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China Zheshang Bank Co., Ltd. (hereinafter referred to as “CZBank”) is one of the 12 national joint-stock commercial banks approved by the China Banking Regulatory Commission (“CBRC”). Headquartered in Hangzhou, Zhejiang, CZBank is the only national joint-stock commercial bank headquartered in Zhejiang province. Our predecessor, “Zhejiang Commercial Bank”, was a sino-foreign banking joint venture established in Ningbo, Zhejiang in 1993. Upon approval of the CBRC on June 30, 2004, Zhejiang Commercial Bank was reorganized, renamed, relocated and converted into the existing CZBank which commenced its business officially on August 18, 2004. As of the end of June 2016, CZBank has established 144 outlets in 12 provincial level divisions or municipalities including Beijing, Tianjin, Liaoning, Shanghai, Jiangsu, Shandong, Hubei, Guangdong, Chongqing, Sichuan, Shaanxi and Gansu and in all provincial cities of Zhejiang Province, effectively covering the Yangtze River Delta Area, the Bohai Rim Area, the Pearl River Delta Area and certain areas in the Central and Western China. At the same time, it is arranging the establishment of its Hong Kong branch proactively in order to accelerate the increase of its international presence.
In virtue of the flexible market mechanism, strategic nationwide coverage as well as efficient operation and management, the Company has developed into a quality commercial bank with solid foundation, excellent benefits, rapid growth and excellent risk control since its reorganization in 2004. The Company ranked the 158th and 117th among the “Top 1000 World Banks 2016” by The Banker in terms of tier 1 capital and total assets respectively. It was granted the AAA corporate credit rating by CCXI, which is the highest credit rating CCXI grants to financial institutions. It was also awarded “The Bank with the Best Corporate Liquidity Services”, “The Investment Bank Most Respected by Investors”, “Best Bank Wealth Management Brand”, “Award for Internet Finance Innovation”, “The Most Reliable Financial Institution—Joint-stock Commercial Bank chosen by Zhejiang Merchants” and “Award of Best CSR Practice Case Study” by various renowned institutions and authorities.
Our vision is to become the most competitive national joint-stock commercial bank and Zhejiang’s most important financial platform. To qualify as “The most competitive national joint-stock commercial bank”, we must incorporate the highest professional level of a first class joint-stock bank into the services provided to the target customers and possess distinct competitive strength as to the ability for innovation, risk control, market-based services and value creation; we must reach a business scale of a national joint-stock commercial bank which may support the continuous development of professionalism. To qualify as “Zhejiang’s most important financial platform”, we must become the iconic financial group in Zhejiang possessing comprehensive functions, with one of the largest operation scale, outstanding results, sound reputation; we must be a front runner in terms of deployment of resources, provision of efficient service, and business innovation, and a strategic partner to different levels of government, financial institutions, key enterprises, and numerous merchants in the province. While being “the most competitive” is the essential basis for becoming “the most important financial platform”, being “the most important financial platform” is a solid achievement which will reinforce the case for becoming “the most competitive”. Therefore, the two are mutually supportive.
Based on our judgements regarding development trends of the macroeconomy and the financial market conditions, the trend for corporate demand changes, the supervision trends of regulatory authorities, the transformation trend of the banking industry, the Company has put forward a full-asset class operation strategy to embrace the “new normal” and sought the realization of the rapid development and overtaking in an economic transition period. Full-asset class operation strategy is a systematic operation strategy that covers management and coordination of front, middle and back office and enables the Company to actively adapt to the market environment of high uncertainty and rapid changes, formulate an agile operation system with a clear direction, flexible mechanism, diversified tactics and various instruments. Full-asset class operation strategy is comprised of three parts, namely business expansion, internal management and strategic direction:
With respect to business expansion, the Company will explore source of customers continuously in serving the whole economy and adjust according to the actual changes based on the needs of corporate customers, personal customers, small and micro customers and inter-bank customers. The Company will also strengthen synergy of business lines and cross-selling and meet customers’ changing and diversified needs through product portfolio and product innovation timely and effectively.
With respect to internal management, the Company will step up construction of its institutions and channels, enhance innovation of products and business models that are market-oriented and customer-experience driven, establish credit assets, trading assets, investment assets and inter-bank assets that match market demand and customer needs, whereby the Company’s liability operation capability can be driven by its asset operation capability. Therefore, the Company can transform from an asset holding bank to an asset management and trading bank and continuously innovate full-asset and liability management system and optimize comprehensive risk management system.
Strategic direction refers to formation of differentiated competitive advantages, exploration of diversified sources of profit, effective balance of impact of the economy, market or business fluctuation on the Company’s asset size and profitability, so as to achieve a growth higher than our peers and accomplish the general objective of “two most”. Differentiated competitive advantages can be reflected in the combination performance of our business and products in different development stages and the adjustment to the importance of business according to changes of market and customer demands.
