Industrial And Commercial Bank Of China Essay ⋆ Business Essay Examples ⋆ EssayEmpire

The Industrial and Commercial Bank of China was founded on January 1, 1984, as the result of a major banking system reform in China. It inherited the industrial and commercial credits and savings businesses from People’s Bank of China and developed into one of the four major state-owned commercial banks in China (the other three being the Bank of China, Agricultural Bank of China, and China Construction Bank). On October 28, 2005, the Industrial and Commercial Bank of China was restructured into a joint-stock limited company and officially changed its name to Industrial and Commercial Bank of China Ltd. (ICBC). On October 27, 2006, ICBC was listed on both the Shanghai Stock Exchange and the Stock Exchange of Hong Kong Limited, making it an international public shareholding company. In 2007 ICBC had 81.99 billion yuan (RMB) after-tax profits; total market value rose to US$338.934 billion, making it the largest bank in the world.

ICBC provides diversified financial services that include, structurally, Corporate Finance Business, Personal Finance Business, Bank Card Business, Funds Business, and Internet Bank Business. The Corporate Finance Business of ICBC served 2.72 million corporate customers by the end of 2007. Its domestic corporate loans balance amounted to 2.914993 trillion yuan (an increase of 15.2 percent from the previous year), and domestic corporate deposits balance amounted to 3.402683 trillion yuan (an increase of 20.1 percent).

ICBC also provides financing services covering international and domestic trading financing procedures for customers, and works out international settlement and trade financing centralized operation schemes. In 2007, trading finance from domestic branches accumulated to 223.646 billion yuan, an increase of 132.9 percent; accumulatively transacting international settlement business 593.3 billion dollars, an increase of 48.5 percent. The Personal Finance Business of ICBC served 170 million individual customers through 1,112 financing centers, 95,588 telephone banking, internet bank, and other electronic channels by the end of 2007. Its domestic deposit balance amounted to 3,244.074 billion yuan and domestic personal loans balance amounted to 752.113 billion yuan. The Bank Card Business of ICBC issues euro credit card, Peony Express Business Card, Peony UnionPay Card, Peony Sports Card, and new Peony Traffic Card. By the end of 2007, the overdraft balance of credit cards amounted to 8.241 billion yuan, with an increase of 59.5 percent. The issuing volume of debit cards amounted to 187 million, an increase of 8.58 million, and the yearly consumption reached 454.3 billion yuan, with an increase of 71.4 percent. The Funds Business of ICBC operates domestic and foreign currency in various financial markets. In 2007 domestic institutions had financed RMB inwardly and outwardly 6,096.7 billion yuan, an increase of 27.6 percent. The trade volume of foreign currency market amounted to US$868.2 billion, an increase of 43.5 percent.

The success of ICBC should be largely attributed to the growing economy in China, its strategic focus on sustainable market growth, and a relatively stable management team. Specifically, the optimized deposit structure has enabled the bank to keep the growth of deposits at a low cost in the cycle of rising market interest rates. With an optimized credit structure, the bank has managed to increase credit revenue while complying with macroeconomic policies and maintaining moderate credit growth. Improvement in the investment structure and comprehensive development of the financial market business have brought about substantial increase in income from treasury operation. The rapid development of the intermediary business has further diversified the drivers of growth in income.

In 2007 ICBC successfully acquired 79.9333 percent of Seng Heng Bank, the largest local bank in Macau, and 20 percent of Standard Bank of South Africa, the largest commercial bank in Africa. The bank also entered into new markets in Russia and Indonesia. With 112 overseas institutions, it has formed a global service network covering major international financial centers and the main regions trading with China. The inter-market and global businesses have created synergies and are becoming new drivers for its growth in profit.

ICBC’s operation performance has been consistently acknowledged by domestic and foreign banking industry. In 2007 it was awarded “Best Bank in China,” “Best Trading in the World,” and “Best Management Company in China” by the Bankers, Global Finance, The Assets, Finance Asia, and was appraised by Economic Observer as the “Most Honored Corporation in China.” The international professional certificating institutions have raised the ranks of ICBC continuously, among which Moody’s raised its long-term credit rank to “A1,” and Standard & Poor’s raised it to “A-.” Relatively unscathed by the banking crisis of 2008, ICBC initiated a new branch in New York and also opened its first bank in the Middle East (in Dubai) that same year.

Bibliography:

James T. Areddy, “The Financial Crisis: Global Fallout: China Seeks to Lift Market by Raising Stake in Major Banks,” Wall Street Journal (September 19, 2008);
ICBC, www.icbc.com.cn (cited March 2009);
Weiye Li and Louis Putterman, “Reforming China’s SOEs: An Overview,” Comparative Economic Studies (v.50/3, 2008);
Stephen Timewell, “Global Shifts as China Looks Overseas,” The Banker (v.157, 2007).

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