On March 28, 2019, Industrial and Commercial Bank of China (stock code: SH: 601398; HK: 1398) released 2018 annual results. The annual report shows that in 2018, ICBC maintained a positive balance in the total volume, structure and quality, and attained good business performance.
Profit growth comprised many highlights. According to the International Financial Reporting Standards, ICBC realized a net profit of RMB298.7 billion in 2018, up 3.9% year on year, 0.9 percentage points higher than that in the previous year, continuing to hold the largest total net profit in the global banking industry. The pre-provision profit, which reflects the operating growth, reached RMB534 billion, representing an increase of 8.4% over the previous year. Net fee and commission income stood at RMB145.3 billion. Net interest margin (NIM) amounted to 2.3%, up 8BP year on year. Asset quality improved, with non-performing loan (NPL) ratio down 0.03 percentage points to 1.52% from the year beginning, dropping for 8 consecutive quarters. The “scissors difference” between overdue loans and NPL fell for 10 consecutive quarters and it dropped by 46%. Allowance to NPL rose to over 175%. Market competitiveness continued to increase. Individual customers increased by 40 million in 2018, a new high in recent years. Owing to the continuous expansion of the Bank’s customer base and the ongoing improvement of its services, the Bank’s general deposits increased by RMB1.45 trillion, with both the balance and increment ranking first in the market. The operating contributions of its Mega Retail Business further escalated. Transformation of Mega Asset Management and Mega Investment Banking was advanced smoothly, and overseas institutions’ pre-tax profit grew by 5%.
According to the resolution of the Board of Directors of ICBC, the cash dividends in 2018 are expected to be RMB89.3 billion, or RMB2.506 per 10 shares (pre-tax), both higher than those in 2017. Since its listing, the Bank has cumulatively created cash dividends of over RMB900 billion for its shareholders, and maintained as a listed company with the highest total annual cash dividends on A shares for 11 years in a row. Due to its steady and good performance, for six consecutive years, the Bank has ranked the first place among the Top 1000 World Banks by The Banker and the Global 2000 listed by Forbes, and its brand value topped the global banks for three years in a row.
In the face of growing economic and financial challenges in 2018, the Bank pooled efforts, stayed focused and arouse the vitality to advance the fulfillment of “three major tasks”, i.e. serving the real economy, preventing and controlling financial risks and deepening reform and innovation, and to deeply implement the “five strategic projects”, i.e. services for the real economy, broadest customer base, transformation and upgrade, leading in innovation, and enhancement of risk control. Overall operation tended to advance steadily and get better. Specifically, it shows four characteristics as follows:
I. Holding fast to the Bank’s founding mission, and giving play to the role as a leading bank in serving the real economy.
In 2018, the Bank focused on serving the high-quality economic development and supply-side structural reform, planned on the total volume and rhythm of investment and financing, optimized credit layout, and nourished the real economy through “targeted irrigation”.
Advanced the integration of investment and financing. The Bank coordinated increment and stock, credit and non-credit as well as financing and intelligence, and led to the activation of the vitality and efficiency of all key financial elements. It enhanced the capability of financial supply, and effectively gave play to its role as a major channel for financial allocation. In 2018, the Bank granted new loans of more than RMB3 trillion to the real economy, including newly increased domestic RMB loans of RMB1.16 trillion, up 9.3%, and refinancing of RMB1.96 trillion. Meanwhile, newly increased non-credit financing and local bond investment totalled RMB840 billion.
Financial resource allocation continued improving. The Bank focused on areas such as major national infrastructure, high-quality development of manufacturing, and construction under the Belt and Road Initiative, a shift to new growth drivers, and enhancement of domestic consumption. Corporate loans rose by RMB482 billion, of which 31% was contributed by advanced manufacturing, happiness industries, internet of things and other new economic engines. The Bank reasonably supported the housing needs for residential purpose, innovated in consumer credit products and services, and ranked first in terms of the growth of personal loans and mortgage loans. It took the lead to advance the Belt and Road Bankers Roundtable mechanism, and undertook 83 new “Belt and Road” projects with a total amount of USD19.1 billion.
Serving private enterprises and small and micro enterprises has begun to produce the desired results. The Bank upheld the development philosophy of “ICBC has no future without serving small and micro enterprises” and the principle of fair credit, and played a leading role in serving private enterprises and small and micro enterprises. As at the end of 2018, nearly 80,000 private enterprises had outstanding financing from the Bank, an increase of 10% over the previous year, accounting for nearly 80% of total number of financing enterprise customers. The balance of loan was RMB1.78 trillion, up over RMB110 billion over the year beginning, leading the market. In respect of inclusive finance, the Bank completed the regulatory requirements by increasing loans granted to small and micro enterprises with a total credit of RMB10 million or below by RMB49.2 trillion, or 18.1%, over the year beginning. The number of small and micro enterprise loan customers reached 308,000, up 91,000 over the year beginning. Achievement in product innovation for small and micro enterprises was noticeable. Through “Operation Quick Loan”, an online product, the Bank had granted more than RMB300 billion credits for over 600,000 small and micro enterprises, with cumulative loans of more than RMB40 billion. For the “e Mortgage Quick Loan”, an online product customized for small and micro enterprise with housing mortgage, customers can go through all formalities, from application to lending, with a minimum of two working days. The financing balance of the product has exceeded RMB4 billion for more than three months after its launch. The average loan interest rate for private enterprises and small and micro enterprises was lower than the market average, with the average interest rate of newly granted loans for small and micro enterprises in the 4th quarter last year lower than 4.5% .
