China International Banking Convention 2011 How the Asian
China International Banking Convention 2011 How the Asian Banker evaluates the competition in Chinas banking industry today 26th May 2011 Beijing Copyright The Asian Banker 2011. 2010. All rights reserved 1/104 The Retail Banking Working Group is keeping track of retail banking trends Copyright The Asian Banker 2011. 2010. All rights reserved 2/104 Copyright The Asian Banker 2011. All rights reserved How we assess the financial services industry in China Scope of Financial Institutions National Banks, Joint Stock Banks, City Commercial Banks, Rural Banks, Foreign Banks (overall 96 banks) Evaluation Criteria Rational and transparent evaluation process based on balanced scorecards Retail Banking Product Awards Taking stock of innovative products and process improvements Technology/Infrastructure/Risk Awards Implementations that make an impact on the business International Panel of Referees Supervises and verifies the comprehensive 2 months evaluation exercise of The Asian Banker Research team Retail Banking Product Awards - Best Wealth Management Product - Best Internet Banking - Best Branch Banking - Best Mobile Phone Banking Application - Best City Bank Branch - Best Provincial Town Bank Branch - Best Mortgage Product - Best Credit Card Product - Best Bancassurance Product - Best SME Product - Best Deposit Product Technology and Infrastructure Awards - Best Banking Technology - Best Core Banking Implementation - Best Risk & Analytics Project - Best Data Center Initiative - Best E-Banking Project - Best HR Systems Implementation - Best Call Center Project - Best Banking Security System Risk Management Award Copyright The Asian Banker 2011. All rights reserved Chinas largest bank has more customers than entire financial industries in Asia Pacific Number of customers for the largest banks (million, 2010) Copyright The Asian Banker 2011. 2010. All rights reserved 5/104 Chinas financial industry dwarfs other countries by its asset size Total Banking Assets of the Financial System ($ trillion, 2010) Copyright The Asian Banker 2011. 2010. All rights reserved 6/104 China has twice as many branches as India Number of Branches in China and India)
Number of Branches Number of Branches in Asia Pacific (Ex China and India) Copyright The Asian Banker 2011. All rights reserved The evaluation of China s retail financial services is based on 10 dimensions Scorecard for Best Retail Bank Value of Franchise Financial Performance Core Deposits Operating Profit (%, $) Market Share/Change in Core Deposits Retail Return on Assets (%) Classification of Delinquencies Risk Reporting Structure Clearly Conceptualized Strategy Average Cross Sell (Mass) NIM (bps) Average Cross Sell (Affluent) Excellence Submission Market Share Mortgages Cost to Income Ratio (%) Process & Technology Time to Market Net Credit Loss ($) Sales Management Depth of Reporting (AR) 3rd party providers Gross NPL (%) Portion of Recurrent Income (%) Strategy Portion of Fee Income (%) AUM (%, $) Risk Management Sustainability Customer Cycle Times Distribution Peoples Skill Ethical Banking Proportion of Self Service Transaction to Total Portion of Senior Executives with more than 13 years of Experience in the Bank (Retail, IT) Published Ethical Service Document Straight through Processing
Branch - Fee Income/Core Deposits Centralisation of Branch Processes Uptime of ATM (monthly) Automation Levels of Assets/Liabilities Mgmt Market Share Credit Cards Attrition Rates (Sales, IT) Proportion of Active Bill Payment Users (e/banking) Budget for Training (% of operational Cost) Copyright The Asian Banker 2011. All rights reserved Depth of Social Corporate Responsibility Large scale Chinese banks balance their revenues by diversifying their competencies Ranking of Chinese Retail Banks 2011 Ranking 2009 2010 2 1 1 na 4 1 Strategy 2011 Value of Financial Sustain Franchise Performance ability Sales Risk Penetration Process Efficiency Technology Distribution Efficiency Channels People Skills Ethical Banking Total Scores 4.0 4.0 7.0 5.0 5.0 5.0
2.5 1.3 17.5 4 7 0.8 0.6 2.6 1.4 1.2 2.0 2.0 2.2 2.5 1.3 16.6 Average Score Top 10 2.7 1.9 3.4 2.4 2.2 3.6 3.5 3.3 2.3 1.6 26.9 Average Score Chinese banks 1.7 1.2 2.6 1.7 1.7 2.2 2.3 2.4 2.5 0.9 19.3 GAP 1.5 0.6
0.6 0.7 1.0 1.6 1.7 1.2 0.0 0.7 9.6 6 9 10 BoCom Source: Asian Banker Research Areas managed well Copyright The Asian Banker 2011. 2010. All rights reserved Highest GAP to Top 10 9/104 The Evaluation Criteria for Internet Banking are based on 6 key dimensions Scorecard Internet Banking Financial Performance Transactional Strength Revenue generated Revenue per registered customer Revenue structure Fee income Fee income per customer Fully loaded cost per transaction Cost of an internet banking transaction to branch transaction Value and volume of transaction (annually) % contribution to total value and volume of retail transactions YoY growth of users Number of transactional services deployed Operations and Technology Security Straight through processing of product applications and account opening Level of consolidated view of all customer holdings Analytics and segmentation CRM connectivity Security standards and systems Security features deployed Authentication model and processes Alert features Fraud incidences Sales Number of product s offered online Average product holding for internet banking users compared to non internet banking users Internal revenue sharing model Strength of Usage Number of registered users
