Asiamoney China Retail Banking Awards 2019
In a challenging market, some have been nimble in transforming themselves in to winners, often through good use of technology
Overall best national retail bank: Agricultural Bank of China
|Zhai Mingshu, Agricultural Bank of China|
Despite its massive operations, ABC has proved itself to be a nimble player in transforming and strengthening its retail banking business with the use of technology and a management upgrade. That enabled the bank to outperform other state-owned banks across segments of retail banking in the first three quarters of 2018.
For years, ABC has made steady progress in centralizing the management of its retail banking network across China by upgrading its online platforms. And with the help of fintech, it has also greatly improved the efficiency and effectiveness of its marketing and sales for retail banking services.
Such efforts have paid off nicely for the bank under the watch of Zhai Mingshu, deputy general manager of ABC’s personal banking department.
For the first three quarters of 2018, the bank recorded robust growth in outstanding retail deposits and loans. At the end of September, it became the first Chinese bank with outstanding retail deposits topping Rmb10 trillion ($1.5 trillion). The bank also posted stronger growth in retail loans than other state-owned commercial banks: its outstanding retail loans rose more than 17% from a year earlier, to exceed Rmb4.5 trillion by the end of September.
Thanks to effective marketing strategies, ABC’s credit card business continued to grow last year. For the first half of 2018, the total number of credit cards issued by the bank increased by more than 8.5 million to 93.3 million and the transaction volume generated by its credit cards jumped 22.2% year on year to Rmb842.2 billion during the period.
Backed by its robust retail banking operations, ABC’s net profit rose 7.3% year on year for the first three quarters of 2018, the fastest profit increase recorded by a state-owned bank for the period.
While rapidly growing its retail bank businesses, ABC did a good job of controlling associated risks. By the end of September, the bank’s overall non-performing loan ratio dropped 0.21 percentage points to 1.6%. According to the latest available data, the default rate of its credit cards decreased to 1.96% at the end of June 2018 from nearly 2% a year earlier.
Overall best regional retail bank: Bank of Ningbo
Bank of Ningbo was incorporated in Ningbo, a port city in east China’s Zhejiang province, in 1997 and operates mainly in Zhejiang and Jiangsu provinces and in Shanghai.
Ranking sixth in terms of assets at the end of September 2018, Bank of Ningbo is not the largest regional bank in China but it stands out thanks to its robust profit growth and rigorous risk management.
Bank of Ningbo has maintained profitable growth for more than a decade, and despite the slowing Chinese economy, its profits and revenue continue to gather steam. For the first nine months of 2018, its revenue rose 14.1% year on year, to Rmb21.2 billion ($3.2 billion) while its net profit jumped 21.1% to Rmb8.9 billion. In the third quarter of last year alone, its revenue increased 22.6%, while its net profit surged 23.8%.
While outperforming its peers in business growth, Bank of Ningbo managed to lower its non-performing loan ratio to 0.8% by the end of September 2018, down 0.02 percentage points from the start of the year. By contrast, the average NPL ratio of regional banks in China rose by 0.05 percentage points to 1.57% in the same period.
What has enabled the bank to achieve such impressive results is its embrace of financial technology, as well as its innovation in products and services.
In recent years, Bank of Ningbo has applied big data analysis based on data collected from local social security and tax offices to attract potential customers for retail loans and to manage credit risks. It has also launched direct bank services to meet customers’ financing and asset management needs, and offered customized financial service solutions for the micro businesses that abound in the region where it operates.
All this has unleashed the growth potential of its retail banking. In the first three quarters of 2018, Bank of Ningbo’s outstanding retail deposits increased 16.3% while the balance of its retail loans rose 19.3%. Over that period, retail banking contributed some 35% of its net profits, up from roughly 14% in 2013.
Best retail bank for credit cards: China Merchants Bank
As a big bank issuer of credit cards in China, China Merchants bank stood out because of the rapid expansion of its customer base for credit cards and for its customers’ active use of the cards.
After maintaining double-digit increases in new credit card issuance in the past several years, CMB became the third Chinese bank where the total number of credit cards issued topped 100 million in early 2018; the other two to achieve this are state-owned commercial banks, Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB).
According to the latest available data, in the first half of 2018, the number of new credit cards CMB issued was 121% higher than the same period a year earlier. As a result, by the end of June last year, the bank had issued more than 114 million credit cards in total, up 19.5% from the end of 2017.
Given its rapid growth in new card issuance, CMB is poised to overtake CCB to become the second-largest credit card issuer among Chinese banks. The total number of credit cards issued by CCB was 115 million at the end of June 2018.
Data also shows that credit card holders made more frequent use of CMB’s credit cards than cards issued by other Chinese banks. In the first half of last year, the volume of transactions conducted through CMB’s credit cards reached Rmb1.82 trillion ($270 billion), up 41.2% year on year.
CMB has benefited from its buoyant credit card business. In the first half of 2018, the interest income brought by its credit card unit rose 14.1% from a year earlier, while the non-interest income generated by the unit jumped 44.5%.
While achieving explosive growth in credit card issuance, CMB did not drop the ball in terms of managing credit risks. By the end of June 2018, its credit card default rate was 1.14%, inching up 0.03 percentage points from the end of 2017, but the rate was well below the industry average.
Best retail bank for car finance: PingAn Bank
Ping An Bank is widely perceived as a leading provider of car finance, not only because of the robust growth it has seen in this business area but also for the leadership it has demonstrated in adopting technologies that facilitate car finance services and control the risks in the business.
