Postal Savings Bank of China Co., Ltd. (stock code: 601658.SH and 1658.HK) (hereinafter referred to as “PSBC” or “the Bank”) released the 2023 Interim Report on August 30, 2023. In the first half of 2023, PSBC earnestly implemented the decisions and plans of the CPC Central Committee and the State Council, pursued the “5 plus 1” strategic path to vigorously develop technological finance, eco-finance, coordinated finance, industrial finance, green finance, and end-to-end risk management and compliance, blazed a trail of differentiated development around the five growth poles, namely, Sannong finance, microfinance, proactive credit extension, wealth management, and financial market business, relied on resource endowments to foster new competitive advantages, and kept accelerating the pace of innovative breakthroughs, transformation, and upgrading. By doing so, the Bank fulfilled its responsibility as a major state-owned bank with solid efforts, in a bid to open up new horizons of high-quality development.

According to the Report, as of the end of June 2023, PSBC’s total assets crossed the RMB15 trillion mark and hit RMB15.12 trillion, an increase of 7.51% over the end of the previous year; the total liabilities exceeded RMB14 trillion and reached RMB14.23 trillion, an increase of 7.48% over the end of the previous year; the net profit attributable to equity holders of the Bank amounted to RMB49,564 million, a year-on-year increase of 5.20% (calculated as per the China Accounting Standards for Business Enterprises (CASBE), the same below); excluding the one-off factor of the transformation to net-value wealth management products in the same period of the prior year, the net fee and commission income increased by 24.17% year on year, which maintained a double-digit growth for five consecutive years; the net interest margin was 2.08%, which stood at a relatively good level; and the non-performing loan (NPL) ratio stood at 0.81% and the allowance to NPLs ratio was 381.28%, maintaining excellent asset quality and risk offsetting capabilities.

With persistent efforts, PSBC managed to enhance its comprehensive strength, thus becoming more socially influential. It ranked 12th in The Banker’s list of 2023 “Top 1000 World Banks” in terms of tier 1 capital, reaching a new record high. Meanwhile, it continued to lead domestic commercial banks in terms of ratings by the three major international rating agencies, that is, Fitch, S&P, and Moody’s.

Further Enhancing the Quality and Efficiency in Serving the Real Economy

Serving the real economy is an inherent nature of finance. To actively fulfill the responsibility as a large state-owned bank, PSBC has increased credit supply with a view to channeling more financial resources into the real economy. As of the end of June, PSBC’s total loans to customers amounted to RMB7.82 trillion, an increase of 8.49% over the prior year-end; and loans to customers rose by RMB612,234 million, RMB75,269 million more than the increment in the same period of last year, which set a record high for the same periods in history.

Promoting coordinated regional development. PSBC proactively directed funds towards strategic regions, key industries, and major projects, and supported national strategies of key regional development. It facilitated the coordinated development of the Beijing-Tianjin-Hebei region, the Yangtze Economic Belt, and the Yangtze River Delta, supported the development of the Guangdong-Hong Kong-Macao Greater Bay Area, and the ecological protection of the Yellow River basin, and promoted the establishment of the Xiongan New Area and the Chengdu Chongqing economic circle. As of the end of June 2023, corporate loans granted to key regions surged by 16.51% over the prior year-end.

Driving the high-quality development of the manufacturing industry. Remaining committed to traditional manufacturing, PSBC actively sought to cooperate with advanced manufacturing enterprises with strong innovation and growth potential, and identified development opportunities in high-end equipment manufacturing, new energy vehicle supply chain, energy conservation & environmental protection, and new energy industries, strategic emerging industries, and green transformation of traditional industries. The Bank’s medium and long-term loans granted to the manufacturing industry increased by 23.64% over the prior year-end.

