance was RMB 3938.967 billion, up 15.8%. It was awarded the 2008 "Best Corporate Lending Bank of China" by Global Finance.
ICBC actively boosted the construction of "green credit", enhanced innovation of financing products and improved the joint marketing mechanism of financial products, so as to provide comprehensive financial services for small and medium-sized enterprises. At the end of 2008, the bank had 36,267 clients of small enterprises with the loan issuance amounting to RMB 357.229 billion. Therefore it was awarded "Model Enterprise of Nationwide SME Financial Services" by China Banking Regulatory Commission.
ICBC quite emphasized the capital management service for large-scale high-end corporate clients as well as the settlement service form small and medium-sized corporate clients, and consequently it endeavored to improve its product line of capital management and payment settlement. Throughout the year the bank's corporate RMB settlement business amounted to 520,000 billion, which increased 30.0% and continued to maintain the leading position in the market. At the end of 2008, ICBC had 118,751 clients of cash management, which was 60,188 more than the end of last year, thus increasing 102.8%. The performance led ICBC to win "Best Cash Management Bank in China" by The Asset and Asia Finance, as well as "Best RMB Cash Management Bank in China" by Asia Money.
ICBC conducted agency cooperation with 42 domestic insurance companies and the scale of its bank insurance agency business continued to expand. It maintained cooperation with 101 brokers in terms of third party depositary business. It also strived to promote the Centralized Bank-Futures Transfer business, signing cooperation agreements of Centralized Bank-Futures Transfer with 126 futures companies, of which 110 were officially put into operation. Also, ICBC's domestic agency bank increased to 85. The bank was also actively marketing the different types of business cards, with card issuance closing to 600,000. It also launched the system of "Online Banking Tax Service Platform", which was a one-stop service platform for taxpayers.
ICBC's investment banking business had also experienced rapid growth in 2008. The bank grasped the hotspot of industry M&A, and provided consulting service of industry integration for the leading domestic steel companies. ICBC also strongly supported regional economic development and financial innovation by assuming the financial consultant of industry investment fund for local governments. It launched the private equity banking business so as to extend its business to the field of equity financing. Meanwhile, the bank's bond underwriting business continued fast development: in 2008, ICBC was the underwriter of short-term financing bills worth of RMB 89.6 billion, medium-term bill worth of RMB 63.4 billion, and financial bond worth of RMB 11.6 billion, with its underwriting sum rated No.1in the industry. Its revenue from the investment banking business was RMB 8,028 million, increasing 78.2% compared to the year before.
ICBC provided clients with financial services that covered the whole process of international and domestic trade financing. In 2008, the accumulative amount of trade financing issued by its domestic branches reached RMB 362.3 billion, up 62.0%. Meanwhile, the bank attained new development in terms of the intensive management of international settlement document business: it completed the integrate work of the international settlement document business of its 25 domestic branches and 2 overseas branches, and the accumulative amount of the all-year-around international settlement business amounted to USD 756.6 billion, up 27.5%.
In 2008, despite the unfavorable market environment featured by the expansion of global financial crisis and the fluctuating fall of domestic stock index, ICBC's asset custody business achieved steady growth. It expanded the cooperation with outstanding fund companies, and became the first bank in China with the custody securities investment funds outnumbering 100. Its industrial advantage in enterprise annuity fund custody was strengthened, while its clients of insurance asset custody was in steady growth as well; its QFII clients and QDII combination number was in rapid increase, and its global custody business assumed a leading position in the industry. Moreover, ICBC also launched the first assets custody business for special clients of fund companies. At the end of 2008, the bank's total net custody assets was worth RMB 1143.8 billion, and therefore, it was awarded "Best Sub-Custody Bank of China" by several financial media both at home and abroad, including The Asset, Global Custodian, Global Finance, and Securities Times.
ICBC took the advantage of its complete industry qualification and sound service network to promote the coordinated development of its various businesses, such as enterprise annuity custody management, account management, fund custody, etc. By the end of 2008, ICBC was providing annuity service for 15,534 enterprises, with the sum of custody management annuity amounting to RMB 4 billion; and it also took charge of the annuity management for 5,050 thousand personal accounts, with the sum of custody management annuity worth RMB 54 billion.
