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ICBC Business Review
 

In 2011, Industrial and Commercial Bank of China Limited ("ICBC") remained committed to serve the real economy during an extraordinarily difficult year. The Bank forged ahead business re-orientation and development advance by better aligning the diversified needs of financial services from customers. Through spreading effort on a global scale and integrated operation, ICBC stepped up its reform backed by robust corporate governance practices and risk management. ICBC was well- positioned to remain as the world's largest bank by market value, customer deposit.

[Business Review]
At the end of the year, ICBC had 408,859 employees under payroll. ICBC provided a wide range of financial products and services to 4.11 million corporate clients and 282 million individual customers through 16,648 outlets across China, 239 overseas subsidiaries and a global network of more than 1,669 correspondent banks as well as Internet Banking, Telephone Banking and Self-service Banking. ICBC established strong presence by its commercial banking operation and rapid expansion to markets worldwide. ICBC held the top slots in the country in many business areas of commercial banking.

At the end of 2011, total assets reached RMB 15,476.868 billion, representing an increase of RMB 2,018.246 billion, or 15.0% over the end of previous year; Total liabilities reached RMB 14,519.045 billion at the end of 2011, up RMB 1,882.08 billion, or 14.9% from a year earlier. Having a 25.6% increase against previous year in net profit to RMB 208.445 billion in 2011, ICBC defended its position as the world’s most profitable bank. Return on average total assets and return on weighted average equity on par with the international standard, were at 1.44% and 23.44% respectively. Earnings per share rose RMB 0.12 from a year earlier to RMB 0.6. Ratio of non-performing loans fell to 0.94 percent, down 0.14 percentage points against previous year. Bad loan balance and ratio "both declined" in the twelve years in a row. ICBC scaled up its capital strength and sustainable development by securing capital adequacy ratio and core capital adequacy at 13.17% and 10.07% respectively.

[Corporate Banking]
In 2011, ICBC bolstered its business portfolio and advanced the transformation of Corporate Banking in line with the changes in the macro environment. One focus was to expand the customer base through different enhanced services targeting at different customers, especially services to key customers and small-and-medium business owners. In order to meet the demand of customers for diversified financial services, ICBC exerted concrete steps to increase synergy between commercial banking and investment banking through service innovation and all-product marketing. Asset management, account services, asset support services, intermediary finance services were financial asset services for large customers. Leveraging its global service network and integrated IT platform covering all ICBC branches at home and abroad, ICBC supported "go global" projects of Chinese enterprises. Global cash management, cross-border RMB services were some of the global services of ICBC to serve worldwide customers. ICBC has been named "Best Corporate Bank in China" by the UK Financial Times. At the end of 2011, the Bank had 4.11 million corporate customers,while 127,000 customers had loan balances with the Bank, or an increase of 25,000 customers over end of previous year. According to data from People's Bank of China, by end of 2011 ICBC ranked No. 1 among the domestic banks in terms of corporate loans and corporate deposits with market shares of 12.0% and 12.7% respectively.

Corporate Deposits and Loans
In conformity with the macro economy and regulatory requirement, ICBC controlled credit availability and lending to target recipients at the right pace to achieved balanced loan portfolio in a bid to support real economy and achieve stable and healthy growth of loan business. By keeping pace with the national industry plan and regional planning, ICBC shifted its lending practices in favor of key industries and top customers, particularly national major projects under construction or ongoing projects. The first priority was loans for four new markets - advanced manufacturing, strategic emerging industries, modern services and cultural sectors. Loans were strictly prohibited to local government financing vehicle, real estate developers and companies of "high energy-consumption, high emission, and over-production". ICBC concentrated on building a balanced loan portfolio covering large, mid-range and small corporate clients. Product innovation was one way to accelerate the offering of high-income and capital-saving loan products. Supply chain finance to companies, trade finance and SME loans were the main focus. ICBC won "Best Syndicated Loan Project" and "Best Deal" from China Banking Association in recognition of the Bank's excellence in loan syndication. Balance of all corporate loans in domestic branches at the end of 2011 rose RMB 515.262 billion over end of previous year, or 11.0%, to RMB 5,215.605 billion. Leveraging its solid customer base and extensive network, the Bank strengthened marketing efforts to absorb and aggregate customer funds from supply chain customers, customer clusters in urban circles as well as special customer groups. ICBC stepped up its effort to win corporate deposits through the offering of integrated financial services such as corporate wealth management, cash management, electronic banking and asset custody. At the end of 2011, the balance of domestic corporate deposits amounted to RMB 5,928.749 billion, representing an increase of RMB 457.44 billion or 8.4% from the end of the previous year.

SME Banking
ICBC continued meeting the State policy of support SME to provide small-and-medium enterprises ("SMEs") with a unique suite of professional, highly efficient and convenient financial services. When lending to small business customers, ICBC set forth independent policies and schemes, business process and product offering. Availability of funding and special outlets were various measures taken to serve the SMEs. Over 1,400 small business financial centers were dedicated to serve small enterprises, 35,000 ICBC employees were certified to provide loan service to small enterprises. To meet the different needs of small business customers to get funded, ICBC accelerated its innovation to add new loan products, such as small business revolving loans, online revolving loans, mortgage loan secured under standard manufacturing plant or equipment. The Bank widened its base of small business customers through the delivery of excellent loan products and services via different service channels. ICBC has been named "Excellent SME Service Organization" by China Association of Small & Medium Enterprises ("CASME"). "Online revolving loans" was named "Unique Product in Small Business Financial Services by National Financial Institutions in the Banking Sector" by China Banking Regulatory Commission. At the end of 2011, 85,324 small business customers had loan balance with the Bank, representing an increase of 22,243 over end of the previous year.

