ICBC profits jump 30% on fee growth

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China’s largest bank yesterday posted a 31 per cent gain in profits in its first set of results since it launched the world’s largest initial public offering last October.

ICBC’s net profit rose to Rmb49.8bn ($6.4bn) last year on the back of growing personal banking and wealth management businesses as China’s economy continued to prosper.

“All financial indicators are favourable,” Pan Gongsheng, the secretary to the board, told a press conference in Beijing.

State-owned ICBC, the world’s second largest bank by market value, made history last year when it launched a dual listing on both the Hong Kong and Shanghai stock exchanges, raising $21.2bn.

Jiang Jianqing, chairman, said the bank aimed for only a modest growth in its lending, in favour of less risky income from wealth management and other fee-based products. Last year, ICBC nearly doubled the amount of wealth management products it sold.

“In the past, the Chinese relied on rice and noodles when we were not so well-off. Now we eat beef and drink milk. This is similar in banking,” Mr Jiang said, referring to the bank’s increasingly diverse income streams.

He said the bank would look to overseas expansion and hoped to break into the investment banking sector and capital markets, within regulatory limits.

Analysts have long warned that Chinese banks’ reliance on loans expose them to credit risks and that any downturn in China’s economy could see non-performing loans rocket.

May Yan, vice-president of ratings agency Moody’s, said the strategy of emphasising wealth management and fee-based products would help reduce such risks, but increase costs.

“[ICBC rival] China Construction Bank, for example, is trying to lend more, because lending gives you bigger margins,” Ms Yan said.

ICBC’s non-performing loan ratio fell from 4.69 per cent in 2005 to 3.79 per cent last year, even as its loan book grew by around 10 per cent. However, special mention loans – loans most at risk of becoming non-performing – had increased in the second half of last year.

President Yang Kaisheng said ICBC aimed to lower its non-performing loan ratio three per cent within three years. The bank hopes to achieve this through measures such as differential credit policies, writing off non-performing loans earlier, and implementing a new risk management system.

Ms Yan said those targets would probably be achievable if the overall environment remains benign, “but our concern has always been if something happens to economy.”

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