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PSBC Releases Its 2022 Annual Results: Developing Five Differentiated Growth Poles

2023-04-10

On March 30, Postal Savings Bank of China Co., Ltd. (the “Bank” or “PSBC”) (Stock Code: 601658.SH, 1658.HK) released its 2022 annual report. In 2022, the Bank actively served and integrated into the new development pattern, stepped up efforts to develop five differentiated growth poles, namely, rural revitalization, micro, small and medium-sized enterprises, proactive credit extension, wealth management and financial market business, constantly expanded its development space in the process of implementing national strategies, supporting the real economy and improving people’s wellbeing, and strode toward a first-tier large retail bank.

The annual report shows that as at the end of 2022, the Bank’s total assets exceeded RMB14 trillion, an increase of 11.75% over the prior year-end; total liabilities recorded RMB13.24 trillion, an increase of 12.29% over the prior year-end; net profit attributable to equity holders of the Bank was RMB85,224 million, up 11.89% year on year; NPL ratio was 0.84% and allowance to NPLs ratio posted 385.51%. Asset quality and risk compensation capability remained excellent.

Expanding the space of development in the process of serving the real economy

Net profit attributable to equity holders of the Bank increasing by 11.89% year on year

In 2022, adhering to the principle of serving the real economy, focusing on the theme of high-quality development and centering around the strategic objectives and guidelines of the 14th Five-Year Plan of the Bank, the Bank pushed forward the implementation of various key strategic measures and actively supported the central government in maintaining overall economic stability. The Bank’s loans to the real economy increased by RMB705,378 million, accounting for about 90% of the Bank’s newly granted loans.

Meanwhile, through top-level design, cascade communication and pilot implementation, the Bank gradually strengthened major capabilities in six aspects: core business, system support, coordination and integration, technological facilitation, institutional drive and innovation leadership, realized top-down mindset upgrade and model reconstruction across the Bank, and saw scale and business income improve steadily. According to the annual report, in 2022, the Bank realized operating income of RMB335,391 million (International Financial Reporting Standards, similarly hereinafter), a year-on-year increase of 5.10%. Net profit attributable to equity holders of the Bank recorded RMB85,224 million, a year-on-year increase of 11.89%; net fee and commission income was RMB28,434 million, a year-on-year increase of 29.20%; return on weighted average equity was 11.89%, up 0.03 percentage point compared with the same period of last year; earnings per share was RMB0.85, up RMB0.07 compared with the same period of last year. As at the end of 2022, the Bank’s total assets exceeded RMB14 trillion and reached RMB14.07 trillion, an increase of 11.75% over the prior year-end, and total liabilities registered RMB13.24 trillion, an increase of 12.29% over the prior year-end.

In its operation and development, the Bank, taking a risk-based approach, made greater efforts to fulfill its responsibilities as a major state-owned bank, worked continuously to build excellent risk management capability and improved digital and intensive risk management in all respects. As at the end of 2022, the Bank’s NPL ratio recorded 0.84%; allowance to NPLs ratio stood at 385.51%; and asset quality and risk compensation capability remained excellent.

Determined to serve as the main force of Sannong finance

Balance of agro-related loans totaling RMB1.81 trillion

It is a major strategic plan of the CPC Central Committee to advance rural revitalization across the board and move faster to build up China’s strength in agriculture. The expanding investment in rural areas, stable agricultural economy and continuous increase in farmers’ income point to huge potential of the Sannong market and robust demand for Sannong finance.

The Bank faithfully carried out the decisions and plans of the CPC Central Committee and the State Council on rural revitalization. Centering around the digital transformation of Sannong finance, the Bank focused on the development of a rural credit system and gained support from the intensive operation of Sannong finance. It collaborated with China Post Group in projects to benefit farmers based on villages, cooperatives, farmers, agricultural enterprises and rural supermarkets, worked to build a digital ecosystem-based bank serving rural revitalization, and provided comprehensive services for Sannong, so as to facilitate the high-quality and efficient development of Sannong financial services and promote all-around rural revitalization. As at the end of the reporting period, the Bank’s balance of agro-related loans stood at RMB1.81 trillion, and its proportion in total loans was among the highest of large state-owned banks. The Bank vigorously built the rural credit system and extended credit to farmers, with the aim to “let the vast majority of farmers have credit from PSBC”. The Bank has designated 383.5 thousand creditworthy villages and rated more than 10 million creditworthy households.

