ICBC looks for balanced revenue mix

PUBLISHED : Wednesday, 11 April, 2007, 12:00am
UPDATED : Wednesday, 11 April, 2007, 12:00am

Industrial and Commercial Bank of China, the mainland's largest lender, aims to strengthen its retail banking, non-interest and treasury businesses to help maintain its high earnings growth, according to chairman Jiang Jianqing.

The bank recorded more than 30 per cent profit growth in each of the past four years, thanks partly to strong loan demand amid the mainland's soaring economy.

However, Mr Jiang said the bank would face higher risk if lending grew too fast, and hoped to seek a better revenue mix.

'We are looking for a balanced development,' Mr Jiang said yesterday.

ICBC saw loan growth of 10.4 per cent last year, slower than the average growth of 15 per cent in the industry. Mr Jiang said it would like to keep the pace at about 10 per cent.

Mr Jiang said the lender's loans generated a yield of 5.42 per cent in the second half of last year, up from 5.11 per cent in the first half, which would help widen its net interest margin.

For the non-interest business, Mr Jiang said ICBC planned to strengthen its retail banking, particularly its wealth management operation, which had income growth of 70 per cent last year.

ICBC's non-interest income accounted for 10.2 per cent of its total income last year, well below the up to 40 per cent at global lenders as the bank did not have strong insurance and trading operations, Mr Jiang said.

Despite a ninefold to 10-fold increase in non-interest businesses over the past six years, it would still take 'a period of time' for ICBC to catch up with global counterparts, Mr Jiang added.

'The net fee and commission income rose 55 per cent last year and we hope it could continue,' he said.

To improve its treasury business, which includes trading securities, ICBC planned to develop proprietary trading and consumer-oriented investment products with shareholder Goldman Sachs.

As ICBC had more than three trillion yuan of funds, its return could be improved by enhancing the treasury business, Mr Jiang said.

Meanwhile, Mr Jiang said the bank's 15.7 per cent return on equity last year was affected by its more than US$20 billion initial public offering, which widened its capital base, but he expected the rate to improve next year.

The bank also booked a foreign exchange loss from the initial public offering, which was mainly denominated in foreign currency, but the impact was offset by income generated from the proceeds, he said.

ICBC's foreign currency holdings declined to US$3.1 billion in the first quarter from US$6.7 billion last year, Mr Jiang said.

Separately, Mr Jiang said ICBC had no plans to privatise the Hong Kong-listed unit, ICBC (Asia), but declined to comment on whether it would inject the retail securities business of ICEA into the unit.