Asiamoney Best Bank Awards 2017: China
Best domestic bank: China Construction Bank
Of the big four state lenders in China, none has done a better job of improving its image in recent years, at home and abroad, than China Construction Bank under chairman Wang Hongzhang. The Beijing-based financial institution is visible on advertising hoardings, on TV screens and in the pages of print magazines, touting its corporate, private and retail banking expertise in an increasing number of developed and developing markets.
Traditionally smaller and less influential than its biggest local competitors, Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC), CCB is now arguably as systemically important as either. Its market capitalization, which was around Rmb1.52 trillion ($223 trillion) at the end of May, is more than 25% higher than BOC’s. Its non-performing loan ratio at the end of 2016 came in at 1.52%, below both ICBC (1.62%) and the final member of the big-bank quartet, Agricultural Bank of China (2.37%).
The bank has been cleverly diluting its presence in sectors that suffer from overcapacity (mining, cement, glass, shipbuilding), while expanding its funding of fast-growing, consumer-facing industries. Loans to struggling industrial sectors fell sharply last year, while domestic personal loans rose to Rmb4.34 trillion, accounting for 69% of all new lending in 2016. Outstanding credit-card loans rose 16% over the same period, to Rmb517 billion.
The good news has continued into the current year, with CCB reporting a 3.4% year-on-year rise in net profit in the first three months of 2017, driven by higher fee income, while net interest margins continued to stabilize.
Best corporate and investment bank: China Citic Bank
China Citic Bank has grown quietly into its role as one of China’s most systemically important corporate and investment banks. It banks many of the mainland’s largest domestic and most globally acquisitive corporates, and is an increasingly weighty presence in the global capital markets.
Over the last year, it has played a big role in many of China Inc’s most striking global capital-raising events, starting with the $12.7 billion financial package – a blend of term loans and revolving credit – secured by ChemChina to complete its takeover of Swiss pesticides-maker Syngenta. ChemChina tapped 16 banks for funding, with Citic chosen as global coordinator and lead arranger on the deal.
The decision by Hong Kong-listed car dealership Baoxin Auto Group to more than double the offshore tranche to $763.4 million from $300 million of a three-year loan facility, following an overwhelming response from lenders, also stands out. Citic acted as one of three lead arrangers on the deal, alongside Bank of China and Tai Fung Bank.
The lender is increasingly vital to corporate China’s bigger outbound M&A deals, as well as being a big player in the onshore debt markets, underwriting Rmb377.4 billion ($55 billion) worth of prints in 2016, a year-on-year rise of 16%. It underwrote 391 publicly offered bonds worth Rmb344 billion over the same period, the top-ranked among all onshore joint-stock banks.
Citic is also a leading provider of cross-border financing and foreign exchange services, with income from its FX division jumping 25% in 2016.
Best bank for SMEs: Bank of China
There is a long- and widely held assumption that Chinese lenders are bad at funding the nation’s best young firms. It’s a belief that persists, often for good reason. China’s big banks prefer to fund big corporates – sometimes through force of habit, sometimes for political reasons (because they are told to).
But this overlooks the strides specific lenders have made in reaching out to small and medium-sized enterprises.
Shenzhen-based China Merchants Bank has done a great job banking SMEs in the Pearl River Delta, a sprawl of cities connected to Hong Kong, and deserves a special mention. But the award for best SME lender this year goes to Bank of China. Traditionally the most international-facing lender, it has made much of its desire to support and profit from the country’s best up-and-coming corporates and the minds that run and own them.
So far, the bank has hosted 28 matchmaking events across five continents, including 10 in 2016 alone, in a concerted effort to connect more than 20,000 mainland SMEs with new suppliers and customers, and to deepen their links to global capital and trade flows. Outstanding lending by Bank of China to domestic micro, small and medium-sized enterprises rose 12.2% year on year in 2016, hitting Rmb1.28 billion ($187 million), while the lender counts on its books 3.11 million small corporate customers.
And if proof of a financial institution’s expertise in a single field is best embodied by the awards it accumulates, look no further than the Hong Kong General Chamber of Small and Medium Business, which handed Bank of China its best SME partner award for the ninth straight year in 2016.
Best international bank: HSBC
HSBC has the widest network of any foreign bank in China by some distance:178 outlets in 57 cities. That visibility clearly helps in China and beyond.
