Awards recognizing the strongest banks in China, as Chinese bankers take leading roleson the global stage.
The Chinese financial services industry has undergone tremendous change in the past decade as its massive banks underwent drastic reforms to become more market-oriented and list on international markets. China offered its banks an ideal environment for these changes.
The economy was booming, foreign investment was restricted, and the central bank’s fixed lending and deposit rates provided comfortable profit margins.
Times are changing. The Chinese economy, although still growing, has slowed from its double-digit pace, while banking reforms have freed up rates to force interest margins down. Foreign banks have fully entered the market, bringing international best practices and multinational experience.
Chinese banks are changing, too. They are greatly expanding their product and service lines and adopting sophisticated risk analysis and Big Data tracking to serve their existing customers more effectively as well as to reach underbanked portions of the population. At the same time, Chinese banks are moving beyond the country’s borders to help local companies realize international ambitions. Big improvements in technology have brought great gains in efficiency and given rise to unconventional competitors such as Alibaba affiliate Ant Financial and WeBank.
This new and more challenging operating environment is testing the extent of the country’s ambitious banking reforms and the agility of its financial institutions. Business models and reputations are forming around the products and services in which each bank excels. With these trends in mind, Global Finance’s Stars of China 2016 recognizes the tremendous progress being made and the banks that are pushing the industry to greater heights by offering top-notch service. We honor the institutions that are forging new business models, adapting to changing market and regulatory conditions with speed and efficiency, and demonstrating continued strong commitment to customer service.
Stars of China | Domestic
China Construction Bank
CCB is combining its strength in traditional banking with significant new technologies to offer the best customer banking services in the country. CCB has long been the country’s largest mortgage lender and is implementing a network of “smart” ATMs to replace conventional counter banking service. These ATMs, which utilize facial recognition, ID verification and check scanning features, will bring more convenience to the customer’s experience while allowing CCB to expand its geographic reach more easily. The bank also has made improvements to its mobile banking services, resulting in a 36% increase in mobile banking fees in the first half of the year.
Industrial and Commercial Bank of China
ICBC has the largest share of both corporate loans and corporate deposits in the banking industry. This tremendous size has not prevented the bank from being responsive to the always-evolving market conditions within China and in the many markets around the world in which the bank operates. ICBC provided more than $20 billion in loans to almost 40 “Go Global” projects in the first half of the year, while also building more small and micro banking centers and expanding credit card and loan services for small business owners.
Last year was volatile for Chinese securities, with domestic stock exchanges hitting record highs in the spring before plummeting in June. GF Securities weathered the storm well, increasing its underwriting revenue in the first half of 2016 by almost 11% year over year, despite much more challenging market conditions. The firm, which raised $3.6 billion in its own well-timed Hong Kong IPO in April 2015, underwrote 26 equity deals worth $7.9 billion in the first half, ranking behind only Citic Securities in Dealogic’s China league tables.
China Construction Bank
Infrastructure investment has been a cornerstone of CCB’s operations since the bank opened in 1954. Despite growing to become a world-class consumer and corporate bank, CCB has not lost touch with that original mandate. In the first half of 2016, the bank extended Rmb2.78 trillion ($417 billion) in infrastructure-related loans, accounting for almost 48% of its total corporate lending portfolio. The bank’s experience in infrastructure lending has helped overseas as well: CCB inked an agreement with the Singapore government in April to provide S$30 billion (US$22 billion) in financing for infrastructure projects in Southeast Asia.
Bank of China
This year, China’s outbound investment is outpacing inbound investment for the first time since the country began opening up its market almost four decades ago. Historically the most international of China’s big four banks, BOC is perfectly placed to benefit from this wave of investment pouring out of China and into markets around the world. BOC led all mandated mergers and acquisitions arrangers in the Asia Pacific region (ex-Japan) in M&A last year by working on 15 deals worth $7 billion—a 14.7% market share, according to Thomson Reuters tracking.