Institutional Banking
While efforts to offer integrated financial services and tailored solutions for public institutions, fiscal and people's livelihood, ICBC streamlined services to achieve fast growth, including centralized fiscal payment, official card for central budget units, social security card, co-branded cards for housing allowances, services of pooling and disbursement of social security fund and provident fund. ICBC worked with securities companies to provide fast and safer services for customers to transfer money, as well as third party depositary, margin trading service, sales of wealth management products and asset custody service. ICBC topped the league tables in terms of the number of third party depositary customers and volume of customer fund. ICBC built closer partnership with other banks to deliver services in RMB financing, payment and settlement, FX clearing, international settlement and trade finance. A platform was in place for small-and-medium banks to use the service of ICBC for correspondent banking services. So far, ICBC has 116 correspondent banks in China. By building a strong relationship with insurance companies and leveraging each partner's resources, ICBC strengthened its bank-insurance services covering payroll service, asset custody and cash management. ICBC also cooperated with different financial institutions (futures companies, trust companies) to expand its business scale and market influence.

Settlement and Cash Management
With the launch of "E Express for Industrial and Commercial Capital Verification" service, ICBC stepped up its marketing effort to win new customers and offer services for merchants in industry clusters to expand and streamline its customer portfolio. More functions in ICBC Cash Management Card and self-service devices for companies were aimed at wide application of ICBC products and services to increase the brand awareness of "ICBC Cash Management" and settlement volume. The volume of corporate RMB settlements increased by 55.2% to RMB 1,350 trillion during the year enabled the Bank to maintain its leading position in the market. ICBC leveraged its global cash management service to attract and foster closer business ties with large group corporations in China and multinational companies in an effort to reinforce its market dominance in this field. By spending more efforts on product innovation, ICBC extended its range of cash management services such as collection manager, bill pool and fund pool, high-end cash management services that allow ICBC to better compete in the market. For the fifth year running ICBC proved itself to be the "Best Cash Management Bank in China" by The Asset and Finance Asia, and the "Achievement Award for Cash Management in China" by Asian Banker. At the end of 2011, the Bank had 661,000 cash management customers, representing an increase of 30.1% over end of previous year.

International Settlement and Trade Finance
ICBC offered combined services of remittance payment, foreign exchange settlement and sale, and deposit, improving the financial services for import trade. Joint service of export finance (by domestic and overseas ICBC branches), invoice financing (under a credit line of FX receivables) were new ICBC services for export companies. ICBC set up a system for international settlement, trade processing and trade finance solution in which trade processing system has been installed in 73 ICBC subsidiaries at home and abroad. Through the extension of RMB clearing network outside China, ICBC "Cross-Border Link" represented a range of cross-border RMB services for international settlements such as financing, wealth management and treasury transactions. At the end of 2011, ICBC branches in China have provided international trade facility totaling USD 96 billion, up 81.5% from a year earlier. International settlement volume rose 37.1% to over USD 1 trillion, to USD 1.0728 trillion.

Investment Banking
ICBC promoted investment banking services together with commercial banking services and gathered its pace to tap into different markets (bond, capital, M&A, private equity). Under a service model of "Finance + Advisory" for restructuring/M&A, ICBC used M&A fiduciary, M&A wealth management, M&A loans, cross-border syndication to raise funds and arrange syndication for customers. ICBC focused on equity financing service with a complete service offering, where ICBC acted as the administrating bank for equity investment fund, consultant for IPO, private placement and arrangement for share options. ICBC has supported companies to raise over RMB 20 billion in equity funds. The Bank published research reports and offered investment banking services through electronic banking. ICBC also widened its bond underwriting business and underwrote debt instruments worth RMB 290.1 billion in 2011, ranking first in China. Given the ever-increasing awareness of its investment banking brand, ICBC was awarded the "Best Bank in Investment Banking" by the Securities Times for three years in a row. In 2011, income generated from investment banking rose 45.7% from a year earlier to RMB 22.592 billion.

Asset Management
In asset custody services, ICBC targeted at insurance companies. ICBC secured the first place in the league table by generating impressive growth of insurance assets under custody. Global custody service moved on steadily. ICBC retained its place at the top of Chinese banks in the delivery of custodian services to QFII customers and captured leading market shares in terms of the scale of QDII assets under custody. One focus of ICBC was to provide custody services for capital-protected funds and bond funds. ICBC pulled further away from the peers despite the downside of capital market and dropping NAV of securities investment funds under custody. New emerging custody services such as asset management plan for securities firms, custody of wealth management funds were launched in a bid to optimize the structure of custody business. In recognition of its brand influence, for consecutive years ICBC has been named "The Best Custodian Bank in China" by many renowned financial publications, including the Global Custodian, Global Finance and The Asset. At the end of 2011, the total net value of asset under ICBC's custody reached RMB 3,530 billion, representing an increase of 22.8% over end of the previous year. ICBC was the only bank in China with over RMB 3 trillion of assets under custody.

In pension fund services, ICBC has kept a clear focus on large customers while offering different services and special solutions to different customers. The "Ruyi Pension Management", a collective corporate annuity plan, was launched to attract small and mid corporate segment. By year-end 2011, ICBC provided pension management services for 29,424 enterprises, representing an increase of 6,634 over end of the previous year. Pension funds under ICBC's trusteeship amounted to RMB 44.6 billion. The Bank managed 9.9 million individual pension accounts and RMB 184.6 billion of pension funds was under the custody of ICBC. ICBC remained the house to beat in terms of management of corporate annuity, management of corporate annuity personal accounts and scale of corporate annuity under custody.

