Big banks diversify as profits slow

Nation's largest state-owned lenders are speeding up their global expansion plans

China's three largest commercial banks are stepping up business transformation as their profit growth hit a record low last year amid the economic slowdown and interest rate liberalization.

All three posted slim growth in net profits attributable to parent-company shareholders, ranging from 0.14 percent to 0.74 percent last year, compared with 5 to 8 percent in 2014.

The slowdown in profit growth has forced them to accelerate reforms they began several years ago.

China Construction Bank Corp, the country's second-largest lender by assets, is trying to turn itself into a comprehensive banking group with nonbanking subsidiaries.

CCB Pension Management Co Ltd was approved to open for business in November with registered capital of 2.3 billion yuan ($354 million; 311 million euros). Eighty-five percent of its shares are held by China Construction Bank and 15 percent by the National Council of Social Security Fund.

The bank's subsidiaries cover a wide range of businesses including financial leasing, life insurance, trusts and housing savings. Next, the bank will expand its businesses to construction cost consulting, large infrastructure construction appraisal and property insurance.

According to its 2015 annual report, the bank has continued to deepen its transformation toward comprehensive operations. Last year, its subsidiaries posted a 41 percent increase of total assets year-on-year to 266.6 billion yuan and a 59 percent growth in net profit.

China Construction Bank also increased its reliance on noninterest business for greater profit.

Wang Zuji, the bank's president, says its private banking clients whose financial assets exceeded 10 million yuan rose 23 percent last year, with total financial assets rising 33 percent. During the same period, its asset custody business grew 67 percent to 7.17 trillion yuan.

These banks are also speeding up the expansion of their global layout in accordance with the implementation of the Belt and Road Initiative, which aims to promote infrastructure connectivity of Asia, Europe and Africa.

Chen Siqing, president of Bank of China Ltd, says, "We'll adapt to the trend of the internationalization of the yuan, strengthen our business and product innovation, and accelerate construction of the financial artery for the Belt and Road Initiative."

By the end of last year, BOC had established overseas institutions in 46 countries and regions, including 18 countries along the routes of the Belt and Road.

Last year, it loaned $28.6 billion to projects in countries along the routes. Its cross-border yuan settlement was 5.39 trillion yuan and its cross-border yuan clearing business amounted to 330.96 trillion yuan.

According to the bank's annual report, its overseas assets grew 54 percent between 2012 and 2015, accounting for 27 percent of its total assets. Its overseas pretax profit rose 5.05 percentage points, contributing 24 percent of the overall pretax profit.

Large commercial banks are making efforts to apply Internet technologies and the Internet-based business mindset to the development of financial services, products and business models.

Industrial and Commercial Bank of China Ltd announced its upgraded strategies to develop e-ICBC in March last year. Six months later, it launched an online financing center, using big data analytics to grant loans to corporate and individual clients without collateral via the Internet. At the end of last year, the center's outstanding loans had hit 523.5 billion yuan.

Jiang Jianqing, chairman of ICBC, says the bank is looking forward to enlarging the scope of inclusive finance by expanding the current client base of 190 million on its direct banking platform through the integration of its Internet and mobile banking platforms.

jiangxueqing@chinadaily.com.cn

(China Daily Africa Weekly 04/08/2016 page29)