Bank of China
The strength of BOC’s bond business shows on many fronts. In the first half of the year, the bank ranked first in total value of offshore Renminbi bond issuance, first in value of interbank “panda bonds,” and second in value of Chinese enterprises’ G3 bonds. The bank also boasts the fourth-largest market share in debt underwriting on the domestic open market. In June, the bank boosted its international profile and contributed to an economic milestone by underwriting China’s first overseas, renminbi-denominated sovereign bond issuance in London.
Small Business Lending
Based in China’s northeast, Harbin Bank has taken an unconventional approach to its growth by focusing on lending to small businesses rather than big corporate clients. Loans to small enterprises (SMEs) grew by 16.9% in the first half of the year and now account for 57% of the bank’s overall corporate lending portfolio. The bank hopes to keep up the momentum in the coming year with recent improvements to its online services and cross-border settlement services for small-business customers.
Supply Chain Finance
Bank of Communications
As China’s fifth-largest bank, BoCom has long relied on progressive products and services to reach corporate customers that historically have been underserved by its more-established Big Four peers. Strengthened by its relationship with its second-largest investor, HSBC, BoCom’s supply chain finance team focuses on the many companies along a supply chain and assists not only with financing and liquidity management but logistics, insurance and other services as well. In the past year, the bank has improved its e-banking services for corporate clients while expanding its presence overseas.
Bank of China
BOC built on historically strong ties to foreign financial entities to establish an industry-leading 1,489 cross-border clearing accounts for correspondent banks from 110 countries and regions. The bank ranks first in both customer base and business scale for Qualified Foreign Institutional Investors (QFIIs) and Renminbi-Qualified Foreign Institutional Investors (RQFIIs) and has helped foreign entities—including British Columbia and the government of Hungary—issue renminbi-denominated bonds domestically and abroad.
Guangdong Huaxing Bank
Guangdong Huaxing Bank has launched several innovative products to help Chinese investors take advantage of financial markets. The bank has created micro-investment accounts that allow customers to invest any amount at any time during trading hours, with interest accruing daily. The products have opened investment channels for new and existing customers at all income levels. The bank employs strong technology and multiple levels of risk review to minimize risks in China’s volatile investment environment.
FX and Interest Rate Hedging
Bank of China
BOC has more foreign currency deposits than any bank in the country. BOC’s depth of experience at home and abroad makes it perfectly positioned for foreign exchange transactions and interest rate hedging. As China’s companies continue their push toward greater globalization, BOC has offered products and services to reduce their exchange and interest rate risks.
Cross-Border Trade Settlement
China Guangfa Bank
Based in southern China, near Hong Kong, China Guangfa Bank has much experience in cross-border transactions, and has deployed extensive technological advances to offer wide-ranging trade settlement products, including capital exchange pools within China’s free-trade areas in Guangdong and more recently within the Shanghai Free-Trade Zone. Guangfa conducts its international payments and settlement services through its designated bill center, which has 39 branches and more than 700 sub-branches.
Provider of International services
Bank of China
As Chinese companies expand around the globe at a record pace, BOC has leveraged its long-standing reputation as the country’s most international state-owned bank to facilitate financing of trade and investment deals of all shapes and sizes. In the past year, BOC worked on some of the world’s biggest cross-border mergers while creating a cross-border matchmaking platform for small and midsize enterprises. Additionally, the bank held more than a dozen meetings to assist SMEs in their internationalization efforts.
China Merchants Bank
CMB has a well-earned reputation as one of China’s most progressive banks, and it’s attracting many of China’s new wealthy citizens to its private banking service. CMB offers a range of products to assist clients in investment, tax, legal and other financial planning for themselves, their families and their businesses. In the first six months of the year, the bank increased its number of high-net-worth private banking clients by 10% and assets under management by 14%.
City Commercial Bank
China’s city commercial banks often must take bold steps to move beyond the geographical area where they began. Harbin Bank, based in China’s far northeast, chose to build its business model on lending to the private sector rather than state-owned enterprises. Such lending takes more skill and comes with more risk but can offer higher returns and is ultimately more sustainable. The bet appears to be paying off. Harbin Bank launched a successful IPO in Hong Kong in 2014 and is now the fourth-largest city commercial bank in China.