II. Maintaining stable operation and advancing comprehensive risk management steadily.
In 2018, the Bank held the bottom line of risk prevention and control, and endeavored to guard against risks. Under the principle of “clear vision, thorough understanding and good management”, the Bank established the risk control system of full market pattern, panoramic view of risks and full life cycle management to ensure the controllability of various risks and make operation healthier.
Risk management continued to be enhanced. The Bank established a global credit monitoring radar using big data technology, realizing centralized monitoring of all processes from access to post-lending, omni-directional drawing of risk view and dynamic monitoring of financing risks. For cross-border and cross-region risks and other cross risks, the Bank built an investment and financing risk monitoring platform of the Group, to collect, penetrate into and integrate cross-risk, cross-market, cross-institution and cross-product risk data, effectively enhancing risk control.
Asset quality improved. The Bank exerted to enhance asset quality, and constantly improve credit risk management system, risk monitoring and mitigation means and asset quality. As at the end of 2018, the NPL ratio dropped 0.03 percentage points to 1.52% from the year beginning, dropping for 8 consecutive quarters. The “scissors difference” between overdue loans and NPL fell by 46%, dropping for 10 consecutive quarters.The Bank continued to advance risk mitigation, reduced financing with potential risks by RMB188 billion in 2018. The balance of financing with potential risks has dropped for 11 consecutive quarters. The NPL ratio of financing increased after 2013 was 0.86%. Allowance to NPL reached 175.76% at the end of 2018, up 21.69 percentage points over the previous year, indicating that the Bank’s capability to mitigate risks was further enhanced. Non-performing loans of RMB226.5 billion were recovered and disposed in 2018, up RMB33.8 billion over the previous year, further consolidating the asset quality base.
III. Adhering to reform and innovation and achieving new progress in operation transformation
In 2018, in light of a new development philosophy, ICBC persisted in reform and innovation, and further promoted the healthy mutual development facilitation between traditional business and emerging business, the organic linkage between domestic and overseas business, and the integration of banking and non-banking business.
Transformation and upgrade of Mega Retail, Mega Asset Management and Mega Investment Banking strategies were accelerated. The Bank benefited from Mega Retail, and improved its operating contribution and market competitiveness. In 2018, individual customers increased by 40 million, and personal deposits rose by RMB867.5 billion, with development momentum gaining continuously. The Bank smoothly advanced the transformation of asset management and investment banking business under the new rules on asset management. The Bank continued to rank first in terms of the amount of wealth management products, and stayed ahead in terms of wealth management business income. Net profits in financing market grew by 26% year on year.
Construction of an ecosystem of integrated development of finance and IT was enhanced. The Bank pushed forward the construction of smart banking in an all-round way, and successfully have grown from a financial “regular army” to a “main force” in the ocean of FinTech. New progress was made in e-ICBC3.0, and the number of ICBC Mobile, ICBC Mall and ICBC Link platform users has exceeded 100 million respectively, of which the number of mobile banking ICBC Mobile customers reached 313 million, an increase of 11% year on year, ranking first in the market in terms of customer size, loyalty and activity. The transaction value of e-finance amounted to around RMB680 trillion in 2018, and the transaction volume of e-finance accounted for 98% of the Bank’s total transaction volume. The Bank advanced the construction of smart banking information system (ECOS) as planned, and realized the integration of 28 major business frameworks, including Mega Retail. Construction of service scenarios was accelerated, with more than 400 financial services of nine categories already available in the API platform. The Bank built 1,700 Internet scenarios, covering government affairs, information, living, consumption, travel, education, wealth management and investment, public service and other major living fields. The Bank carried out technical system reform, set up the FinTech Department and further enhanced the technical R&D efficiency and achievement commercialization.
Internationalized development was advanced steadily. In 2018, the Bank successively established such overseas institutions as Almaty Astana Representative Office, Zurich Branch, Ho Chi Minh City Representative Office and Manila Branch, increasing the number of its overseas institutions to 426, covering 47 countries and regions. It also extended its outlets to 20 African countries by holding shares in the Standard Bank of South Africa. In 2018, overseas institutions recorded total pre-tax profits of USD4.12 billion, an increase of 5% over the previous year, accounting for 7.6% of the Group’s total, up 0.6 percentage points year on year. The Bank accelerated the overseas development of such product lines as asset management, investment banking, custody, private banking and global cash management, and realized an average annual growth of 7.3% in relevant fee-based business income. It actively embraced the market and innovation opportunities brought by the building of Guangdong-Hong Kong-Macao Greater Bay Area to advance the improvement of its financial services in the area.
IV. Constantly improving the modernization of corporate governance and advancing the building of talent team
In 2018, the Bank continued to improve and give play to its corporate governance advantages, carry out the strategy of boosting the Bank by talent, and cultivate the foundation of sustainable and healthy development.
The Bank continued to improve its corporate governance. It gave full play to the professional advantages of the Board of Directors and special committees to continuously improve the efficiency and quality of decision-making, reasonably formulate the Group’s strategic direction, objectives and measures, and strengthen the farsightedness of risk management and control. A new three-year development plan was adopted. Meanwhile, it regarded “fighter + doer” as the annual key words and an important part of its corporate culture cultivation, and strengthened the professional capacity building of the management at all levels and promoted the implementation of strategies.
Improving the cultivation of professionals. The Bank established the dual-driver system of “young cadre cultivation” and “key talent bank” and reinforced the concept of “banking professionalism”. The Bank built up the personnel selection orientation of “focusing on work efficiency and performance”, implemented the cadre cultivation plan, and further improved the mechanism of selection, cultivation, appointment and management of young employees. The Bank released the white paper of core concepts of innovative culture and corporate culture, and actively created a sound climate of assuming responsibilities, and being aggressive and devoted to work.