On March 30, Postal Savings Bank of China (hereinafter referred to as “PSBC” or “the Bank”, stock code: 601658.SH, 1658.HK) released its 2021 annual report. Against the backdrop of continuous economic recovery last year, PSBC earnestly implemented the decisions and plans of the CPC Central Committee and the State Council and seized the opportunities arising from national strategies such as rural revitalization, peaking carbon emissions and carbon neutrality, common prosperity, etc. Its business grew at a steady pace with sound momentum, making a good start of the 14th Five-year Plan period.

The annual report shows that PSBC realized operating income of RMB319,107 million (prepared in accordance with the International Financial Reporting Standards, the same below) for the year, up 11.37% year on year; net profit of RMB76,532 million, up 18.99% year on year; fee and commission income of RMB22,007 million, up 33.42% year on year. As at the end of 2021, its NPL ratio recorded 0.82%, down 0.06 percentage point from the prior year-end, and allowance to NPLs ratio stood at 418.61%, up 10.55 percentage points from the prior year-end.

Since the launch of the postal savings business in 1919, following the philosophy of “working on the trivial work even others despise”, the century-old institution advanced with the times, undertook fundamental changes through reform and development, and has been transformed into PSBC, a responsible, resilient and caring bank. Since its establishment on March 20, 2007, it has gone through 15 years of development, during which it maintained its strategic focus on retail banking, actively embraced innovation and changes, and accelerated its progress, with its current asset scale reaching RMB12.59 trillion.

In the future, how will this large retail bank with a cultural heritage of over 100 years and  nearly 40,000 outlets make greater progress in technology empowerment, institutional reform, model innovation, etc., chart the path for the transformation of a modern commercial bank, and build up and constantly increase its new strengths? We can find out about its growth path and future direction in its 2021 annual report.

Leapfrog development——

Its asset scale is 5.6 times that 15 years ago when the Bank was founded

In March 2007, based on the reform of the previous postal savings management system, Postal Savings Bank of China Limited was officially established. However, if one takes a look at the history, the postal savings business can be traced back to its start in 1919 with a history of over one hundred years.

Over a century ago, the Postal Savings Bureau adhered to the philosophy of “working on the trivial work even others despise; working towards stability rather than big profits”. At the beginning of reform and opening-up, we advocated the spirit of “looking for savings resources from millions of families, conducting publicity by thousands of words, and using every possible means to make contributions” in carrying out the postal savings business. Today, PSBC adheres to the strategic positioning of “serving Sannong customers, urban and rural residents, and SMEs”. Throughout its history, the genes of inclusiveness and prudence are deeply rooted in its blood. Guided by the mission of making financial services accessible to everyone, we create happiness and bring a better life to the people. PSBC has achieved its own high-quality development while supporting national strategies and people’s livelihood and serving economic and social development. Data show that its assets increased from RMB2.23 trillion at the beginning of its establishment to RMB12.59 trillion, total deposits from RMB2.13 trillion to RMB11.35 trillion, loans from zero to RMB6.45 trillion, operating income from RMB39,699 million to RMB319,107 million, net profit from RMB1,024 million to RMB76,532 million, and equity attributable to equity holders of the Bank from RMB22,024 million to RMB794,091 million. The Bank once again obtained the best credit ratings among Chinese banks from the world’s top three rating agencies, and ranked 15th in The Banker’s list of “Top 1000 World Banks”.

Zhang Jinliang, Chairman of PSBC, said in his message in the annual report, “We owe the Bank’s solid and rapid growth to the trust of hundreds of millions of customers, and our distinctive competitive edges to all PSBC employees’ perseverance and dedication. ” Looking forward, he said that “we will acquire a deep understanding of the political importance and the people-centered nature of financial work, apply the new development philosophy in full, in the right way and in all fields of endeavor, promote the reform of systems and mechanisms, and keep modernizing our corporate governance system and capability, thus staying ahead and conveying our characteristics in the pursuit of high-quality development.”

First-class financial services rely on a full range of first-class capabilities. Only with strong support of the back office can the front office better satisfy the differentiated financial needs of the customers. Liu Jianjun, President of PSBC, said in his message in the annual report that “we make efforts to strengthen major capabilities in six aspects including core business, system support, coordination and integration, technological facilitation, institutional drive and innovation leadership, leverage the human resource advantages of a major bank, incorporate customer portrait, risk warning, intensive operation and customer experience feedback into the service processes, pool resources across the Bank to support customer service each and every time, and provide more targeted and refined service to every customer.”