In precious metal service, growth in 2011 remained compelling. An array of ICBC precious metal products were launched for collectors and investors. ICBC secured the top spot by offering a range of precious metals covering gold, silver, platinum and palladium. New accrual system, a leading system among the banks in China, provided automatic price quotes and allowed ICBC customers to schedule a date online for gold withdrawal, draw gold in other cities, or subscribe SMS alert for accrual. ICBC ranked No.1 in terms of the volume of gold leased driven by the fast growth. Volume of precious metals traded surged significantly on the back of new exclusive outlets. In 2011, total turnover of precious metal reached RMB 1.78 trillion which was 3.1-fold more than 2010's. In the year, ICBC cleared RMB 184.6 billion on behalf of Shanghai Gold Exchange, maintaining its leading position among peers.

In corporate wealth management, ICBC remained at the head of the pack through aggressive product innovation and improved risk management and more informed investment decisions. "Win-Win" series of fixed-return wealth management products and "Weekly Dividend" seven-day wealth management products were new products for ICBC to better compete in the market, for customers to buy and accumulate wealth under different periods. ICBC customers also had the choice to invest in alternative wealth management products like art or wine. ICBC wealth management products were also available online for customers to buy through electronic banking. ICBC won the "Best Banking Wealth Management Brand" from the 21st Century Business Herald and "Best Bond Wealth Management Product" from Shanghai Securities News. ICBC sold corporate wealth management products to a total of RMB 1,986.1 billion in 2011, up 39.9% as compared with the previous year.

[Personal Banking]
In 2011, ICBC focused consistently on the transformation in personal banking business and executed the "Strong Personal Banking" strategy. The target was to win new markets, new customers. Personal banking departments and corporate banking departments joined force to pursue customers in batch in order to expand customer base. ICBC Merchant Friend Club and Celebrity Wealth Management Club were examples of new service channels through bank-merchant partnership. More innovative personal banking products were launched to better compete in the market. The Bank pushed ahead savings deposits, personal loans, wealth management service and credit cards to consolidate its position in these business fields. ICBC set up a team to serve star-class personal customers and attract top customers. ICBC was honored the title "Best Retail Bank in China" once again by Asian Banker. The Bank had 22.9 million new personal customers over end of 2010, to 282 million at the end of 2011. 540,000 new personal loan customers brought the total to 7.39 million. According to data of People’s Bank of China, for the period ending 2011, ICBC topped the league table in terms of savings deposits and personal loans, with a market share of 16.7% and 14.5% respectively.

Savings Deposit
Under the marketing campaign "Mega Force Promotion", personal banking departments and corporate banking departments tapped fresh markets represented by payroll services and merchandise markets to expand customer scale, improve customer portfolio and pave the way for the solid growth of savings deposits. New outlets were set up in key counties to provide more services in different regions and attract savings deposits from retail customers. Leveraging its domain expertise in wealth management, ICBC offered competitive products to retain customers so that their savings deposits were invested in different ICBC wealth management products. At the end of 2011, ICBC’s balance in domestic savings deposits amounted to RMB 5,843.859 billion, up RMB 600.202 billion or 11.4% from the end of the previous year. Out of which, current savings deposits increased by 13.1%, and time savings deposits increased by 10.2%.

Personal Loan
ICBC provided consumer loans and business loans for personal customers to meet their reasonable needs, driving the fast growth and bolstering personal loan portfolio. More personal loans and innovative services were provided to emerging consumer markets such as cultural, education and tourism. New types of loans and services offered more choices for personal customers, such as mortgage (pledge) loans secured by assets in other cities, petty credit loan, engineering/machinery loan, small agribusiness loan. More services were offered in personal business loan, "Card-Based Loan Express", "Online Revolving Loans", and "Deposit-Based Loan Express". Different lending policies were offered for home buyers in order to ensure the stable growth of personal housing loans. At the end of 2011, domestic personal loans amounted to RMB 1,991.271 billion, rising RMB 358.079 billion or 21.9% from the end of the previous year, of which, personal consumer loans increased by RMB 105.803 billion or 39.5%, personal business loans increased by RMB 79.568 billion or 43.3%.

Personal Wealth Management
ICBC offered new types of wealth management services oriented to customers and captured the largest market share. Competitive, different products were promoted to attract three types of customers - affluent customers in the cities, customers in emerging markets and customers in counties. To enhance the services to customers, ICBC offered exclusive wealth management products and different subscription options. A broad spectrum of funds was available online for customers to subscribe or buy at a discount. ICBC led the peers in selling RMB 422.3 billion worth of open-ended funds. More insurance products were available and innovative selling was adopted. ICBC remained first-place in the ranking after selling RMB 73.5 billion worth of personal insurance products and RMB 80.9 billion worth of treasury bonds in the year. In 2011, sales of personal wealth management products in the country totaled RMB 4,135.2 billion, representing an increase of 74.2% from a year earlier, of which sales of personal banking wealth management products surged 91.6% to RMB 3,558.5 billion. Aggressive marketing effort has been spent to tap into emerging markets and widen the base of affluent customers. ICBC brought into play its technological advances in chip cards to roll out Elite Club Account chip cards, which offered extra security and convenience for cardholders. In a bid to improve services to ICBC wise gold customers, ICBC launched ICBC messaging service exclusively for wealthy customers and ICBC wealth advisory business. A team of experienced staff was in place to serve the ICBC wise gold customers. ICBC had 17,199 Associated Financial Planners (AFP) and 3,285 Certified Financial Planners (CFP), the highest number of AFP and CFP among the banks in China. At the end of 2011, ICBC had 15.03 million Elite Club Account customers, up 53.2% over end of previous year, while wise gold customers rose 50.8% to 3.83 million.