Ping An’s dedicated domestic car finance business unit was created in 2012 after it came top of a list of business areas around which Ping An planned to build up its retail banking operations.
Since then, the unit has experienced tremendous growth. The balance of its car loan book increased more than 10 times to exceed Rmb100 billion ($15 billion) by the end of 2017.
In 2018, Ping An consolidated its position as the largest provider of car finance in China’s banking sector. In the first three quarters of last year, newly generated auto loans jumped 37.9% from a year earlier to approach Rmb110 billion, while the balance of its auto loans rose 9.7% to Rmb143 billion by the end of September.
What is equally impressive about Ping An’s car finance business is the remarkable progress the bank has made to upgrade services and manage associated risks.
By using big data analysis to sift through loan applicants and assess the residual value of used cars, the bank developed an automated system that processed two-thirds of the car finance applications it had received for new cars and nearly 60% of the applications for used cars last year.
By adopting fingerprint, voice print and facial recognition technologies to prevent fraud and by deploying an artificial intelligence-powered robotic system for bill collection, the bank instituted a robust risk control mechanism that enables it to keep the non-performing loan ratio for its car finance business at 0.55% as of the end of September 2018.
Best retail bank for online banking: Agricultural Bank of China
Among Chinese banks, Agricultural Bank of China has the largest retail client pool for online banking. In recent years, ABC has consistently ranked number one among domestic banks in terms of transactions generated by retail online banking and mobile phone banking operations.
The bank succeeded in solidifying its market-leading position in these areas last year by upgrading its online banking platforms.
ABC has made more than 90% of its products and services accessible to its retail customers via smartphones. In June 2018, the bank launched a new-generation mobile banking app that deploys artificial intelligence, big data analysis and blockchain technology to further optimize services for its retail customers. The app also features a bonus programme, which was developed with blockchain technology, to track and encourage the use of the app by customers.
ABC’s sustained efforts in upgrading technology and services have proved effective in ensuring the growth of its online and mobile banking businesses. By the end of June 2018, it had 243 million online retail banking customers, up 9% from the end of 2017; transaction volumes for these clients rose 15.3% from a year earlier to exceed Rmb2.8 billion ($417 million).
In the same period, the number of the bank’s mobile retail banking clients hit 226 million, up 9.7% from the end of 2017; transaction volumes for these clients surged 68.4% year on year to approach Rmb2.3 billion.
The latest information released by ABC shows its online bank continued to drive its retail banking business. As of the end of September 2018, the bank distributed 95% of its mutual funds and asset management products online to retail clients, up 10 percentage points from a year earlier. In addition, the volume of retail loans provided to farmers through online banking increased by nearly six times in the first 11 months of last year.
Best retail bank for innovation in technology: China Merchants Bank
|Zhang Dong, China Merchants Bank|
China Merchants Bank is widely recognized as a technology leader in China’s banking sector. This award is to recognize the remarkable progress the bank has made to gain a foothold in China’s mobile payment market, which is dominated by domestic technology firms.
With the rapid development of internet technologies and the increasing use of smart phones, technology companies have emerged to snatch market share from commercial banks for payment services. This is especially true in China, where Alibaba and Tencent together controlled more than 92% of the local mobile payment market in 2018.
In 2016, CMB made a bid to break that duopoly by launching its ‘All in one net’ mobile payment system, which enables customers of all participating banks to make payments through their smart phones. The system also deploys big data analysis and cloud computing in marketing and fraud prevention.
Over the next two years, CMB steadily widened the range of uses of ‘All in one net’ to include daily payments. In 2018, the system’s coverage was expanded to include public transport, car parking, hailing rides and courier services.
Led by Zhang Dong, president of its retail banking division, CMB became the first Chinese bank to introduce a pilot programme in June 2018 to allow smart phone users to make payments simply through facial recognition. Under the programme, customers only need to face cameras on cashier desks and key in their mobile phone numbers to complete payment.
Since its launch, CMB’s “All in One Net” system has kept winning customers, thanks to the convenience and security it provides for mobile payment. By the end of 2018, the number of users topped 15 million, more than double the number a year earlier. The income generated by the system also increased: for the first 11 months of 2018, it brought in Rmb6.8 million ($1 million) in net income, up from about Rmb3.9 million booked for 2017.
Best retail bank for inclusive finance: Postal Savings Bank of China
PSBC continues to lead domestic banks in providing and promoting inclusive finance across China by running the most extensive network in rural areas among domestic banks.
|Li Guohua, Postal Savings Bank of China|
No other Chinese bank has allocated so much in terms of human and capital resources for inclusive finance as PSBC. The bank has set up a team of about 30,000 employees, or one sixth of its workforce, to serve small and micro enterprises.
By the end of September 2018, the balance of its loans to farmers and agricultural projects had reached Rmb1.2 billion ($179 million). Of that amount, 46% was lent to small and micro enterprises. These numbers were by far the largest in China’s banking sector.
Among domestic banks, PSBC has developed a range of inclusive finance products that are distributed through its 40,000-plus bricks-and-mortar outlets as well as the internet, smart phones and instant messenger WeChat.
According to PSBC chairman Li Guohua, inclusive finance is traditionally a high-risk and high-cost business, but using financial technology such as big data analysis, cloud computing and artificial intelligence can help a bank to control risks and reduce costs.
By applying fintech and partnering with external parties such as insurance companies and loan guarantors, PSBC has kept its non-performing loan and loan default ratios well below the industry average.
The bank has also teamed up with government agencies and industry associations to organize training programmes to help farmers and micro businesses upgrade technology and improve management skills.