OREANDA-NEWS. September 23, 2013. Industrial and Commercial Bank of China Limited (“ICBC” or “the Bank”, Stock Code: SH: 601398; HK: 1398) announced its results for the first half of 2013.

In accordance with the International Financial Reporting Standards, ICBC posted a net profit of RMB 138.5 billion for the first half of 2013, up 12.4% over the year-ago period. Earnings per share reached RMB 0.40, up RMB 0.05 year-on-year. Net asset per share rose RMB 0.13 from the end of 2012 to RMB 3.35. The Bank's annualized return on average total assets (ROA) and return on weighted average equity (ROE) reached 1.53% and 23.25% respectively, up 0.08 and 0.23 percentage points respectively over the end of the previous year.

ICBC continued to enhance its operational competency while generating healthy returns to investors in a sustainable manner. The Bank topped the Forbes Global 2000 list this year, in terms of four benchmark weightings such as sales, profits, assets and market value, becoming the largest corporation worldwide. ICBC also led the Fortune Global 500 commercial banks by the ranking of its overall operational income.

With Tier 1 Capital of USD 160.6 billion, ICBC was top-placed in The Banker’s Top 1000 World Banks ranking, the first Chinese bank with such a distinction in the past 50 years. As of the end of June 2013, in accordance with the new Administrative Measures for the Capital of Commercial Banks, ICBC’s capital adequacy ratio reached 13.11%, while core Tier 1 capital adequacy ratio and Tier 1 capital adequacy ratio both reached 10.48%, keeping a moderate safety margin and buffer.
 
In the first half of 2013, in response to the complex economic conditions both domestically and globally, ICBC forged ahead with its business transformation that strengthened cost control and enforced strict risk management. These initiatives helped to enhance the support of the real economy in terms of quality and efficiency, while maintaining a steady and healthy growth momentum. On an overall basis, ICBC’s operational performance for the first half of 2013 could be illustrated in four points below:

Firstly, while facilitating the development of the real economy, ICBC capitalized on market opportunities which resulted in healthy business development.

Since the beginning of this year, ICBC has been proactively responding to the new changes on the economic and financial landscape, as well as new trends in relation to the economic transformation. Instead of supporting the real economy primarily through extending new loans, the Bank stepped up its pace both in optimization of new loans and in adjustment to the outstanding. While maintaining a steady growth in loans and a balanced credit orientation to target borrowers, the Bank optimized the loan structure and raised the turnover rate of outstanding loans, so as to enhance its capability and efficiency in servicing the economy. In the first half of 2013, the new RMB loans of ICBC’s domestic branches reached RMB 490.7 billion, an increase of 6.22% year-on-year, which was RMB 39.5 billion higher than the new loan increment of the year-ago period. The cumulative lending rose 21% to RMB 4.34 trillion. ICBC’s annual cumulative lending volume for the past three years were 5.65, 6.82 and 8.02 times of new loans for the respective years, which indicated that the revolving of loans kept accelerating year-on-year, and had greatly enhanced the capital efficiency.

As for credit allocation, in consistency with the country’s economic transformation roadmap, ICBC ramped up its support for advanced manufacturing, modern service, cultural industries and strategic emerging industries, to which new loans extended accounted for 86% of ICBC’s entire corporate loan increment. The Bank also made significant effort to better meet the financing needs of small-and-medium enterprises (SMEs), micro and small enterprises (MSEs) in particular. ICBC developed an innovative mode of supply chain finance, and expanded its customer base to more than 10,000 SME customers upstream and downstream of 1,300 supply-chain-spanning core enterprises, which brought a pull effect ratio of 1:8. To meet the financial needs relating to personal consumption and people’s livelihoods, ICBC’s personal loans such as bank card financing increased by RMB 250.6 billion, which accounted for 50.3% of the Bank’s total loan growth.

The Bank significantly enhanced the operating efficiency and quality of its credit business, as well as fostering a healthy and sustainable development of its credit business through optimizing the new loan orientation and restructuring its existing loans. Furthermore, the Bank also strived to develop its non-credit financing business through providing various financing tools such as financial leasing, short-term financing bonds, medium-term notes and syndicated loans. All these measures helped companies widen their financial channels, and also served as impetus for economic development.

Secondly, the Bank achieved stable asset quality with ongoing improvement in risk management and corporate governance.

During the first half of 2013, ICBC planned and promoted the transformation of its credit system based on the “big data” thinking, amid the slowdown in economic growth and the rising pressure in credit risk management. The Bank developed a risk control model focusing on the information flow between connected businesses, upstream and downstream businesses and cross-account transactions, ensuring the stable quality of its credit assets. As of the end of June 2013, the Bank’s non-performing loan (“NPL”) ratio edged up 0.02 percentage point to 0.87% compared to the beginning of the year, while maintaining the same level with the end of March this year. Meantime, in facing more risk factors and a higher chance of risk cross-contamination under such complicated and complex business environment, ICBC further strengthened its comprehensive risk management system and continued to enhance its effort in regulating risk-prone areas, to ensure the overall control of different types of risks and keep the incident possibility at a low level.