In terms of strengthening FinTech empowerment, the Bank promoted digital transformation of Sannong finance. It focused on building an end-to-end whole-process digital credit business platform that allows flexible configuration of products, continuously optimized the features of online products, and accelerated the development of online products like Speedy Loan and “Easy Small and Micro Loan”, to offer rural customers efficient and convenient financial services. In 2022, the number of the Bank’s micro loans granted online accounted for over 95% of the total.

Staying committed to providing support to micro, small and medium-sized enterprises

Balance of inclusive loans to MSEs recording RMB1.18 trillion

Flourishing micro and small enterprises create vibrant job markets and a thriving economy. The micro, small and medium-sized enterprises are vital contributors to ensuring stable growth, employment and living standards, representing a field where PSBC devotes itself to for a long time and has a sharp edge.

In 2022, the Bank actively implemented the decisions and plans of the CPC Central Committee and the State Council for ensuring overall economic stability, and worked vigorously to help micro and small enterprises (MSEs) ease their burdens, overcome difficulties and restore development. It strengthened empowerment through technology, continued to optimize the “5D (Digital)” systems, i.e., digital marketing system, digital product system, digital risk control system, digital operation model and digital service method, and boosted the quality and efficiency of microfinance services. The Bank further optimized the long-term mechanism of “having the courage, will, ability and means to grant loans” to MSEs and strengthened the core professional capability of providing microfinance services. The annual report shows that as at the end of 2022, the Bank’s balance of inclusive loans to MSEs stood at RMB1.18 trillion, an increase of 23.04% over the prior year-end, and outstanding online loans to MSEs recorded RMB1.12 trillion, an increase of RMB403,146 million or 56.53% over the prior year-end.

In terms of serving specialized and sophisticated enterprises that produce new and unique products and sci-tech enterprises, the Bank set up 30 specialized institutions dedicated to providing financial services for sci-tech enterprises in key regions of the country to provide sci-tech enterprises with comprehensive, specialized and dedicated services. It customized rating models, worked out precise customer portraits, established the “future-oriented” evaluation approach, and refined the whole-life-cycle product system in support of sci-tech enterprises. As at the end of 2022, the Bank served 54.0 thousand specialized and sophisticated enterprises that produce new and unique products as well as sci-tech enterprises, with the loan growth rate exceeding 40%.

Reaching customers through proactive credit extension

More than 70 million customers on the proactive credit extension list

Making credit funds increasingly available to a wider range of customers in a more balanced fashion is what customers want and what the Bank pursues. Taking proactive credit extension as an important driver for developing differentiated competitive advantage and turning it into a “golden touch” for customer outreach, the Bank relied on smart risk control technology to pick customers with adequate data and controllable risks from fields such as Sannong finance, consumer credit, credit cards, corporate banking, etc. With such a precise and low-cost approach to reach customers, the Bank provides customers with online credit services through an instant approval process, striking a balance among risk control, business development and customer experience.

Take the proactive credit extension model for retail credit business for example. The Bank actively explored the proactive credit extension model for retail credit business, and relied on intelligent risk control technologies to tap the potential of existing high-quality customers. It promoted multi-channel collaboration to ensure market reach, used the online platform to handle loan applications, provided the ultimate customer experience featuring “instant approval and lending”, and created new growth points for retail credit business.

