Industrial Bank : Going Far and Steadily, Industrial Bank Keeps Building A First-ranking and Blue-chip Brand

In 2017, the 29-year old Industrial Bank (IB) has its 10th anniversary of A-share listing.

Over the past ten years of since IB was listed, as the China's economy has been soaring, IB has achieved a leapfrog development towards the goal of building a 'centenary blue chip' and submitted an outstanding performance to clients, shareholders and supervisors: its asset scale is increased from RMB 617.7 billion in 2007 to RMB 5816.9 billion in the end of September 2016, ranking first among all Chinese shareholding banks; the net capital is increased from RMB 28.8 billion to RMB 450.7 billion, up by 14.6 times; the net profit is increased from RMB 3.8 billion in 2006 to 50.25 billion in 2015, up by 12.2 times; the ROE has been maintained high at 24% during the past ten years; the accumulative cash dividends since the date of listing reaches RMB 52.884 billion, thus creating considerable returns for investors.

Over the past ten years of development, IB has grown from a single bank into a financial holding group that relies on banking and owns multiple licenses in trust, financial leasing, fund, futures, asset management, consumer finance, research consultation and digital finance. Its presence covers the globe and the number of employees is more than 50,000, which stabilize its position as one of world top 50 banks and world top 100 listed companies.

Over the ten years of development, IB has made aggressive progress and reform to take the high ground in many niche financial market via its differentiated development. Relying on stable operation, continuous growth and fine performance, it has become an unquestionable blue chip in the capital market of China.

Reviewing the past ten years, how did IB surpass other competitors without inborn advantages? Facing the challenges and opportunities in the greatly changed economic and financial environment at its thirty, how does IB expect its thirty five birthday as a benchmark shareholding bank with differentiated development? In the 100th regular press conference of the banking industry held in Beijing on March 28, Tao Yiping, the governor of IB, disclosed the blueprint of the next Five Year Plan and the path of transformation and development.

Being Innovative and Earnest, IB Insists on Differentiated Business Mode

When mentioning IB, people know about its story of struggling growth from a mall bank in the southeast corner of China to a Fortune 500 enterprise. It is the inherent innovation and remitting efforts that underlie the success of IB.

'It is our insistence on differentiated operation that has helped us make bold innovations and seek for featured business modes in the past ten years. We not only surpass our competitors, but also make positive contribution to the entity economy.' In the press conference, Tao Yiping attributed the leapfrog development of IB in the past ten years to its powerful and innovative gene and culture, and used four phrases to conclude its practices of innovation: 'directed by the market, based on clients, follow the rules and see talents as foundation'.

In his point of view, only by sticking to the national policies, accurately understanding supervisory policies, mastering the development trend of economy and finance and making deployment in advance can we move one step ahead of the market; only by focusing on serving clients, addressing the fundamental needs of entity economy and solving the 'difficulties' and 'pain points' of clients can we achieve sustainable innovation; only by following the basic industrial rules and accounting standards can we clarify, understand and measure innovation and risks; only by running a bank in a professional way, emphasizing the function of front-line business employees in innovation, encouraging grass-root innovation, partly implementing initiatives and examining them in real scenarios, can we vitalize innovation.

In the past ten years, IB has, based on the market, accurately mastered the trend of interest rate liberalization and diversifying financing and become the first bank in China to restructure the balance sheet. It is an important participant in domestic large-sum agreement deposit, NCD, CD market and SHIBOR offer, and actively promotes innovation in bonds, trust, leasing, asset securitization and other financing tools.

Following the accelerated development of comprehensive financial operation and diversified financing demands, IB was the first to facilitate the development of FICC, investment banking, asset management, asset custody and other financial business which now are indispensable business categories of banks. By the end of last year, the balance of asset management of the group has reached nearly RMB 3 trillion with the scale reaching RMB 9.44 trillion.

As the first equator of China and a pioneer and leader of green finance, IB is the first one to establish a professional team that has been studying green finance in the past ten years. Every year, IB will actively disclose the index related to energy saving, emission reduction and other social responsibilities. It has accumulatively provided over RMB 1 trillion of green financing for over ten thousand enterprises and projects, supported countless projects that each year save 26.47 million tons of standard coal, 74.08 million tons of CO2 and 340 million tons of water.

IB has proposed 'making finance warmer' and is one of the early founders of inclusive finance and interbank platform. By deeply combining and innovating in finance and technologies, IB has achieved resource sharing and mutual benefits among small- and medium-sized financial institutions and has built a network connecting nearly 800 small- and medium-sized financial institutions and 46,000 outlets. It provides more than 300 small- and medium-sized financial institutions with information system construction and maintenance service, saves social resources for re-input, and expands financial services to more second-tier or third-tire cities and rural areas. IB is the first to include elderly care finance into its strategic business and devoted to providing elderly clients with high-quality and tailor-made financial services and satisfying the growing demands for elderly care service.

The corporate governance philosophy of sustainable development is reflected in every aspect of the operation and management of IB. For example, IB is one of the early banks that apply matrix management mode, proposes the performance evaluation mode with the core of economic value added (EVA), and establishes an asset & liability management system with the core of FTP, and etc.

Ten years of exploration and innovation. As one of the first shareholding banks in China, IB was born with the mission of 'finding the way of financial reform and making contribution to economic construction'. Based on bold and innovative practices, IB not only supports its own growth, but expands the business and function boundary of commercial banks, which is very significant in improving the quality and efficiency of the entity economy supported by finance, and offers practices in deepening the reform of domestic financial supervision.