Private Banking
ICBC provided private banking services to high-net-worth customers with RMB 8 million (or above) of personal financial assets, covering financial management, asset management, advisory, private wealth accumulation and cross-border finance. In 2011, on top of the 10 private banking divisions, ICBC set up new private banking centers in Hubei, Ningbo to build a service network covering all affluent customers in China. Meanwhile, ICBC set up Private Banking Center (Hong Kong), a global asset allocation service platform. The Bank consolidated the best resources and designed innovative financial asset services to enrich the offering of exclusive private banking products. ICBC financial services to private banking customers were combinations of personal banking and corporate banking, investment and financing, domestic and overseas. Euromoney, Finance Asia named ICBC as the "Best Private Bank in China". By year-end 2011, the Bank secured over 22,000 private banking customers and managed assets worth RMB 434.5 billion.

Bank Card Business
In bank card business, ICBC stepped up the effort in market expansion, product innovation and service upgrade in the year and further consolidated its leading position in the banking industry. At the end of 2011, ICBC has issued 410 million bank cards, an increase of 57.86 million cards over end of previous year. Cardholder expenditure volume in the year rose 43.0% from a year earlier to RMB 3,203.4 billion. Income from bank card business amounted to RMB 17.268 billion, representing an increase of 26.2%.

In credit card business, ICBC attracted famous corporate clients to use ICBC credit cards in a bid to drive card issuance volume, service quality and fast growth of cardholder expenditure amount. On another front, ICBC attracted merchants to accept ICBC credit cards, large merchants such as hotels, department stores, supermarkets and home furniture marts, small merchants such as convenient chain stores, fast food restaurants. When buying car, home appliance, home furniture, ICBC credit card holders were allowed to pay by installment. ICBC launched "Easy Loan Credit Card", the first credit card in China for Chinese residents to pay retail spends by installment. Other new services for affluent customers included SMS customer services, VIP Customer Service Center and exclusive services for corporate group clients.   ICBC was recognized as the "Trusted Brand — Credit Card Issuing Bank: Gold (China) " by Reader's Digest of the United States for the second year running, and "Platinum Card Excellence Award" from VISA. At the end of 2011, 70.65 million credit cards were issued, up 6.99 million from the end of the previous year. 2011's cardholder expenditure volume stood at RMB 976.5 billion, rising 53.0% from previous year. The balance of domestic credit card overdraft went up RMB 86.239 billion, or 94.2% to RMB 177.8 billion. ICBC maintained the leading edge in terms of card issuance volume, cardholder expenditure volume and overdraft volume.

In debit card business, ICBC cooperated with different industries to issue and promote co-branded debit cards to new customers and compete in new markets. Though aggressive marketing, ICBC edged further ahead the peers in the launch of chip cards - Elite Club Card, ICBC MoneyLink Card, ICBC Elite Club Account Card. ICBC rolled out new services such as replacing debit card without changing card No., applying card online, subscription service on personalized transaction functions, for customers to apply and use debit cards. Promotions were launched to encourage cardholders to use debit cards for spending and increase expenditure volume. By year-end 2011, 340 million debit cards were issued, representing an increase of 50.87 million from the end of the previous year. Annual cardholder expenditure volume has soared 39.1% to RMB 2,226.9 billion.

[Treasury Business]
During a particularly difficult year of 2011, ICBC aimed to improve profitability. The Bank continued to focus on product innovation and adapt new policies to invest and conduct trading activities for the bank's own account and capital with the ultimate goal of maximizing ICBC's liquidity and mitigating risks.

Money Market Transaction
In 2011, interest rates in money market surged then fell, but higher than 2010's. ICBC took steps to maximize interest earnings on cash balances backed by a thorough and expert understanding of money market and a solid customer base. In times of tight liquidity, ICBC made better prediction on the future direction of the market and aimed to ensure liquidity to support asset business through optimal policies and reasonable maturities. By using market timing strategy, decisions were made to sell when the opportunities arise to increase yield from cash resources. In the year, ICBC topped the league table for the volume of borrowing/lending deals totaling RMB 16.63 trillion and lending RMB 8.2 trillion. The availability of FX capital remained tight in China. ICBC strengthened its management on FX position with reasonable maturities for FX payments. The Bank closely monitored the market and chose the right counterparties to avert credit risk. In 2011, ICBC traded foreign currencies to a tune of USD 409.2 billion in money market.

Bond Trading
In 2011, bond price in RMB bond market rose despite fluctuations. In trading bond, ICBC used duration-based and market timing strategies. Flexible adjustments were made on the positions in line with the market interest rates to control the duration of bond portfolio. To increase earnings, ICBC bought at low prices and sold at high prices, or bought and sold at the same time during the day. Being a leading market maker responsible for facilitating the trading process, ICBC set up the right prices and controlled the risk. ICBC offered more trading channels and types of bonds for traders and successfully entered the Stock Exchange bond market. In 2011, ICBC has traded RMB bonds and OTC book-entry bonds amounting to RMB 569.2 billion and RMB 1.5 billion. For FX transactions, treasury yields of major developed economies fell to ominous all-time low. ICBC set reasonable maturity schedules to control risk. ICBC traded US treasury bonds on a short-term basis totaling USD 5.4 billion.

Bond Investment
In 2011, the downward-sloping RMB bond yield curve indicated drastic changes in different periods. Using the yield curve, ICBC focused on reducing interest rate risk to achieve balanced portfolio. ICBC set up a schedule to buy bonds when the yield curve sloped upward. By looking at the duration of new bonds and dynamically controlling the portfolio duration, ICBC bought short-term bonds and floating rate-bonds during the first half of 2011 when interest rate scaled up. In the next half of 2011 when market interest rates edged up to the peak, the Bank bought mid-to-long term bonds. ICBC also focused to invest in policy financial bonds, regional government bonds issued by Ministry of Finance and premium short-term bonds to increase return. For FX transactions, escalating eurozone woes and volatile global financial market dominated the scene. ICBC captured the right market opportunity to "buy low and sell high" to increase yield. The strategy was to control the duration of investment portfolio and choose the right timing to sell risky FX bonds. Another focus was to invest in different currencies to reduce risk.

