On April 29, Postal Savings Bank of China Co., Ltd. (hereinafter referred to as “PSBC” or “the Bank”, Stock Code: 1658.HK) released its quarterly report for 2022 Q1. With high-quality development as its priority, PSBC made all-out efforts to serve economic and social development and strove to build a first-tier large retail bank in 2022 Q1, suggesting a steady start for the year. Statistics show that as at the end of March, PSBC’s total assets and assets under management (AUM) of personal customers both surpassed RMB13 trillion. The Bank worked to ease the difficulties of businesses and proactively serve the real economy, with the balance of inclusive finance loans to micro and small enterprises(MSEs) exceeding RMB1 trillion; scaled up the support for Sannong and fully served the rural revitalization, with the balance of agro-related loans reaching RMB1.68 trillion; fully implemented the national strategies and increased credit supply to key areas such as transportation infrastructure, clean energy and environmental protection, granting a total of RMB2.46 trillion corporate loans. Overall, the Bank recorded a steady and sound performance and maintained good asset quality.

Proactively serving the real economy with the proportion of new loans to the real economy reaching 98.56% in Q1

In Q1, PSBC actively fulfilled its responsibility as a large state-owned bank, made coordinated efforts in improving pandemic response and contributing to economic and social development, and effectively served various types of market entities, with an aim to ensure the smooth logistics and the stability of the industrial chain and supply chain. Statistics show that the net increase of PSBC’s loans to customer in Q1 amounted to RMB354,674 million, up RMB82,184 million year on year, of which 98.56% were contributed by new loans to the real economy.

As MSEs is huge in number and involves all walks of life, their financing difficulties concern not only market vitality, but also people’s livelihood. PSBC has continued to deepen its financial services for MSEs and accelerated the digital transformation of micro finance. It enhanced the coverage of financial services to MSEs with competitive digital products such as “Easy Small and Micro Loan” and “Speedy Micro Loan” and unremittingly worked to ensure the stable and efficient credit supply for MSEs. As at the end of March, the Bank’s balance of inclusive finance loans to MSEs exceeded RMB1 trillion, with its proportion to the Bank’s all loans staying at the forefront among large banks. Meanwhile, PSBC advanced financial services to specialized and sophisticated enterprises that produce new and unique products as well as technology startups, signed a strategic cooperation agreement with the Torch High Technology Industry Development Center of the Ministry of Science and Technology, and lent to more than 19,000 specialized and sophisticated enterprises and innovative high-tech enterprises.

Stabilizing the agricultural fundamentals and consolidating the foundation for Sannong is the cornerstone for the country to tackle the changing situations and open up new prospects. To scale up support for Sannong, PSBC continued to develop rural credit system, accelerated the development of micro loans, and provided credit services for spring ploughing and its preparation, as part of its efforts to promote rural revitalization in an all-round way. As at the end of March, the total amount of PSBC’s micro loans exceeded RMB1 trillion, and the balance of agro-related loans stood at RMB1.68 trillion; the Bank also built around 232,800 creditworthy villages and rated approximately 3,897,800 households as creditworthy.

China now has about 300 million new urbanites, who serve as a critical force for the future development of cities and towns. With nearly 40,000 outlets covering 99% of counties (cities) in China, PSBC takes new urbanites as an important customer group.  In order to promote financial services for new urbanites, the Bank developed a financial service plan for new urbanites. A special “U+ Card” was launched with multiple fee cuts and discounts, so as to increase credit support and continuously improve the financial service experience for new urbanites and help them to live a better life with good use of financial resources.

In addition, PSBC actively took national policies as its guidance, increased credit supply in key areas such as transportation infrastructure, clean energy and environmental protection, and supported the development of the real economy. Statistics show that as at the end of March, the Bank’s corporate loans amounted to RMB2.46 trillion, representing an increase of 9.32% compared with the prior year-end.

Solid progress was made in capacity building to help create new advantages for future competition

The offering of first-class financial services relies on first-class system capabilities. Only with the strong support of the back office can the front office better satisfy the differentiated financial needs of the customers. Entering 2022, PSBC has sped up its efforts to strengthen major capabilities in six aspects including core business, system support, coordination and integration, technological facilitation, institutional drive and innovation leadership, with the aim to empower transformation and development and improve customer experience.

In 2022 Q1, PSBC implemented the IT planning for the 14th Five-Year Plan period, and 53 projects successfully went online, including the “PSBC Brain” knowledge graph system. It further enhanced its independence and controlability by adding eight self-developed systems, including the new generation AML system and cash management business system. The proportions of independent R&D projects, application of self-developed platform, and agile R&D projects in total development projects continued to improve. Furthermore, the Bank strengthened data empowerment and included special bond marketing and corporate deposits growth to the pool of major projects. It also enriched the customer data marts by adding five new sectors and over 450 customer tags. So far, close to 1,300 tags for retail customers have been put into use.

The core system comes as the top priority of a bank’s IT system building. It is the brain and heart of a bank, as well as an important reflection of a bank’s technological strength. On April 23, the new generation core system for the personal banking business of PSBC was successfully put into operation. The system was the first of its kind among large banks to adopt both enterprise-level business modeling and distributed micro-service architecture. It injected new momentum into PSBC’s digital transformation and customer experience improvement. The Bank also redesigned the front office operation interface of outlets to streamline the handling process, reduce manual procedures, improve processing efficiency and shorten the time for customers to handle business. The transaction time of international remittance business, for example, was cut by half on average.