Of all banks in China, foreign and local, HSBC China, led by David Liao was second only to the state’s China Merchants Bank in loan syndications, booking $4 billion-worth of deals in 2016. In debt capital markets, it narrowly trails only the state’s mighty Bank of China, tallying $12.4 billion-worth of business last year.
It’s also making friends at the central People’s Bank by leading the internationalization and acceptance of the renminbi, being selected in the first batch of preferred market-makers for direct onshore trading against a basket of currencies in the Middle East, Europe and Africa. HSBC China now ranks first among foreign banks for renminbi payment volume through China’s cross-border interbank payment system.
It is unsurprising then that HSBC China is now the preferred foreign bank for so-called panda bonds, the renminbi-denominated bonds sold by foreign issuers to mainland Chinese investors, notably the Rmb3 billion ($440 million) deal it arranged in August with the Bank of China for the Polish government, the first-ever European sovereign issuer to offer renminbi bonds in China’s domestic capital markets.
HSBC is also the favoured entry point to China for international central banks, sovereign funds and multilaterals investing in China. HSBC was the only foreign bank to participate in an August bond deal for the World Bank, a deal that marked the renminbi’s entry to the IMF’s elite special drawing rights currency basket, another landmark in China’s integration into the international financial system.
In the meantime, the market continues to wait with bated breath for news that its majority-owned securities joint venture in the Pearl River Delta has received official approval – it is slated to be the first of its kind in China.
HSBC is the international bank to catch in the PRC.
Best digital bank: Agricultural Bank of China
Agricultural Bank of China has fast-tracked its digital offerings this last year – and the market liked what it saw on its screens. By the end of 2016, ABC counted its internet banking users – across all platforms – at a staggering 711 million, more than half of China’s population.
As ABC’s apps went viral among its traditional farmer and peasant base, it added 119 million new online customers in a year. That’s the equivalent of adding a country the size of Mexico to the ABC roster.
ABC’s gobsmacking numbers don’t stop there. ABC’s customers made transactions worth Rmb14.7 trillion ($2.2 trillion) in the year, an increase of 146% over the previous year. ABC’s website recorded 3.43 billion visits through 2016. Banking by text also took off, with the bank recording 347 million official SMS accountholders, who sent a collective 17.6 billion texts.
Indeed, there’s something of a rural Alibaba-like atmosphere around ABC’s electronic strategy. Its e-business platform helps China’s farmers find customers and trading partners, procure plant, get their output to market and, when the cash rolls in, provide expansion loans and securely manage the wealth to begin the process again. ABC claims 703,000 merchants have signed up for its e-steward services, almost four times more than 2015. They transacted Rmb147 billion worth of business than in 2016, more than three times the previous year.
What’s the trend here? A clue comes from ABC’s own statistics on the use of its ATM network, which rose just 5%. As China rolls out its mobile walled garden across the province, in effect a secured national intranet, ABC’s farmer-customers have leapt over old tech to make ABC one of the country’s most forward-looking institutions.
Best bank for CSR: Industrial Bank
Does China have a national dress? A national colour? Increasingly, the preferred garb is the gauze facemask, the colour not the vibrant vermillion of the national flag but dull beige, the shade of the film of filth that settles on surfaces – and in lungs – across the nation.
In places like the heavily industrialized northeast, in cities such as Harbin, Shenyang and Changchun, it is standard morning procedure to check the weather app to gauge how dangerous the pollution levels are. So any bank that enforces improvement in air quality gets our vote.
Step forward the Industrial Bank, which for years has funded many of the very enterprises that have contributed to China’s shocking air quality. Industrial Bank, under chairman Gao Jianping, seems to have got the message. It is even blacklisting suppliers with an “adverse environmental and social impact behaviour,” directly terminating contracts signed with polluters. As Industrial Bank puts it, “the bank advocates the handling with official business in low-carbon conditions, preserves the ecological environment and reduces the greenhouse gas emission in the routine of daily work.” The language may be clunky, but it’s the actions that matter.
Speak to anyone involved in green finance in China today – and there are plenty of important people and institutions doing far more than paying lip-service to it – and they’ll tell you that Industrial Bank is firmly at the forefront.
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