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Technology Empowers PSBC’s Transformation into a New Retail Bank with Eight Core Competitive Edges Sharpened

2021-05-07

Postal Savings Bank of China Co., Ltd. (the “Bank”) is committed to delivering financial services to the customer groups playing an active role in China’s economic transformation, namely Sannong (agriculture, rural areas and rural residents) customers, urban and rural residents and small and medium enterprises (SMEs). The Bank is accelerating its transformation towards a new retail bank featuring data-driven development, channel coordination, interaction between wholesale banking and retail banking, and efficient operation, and endeavoring to become a first-tier large retail bank which is trustworthy, distinctive, prudent, safe and innovative with remarkable value.

Well-defined strategy for retail banking. The Bank boasts a broad outlet network covering urban and rural areas and a large number of retail banking customers. The Bank gives priority to serving Sannong customers, urban and rural residents as well as SMEs, and has determined and firmly implemented a distinctive strategy for retail banking by leveraging on its own competitive edges and resources. The Bank has established a strategy management system covering the whole process of research, formulation, implementation, monitoring, assessment and adjustment of strategies. It maintains strategic resolve while getting ready to adjust the approach when necessary. Through these efforts, the Bank has developed differentiated competitive advantages, built a good brand image and achieved excellent operating results, fully displaying the potential for growth.

As at the end of 2020, the Bank had nearly 40,000 outlets and served 622 million personal customers. Its assets exceeded RMB11 trillion for the first time, reaching RMB11.35 trillion, an increase of 11.12% from the prior year-end. Liabilities recorded RMB10.68 trillion, up 10.43% from the prior year-end. In 2020, the Bank realized operating income of RMB286.537 billion, a year-on-year increase of 3.40%. Net profit recorded RMB64.318 billion, a year-on-year increase of 5.38%. Net interest margin and net interest spread were 2.42% and 2.36%, respectively, continuing to lead the industry.

A unique distribution network consisting of directly-operated outlets and agency outlets. The Bank has established a stable, transparent, fair and mutually beneficial principle-agent relationship with China Post Group, its controlling shareholder. Based on its distribution network consisting of directly-operated outlets and agency outlets, the Bank boasts a great number of outlets with wide coverage and deep involvement at primary level. Capitalizing on the advantages of China Post Group in resources, it has established a multi-dimensional and multi-layered coordination mechanism in customers, channels and products to deepen cooperation with China Post Group, securities companies and insurance companies, and to provide customers with integrated financial service solutions.

Personal banking with unique advantages. The Bank makes full use of its outlet network covering urban and rural areas to serve more than 40% of the population in China, showing its unique characteristics in retail banking. It vigorously pushes forward systemic outlet transformation and the development of a wealth management system, speeds up digital transformation and scenario-based customer acquisition, and creates a retail credit service system covering consumer credit, micro loans and credit cards. Besides, it makes efforts to establish a three-in-one development model characterized by “attracting users, retaining customers, and delivering more value” to empower high-quality development of retail banking. Therefore, the Bank secures a leading position among peers in key indicators such as the proportion of operating income from personal banking, AUM (asset under management) of retail customers and scale of personal deposits.

As at the end of 2020, the Bank’s personal deposits exceeded RMB9 trillion for the first time, which accounted for 87.81% of the Bank’s total deposits. Personal loans took up 56.92% of total loans. AUM of retail customers reached RMB11.25 trillion, an increase of more than RMB1 trillion from the prior year-end. Income from personal banking rose 12.17% year on year and accounted for 69.15% of operating income, up 5.41 percentage points from the previous year.

Corporate banking with breakthrough development. The Bank leverages the important role of corporate banking in the strategy of building a large retail bank and focuses on coordination and synergy between wholesale banking and retail banking. On one hand, it expands customer marketing, improves the customer service and management system, and puts in a great deal of efforts to serve SMEs and industrial chain customers. In addition, the Bank strengthens online scenario-based marketing, facilitates the establishment of a comprehensive business model of “commercial banking + investment banking + asset management”, and realizes the rapid growth of customer base. On the other hand, the Bank intensifies efforts to increase basic capabilities, improves the product system, streamlines the business process, launches corporate banking services at outlets, spares no effort on team building, and focuses more on technology empowerment. With remarkable latecomer advantages in corporate banking, it makes significant achievements in business transformation. As at the end of 2020, the Bank’s balance of corporate loans stood at RMB1.98 trillion, an increase of RMB237.221 billion from the prior year-end.

