ICBC continues to gather pace on its precious metal business in the first half of this year, pulling further away from the peers. At the end of June, ICBC traded over 85,000 tons of precious metal, or 3.5 times as much for the whole of 2010, and recorded a turnover of over RMB 840 billion, up 93% against 2010's. The Bank's over 3.7 million precious metal customers represented a fast growing customer base.
Since January this years ICBC takes concrete steps to build up its product offering to drive its precious metal business. In terms of physical precious metal, ICBC either sells its own branded products (87 specifications under 17 categories) or represents products of other companies (56 specifications under 17 categories). Among the commercial banks in China, ICBC offers the most number of physical precious metal products. During the first six months of this year, ICBC has sold 68 tons of physical precious metal, around 7 tons more than the total quantity sold in 2010.
In offering precious metals for customer to buy or sell, the surging market prices of precious metal internationally drive the impressive growth in the trading volume of gold or silver (via accounts) since beginning of this year, increasing by multi-fold. In the January-June period of 2011, the closing volume rose 250% over the whole 2010, especially the growth of silver trades (via account) and deferred settlement of silver (on behalf of Shanghai Gold Exchange) which was significant. In the first half of 2011, every day on average over 300 tons of silver were traded via account with cumulative turnover tantamount to 3.9 times as much for the whole 2010, and over 290 tons of silver were traded on deferred settlement with cumulative turnover tantamount to 3.4 times as much for the whole 2010.
In terms of precious metal financing, ICBC fosters closer ties with large gold group corporation, companies either producers or users of gold to launch the gold leasing service and provide loans pledged by precious metal. The aim is to support the growth of gold industry. During the first six months of 2011, ICBC has leased 28 tons of gold to the concerned gold companies, marking the beginning of ICBC's attempt on the financial services to an industry.
In order to serve the customers better, ICBC was the first bank in China to roll out a new service for customers to trade platinum through accounts in January this year, offering more channels for customers to invest in precious metal. Besides, ICBC and World Gold Council jointly launched the "Accrual Gold" service, the only financial product currently available in the domestic market for customers to invest in gold at daily average price. The advantage is to spread the investment cost evenly and effectively, and to the greatest extent, avoid the risk arising from the fluctuation of gold price. "Accrual Gold" is a service designed for all customers to buy gold in small quantity at low risk, to preserve and add value on the assets. "Accrual Gold", an upgrade to the former "Ruyi Gold Accrual", is warmly received by the customers since launched. Today, ICBC has more than 1.3 million gold accrual customers, who have accrued more than 13 tons of gold so far.
Meanwhile, ICBC takes continual step on service innovation. The Bank moves faster in setting up outlets and offering services for buying back physical precious metal. In March this year, ICBC opened its first center in Beijing for selling and repurchasing gold. The Center is the first standard flagship store among the domestic banks for the sales, repurchase, display and trading of precious metal. Besides offering advisory and experiential one-stop services to cater for different needs of the customers, the new Center also buys back investment gold bars of ICBC brand and other pure gold products. This signifies the competitive advantage of ICBC services in trading and settlement of gold, covering all the steps for customers to buy gold for investment and sell gold for cash. ICBC also expedites the process of setting up an overseas precious metal business center leveraging the global service network of ICBC Group and information technology. Silver products are now available for sale in ICBC Macau and ICBC London. This demonstrates ICBC's effort in extending precious metal business outside China.
An executive with ICBC said, ICBC is moving towards a "capital-saving" business development model and diversified profit-making pattern by pushing ahead precious metal business, a business of strategic importance to ICBC. Prospect for commercial banks in China to focus on precious metal business is good, given the increasing size of China's precious metal market. In the next step, through product innovation, resource consolidation and channel set up, ICBC will continue the effort to explore the potential of precious metal market, and move faster to provide integrated, professional and global services for customers to invest in precious metal. ICBC aims to reinforce its domestic dominance (the largest bank in China playing the role of precious metal market maker) and asset management bank of international influence in precious metal.
