On August 22, Postal Savings Bank of China Co., Ltd. (the “Bank” or “PSBC”) (Stock Code: 601658.SH, 1658.HK) released its 2022 interim report. In the first half of this year, the Bank responded to Covid-19 and supported economic and social development in a well-coordinated way. While putting in place the policies and measures aimed to maintain stable macroeconomic performance, the Bank continuously deepened its five-pronged transformation towards uniqueness, comprehensiveness, lightness, digitalization and intensiveness, strengthened the building of major capabilities in six aspects including core business, system support, coordination and integration, technological facilitation, institutional drive, and innovation leadership, and accelerated the building of a first-tier large retail bank. The Bank’s operating results showed good momentum.

According to the interim report, as at the end of June 2022, the Bank’s total assets reached RMB13.43 trillion, an increase of 6.66% over the prior year-end; total liabilities registered RMB12.59 trillion, an increase of 6.72% over the prior year-end; operating income reached RMB173,635 million (prepared under IFRSs, the same below), a year-on-year increase of 10.05%; net profit attributable to equity holders of the Bank was RMB47,114 million, a year-on-year increase of 14.88%; net fee and commission income reached RMB17,880 million, a year-on-year increase of 56.44%; and NPL ratio was 0.83%, which kept an excellent level in the industry.

Reading through the interim report, PSBC’s 2022 interim results could be summarized by five keywords, which are: growth, responsibility, quality, transformation, and innovation.

Keyword 1: Growth

Registering sound operating results with positive momentum: both operating income and profit recorded a two-digit growth

In the first half of 2022, with the effective implementation of a package of policies and measures aimed to maintain stable growth, the economy steadily picked up, people’s living needs were effectively met, and overall social stability was remained. Against such backdrop, PSBC registered sound operating results, with both the operating income and net profit attributable to equity holders of the Bank realizing a two-digit growth.

PSBC has always pursued high-quality, sustainable growth in business development. The interim report shows that as at the end of June 2022, the Bank’s total assets reached RMB13.43 trillion, an increase of 6.66% over the prior year-end, and total liabilities recorded RMB12.59 trillion, an increase of 6.72% over the prior year-end.

High-quality business development acts as the cornerstone of stable profitability. In the first half of 2022, the Bank realized a two-digit growth in both income and profit. Its net profit attributable to equity holders of the Bank recorded RMB47,114 million, a year-on-year increase of 14.88%; and operating income reached RMB173,635 million, a year-on-year increase of 10.05%.

The intermediary business features less capital consumption, lower risk, high customer stickiness and stable earnings, which is an effective means of banks to optimize income structure and strengthen operating capacity. Even though the Bank started later in this business, it has developed fast and has great room for further growth, and the market has much expectation for it. According to its interim report, in the first half of 2022, while implementing the government policy of cutting fees and making profit concessions, the Bank advanced in depth its strategy of boosting the leapfrog growth of intermediary business income. Its net fee and commission income maintained rapid growth and reached RMB17,880 million, a year-on-year increase of 56.44%.

Thanks to the rapid development of all business segments, the Bank saw its value creation ability further improved. Data show that in the first half of 2022, the Bank’s ROA (annualized return on average total assets) and ROE (annualized return on weighted average equity) recorded 0.73% and 13.35% respectively, up 0.02 and 0.05 percentage point year on year respectively.

Keyword 2: Responsibility

Continuing to provide support to the real economy: balance of agro-related loans accounted for about one fourth

Finance and the real economy can be described as coexistence and co-prosperity. Serving the real economy is a bounden duty of financial institutions. The Bank firmly bore in mind the country’s most fundamental interests, placed serving the real economy in an important position and increased fund support to key areas and weak links, and allowed more financial resources to be channeled into the real economy.

Micro and small enterprises (MSEs), which are large in number and extensive in scope, vigorous and flexible, are the important foundation of stable economic growth and the main force for stabilizing employment. The Bank advanced its service to MESs on all fronts, continued to optimize the long-term mechanism of “having the courage, will, ability and means to grant loans” to MSEs. It provided full support to MSEs, self-employed individuals and other market entities to overcome difficulties and improved the coverage, availability and convenience of inclusive financial services. The interim report shows that as at the end of June 2022, the Bank’s balance of inclusive loans to MSEs was RMB1.09 trillion, accounting for more than 15% of the total loans to customers, ranking in the forefront of major state-owned banks.

