Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
WorldJuly 1 2014

From out of nowhere: the Postal Savings Bank of China

Over the past seven years, the Postal Savings Bank of China has emerged out of nowhere to establish the largest banking network in the world. Stephen Timewell assesses its meteoric rise.
Share the article
twitter-iconcopy-link-iconprint-icon
share-icon
From out of nowhere: the Postal Savings Bank of China

Which bank has the largest banking network in the world? It would be no surprise to hear it is a Chinese bank, but it is quite a shock to learn that this Chinese bank, established in 2007, not only has a network of 39,700 branches but also has a larger network than both Industrial and Commercial Bank of China and Agricultural Bank of China combined.

The Postal Savings Bank of China (PSBC) is the new kid on the block, and it is making quite a splash. PSBC enters The Banker’s Top 1000 World Bank’s ranking this year at 63rd in the world and 12th in China, and all the signs point to there being a lot of growth and expansion to come. Also, besides the nearly 40,000 branches, PSBC has 600 million individual customers, the largest number of customers in China, and 1.2 billion renminbi and foreign currency accounts across the country.

A flying start

So how did this megabank suddenly emerge on the banking scene? China Post Group, the state-owned postal operator, founded the bank in March 2007 by separating its rudimentary banking operations from its postal services. It was restructured into a joint-stock bank in December 2011 and in addition to its initial registered capital of Rmb20bn, the China Post Group made two capital injections of Rmb10bn ($1.62bn) and Rmb11bn in September 2009 and October 2010, respectively. At the end of 2012, registered capital was increased to Rmb45bn, and by the end of 2013, Tier 1 capital had reached $23bn, up 32.7% on the end of 2012.

With 600 million customers (430 million described as active) and total assets nearing Rmb6000bn, how does PSBC see its mission and what is its particular strategy? Xu Xue Ming, vice-president and board secretary of PSBC, explains to The Banker that his bank is “a pioneer of inclusive finance” and is a great advocate of the microcredit approach taken by Muhammad Yunus and Grameen Bank in Bangladesh where “everybody has a right to financial services”.

Mr Xu sees the bank’s focus as looking after the poor and serving what he describes as the “ugly goose”, or to focus on three main groups, peasants, small and medium-sized enterprises (SMEs) and rural urban communities. He believes these groups are poorly served by the big banks and there are big opportunities for a bank such as PSBC to meet the needs of these market segments.

Postal Savings Bank, as part of the Chinese government’s stimulus plan following the recent global financial crisis, provided microfinance services as a tool for national development and poverty reduction, and with its broad rural network also assists China’s credit co-operatives in various microcredit schemes.

Individualistic approach

Mr Xu’s vision for the bank is based around individuals, not corporates, and he sees PSBC as a large-scale retail commercial bank with a 60% focus on retail. “We want to be the Wells Fargo of China,” he explains, reflecting on the successful retail strategy of the California-based bank, the fourth largest in the US.

PSBC has witnessed rapid growth in recent years with operating revenues more than tripling from Rmb38.2bn in 2007 to Rmb144bn in 2013. The annual growth rate of net profit since 2007 has hit 80%, rising from Rmb650m in 2007 to Rmb29.7bn in 2013, and profits are up 43% for the first four months of 2014, well ahead of other banks.

Mr Xu sees huge potential in PSBC’s lending business. At present, the total value of loans is Rmb1600bn, divided between Rmb560bn to corporate clients and Rmb1.050bn to individuals. With the bank’s loan-to-deposit ratio at 30% (compared with 75% at most banks) the room for expansion in lending is great. And due to tight risk management, Mr Xu claims the non-performing loan ratio is 0.51%, half that of the big banks, and provisions cover is 379%, much higher than average in the banking sector. 

While Hong Kong’s South China Morning Post reported recently that plans for an initial public offering through a listing in Hong Kong to further raise capital had been put on hold due to the scandal around the arrest of the former president Tao Liming last December, PSBC’s capital is low, says Mr Xu, and the bank wants a further increase. In the meantime, the postal megabank is successfully servicing the needs of its niche customer base. 

Was this article helpful?

Thank you for your feedback!

Read more about:  Asia-Pacific , Asia-Pacific , China