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ICBC aims for income shift
By Chuan Yu (China Daily)
Updated: 2005-03-08 15:37
The Industrial and Commercial Bank of China (ICBC) said yesterday it aims to
double intermediary business income in three years to facilitate a strategic
shift from an interest-based income structure to one based on other sources,
such as commissions.
China's largest commercial bank said it has set a target of 21.1-24 billion
yuan (US$2.5-2.9 billion) in intermediary business income for 2007, up at least
86 per cent from last year.
Total income from intermediary business such as bank cards for the three
years starting this year is estimated to come in between 52.7 and 58.5 billion
yuan (US$6.3 to 7 billion).
A bank spokesman said the bank is expecting a breakthrough from intermediary
business in its effort to improve its development model and redesign its income
structure on non-interest sources.
"Without properly changing the corporate governance structure and development
model, it is difficult to achieve the maintenance or appreciation of State-owned
assets and maintain a long-term appeal to various investors," the spokesman
said.
The State-owned lender is awaiting regulatory approval for a key joint-stock
restructuring plan, which is expected to include a massive recapitalization by
the Chinese Government and an initial public offering.
The over-reliance on interest income is among the major reasons for the poor
profitability of most Chinese banks.
They are also hampered by high non-performing loans and inadequate capital.
The ICBC has reported substantial progress in recent years in improving its
income structure, largely as a result of an energetic campaign to promote
intermediary business such as e-banking, cash management, merger and acquisition
consulting, bank cards and asset custodianship.
Its intermediary business income surged by a yearly average of 38 per cent
from 2.3 billion yuan (US$277 million) in 2000 to 11.5 billion yuan (US$1.4
billion) last year, making it the largest intermediary services provider in
China's banking sector.
Intermediary business income was equivalent to 14 per cent of the bank's
interest rate income last year, 3 percentage points higher than the previous
year.
Non-interest income, 77 per cent of which came from asset management,
accounted for 37 per cent of the bank's 49.3 billion yuan (US$5.9 billion) total
income last year, it said earlier this year.
The spokesman said the bank plans to tilt its resource allocation towards
intermediary business in the three years starting this year, upgrade existing
products and develop new products, and launch a marketing campaign to enhance
its influence in the market.
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