Brokerage Services
The opening of ICBC London Trading Center, together with Beijing Trading Center and New York Trading Center, and the 24-hour global trading management system enabled ICBC to buy/sell precious metals (via account) and foreign exchange on behalf of customers. Given the appreciation of RMB, ICBC promoted currency exchange settlement (in all major currencies) service and FX hedging derivatives for customers to hedge exchange rate risk. ICBC settled and traded foreign currencies on behalf of customers amounting to USD 565.9 billion in the year, up 55.5% over 2010's. Structured deposit products (in home and foreign currency), exchange rate/interest rate hedging risk management products were some of the new products added to the product offering to attract more customers. In 2011, ICBC traded structured derivatives on behalf of customers totaling USD 106.7 billion, representing an increase of 49.2%.

[Distribution Channel]
Domestic Branch Network
In 2011, ICBC started the branch reconfiguration project to upgrade all outlets. More outlets were set up in new city zones and counties with rapid development. Nearly 60% new outlets were in the counties, including 39 new sub-branches in counties where ICBC had no presence. To improve outlet services, outlets which were small, with few staff or low efficiency have been reconverted. 634 low-efficiency outlets have been upgraded. Outlets and self-service banking were reconfigured at the same time. 1,292 new off-premise self-service banking kiosks enhanced the self-service channel of ICBC.

At the end of 2011, ICBC had 16,648 branches in China, including Head Office, 31 tier-1 branches, 5 direct branches, 26 banking departments in tier-1 branches, 396 tier-2 branches, 3,076 tier-1 sub-branches, 13,075 low-level outlets, 34 direct branches and subsidiaries under Head Office and 4 affiliated companies.

Electronic Banking
In Electronic Banking, ICBC pursued the bank-wide development strategy to expand into new business segments by employing new technologies and studying new requirements. The focus was to set up an integrated platform encompassing transaction, marketing and services under one roof. Through product innovation, in 2011 ICBC introduced 50+ new products and upgraded nearly 200 existing product functions to improve the level of customer services and reinforce the leading position in the market. Large marketing campaigns were launched to promote "ICBC Mobile Banking" sub-brand. The objective was to beef up the visibility of ICBC Electronic Banking and drive the fast growth of online users and transaction volume. In 2011, the transaction volume of E-banking increased by 25.5% when compared to the previous year. Electronic Banking transactions accounted for 70.1% of all ICBC transactions, a jump of 11 percentage points from the previous year. ICBC Electronic Banking further demonstrated its role as one major transaction channel.

In Internet Banking, ICBC continued focusing on innovation and launch of new products, namely, iPad Personal Internet Banking, Personalization of Personal Internet Banking Feature Version, Corporate Internet Banking Industry Version and ICBC e-Payment. Other upgrades included, VIP Room, ICBC Messenging in Corporate Internet Banking, new version of Internet Banking Assistant, USB-Shield driver and ActiveX. ICBC provided online ticketing services for Ministry of Railways so that passengers can buy and pay train tickets via ICBC Internet Banking.

At the end of 2011 in Corporate Internet Banking and Personal Internet Banking, ICBC has registered an increase of online users of 18.8% and 22.8% over end of previous year respectively, Annual transaction turnover rose 26.6% and 25.6% respectively. ICBC has been named the "Best Internet Banking in China" by Asian Banker.

In Telephone Banking, new functions such as automatic voice recognition enabled easier steps, faster processing and higher satisfaction rate. Call desk services have been enhanced by a mechanism to address and feedback the hot questions from customers. SMS customer services, online customer services were new service channels for customers to ask for further information. With the opening of E-Banking Center (Guangzhou), together with E-Banking Center (Beijing), E-Banking Center (Shijiazhuang), E-Banking Center (Hefei) ICBC had four E-banking centers to serve all online users.

In Mobile Banking, ICBC accelerated innovation in mobile financial products. "ICBC Mobile Banking" sub-brand represented a wide range of ICBC mobile financial products: Mobile Banking (WAP), iPhone Banking, Android Mobile Banking, SMS Banking, iPad Banking. Customers will benefit from the convenience of being able to check their accounts, transfer/remit money, make bill payments, buy/sell precious metals, wealth management products or exchange currency. At the end of 2011, growth of mobile banking users was 63.3% against end of previous year. ICBC mobile banking transactions surged 261% in the year.

In self-service banking, more self-service devices were installed, especially in merchandize marts, key counties. Transaction flows and service functions have been upgraded. More promotions were launched to encourage customers to use self-service devices instead of counter services. At the end of 2011, ICBC owned 13,772 self-service banking outlets, representing an increase of 20.7% over end of previous year, and 59,140 ATMs, up 21.6%. Turnover of ATM transactions amounted to RMB 4,863.4 billion, up 44.1%.

[Year of Process Restructuring, Service Improvement]
In 2011, ICBC embarked the "Year of Process Restructuring, Service Improvement", a program to improve all services and achieve good progress. Outlet operation and services were much improved after process restructuring and upgrade across different departments, organizations, platforms and business segments. As a result, time take to process each transaction was 20% faster on average. New processes have been designed for centralized processing of 135 products under 37 categories. All branches implemented centralized business processing for "outlets to process application, centralized processing at the center". 21 main processes have been upgraded to identify customers accurately and provide services to different classes of customers. 340 salient issues have been addressed to improve customer experience and teller experience. With an aim to improve service style, quality and solve salient problems, various measures have been taken to encourage outlets "Excel in the Performance" to serve the customers. ICBC drew up modern commercial banking service practices and a framework to streamline service delivery. Instruction and guidance were provided to assist outlets to improve their services. I7 ICBC outlets have been included in the China Banking Association's "Top 100 Best Performing Banks of Premier Services 2011". Among all banks in China, ICBC had the highest number of outlets included in the ranking.

