Industrial and Commercial Bank of China (ICBC) had another record year in 2010, with improved profitability, enhanced risk management and internal control, and a focus on sensible growth.



With an unwavering focus on careful business management, Industrial and Commercial Bank of China (ICBC) overcame increasingly fierce competition and uncertain market conditions to report solid growth, accelerate product innovation and market expansion, and improve its capital base in 2010. Developing a greater diversity of income structure, better efficiency of capital use and enhanced risk management helped to make 2010 another year of strong growth and increasing profitability for ICBC. The bank produced a net profit of RMB166 billion—an increase of RMB36.63 billion, or 28.3%, over 2009. Its return on weighted average equity increased by 2.64 percentage points to 22.79%.


Operating income increased by 23.1%, growing to RMB380.75 billion, and with rising interestgenerating assets and further recovery of net interest margin, net interest income was RMB303.75 billion, an increase of 23.6% over 2009. Non-interest income also grew by 21.1% this year to RMB77.00 billion, of which the proportion of fee and commission income increased by 32.1%.


Thanks to prudent management, the bank managed to reduce cost-to-income ratio by 2.19 percentage points, bringing it down to 30.99% on operating expenses of to RMB139.48 billion.


This prudent business philosophy, long a central tenet of ICBC’s growth and management strategy, paid off well for the bank in 2010, as it further overcame the influences of the global financial crisis. The bank maintained a healthy and stable growth trend in an ever-changing and complicated environment.


Its rate of growth increased by 12 percentage points over the previous year as a result of the bank’s active efforts to optimize its asset and liability structure, refine interest rate management, and intensify investment management. As a result, ICBC succeeded in pushing its net interest margin (NIM) up by 18 basis points compared to that of last year, and the ratio of the bank’s net fee and commission income to total operating income rose by 1.31 percentage points to 19.13%.


Credit Structure Optimization

By optimizing group credit structure, ICBC improved business performance and managed sustainable development of its credit business. Over the past year, ICBC further aligned its credit strategies to complement national macroeconomic policies and actively pushed forward credit structure growth while keeping an eye on the total amount and pace of lending.


The bank grew its portfolio of renminbi-denominated loans by 16.9%, adding RMB898.10 billion to the renminbi loan book. Of these, 95% of new project loans were invested in State-targeted sectors, including strategic emerging industries and green industries for energysaving and emission-reduction.


ICBC also continued to strengthen its product offerings and loan portfolio to small and medium-sized enterprises (SMEs). New loans to SMEs accounted for 55% of total corporate loans, and the growth rate for small enterprises loans reached 51%. Personal loans accounted for 40% of the total increment of loans.


State regional development strategies were supported through differentiated regional credit policies and support for major regional projects focused on local planning for industrial development and key customers in relevant industries.


I ncreasing Competitiveness on the Global Stage

ICBC continued to develop its profile as a world banking leader through in-depth monitoring of global banking trends. The bank maintained the flexibility to actively grasp market opportunities and make use of favorable conditions to develop new products and grow within new markets. It vigorously pushed forward the development of its capital-saving fee-based and emerging businesses while promoting the stable development of traditional businesses.


With a balanced and multi-layered approach, ICBC was able to increase renminbi deposits by RMB1.33 trillion, exceeding RMB1 trillion for the third consecutive year and maintaining ICBC’s status as the world’s top bank in terms of deposits.


ICBC consolidated and expanded its market leading position across different business areas. It issued 63.66 million credit cards, becoming the world’s fourth largest bank by credit cards issuance. E-banking now accounts for 59.1% of the bank’s total business, reaching transaction volumes of RMB249 trillion for a rise of 9.0 percentage points over the previous year.


The bank accelerated reform and innovation in key areas and processes as a central platform for stimulating business vitality and addressing development difficulties. For example, ICBC took a lead role in setting up the Centralized Fund Management System to further promote central and simplified funds management.


The bank also launched pilot reforms in four major profit centers: financial markets, assets custody, the precious metal business and the bill business. Centralization and technological advancements were essential to improving efficiency in these areas.


By increasing back-office centralization for processing of remote authorization and management of books and records, and by putting in place a documents center, ICBC increased management efficiency and service quality. In addition, it facilitated the transfer of tens of thousands of employees from middle- and back-offices to front-office and marketing posts, thus optimizing human resources allocation.


Enhanced Risk Management

Steady operational growth and healthy development at ICBC was backed by a focus on enhanced risk management. In an ever-changing business environment, ICBC has always paid equal attention to business development and risk control.


In particular, in the credit business the bank implemented its “Three Measures and One Guide” strategy, which is focused on controlling risks involved in loans to local government financing platforms, the real estate sector, industries of high pollution and high energy consumption, and those with excess production capacity.


ICBC has always adhered to a prudent provision policy and ongoing enhancement and preservation of provisioning. The quality of the bank’s credit assets remained stable in 2010 thanks to improved risk mitigation for loans with cross guarantees and termination of loans with hidden risks. At the same time, both the balance of non-performing loans and the NPL ratio of ICBC’s loan portfolio declined for the 11th consecutive year. The NPL ratio fell to 1.08% and the allowance to NPL increased to 228.20%, up 63.79 percentage points over the last year.


Following the unified planning of regulatory authorities and taking into account its own circumstances, ICBC also improved its internal control, and case and irregularity monitoring.


The year 2011 marks the start of the twelfth Five-Year Plan in China, and ICBC will take advantage of the opportunities and address the challenges that this presents. By assessing changes in its external environment, and adjusting and optimizing operational structure in light of those changes, the bank will continue its long tradition of innovation and service level improvement and further institutional reform to enhance risk management and internal control. It will strive to strengthen its core competitiveness and focus on sustainable development to continue its development as a bank of strong performance, profitability and prestige.