A responsible bank——

Fulfilling responsibilities as a major bank, and integrating into and serving economic and social development

Finance is the core of the modern economy and the lifeline of the real economy. PSBC has actively implemented major national strategies, served Sannong customers, urban and rural residents and SMEs with innovative means, and provided strong financial support to the development of the real economy and the improvement of people’s livelihood.

PSBC has promoted rural revitalization in all respects. The Bank has made full use of its established advantages to carry out the plans of the central government, meet the people’s demand and tap into market potential. Seizing the opportunity of the rural revitalization strategy, PSBC has pursued the dream of “extending PSBC credit to the majority of rural household”. With its gene of inclusiveness deeply rooted in the field of hope, PSBC has accelerated the development of a rural credit system, explored the proactive credit extension mechanism based on big data of agriculture and rural areas, and provided small-amount, wide-coverage and pure credit loans on the online service platform. It is committed to building itself into a digital bank that serves rural revitalization. Data show that as at the end of 2021, its balance of agriculture-related loans stood at RMB1.61 trillion, accounting for one fourth of its total loans; it built 190,800 creditworthy villages and rated 3,636,400 households as creditworthy.

The Bank threw itself into serving the MSMEs, which constitute the most dynamic part of the economy. It accessed an extensive range of external data such as taxes and invoices, developed online loans to address “short-term, small-amount, frequent and urgent” financing needs. It has signed a strategic cooperation agreement with the National Equities Exchange and Quotations (NEEQ) and the Beijing Stock Exchange to support the growth of specialized and sophisticated enterprises that produce new and unique products. Data show that as at the end of 2021, the Bank’s balance of loans to inclusive micro and small businesses was RMB960,602 million and it provided financing to over 1.71 million inclusive micro and small enterprises.

In core areas of major regional strategies and regional coordinated development strategies, PSBC has, centering on supply-side structural reform, continuously increased resource input into key fields such as new infrastructure and new urbanization initiatives as well as major projects, the advanced manufacturing industry, and little giant firms recognized as specialized and sophisticated enterprises that produce new and unique products, to fully support national strategies. Data show that as at the end of 2021, PSBC’s balance of corporate loans registered RMB2.25 trillion, an increase of 13.96% from the prior year-end, and medium and long-term loans to the manufacturing industry went up by 42.72%. It served more than 1,000 national-level little giant firms recognized as specialized and sophisticated enterprises that produce new and unique products, and the proportion of new loans granted to private enterprises in the year rose by 4.70 percentage points.

New citizens are important forces driving the future development of cities. Meeting their financial needs is of great significance in energizing the urban development. Attaching great importance to services for new citizens, PSBC issued the financial service solutions for new citizens on March 28, aiming to provide them with high-quality comprehensive financial service, improve the availability and convenience of financial services, and facilitate them in enjoying a better life by making good use of finance.

Retail business——

AUM increased by over RMB1 trillion in the year, and income from personal banking business accounted for nearly seventy percent of operating income

AUM is considered a core indicator to measure a bank’s competitiveness in retail banking. Data show that as at the end of 2021, PSBC had 637 million personal customers, and its AUM increased by over RMB1 trillion during the year to reach RMB12.53 trillion, representing a year-on-year increase of 11.40%.

As a major retail bank, PSBC has natural advantages in developing retail banking. While other banks have generally realized the importance of retail business and are quickly engaging in the business layout, how has PSBC maintained and consolidated its strengths? We may find the answer in its annual report.

Zhang Jinliang said in his message in the annual report that “by creating network, strengthening linkage and expanding business district, we built a ‘scenarios plus’ open bank model. Creating network: As nearly 40,000 offline outlets and online channels complemented each other, we served as a bank close to people’s homes and close at hand. Strengthening linkage: We optimized a classified and multi-tier service system for different types of customers including strategic customers, interbank customers, institutional customers, and micro, small and medium-sized customers, and upgraded professional operation systems, forming a service model covering whole customer journey, all channels and entire chain. In doing so, we boosted the stable circulation of industrial chain and supply chain and optimized our ‘value chain’. Expanding business district: We promoted the digital transformation of online retail business, built offline business model featuring ‘outlets plus business district’, and created an interbank ecosystem. By understanding customers, discovering demands, creating scenarios and establishing ecosystem, we integrated financial products and services into customers’ production and lives.”

