Industrial and Commercial Bank of China Limited (“ICBC” or “the Bank”; Stock Codes SH: 601398, HK: 1398) announced its interim results today for the six months ended 30 June 2016. In accordance with the International Financial Reporting Standards, ICBC posted a pre-provision profit of RMB239.5 billion for the first half of 2016, representing a growth of 1.2% from the same period last year. After making a provision of RMB44.4 billion, the Bank realized a net profit of RMB150.7 billion, up 0.8% over the corresponding period of the preceding year.
In the first half of 2016, despite a more challenging and severe external environment, ICBC, by promoting transformation, tapping potentialities and improving efficiency, maintained a stable operation and played its part in serving the quality and efficiency improvement of the real economy. The intermediary segment, which satisfies the needs of the real economy and clients with a precondition of compliance with relevant regulatory requirements, achieved a rapid growth with net fees and commissions amounting to RMB81.7 billion, representing a 6% year-on-year increase, and its revenue contribution increased by 3.4 percentage points to 24.84% , becoming a critical driver for the growth of overall profit. All in all, the results for the first half of 2016 are broadly reflected in four aspects as listed below:
First, innovative financial services enhanced support to the real economy in terms of quality and efficiency.
In the first half of 2016, ICBC actively adapted to the needs of economic transformation and upgrading and the supply-side structural reform, optimized the management of the new and existing credit, combined credit and non-credit services and helped enterprises reduce costs and de-leverage by increasing the efficiency of fund use and utilizing direct financing services. In the first half of the year, the total amount of newly disbursed loans was RMB1.8 trillion, of which RMB569.9 billion was new loans and RMB1.2 trillion was re-lending of existing loans. Responding to the trend of financial?disintermediation of corporate finance, ICBC achieved a total non-credit financing of RMB713.7 billion by developing bond underwriting, asset trading, financial leasing and entrusted loans, etc., which was 7 times of new corporate loans for the same period.
In terms of investment target, ICBC focused its support on the key areas and weak links of the real economy and the loans extended to key national projects amounted to RMB487.4 billion in aggregate, RMB79.9 billion more than the same period last year. With strong support to the financing needs of “Made in China 2025”, “Internet +”, energy saving and environment protection and other fields, ICBC channeled more fund resources to areas of real economy which helps strengthen weak links and takes the development to a higher level.
Benefiting from the promotion of innovative service model to small and micro enterprises which integrates offline professional operations with online standardized operations, the balance of loans to small and micro enterprises has reached RMB1.98 trillion, representing a year-on-year increase of RMB178.2 billion or 9.9%, and maintained ICBC’s position as the largest Bank in China in terms of the loans provided to small and micro enterprises. In support of reasonable housing demand and consumption upgrade, the housing mortgage loans, personal consumption loans and credit card overdraft loans increased by RMB342.5 billion, accounting for 46% of all loan increments. Also in great support of “Going Global” enterprises, credit facilities amounting to US$20.1 billion were granted to an addition of 39 “Going Global” projects in the first half of the year.
Second, ICBC strengthened risk control and ensured stable asset quality.
In response to the increasing financing risks under economic downturn pressure, ICBC placed stabilizing credit asset quality as its top priority, ensured the all-round implementation of accountability mechanism in quality and accelerated the establishment of the credit mechanism, expert team and credit culture which fits the new normal. In addition, the establishment of an evolutionary corporate data application system was initiated and significant progress was made in applying big data technology to credit operation and monitoring system construction. Various comprehensive approaches were used to mitigate substantial risks and enhance the recovery rate of non-performing loan (NPL). NPL amounting to RMB113.2 billion was settled in the first half of the year, a year-on-year increase of RMB39.7 billion. As of the end of the first half, ICBC’s NPL ratio was 1.55%, representing an increase of 0.05 percentage points from the beginning of the year and a decrease of 0.11 percentage points from the end of the first quarter, and the balance of NPL decreased by RMB8.4 billion as compared with the first quarter. Although the pressure of the upward trend of NPL remains relatively high, the Bank’s credit risk is under control and its asset quality has outperformed most international and domestic peers.
ICBC’s credit risk continued to drop in key areas which draw lots of market attention such as personal mortgages and industries with over-capacity. Personal mortgages mainly supported the demand of homebuyers for self occupation and upgraders with an NPL ratio maintained at a relative low level of 0.43% as at the end of the first half-year. Innovative financial methods such as merger and acquisition and international production capacity cooperation were provided to facilitate de-capacity and de-leverage of industries with over capacity. During the first half of 2016, the balance of NPL in the 5 industries with over capacity including steel industry decreased by RMB600 million and NPL ratio decreased by 0.34 percentage points to 2.44%. The NPL ratio of steel industry was 0.78%.
Third, the Bank promoted the cultivation of new drivers of growth, while upgrading traditional ones.
In the first half of the year, ICBC further advanced business transformation to release new dynamics and operational vitality. As an advantageous traditional business, retail finance functioned as a stabilizer in smoothing cyclical fluctuation amid the innovative development. Financial assets relating to individual clients reached RMB12 trillion and the retail finance made an operational contribution of about 40%. Intermediary operations achieved healthy development through business innovation and better services, with RMB81.7 billion fees and commissions, a year-on-year increase of 6%, among which the revenue from individual insurance agency, third-party custody, asset custody, bond issuance and underwriting agency and other businesses increased by over 30%. The volume of credit cards issued was 118 million, by which the Bank became the largest credit card issuer worldwide. Online financial business maintained rapid growth with the scale, number of clients and activity rate rising. The number of users of ICBC mobile, the open online banking platform, has reached 215 million. ICBC Mall, the Bank’s e-commerce platform, recorded a transaction volume of RMB681.4 billion, and the instant messaging platform ICBC Link had over 30 million registered users. QR code payment product was launched and ICBC e-payment had over 100 million users. The financial ecosystem integrating online and offline elements became further developed. The service network was optimized and upgraded in functionality with an orderly manner and, in the first half of the year, near 700 outlets were upgraded and over 3,600 were installed with smart equipments. The new teller service procedure, which was more streamlined and more efficient was widely applied in branches and significantly enhanced experience of clients.
Fourth, ICBC strengthened localized development of its overseas institutions, and steadily promoted cross-market operation with full range of licenses.
In the first half of the year, ICBC continued with internationalization and integrated operations to provide further financial support to companies “Going Global” and construction under “the Belt and Road Initiative”. As of the end of the first half of the year, the Bank has established 412 institutions in 42 countries or regions globally, with 123 overseas institutions in 18 countries and regions along “the Belt and Road Initiative”. Total assets of overseas institutions amounted to near US$304.8 billion, which increased by 8.9% from the end of last year. The pre-provision profit amounted to the equivalent of RMB12.09 billion, representing a year-on-year increase of 5.87%.
Contributions from comprehensive subsidiaries to profits of the Group and the corresponding strategic synergy effect were further enhanced. For the first half of the year, comprehensive subsidiaries including ICBC Credit Suisse, ICBC Leasing, ICBC-AXA and others recorded a net profit of RMB2.8 billion, representing a year-on-year increase of 11.3%. In particular, ICBC Credit Suisse, a comprehensive asset management platform, by capturing favorable opportunities in the improvement of multi-layered capital markets, had assets under management exceeding RMB1 trillion, representing an increase of 14% over the beginning of the year; ICBC Leasing retained its leading position in the industry in terms of asset size and profit by expanding in both the international and the domestic markets and key sectors; and ICBC-AXA recorded rising business scale and market position with its aggressive transformation of regular premium operations, and recorded premiums of RMB26.275 billion, representing a year-on-year increase of 75%.