Reinforcing the role of “Sannong” as ballast stones is of great importance to economic and social development. The Bank attached great importance to financial services for Sannong. It strengthened the top-level design for serving rural revitalization, continued to increase credit supply in key entities and fields of rural revitalization, strove to pursue the dream of “letting the vast majority of farmers have credit from PSBC”, and promoted the general availability of credit for creditworthy villages, sparing no effort to serve rural revitalization. According to the interim report, as at the end of June 2022, the balance of agro-related loans amounted to RMB1.72 trillion, an increase of RMB104,264 million over the prior year-end, accounting for about a quarter of the total loans to customers, which ranked in the forefront of major state-owned banks; and a total of 304.1 thousand creditworthy villages were built, with 4,861.5 thousand recognized as creditworthy households.

It is noteworthy that the Bank centered on the country’s regional development strategies and the development of the real economy and increased loan supply to technological innovation, manufacturing and green development fields. The interim report indicates that as at the end of June 2022, the Bank set up a financial service system for sci-tech enterprises. Focusing on the special demands of specialized and sophisticated enterprises that produce new and unique products and sci-tech enterprises at different growth stages, the Bank provided specialized, differentiated comprehensive financial services. The number of specialized and sophisticated enterprises that produce new and unique products and sci-tech enterprises to which loans were extended was more than 20,000. The Bank deepened its business in the traditional manufacturing industry, and actively expanded its business for advanced manufacturing enterprises with strong innovation capability and growth potential. The medium and long-term loans to the manufacturing industry increased by 19.23% over the prior year-end. The Bank formulated and carried out the action plan for peaking carbon emissions and realizing carbon neutrality, vigorously developed green finance business and explored transition finance. The balance of green loans amounted to RMB433,671 million, an increase of 16.49% over the prior year-end.

Keyword 3: Quality

Steadily improving development quality and efficiency: NPL ratio stood at 0.83%

In the first half of 2022, the Bank actively responded to changes and challenges in the external environment. While putting concrete efforts to support stable economic recovery, the Bank worked to make its own management more forward-looking, refined and scientific, and promoted high-quality development through more proactive management.

In terms of asset allocation, the Bank made every effort to provide more funds to the real economy and continuously optimized its asset and liability structure. In terms of credit extension, the Bank made proactive arrangement in terms of the pace and channeled more financial resources to the real economy in a more effective manner. As at the end of June 2022, the Bank’s total loans to customers reached RMB6.99 trillion, an increase of RMB536,965 million over the prior year-end and RMB60,823 million more than the growth for the first half of last year; loan-to-deposit ratio and the proportion of credit assets increased by 0.83 and 0.80 percentage point respectively over the prior year-end. With greater flexibility in the allocation of non-credit assets, the Bank enhanced market analysis and prediction, scientifically formulated fund allocation strategies, reasonably grasped the investment pace, continued to expand investment channels, actively increased the investment in high-RAROC (risk-adjusted return on capital) assets, and strengthened circulation and product innovation.

In terms of liability management, the Bank tapped the potential of structural adjustment by vigorously developing value deposits, leading to the high-quality development of its liability business with “stable size, optimal structure and lower cost”. According to the interim report, as at the end of June 2022, the Bank’s customer deposits totalled RMB12.12 trillion, an increase of RMB768,444 million over the prior year-end, RMB212,906 million more than the growth for the first half of last year.

In terms of risk management, the Bank continued to deepen the comprehensive transformation towards digitalization and intensiveness, and promoted the development and application of advanced approaches for capital management. Its risk management capacity was effectively improved and sound asset quality was maintained. The interim reports shows that as at the end of June 2022, the Bank’s NPL ratio was 0.83%, an excellent level in the industry.

Keyword 4: Transformation

Accelerating transformation and upgrading: AUM reached RMB13.41 trillion

The Bank accelerated transformation and upgrading in line with its principle of “creating value for customers”. While striving to build differentiated competitive advantages, the Bank enhanced both the customer value and its profitability.

There is a general consensus that banks shall meet different financial needs of clients through stratified customer management in developing wealth management business. The Bank continuously consolidated the retail banking as its core business, and accelerated the upgrading of its wealth management system with AUM (assets of individual customers under management) as the backbone. With a focus on the diversified needs of individual customers, the Bank deepened the stratified customer management, and accelerated the establishment of a professional capability system, so as to share the benefits of economic development with more people and achieve a rapid increase in AUM. The interim report shows that as at the end of June 2022, the Bank served 644 million individual customers, with the AUM reaching RMB13.41 trillion, an increase of RMB881,224 million or 7.03% over the prior year-end. In addition, customers’ total assets with the Bank saw an improvement. The number of VIP customers reached 46,248.0 thousand, an increase of 8.49% over the prior year-end; the number of affluent customers exceeded 4 million to reach 4,060.2 thousand, an increase of 13.98% over the prior year-end.

