Industrial and Commercial Bank of China Limited (stock code SH: 601398; HK: 1398) announced its interim results for the first half of 2018. According to the Interim Report, in the first half of the year, ICBC achieved impressive business performance marked by steady progress with further coordinated development in terms of volume, structure, and quality.

According to the International Financial Reporting Standards (“IFRS”), ICBC recorded steady profit growth in the first half of the year with net profits of RMB160.7 billion, up 4.5% year-on-year; pre-provision profits reached RMB280.7 billion, up 8.9% year-on-year, reflecting favorable business growth. Both the net profits growth and pre-provision profits growth hit record highs year-on-year over the past several years. Net interest margin (NIM) increased by 8 bps to 2.3% from the previous year. The profit structure in general was optimized. ICBC continued with its efforts to serve the real economy through relief on bank charges with an offsetting profit reduction. Despite this, the Bank was able to achieve a volume growth ranked the highest among its industry peers. Profit contributions from mega retail sales improved further year-on-year; Overseas operations realized net profits of USD1.55 billion. Overall assets quality continued to improve. Core indicators such as NPL ratio, non-performing loans, overdue rate and “scissors difference” continued to improve. The NPL ratio has dropped by 1 bp to 1.54% since the beginning of the year in a series of decline for six consecutive quarters. The provision coverage ratio increased to 173% and risk offset capability was further strengthened. ICBC’s market competitiveness continued to improve. Customer deposits have increased by RMB1.26 trillion. Compared with the beginning of the year; ICBC’s deposit amount and growth rate were highest among its industry peers with the accelerating of a full-spectrum customer strategy. In the first half of the year, the company's total number of credit account holders reached a record-high 100,000 while the number of individual customers rose by nearly 20 million, with the proportion of young customers further increased.

During the first half of the year, despite complex and unstable economic as well as financial conditions, ICBC held firm to implementing its three major missions: 1) to serve the real economy, 2) to prevent and control financial risks, 3) to enact intensified initiatives to reform and innovate. In addition, ICBC’s three major enhancements included: 1) to focus on value-creation, 2) to enhance risk-control capabilities, and 3) to bolster market competitiveness. Major measures are listed as follows:

(1) Striving to attain value-creation through service.  While pursuing quality development in serving the economy, ICBC seeks to improve overall operational quality. During the first half of the year, ICBC closely focused on supply-side structural reforms, coordinating credit loan balance and portfolio optimization, making steady progress in aggregate loans creation, targeted investments, investment pace, and actively leading the real economy on the path to high-quality development.

Financing supply capacity has grown steadily. In the first half of the year, the aggregate amount of newly granted loans reached RMB1.68 trillion, of which RMB626.8 billion comprised newly created loans, and re-covered re-lent loans amounted to RMB1.05 trillion. The credit extensions were reasonable and balanced. Non-credit financing and local government debt investment increased by RMB351.5 billion, serving as a clear directive as well as stabilizer to the market.

The credit portfolio was further optimized. ICBC continued to intensify support efforts to initiate major national strategies and launch key projects, including the “four regions” and “three support belts”. In the first half of the year, project loans increased by RMB210.5 billion, accounting for 65% of the increase in total corporate loans. Emerging market loans derived from the so-called ‘happiness industry’, advanced manufacturing and Internet of Things (IoT) increased by RMB68.5 billion, accounting for 21% of the increase in domestic corporate loans. The coordinated integration between financial resources and the real economy’s development was also further intensified.

Vigorously promoting the development of inclusive finance. ICBC has adopted the business motto - “ICBC will have zero prospects when small and micro enterprises are ignored.” To this end, small and micro enterprise loans, according to the standard definition of inclusive financing by the China Banking?and?Insurance Regulatory Commission (CBIRC), increased by 16.8%, compared with the beginning of the year. The interest rate of newly extended inclusive loans was generally stable with a moderate declining trend. ICBC has satisfactorily fulfilled the "two increments and two controls” requirements of the CBIRC and the Macro Prudential Assessment (MPA) of the People's Bank of China. 236 small & micro finance service centers were established, handling more than 75% of all SME loans of the Bank, providing one-stop services for SMEs. There was also a faster initiation of the “digital inclusive” concept through improved convenience and availability in terms of small and micro financing. The outstanding Internet financing to SMEs amounted to approximately RMB200 billion.

(2) ICBC worked diligently to maintain its market competitiveness, generating an internal impetus through a deeper transformation and innovative efforts. During the first half of the year, ICBC laid a solid foundation by serving the real economy and meeting customer needs. Leveraging business transformation and innovation, ICBC promoted constructive and mutual facilitation between traditional and emerging businesses, integrated and compatible development of both finance and technology, and an organic interaction between domestic and overseas institutions.

Further developing a new impetus for growth.  Contributions from mega retail sales continually improved, among which revenue from credit card operations increased by 28% year-on-year; mega asset management and mega investment banking, amid unstable market conditions, progressed steadily towards business transformation. Advantageous business sectors such as syndicated loan, bond underwriting and asset custody grew steadily. Market competitiveness in financial market business continued to improve. Customer base has been continuously expanding, which has promoted the growth of basic revenues such as payments and settlements; in the first half of the year, fees and commissions revenue derived from basic products reached RMB27.1 billion, an increase of 14% year-on-year.