Background:
Precious Metal Business
Precious metals mainly include gold, silver, platinum, palladium. Precious metals have long been considered as a very ideal hedging tool due to their relatively stable value. Precious metals, mainly referring to gold, are commodities, currencies as well as financial products. Precious metal market, exemplified by gold market, is one important element in international financial market and commodity market. Many large commercial banks like HSBC, JP Morgan are important market participants. Precious metal business is a main revenue source for these banks.
China is now the world's largest gold producer and has a large number of gold mines. In China's gold industry, large companies take the leading role backed by large gold production bases. Business is booming for all gold companies in China. In terms of consumer demand, currently China is world's No.2 gold consumer market, and the gap with India, world's No.1 gold consuming nation, is getting smaller. In terms of investment demand, precious metal is an important investment in investors' asset allocation portfolio. Especially the global financial crisis since 2008, precious metals, or gold, are sought-after to preserve value and beat inflation. Prices of gold, silver climb to history highs. Shanghai Gold Exchange becomes the world's largest Exchange by spot gold trading volume. In other words, precious metal business in China is just unfolding. In the days ahead, there is a great potential for commercial banks to move into this business.
ICBC is one of the earliest commercial banks in China to open precious metal business. ICBC entered gold business market as early as in October, 2002 when Shanghai Gold Exchange was opened. As a banking member of the Exchange, ICBC offered gold services and invested in gold on behalf of customers who are not members of the Exchange. To ride with the booming precious metal market and meet the needs of the customers, ICBC set up the Precious Metal Department in Shanghai on September 9, 2009 - the first organization in China dedicated to precious metal business, to loom large the business. Since the establishment of the Department, ICBC sees the opportunity of the booming precious metal markets in China and overseas to expand sales and market reach, leveraging its substantial resources and strong IT. Efforts have been spent on product innovation to build a product offering encompassing four large categories - physical metals, trading metals, precious metal financing and wealth management metals. ICBC is now a commercial bank in China offering the most complete range of precious metals, the widest variety of services and highest innovative capacity. The visibility of "ICBC Gold Expert", ICBC brand of precious metal business, has been significantly raised.
ICBC physical precious metal products are made of gold, silver, platinum or palladium, under the "Ruyi" brand. They carry the Chinese traditions of gold and silver and are mainly for customers to invest for preserving or adding value to the assets, or for collection. Precious metals for customers to trade mainly include gold, silver or platinum (bought or sold via accounts), service of spot trading and deterred settlement on behalf of Gold Exchange. Customers now have the opportunity to directly buy precious metal in the Exchange. Precious metal financing is an important service of ICBC provided to the gold companies, mainly include gold leasing, loan pledged under gold, interbank lending of gold. Precious metal wealth management is mainly a service of providing customers structured wealth management products that are linked with precious metal market.
ICBC, backed by the strong ICBC Group, economy of scale, a vast network of outlets and Internet Banking, provides "All-in-one" services to all precious metal customers from warehousing, delivery, transportation to fund clearing. ICBC outlets offer a wide range of convenient services for customers to buy/sell physical metals. Customers also have the choice to buy precious metals of ICBC or sold by ICBC on-behalf or trade precious metal over-the-counter, via Internet Banking or Telephone Banking 24 hours a day. While offering services across conventional service channels, Precious Metal Department also set up its exclusive service channel. At present, the Department has set up service outlets (flagship stores) in Shanghai, Shanxi, Beijing, Jiangsu, Guangdong and Shandong. The Department is providing more innovative, direct, accessible products and services to all customers.
In March, 2010, ICBC established the strategic partnership with World Gold Council working together in many areas: product optimization and R&D, market study and information sharing, product launch, staff training.
ICBC has been widely recognized for its performance and achievement in precious metal business. Among the numerous accolades received were: Shanghai Gold Exchange 2010 Outstanding Member (First Class Award), 2010 Gold Deal (Category Award), 2010 Platinum Deal (Category Award), 2010 Silver Deal (Category Award).