Transaction bank of the year: China Merchants Bank
Transaction banking is something of a new discipline for Chinese commercial banks. Thanks to the rapid business restructuring it carried out, China Merchants Bank has set itself apart under general manager Zuo Chuanghong from its domestic peers by building the most efficient transaction banking operations among Chinese banks.
Transaction banking requires a bank to provide one-stop comprehensive financial solutions for corporate clients. To embrace transaction banking, Chinese banks must integrate corporate banking operations scattered in multiple units as well as branches and sub-branches into a tightly knit new business. Due to their massive scale of operations and complex business structures, state-owned commercial banks have not been able to adopt transaction banking in this sense.
In recent years, national commercial banks that are not state-owned and city commercial banks began transitioning towards transaction banking. CMB has emerged as a clear leader.
In 2016, CMB boasted the most comprehensive transaction banking services among Chinese banks, integrating all its corporate banking businesses, ranging from payments and settlements, cash management, trade finance, supply chain finance, cross-border finance to internet banking.
Last year, the bank also excelled in exploiting the synergies generated by the integration and capturing fresh business opportunities uncovered by its newly instituted transaction banking operations.
By offering comprehensive and customized financial services under the transaction banking structure, CMB not only strengthened relationships with corporate customers in traditional industries, but also picked up new clients among the leading internet companies in China, such as e-commerce leaders Alibaba and Didi Chuxing, the Chinese equivalent of ride-hailing service Uber.
In 2016, CMB’s transaction banking recorded robust business growth. By the end of the year, the intermediary businesses under the bank’s transaction banking structure generated more than Rmb8.6 billion ($1.3 billion) in income. The number was by far the biggest among China’s national commercial banks.
Best transaction bank for payments services: Postal Savings Bank of China
Postal Savings Bank of China was spun off from state-owned postal service provider China Post Group in 2007. By employing modern technology and leveraging its extensive network in China’s rural areas and small cities, PSBC has become a powerhouse driving e-commerce growth in rural China with a full range of innovative payment products.
PSBC has inherited China Post’s remittance business, which has operated in China for more than a century. No other financial institution can match PSBC’s strength in terms of its network, which covers all the provinces, municipalities and autonomous regions across China. In 2016, PSBC processed roughly 57 million domestic remittances, totalling Rmb230 billion ($34 billion). It also handled more than one third of cross-border transmittances last year.
But PSBC has not rested on its laurels. Instead, it has seized the opportunities provided by the burgeoning e-commerce sector in China to expand its payment business. By the end of 2016, China had 731 million internet users and 695 million smartphone users. Among them, more than 27% live in rural areas, the traditional markets for PSBC. Last year, goods purchased online in rural China approached Rmb650 billion, up 86% from 2015, according to official figures.
To support the explosive growth of e-commerce in China’s rural areas, PSBC has rolled out comprehensive electronic payment solutions to enable farmers to transfer money and settle business transactions via the internet, smartphones, ATMs and television sets.
The bank has also introduced new solutions to better serve its rural customers offline. In 2016, it launched Agricultural Aid Plus, a customized service to allow farmers and small rural businesses to rely on telephones to transfer money and make payments across banks. By the end of last year, more than 420,000 of its clients were using Agricultural Aid Plus.
In September 2016, PSBC launched an IPO in Hong Kong. With access to the global capital markets and more corporate social responsibility as a public company, PSBC is poised to play a bigger role in serving its customers in rural China with more innovative and customized payment solutions.
Best transaction bank for domestic cash management: China Merchants Bank
One reason why China Merchants Bank stood out in the provision of transaction banking is its strength in cash management. In 2016, CMB recorded another year of robust and sustainable business growth in cash management.
By the end of the year, it had more than 1.1 million cash management clients, up 33.4% from the previous year, making it the leader among the national commercial banks.
