Industrial and Commercial Bank of China Limited (“ICBC” or the “Bank”, stock codes: SH: 601398, HK: 1398) announced its 2017 interim results today. The interim report shows that the operating performance of ICBC during the first half of 2017 was satisfactory in three aspects: better than planned, better than the same period last year, and better than expected.

According to the International Financial Reporting Standards (“IFRS”), ICBC posted a pre-provision profit of RMB 257.8 billion in the first half of 2017, up by 7.7% over the same period last year, with an increase of 7.5 percentage points in the growth rate year on year. After making a provision of RMB 61 billion, the Bank recorded a net profit of RMB 153.7 billion, up by 2% over the same period last year. Asset quality showed a steadily improving trend, with a comprehensive decline in 3 key indicators, namely the nonperforming loan ratio, overdue loan ratio and price scissors. The nonperforming loan ratio decreased by 0.05 percentage points to 1.57% over the beginning of the year, and the provision coverage ratio increased by 9.12 percentage points over the beginning of the year, implying the continual improvement of ICBC’s risk offset capability. The continual rise in the stability of profit growth was reflected by a better NIM, which was 2.16%. The market competitiveness of ICBC further improved, proven by an increase of approximately RMB 1.2 trillion or 6.7% in customer deposits over the beginning of the year, by which ICBC became the only financial institution with an increment over one trillion. In particular, the average daily balance of domestic current deposits accounted for 51.28%. Contribution from the mega retail business line increased remarkably, better playing its roles as a “ballast” and “stabilizer”. Net profit generated by overseas and controlling institutions increased by 21.4% over the same period last year, which was a higher growth rate compared with the Group’s average and domestic average and implied a rise to 7.9% in its proportion of the Group’s net profit.

In the first half of 2017, ICBC achieved good operating performance in a complex and ever-changing business environment, thanks to its continuous exploration and grasp of the operating patterns of commercial banks, dedicated pursuit and careful forging of professional capacities, as well as perseverance in developing the main business whiling holding firmly to the beginner’s mind. The specific measures can be classified into three aspects:

First, ICBC actively improved its financing management and made new progress in serving the real economy.
In the first half of 2017, ICBC continued to treat serving the real economy as its mission and duty. It has endeavored to further consolidate its main business and refine its professions. By comprehensively enhancing the efficiency and standard of serving the real economy, the Bank has facilitated the improvement of its business operation. 

At the same time, ICBC kept perfecting the parallel management of existing loans and new loans to cater to the financial needs of the real economy. In the first half of the year, the Bank granted actual new loans of RMB 1.66 trillion, including new domestic loans of RMB 624.8 billion and re-lending of RMB1.04 trillion recovered loans. Non-credit financing and local debt investment increased by nearly RMB 450 billion, becoming a multi-channel and low-cost source of funding to support the real economy.

The Bank continued to step up its support for major strategies of the PRC government. It took the initiative to align itself with the “four regions”, “three support belts” and the construction of Xiong ’an New Area by issuing cumulative RMB 670.7 billion worth of project loans, up by RMB183.3 billion from the same period last year. The “Belt and Road” inter-bank normalization cooperation and exchange mechanism initiated by ICBC, as the sole commercial result, was included in the official achievement list of the Belt and Road Forum for International Cooperation. In the first half of 2017, the Bank supported a total of 71 “going global” projects with an aggregate project loans of USD 15.3 billion.

ICBC proactively served the fundamental task of China’s supply-side structural reform. Following the direction of “de-capacity, destocking and deleveraging” and lowering the occupancy rate of financial resources by “low efficiency marshland”, the Bank realized a framework agreement contract amount of market-based debt-to-equity swap of approximately RMB 200 billion, playing a positive role in helping enterprises de-leverage and get through difficult times. Moreover, by prioritizing the credit demand of first-time homebuyers and that for houses for improving housing conditions, the proportion of new individual housing loans in major cities decreased in a steady manner.

In addition, ICBC paid more attention to supporting the vulnerabilities of the real economy by establishing the Inclusive Finance Business Division and promoted financial services for fields such as small and micro enterprises, “three rurals”, “mass entrepreneurship and innovation” and targeted poverty alleviation. In the light of the “franchise, decentralization, enhancing efficiency and strict management” ideas, the Bank strengthened the construction of the small and micro enterprise center. As a result, the small and micro enterprise loans increased by RMB156.8 billion or 8% over the same period last year, maintaining the Bank’s leading position as China’s largest lending bank for small and micro enterprises. The balance of financial targeted poverty alleviation loans was RMB 107.5 billion, up by 16% over the beginning of 2017.

Second, ICBC continued to strengthen risk prevention and control and improve asset quality.

