Banking

CITIC Bank is a fast-growing commercial bank, with a strong corporate banking arm and supported by an increasing focus on retail banking and financial markets business.

CITIC Bank has also built on its existing profile in mainland China by setting up branches in economicallydeveloped cities where it has raised its overall market presence. By the end of 2014, CITIC Bank had 1,230 branches in 121 cities across all provinces.

Year in review

2014 was a year of profound change for the Chinese banking industry. The liberalisation of interest rates had an impact on the profitability of banks, which had relied heavily on the traditional savings and loan model. At the same time, internationalisation of the RMB, the growth of internet finance, capital market reform and the stringent regulatory environment not only brought new challenges but also unlocked new opportunities.

CITIC Bank is meeting these challenges by diversifying its income streams, striving to provide better customer experiences and creating new products and channels for specific customer groups. In 2014, revenue grew 19% to RMB125 billion, driven by healthy growth in loans, as well as a sharp increase in non-interest income. Net profit, however, grew at a slower rate of 4% to RMB41 billion. This followed a larger impairment as a result of an increase in non-performing loans.

Corporate banking

Corporate banking remains a core component of CITIC Bank’s business. In recent years, the bank has been increasing its effort to optimise its products, customer base and income structure, as well as accelerating the development of its supply chain finance, cash management, custody and factoring businesses. As a result, corporate banking experienced healthy growth.

The balance of corporate loans at the end of 2014 was RMB1,633 billion, an increase of 9% from 2013. This represented 75% of the bank’s total loans. For 2014, revenue from corporate banking amounted to RMB65 billion, an increase of 8% from 2013.

Retail banking

In recent years, CITIC Bank has focused on expanding its retail banking business by optimising its network of branches in tier-one cities and seeking to create an improved customer experience. More than 150 outlets opened in 2014. This bespoke approach includes the introduction of one-on-one meeting areas and dedicated relationship managers. In addition to these physical branches, CITIC Bank has developed internet finance and broadened its web sales channels to increase market penetration by capitalising on the rapid growth of mobile internet.

New products and marketing initiatives introduced during the year included an integrated payroll account to provide value-added services such as cash management in order to secure a broader customer base, including higher income clients. In addition, the CITIC Elite Card, aimed at young people with rising incomes and stable assets, as well as the CITIC Red Season marketing campaign, were successfully rolled out in 2014.

In 2014, the number of retail customers in mainland China increased by 16%. The retail business represented 20% of the bank’s revenue, a year-on-year increase of 23%.

Financial markets

Principal products offered by CITIC Bank’s financial markets business include foreign currency, wealth management, precious metals and derivatives, as well as risk management, investment and financing services, all of which were provided to retail, corporate and financial institution customers.

In 2014, the bank integrated its financial markets service, aligned its marketing channels and introduced intermediary businesses and innovative new products. These efforts resulted in a 42% increase in financial markets revenue to RMB36 billion.

Risk management

CITIC Bank currently operates within a banking environment characterised by significantly higher non-performing loans, particularly in industries affected by overcapacity. Non-performing loans in the banking industry increased during the period, and CITIC Bank was required to make related adjustments in loan provisions.

Risk control is an ongoing focus for the management team. CITIC Bank constantly reviews its risk exposure across major sectors and continues to strengthen its risk control by improving the review, assessment and crisis management systems.

In 2014, CITIC Bank completed the issuance of RMB37 billion in 10-year, tier-2 debt instruments to replenish its tier-2 capital. In addition, the bank intends to issue A-shares to China National Tobacco Corporation through a private placement, which is expected to raise about RMB12 billion. This transaction will further strengthen the bank’s overall competitiveness by increasing its risk tolerance and profitability as well as its ability to meet stringent regulatory requirements.