A key driver of the growth is CMB’s newly instituted transaction banking structure, which has enabled the bank to attract more clients for cash management with comprehensive and customized services. But there are other reasons behind its remarkable growth.
First is the launch of a global cash management (GCM) platform last year. The platform has made it possible for CMB’s multinational company clients to conduct real-time monitoring of their overseas bank accounts, as well as to make cash remittances and transfers from China to their accounts at CMB’s overseas branches.
The second is the bank’s cross-border cash pooling service, which helps customers to manage cash more efficiently. In 2016, CMB signed up an additional 159 clients operating in and outside China for the service.
The third is the introduction of customized multi-level cash-pool programmes to strengthen relations with large Chinese conglomerates. The programmes allow clients to closely track cash movements between their various subsidiaries and affiliates and to quickly allocate cash to suit the needs of each business unit. Launched in late 2014, the programmes attracted 7,679 customers for CMB in 2016.
The fourth is the continuous upgrade of its Cross-Banking Solutions and Treasury Management System, which were designed to enable large businesses and governmental bodies to centralize their cash management. Last year, Cross-Banking Solutions alone won 514 customers for CMB, up 154% over 2015.
Best transaction bank for international cash management: Bank of China
By the end of 2016, BOC had expanded the coverage of its international cash management to 43 foreign countries and overseas regions. It has also upgraded its global cash management platform in areas such as account management and direct connections with Swift in overseas payments for clients.
By enhancing its capability to service cross-border clients, the bank landed international cash-management mandates in 2016 from multiple global companies operating in China, including Merck, PVH and Dyson, as well as three Chinese airline companies operating overseas – China Southern Airlines, Xiamen Airlines and Hainan Airlines.
Last year, BOC also expanded the range of its international cash management offering for many of its existing clients. These clients include global companies such as Bosch, Volvo and Byso Resources, as well as large domestic companies such as Sinopec, Huawei Technologies and China General Nuclear Power Corp.
In 2016, the bank also consolidated its market leading position among Chinese commercial banks in cross-border cash pooling for domestic currency renminbi and foreign currencies. It signed up 317 clients for cross-border renminbi cash pooling and 458 clients for cross-border foreign currency cash pooling.
Last year, BOC also established itself as the leading cross-border cash pooling service provider in the newly established pilot free trade zones in Shanghai and other domestic cities by adding 72 companies operating in these zones as clients for the services.
Leveraging its international business network and powerful global cash-management platform, BOC’s international cash-management business has maintained robust growth. By the end of 2016, it had 233,087 clients using the business, up 28% from the previous year. At the same time, the business brought in cash deposits of Rmb660.5 billion ($97 billion), up 26% since the end of 2015.
Best transaction bank for supply chain finance: Bank of Communications
Bank of Communications, the fifth-largest commercial bank in China by assets, stands out in China’s banking sector for the strong capability it has developed to serve supply chain finance clients.
Led by general manager Fu Wanjun, the bank’s strength in supply chain finance is reflected by its extensive coverage of industries and the large number of customers it has served. BoCom has made its supply-chain finance services available to businesses in more than 20 industries in China. By the end of 2016, it had signed up some 2,000 leading companies in their respective industries, as well as roughly 20,000 small and medium-sized enterprises associated with these industry leaders as clients for trade finance.
BoCom has built its competitive strength in trade finance with the support of its comprehensive services, innovative solutions and rigorous risk management.
To help its key clients in various industries and their suppliers to finance their business activities, the bank has to-date offered 23 supply-chain finance products, including loans backed up by inventories and delivery orders, account receivables financing, commercial bill discounting and factoring.
And to speed up the financing process, BoCom has developed its own innovative electronic supply-chain finance system to conduct receivables financing, commercial bill discounting and factoring online for its clients.
The bank’s online trade-financing services are well received by Chinese companies as well as their suppliers and distributors in the logistics, petrochemicals, home appliances, automobiles and construction industries.