Make A Plan to Become A First-rate Financial Service Group

In the next several years, China will go deep into the structural reform of the supply side where industrial upgrade and transformation will be accelerated and the economy will be further boosted by new power instead of old one. The goal of financial transformation is to de-leverage, suppress the generation of foams, support the entity economy and prevent the economy from 'going virtual'. The great changes to the economic and financial environment bring pressure and challenges to banks while offering new opportunities.

Standing at the junction of the last and next Five Year Plans, where is the way? How can we maintain strategically stable and head for the future? In the press conference, Tao Yiping explained the 'general keynote' of IB for stable while progressive development as well as the idea for the new Five Year Plan.

Tao Yiping summarized 'stable while progressive development' into five 'stabilizes' and five 'facilitates': First, stabilize the aggregate and facilitate structural adjustment. Second, stabilize assets and facilitate growth-cum-debt. Third, stabilize profitability and facilitate non-interest incomes. Fourth, stabilize quality and facilitate risk disposition and mitigation. Fifth, stabilize foundation and facilitate service quality.

This year, while stabilizing the asset scale, IB intensified the return to the original purpose of operation. By optimizing the asset structure and debt structure, IB further emphasized the quality and efficiency of serving the entity economy to prevent the economy from 'going virtual'. IB further solved the difficulties and pain points of clients by applying useful strategies and measures so as to meet their diversified and comprehensive demands. By optimizing the business structure, IB boosted the acceleration of non-interest income growth while increasing the outcome of disposition and mitigation and the profitability of non-performing assets.

Considering the long-term development resulting from economic transformation, the new Five Year Plan, based on a higher strategic view, further consolidates its steps towards the upgrade and transformation to 'light asset and high efficiency'.

Tao Yiping said, the new environment makes 'soaring development by occupying territories' a history. In terms of operation, the group no longer pursues simple expansion but more focuses on the quality and efficiency. Around the goal of transforming into a 'light asset and high efficiency' bank, IB will accelerate to construction a bank focusing on settlement, investment and transaction.

He pointed out that the development of a settlement-based bank means more focusing on developing payment settlement, cash management, trade financing and other settlement business; intensifying the penetration into the whole process of operation of clients; consolidating the fundamentals of clients and business. An investment-based bank means exerting the general advantages of the group to provide clients with comprehensive financing services by relying on resources in the diversified financial market. A transaction-based bank means further strengthening the financial transaction business including FICC, managing and transacting assets more rather than holding them, making the group development light.

In the press conference, Tao Yiping mentioned the idea of client orientation, which is prominent in the new Five Year Plan. IB has clearly indicated to comprehensively enhance its capability as a one-stop financial service provider, establish a unified in-built customer service system, treat clients identically and allocate all resources throughout the group with one directive.

'It is the most important to settle down to expand the client poor, serve them sincerely and grow with them so as to underlay the sustainable development.' Tao Yiping said that as a mainstream bank, IB shall take responsibilities, follow the rules and always remember the original purpose of running a bank. Based on refined operation, IB keeps improving the standardization of management as well as its supporting and leading capacity for business and management by relying on advanced technologies, which is the premise of becoming differentiated and featured.

IB has turned itself into a real 'light' modern commercial bank by adopting the strategy of transforming itself from heavy asset and capital into light asset and capital; from an agency of credit and capital to an agency of information and capital; from holding assets to managing and transacting assets; from financing to knowledge leveraging; from a single market to the entire financial market.

'After the business transformation, we expect over 30% of contribution from retail banking, over 15% of contribution from group members and over 30% of contribution from intermediate business.' said by Wang Shengqian, the General Manager of the Development Planning Department of IB, in the press conference.

Deny the Past to Motivate New Force

The blueprint has been made and is waiting to be executed. To facilitate the successful implementation of the Five Year Plan, IB has this year launched another round of reform in systems and organizational structure.

'Adapt ourselves to changes and make changes to win. This reform mainly aims at further enhancing the professional skill, market response and service efficiency.' As introduced by Tao Yiping, this reform will separate the customer department and product department; traditional business and emerging business. The customer department will more focus on satisfying the comprehensive financial needs of clients while the product department will focus on developing good products.

Following this idea, IB will redesign its organizational structure, streamline its departments and flatten the management. Four major department groups will be created, i.e. corporate finance, retail finance, interbank finance, and investing bank & financial market. The first three groups are defined as department groups for customer relationship management and specialized business products, the last group is defined as the department group for public products. The purpose is to simplify and streamline governance by reducing management levels. Meanwhile, to comply with market requirements and supervisory requirements, new business sectors are independent and equipped with a sophisticated procedure and mechanism, including a controllable and highly efficient risk management mechanism that can adapt itself to market changes, as well as a performance measurement and evaluation mechanism that focuses both clients and products.

Tao Yiping summarized that the history of IB in the past 30 years witnesses countless denials and reshaping that keep powering the undertakings of IB. For this reason, IB can lead the industry in every market reform and innovation. Facing new development opportunities, the far-sighted strategic deployment and powerful enforcement once again injected impetus for IB to develop, allowing it to achieve all goals of the Five Year Plan and deliver excellent results recognized by investors and the market.