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Today, Postal Savings Bank of China (stock code: 1658.HK, hereinafter referred to as the “Bank”) announced its 2018 results. The annual report shows that in 2018, the Bank achieved a significant increase of 16.18% in operating income, and the profit before allowance saw a growth rate up to 39.91%, with net interest margin growing significantly by 27 BPs year-on-year. The cost-to-income ratio declined by 7.04 percentage points. Asset quality continued to lead the industry with the NPL ratio at only 0.86% and allowance coverage ratio reached up to 346.80%.
Operating results hit a new high and profitability improved steadily
In 2018, the Bank’s profitability improved steadily, and its return on total assets, net interest margin, capital adequacy ratio, cost-to-income ratio and other indicators improved markedly. The 2018 Annual Report shows that the Bank’s operating income reached RMB261,245 million with a year-on-year growth of 16.18%, and net profit amounted to RMB52,384 million, exceeding RMB50 billion for the first time and showing a year-on-year increase of 9.80%. The net interest margin (NIM) increased by 27 BPs to 2.67%, remaining top among peers. The cost-to-income ratio stood at 57.60%, down 7.04 percentage points year on year, and return on average total assets (ROA) was 0.57%, a rise of 2 BPs year on year.
The Bank also realized a steady growth of assets and liabilities. As at the end of 2018, the Bank’s total assets reached RMB9.52 trillion, a rise of 5.59% from the end of 2017 and liabilities exceeded RMB9 trillion to RMB9.04 trillion, growing by 5.36% from the prior year-end, among which, the balance of deposits increased by 7.00% to RMB8.63 trillion. The Bank ranked 21st in terms of total assets in The Banker’s Top 1,000 World Banks 2018.
In the meantime, the Bank’s business structure was further optimized. Its total loans increased by 17.82% from the end of 2017 to RMB4.28 trillion, exceeding RMB4 trillion for the first time. The proportion of loans to total assets reached 44.94%, and the loan-to-deposit ratio reached 49.59%, up 4.57 percentage points from the prior year-end, delivering on the goal of “achieving a loan-to-deposit ratio around 50% in three years” at the time of listing.
Profit before allowance grew rapidly and asset quality remained excellent
According to 2018 Annual Report, the Bank’s profit before allowance reported a year-on-year increase of 39.91%, which is quite difficult to achieve in the current market conditions. Meanwhile, the allowance coverage ratio increased by 22.03 percentage points from the prior year-end to 346.80%, twice of the industry average.
It is worth mentioning that a clean balance sheet has always been one of the biggest highlights of the Bank. According to the Annual Report, the Bank’s NPL ratio was 0.86%, less than half of the industry average. The proportion of NPLs plus special-mention loans was 1.49%, less than 1/3 of the industry average. Compared with the current regulatory requirements that loans overdue for more than 90 days should be included as NPLs, the Bank has adopted a more prudent risk policy and stressed the forward-looking nature of risk management. The Bank’s ratio of NPLs to loans overdue for more than 90 days reached 1.33. Loans overdue for more than 60 days have all been included in NPLs and the proportion of loans overdue for more than 30 days reached 97%, so the Bank kept its excellent asset quality in the industry.
In addition, thanks to sustained profitability and effective cost control and relying on internal capital replenishment, the Bank’s capital adequacy ratio increased by 1.25 percentage points to 13.76%, and its ability to mitigate risks was further enhanced.
Serving the real economy effectively with remarkable results and business advantages continued to be consolidated
On February 11, 2019, the China Banking and Insurance Regulatory Commission announced that the Bank was reclassified as a “large commercial bank”. The Bank has actively fulfilled the responsibility as a state-owned large-scale bank, deepened the supply-side structural reform of the financial industry, and fully utilized its resource endowments to serve the real economy and provide financial services to more than one-third of the Chinese population. As of the end of 2018, the Bank’s total personal loans exceeded RMB2 trillion for the first time, reaching RMB2.32 trillion.
“Sannong” (agriculture, rural areas and farmers), private sector and inclusive financial loans to small and micro enterprises are not only key emphases encouraged by the government, but also the direction of industry transformation. It is highly consistent with the Bank’s positioning and characteristics to serve communities, SMEs and “Sannong” customers.
