Industrial and Commercial Bank of China (ICBC) (stock code: SH: 601398; HK: 1398) disclosed its operating results for the first half of 2020 on August 30, 2020. The interim report shows that ICBC made coordinated efforts to contain the spread of the COVID-19 while ensuring financial support and business development in the first half year, fulfilling its responsibility as a major bank on top of maintaining resilient development.
I. Supporting the real economy and maintaining stable business fundamentals
As per the International Financial Reporting Standards, ICBC achieved an operating income of RMB402.3 billion and a pre-provision profit of RMB314.8 billion in the first half year, representing an increase of 2.1% and 2.1% respectively compared with the same period of last year. While ICBC’s net profit was down 11.2% year-on-year to RMB149.8 billion, the asset quality remained stable overall. NPL ratio was 1.5% by the end of June, up 0.07 percentage points from the end of last year. It was ranked the 1st place among the Top 1000 World Banks by The Banker of the UK for the eighth consecutive year, and took the 1st place among the Top 500 Banking Brands of Brand Finance for the fourth consecutive year.
It should be noted that year-on-year drop on ICBC’s H1 net profit was resulted from its earnest support to the epidemic prevention and control, surrendering some profits to boost the real economy and stepping up risk control in accordance with the principle of business sustainability, instead of encountering any difficulties in its operations. In general, ICBC gave full play to its role of leading the financial sector and weathering the storm together with the real economy while maintaining a healthy growth in its operations.
II. Advancing “the stability on six fronts and security in six areas” and serving the real economy with higher efficiency and precision
First, total amount of new financing was ample. In the first half of the year, ICBC granted RMB1.1 trillion of new RMB loans at home, RMB312.7 billion higher over the same period, up 7.3% year-on-year. Its H1 growth cruised past the RMB1 trillion mark for the first time in history. It increased RMB467.3 billion of investment in local government bonds and underwrote RMB911.1 billion of bonds as lead underwriter, both ranking first in the market.
Second, ICBC continued to optimize credit structure. The growth of medium to long-term loans accounted for 77.5% of new loan, offering strong support to the medium to long-term fund demand of the real economy. Matured loan re-lending amounted to RMB1.12 trillion. By coordinating the allocation of existing loans and incremental loans, ICBC strengthened its support to new industries, new customers and new areas.
Third, ICBC efficiently boost epidemic prevention and control, and resumption of business activities. The bank provided RMB1.2 trillion of financing in total to restart the engine of the real economy, including RMB944.7 billion loans. To meet the demands of different sectors, it launched the “Chunrun Action” to support resumption of business activities, the “Chunrong Action” to help stabilize foreign trade and foreign investment, the special action supporting economic and social development of Hubei Province, and the financing action for the “five health care fields”.
Fourth, ICBC injected capitals to the key sectors and weaker links of the real economy. Loans granted to manufacturing firms rose by RMB229.2 billion, of which RMB82.8 billion is medium to long-term loans. More inclusive finance was granted to a broader range of borrowers at lower interest rates. Inclusive loans grew by RMB168.4 billion, 35.7% higher than the beginning of the year, whose instantaneous progress exceeded the annual growth target of 40%. The average interest rate of new inclusive loans fell by 37 basis points over the previous year to 4.15%. The rapid development of inclusive finance was partly due to ICBC actively assuming its responsibility of supporting economic and social development, that was accordingly guaranteed by its risk control and management capability. Loans to private enterprises increased by RMB187.4 billion.
Fifth, ICBC accelerated its strategic layout in key regions. Loans increased by RMB840.7 billion in national strategic regions like Beijing-Tianjin-Hebei Region, Yangtze River Economic Belt, Guangdong-Hong Kong-Macau Greater Bay Area and Chengdu-Chongqing Economic Circle, RMB252 billion more than same period of last year, accounting for 77.5% of total new loans of branches at home.
III. Speeding up transformation and continuously sharpening cutting edge
First, ICBC implemented the strategy of “No.1 Personal Bank” in a well-organized manner. In the first half of the year, the number of personal customers rallied 14 million to 664 million, enabling ICBC to maintained its leading position on customer size and activeness of mobile banking. The number of ICBC’s internet finance customers exceeded 500 million, the first in the financial industry that has more than one billion monthly active users. Financial assets of personal customers, including deposits, bonds and investments, reached RMB15.5 trillion. The revenue contribution of personal banking rose to approximately 50%.
Second, ICBC leveraged FinTech to empower business development. In H1 2020, ICBC was granted 44 new patents, adding the total number to 651, topping its counterparts at home. The bank continued to advance the ECOS project in a well-organized manner to accelerate FinTech innovation and application, thus providing strong high-tech support to COVID-19 prevention and control as well as financial services. It launched the customer managers’ cloud office to offer customers with “contactless” cloud-based financial services around the clock. It also introduced 17 standard cloud services, including Education Cloud, Property Management Cloud and Medical Commerce Cloud. By virtue of the API open platform, ICBC strengthened connection among G (government), B (business) and C (customers), and built more than 3,700 effective scenarios. Applying robotic process automation (RPA) technology, it achieved automatic processing of credit card interest expenses work orders by robots. The bank also developed the “ICBC Charity Chain”, providing nearly 200 charitable organizations with traceability service using the blockchain technology.
Third, ICBC steadily pushed forward internationalized operations. In H1 2020, Auckland Branch and Panama Branch were granted licenses. As at the end of June, ICBC already had 425 overseas institutions in 49 countries and regions, and indirectly covered 20 African countries by strategically investing in Standard Bank. ICBC, relying on collaboration between institutions at home and abroad, went all out to support COVID-19 containment and business resumption, in an effort to build a community with shared future for the mankind.
IV. Adhering to solid foundation by risk control and keeping risk response ahead of market curve
First, ICBC reinforced full risk management. ICBC identified the responsibilities of “three lines of defense” in risk management and improved the global, comprehensive and brand-new risk management system involving all personnel, spanning all processes and covering all risk exposures under the principles of “proactive prevention, smart control and comprehensive management”, making its risk control capabilities better match business innovation and development speed.
Second, ICBC advanced three-dimensional and intelligent credit risk control. ICBC adopted the multi-dimensional and intelligent “Seven-color Pools” credit risk management solution, which realizes risk control by pool, area and segment. It securely guarded the “Three Gates” of entrance, threshold and exit, and implemented new rules for credit approval to better mitigate credit risks. In H1 2020, ICBC appropriated RMB111.7 billion of impairment losses on loans, an increase of RMB19.8 billion or 21.6% year on year. It recovered and disposed RMB104.2 billion of NPLs, RMB12.2 billion more than the same period of the last year. The bank also continuously improved the effectiveness of NPA disposal to promote asset quality stability.