New outlets, relocation, renovation, upgrade were different ways to reconfigure outlet network and improve services under a system to provide different types of services for different classes of customers in different areas. In answering the customer need for greater accessibility and convenience, ICBC installed and maintained self-service devices for customers to use E-banking. ICBC followed the national policy to support micro and small enterprises ("MSEs") and enhanced the effectiveness in the provision of financial services to MSEs. ICBC underscored its role to support the economic and social development. By maintaining a policy of innovation to deliver the best services, ICBC became the bank in China offering the widest range of products. To protect the rights and interests of consumers, "A Ten Thousand Mile Walk to Financial Knowledge" was an event to educate the public on financial services and how to spend wisely and save intelligently.

[Globalization, Integrated Operation]
Implementation of Globalization and Integrated Operation Strategy
In 2011, ICBC steadfastly moved forward its globalization and integration of businesses to build a commercial banking franchise across different markets. This brought synergistic benefits and continuous profitability growth. The RMB internationalization and "go global" Chinese enterprises offered a once-in-a-lifetime opportunity. By dint of integrated operation between domestic and overseas branches, solid financial position, technological leadership and full licenses, ICBC adapted the principle of "One Branch, One Policy" to local situations, and helped overseas branches become mainstream banks, improve management and grow in a sustainable and profitable way. ICBC escalated its international presence through new branches and strategic acquisitions, physical outlets and online service channels. A global service network has been in place with growing geographic coverage and tier-2 outlets under overseas branches. The Bank extended its product lines to overseas and set up a global IT platform with major products in domestic branches available to overseas customers. The priority was to widen business scope, expand customer base and push ahead cross-border RMB business. ICBC set up a vertical, independent risk management framework in a bid to strengthen multinational business and control cross-border risks. In human resources management, ICBC "get the right people, in the right job positions, at the right time". A structured program was in place to train up and develop a pool of international staff. The Bank built corporate culture and kept evolving ICBC culture.

Global Presence
At the end of 2011, total assets of ICBC overseas subsidiaries (overseas branches, overseas affiliated companies, investments in Standard Bank) were USD 124.729 billion, representing an increase of USD 49.002 billion, or 64.7%, over end of previous year, accounting for 5.1% of total assets of the Group and up 1.4 percentage points. Loans and deposits rose USD 21.088 billion (47.5%) and USD 13.376 billion (37.4%) respectively, to USD 65.525 billion and USD 49.134 billion. Profit before tax surged 15.9% from a year earlier to reach USD 1.373 billion.

Overseas Branches
ICBC boost its regional offices globally through new branches and acquisition. Under ICBC Europe were Paris Branch, Brussels Branch, Amsterdam Branch, Milan Branch and Madrid Branch. New branches were: in Pakistan (Karachi Branch, Islamabad Branch), Mumbai Branch, Phnom Penh Branch, Vientiane Branch, Rangoon Representative Office and Africa Representative Office. New branches pending for approval from foreign regulatory authorities were Brazil Branch, Peru Branch, Riyadh Branch, Kuwait Branch and Warsaw Branch. ICBC signed an agreement to acquire Bank of East Asia (U.S.A.) and memorandum of understanding on the sales and purchase of Standard Bank Argentina. The two acquisitions have been approved by China Banking Regulatory Commission and pending for approval from US and Argentine regulatory authorities. ICBC concluded the voluntary tender offer for all of Thailand ACL Bank shares and exercised the right to buy ICBC Canada's options. The expansion of tier-2 branch network (Canada, Germany, Macau, Indonesia) was moving at a faster tempo.

At the end of 2011, ICBC had a global network comprising 239 overseas subsidiaries in 33 countries/territories, and 1,553 correspondent banks in 136 countries/territories. With diversified channels, well-defined hierarchy, reasonable positioning and efficient operation, a global financial service network spreading over five continents of Asia, Africa, Europe, America and Australia and major international financial centers has been basically in place.

Risk Management
ICBC's approach to risk was to create a global risk management system to strike a balance between business development and control of risk. In 2011, ICBC ramped up its credit risk consolidated management, authorization control, credit line approval process for overseas branches and set up one credit authorization system that spanned the entire ICBC Group. Instructions and assistance were provided on overseas loan approval under a unified internal rating system for all ICBC branches at home and abroad. Market risk consolidated management, reporting of market risk in the Group and limit management have been completed. A new Global Market Risk Management ("GMRM") with the first version has been installed in overseas branches. Through capital injection or self-funding, ICBC improved the capital strength of overseas branches and expanded funding sources. All overseas branches were now responsible for operational risk monitoring, reporting of material events and data collection on the loss arising from operational risk incidents. A system was in place to manage country risks. Group-wise guidelines have been set on the management of concentration risk. ICBC set up a system to control M&A risk and approve acquisition/exit based on a corporate governance framework of "Three Committees, One Management Level" and capital management.

Information Technology
ICBC has installed FOVA in 34 overseas branches with enhancement in system architecture and functions with an aim to enrich product offering and upgrade service delivery. FOVA, managed by different levels of management and installed in different regions, is a business platform designed for overseas branches to provide standard services and develop innovative products and services for local customers. Using FOVA, ICBC achieved major inroads in setting up a global IT platform encompassing Global Credit Management System ("GCMS"), global cash management system, overseas trade processing system, global market business management platform, anti-money laundering system for overseas and domestic branches, overseas reporting system, overseas credit card and electronic banking.