MyBank, the virtual banking arm of Ant Financial, opened in June 2015 and has garnered much attention in the 15 months since for its innovative approach to small lending, much of which flows to e-commerce merchants on the Alibaba marketplace. MyBank extends small, short-term loans to small companies to assist in business development. In its short time of operation, the bank has extended loans to more than 800,000 small businesses and is extending its reach through its mobile app, which was launched in the spring.
Postal Savings Bank of China
Until recently, Postal Savings Bank of China has received much less attention from investors than the country’s other large, nationally owned banks. Operating through China’s postal network, the bank has focused historically on increasing access to banking services throughout the country, especially in rural areas. In preparation for its recent IPO, however, the bank has turned its attention to improving efficiency and profitability across its vast network, which already counts more domestic branches than any other Chinese bank. The bank listed in Hong Kong in September, the largest IPO of the year.
China Cinda Asset Management
China Cinda Asset Management has historically played a precarious role in the Chinese financial system. The company was one of four asset management companies set up by the central government to buy bad loans from the country’s banks. This background contributed to the asset management company’s sensitivity to risk and its sophistication in minimizing it. In recent years, the company has diversified its product line while taking on experienced investors such as UBS, Standard Chartered and Citic Securities.
Consumer Credit Card Program
Industrial and Commercial Bank of China
Through its massive network of branches, its innovative approach to mobile payments and point-of-sale transactions, and its general popularity with Chinese consumers, ICBC has become the world’s largest issuer of credit cards, with more than 117 million in circulation. In the first half of this year, card transactions for the bank totaled almost Rmb1.4 trillion ($210 billion). The bank has inspired almost a million merchants across the country to install POS terminals, and introduced cellphone-based credit cards and QR code scanning.
Corporate Credit Card Program
China Construction Bank
CCB has created innovative corporate card products, such as its global payment cards for international trade settlement, while improving operating efficiency to make the most of these contributors. As a result of this and other services, such as its wealth management and FX, non-interest income rose by 16% in the first half of year, with CCB now deriving an industry-leading 28% of its income from non-interest sources.
Bank of China
BOC expanded its commodities-related business quickly this year and last, opening commodity business centers in New York and Singapore and becoming the first Chinese financial institution to be certified as a trading member on the Bursa Malaysia. Last year BOC’s investment banking arm joined with Bloomberg to launch Bank of China International Crude Oil Index, a move that likely will strengthen its research capability and its reputation. Gains from commodities trading nearly doubled year-on-year in the first six months.
Ping An Bank
Despite having assets totaling around 10% of those of ICBC, China’s largest bank, Ping An was the first medium-size bank to obtain all the same gold trading qualifications as the country’s Big Four banks. The Shenzhen-based bank has successfully branded itself as China’s “gold bank” and now has more than one million users, gaining around 10,000 new ones each day. Last year the bank ranked third nationally in gold transaction volume.
precious Metals Broker
Industrial and Commercial Bank of China
As China’s largest precious metals broker, ICBC has cumulatively traded 730,000 tons of precious metals worth Rmb7 trillion ($1 trillion) in the seven years since launching its precious metals division. Last year saw drastic gains, with its precious metals business growing 38% by volume and 22% by value. The bank’s booming metals business has bumped up its status internationally, with London Precious Metals Clearing inviting ICBC in May to join its precious metals clearing system. By accepting the invitation, ICBC became the first Chinese bank to join LMNCL and the first new member since 2005.
Most Innovative Bank
China International Capital Corporation
CICC led the country’s first asset-backed security offering in 2005, its first quasi-sovereign bond offering in 2010 and its first “green bond” offering earlier this year. These and other pioneering moves have boosted CICC’s reputation at home and abroad, and Chinese firms looking to invest overseas most often look to CICC to help. In recent months CICC led consumer electronics company Haier’s acquisition of GE Appliances, the merger of container lines Costco and China Shipping, and the privatization of Dalian Wanda Commercial Properties in Hong Kong, the largest such deal in the H-share market. CICC ranks 14th globally and first among Chinese firms for M&A arranging thus far in 2016, according to Dealogic.