Active users (one transaction within < 3 months) Active bill payment customers Number of billing institutions Financial tools Participation rate of real time online support Customer interface Usability Copyright The Asian Banker 2011. All rights reserved Most of the Top 10 players generate significant more revenue from this channel than their peers Evaluation Scorecard for Internet Banking (2011) Country Rank Bank Financial Transactiona Performance l Strength Sales Strength of Operations & Security Total Score Usage Technology 8 6 8 8 5 5 32 Hong Kong 1 HSBC 6.8 1.8 5.7 3.3 4.5 3.1 25.1 South Africa 2 Absa Bank 6.3 2.6 3.8 4.3 4.4 2.9 24.3 Malaysia
3 Maybank 3.1 2.9 3.1 4.7 3.4 1.9 19.1 Japan 4 Rakuten Bank 7.8 2.6 2.8 1.6 2.5 1.7 19.1 Australia 5 Citibank 3.9 0.6 2.6 3.4 4.5 1.7 16.6 UAE 6 Abu Dhabi Commercial Bank 2.7 0.9 2.5 2.5 3.8 3.6 16.0 China 7 ICBC 1.8
4.1 2.0 3.5 2.1 2.3 15.8 Taiwan 8 Taishin International Bank 3.7 1.0 2.6 3.2 2.7 2.4 15.6 Korea 9 Citibank 1.7 0.7 4.3 2.7 4.3 1.6 15.2 India 10 Citibank 3.2 1.9 2.0 1.6 3.8 2.4 15.0 Saudi Arabia 11 Samba 3.9 1.5 2.2 4.0
2.1 0.9 14.6 Hong Kong 12 5.1 1.0 2.2 3.1 0.5 1.7 13.7 Philippines 13 Citibank Bank of the Philippine Islands 1.8 2.1 2.8 3.2 2.5 0.6 13.0 India 14 ICICI Bank 0.3 1.5 2.6 3.8 2.9 1.5 12.5 Japan 15 HSBC 2.9 0.0 1.8 2.7 3.6 1.3 12.3
Copyright The Asian Banker 2011. All rights reserved Our technology scorecards are based on general and specific criteria General Criteria Awards Specific Criteria (Core Banking) Strategy Alignment ROI & Cost Benefit Delivery of the overall articulated business value Project Size vs Business Size Project Management Meeting Regulatory Compliance Project Execution Architecture & Technology Vendor Strategy/Evaluation Contract Development Management Clear Project Management Guidelines Cost Management Meeting Quantifiable Targets Meeting Goals Risk Mitigation Copyright The Asian Banker 2011. All rights reserved Foreign banks face an uphill battle in China Top 10 Chinese and Foreign Players in China (Ranked by Assets at End 2010 RMB million) Rank Bank 1 ICBCb 2 CCB b Assets 13,328,791 10,706,029 Pre-Tax Profita 164,426 173,470 NPL (%) 1.08 1.14 ROA (%) 1.32 Bank Assets Pre-Tax Profita NPL (%) ROA (%) HSBC 256,960(e) 1,456 n/a
0.42(e) Standard Chartered Bank 207,912(e) 482 0.32 0.19(e) Bank of East Asia 191,760 1,243 0.19 0.49(e) Bank of Tokyo-Mitsubishi UFJ 123,108(e) 1,724(e) n/a 1.05(e) DBS 62,459 347 0.78 0.42 1.32 3 b BOC 10,358,958 140,774 1.1 1.14 4 ABCb 10,237,683 34,192 2.51 0.99 5 China Development Bankc 4,951,766 49,364(e) 0.68 0.75(e) 6 Bank of Communicationsd
3,913,473 49,471 1.12 1.10 BNP Paribas 45,182(e) 253(e) n/a 0.45(e) 7 China Merchants Bankd 2,379,333 33,018 0.68 1.15 The Royal Bank of Scotland 44,843(e) 56(e) n/a 0.10(e) 8 China CITIC Bankd 2,061,233 28,417 0.67 1.13 OCBC Bank 34,000(e) 61(e) 0.20 0.14(e) 9 Shanghai Pudong Development Bankc 2,009,000(e) 25,098(e) 0.51 1.00(e) JP Morgan Chase 25,562(e) 259(e) n/a 0.81(e) 10
China Minsheng Banking Corpd 1,806,144 22,755 0.69 1.09 United Overseas Bank 22,762 126 2.88 0.41 (a) After NPL provisions. (e) Figures Estimated. ROA was calculated via net income over assets based on the financial figures provided by the banks unaudited figures published on their website. (#) Does not include banks with asset value that is unavailable. (a) After NPL provisions. (e) Figures Estimated. ROA was calculated via net income over assets based on the financial figures provided by the banks unaudited figures published on their website. (#) Does not include banks with asset value that is unavailable Copyright The Asian Banker 2011. All rights reserved Chinese banks seek to leverage on a comprehensive product scope, brand and distribution channels Key Emerging Themes in Retail Financial Services 2010/2011 Asia Pacific China Institutionalisation of businesses (i.e. process standardisation and operational issues in wealth management and private banking) Data management and integration Continuing internationalisation of Chinese banks and opening of Taiwanese market (interoperability issues) Online and mobile phone banking Growing regionalisation of domestic banks and integration of systems Foreign banks are pushing the edge in innovation Consumer protection as regulatory theme in Asia Pacific? (i.e. consumer finance) The rise of foreign players in wealth management and private banking? Aggressive cross selling and product bundling calling the regulator into action Banks have to decide which platform and device to utilize in mobile banking Agility is enabled both by technical solutions and institutional changes Copyright The Asian Banker 2011. All rights reserved Conclusion The Asian Banker Body of Knowledge will be organised 100% online The Chinese financial industry differs relative to scale and merits is own approach Finding suitable benchmarks and peers to compare with Chinese banks seek to leverage on a comprehensive product scope, brand and distribution channels Copyright The Asian Banker 2011. All rights reserved END Copyright The Asian Banker 2011. All rights reserved
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