Making great efforts to develop green finance. In the first half of 2023, PSBC signed the Sustainable Blue Economy Finance principles of the UN, becoming the first large state-owned commercial bank in China to do so. The Bank released its first Task Force on Climate-related Financial Disclosures (TCFD) report, which demonstrated the practices it had conducted to build a first-tier green and inclusive bank, a climate-friendly bank, and an eco-friendly bank as well as the results already achieved therefrom. Meanwhile, a total of 25 green finance institutions have been set up, including carbon-neutral sub-branches, green sub-branches, and green financial centers to help local economies in their green and low-carbon transformation. As of the end of June 2023, the balance of green loans amounted to RMB569,699 million, an increase of 14.73% from the end of last year.

Cultivating scenarios for supply chain finance. Aiming at industrial digital finance, PSBC took roots in key industries, provided full-chain, full-process, and full-product supply chain financial services, and strove to improve the resilience and safety of the industrial chain and supply chain. In the first half of 2023, the Bank granted loans of RMB69,633 million in the supply chain business, with the balance increasing by RMB32,373 million over the prior year-end. The number of valid supply chain customers grew by 174.42% over the prior year-end.

Making Remarkable Headway in Building Five Differentiated Growth Poles

Maintaining firm strategic resolve and continuing to create and consolidate differentiated competitive advantages turn out to be key measures for a bank to attain its long-term value. PSBC continued to foster the five differentiated growth poles, namely, Sannong finance, microfinance, proactive credit extension, wealth management, and financial market business. It worked to better serve the real economy through its differentiated competitive advantages and achieved remarkable results in building a first-tier large retail bank with more solid efforts.

Rural revitalization is a strategy proposed by the Chinese government to meet what its people need and unlock market potential. Fully leveraging its resource endowments and other advantages, PSBC tapped into the potential of Sannong finance to become the main force of rural revitalization. From the beginning of 2023, the Bank accelerated the transformation of Sannong finance toward digitalized, scenario-based, and intensive operation, built a rural financial service system with its own characteristics, and formed four distinctive business modes to serve rural revitalization, that is, the proactive credit extension mode, whole-village credit extension mode, online and offline integrated mode, and coordinated service mode. It made continuous progress in building a rural credit system, steadily carried out universal credit extension to all farmers, and kept extending service reach in the field of rural revitalization. As shown in the Report, by the end of June 2023, the balance of agro-related loans exceeded RMB2 trillion, representing an increase of RMB232,964 million from the prior year-end and setting an all-time high for increments in the same periods in history. The balance of such loans accounted for about one-fourth of total loans to customers, a figure ranking high among large state-owned banks in China. Approximately 380,000 creditworthy villages were built; and over 10 million creditworthy households were recognized. The balance of personal micro loans was RMB1.32 trillion, an increase of RMB186,691 million from the prior year-end, with the incremental amount hitting a record high over the same periods in history.

With an extensive connection to ordinary people, micro and small enterprises (MSEs) are not just an important force in promoting innovation, employment, and people’s well-being, but also a niche area in which PSBC has been deeply engaged for a long period of time. Relying on the “5D (Digital)” microfinance system (namely digital marketing system, digital product system, digital risk control system, digital operation model, and digital service method), the Bank continuously strengthened its core competence in micro financial services, and endeavored to accompany MSEs through their growth and expansion. As of the end of June 2023, the balance of inclusive loans to MSEs amounted to RMB1.35 trillion, representing an increase of RMB170,282 million from the prior year-end and setting a record high for the same periods in history. The balance of such loans accounted for more than 17% of total loans to customers, steadily leading the performance among large state-owned banks. The number of customers with loan balances was 2,084.5 thousand, a net increase of 150.1 thousand from the prior year-end. Meanwhile, the Bank continuously improved the professional service system for technological finance, and created the “U Prosper” service brand under technological finance, so as to support the innovation and development of sci-tech enterprises with a full range of financial services. As of the end of June 2023, it served 61.4 thousand specialized and sophisticated enterprises that produce new and unique products and sci-tech enterprises, a year-on-year increase of more than 30%; and the balance of loans to these enterprises amounted to RMB292,381 million, a year-on-year increase of more than 40%.

