Asiamoney China retail banking awards 2018

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China’s retail banks must overcome their own inertia and challenges from fintech if they are to maintain profitability.

The best are prepared for the challenges

China retail awards
© 2018 Euromoney

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It can be hard to understand the sheer size of China’s banking system. At the end of January, Chinese commercial banks had Rmb248.9 trillion ($39.35 trillion) of assets. 

Four of the world’s five largest banks are Chinese. Bank of China alone has assets larger than the economic output of most of the world’s countries.

One might imagine that such big firms would have life easy, enjoying immense economies of scale, a lot of bargaining power and a crucial position in government plans. Instead, things are only getting more difficult. Chinese bank profits are not quite on a downward trend, but they’re certainly not growing at the rate they used to. 

Many Chinese banks have been too cumbersome and slow – lazy even – toward their retail customers for too long. They are losing out to the likes of Alipay (owned by Ant Financial) and WeChat/WePay (Tencent), who are nimble, innovative and appear to listen to what their customers want and have access to their digital data. 

Smarter banks are reacting and innovating. They do not see old-style branch banking and digital banking as opposites: they are trying to find the best of both worlds. 

Foreign banks are also on the field, but it will be some time before they become a real threat. They will certainly struggle to compete on scale, weighing up the costs of branch network expansion in an already crowded market, when digital banking can only go so far.

But the same impulse that has encouraged the Chinese government to allow foreign banks greater access will threaten profits at China’s bigger retail banks. 

The move in 2015 to deregulate interest rates pushed up deposit rates in the country and has eaten into bank profits. Any attempt to curtail shadow banking will also hurt, although it should boost the long-term health of the sector.

There are certainly challenges facing retail banks in China, but the best banks are already prepared to withstand such changes.


Award winners


Best state-owned retail bank: Agricultural Bank of China

Best national retail bank: China Merchants Bank

Best retail bank for innovation in technology: Shanghai Pudong Development Bank

Best retail bank for inclusive finance: Postal Savings Bank of China

Best retail bank for premier banking services: China Construction Bank.


Best state-owned retail bank
Agricultural Bank of China

160x186 Zhao Huan

Zhao Huan, ABC 

Agricultural Bank of China, which operates one of the largest networks in China among domestic banks, has demonstrated a strong commitment to transforming its traditional retail banking operations and has made solid progress towards achieving that goal.

It has been enthusiastic in adopting technology to upgrade its retail banking operations. It was the first Chinese bank to use facial recognition in retail banking. By the end of 2017, more than 7,000 of its ATMs had been equipped with the technology, and the bank is planning to deploy it in all its ATMs across China in the near future. 

Under president Zhao Huan, ABC has turned increasingly to digital channels, especially smartphones, to market its credit cards. It has achieved remarkable success on that front. In 2017, as many as 74% of new credit card applications were made through its digital channels, and it issued 3.2 million credit cards to customers who had applied that way, 5.5 times the tally of 2016. 

The bank has also played a big role in boosting financial inclusion through its extensive network in China’s rural areas. From the start of 2016 to November 2017, it loaned out Rmb241 billion ($38 billion) to 8.2 million customers in rural China. 

ABC has yet to disclose more information on its performance in 2017, but the latest available statistics show that the bank outperformed other state-owned Chinese banks in attracting saving deposits from retail clients and growing the customer base for credit cards for the first nine months of 2017.

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Best national retail bank
China Merchants Bank

Compared with other national commercial banks in China, China Merchants Bank has built the largest and the most competitive retail banking operation. Last year, the bank strengthened its position as the best performer in the retail banking sector. 

By the end of 2017, the number of CMB’s retail banking customers had increased 17.1% from a year earlier. The total now tops 100 million; and customer assets under management in its retail banking division rose 11.5%, to approach Rmb6.2 trillion ($979 billion). CMB’s net profit was up 13% year on year, to nearly Rmb70.2 billion, thanks to the sustained rapid growth of its retail banking business, while the bank’s total operating revenue increased 5.4% to more than Rmb221 billion.

For CMB, a big enabler of its rapid retail banking growth is the bank’s fervent embrace of technology to improve operational efficiency. It has applied biometric identification technology including facial, fingerprint and voice recognition, as well as robot advisory, robot risk control and augmented reality to its retail banking operations.

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Best retail bank for innovation in technology
Shanghai Pudong Development Bank

PAN YAOdong 160x186

Pan Yaodong, SPDB

For decades the Chinese government has repeatedly urged domestic banks to find ways to serve micro businesses to boost job creation and economic growth. But the banks have been hesitant because of the enormous costs and high risks involved. 

Shanghai Pudong Development Bank, a Shanghai-headquartered commercial bank that operates across the country under Pan Yaodong, finally came up with an innovative solution whose effectiveness has been proved after more than two years in operation.

SPDB’s online supply-chain financing project for micro businesses was launched in September 2015. By the end of 2017, the bank had loaned nearly Rmb6 billion ($948 million) to nearly 10,000 micro businesses across China. It has a very low loan repayment default rate, according to SPDB. 

In China, a large number of micro businesses are small distributors and retailers for large companies. To check background and operations of these businesses, SPDB’s platform accesses information systems at dozens of large companies across a wide range of industries. The project’s team also uses big data analysis. Together, that enables the project to carry out a thorough investigation into the micro businesses to minimise credit risks. 

In addition, the project also stands out in efficiency; all its processes are conducted online, starting with customer engagement, through loan application to loan approval. This means it can send a loan to an eligible micro business within five minutes of receiving an application.

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Best retail bank for inclusive finance
Postal Savings Bank of China

Postal Savings Bank of China has long led other Chinese banks in making its financial services available to individuals and small businesses in the country’s economically underdeveloped rural and inland regions. The bank also stands out for its willingness to go the extra mile to serve customers in these regions.

Granted, PSBC has a natural advantage over other Chinese banks – it boasts a very extensive network among domestic banks; among its roughly 40,000 outlets, more than 70% are located in small towns and rural areas. 

The bank has made good use of that advantage: at the end of September 2017, it had provided a cumulative Rmb1.4 trillion ($221 billion) in micro loans; the balance of its loans to micro businesses exceeds Rmb640 billion, an increase of 11% from a year earlier. 

While operating a network of brick-and-mortar outlets in rural and interior China, PSBC has also installed up to 100,000 ATMs and reached out to customers in these areas via the internet and smartphones. 

In remote and mountainous areas where the bank doesn’t have outlets, it uses a fleet of vehicles to provide basic retail banking services for locals. The bank has also formed partnerships with government agencies, insurance companies and loan guarantee providers to extend its reach and to control credit risks.

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Best retail bank for premier banking services
China Construction Bank

China Construction Bank started offering integrated retail banking services for affluent individuals and families under its ‘Golden Butler’ brand in 2013 and has succeeded in expanding the customer base in 2017. 

Golden Butler provides cash pooling and asset management services for affluent individuals, small business owners and their family members. The services have been made available to customers throughout CCB’s retail banking outlets. 

In 2017, CCB stepped up efforts to market Golden Butler services through digital channels, including smartphones. It also launched a smartphone app to allow the brand’s marketing and sales teams to share customer data, coordinate business activities and interact with potential customers. The result was impressive: by the end of 2017, the bank had more than 3.5 million customers for Golden Butler, of which some 600,000 or 17% were signed up in the year.

While generating income for the bank, Golden Butler has also paved the way for the strong growth of CCB’s private banking business: as wealth has accrued, a large number of Golden Butler users have become the bank’s private banking customers. 

At the end of 2017, the number of CCB’s private banking clients had increased nearly 17% from a year earlier, to top 110,000.



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