Banks should realize that reshuffle of industry will come soon, says expert

Many commercial banks in China have highlighted retail banking as a business transformation strategy as they faced challenges from the booming fintech sector and tightening financial risk regulation in the first half of 2017, according to their interim results announcements.

For Bank of China Ltd, the fourth-largest commercial lender by assets in China, personal banking contributed 40.2 percent of its comprehensive income related to domestic commercial banking, up 30 basis points from the same period last year. Among new domestic yuan loans totaling 460 billion yuan ($70 billion), personal loans accounted for 58 percent.

Liu Qiang, executive vice-president of BOC, said: "Among various banking businesses, personal banking requires less capital and plays a significant role in hedging against economic cycles.

"We'll deepen our reform of personal banking by building a personal banking product system, developing the cross-channel coordination ability, and making greater efforts to acquire customers."

The BOC is not alone in further implementing a retail banking strategy. The number of personal clients of the Industrial and Commercial Bank of China Ltd, the nation's largest commercial lender by assets, increased by 16.86 million in the first half, and its personal financial assets totaled 12.67 trillion yuan. ICBC's net profit rose 2 percent year-on-year to 153.7 billion yuan.

China CITIC Bank Corp Ltd also devoted a larger part of its credit resources to retail banking. During the first six months of this year, the Beijing-based national joint-stock commercial lender recorded incremental loans worth 213.17 billion yuan, of which 82 percent were personal loans. Retail banking accounted for 31 percent of its operating income during the period, up from 25 percent a year ago.

Wu Qing, director of the comprehensive research office of the Research Institute of Finance at the Development Research Center of the State Council, said: "The gap in financial performance has enlarged among commercial banks.

"Although some expanded rapidly by almost 30 percent in regard to total assets, more banks posted single-digit growth in net profit. This should raise the alarm, making all senior banking executives, especially the chairperson of each bank, realize that a reshuffle of the banking industry will soon take place. They have to further maximize their own bank's advantages to find their niche market. For those banks that lack core competence or whose core competence is diminishing, their outlook will be gloomy even though some of them still have a large market share for now," Wu added.

jiangxueqing@chinadaily.com.cn