Building a New retail Bank Through Reform and
Innovation
Mr. Chairman, Distinguished guests, ladies and Gentlemen
Good afternoon.
It’s my great honor to be here today participating the 21 st WSBI World
Congress. First of all, I would like to thank the WSBI for inviting me and
giving me a chance. My topic today is “Building a New Retail Bank through
Reform and Innovation”. In the past few years, Chinese economy has been
growing at a high speed. It technology has been widely applied in China and
the Chinese residents need for financial service is constantly increasing. The
Chinese banking industry is undergoing a reform, which now is in a critical
phase, and indicating a number of new features of future development.
Today I would like to share with you my thoughts on the trend of retail
banking industry and the experience of ICBC in this area.
First, Chinese banking industry is facing unprecedented
opportunities
The four major state-owned commercial banks consist the pillar of China’s
financial industry. The fast economic growth and wide application of IT
technology in recent years have created new opportunities for the Chinese
banks and therefore, the banks have demonstrated huge potential and bright
prospect. Since china adopted the reform and opening-up policy, the
economy has achieved high-speed growth for more than 20 years, and China
has become an engine of world economy, which, to some extent, helped to
change the global economic structure. From 1978 to 2005, China’s annual
real GDP growth tare was more than 9.6 percent and average annual foreign
trade growth rate was 24 percent. Meantime, average annual income for
Chinese urban residents increased from RMB 343 RMB to 9421.6 RMB,
showing an annual growth rate of 13.6 percent. Benefiting from the stable
economic growth and personal income increase, Chinese banks have
achieved continuous healthy development. From 1978 to 2005, the
outstanding savings deposits of Chinese residents increased from 21.6
billion RMB to 11.9 trillion RMB, growing by 27.6 percent annually. As of
end 2005, total assets held by Chinese financial institutions reached 37.47
trillion RMB, 142 times that of 1980, with an average annual growth rate of
22 percent. Looking to the future, we believe the Chinese banking industry
will have a bright prospect, due to the positive economic outlook and sound
financial reform policy. The banks themselves also demonstrate attractive
investment value.
At the same time, as personal wealth keeps growing, Chinese residents are
raising more and more demand for wealth management, consumer finance,
personal transaction and settlement services. These have provided
continuous impetus for business diversification of Chinese banking industry.
From 2001 to 2005 the outstanding consumer lean to Chinese residents has
increased from 699 billion RMB to 2.2 trillion RMB, showing an average
annual growth rate of 33.19 percent. The proportion of credit card spending
to the general consumer spending has increased from 2.97 percent to 14.29
percent. The market of insurance, mutual fund, bonds, equity and other
wealth management products have reached 3.55 trillion RMB. Obviously
China has already become the world’s fastest growing and most attractive
market for consumer finance, personal transactions and settlement and
wealth management.
Moreover, recently, Chinese commercial banks have undertaken financial
restructuring and share-holding reform, which cleaned the bank’s balance
sheet, improved their corporate governance, and enhanced business
performance. These initiatives are the key drivers of reform and innovation
of Chinese banking industry. Now the banks have put in place sound
corporate governance and information disclosure framework established
with stakeholders cooperative relationship that aims at creating wealth and
value, and are showing a strong balance sheet. All these contribute to
significantly changing the operation mode and management model of
Chinese banking industry. To enhance competitive edge through reform,
create value for shareholders, improve service capability have become the
keynote of Chinese banking industry development today.
Second, the retail banking market in China is in a critical
phase of transformation
Although the opportunities are good for us, we also face significant
challenges, mainly from market opening to competitors, costumer
requirements for satisfactory financial consumption and wealth management
service, and the diversification of service channels. Now every bank finds
itself in a very different, more challenging competition landscape and one
has to change in order to stay in the game. The retail banking market is
growing very quickly and requires every participant to undertake overall
transformation in order to survive and prosper. This transformation process
shows 4 features.
No. 1 the fast accumulation of personal wealth, diversified need for financial
services make the Chinese retail banks to change from traditional savings
institutions providing deposits and settlement services to modern retail banks
offering comprehensive personal financial services. Now the Chinese
residents are becoming more sophisticated. They are no longer satisfied with
savings and settlement and are going to banks for comprehensive services.
As the banker, we must respect this change in customer requirement and
build a financial supermarket to satisfy their requirement for deposits,
settlement, consumer finance, credit card, wealth management, and
electronic-banking.
No. 2, technology breakthroughs in IT and quick emerging of electronic
banking business are changing retail banking service model in China to the
very fundamentals, a process featured by physical network’s extensive to
multi-channel service system. China is the world’s largest growing market
for Internet and mobile telecommunication. The application of new network
technology and the Internet market are quietly changing the personal
banking behavior and the services company. From 2003 to 2005, Internet
banking users in China increased from 8 millions to 34-6 million, with an
average annual growth rate of 108 percent. In 2005, Internet banking
transaction volume reached 70 million RMB, 72 percent more than that of
the previous year. Retail banking services are extended quickly from
traditional physical network to electronic banking and self-service channels
like Internet banking, telephone banking, mobile phone banking and ATM.
