China has been the story in global banking over the past decade. The Banker speaks to the CEOs and chairmen of the country's leading banks, and assesses their options as the growth of the national economy begins to slow.

Industrial Commercial Bank of China

ICBC chairman Jiang Jianqing

ICBC chairman Jiang Jianqing

Beijing-based Industrial Commercial Bank of China (ICBC) is not only the largest bank in China in almost all areas, it is the third largest in the world, according to The Banker’s Top 1000 World Banks for 2012. It is also the most profitable bank in the world, with net profit after tax rising 25.6% in 2011 to reach a staggering $33.1bn, representing a compound annual growth rate of 33.1% over the past six years.

With its return on weighted average equity reaching 23.4% in 2011, ICBC has improved profitability and also improved asset quality, with its non-performing loan (NPL) ratio dropping to 0.94%. It has also improved its capital adequacy ratio to 13.17% and its core capital adequacy ratio to 10.07% as well as maintaining a low cost-to-income ratio of 29.9%.

With 287 million retail customers and 4.24 million corporate clients, ICBC has a formidable customer base along with a network of 16,765 domestic branches, and operations in 34 countries with a further 244 branches abroad. Chairman Jiang Jianqing is keen to emphasise the bank’s domestic focus, with operations abroad accounting for only 5% of assets and 4% of profits; ICBC’s long-term target, however, is to build overseas assets and profits to 10% each by 2020.

In early May ICBC gained an important US foothold with US regulatory approval to buy a US bank, the US subsidiary of Hong Kong’s Bank of East Asia, a small operation with 10 branches.

China Construction Bank

Wang Hongzhang, chairman of China Construction Bank

Wang Hongzhang, chairman of China Construction Bank

The second largest bank in China and sixth largest in the world, according to The Banker’s Top 1000 World Banks for 2012, China Construction Bank (CCB) is also hugely profitable, with its net profits up 25.5% in 2011 to Rmb169.4bn ($26.6bn), and providing a return on average equity of 22.5%. Profit growth, however, slowed in the first quarter of 2012 at only 9.26%, but the capital adequacy ratio remained strong at 13.66% with core capital adequacy at 11.02%.

New chairman Wang Hongzhang says that CCB has been keen to develop more business sectors such as e-banking, pension funds and credit cards along with improving lending to small and micro-sized enterprises. In 2011, in the ‘three rurals’ sectors (agriculture, rural areas and farmers), CCB’s balance of agriculture-related loans was up 27.7% to Rmb1049.9bn, of which the balance of loans designated for new rural construction was Rmb31.6bn. Mr Wang also sees huge opportunities in wealth management through the bank’s 13,000 retail outlets, wealth management centres and private banks.

In its 13 operations overseas, Mr Wang says CCB’s overseas assets currently amount to Rmb443bn, but in the next five years he plans to expand with 17 or 18 new operations largely in emerging markets and Europe, which will increase the bank’s overseas assets to $180bn. He believes that in addition to CCB’s London subsidiary there are strong opportunities in Luxembourg.

Bank of China

Bank of China president Li Lihui

The most internationalised and diversified bank in China, with operations in 32 countries, Bank of China (BoC) is the third largest bank in China and the ninth largest in the world according to The Banker’s Top 1000 World Banks 2012.

Despite a relative slowdown of late, Bank of China still achieved an 18.8% growth in post-tax profits to Rmb130.3bn in 2011 and an acceptable return on average equity of 18.3%, while maintaining a high level capital adequacy ratio of 12.97% and core capital adequacy ratio of 10.07%.

In 2011, BoC continued to expand globally. It currently has 586 branches abroad, and the proportion of overseas assets has reached 22.39%, with pre-tax profits from overseas institutions standing at 21.23%, the highest of any Chinese bank. BoC president Li Lihui says the bank’s prime overseas focus is still Asia but it is also interested in selected business expansion in central Europe and Africa. He adds that BoC has no exposure in the eurozone and the region's current malaise will have no impact on BoC's financial performance. 

Like other Chinese banks, BoC is increasing its focus on lending to small and medium-sized enterprises (SMEs), as opposed to big corporates, and is strengthening its leading position in cross-border renminbi settlement and clearing businesses. In 2011, BoC’s total volume of cross-border renminbi settlement business exceeded Rmb1700bn with a domestic market share of more than 30%.