Intensive operation is an ideal solution for large banks to reduce cost, improve efficiency and prevent risks, and transformation is urgently needed. It is noteworthy that PSBC has launched the reform to concentrate its internal procedures from across the nation and basically formed a cross-region, cross-business, cross-level and cross-channel operation management system in which the front office offers comprehensive services and the back office provides centralized, professional services, firmly pressing toward its goal of becoming a large modern retail commercial bank.

In the pursuit of common prosperity, PSBC has practiced the economics of bringing happiness to the people. It has comprehensively upgraded its team, investment research and technological capabilities and built its nearly 40,000 outlets into investor education centers and platforms that create value for customers, thus sharing the achievements of China’s economic development with more than 600 million customers and contributing to common property.

Thanks to its enduring commitment to retail banking, PSBC’s personal banking business contributed nearly seventy percent of its operating income. Data show that in 2021, the Bank’s income from personal banking business recorded RMB221,883 million, up 11.99% year on year, accounting for 69.53% of the Bank’s operating income, an increase of 0.38 percentage point year on year.

Technology empowerment——

IT investment exceeded RMB27.2 billion over the past three years, accounting for over 3% of operating income

Amid the changes unseen in one hundred years, technological innovation is a “key variable” and also the “biggest increment” of high-quality development. In 2021, PSBC adhered to systematic thinking and drove changes in production and operation through digital transformation. By putting forward the IT strategy featuring smart, platform, experience, ecosystem and digitalization (SPEED), it promoted overall innovation of systems and mechanisms, organizational structure, and products and services, applying FinTech to empower high-quality development.

In 2021, PSBC implemented 389 IT projects, which served as a strong new engine for the building of a first-tier major retail bank. Meanwhile, YOU+ BANK was opened for business upon approval, adding a new inclusive financial service platform and digital life sharing platform to PSBC and opening up even greater development potential for the Bank. In terms of the development of e-CNY business, PSBC has further improved its e-CNY product matrix by launching over 230 functional components of e-CNY products. Meanwhile, it has given full play to its own characteristics to actively expand application scenarios, and has actively strengthened external cooperation to build an e-CNY ecosystem.

In fact, PSBC has vigorously implemented the strategy of building a strong bank with technology and increased IT input in recent years. Data show that PSBC invested over RMB27.2 billion in IT over the past three years, accounting for over 3% of its operating income. In the meantime, PSBC has built the three-tiered talent team comprising of “youth, backbone and leader” and strengthened the development of the IT talent team.

Through technology empowerment, PSBC has made financial services more proactive, targeted, accessible and better suit customers’ needs. For example, with online loan products such as Speedy Loan and Easy Small and Micro Loan, eligible customers can get a loan in just a few minutes at the fastest. With mobile business terminals, customer managers can handle loan applications, sign contracts and grant a loan on site, turning “window service” into “doorstep service”. The open fee payment platform provides one-stop services for public institutions and enterprises with fund collection & payment and bill management demands, thus offering convenient online and offline experiences to fee payment users.

Data show that as at the end of 2021, PSBC had more than 326 million mobile banking customers, and its transaction amount via mobile banking recorded RMB13.04 trillion, up 16.85% year on year. Nearly 95% of micro loans were granted online. The balance of online MSE loans recorded RMB713,099 million, representing an increase of 56.02% from the prior year-end. In two years after its launch, the open fee payment platform had nearly 20,000 active customers, and its transaction amount throughout the year exceeded RMB100 billion.

Green development——

Balance of green loans increased by 32.52%; PSBC is committed to building itself into a first-tier green, inclusive bank

When providing financial support to carbon peak and carbon neutrality, financial institutions should not only help to retain lucid waters and lush mountains but also jointly build “mountains of gold and silver with invaluable assets” with the real economy. As a bank with green as its defining color, PSBC has said that it will strive to build itself into a first-tier green, inclusive and climate-friendly bank and will support China in peaking carbon emissions by 2030 and achieving carbon neutrality by 2060.