Accelerating the establishment of Smart Banking. Two major projects, e-ICBC 3.0 and the Next Generation Information System (ECOS), have made continuous breakthroughs. In the first half of the year, new customers acquired through online scenarios exceeded 7 million, while internet finance customers reached 300 million. Aggregate of online financial transactions amounted to approximately RMB340 trillion, accounted for 98% of the Bank’s total transaction numbers. Innovative achievements from the “seven innovation laboratories” were launched into operation in the fields of cloud computing, big data, artificial intelligence, blockchain, and IoT, helping to sustain ICBC’s leading position in the field of technology. Smart banking application scenario construction has continuously made new breakthroughs, marked by the launch of API open platform. At present, the Bank has created more than 900 various types of scenarios, covering the main aspects of people’s lives, namely, lifestyle, consumption, travel, financial investment, and public services, among others.

Steadily promoting international development and fully on board with “Belt and Road” construction. In the first half of the year, ICBC's Zurich branch and ICBC Almaty Astana representative office officially opened, bringing the number of ICBC’s overseas institutions to 420, covering 45 countries and regions. Through share acquisition, ICBC indirectly covers 20 countries in Africa. Overseas institutions realized net profits of USD1.55 billion, which was a positive contribution to the Group's overall profits. The Bank continually works towards transformation from international network expansion to an operation-level refinement. This has led to localized, characteristics and a professional development path for overseas institutions that continuously enhances the Group's overall synergy value and risk management capabilities. The Bank fully supports the construction of the “Belt and Road” and seeks strengthened cooperation with industry and through inter-bank cooperation mechanisms. In the first half of the year, ICBC extended new loans for 50 “Belt and Road” projects, with loan volume amounted to US$11 billion in aggregate.

(3) Unwavering in the promotion of overall risk management, and working hard to build a consolidated foundation to prevent and mitigate risks. In the first half of the year, ICBC safeguarded its risk prevention bottom line and control. We mitigated on-balance sheet and off-balance sheet risks and two distinctive lines for domestic and overseas institutions. ICBC is committed to controlling and preventing risks; recognizing that various kinds of risks were observed, managed and controlled strengthened business operations. At the same time, ICBC actively played a leading role in the management of the last financial crisis as well as serving as a market stabilizer, given our role as a large-scale bank.

Actively promoting the transformation of credit risk prevention and control, and the upgrading of basic management. Implementing the “solid foundation” project of asset quality. ICBC constantly consolidates asset quality management through building a new credit management model that adapts to new economic norms. The NPL for newly extended financing loans has remained at an impressive low level of 0.88% since 2013. In the first half of the year, the overdue rate of loans, as well as the scissors difference between overdue loans and non-performing loans fell for eight consecutive quarters, of which scissors difference declined by 39.1%. Regarding the acceleration of the elimination and remediation of potentially high-risk assets, the potentially high-risk financing decreased by RMB104.1 billion from the beginning of the year, continuing a decline for 9 consecutive quarters. This has helped resuscitating?an entire set of purified assets, laying a consolidated foundation. Meanwhile, ICBC leveraged its “window period”, amid steady growth while strengthening financial capability and impressive provisioning basis. ICBC put forth scale-up effort to eradicate non-performing assets. In the first half of the year, accumulated non-performing loans that were eliminated and remediated reached RMB107.7 billion, an increase of RMB16.6 billion year-on-year.

Specifically enhancing capabilities to prevent and control compliance risks. Strengthening cross-risk prevention and control, ICBC is exploring and establishing a comprehensive monitoring and penetrating management system; focusing on eight key segments, including: credit, asset management, financial market, investment banking, outsourcing business, inter-bank business, asset disposal, as well as centralized procurement; reinforce priority troubleshooting and project rectification. Establishing deepening rectification and priority governance, this  dual risk control mechanism; strictly adhering  to the compliance manager's responsibility chain, forming a pattern of accessible connectivity for the front, middle and back, operations of internal control and internal assessment, coordinating facilitation among three previously  noted aspects; actively responding to  tightening policies of international financial supervisory institutions, benchmarking global best practices, underscoring and reinforcing overseas compliance management, and further consolidating  an international operations base.

(4) Adhering to a humanistic philosophy and nurturing a unifying spirit and team-building efforts to usher in a new mindset.

Always convinced that human resources are a company's core resources, ICBC continues to implement the strategy of: “talents can help the Bank flourish and prosper”. To this end, the Bank has introduced a new three-year personnel allocation plan, and has expanded the training of various professional talents. The core concepts of innovation culture have been officially released, completing the establishment of an ICBC corporate culture system in order to foster a culture of integrity, compliance and service. The Bank is exploring and establishing a system for assessing the tenure of management personnel, so that those who dare to shoulder more responsibility, and act properly shall receive greater chance for promotion and compliments. By the same token, this will help identify staff members who are not professionally competent, demonstrate an inferior mental state, and either refrain to act or are slow to act to step down, forming a normal adjustment and exit mechanism. ICBC adheres to a “endeavor + implementation” principle as the theme of the entire year’s work, with “action” serving as the primary driver, while ’practicability’ being a secondary consideration in order to stimulate the spirit of the staff of the entire bank and prompting them to act in entrepreneurial and innovative sentiments, bringing in innovative vitality to the Bank.