In 2018, the Bank enhanced its service for rural revitalization, and the agriculture-related loans had a balance of RMB1.16 trillion, up RMB107,286 million or 10.18% from the prior year-end. Active support was provided to private enterprises and small and micro businesses, and inclusive financial loans to small and micro businesses numbered 1,457,700, with a balance of RMB544,992 million, ranking among the highest in the industry. The Bank helped to win the battle of targeted poverty alleviation and the balance of poverty alleviation loans (including loans to those already out of poverty) through financial services was RMB93,858 million, representing an increase of RMB32,294 million or 52.46% compared with the prior year-end. With a purpose of satisfying the demand for financial services of the masses, the Bank grew the balance of personal operational loans to RMB557,126 million while the average size of each micro loan was RMB78,100, showing the Bank’s considerable support to Sannong customers and micro businesses. The balance of residential mortgage loans of the Bank was RMB1.42 trillion, and 850,000 residential loans was provided in 2018 with an average amount of RMB470,000, effectively serving the rigid housing demand.
Based on the “direct-operated + agency outlets” model, the Bank steadily strengthened its core liability advantages. By the end of 2018, the Bank’s deposit balance totaled RMB8.63 trillion, of which personal deposits amounted to RMB7.47 trillion. The percentage of deposits in total liabilities was 95.43% and that of personal deposits in total deposits was 86.56%, both ranking first among peers. Its market share of savings deposits was 10.96%, the fourth largest in the banking sector. The cost of deposits reported 1.42%, continuing an excellent level in the sector.
The Bank develops a “12345” strategy indicating enormous development potential
The postal remittance services were introduced in 1898, and then the postal savings business in 1919. The year of 2019 is the 100th anniversary of the Bank’s postal savings business and also the first year for the Bank classified as a large state-owned bank. After a century’s development, how can the Bank continue to exert its inherent advantages and deepen its transformation to meet new challenges? Under the leadership of the new Board of Directors, how will the Bank plan its future development?
In the Message from the Board of Directors and Senior Management in 2018 Annual Report, the Bank defines a “12345” strategy and will adhere to the main route of transformation and development. It will consolidate the advantages of county-level outlets, and create a strategic pattern with urban and rural areas as the two wheels driving development. It will adhere to the three major positionings of serving the community, SMEs and Sannong customers, strengthen the four pillars of headquarters leadership, risk management, information technology and talent team, promote five transformations of specialized, comprehensive, light, intelligent and intensive management transformations, and strive to become “the most trusted and valuable large-scale retail commercial bank”.
To be specific, the Bank will highlight “five adheres”, i.e., adhere to the serving the real economy as its foundation and basis, risk prevention and control as the lifeblood of business development; the reform and innovation as the source of sustainable development; creating a distinctive competitiveness in an open and collaborative way; and the professional value as key to long-term success.
Besides, the Bank will, based on technological empowerment, accelerate the pace of digitization, increase investment in information technology, deepen the application of big data, and continue to promote transformation and upgrade of outlets to realize “connected, shared, intelligent, and innovative” development. With the help of large postal networks, the Bank will actively expand financial business, share customer resources and improve comprehensive competitiveness and cross-selling capabilities. The Bank will continue deepening cooperation with strategic investors and large-scale premier and core enterprises and realize seamless integration between online and offline channels and between financial transactions and consumption scenarios, effectively transforming the network advantage into a competitive advantage. The Bank will build a career development platform that allows employees to contribute with their talents, improve themselves and be well motivated, improve the incentive system based on job value assessment and performance appraisal with market competitiveness, so that the vitality of talents can be fully realized.
The Bank undertakes that it will adhere to the new development concept, bear the responsibility as a large state-owned bank, usher in a new phase of high-quality development, make due contributions to deepening the supply-side structural reform of the financial sector, and present its outstanding achievements as a gift for the 70th anniversary of the founding of the People’s Republic of China.
Quoted from www.chinanews.com
March 26, 2019