ICBC's precious metal business was also developing rapidly. In 2008, the transaction volume of precious metal agency and self-business was 1,063 tons, 2.7 times compared to the year before. Among it, the sales volume of Ruyi gold was 18 tons, increasing 3.9 times; And its account gold trading volume was 796 tons, increasing 3.4 times. ICBC's clearing amount of the agency business for Shanghai Gold Exchange was RMB 145.5 billion, thus continuing to take the lead in the industry.By closely relating to the situation of the capital market, ICBC's corporate business realized growth by leaps and bounds. It launched a series of financial products, such as the financial products of non-fixed duration and of the 28-day rolling ultra-short-term as well as the bill investment financial products, so as to meet clients' various demands for proceeds, risk and liquidity. In 2008, the accumulative amount of the sold corporate financial products in RMB was 787.3 billion, which increased 5.8 times compared to the year before.
［Personal Financial Business］Client-centered and market-oriented, ICBC endeavored to accelerate business innovation and improve client service, so as to forge itself as "China's No.1 Retail Bank".
ICBC stressed the basic role of savings deposit for the development of personal financial businesses. The bank increased clients of wage distribution, and strengthened the collaborative development between financial products and savings deposit, hence realizing the rapid growth of savings deposits. By the end of 2008, its balance of domestic savings deposit was RMB 4010.248 billion, up 23.6%.
In 2008, ICBC further enhanced its support for residents in terms of general housing purchase, and strengthened the cooperation with the large-scale high-quality real estate agencies, in order to promote the business of personal housing loan. By the end of the year, the balance of domestic personal loan was RMB 829.342 billion, up 10.3%.
Along with the fast development of personal financial product market, ICBC, while maintaining the low-risk and stable-income financial products such as bills, bonds, loans and other tools, expanded its efforts in product innovation by timely launching "Link Express" Ultra-Short Financial Products as well as exclusive financial products—including the "Elite Club Account", "ICBC Wealth" and "Private Banking"—for medium and high-end clients. Throughout the year, the sales volume of the bank's personal banking products hit RMB 1000 billion for the first time, reaching 1342.4 billion, increasing 7.7 times compared to the year before. Moreover, it remained No. 1 in the industry according to multiple indices, such as fund sales volume, fund storage quantity and client number, as well as the sales volume of T-bond. In 2008, the bank's sales volume of domestic personal financial products was RMB 1937.3 billion, up 73.2%.
The Elite Club Account is a personal financial brand ICBC designed for medium and high-end clients. In 2008, ICBC continued to update the client services of Elite Club Account by launching 15 exclusive financial products with high expected rate of return, as well as Personal Internet Banking—VIP Version and Telephone Banking VIP Hotline. ICBC took the lead in the industry with 7,275 AFPs and 1,086 CFPs. By the end of 2008, it had 4,550 thousand clients of Elite Club Account, increasing 50.7%.
In March 2008, ICBC formally established its Department of Private Banking, which aimed to provide differentiated service for high net-worth clients whose personal financial assets were worth over RMB 8 million. The service, with asset management as the core and consulting service as the focus included five major categories: financial management service, asset management service, consulting service, personal value-added service, and overseas financial service. The department set up branches in Beijing, Shanghai, Guangzhou and Shenzhen successively, and had been maintaining steadily rapid development by its high-quality service team, advanced product system and top-class service channels.
［Bank Card Business］ICBC aimed to build a service environment of convenient payment, high-quality service, high safety and efficiency, so it improved the bank card admissibility environment and payment system construction, and as a consequence, the number of its issued cards and the business revenue kept rapid growth. By the end of 2008, it had issued 240 million cards, with an increase of 28.2 million cards. Throughout the year, the bank card revenue was RMB 7,199 million, up 34.0%, among which the issued credit cards was 39.05 million, up 67.0%, and the annual consumption sum was RMB 255.1 billion, increasing 57.6%. Both ICBC's card issuance quantity and consumption sum took a leading position in the industry. Meanwhile, ICBC possessed multiple theme cards, feature cards, and co-brand cards, hence forging a clearly stratified product line including dual currency credit card, RMB credit card, quasi credit card, etc. ICBC established 76 VIP client service centers and extended the circle of special and preferential stores, so it obtained the "Credit Card Advanced Technology Award" by VISA International and "Best Product Innovation Award" by MasterCard International.