Continuously improving the coverage, equity and availability of credit funds to meet customer needs remains an unrelenting pursuit of PSBC. The Bank accelerated the pace of proactive credit extension, deepened the application of intelligent risk control tools, built a proactive credit extension model for all customers with assets, completed the integration and analysis of multi-dimensional data on these customers such as basic information, asset data, and transaction records, and pushed forward the building of a digital operation system for proactive credit extension, thus creating an industry-leading online lending operation capability and turning proactive credit extension into a “golden touch” for customer outreach. As of the end of June 2023, the number of customers on the list of proactive credit extension exceeded 120 million, with the outstanding loans surpassing RMB100 billion.

In the face of the promising wealth management market, PSBC moved faster to upgrade its wealth management system, pushed forward the building of the customer chain operation system which supported stratified progress and continuous growth, and strengthened the capacity building of the wealth advisor team, in a bid to build a chain operation system covering long-tail customers and private banking customers, a specialized, dedicated and digitalized service system, a full-spectrum, high-quality and open-ended product lineup as well as a robust and smart risk control system. Three-dimensional financial services became accessible to a wider range of customers around the clock. As of the end of June 2023, the Bank served 656 million personal customers, of whom 50,505.9 thousand were VIP customers (each with assets of RMB100,000 at least), an increase of 6.67% from the prior year-end; and 4,741.1 thousand were Fujia customers and above (each with assets of RMB500,000 at least), an increase of 11.55% from the prior year-end. The AUM of personal customers hit RMB14.52 trillion, an increase of RMB632,496 million from the prior year-end.

Additionally, PSBC tapped deep into financial market business. The Bank refined its strategy management, properly allocated its assets, and promoted its transaction transformation. Relying on the interbank ecosystem platform “Together We Thrive”, it continued to deepen scenario building. As a result, the interbank ecosystem has became a more influential and popular brand. As of the end of June 2023, with over 2,100 registered institutions, the platform covered 85% of offline ecosystem clients. Nearly 800 interbank institutions carried out transactions on the platform, with a cumulative transaction volume of nearly RMB1 trillion.

Stimulating Development Vitality through Institutional Reforms

At a time when changes unseen in a century are unfolding at a faster pace, the banking industry sees profound changes in its operating and development environment. How to respond to the diversified financial needs of customers and the market, build up the ability to lead innovation, and attain sustained high-quality development is a major issue for commercial banks. In the first half of 2023, PSBC accelerated its innovation drive and focused on institutional reforms to solidify the foundation for further growth and fully stimulate development vitality.

PSBC has deepened institutional reforms and taken creating value for customers as its ultimate goal of survival and development. In the first half of 2023, the new “1 plus N” operation and service system was implemented and rolled out on all fronts, which centered around six spheres, that is, customer, product, cooperation, service, risk and technology. The Bank took the provision of lead bank services as its core, and pushed forward reforms in organizational mode, service mode, risk mode and incentive mode to achieve value co-creation with customers. According to the Report, the Bank newly acquired 170.8 thousand corporate customers in the first half of 2023, of which 157.6 thousand were active customers. The number of customers for whom the Bank served as the lead bank increased by 48.98%. The finance product aggregate (FPA) of corporate clients amounted to RMB4.21 trillion, an increase of RMB523,519 million from the prior year-end.

The intensive operation mode is an effective solution for large banks to reduce costs, improve efficiency, and prevent risks. PSBC accelerated the implementation of a three-year work plan for transition to intensive operation and pressed ahead with the intensive operation project of the Head Office with coordinated efforts. Ten major intensive operation projects were launched to form a centralized and multi-level credit factory system. The Bank realized automated review and approval of retail credit applications, continued to upgrade and optimize the review and approval model, and advanced the reform toward centralized operation of post-lending management.