Innovation in Fintech
China’s financial system has an underdeveloped credit tracking system, a problem that has inhibited Chinese banks’ lending to unestablished private companies. Ant Financial is working around this issue by developing its own credit scoring system based on the buying and selling histories of users on Alibaba, the massive online marketplace with which Ant is affiliated. Ant also offers wealth management options connecting lenders and borrowers to facilitate peer-to-peer microlending.
innovation in payments services
While Alibaba has garnered attention in fintech circles over the success of Ant and MyBank, the company’s chief competitor, Tencent, has been expanding its range of services and increasing its market share as well. Tencent launched its own online bank, WeBank, and offers a very popular payment service, known as WePay, which allows users to make purchases directly through Tencent’s wildly popular WeChat service.
DBS opened its first representative office in China in 1993 and incorporated in 2007 as part of the first group of foreign banks to enter the domestic market. Singapore’s largest bank, DBS leveraged its international brand to attract wealthy clients. Its deposits and investment revenue in China rose 26% and 29%, respectively, in the first half of 2016. DBS recently launched its own WeChat platform and expanded options for clients to do business online. In 2015 more than 23% of its wealth management deals were completed via digital channels.
HSBC’s profits fell by 29% in the first half of this year, and in August the bank disclosed compliance issues with US regulators. Amid turbulence, the bank has pared down its global footprint; it sold off its Brazilian operations last year. However, HSBC continues to push for expansion in China. It already boasts the largest branch network among foreign banks and plans to add 3,000 more employees in the Pearl River Delta in the next several years.
China-related equity underwriting has cooled off this year, after a sizzling start in 2015 led to a record-breaking 847 deals totaling $188.4 billion. UBS capitalized on the activity to raise almost $12 billion in 33 international equity deals and $5.8 billion in nine deals on China’s A-share market. Those numbers make the bank first in those measures among foreign banks, and second and third, respectively, among all banks. While its activity has slowed this year, UBS saw big gains recently on its December 2015 investment in Postal Savings Bank of China, which raised $7.4 billion in its IPO in September.
China’s tremendous investments in infrastructure have facilitated its economic rise and are likely to increase, both within and beyond its borders, as part of the country’s One Belt, One Road initiative. A top bank globally for infrastructure finance, BNP Paribas capitalized on its experience to participate in China-related infrastructure finance projects: serving as joint bookrunner of the euro tranche on BOCs 2015 four-currency, six-tranche, $3.5 billion One Belt, One Road bond.
Mergers & Acquisitions
China’s outbound M&A totaled $135.3 billion in the first half of 2016, far surpassing the annual record of $107 billion set in 2015, says Dealogic. Goldman Sachs, the largest M&A adviser globally so far this year, capitalized on its status and extensive experience to advise on 17 China-related deals worth $81.5 billion through June. This figure ranks behind only domestic firm CICC. Goldman also worked on the most China-related deals among foreign banks in 2015.
HSBC has stayed at the forefront of renminbi internationalization, and, as part of that drive, has introduced Chinese-denominated bond products to various world markets. In 2012 the London-based bank offered the first renminbi-denominated bond, or dim sum bond, on the London exchange and was among the first to offer dim sum bonds in Singapore. Last year HSBC passed another milestone when it, along with an offshore unit of Bank of China, became the first foreign commercial bank to issue bonds in China.
Standard Chartered branded itself as China’s go-to foreign bank for small-business lending. The UK-based bank hosts SME training sessions and an annual award program, and in 2014 launched an SME confidence index. The bank’s Smart Business Account builds on the bank’s strengths in transactional banking to open channels for China’s smaller entrepreneurs to reach new customers around the world.