With the proactive credit extension model, the Bank adopted the centralized operation model, established a refined full-process monitoring system with the Head Office at the core, and realized data-driven service optimization and closed-loop risk management. In terms of customer acquisition, the Bank relied on the intelligent risk control platform to integrate and analyze various types of information on customers’ risks such as their assets, liabilities and transaction flow to build a big data model, and created a list of high-quality customers for proactive credit extension. In terms of marketing reach, the Bank carried out in-depth research on the needs, behaviors and preference of customers, provided targeted products, solutions and marketing strategies to various customer groups, and effectively enhanced marketing reach and customer conversion. In terms of customer application, the Bank integrated relevant products and IT resources, and streamlined and improved the online application and approval processes to create the ultimate customer experience of “instant approval and lending”. In terms of risk control, the Bank gave full play to the intelligent risk control model based on big data, formulated exclusive risk management plans for customers on the proactive credit extension list, developed differentiated pricing and credit line strategies, and hit a balance between sound risk control and consumer experience.

According to the annual report, since its launch in September 2022, the proactive credit extension business achieved fast growth in scale. As at the end of 2022, the Bank added more than 70 million customers to the proactive credit extension list, providing more than RMB50 billion of credit.

AUM approaching RMB14 trillion

Expanding the wealth management business to cover general households

The continuous drive for common prosperity, the reform of the income distribution system, the increase of household income and people’s unremitting pursuit of a better life constitute a huge market demand for wealth management. Unswervingly following the strategy of building a first-tier large retail bank and adhering to the concept of customer centricity and value creation for customers, the Bank focused on improving capabilities in six aspects, fostered differentiated competitive advantages, and accelerated the transformation toward a “wealth management bank”, so as to help a wide range of customers share in the gains of China’s economic development, and create value for both customers and the Bank itself.

The annual report shows that as at the end of 2022, the Bank’s income from personal banking business rose by 6.10% year on year, accounting for 70.19% of the operating income, up 0.66 percentage point year on year. The Bank served 652 million personal customers, with its AUM of personal customers reaching RMB13.89 trillion, up 10.83% over the prior year-end.

Meanwhile, the Bank has established a chain-like service system for customers ranging from long-tail customers to private banking customers. The Bank provides them with high-quality multi-product portfolios as well as intensive services, dedicated services and diversified services, so as to stay closer to customers, continually meet their needs, and help urban and rural residents grow their wealth steadily along with China’s economic development.

It’s worth mentioning that in 2022 the Bank moved faster to build the wealth management system and improve its all-round, differentiated and forward-looking comprehensive service capabilities. The number of Jingui customers (with assets of RMB100,000 (inclusive) to RMB500,000) and the number of Fujia customers and above (with assets of RMB500,000 and above) increased by 10.32% and 19.32%, respectively.

Giving play to the Bank’s role as a main player in the financial market

Facilitating more smooth and efficient financing

The banking market is an important vehicle for allocating funds and resources. With a stable fund pool and abundant resources, the Bank is an important participant in the financial market. As a main player in the financial market, the Bank has always energetically facilitated more smooth and efficient financing, and promoted the steady and healthy development of the financial system.

In 2022, the Bank deepened business innovation, intensified its efforts to expand online interbank deposits, explored a new business model for asset securitization products, launched the new online discounted bill product “Specialized New Discounting”, brought interbank certificate of deposit index fund and ESG-themed fund under custody for the first time, and successfully completed investments in offshore RMB bonds including the first transaction under Southbound Bond Connect, free-trade-zone bonds, etc. Meanwhile, the Bank seized the opportunity of trading transformation, gradually enriched trading varieties, boosted trading activity, and successfully launched the first standard bond forward business. It created an intelligent trading model, tried to carry out real quantitative trading, and optimized the bill circulation mechanism to promote fast circulation of bill assets, thus greatly consolidating its customer base and system support capability.

The annual report shows that in 2022, the Bank’s total number of interbank customers in the industry ecosystem reached 2,828; the number of local currency bonds quoted by PSBC as a market maker exceeded 800, maintaining the leading position among peers; the volume of over-the-counter bill trading amounted to RMB4.97 trillion, which was at the forefront of the market; and insurance funds under custody exceeded RMB700.0 billion for the first time, up 26.48% over the prior year-end.