Human Resources
To strengthen the management on affiliated companies, ICBC set up the Board of Directors' Executive Office and Board of Supervisors' Executive Office for affiliated companies and sent directors and supervisors to head the affiliated companies. A system has been set up to manage the payroll in overseas branches and affiliated companies. More options were offered to internal staff to apply for overseas posts. More training programs were organized to develop a pool of international staff with theory and practices running in parallel. Every year, ICBC sends 200 staff for 1-year study/training in international respected schools, financial institutions, and multinational corporations. ICBC organized the first "Honoring Global Employees" program and training session in China for global staff in order to let domestic and overseas staff to share opinions and understand each other. The effort was to train up domestic and overseas staff to support the growth of ICBC.

[IT and Product Innovation]
Under the strategy of "Technology Leads to Future", ICBC adhered to independent innovation to build new systems, new platforms. More innovative products have been launched to bring value-loaded benefits. Significant improvement in IT management and innovation management provided strong support for ICBC to improve services, step up reform, escalate global presence and strengthen risk management. In 2011, ICBC won the Asian Banker Award for "Best Data Center Initiative in China".

Systems and Applications
ICBC maintained its technology leadership among all banks in China with the launch of fourth generation application system (NOVA+). A host of products and services have been rolled out covering customer services, global market, bank card, electronic banking and risk management. Today, one system was used to assess and promote services to personal customers and corporate clients. To better serve the customers, ICBC was the first bank in the country to launch SMS customer services, Telephone Banking + customer managers. In risk management, ICBC developed own applications - internal model approach and risk quantification, internal capital adequacy assessment and risk weighted asset quantification. Enhancement and upgrade on FOVA have been continued. FOVA was online in 9 overseas branches including ICBC Canada, 34 overseas branches have installed FOVA. Global market management system, independently developed by ICBC, has been installed in New York Branch trading center, ICBC London trading center for 24-hour trading, exposure management and price quotes monitoring. All staffs were assessed against MOVA, a performance evaluation management system, as a component of overall performance and resource allocation. ICBC received 48 new state patents in the year 2011, adding the total to 163.

Continuous Innovation on Products and Services
ICBC marshaled the resources on the reform and product innovation and launched an array of competitive key products: warehouse receipt financing in bulk commodity market, Easy Finance Link, wealth management linked to interest rate, investment in precious metal in fixed amounts at regular intervals and two-way trading, Easy Loan Credit Card, American Express Platinum Card, RMB Foreign Exchange Options, iPhone Mobile Banking, iPad Internet Banking, ICBC Merchant Combination Set, Bank-Bank Partnership for delivery of service for customers to buy/sell physical precious metals and foreign currency and CUP dual-currency cards for overseas customers. ICBC continued to restructure business process and shape new products, new services to address and lead the needs of customers. The Bank geared up its services and competitiveness by taking measures to achieve balanced portfolio in lending, liabilities, income and provide greater convenience across its banking channels for customers in different regions. ICBC had 3,243 products by end of 2011, representing a jump of 15.2%.

Continuous Improvement in IT Management and Innovation Management
In 2011, ICBC saw improvement in production management and service delivery backed by the stable running of all IT systems. The Bank has set up a disaster back-up system and necessary infrastructure to strengthen the framework for information security. All ICBC IT systems were running smoothly to cope with the rising business volume. Expansion for Data Center (Shanghai) Park has been completed for the implementation of a host core system running in two data centers. ICBC was the first bank in China to build a system that was able to switch and take-over production operation uninterrupted. Computer rooms have been completed in 33 tier-1 branches for disaster backup. Personal Internet Banking was deployed across different centers. High availability and remote inter-city disaster backup system was online across all branches and different centers. Business continuity for asset custody, global market and electronic banking that required centralized processing was ensured through drill exercise. IT plan has been drawn up to pave the way for turning ICBC into a world-class IT Bank. ICBC set forth management strategies and monitoring indices to manage IT risks. In addition, the Bank increased the scope of IT management through revision and performance evaluation. Measures were taken to streamline the management flow. Improved management has provided an aggregate view of the overall IT in ICBC.

ICBC has carried out in-depth market study about customer needs to design innovative products targeted to the right customers. The Bank thought ahead to build a pipeline of new products by embracing new technologies and staying innovative. Besides enforcing standards in product design, customers were invited to experience new products to improve R&D quality. Products were restructured in a systematic manner. To improve product innovation efficiency and service delivery, new products were launched faster and more tailored functions were incorporated through different combinations of product factors. In product management, products were measured in terms of efficiency and competitiveness. Various measures were adopted to promote new products that customers find consistently useful and create value through innovation. ICBC organized events to forge industry-academic-research partnership and encourage all staff to come out with new ideas in order to push ahead product innovation.

[Human Resources Management]
With the corporate philosophy of focusing on the primary elements of people, service synergy, and scientific management, ICBC ensured development opportunities for all employees. The Bank forged ahead the reform to recruit and train up senior staff and increase commercial competitiveness. New systems were incorporated to set up top management team, nurture staff with talent into future business leaders and revise salary and benefit scheme. The Bank has made one step further to build a unique ICBC human resources management that is leading in China, well-known internationally. ICBC reinforced the Bank's culture and beefed up the influence.

Human Resources Management and Employee Incentive Program
Under new policies, new rules, ICBC convened staff meeting and built a workplace for "all staff to work and grow with the Bank" and connected deeply with the passion of each employee. Plans for building a team of top staff in the next decade and reform on senior staff management in the next five years have been included as part of the Bank's strategic growth plan. The priority was to build up a team of professional staff. Senior managers and experienced managers will be recruited on a routine basis. Staff were encouraged to stay focused on the job. A total of 141,000 employees have been transferred from other departments to customer service positions, which was an option for front-line staff to advance their careers. The Bank had a couple of initiatives to train up international staff to cope with the fast growth in overseas branches. In payroll government, ICBC designed a framework of controls for the end to end payroll process to keep pace with the group-wise growth, globalization, integrated operation and regulatory rules in China and overseas. New mechanisms in place included payroll management for overseas branches and affiliated companies, promotion and career advancement for staff. All ICBC employees were compensated by job value, competence and performance.