Treasury and asset management business taking deep roots. Leveraging its significant network advantages and solid financial strength, the Bank is an important medium and long-term lender in the interbank market with strong market influence. With abundant products and comprehensive qualifications for treasury and asset management business, the Bank provides its partners with integrated financial services including financing, wealth management, agency business, custody and consulting. Through years of stable development in financing and agency services, it has accumulated abundant interbank customer resources and won a good market reputation, laying a solid foundation for deepening cooperation with other financial institutions.

As at the end of 2020, the Bank’s financial investments amounted to RMB3.91 trillion, representing an increase of RMB239.620 billion or 6.52% from the prior year-end. AUM for wealth management exceeded RMB1 trillion, and the rate of net value- based products increased by 24.18 percentage points as compared with the prior year-end. Custody assets registered RMB4.27 trillion, up RMB297.041 billion from the prior year-end.

Sound and effective comprehensive risk management. Adhering to the risk-based approach and upholding a prudent risk appetite, the Bank continuously improves its risk management system covering “all aspects, whole process and entire staff”. It carries out regular risk assessment, and effectively implements the risk appetite, thereby improving the quality and effectiveness of risk management across the board. It moves ahead with the implementation of the advanced approaches for capital management as scheduled and pushes forward improvement in terms of the risk governance system, management and control of credit business procedures, governance of problems in credit customer ratings and applicability of the internal rating and risk control model. After the outbreak of the epidemic, the Bank made positive responses by continuously monitoring and mitigating risks on all fronts. Therefore, it secured a steady development trend, and maintained good asset quality, displaying strong risk resilience abilities.

As at the end of 2020, the Bank’s NPL ratio recorded 0.88%, less than half of the average of the industry. Special-mention loans accounted for 0.54%, down 0.12 percentage point from the prior year-end and less than one fourth of the industry average. Overdue ratio stood at 0.80%, down 0.23 percentage point from the prior year-end. Allowance to NPLs ratio was 408.06%, up 18.61 percentage points from the prior year-end.

Commercially sustainable inclusive finance. As an initiator, forerunner and contributor of inclusive finance, the Bank has been dedicated to inclusive finance and played an active role in serving rural revitalization and the integrated urban-rural development. On top of the traditional advantages in outlet network and professional teams, it keeps deepening fintech application, accelerating digital transformation, expanding online service channels, improving operation efficiency and intelligence of risk prevention and control, and reducing operating and risk costs. Moreover, the Bank has built an “online plus offline” integrated and coordinated network on all fronts to continuously serve more extensive basic customer groups and facilitate the joint growth of customers and banking values.

Since it launched micro loan business, the Bank has granted over RMB5 trillion loans to nearly 40 million customers, meeting their demands for micro funds. As at the end of 2020, the Bank’s balance of agro-related loans registered RMB1.41 trillion, up RMB149.676 billion from the prior year-end. The balance of inclusive loans to micro and small businesses was RMB801.247 billion, up RMB148.062 billion from the prior year-end. The balance of personal consumer loans stood at RMB2.36 trillion, up RMB345.601 billion from the prior year-end.

IT capabilities under rapid development. Regarding IT as the core drive of business development, the Bank cultivates leading personnel in technology with rapidly growing headcount, and constantly improves capabilities of independent R&D and fintech innovation. It completed the 13th Five-Year Plan for IT Application by launching 16 enterprise-level platforms such as the credit business platform, realizing the blueprint for business architecture and application architecture, improving product innovation capability and user experience in an all-round way, and effectively supporting its digital transformation with a super-large core business system based on an open platform serving more than 600 million customers. It built the big data platform, cloud computing platform, blockchain service platform and “PSBC Brain” artificial intelligence platform, developed a fintech middle office, and empowered customer marketing, operation management and risk management with new technologies, supporting the strategy of building a large retail bank.

In 2020, the Bank invested RMB9.027 billion in IT, accounting for 3.15% of its operating income, and the number of technology personnel at the Head Office doubled that in the previous year. The Bank has made new progress in the fintech field, specifically: It completed the 13th Five-Year Plan for IT Application by building an enterprise-level information platform, integrating IT application with business development, realizing agile product iteration, speeding up the building of digital scenarios and continuously improving the “finance plus service” ecosystem. The Bank joined the national e-CNY pilot program upon approval, launched independent system R&D, and developed at a faster pace convenient and diversified scenarios for the use of e-CNY. The Bank became the first major state-owned bank to obtain the direct banking license, and launched PSBC Online Corporation to build an innovation platform which serves rural revitalization with financial services and creates better life with technology.