Promoting the building of a green bank in all respects

Balance of green loans increasing by 33.38% from the prior year-end

Developing green finance is not only an objective need to build a community with a shared future for mankind and promote harmony between human and nature but also an intrinsic requirement of commercial banks to serve low carbon transition and realize high-quality development.

The Bank vigorously developed sustainable finance, green finance and climate financing, practiced the philosophy that “lucid waters and lush mountains are invaluable assets”, strictly followed national policies and regulatory requirements, and supported the UN’s Sustainable Development Goals (SDGs) for 2030 and the Paris Agreement. From the aspects of top-level design, policy system, resource allocation, product innovation, risk management, technology empowerment and green operation, it vigorously developed sustainable finance, green finance and climate financing, actively explored transition finance and just transition, supported biodiversity protection, and contributed to the realization of carbon peaking and carbon neutrality goals.

The annual report shows that as at the end of 2022, the Bank’s balance of green loans amounted to RMB496,549 million, up 33.38% over prior year-end; the balance of green bond investments amounted to RMB29,950 million, up 29.58% over prior year-end; the value of green bond underwriting amounted to 11,770 million. The Bank was rated as an “Advanced Organization in Green Bank Evaluation” again by China Banking Association, and awarded “A” in MSCI’s ESG ratings for two years in a row.

Putting forth effort to advance the building of a digital ecosystem-based bank

IT investment accounting for 3.18% of operating income

In 2022, guided by its IT Planning for the 14th Five-Year Plan period, the Bank further promoted the implementation of the “SPEED” IT strategy featuring smart, platform, experience, ecosystem and digitalization, providing technological support for the digital transformation of the Bank. According to the annual report, in 2022 the Bank’s IT investment amounted to RMB10,652 million, representing a year-on-year increase of 6.20% and accounting for 3.18% of its operating income; and 330 IT projects were put into operation, which effectively empowered financial services with intelligent technology, cut service costs and improved customer experience.

To further improve personal financial services, the Bank launched the mobile banking app 8.0, which provides multiple versions for the young people, Sannong customers as well as a large-font interface for elderly customers. It offers inquiry of account details for the past eight years and local services through the city channels. With such efforts, the Bank continued to break down boundaries of industry innovation to provide users with safer, more convenient, more efficient, smarter and more thoughtful mobile banking services. Meanwhile, the Bank concluded the development of the new generation core system for personal banking business. With this system, the Bank was the first large bank to adopt a next generation core system with both enterprise-class business models and a distributed microservice architecture. The system can process up to 67,000 transactions per second at peak time, which can satisfy the business development needs of the Bank for the next 10 years.

In terms of empowering corporate banking with FinTech, the Bank’s first batch of new generation core system for corporate banking business was successfully put into operation, which strengthened the integration of customers, products and channels, optimized business process and service models, and enhanced the Bank’s core competitiveness in corporate banking. A new corporate mobile banking app was also launched, with a standard version, an MSE version, etc. to meet diversified needs of different customer groups. It provides various functions such as USB security key-free transactions, smart transfer, all-online inclusive loans and integrated workbench, and introduces financial services scenarios in a broad sense, which includes financial management and industrial & commercial information services, effectively promoting the digital transformation of corporate banking business.

What’s worth mentioning is that the Bank, adhering to digital transformation as the drive and following the concept of open bank, ecology bank, digital bank and technology bank, successfully launched and put into operation the “Together We Thrive” interbank ecosystem platform, which provides interbank customers with multi-layer comprehensive financial products and services. In 2022, the Bank launched a financing trading hall, a bill trading hall and a fund trading hall on the platform, with more than 1,100 customers signed for the platform.

In 2023, as China embarks on a new journey to build a modern socialist country in all respects, the banking industry has ushered in a new landscape with greater opportunities. The Bank will stick to the original aspiration of serving the real economy, follow the “5+1” strategic path, vigorously develop technological finance, eco-finance, coordinated finance, industrial finance and green finance, and maintain risk control and compliance throughout every process. The Bank will continue to develop the five differentiated growth poles with innovation as the drive, provide high-quality financial services and play its due part in building China into a modern socialist country in all respects.