In terms of loans to local government financing vehicles (LGFV) which arouses great market concern, the Bank successfully reduced both the balance and the proportion of NPLs extended to local government financing vehicles, while steadily enhancing its cash flow coverage ratio. At the end of the first half of 2013, ICBC’s loan balance to local government financing vehicles reduced by RMB 58.7 billion over the end of last year, and its proportion to total loans fell by 1.1 percentage points. NPL ratio of LGFV loans fell 0.13 percentage point from the end of last year to 0.26%, and its cash flow coverage ratio stood at 98.2% for the full-covered and generally-covered loans conbined. While strengthening its loan quota management in the real-estate development sector, the Bank offered greater support for the construction of low-income housing and first-time home buyers, which lowered both NPL balance and NPL ratio of the Bank. By the end of June 2013, the balance of NPLs to the real-estate sector from the Bank’s domestic branches fell by RMB 40 million and the NPL ratio was down by 0.04 percentage point to 0.38% compared to the end of last year.

Thirdly, the releasing of benefits of ICBC’s development towards globalization and integration has speeded up, which greatly enhances its global service capacity significantly.

In the first half of 2013, the profit contributed by ICBC’s overseas branches and domestic integrated subsidiaries went up 36.2% year-on-year, underscoring the role of globalized and integrated operation in stabilizing profit and spreading risks. The Bank has established its global network with nearly 400 overseas institutions in 39 countries and regions at present. As the single largest shareholder of Standard Bank — a leading bank in Africa, ICBC has entered into close collaboration with financial institutions in 18 countries across Africa. On this basis, ICBC fostered the transformation of its internationalized operational strategy with a focus on localization, mainstreaming and differentiation to become the major player among local peers. By extending the footprints of key product lines overseas and promoting the interaction between domestic and overseas operations, ICBC was able to boost its overseas branches’ competitiveness and business development. During the first half of 2013, profit before tax of the Bank’s overseas institutions totalled USD 1.07 billion, up 23.8% year-on-year.

ICBC’s Singapore Branch was designated by the People’s Bank of China (PBC) as a RMB clearing bank in Singapore, the first time that PBC had designated a RMB Clearing Bank outside China. ICBC also captured the opportunities arising from the opening up of the cross-straits financial ties, by signing a share subscription agreement with Taiwan SinoPac Holdings and SinoPac Bank, which highlighted ICBC as the first mainland Chinese bank that invested in Taiwan’s financial industry through share subscription. Meanwhile, ICBC continued to optimize its integrated operation system, which included fund management, financial leasing, licensed investment banking, insurance and broker dealing, to further enhance profit contribution and synergies to the Group.

Fourthly, the Bank promoted coordinated development among various business lines, with remarkable results achieved in its business transformation.

In the basic business sectors such as deposits, the increment of ICBC’s renminbi deposit reached RMB 854.8 billion for the first half of 2013, ranking first among all peers, enabling ICBC to play a key role in market stabilization. In emerging sectors, ICBC continued to focus its strategic transformation on the financial asset services and stepped up its promotion efforts, which resulted in a 40.1% growth of its revenue during the first half of the year. Specifically, income generated from branded investment banking services such as M&A/restructuring rose 82.4% year-on-year, which involved more than 370 M&A/restructuring projects with a total transaction value of over RMB 115 billion.

This signified acceleration in the Bank’s transformation from traditional financing services to comprehensive financial services. Bank card issuance nearly hit 500 million with consumption totalling RMB 2.6 trillion, among which credit card issuance and consumption volume exceeded 80 million and RMB 750 billion respectively, making ICBC one of the world’s top four card-issuing banks. The Bank’s E-banking transaction volume also achieved a breakthrough with a record of RMB 180 trillion, a 12.9% increase year-on-year, while the number of mobile banking customers exceeded 100 million, the first among Chinese peers to reach that figure, which also make ICBC the bank with the largest mobile banking customer base in China. The scale of asset custody amounted to RMB 4.27 trillion, placing the Bank top among its domestic peers for the 15th consecutive year. Year-on-year growth rate of income from pension fund, private banking and precious metal services all exceeded 90% respectively.

In the first half of 2013, ICBC actively sought to meet the demands of the market and customers. With product reform as the starting point and product design helmed by standardization and modularization, ICBC stepped up its business innovation by implementing reforms in more than 10 of its product lines, such as personal finance and corporate online banking, while launching more than 50 innovative products such as paper crude oil and paper foreign exchange. ICBC also initiated and undertook a series of new business development and promotion activities, such as supply chain financing, small and medium-sized business financing based on POS transactions, and online and offline payment products. ICBC also launched a “Service Quality Improvement Year” initiative to spur continuous service improvement in line with customers’ expectation, by strengthening certain improvable points in the service process, which saw a significant progress and gained positive responses from the public.