By making use of the function of "comprehensive trade account" of Peony Money Link Card, ICBC launched the joint sales of Peony Money Link Card with a series of financial products such as wage distribution, settlement and remittance, financial products, Internet Banking, etc. It promoted multiple co-brand Money Link Cards, accompanied by the campaign that encouraged various forms of POS consumption. By the end of 2008, the issuance of debit card amounted to 199 million, and the annual consumption sum was RMB 541.3 billion.
［Capital Business］In 2008, ICBC did proactive research and analysis on market changes and economic trends, accurately grasped the macro-control tone, carefully assessed and sought the appropriate allocation of capital business return risks, and reasonably controlled the financing cost during the period of tightened liquidity, so as to achieve the unity of liquidity and efficiency, as well as the coordination between short-term payment security and long-term sustained development. In 2008, the accumulative amount of RMB trading (in and out) in the domestic branches amounted to RMB 7618.3 billion, increasing 25.0%. Throughout the year the trade volume of the foreign currency money market was USD 1,210.4 billion, up 39.4%.
The RMB bond business was also developing rapidly, witnessing a huge rise in returns. During the year the trading volume of the inter-bank market reached RMB 2430 billion, an increase of 16.8%. The trading types and pricing types of the Counter Book-entry T-bond were increased to 43. The bank also realized the e-management of RMB interest rate derivative product transaction, while the volume of the RMB interest rate swap transaction achieved RMB 33.3 billion. The annual trading volume of foreign currency bond amounted to USD 51.7 billion.
Based on the various characteristics of the bond market yield curve during different periods, ICBC managed to timely adjust its investment focus, and took a series of measures to increase its portfolio yield, such as to increase the holdings of medium and long-term bonds, extend the portfolio duration, maintain a reasonable proportion of T-bond, financial debt, and central bank bills, and extend the size of credit debts including corporate bonds, short-term financing bill, and medium-term notes. At the end of 2008, the balance of bond investment in the RMB bank account was 2886.705 billion. Facing the unfavorable situation of the U.S. subprime mortgage crisis and the deterioration of the credit market, ICBC reduced its holding mortgage bonds to a significant extent in order to decrease its portfolio credit risk. Meanwhile, ICBC also increased the investment scale in non-US dollar foreign currency bond, so as to enhance the diversification of its invested currencies.
Moreover, ICBC also strived to enhance its ability of product pricing and service for the agency capital transactions, steadily promoted the development of agency capital business and agency RMB interest rate swaps-off business. The volume of agency FX settlement and FX trading was USD 371.7 billion, while the trading volume of agency structural derivative products was USD 12.2 billion.
ICBC also actively developed the asset securitization business. It successfully issued RMB 8 billion of the 2008 credit asset securitization products (first phase), whose size of issuance was the top among all the domestic single asset-backed securities. By the end of 2008, ICBC as the initiator completed two phases of the credit asset securitization project, whose asset-backed securities balance amounted to RMB 8.3 billion. The basic asset did not appear overdue nor did it breach the contract, and all the loans were normal.
［Physical Distribution Channel］In 2008, ICBC's multi-layer and multi-category branch function service system basically took the shape, with Wealth Management Center, VIP Finance Center, Wealth Management Network and Financial Convenience Store as the major components. Therefore, the transformation of its network management was further strengthened. With the premise of maintaining a steady total volume, ICBC tended to allocate appropriately more network resources to provincial capitals, the key cities of big and medium size, and economically developed counties. It also implemented network optimization and strategic transformation in key cities, and constantly optimized its institute network distribution and accelerated the network upgrade. During the year, it completed the establishment of 100 wealth management centers and about 2,000 VIP financial centers, which further strengthened the client service ability, market competitiveness and profiting ability of its network. It also finished the application and establishment of the Tibetan Branch and Private Banking Department, so as to improve its national network service system.
［E-Banking Business］ICBC's E-banking business continued to assume a leading role in the domestic industry. In 2008, its trading volume of E-banking amounted to RMB 145.29 trillion, up 41.2% compared to the year before. Its business of E-banking took the share of 43.1% of the industry, which increased 5.9 percent. Meanwhile, ICBC also launched products such as the USB-Shield (Second Generation) and Telephone Banking Code Card, for the sake of improving the security of E-banking for clients. It also pushed forwards a series of new products, such as Mobile Banking (WAP) and Personal Internet Banking—VIP Version, so as to diversity the function of the many original products and meet the demand for differentiated and personalized services.