After operation for more than a decade, the Company has built up significant development advantages:
First, we are among the fastest growing banks and is highly efficient in operation and management. Benefiting from the full-asset class operation strategy, the Company has total assets exceeding RMB1,000 billion for the first time in 2015. As of the end of June 2016, our total assets amounted to RMB1,181.634 billion, our deposit balances and outstanding loans were RMB644.555 billion and RMB410.622 billion, representing an increase of 14.54%, 24.91% and 18.88% respectively as compared to the beginning of 2016. Such increase is at the top of the list among listed national joint-stock commercial banks. In the first half of 2016, net non-interest income amounted RMB4.003 billion, representing an increase of 179.93% as compared to the same period of last year. The proportion of net non-interest income increased by 11.50 percentage points on a year-on-year basis. We recorded net profit of RMB4.735 billion, representing an increase of 42.37% as compared to the same period of last year. The CAGR of our operating income, profit before provisions and ROE for the past three years (2013-2015) are among the best when compared with other listed national joint-stock commercial banks.
Secondly, we strive to develop ourselves into a bank that provides corporate liquidity services and full-value-chain services. In response to the diversified needs of liquidity services of corporate customers, we have adopted the “pooled financing” services model represented by products such as “Yongjin Bill Pool” (涌金票据池), “Yongjin Export Pool” (涌金出口池) and “Yongjin Assets Pool” (涌金资产池) under the direction of the full-asset class operation strategy, effectively enhancing customers’ comprehensive asset management ability and profitability, and realizing the objective of being the financial partner and the trusted bank for customers. As of the end of June 2016, we had more than 6,200 customers of Asset Pool (资产池) (Bill Pool (票据池)) who signed contracts with respect to these products, representing an increase of more than 60% as compared to that at the beginning of the year, with an accumulated pooled asset amount of more than RMB280 billion, representing an increase of more than 74% as compared to that at the beginning of the year. In addition, we have actively promoted transformation of traditional financial service model, explored a full-chain and comprehensive investment and financial service system, expanded corporate financing channels, and promoted innovation in trading business model which combined loans and asset securitization, engagement in private placements business of listed companies on the basis of credit increase by substantial shareholders, as well as cooperation with external private funds to participate in the direct investment in equity of governmental industrial funds. Our product lines and service lines have covered the financial needs of enterprises during each development stage, and we have established business partnership with over 100 listed companies or their shareholders. All of these have contributed to our initial capabilities to provide full-value-chain services to enterprises.
Thirdly, we strive to forge a bank for inter-bank trading service. The inter-bank financial business segment is committed to acquiring high quality customers, designing innovative products, achieving excess returns for CZBank. We have also set up six departments at the head office level, including Financial Market Department, Capital Markets Department, Financial Institutions Department, Asset Management Department, Asset Custody Department and Financial Market Risk Management Department, gradually forming an improved and professional inter-bank financial service platform. In the recent two years, in order to actively respond to the new trend of liberalization of interest rates as well as more established integrated operations and stricter regulation, we adheres to transformation, innovation and compliance, diversifying the source of assets and liabilities, increasing the profit gradually and enhancing value contribution. Moreover, through innovations of businesses, models and systems, the Company also strengthened the cooperation with all kinds of transacting parties in the capital markets to participate in the development of the different tiers of the capital market, explore various businesses connected with the capital market and innovate business models through collaboration between investment and lending. We have provided integrated financial service to over a hundred listed companies, entities from the New Economy and local industry funds. By serving the real economy instead of the virtual economy, the Company has achieved high recognition and influence in the market.
Fourthly, we make efforts to build a bank providing customized services for small and micro enterprises. As the pioneering commercial bank in China with a small and micro enterprise business, China Zheshang Bank set up the first specialized branch in the PRC offering services exclusive to small and micro enterprises in June 2006. We have continuously developed and improved the relevant systems and business procedures for small and micro enterprises and innovatively developed featured products that satisfy the primary needs of small enterprises, such as our “bridge and tunnel mode” (桥隧模式), “villager guaranteed loan” (村民保证贷), “one day release loan” (一日贷), “three-year loan” (三年贷), “zero down payment loan” (全额贷) products. We launched products and services including “accounts universal” (账户通) with public and private interactive payment function, “credit universal” (信用通) with limit adjusted neatly and “growth loan” (成长贷) satisfying needs of small and micro customers upon its size growth and customized exclusive finance service products including “residential loans of Small and Micro Enterprise” (小微民宿贷) and “Youth Entrepreneurs loan” (青年创客贷) against financing “pain points” of different customers, which effectively increased customer service capacity and continuously improved customers’ average usage times of products. We reinforced our effort to support the undertaking of the personnel from “Innovation and Entrepreneurship Program” (双创) (such as “Thousand Talents Program For our Nation and Province” (国千、省千)) through holding the financial cooperation meeting with the personnel from “Thousand Talents Program” (千人计划). At end of June 2016, the loan balances for “Innovation and Entrepreneurship Program” increased by RMB5.7 billion as compared to that at the beginning of this year, which results in the increase of the Company’s brand recognition for the small and micro enterprises. As of the end of June 2016, the national-standard small enterprise loan balance was RMB120.546 billion which increased by RMB13.132 billion or 12.23% as compared to that at the beginning of the year. The increase exceeded that for the same period of last year by RMB6.178 billion.