China Citic Bank

Describing itself as being placed second among China's medium-sized banks in terms of total net profit (which exceeded Rmb30bn in 2011), Beijing-based China Citic Bank has improved its profits and has become the sixth largest bank in China and the 48th largest in the world, according to The Banker’s Top 1000 World Banks for 2012.

Explaining Citic’s performance, president Chen Xiaoxian says it ranks in the front row of medium-sized banks with total assets rising 32.5% in 2011 to Rmb2770bn, and with an NPL ratio dropping to 0.6% and provision coverage increasing to more than 280%. He says: “[China Citic Bank] maintains the leading position among medium-sized commercial banks in terms of the corporate deposit, loan business and the transaction banking business, including supply chain financing, international business, cash management and capital business." He also says that Citic leads its peers in retail banking, investment banking, credit cards, custody and car financing.

In terms of client structure, Mr Chen says: “Citic will gradually reduce the loans to large-scale enterprises while increasing the loans to SMEs and personal clients, so as to adapt to the transformation of national economic pattern and policy orientation.” In noting the increasing role of the renminbi in trade settlement, he explains the proportion of trade settled in renminbi has increased from 2% in 2010 to 8% in 2011, and predicts that the currency will become increasingly convertible.

China Merchants Bank

Dr Ma Weihua, CEO at China Merchants Bank

Dr Ma Weihua, CEO at China Merchants Bank

Established in Shenzhen in 1987, China Merchants Bank (CMB) is China’s first joint-stock commercial bank and a clear pioneering institution that has grown to China’s seventh largest bank and the 56th largest in the world in The Banker’s Top 1000 World Banks for 2012.

With 800 branches, CMB is relatively small, but it has strong internet coverage and has established a particularly strong foothold in retail, private banking and wealth management catering to high-end customers. Its CEO, Dr Ma Weihua, sees significant change in the marketing of securities and huge opportunities in the offshore renminbi market, and he plans to set up a branch in Singapore to cater for this, along with the first Chinese bank representative office in Taipei, the capital of Taiwan.

In 2011, CMB increased group profit attributable to shareholders by 40.2% to Rmb36.1bn and boosted return on average equity to a creditable 24.2%. In the first quarter of 2012, group profits rose 32.2% to a strong Rmb11.6bn, helping to maintain CMB's healthy position.

Mr Ma sees China's recent slowdown as an important turning point for the country's banking sector and stresses that CMB’s focus is on supporting SMEs rather than lower-margin financing of big business. Given his view that the European crisis is far from over, he is reluctant to upgrade in London and is focused on domestic opportunities.

Shanghai Pudong Development Bank

Xiaohui Ji, chairman of SPD Bank

Xiaohui Ji, chairman of SPD Bank

Shanghai Pudong Development Bank (SPD Bank) continued to maintain a steady rather than fast growth in 2011, but as its chairman, Xiaohui Ji, notes, steady growth is still growth. SPD is the eighth largest bank in China and the 57th largest in the world, according to The Banker’s Top 1000 World Banks for 2012.

SPD, which had 741 branches at the end of 2011 and 31,200 employees, has opened up 80 new branches this year and established a Hong Kong branch in 2011. It is also planning to open a representative office in London. In 2011, its post-tax profits rose 42.1% to Rmb27.3bn, with total assets up 22%, and its market share in Shanghai reached 7%.

Mr Ji is keen to emphasise the importance of SPD Bank's five-year plan introduced in 2011, which focuses on the growth of SMEs, customer-centric services and innovation, especially around the bank’s enhanced operating system. He notes developments in custody services and SPD’s leading role in private equity finance and green credit, based around energy-saving products. Mr Ji says: “We try to maintain good quality assets,” adding that the bank’s NPL ratio – which is less than 0.5% – is outstanding. But with China’s banking industry at a turning point, Mr Ji sees the need for transformational growth.

China Minsheng Banking Corporation

China Minsheng Banking Corporation, established in 1996, is somewhat unusual in Chinese banking terms. It is 100% privately owned and has a defined identity with a major focus on reform, entrepreneurship and private banking. It has also managed to become the ninth largest bank in China and the 62nd largest in the world, according to The Banker’s Top 1000 World Banks for 2012.

Chairman Dong Wenbiao has taken the lead in SME financing in recent years, along with MSE (micro and small enterprises) financing, and these areas dominate Minsheng’s loan book. Mr Dong says that the bank’s three core strategies are private banking, banking for MSEs and banking for high-net-worth individuals. He adds that Minsheng’s key role in the market for leasing private jets has been a sound foundation for the private banking business. Minsheng is China's biggest player in the leasing of private jets.