By the end of the year, its clients of Corporate Internet Banking reached 1.44 million, and that of Personal Internet Banking 56.72 million. The trading volume of Corporate Internet Banking was RMB 110.50 trillion, up 28.9%, and that of Personal Internet Banking RMB 9,770 billion, up 135.4%. Consequently, it was awarded "Best Consumer Internet Bank of Asia", "Best Consumer Internet Bank of China", and "Best Corporate/Institutional Internet Bank of China" by Global Finance.
ICBC also launched a series of services such as Telephone Banking booking, Telephone Banking personalized menu, and the Telephone Banking VIP Service Line 4006695588. It completed the concentrated human service in six branches in Shangxi and Hebei provinces, which further promoted the integration process of Telephone Banking. During the Fifth Selection of Asia-Pacific Best Call Center, ICBC was awarded "Best Call Center in Asia-Pacific Region", "Best Call Center in China", and "Best Call Center Manager in China".
The newly launched Mobile Banking (WAP) business further lowered the threshold for clients of Mobile Banking and enhanced its security. With the increase of the reputation of Mobile Banking (WAP), its number of clients rose rapidly to 550 thousand.
ICBC was also constantly increasing its input in self-service equipment, so as to optimize ATM functions, simplify its operation process, improve trade efficiency and convenience, and reduce the quantity of counter business. By the end of 2008, it possessed 7,085 self-service banks, which was an increase of 44.9%; and 28,656 ATMs, up 22.4%. The ATM trading volume reached RMB 1,555.7 billion, up 45.4%.
［Advanced Technology］ICBC accelerated the planning of information technology development in order to guarantee the safe and steady operation of its information system. Consequently, it was rated No.1 of the 2008 "China's Top 500 Information Technology Companies", and was also awarded "Best Business Continuity Management" by The Banker (Britain).
During 2008, ICBC had developed 420 new programs and optimized 488 old ones. It received 9 patents by State Intellectual Property Office of P.R.C, and was thus in possession of 72 patents, which took 55% of all patents in the industry. It launched new products such as the JETCO platform, optimized its current products including the fund platform and wealth management platform, and optimized and promoted the FOVA function in its overseas branches. Besides, it also launched the market risk management system (first phase), improved the non-retail IRB credit risk system, completed the development of the personal loan part of the retail IRB credit risk system, and established the basic data platform for the data warehouse.
In addition, ICBC successfully completed the security work for the 2008 Beijing Olympic Games, and realized the goal of "zero accidents of production and operation" during the period. Meanwhile, the bank further improved its emergency disaster preparation system, which withstood the test of earthquake, snowstorm and other natural disasters with most of its business unaffected. Its information system maintained in safe and steady operation, hence providing a sound technological environment for the bank's management and development.
［Regulative Management］ICBC's corporate governance was in constant improvement. With the aim to build the most profitable, most outstanding, and most esteemed financial corporate of world class, ICBC implemented a series of measures, including to improve the corporate governance structure, strengthen the system construction, improve the quality of information disclosure, deepen the management of investor relation, and accelerate the transformation of business model and growth model. These measures had achieved remarkable results.
ICBC's ability of risk management improved significantly. It paid close attention to the evolution of the international financial crisis and its impact on the various businesses of the bank, and thus adopted effectively measures of risk prevention, which initially withstood the test of austere risks. Through learning from international experience and self-innovation, ICBC comprehensively enhanced its management of credit risk, market risk, liquidity risk and operation risk. Its capital management also achieved new progress, with its capital allocation becoming more regulated and efficient, whereas the capital adequacy ratio and core capital adequacy ratio were kept on the high level of 13.06% and 10.75% respectively during rapid development.