Fifthly, we strive to develop ourselves into a bank for personal wealth management. The Company maintained a positive development trend in business operations and achieved rapid growth in customer scale and financial assets by strengthening the “Internet plus” and innovation. Furthermore, the Company actively integrated the Internet genes and created personal business with featured competitive strengths, and successively launched businesses and products including a new version of mobile banking, a one-stop investment and wealth management platform “finance market” (财市场) and the first individual pooled credit financing product in the industry “zengjin wealth pool” (增金财富池). The Company gradually focused on residential mortgage loans and consumption loans, launching a new consumption loan product “Zhe mortgage loan” (浙抵贷). As of the end of June 2016, the aggregate balance of residential mortgage loans and consumption loans increased by 165% as compared to that of the beginning of the year and loan quality kept excellent. The Company also launched characteristic services including personalized card and ready-made credit card, and built promotion brand “Accommodation & Entertainment, Full Strategies for Life in Zhe” (食宿行乐,浙有生活全攻略), which greatly improved the customers’ card using experience and service quality. As of the end of June 2016, the number of effective individual customers was 1.5265 million, increased by 38.73% as compared to that of the beginning of the year; individual financial assets balance was RMB94.208 billion, increased by 31.30% as compared to that of the beginning of the year. A total of more than 500,000 credit cards have been issued by the Company.
Sixthly, China Zheshang Bank has laid solid foundation for the development of internet finance business. Capitalizing on the core financial strength, the Company proactively integrates the technology and spirit of internet in restructuring products, services and the management system, providing a plenty of secure and convenient financial services for our customers. As for the management system, we have integrated the internet into each of our business lines instead of confining it in one single department. Products and services such as Zengjinbao and online transfer of financial products launched in the personal business, as well as “Yongjin Notes Pool” launched in the corporate business all adopt the concept of internet financing. We have pioneered in utilizing biometric facial recognition technology in our direct marketing of mobile banking customer registration. We innovatively launched the featured Internet financial products such as “Receipt and Payment Express” (收付通), “Custody Express” (存管通), “E-commerce Payment” (电商付) and “Mobile Cloud Pay” (移动云支付). In addition, we conducted comprehensive custody business cooperation, and have developed a multi-class custody business system including custody for third party payment companies, custody for bulk trading and custody for prepaid card for single purpose. We also continuously optimize the experience of customers who use our electronic banking channels. The replacement rate of electronic banking channels exceeded 95%, which is among the best level in the industry.
Seventhly, China Zheshang Bank has the solid capability of risk management. We have adopted a positive and solid risk management strategy, which focuses on the compatibility between our risk management and business operations and the effective and strategic risk management. We have established and keep refining a comprehensive risk management system which is in line with the Company’s full-asset class operation strategy. On a basis of remaining relatively independent and effectively check and balance, we strengthen the integration and highly link between risk management and business operation, adhere to relative independence, professional management, effectiveness, quick response and gradually form a comprehensive risk management system which is beneficial for operation, risk management and innovation. Despite the trend of growing non-performing loan ratio reported by financial institutions nationwide in recent years, the Bank have managed to maintain its asset quality at the highest rank among listed national joint-stock commercial banks. As of the end of June 2016, our non-performing loan ratio was 1.33%, allowance to non-performing loans was 229.27% and allowance to total loan ratio was 3.06%. China Zheshang Bank implements a relatively vertical risk management model by assigning risk monitoring officer to important departments at our head office and to each branch. The risk monitoring officer assists the president of the branch in organizing comprehensive risk management which focuses on managing and controlling various business risks that are significant, complex and difficult. Each risk monitoring officer directly reports to our head office and acts independently from the related branch to report risk events to the head office. This practice ensures the independence of risk management. Furthermore, The Company implements line risk management model which means to establish risk management centre in important business lines so as to improve the professional level and work efficiency of risk management.