No. 3, the opening of the financial market and growing competition have
driven the change of Chinese banks from product-oriented to customer
oriented, from providing unified products and services despite difference in
customer demands to offering tailor-made solutions to and creating value for
the costumers, rather than merely realizing the banks own interest. With this
change of concept, Chinese banks are quickly undergoing transformation in
service model and reorganizing business units previously dedicated to
different products into a customer-oriented structure. To create value for the
customers is the most important principal for the banks to follow in
designing product and participating in competition.
No. 4, with the economic opening-up, Chinese retail banks are going
international. While serving customers in the domestic market, they also
provide global financial services to customers outside China, processing
their overseas spending transactions, remittance, offshore investments and
global RMB wealth management. Because of this ever-increasing
participation in the global market, the banks are becoming an important
force driving China’s economic globalization.
Third, ICBC’s Initiative to Build the “No 1 retail Bank in China”
As the largest commercial bank in china with dominant market share, ICBC
closely follows the trend of world savings banking industry. Aiming at
growing through reform and creation, we are seeking constant innovation so
as to maintain competitiveness and create value. As of end June 2005,
ICBC’s core capital reached 310.5 billion RMB and total assets reached
7055.4 billion RMB. Our market shares in personal deposits, personal loans,
bank card, e-banking all ranked No. 1 in China. We are also the largest
distributor of Treasury bond, mutual funds, and other personal banking
products. Starting from a higher level, ICBC will accelerate innovation,
transform us from a traditional savings bank into a diversified modern retail
bank, which provides all-round, comprehensive, high-tech financial services
to customers and thus make ourselves the “No 1 retail bank in China”. To
achieves this goal, we will,
First of all, focus on product innovation in order to provide one-stop,
comprehensive retail services to our customers. As of end 2005, TCBS had
150 million personal customers and 430 million personal accounts. The
outstanding savings deposits reached 3116.6 billion RMB taking up 21
percent of the domestic market share. Relying on our stung customer base
and the most powerful distribution network, ICBC will consistently make
product innovation and actively seek interaction between savings business,
wealth management and financing activities. We will design tailor-made
wealth management solutions and investment packages to customer with
different needs, providing them a fully array of products including deposits,
consumer financing, credit and risk assessment, wealth management,
transaction and settlement services, electronic banking, etc. We will
combine our strength in capital, technology, network and expertise into
comprehensive financial services solutions and spare no effort to build a
retail bank with diversified businesses.
Secondly, ICBC will focus on technology innovation and improve customer
relation management in order to build a high-tech retail bank. ICBC is the
most advanced bank in IT in China, and we also have the best payment
network in China. Relying on our technology strength, ICBC will make full
effort to build a first-class high-tech financial services company. Based on a
clearly-defined customer strategy, ICBC will established a comprehensive
CRM system and a unified personal client interface, which will helps us to
adjust and optimize customer composition and conduct customer
segmentation. With an accurate profile of the customers, we will be able to
properly determine their preference for financial services regarding brand,
product type, service channel, etc. Then through a unified sales platform we
can carry out cross selling and provide differentiated services. From the
above we can see high-tech driven financial services will constantly change
ICBC’s service model and enhance our service level.
Thirdly, ICBC will focus on creating new financial service model and
setting up a tiered multi-channel service system in order to increase our
competitiveness. Today, our Internet banking has nearly 20 million users
and takes up 60 percent of China’s Internet banking transactions. We want to
establish a multi-channel service system. Under this goal, we will enrich the
wealth management functions of our Internet banking and make ICBC the
largest Internet financial service company in China. Meantime, we are also
reorganizing our branch resources to set up a tiered physical service network
consisting of, from top to end, “Wealth management Centers”, “Financial
Planning Centers”, “Personal Banking Offices” and “Financial Convenient
Stores”.
Our specialized customers with different financial needs and
concerns, offering our top-brand products like Wealth Management For Elite
Club, Sweet Loan, Peony Card, and Banking @ Home.
Lastly, ICBC will be always thinking innovatively to realize the bank’s
concerted and sustainable development. Under the guidance of scientific
view of development, ICBC will proactively promote concerted growth of
retail business denominated in RMN and foreign exchange, trying to ensure
the main business activities, such as savings and lending, wealth
management and other new products, service techniques and brand building
are going forward side by side. We will also take measures to achieve
balance between scale and structure, expensive and risk. At the same time,
we attach great importance to our social responsibility and keep contributing
to the government’s initiative to build an innovative country and a
harmonized society.
Ladies and Gentlemen:
Retail banking in China is facing substantial development opportunities and
showing huge potential and bright prospect. ICBC as transforming toward a
first-class financial services company in the world, would be very willing to
carry out a broad range of cooperation with you. We would like to exchange
views and thoughts with you on retail banking reform and innovation, and
work together to deliver comprehensive quality service and create value for
customers.
Thank you.