ICBC fees yield surges amid credit squeeze

PUBLISHED : Saturday, 02 February, 2008, 12:00am
UPDATED : Saturday, 02 February, 2008, 12:00am

Industrial and Commercial Bank of China, the world's largest lender by assets, said it more than doubled fee-based income last year from a year earlier to mitigate the impact of a tightened credit policy.

Correspondingly, the state-controlled lender reported loan growth well below the industry average of 10.8 per cent last year.

The growth in intermediary business income, driven by mutual fund distribution, custodian services and credit cards, was a 'breakthrough', the lender said in a statement previewing its full-year results yesterday.

No figure was given of the actual fee-based income nor its profit contribution in percentage terms. Fee-based services had contributed 13 per cent to profit in the first half.

In terms of fee-based income for the full year, sales of mutual funds surged 150 per cent and commissions from investment banking activities jumped 57 per cent to four billion yuan.

Meanwhile, the lender estimated net profit of 78 billion yuan for last year, a rise of more than 60 per cent year on year.

The lender issued 340 billion payment cards last year, 130 billion of which are credit cards. Annual card spending saw strong gains.

'Given that China Merchants Bank derives 18 per cent of its earnings from fee-based income, ICBC has more room to develop its intermediary business,' said Lee Yuk-kei, an analyst at Core Pacific-Yamaichi International.

'But growth in fee-based income is likely to slow down to only 20 per cent this year due to the dampening stock market,' he said.

The lender expected its fee-based business to account for almost 33 per cent of net profit 'in several years', ICBC president Yang Kaisheng said in October last year.

As Beijing continues to crimp loan growth, state-owned banks are moving away from the tradition of earning interest from loans to other state-owned enterprises as the bulk of their income.

'Under the tightened monetary policy, we will continue to restrict our loan growth to about 10 per cent,' the ICBC statement said. 'At the same time, we will distribute our loan quota evenly throughout the year.'

Reflecting the tighter monetary policy, mainland lenders are reported to divide their yearly loan quota to about 35 per cent, 30 per cent, 25 per cent and 10 per cent for their four quarters.

ICBC said yesterday it became the first mainland bank to receive approval to set up in the Persian Gulf. It will open a branch in Doha.

The bank recently opened an office in Moscow and is waiting approval to open others in Dubai, New York and Sydney.

Separately, China Construction Bank Corp, the mainland's second-largest lender, is reported to be taking a 67 per cent stake in an Anhui-based trust company. A bank spokeswoman said she was not aware of the development.

The trust company has registered capital of 504 million yuan.

Thinking big

ICBC's estimate for profit last year at the mainland's biggest bank, in yuan 78b