Supply Chain Finance
Standard Chartered takes an innovative approach to supply chain finance in China by identifying specific anchor clients and tailoring its products to the many companies with which the anchor client interacts. The process improves efficiency throughout the supply chain by speeding up transactions, freeing up working capital and reducing risks. Currently the bank serves 36 anchor clients with almost 500 supply chains. Outstanding renminbi services and cross-trade settlement capabilities enhance the bank’s supply chain services.
Capitalizing on global interest in the renminbi, Standard Chartered offers a wide array of renminbi services, including cash management, bond offerings, currency hedging and cross-border renminbi clearing. Standard Chartered is now one of the most active participants on China’s Cross-Border Interbank Payment System and leads foreign banks in value and trading of renminbi bonds.
J.P. Morgan was one of the first foreign firms to set up a representative office on the mainland. J.P. Morgan has joint ventures with local partners in its brokerage, trust and fund management business lines and has shared its investment expertise across the ventures, resulting in funds that have performed well amid volatility. The bank’s commitment to being active in the market likely contributed to Chinese regulators’ recent decision to issue it the first license to operate a wholly owned fund management company.
FX and Interest Rate Hedging
Many companies were caught off guard last year when China’s central bank cut the value of the renminbi by almost 2% to boost exports. The move rattled markets and underlined the importance of minimizing currency risks. Standard Chartered draws on its experience and its renminbi capabilities to let clients choose onshore or offshore FX conversions for their trade transactions, reducing risks while presenting opportunities to gain from renminbi value differentials.
Cross Border Trade Settlement
A regional powerhouse, DBS has implemented top-notch technology across its extensive network in Southeast Asia to enhance cross-border trade settlement services. The bank’s online interface streamlines payment and collection while automatically submitting regulatory filings, resulting in an estimated 1% in interest expense savings for clients each year. In the past year, the bank has enhanced its open-account renminbi cross-border trade settlement and seen a 148% increase in its trade finance balances since June 2015.
Foreign Exchange Provider
As Hong Kong’s most popular bank, HSBC has a long history of facilitating business between mainland China and the rest of the world. Based on this experience, HSBC is well-positioned at the forefront of the pack of foreign banks conducting exchange transactions within and beyond China’s borders. Last year HSBC was among the first foreign banks to join the Cross-Border Inter-Bank Payment System and saw its income from the renminbi internationalization rise to $1.7 billion for the year, up 3% over 2014.
In 2005, UBS became the first foreign securities firm to receive a license to operate in China. The Zurich-based bank took advantage of the head start to establish itself as a major player in China’s domestic investment banking industry. UBS ranked sixth overall in China-related investment banking revenue last year and first among foreign banks, according to Dealogic. The bank’s CEO announced earlier this year that UBS will double its staff in China over the next five years.
Standard Chartered was among the first international banks to launch subcustody services when the B share market opened to foreign investors in 1992. Since then, the bank has continued to lead the way, serving as an adviser not just to clients but to regulators as well. Standard Chartered offers clients a specialized interface for subcustody services and assigns individual agents to each client. The investments, both in the past and now, are paying off for the bank, which saw its first-half assets under custody rise 61%, assets under administration grow 121% and revenue increase 161%.
DBS relies on its ever-growing presence in China, across Asia and around the world to provide top-notch trade services to international clients operating in China and domestic companies expanding abroad. The bank offers a wide range of services, including preshipment financing, inventory financing and renminbi bank guarantees, and has seen tremendous growth in its open-account trade finance this year, with the revenue expanding at an annualized rate of 143% in the first half of the year.
Treasury and Cash Management
DBS’s Global Transaction Service team tracks clients’ cash cycles, compares their performance against industry norms and select peers to identify opportunities to improve liquidity and reduce risks. The team’s innovative approach has attracted new clients at a rapid rate, with institutional investor deposits expanding at an average annual rate of 11% since 2009 and overall cash management revenue rising by an average annual rate of 25% in the same period. DBS also was among the first foreign banks to open branches in the Shanghai Free-Trade Zone and now boasts more than 100 clients for its free trade account.