Human Resources Management and Development
With a focus on staff resources, ICBC has established a unique training program in line with the Bank's growth strategy, business development and job competence of staff. Innovative training methods have been used to improve training quality. In providing training to staff, the key was training to management staff, professional staff and business staff. Training programs were mainly for three types of staff: international staff, certification training and mid-aged staff. In 2011, ICBC has organized 38,000 training sessions for 2.23 million employees (in terms of person-times). On average, each employee received around 8.2 days of training. Different libraries (fundamental, trainers, teaching material, case studies, past examination papers, file archive) have been created for training programs and product supply. Training was available for all staff. Internet University and examination system were examples of ICBC intensive training. ICBC set up simulated online banking to train up the staff.

Reform in Head Office and Subsidiaries
To establish robust corporate governance framework ICBC set up the Board of Directors' Executive Office and Board of Supervisors' Executive Office for affiliated companies in Head Office and sent directors and supervisors to head the affiliated companies. In moving forward profit center reform, corporate banking department II (banking department) and pension business department were included in the reform. Number of profit centers increased to 6. ICBC posted a pre-tax profit of RMB 47.541 billion in 2011. ICBC stepped up the reform on banking departments in provincial/regional branches, county sub-branches. More resources were provided whenever necessary to drive their growth. Reform has also been taken place in 22 tier-1 (direct) branches for vertical centralized management of credit authorization. The Bank set up Asia Pacific Cash Management Center, Private Banking Center (Hong Kong) to push ahead global cash management, RMB business and private banking outside China. The opening of Electronic Banking Center (Guangzhou) enabled ICBC to better serve and provide financial services to overseas customers.

Corporate Culture Management
Taking ICBC growth in the center stage, the Bank instilled corporate culture in and out of all branches and assisted employees to establish correct cultural orientation and values. Significant benefits have been witnessed in the increasing influence of the Bank's culture. Topical meetings, thematic education activities, Corporate Culture Stories, A Guide to Corporate Culture were ways to let staffs understand ICBC culture and work for ICBC. Different dimensions were incorporated to better align between ICBC corporate culture and management. ICBC set up a platform for staffs to share and exchange ideas. Encouragement and care were given whenever necessary to help them. The (Second) "Best Touching ICBC Staff" has been organized to honor the staff. A new e-learning column allowed ICBC employees to express their feelings working for ICBC by poems, short stories or cartoons. ICBC encouraged all to learn from the best staff, work very hard to be the leader, let the involvement brought by the "Touching Staff" put into practical actions. The Bank pushed a corporate culture of commitment to best performance and created a harmonious workplace for reform and growth. Through media outreach, ICBC promoted its corporate culture and beefed up its brand. In 2011, ICBC has been included in the "Top Ten Model Organizations in 30-year Practices of Corporate Culture" by China Corporate Culture Institute.

[Social Responsibility]
As a good corporate citizen "in multiple roles", ICBC sponsored philanthropic causes, employee-centric, disseminated creditworthy and paid attention to the customer experience, under the four values of ICBC: "Charity Bank", "Harmonious Bank", "Creditworthy Bank" and "Brand Builder". Socially ICBC is committed to the purpose "rooted in society, rewarding society and serving society". The principle is "overall planning, address sudden events, unified allocation, parallel efforts, innovation". At the heart of the philosophy is "Charity", "People's Livelihood". ICBC actively participated in social charity initiatives in various ways - disaster relief work and poverty alleviation, cultural and education, social services. As of end of the reporting period, besides personal donations of ICBC staffs, the Bank has put in RMB 39.2 million for charity initiatives.

In 2011, a 5.8-magnitude earthquake hit Dehongzhou's Yingjiang County of Yunnan Province, and a disaster struck large areas of Guizhou. ICBC immediately took action. Timely donations in kind and money were sent to disastrous areas to assist the victims. A "green pass" was opened in the first instance to provide fast, convenient, all-inclusive financial services for the relief work. ICBC used new approaches to support poverty alleviation work. That included RMB 7.48 million and HKD 1.3 million from the Bank and nearly RMB 50 million from all sources. The money has been used to sponsor different programs for helping the poor in Sichuan Bazhong's Nanjiang County, Tongjiang County and Wanyuan City. On a long-term basis, ICBC offers assistance to poor cataract patients and gives the gift of sight to the patients and their families. ICBC donated RMB 2.7 million to Chinese Foundation for Lifeline Express to set up the first Eye Microsurgery Training Center in Inner Mongolia. "Baby Growth Happy June 1" was a program to give care and concern to the children of migrant workers. Parent-child education seminars, assistance, donations, homework help, family companionship were voluntary services to promote charity awareness among the public to care for the children of migrant workers.

[Brand Honors]
ICBC's excellence in business won the recognition from home and abroad. With a brand value increasing every year, ICBC establishes its brand name in the international scene. In 2011, ICBC has received 191 domestic and international awards. 50 awards from overseas media/publications included "Best Bank in China", "Best Retail Bank in China" from The Banker (UK), Global Finance (US), The Assets (HK), Asiamoney, Asian Banker (Singapore).  94 awards from domestic media included "Best Commercial Bank of Asia", "Bank of the Year", "People's Award for Social Responsibility", and "Most Welcomed Bank of the Year" from 21st Century Business Herald, China Business News, www.people.com.cn. Moreover, 47 awards were from domestic organizations (Ministry of Finance, China Banking Regulatory Commission, China Banking Association and others).

International companies engaged in brand study gave high remarks to ICBC. In the rankings of brand value by Millward Brown Optimor, Brand Finance and World Brand Lab, ICBC remained the world's most valuable brand among the financial firms with an excellent brand value.


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