In 2021, PSBC achieved a series of results in developing green finance. Aligning itself with international norms, the Bank officially adopted the Principles for Responsible Banking (PRB) and became a supporter of the Task Force on Climate-related Financial Disclosures (TCFD), in a bid to further improve environment and climate related information disclosure quality. It actively applied for carbon emission reduction support facility and gave major support to the development of key fields such as clean energy, environmental protection & energy conservation and carbon emission reduction technology. It launched innovative products like the sustainable development linked bond financing plan, sustainable development linked loan, etc. Moreover, it strengthened the application of its “Jinjing” (Gold Eye) credit risk monitoring system in the management of environmental and climate risks and facilitated 457 corporate customers in completing carbon accounting. Besides, it established ten green finance institutions including carbon neutrality sub-branches, green sub-branches and green finance departments.

Data show that as at the end of 2021, PSBC’s balance of green loans stood at 372,294 million, representing an increase of 32.52% from the prior year-end, the balance of green bond investments was RMB23,114 million, and green bonds underwritten by the Bank totaled RMB6.85 billion. In 2021, PSBC was awarded Grade “A” in MSCI’s ESG Ratings, which led the Chinese banking industry, and won the “Global Green Finance Award – Innovation Award” in International Financial Forum (IFF) which was the second
time for the award.

Steady and sustained development——

NPL ratio was 0.82%; PSBC continued to lead the industry in asset quality

Strong risk control capability is the core competitiveness of commercial banks in coping with uncertainties. To PSBC, a clean balance sheet, sound risk management and excellent asset quality have always been its investment value as well as a beautiful “business card”.

In 2021, PSBC accelerated the development of advanced approaches for capital management, and established the full-lifecycle management mechanism for risk models, which effectively improved the Bank’s refined measurement capability of risk cost and capital. It actively absorbed composite talents with FinTech background and built a professional team, thus further improving intelligent risk control system. Meanwhile, it conducted inspections in high-risk fields and implemented full-process management in a deeper manner to strengthen the “dam” that protects asset quality.

Thanks to effective measures, PSBC has always maintained excellent asset quality. Data shows that as at the end of 2021, PSBC’s NPL ratio was 0.82%, representing a decrease of 0.06 percentage point compared with the prior year-end, and allowance to NPLs ratio was 418.61%, representing an increase of 10.55 percentage points compared with the prior year-end and showing further improvement in its risk offsetting capability. Core tier 1 capital adequacy ratio was 9.92%, representing an increase of 0.32 percentage point compared with the prior year-end, and capital adequacy ratio recorded 14.78%, representing an increase of 0.90 percentage point compared with the prior year-end and indicating a continued increase in capital strength.

Robust culture——

PSBC attaches great importance to talents and culture and regards them as the inexhaustible sources to promote innovation-oriented and long-term development

As the saying goes, success comes to those who share in one purpose. Talents and culture are the inexhaustible sources to stimulate endogenous power and promote innovation and development of enterprises. PSBC has adopted a series of measures to improve its competitive advantage in talent resources and deepen corporate culture building, in a bid to strengthen the foundation for its long-term development.

PSBC will continue to improve the talent selection and recruitment mechanism based on the principles of openness, equality and fairness, promote the open recruitment, fixed-term appointment and contract management, improve the market-oriented recruitment mechanism, and change from “spotting talents via good judges” to “selecting talents through fair competition”. It will optimize the dual promotion channels of “management + professional” to provide employees with more career development opportunities. It will establish a performance-based appraisal mechanism based on the value created and apply the assessment results to the personnel management system, under which managers are prepared for both promotion and demotion, the salaries can be raised or cut, and employees can leave for poor performance, so that the talents can realize their value through frugality and entrepreneurship, and PSBC can achieve a competitive edge in human resources. In 2021, the Bank stood out from the fierce competition of more than 80,000 companies and was ranked among the top 30 best employers of the year in the “Best Employer Award 2021” co-sponsored by zhaopin.com and the Institute of Social Science Survey of Peking University.

Corporate culture is the inexhaustible source to stimulate endogenous power and promote corporate innovation and development. “Release concise documents, attend meaningful meetings, and make straightforward communications” “You are respected for your capacity to create value, not for your authority to dictate” “Dive into the market and get close to customers. It is an idea on paper without field study” “An action is better than a dozen of plans. Do it right away and get the job well-done” “Lessen invalid instructions and streamline front-line business”… In 2020, PSBC released its corporate culture system. Ten “Consensuses of PSBCers” were deeply recognized by its employees and even resonated with peers.

In 2021, the Bank promoted the implementation of its corporate culture in depth, made the “Consensuses of PSBCers” be internalized in the mind and externalized into practice, forged the strong core of the enterprise with culture, and strove to build a first-tier large retail bank that is responsible, resilient and caring.