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Copyright The Asian Banker 2010. All rights reserved 1/104 Copyright The Asian Banker 2011. All rights reserved
China International Banking Convention 2011How the Asian Banker evaluates the competition in China’s banking industry today
26th May 2011Beijing
Copyright The Asian Banker 2010. All rights reserved 2/104 Copyright The Asian Banker 2011. All rights reserved
The Retail Banking Working Group is keeping track of retail banking trends
Copyright The Asian Banker 2011. All rights reserved
How we assess the financial services industry in China
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
Scope of Financial InstitutionsNational Banks, Joint Stock Banks, City Commercial Banks, Rural Banks, Foreign Banks (overall 96 banks)
Evaluation CriteriaRational and transparent evaluation process based on balanced scorecards
Retail Banking Product Awards Taking stock of innovative products and process improvements
Technology/Infrastructure/Risk AwardsImplementations that make an impact on the business
International Panel of RefereesSupervises and verifies the comprehensive 2 months evaluation exercise of The Asian Banker Research team
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Number of customers for the largest banks (million, 2010)
China’s largest bank has more customers than entire financial industries in Asia Pacific
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Total Banking Assets of the Financial System ($ trillion, 2010)
China’s financial industry dwarfs other countries by its asset size
Copyright The Asian Banker 2011. All rights reserved
Num
ber o
f Bra
nche
s
Number of Branches in Asia Pacific (Ex China and India) Number of Branches in China and India)
China has twice as many branches as India
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The evaluation of China’ s retail financial services is based on 10 dimensions
Value of Franchise
Core Deposits
Market Share/Change in Core Deposits
3rd party providers
Financial Performance
Operating Profit (%, $)
Retail Return on Assets (%)
AUM (%, $)
Sustainability Strategy
Clearly Conceptualized Strategy
Excellence Submission
Depth of Reporting (AR)
Portion of Recurrent Income (%)
NIM (bps)
Portion of Fee Income (%)
Cost to Income Ratio (%)
Risk Management
Gross NPL (%)
Net Credit Loss ($)
Classification of Delinquencies
Risk Reporting Structure
Process & Technology
Time to Market
Customer Cycle Times
Straight through Processing
Centralisation of Branch Processes
Automation Levels of Assets/Liabilities Mgmt
Distribution People’s Skill
Portion of Senior Executives with more than 13 years of Experience in the Bank (Retail, IT)
Attrition Rates (Sales, IT)
Budget for Training (% of operational Cost)
Proportion of Self Service Transaction to Total
Branch - Fee Income/Core Deposits
Uptime of ATM (monthly)
Proportion of Active Bill Payment Users (e/banking)
Sales Management
Average Cross Sell (Mass)
Average Cross Sell (Affluent)
Market Share Mortgages
Market Share Credit Cards
Ethical Banking
Published Ethical Service Document
Depth of Social Corporate Responsibility
Scorecard for Best Retail Bank
Copyright The Asian Banker 2010. All rights reserved 9/104 Copyright The Asian Banker 2011. All rights reserved
Ranking StrategyValue of
FranchiseFinancial
PerformanceSustainability
Sales Risk Process
Technology Efficiency
Penetration Efficiency
Distribution Channels
People Skills
Ethical Banking
Total Scores
2009 2010 2011 4.0 4.0 7.0 5.0 5.0 5.0 5.0 5.0 5.0 2.0 47.0
2 1 1 ICBC 2.6 1.4 5.3 2.7 1.4 2.5 2.2 2.0 2.7 1.3 24.1
na 4 2 BOC 2.4 1.2 5.1 2.7 1.7 2.5 1.9 2.2 2.8 1.5 23.9
1 2 3 CMB 2.5 1.3 4.3 2.2 2.2 2.6 3.1 2.6 1.7 1.3 23.6
15 3 4 CCB 1.6 1.0 4.2 2.2 1.2 2.4 2.1 2.0 2.8 1.2 20.8
9 11 5 ABC 0.9 1.6 4.0 2.6 1.0 2.4 1.7 2.1 2.7 0.5 19.5
3 5 6 SPDB 1.6 1.7 2.9 1.5 1.3 1.6 2.4 2.3 2.7 1.3 19.2
6 8 7 BoB 1.3 1.9 2.3 1.3 1.2 1.9 3.0 2.4 3.0 1.0 19.2
7 15 8 BoS 1.4 1.5 3.1 2.0 0.9 2.1 2.1 2.3 2.3 0.5 18.3
16 6 9 CITIC 1.1 1.1 2.5 1.5 1.2 1.8 2.3 2.3 2.5 1.3 17.5
4 7 10 BoCom 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
Areas managed wellSource: Asian Banker Research
Ranking of Chinese Retail Banks 2011
Large scale Chinese banks balance their revenues by diversifying their competencies
Highest GAP to Top 10
Copyright The Asian Banker 2011. All rights reserved
The Evaluation Criteria for Internet Banking are based on 6 key dimensions
Financial Performance
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
Transactional Strength
Value and volume of transaction (annually)
% contribution to total value and volume of retail transactions
YoY growth of users Number of transactional services
deployed
Sales 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
Number of product s offered online
Average product holding for internet banking users compared to non internet banking users
Internal revenue sharing model
Operations and Technology
Straight through processing of product applications and account opening
Level of consolidated view of all customer holdings
Analytics and segmentation CRM connectivity
Security
Scorecard Internet Banking
Security standards and systems Security features deployed Authentication model and
processes Alert features Fraud incidences
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Most of the Top 10 players generate significant more revenue from this channel than their peers
Evaluation Scorecard for Internet Banking (2011)
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
PerformanceTransactiona
l StrengthSales
Strength of Usage
Operations & Technology
Security Total Score
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 Citibank 5.1 1.0 2.2 3.1 0.5 1.7 13.7
Philippines 13Bank 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
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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
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Foreign banks face an uphill battle in China
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
BNP Paribas 45,182(e) 253(e) n/a 0.45(e)
The Royal Bank of Scotland 44,843(e) 56(e) n/a 0.10(e)
OCBC Bank 34,000(e) 61(e) 0.20 0.14(e)
JP Morgan Chase 25,562(e) 259(e) n/a 0.81(e)
United Overseas Bank 22,762 126 2.88 0.41
Rank Bank Assets Pre-Tax Profita
NPL (%) ROA (%)
1 ICBCb 13,328,791 164,426 1.08 1.32
2 CCBb 10,706,029 173,470 1.14 1.32
3 BOCb 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
7 China Merchants Bankd 2,379,333 33,018 0.68 1.15
8 China CITIC Bankd 2,061,233 28,417 0.67 1.13
9Shanghai Pudong Development Bankc 2,009,000(e) 25,098(e) 0.51 1.00(e)
10China Minsheng Banking Corpd 1,806,144 22,755 0.69 1.09
Top 10 Chinese and Foreign Players in China (Ranked by Assets at End 2010 – RMB million)
(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
Data management and integration
Continuing internationalisation of Chinese banks and opening of Taiwanese market (interoperability issues)
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
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)
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)
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
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