In the first quarter of 2017, BoCom lent more than Rmb10 billion ($1.5 billion) via online commercial bill discounting alone to its supply chain finance clients.
Risk management is essential to the healthy development of a bank’s supply chain finance business as the majority of the companies on the supply chain of industries are SMEs. BoCom’s risk management team now uses big data analysis to monitor potential risks facing its trade finance services. In addition, it has engaged insurance providers and loan guarantors to further mitigate the risks.
Best transaction bank for trade finance: Bank of China
Bank of China is the first domestic commercial bank to offer trade finance in China. It has led domestic peers in launching a wide range of trade-finance services, from factoring, forward exchange facilities, renminbi and foreign currency swaps to cross-border renminbi settlements.
Operating in 50 countries and overseas regions across six continents, with a history of 105 years and with a full range of products and services, the bank strengthened its position as a clear leader among domestic banks in trade finance, recording sustained growth across sectors last year.
Take, for example, the bank’s cross-border renminbi settlements for domestic and international companies and guarantees for financing and non-financing activities conducted overseas by domestic businesses.
International settlement business is one of BOC’s traditional strengths. By the end of last year, the bank’s overseas branches had opened a total of around 1,500 renminbi interbank clearing accounts for global customers. And the volume of cross-border renminbi settlements it conducted last year reached Rmb4.04 trillion ($594 billion), putting it well ahead of its domestic peers.
Among Chinese commercial banks, BOC has the most comprehensive financing and non-financing guarantee products. It is also a pioneer in China’s banking sector in offering foreign financing and non-financing guarantees for domestic businesses operating overseas.
With more Chinese businesses seeking to establish a global presence in recent years, BOC has stepped up its guarantee provision to domestic clients to help them secure contracts for bulk commodity exports and the construction of overseas projects, as well as to carry out mergers and acquisitions overseas.
By the end of 2016, the bank had provided more than Rmb79 billion in guarantees for domestic clients’ overseas financing activities while guarantees for their overseas non-financing activities exceeded Rmb97 billion, putting it ahead of the other Chinese commercial banks on both counts.
Best transaction bank for electronic banking services: Citic Bank
In China’s banking sector, no other players would dream of building a physical business network as extensive as that of the state-owned giants. That is why Citic Bank has strived to build its competitive strength around electronic banking since its establishment in Beijing in 1987 – and has succeeded on that front.
Citic, with Wang Penghu as vice general manager, has led its domestic peers in introducing and upgrading electronic banking systems for corporate clients. In July 2016, it became the first Chinese commercial bank to start instituting an integrated electronic architecture for transaction banking.
Thanks to the capabilities of its electronic banking operations, which it has built over the years, the new electronic architecture has enabled Citic to rapidly expand its online banking operations.
By the end of 2016, the total number of transactions the bank had completed online rose 8.5% from a year earlier to reach 520 million. Meanwhile, the total turnover of online transactions it had processed increased 18% to approach Rmb66.1 trillion ($9.7 trillion). Also, at the end of last year, 68.4% of the bank’s transactions were conducted online, an increase of 6.8 percentage points from the end of 2015.
The other milestone last year for the bank was the launch of a fully upgraded online supply-chain finance platform, which is an integral part of its electronic architecture for transaction banking.
The platform provides customized solutions for the bank’s key clients, most of which are large companies in home appliances, auto manufacturing, pharmaceuticals and fast-moving consumer goods industries. Take Haier, a leading Chinese home appliance maker. With the platform, Haier’s distributors across China can place orders and obtain financing from Citic online.
Citic has led domestic commercial banks in providing electronic commercial draft acceptance services. By the end of 2016, it had signed up nearly 30,000 clients, the largest number among Chinese banks, for electronic draft discount and rediscount services.
Now, with the People’s Bank of China, China’s central bank, taking rapid steps to phase out paper drafts in order to curb fraud, Citic is well placed to accelerate the growth of its electronic commercial draft acceptance business.
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