The intensive operation model is an ideal solution for large banks to reduce costs, improve efficiency and prevent risks. It was understood that PSBC further optimized its bank-wide operation system in accordance with the principle of “front-office business handled at the back office, back-office business centralization, intensive business handled professionally, shared professional processing, and cloud-based sharing of services”, so as to realize intensive operation, intelligent processing, automatic dispatch and lean management of the business in all channels, and provide shared operation services for all business lines and branches. In 2022, PSBC accelerated the development of the intensive operational model to further improve the cost utilization efficiency. It sped up to build an industry-leading retail credit factory, implemented logical integration of retail credit across the country, and upgraded the retail credit factory model from centralized operations in provincial branches to nationally centralized operations. The Bank continued to improve its management capability and service quality in the post-lending stage and pushed forward with the building of a post-lending centralized management system of retail credit through coordination among the Head Office, branches and sub-branches in an orderly manner. As of the end of March, the cost to income ratio of PSBC fell by 0.14 percentage point year on year.

The balance of green loans exceeded RMB400 billion, further boosting the realization of peak carbon emissions and carbon neutrality goals

Financial support serves as an important driver in realizing the goals of peak carbon emissions and carbon neutrality. Staying committed to the green development philosophy, PSBC took green finance as one of the four strategic areas in its 14th Five-Year Plan Outline, put forward the proposition of “Green World, Better Life”, and vigorously developed sustainable finance, green finance and climate financing. The Bank also provided support for biodiversity conservation, strove to build PSBC into a first-tier green inclusive bank, climate-friendly bank and ecology-friendly bank, and contributed to achieving the goal of peak carbon emissions by 2030 and carbon neutrality by 2060.

In 2022 Q1, PSBC issued and implemented an action plan for peak carbon emissions and carbon neutrality, drawing up a blueprint and master plan for green development, and proposing a timetable and roadmap for the progressive promotion of carbon peak and carbon neutrality. The Bank developed the key points of work related to carbon peak and carbon neutrality and green finance in 2022, and clarified the annual targets and major tasks. It also put into practice the Principles for Responsible Banking (PRB) and picked up efforts to develop green finance businesses such as green loans, green financing and green bonds, with a total of 11 green financial institutions established.

The quarterly report of 2022 Q1 shows that as at the end of March, the balance of PSBC’s green loans amounted to RMB402.537 billion, representing an increase of 8.12% compared with the prior year-end. The Bank picked up the digital transformation of green finance and the “green credit service based on big data technology” project was incorporated into the pilot project of comprehensive application of financial data initiated by the People’s Bank of China.

Total assets exceeded RMB13 trillion, and the Bank’s development saw a steady improvement in quality

The quarterly report of 2022 Q1 shows that as at the end of March, the total assets of PSBC surpassed RMB13 trillion to reach RMB13.27 trillion, representing an increase of 5.45% compared with the prior year-end, of which total loans to customers amounted to RMB6.81 trillion, representing an increase of 5.50% compared with the prior year-end. Total liabilities surpassed RMB12 trillion to reach RMB12.43 trillion, representing an increase of 5.41% compared with the prior year-end, of which total customer deposits amounted to RMB11.92 trillion, representing an increase of 4.98% compared with the prior year-end.

The business size of PSBC grew steadily with the profitability remaining unchanged. As at the end of March, PSBC recorded an operating income of RMB85.256 billion (under IFRSs, the same below) in Q1, up 10.17% year on year, of which RMB9.087 billion was fee and commission income, up 39.59% year on year. Net profit attributable to equity holders of the Bank reached RMB24.977 billion, up 17.81% year on year. The annualized ROA and annualized ROE stood at 0.78% and 14.82% respectively, up 0.04 percentage point and 0.02 percentage point compared with the same period of last year.

PSBC has always taken structural optimization as the starting point and ultimate goal of its management, with a focus on high-quality business development. In terms of revenue structure, while fully implementing the requirement of fee reduction and profit concession, PSBC attached great importance to enhancing its fee and commission income through upgrading the wealth management system. Statistics show that in 2022 Q1, the ratio of fee and commission income to the total operating income of PSBC was 10.66%, representing an increase of 2.25 percentage points year on year. In terms of customer management, PSBC strengthened its service capability in customer management, serving over 640 million individual customers, including nearly 45 million VIP customers and 3.88 million affluent customers. The total number of corporate customers exceeded 1.2 million; the interbank ecosystem covered 1,809 customers. Adhering to the philosophy of creating value for customers, PSBC achieved rapid growth in the scale of AUM of personal customers in Q1, with AUM exceeding RMB13 trillion as at the end of March.

Risk control guarantee continued to deepen, and asset quality remained stable and good

Asset quality is the cornerstone of a bank’s sustainable and healthy development. PSBC has always regarded asset quality as the “lifeline” of its development. The Bank, with the worst-case scenario in mind, continuously improved the development of the comprehensive risk management system featuring “all aspects, whole process and entire staff”. In 2022 Q1, PSBC accelerated the use of advanced capital management approaches, and researched and formulated a new round of advanced approaches development plan; it clarified the overall risk appetite requirements and the orientation of major risk strategies in 2022 to support high-quality business development; it accelerated the digital transformation of risk management and attracted outstanding talents in risk management and control; it also conducted targeted risk screening in key areas, improved the dynamic risk monitoring mechanism, and initiated the building of a comprehensive risk management system, so as to enhance the proactiveness and foresight of risk monitoring.

The Bank’s asset quality remained good and stable. Statistics show that as at the end of March, the Bank’s non-performing loan ratio stood at 0.82%, remaining unchanged compared with the prior year-end; the Bank’s capital strength further improved with the successful issuance of RMB30 billion of perpetual bonds and RMB40 billion of tier-2 capital bonds, and the capital adequacy ratio was 14.99%, up 0.21 percentage point compared with the prior year-end.