Mr Dong believes his clear focus has helped the bank's profitability, with Minsheng showing a return on equity of 27.5% in the first quarter of 2012 (this figure was 23.89% for the whole of 2011), the highest among Chinese banks. He adds that reforms are necessary in adjusting retail branch operations. “You need to change the way branches work; if you don’t it is suicide,” he says.

China Guangfa Bank

Morris Li, China Guangfa Bank’s president,

Morris Li, China Guangfa Bank’s president

Guangzhou-based China Guangfa Bank (formerly known as Guangdong Development Bank) has continued to show rapid growth in profitability, with net profits in 2011 up 54.89% to Rmb9.6bn and return on equity rising to 20.06%. With the strategic target of “building a first-class commercial bank”, Guangfa has become the 14th largest bank in China and the 123rd largest in the world, according to The Banker’s Top 1000 World Banks for 2012.

Guided by its Five-Year Development Strategy (2011-2015), Guangfa’s core operation philosophy focuses on innovation, efficiency, putting customers first and IT leadership. Under the strategy, Guangfa, according to president Morris Li, greatly expanded SME business, personal banking and financial market businesses. SME loans accounted for 51.6% of its total corporate loans, up 1.89 percentage points from 2010. Fee and commission income was up 76%, accounting for 14.8% of operating income.

Both the NPL ratio and NPL balance declined in 2011, showing improved asset quality, with the NPL ratio down 0.24 percentage points to 1.34% and the balance down to Rmb7.2bn. Loan provision coverage increased to 231.2%. The year-end capital adequacy ratio was 11.1%, with core capital adequacy ratio at 8.05%.

The bank has more than 500 branches in mainland China, Hong Kong and Macao, and also has global banking giant Citigroup as a 20% shareholder.

China Bohai Bank

Established in 2006, Tianjin-based China Bohai Bank has quickly set up a national franchise across 13 provinces and has become the 26th largest bank in China and the 299th largest in the world, according to The Banker’s Top 1000 World Banks for 2012. Its net profit before tax in 2011 rose by a staggering 125.98% to Rmb2.46bn and in the first quarter of 2012 profits were also up by more than 100%.

President Zhao Shigang says that Bohai has achieved remarkable progress in strategic transformation and operating performance with a 217% rise in fee-based business and a 247% rise in investment income. Also, despite a capital increase, return on weighted average equity still reached 13.1% in 2011, an increase of 4.27 percentage points over 2010, and the capital adequacy ratio rose to 11.77% with core capital rising to 9.52%.

With strong support from 20% shareholder Standard Chartered Bank, Mr Zhao intends to strengthen co-operation with Standard Chartered, which in turn sees Bohai as its top investment worldwide. Mr Zhao is keen to increase his bank’s focus on SMEs and building the bank's wealth management capability but is realistic about the impact of the slowdown in the Chinese economy. “If the country has difficulties the banks will have difficulties,” he says. Overseas, Bohai is waiting for approval for a representative office in Hong Kong.  

Beijing Rural Commercial Bank

Established in 2005, Beijing Rural Commercial Bank (BRCB) is the largest of China's 85 rural commercial banks as well as being the country's 28th largest bank and the 306th largest in the world, according to The Banker’s Top 1000 World Banks for 2012.

BRCB, which supports the Chinese capital city's new countryside construction and urban-rural integration development, and has a policy of making a positive contribution to the social-economic development and socialist new countryside construction, has 700 branches in and around Beijing and focuses on financing farms and agriculture generally.

Chairman Qiao Rui believes lower growth in the Chinese economy will impact on his business but says that his biggest concern is to understand what kind of services farmers need, as an in-depth knowledge of farming represents BRCB’s key advantage. He adds that 70% of BRCB’s business is devoted to agriculture, with loans to corporates increasing and the bank producing a range of specialist products for farmers.

In 2011, net profits after tax rose 15.3% to Rmb2.2bn, down on the 25.8% growth the previous year. Meanwhile the bank’s capital structure remains strong, with an overall capital adequacy ratio of 14.87% with a core capital adequacy ratio of 9.52%.

Figures in our China banks reports may differ from those in the Top 1000 World Banks ranking due to definitions and sources. For clarification, e-mail:


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