With respect to the organizational reform, PSBC accelerated the creation of a barbell-shaped organizational structure, strengthened the leadership of the headquarters, pushed forward the organizational reform of tier-2 branches, and allocated resources more accurately and efficiently to key areas and critical links of business development. In doing so, the Bank empowered its transformation and development.

In terms of financial technology, the “future-oriented” concept was upheld to lead business development at PSBC. The Bank continued to expand the application of “future-oriented” technology, comprehensively improved the “future-oriented” risk identification capabilities, and kept tapping high-quality customer groups with a long-term view. As of the end of June 2023, it approved 3,514 customers using the “future-oriented” technology. While reconstructing the digital infrastructure, the Bank explored new business forms such as intelligent customer services by digital humans and generative AI-enabled card face customization. Meanwhile, it explored digital operation and introduced the innovative intensive operation mode called “cloud counter”. By upgrading digital channels, it reconstructed the new-generation mobile banking, which integrated facial recognition, optical character recognition (OCR), and other technologies into core functions, and became capable of providing highly personalized marketing services.

Maintaining Excellent Asset Quality and Risk Offsetting Capabilities

Strong risk control capabilities prove to be the core competitiveness of commercial banks in dealing with uncertainty. A clean balance sheet, good risk management practices, and excellent asset quality have always been PSBC’s shining name cards. According to the Report, as of the end of June 2023, the Bank’s NPL ratio was 0.81%, a decrease of 0.03 percentage point from the end of the previous year, and the allowance to NPLs ratio stood at 381.28%, indicating adequate risk-offsetting capacity.

PSBC has always upheld prudent and steady risk appetite, continued to build excellent risk management capabilities, and never overstepped the risk bottom line. In the first half of 2023, following the principle of “guaranteed by risk control”, the Bank further refined its comprehensive risk management framework, and drove digital transformation of risk management. Laying a solid foundation for risk control, the Bank launched a comprehensive risk management system, developed tools for panoramic risk monitoring and risk detection, and enhanced risk consolidated management. It further enhanced the risk monitoring and assessment mechanism for all subsidiaries, and strengthened the transmission of the Group’s risk appetite. Giving full play to the empowering role of risk management, the Bank continued to strengthen the credit extension policy framework, carried out innovative industry research and application, and enhanced the ability to pick out high-quality customers. It deepened the application of intelligent risk control tools, put in place a credit anti-fraud platform, refined the tiered customer management system, and realized more forward-looking and precise risk management. Firmly guarding the lines of defense against risks and non-compliance, the Bank optimized the long-term mechanism for internal control and case prevention, and effectively elevated the quality and efficacy of internal control and compliance management.

While continuing to promote intensive capital operation, PSBC sped up the adoption of advanced approaches to capital management in areas such as decision-making for credit extension, differentiated post-lending management, loan pricing, impairment provision, economic capital and performance appraisal, in a bid to carry out risk control with quality and efficiency further assured.

At the same time, PSBC actively utilized internal and external channels to replenish capital in an orderly manner. It successfully completed the private placement worth RMB45.0 billion and the issuance of tier 2 capital bonds worth RMB20.0 billion to further solidify the capital base and pursue long-term high-quality development. 

In the face of the new mission presented by the Chinese modernization drive and the new opportunities arising from the development of the country, society, and industry, PSBC will focus on the primary task of high-quality development and rely on resource endowments to reshape the development momentum. It will strive to build future-oriented competitive advantages by focusing on sustainable development, strengthen the coordination between the Bank and China Post Group to gain unique advantages, build digital and intellectual advantages in which the future lies, and get considerable advantages in the vast rural market. While implementing national strategies, supporting the real economy, and enhancing the people’s well-being, the Bank will expand the potential for further development, strive to become a large retail commercial bank with distinctive characteristics, and facilitate high-quality development with its distinctive financial services in all aspects.