19 July 2019

ICBC reinvents itself to fend off e-rivals

China’s state-owned banking titans, although still regarded as profit machines, have to bid farewell to their halcyon days of easy profit as they confront a whole new set of challenges ranging from the sweeping impact of internet finance and the country’s moderate economic growth to the looming interest rate reform.

Figures from industry watchdog China Banking Regulatory Commission show that the market share of major state-owned banks has declined from 52 percent in 2008 to 40 percent as of last year.

Top lender Industrial and Commercial Bank of China (ICBC, 01398.HK, 601398.CN) is not beyond all these woes, despite its assets exceeding 20 trillion yuan (US$3.265 trillion). Some analysts have warned it may not achieve a double-digit net profit growth for 2013. 

In an apparent attempt to calm market concerns, the bank is preparing to undertake the most comprehensive organizational reshuffle since its initial public offerings in 2006. 

ICBC has been hemming and hawing over the restructuring scheme for most of the past two years. It’s not just because of strong objections from some branches and departments which are apparently unwilling to surrender their vested interests. The bank’s new president, Yi Huiman {易會滿}, is also concerned that the revamp, if not meticulously planned, could turn out to be superficial and therefore useless.

But Beijing-based Caijing Magazine reports that ICBC has finalized the restructuring blueprint, and many of the initiatives will be put in place in the bank’s 47 units and 400,000 employees in the second quarter this year.

The first issue to address is rejuvenating its vast network, with the aim of effectively integrating online and offline offerings to prevent e-rivals from chipping away at its 400 million clients.

A dedicated department directly under the bank’s top management will be established to expand its reach into clients. Caijing says the department will be responsible for site selection for new branches and e-banking centers across the nation. Some underperforming sub-branches will be shut down or turned into automated banking centers.

Its existing 20,000 outlets will also be fitted out with diversified layouts that suit different business categories such as corporate, retail and wealth management — more counters will be added for general banking services while private and cozy suites will be dedicated for VIP customers.

It has also come up with a new smartphone application in an attempt to reach out to younger, on-the-go customers. 

The app incorporates virtually all the services it offers for individual clients including loan application, pension management and various capital and fund investment offerings that previously could only be processed through the bank’s brick-and-mortar network. A client only needs to make a one-time visit to an ICBC branch to open an account, after which all of the bank’s services can be fully accessed via the app, a senior bank executive was quoted as saying.

Securing licenses for its trust and futures business is another key objective as the bank endeavors to become an all-round financial conglomerate.

ICBC currently has four non-banking entities —  ICBC Financial Leasing; ICBC International Holdings, an investment banking platform based in Hong Kong; ICBCCS {工銀瑞信}, a joint venture fund management firm with Credit Suisse; and ICBC-AXA Life, an insurance company formed with AXA and China Minmetals Corp.

Since China’s banking regulator still keeps a tight rein on the trust and futures sector, ICBC is likely to make a backdoor entry by acquiring some existing companies to get a license for the business. 

It is also said that in an effort to keep these separate entities free from intervention from ICBC’s dominant banking business, a non-banking sub-committee under the ICBC board will be set up to supervise and coordinate related operations.

Streamlining credit and risk control procedures is also an important item in the reform package. Regional ICBC branches with sound credit control record, such as those in Shanghai, Guangdong, Zhejiang and Jiangsu, will be given higher autonomy in issuing loans and trialing new products.

– Contact the writer at [email protected]


EJ Insight writer

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