24 March 2019

ICBC Asia plans to offer higher rates to lure yuan deposits

Industrial and Commercial Bank of China (Asia) Ltd. (ICBC Asia) plans to offer high interest rates and other incentives to attract more renminbi deposits in April as competition for yuan deposits among lenders intensifies, the Hong Kong arm of ICBC (01398.HK, 601398.CN) said Tuesday.

This comes after HSBC Holdings Plc. (00005.HK) offered record-high yields of as much as 3.8 percent interest per annum for yuan time deposits with a minimum amount of 10,000 yuan (US$6212.36), the British bank said in a statement on its website.

“We have to use interest rates to guide the investors when the currency is volatile, as we need to fight for more stable deposits in a low mobility [situation],” ICBC Asia deputy chief executive Peter Leung told reporters. The lender is eyeing retail consumers instead of corporate clients to gain stable deposits with a maturity of at least over a month.

The lender had more than 100 billion yuan of renminbi assets as of 2013, up 51.88 percent from the previous year and representing 22.22 percent of its total assets. Yuan deposits rose 39.48 percent to 64.3 billion yuan.

Aside from attracting more renminbi deposits, ICBC Asia plans to increase its capital by issuing debts and borrowing from its parent to improve its capital adequacy ratio (CAR). The lender will also keep its profit as capital and not pay dividends to the parent in order to maintain a healthy ratio.

“We have filed an application to the parent for capital increase,” Leung said. “We did it twice last year at about HK$5 billion (US$644.8 million) on average, and this year, we are not going to apply for less than that.” It asked for capital increase of 11.7 billion yuan from the parent in 2013.

The lender expects its CAR to grow to 14.5 percent from 13.83 last year, while the core CAR will stay at a double-digit level. Its core CAR was 10.19 percent last year.

ICBC Asia expects loans to increase about 20 percent this year, but will have to diversify its revenue sources to grow profit.

“We cannot only rely on net interest margins, and we hope to increase our commission income this year,” he said, without giving details.

– Contact HKEJ at [email protected]



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