The Bank made remarkable achievements in the transformation and development of the corporate banking business. In the first half of the year, the Bank accelerated the development of corporate banking. Focusing on the six dimensions of customer, product, collaboration, service, risk, and technology, it continued to build the new “1 plus N” operation and service system and further improved the tiered corporate customer architecture. As a result, the number of corporate customers increased rapidly and the quality and efficiency of its financial services ascended to a new level. The interim report shows that, as at the end of June 2022, the Bank’s corporate loans amounted to RMB2.52 trillion, an increase of 11.76% over the prior year-end; 158.3 thousand corporate customers were new acquired, and the aggregate number increased by 10.22% over the prior year-end.

The intensive operation is an effective solution for large banks to lowering cost, improving efficiency and preventing risks. The Bank optimized its organizational structure and business model, continuously optimized the centralized operation model of retail credit factory, and further standardized operations. It steadily promoted intensive operation, and moved closer toward the modern commercial bank operation model that is efficient, intelligent and low-cost, providing customers with quality and efficient services.

Meanwhile, the Bank followed the guidance of its IT Planning for the 14th Five-Year Plan period, the five-year big data planning, the cybersecurity planning, etc., empowered transformation through technology development, and stepped up coordination between business and technology. Through the implementation of the four “new generation” systems (new generation core system for personal banking, new generation core system for corporate banking, new generation core system for credit card, and new generation mobile banking), ten major programs and 100 key projects, the Bank further strengthened the development of the enterprise-level sharing platform, promoted agile R&D in depth, and brought the IT team close to the business frontline, so as to support the digital transformation of the Bank at a faster pace. In the first half of 2022, the new generation core system for personal banking was fully put into service, blazing a trail for serving over 600 million customers on a distributed platform. Adhering to innovation-driven development, the Bank deepened the application of AI, blockchain, cloud computing, etc. in key fields and continued to build the “platform + capability + application” FinTech innovation and application landscape.

Keyword 5: Innovation

Driving development via innovation and continuing to improve customer experience

Innovation is the primary driver of development. In the first half of 2022, the Bank continued to deepen reform, accelerated digital transformation, enhanced the endogenous development momentum with innovative products and services, and strove for a higher level of development and better customer experience.

Establishing YOU+ BANK is an important move for the Bank to actively implement the requirements of financial reform and accelerate its digital transformation. As the first independent legal-entity direct bank initiated by a major state-owned bank, YOU+ BANK is committed to serving Sannong, supporting MSEs, and bringing benefits to the general public. On June 30, YOU+ BANK officially opened for business, launched the first batch of products, and built four business platforms, namely, scenario-based finance, inclusive credit, mass wealth management and digital village, aiming to build itself into a “light and smart bank”.

Mobile banking is the key in the change from “banking by mouse clicks” to “banking at fingertips”. The Bank is committed to building its mobile banking into a comprehensive financial service platform online that provides customers with personalized services with a human touch. The interim report shows that as at the end of June 2022, the number of the Bank’s mobile banking customers reached 335 million, the transaction amount of mobile banking in the first half of 2022 was RMB6.75 trillion, and the monthly active users (MAUs) of mobile banking exceeded 49 million.

As a designated operator of e-CNY, the Bank made full use of its unique resources to strengthen product R&D and scenario development and further promoted the e-CNY pilot program. It rolled out many innovative products including e-CNY Consumer Loan, Corporate Umbrella Wallet, etc. and expanded e-CNY application scenarios in medical & healthcare, transport & travel, culture & tourism, rural revitalization, and department stores & retail sectors. The interim report shows that the Bank ranked first among the authorized operators in terms of the number of personal wallets opened through the e-CNY APP.

New urban residents are an important force driving the future development of cities and towns. The Bank has an extensive outlet network and a huge customer base, in which new urban residents are an important customer group. For new urban residents, the Bank developed special financial service solutions. With a focus on new urban residents’ aspirations for a better life, the Bank launched the exclusive debit card “U+ card” and exclusive micro loan products. Moreover, the Bank increased support and services to meet the needs of new urban residents for personal consumer loans, and focused on improving the availability and convenience of financial services for them. The Bank also kept improving new urban residents’ financial service experience and took solid steps to enhance their sense of gain, happiness and security.