In the first half of 2017, ICBC considered risk management as the “lifeline” of business operation and paid special attention to the two “external and internal balance sheets”. With the responsibility and expertise of a large bank, ICBC has held fast to the line of defense and bottom line of risk management.

The Bank actively perfected the new mechanism of credit risk prevention and control under the new normal, further promoted the “two projects” of asset quality management and credit management, and kept the “three gates”, namely credit reviews for new loans, control of existing loans and non-performing loans disposal. By controlling new loans, preventing bad loans and quickly disposing nonperforming loans, the Bank’s asset quality showed steady growth with comprehensive improvements in key indicators. In particular, the nonperforming loan ratio was 1.57%, down by 0.05 percentage points compared with the beginning of the year. The overdue loan ratio and the “price scissors”decreased by 0.42 percentage points and 32% over the beginning of the year, respectively, with a decrease of RMB 11.5 billion in new nonperforming loans over the same period last year.

The Bank also strengthened the management of new risks such as cross-border risks, transboundary risks and cross-market risks, and intensified risk prevention and control. In accordance with the “simple, transparent and controllable” principles, ICBC standardized and developed asset management, inter-bank business and note business,  gradually lifted the proportion of net worth financial products, maintained the inter-bank debt to assets ratio and financial leverage ratios within a reasonable range to prevent idle capitals and keep capital from moving from the real economy to the fictitious economy. At the same time, by adhering to a prudent and stable operating strategy, the Bank carried out management and control on liquidity risk, exchange rate risk and interest rate risk. Besides, the Bank expanded the application of big data technologies in the field of risk management, which allowed it to manage financial accounts, and control risks such as illegal fund-raising and financial frauds. In the first half of 2017, the external fraud risk information system of ICBC blocked more than 450,000 risk businesses of various types involving RMB 2.3 billion capitals, effectively protected the interests of its customers.

Risks of key areas of market concern such as the real estate industry and industries facing overcapacity were under control. The Bank adopted the “list system” management for development loans, resulting in a decrease of 0.1 percentage points  the nonperforming loan ratio over the beginning of the year. The nonperforming ratio of individual housing loans was kept at the lower level of 0.31%, down by 0.06 percentage points over the beginning of the year. Based on the principles of “sustainable business and controllable risks”, the Bank continued to offer support for steel and coal enterprises with advanced technologies and equipment, competitive products and markets. At the same time, the Bank resolutely ceased to grant loans for “zombie enterprises”, enterprises with backward production capacity and financially weak enterprises. The nonperforming loan ratio of five industries facing overcapacity such as steel decreased by 0.21 percentage points over the beginning of the year. 

Third, ICBC deepened transformation and innovation to further enhance business vitality and development momentum.

In the first half of 2017, adhering to customer demand orientation, ICBC promoted operational transformation and innovation and created values with financial services. As a result, the development of new driving forces was promoted and traditional driving forces were revived.

Thanks to ICBC’s efforts in further implementing the mega retail, mega asset management and mega investment bank strategies, the Bank’s new saving deposits in the first half of 2017 ranked the first among its industrial peers. The net increase in the number of personal clients was 16.86 million, with an aggregate personal financial assets of RMB 12.67 trillion. The number of credit cards issued was nearly 130 million, and the aggregate credit amount was RMB 1.14 trillion. The scale of ICBC’s wealth management business reached RMB 2.7 trillion and entrusted assets exceeded RMB 14.5 trillion, both standing at the forefront in the industry. By accelerating the investment banking business and standardizing innovation, the Bank successfully became the first domestic bank to have an M&A loan balance of nearly RMB 200 billion.

The Bank’s internet finance business maintained fast growth. The number of users of ICBC Mobile reached 267 million, up 7.3%; that of ICBC Link reached 93.49 million, up 40.6%; and the trading volume of ICBC Mall reached RMB523.9 billion. The scale of internet finance reached RMB 740 billion, maintaining ICBC’s leading position as the largest internet finance bank in China. In order to build an intelligent banking services system, the Bank completed the strategic upgrade of e-ICBC3.0, actively promoted the internetization and intellectualization of traditional services, and transformed the ecosystem layout of innovative services into scenarized platforms.

The Bank has also taken a new step in internationalization and integration, and supported profit growth with diversified operation. As of 30 June 2017, the Bank has established 419 institutions in more than 42 countries and regions, of which 127 branches are located in countries and regions along the Belt and Road. Total assets of the Bank’s overseas institutions reached USD 340.5 billion, up by 11.1% over the end of last year. Profit before tax of these overseas institutions was USD 1.923 billion, up by 19.4% over the same period last year. Contribution from the Group’s subsidiaries, such as ICBC Credit Suisse, ICBC Leasing, ICBC-AXA and ICBC international, further improved, realizing a net profit of RMB 3.227 billion, up by 13.8% year-on-year.