In 2008, ICBC implemented all-round capital management, and established a capital management system as well as enacting the matching regulations of economic capital management and capital adequacy ratio management. It launched the capital management system CAP V1.0, hence realizing the functions of capital automatic calculation and statement demonstration. Since 2005, ICBC began to make use of economic capital management tools, including the three steps of metering, configuration and evaluation. The economic capital indices contained economic capital occupation (EC), Risk-Adjusted Return On Capital (RAROC) and economic value added (EVA), while the application fields contained credit resource allocation, management planning, cost allocation, performance assessment, quota management, product pricing, etc. In 2008, the intensity of economic capital application was furthered enhanced: (1) in terms of performance assessment, it integrated RAROC into the performance assessment system of all its branches; (2) in terms of the pricing of interest rate, ICBC enacted the guiding standards for the interest rate of RMB loan according to the ICBC economic capital metering standards; (3) in terms of risk management, ICBC applied the economic capital data to the evaluation of the bank's risk management. Through strengthening economic capital management, all the branches improved their awareness of capital return, and were able to control the expansion of risk volume along with the scale growth. When undertaking risks, the branches were required to maintain adequate returns, so as to constantly and steadily maximize the shareholder proceeds.
ICBC maintained close cooperation with Goldman Sachs Group, American Express and Allianz Group, and it has achieved remarkable results in terms of corporate governance, risk management, employee training, as well as the businesses of capital transaction and bank card.
［Social Responsibility］ICBC's sound performance won extensive recognition in the industry both at home and abroad. It had won a series of awards: "People's Social Responsibility Award", "Best Corporate Citizen", "Chinese Corporate Social Responsibility Rating: Outstanding Corporate Award", and "The Top Ten Listed Companies with Most Social Responsibility". It was also listed No. 1 on the 2008 "50 Most Esteemed Listed Company of China" and No. 3 of the "Overall Ranking of Listed State-owned Companies by Corporate Social Responsibility".
ICBC was in active support of the country's regional development policy, the implementation of the national industry development policy, as well as the construction of "agriculture, rural area and peasantry" and the development of small and medium-sized enterprises. Meanwhile, ICBC accelerated the construction of green credit system and enlarged the supply of green products. At the end of 2008, 99.87% of ICBC's domestic clients of legal person were identified as qualified for environmental protection or environment-friendly by the state environmental protection department, while the loan balance of these enterprises took 99.92% of the client loan balance of all domestic branches.
In 2008, when confronting the major natural disasters such as the snowstorm in the South and the Wenchuan Earthquake, ICBC fulfilled its promise of "A bank around you, a bank that you can always rely on" through actual actions, and was thus awarded "China Red Cross Medal" by the Red Cross Society of China. After the Wenchuan large earthquake, the loan ICBC issued for earthquake relief and recovery amounted to RMB 28.8 billion; and the money ICBC donated amounted to RMB 141,910 thousand (among which the donation by its domestic and overseas employees was RMB 88,690 thousand), while it also donated materials worth RMB 500 thousand. Meanwhile, ICBC organized the various "mobile bank", "tent bank" and "plank building bank", and created multiple means for disaster relief, such as the free donation "green channel". Therefore, ICBC was the bank that donated the most money, started business the earliest in the earthquake stricken area and issued the most loans for disaster relief.
ICBC had also been working actively for poverty relief. It donated over RMB 5 million to poverty-relief programs in Sichuan and Guizhou provinces, and was thus awarded "2008 China Minsheng Action Vanguard" by China Foundation of Poverty Alleviation, and "Advanced Appointed Unit of Poverty Alleviation of Central Government Departments". It continued to donate RMB 1 million to Peking University as education fund. During the Beijing Olympic Games, it realized "zero accident of production and operation" as well as "zero complaint of Olympic service", making great contribution to the success of Beijing Olympics. It stuck to the principle of returning to the society by organizing employees to participate in volunteer activities in communities from time to time, which were titled by the "ICBC Youth Love Action".
［International Reputation］ICBC's sound performance won extensive recognition from the industry both home and abroad. During the year of 2008, the bank won 131 awards, such as "Best Bank in Asia", "Best Bank in China", "Hong Kong Corporate Governance Excellence Awards", etc., by famous media and agencies, such as Global Finance, The Banker, The Asian Banker, The Asset, and the Chamber of Hong Kong Listed Companies. Besides, ICBC was also highly recognized by international professional rating agencies. For example, ICBC's long-term credit was rated as "A1" by the Moody's, and "A-" by Standard & Poor's.