Message from the President
2004 saw continued development of the Bank, consistent with the growth of the Chinese economy. GDP grew to RMB 13,600 billion, up by 9.5% from the previous year. The Chinese economy has become a major force in driving the growth of the world economy and trade.
In the past year, the Bank took full advantage of the healthy domestic and global economic environment to develop its technical capabilities and move towards the realization of its vision. The Bank made progress in its efforts to expand markets, strengthen risk control, improve operating efficiency, and innovate products and services. The Bank has achieved record results across all major operating indicators, and the Bank's service and competitiveness has been further strengthened.
Deposits and loans continued to grow at a steady pace
Deposits increased by RMB 494.26 billion for the year, achieving No. 1 in growth for the second consecutive year. Loans were up by RMB 321.68 billion for the year, while the quality of loans has been further enhanced during 2004 as evidenced by an increase of 5.4 percentage points of premium clients ratio.
The balance and percentage of non-performing loans both decreased
In accordance with the five-category loan classification system, the balance of non-performing loans ("NPL") was down by RMB 3.10 billion, and the NPL ratio was down by 3.93 percentage points. During the year, non-performing loans of RMB 44.3 billion were collected. Non-performing loans of RMB 18.9 billion, including principal and interest were returned to performing status. Foreclosed assets disposed during the year amounted to RMB 8.0 billion.
Bond investments and the intermediary business have grown rapidly
New securities investments amounted to RMB 167.3 billion to achieve a year-end balance of RMB 706.7 billion. International settlements amounted to USD 142.1 billion, up by 55.1% in comparison to the previous year. Total bank card volumes at merchants of RMB138.7 billion were up by 88% in comparison to the previous year. Our fund custody business expanded further during 2004, with six additional funds added to our portfolio and an increase of 11.2 billion shares under the custody of the Bank. Insurance brokerage fee income reached RMB 43.9 billion, up by 27.2% for the year. Income from intermediary services amounted to RMB 7.1 billion, up by 105.7% from the previous year.
Operating efficiency and profitability have improved
Total business profit in 2004 amounted to RMB 31.97 billion, up by RMB 12.31 billion. Total profit before tax amounted to RMB 8.44 billion, after the write-off of RMB 23.53 billion applicable to historical NPLs.
The Bank's product structure has become more balanced and streamlined, enabling the quality of banking services to improve
The Bank has introduced a series of new personal banking products, including Hui Li Feng (a structured deposit product in foreign currencies), Kins Credit Card and gold bullion trading. The Bank has also successfully completed the initiatives to integrate, refine and re-engineer 20 plus products in cash management and personal debt services. The restructuring of credit card channels and the development of cash withdrawal through ATMs for international cards were also accomplished. New intermediary services have also been added to online banking, including trading of treasury bonds, open-end funds and the Bank-Securities Express product. For corporate clients, online reimbursement and online appointment booking services have been added. Continued efforts have been made to streamline the distribution of banking network while upgrading individual outlets. In addition, we continued the construction of our financial supermarket offering. The Bank launched quality service competitions across the Bank to further promote the quality of ABC's offerings.
The information technology capability of the Bank continued to progress steadily
In 2004, we made breakthroughs in our data consolidation project with the data integration of eight branches and one department. The re-engineering of the ABIS Banking System has been very smooth. With the roll-out of our cash management system and the new intra-bank settlement system in all branches, the largest cash management service network and payment and settlement service system in China has been established. The upgrade of the credit management information system and the development and pilot-testing of the operation analysis system have been completed. A statistical online data analysis system has been implemented and used in 20 branches, marking the initial success of the establishment of a platform for sharing and analyzing statistical information across the Bank.
Internal management has been fortified to enhance the Bank's risk control capability
An initiative was launched to strengthen conduct and discipline across the Bank. The credit risk management system has been enhanced. Developments include technology and techniques to measure and manage the market risks. The reform of the audit and oversight practice has been deepened through a number of initiatives, including a bank-wide internal control comprehensive assessment of tier-two branches. Active efforts have been made to explore new methods to manage expansion of business through allocation of economic capital, and to design a comprehensive performance measurement system that is able to measure potential risks and losses to the Bank.
The Big Four Projects have progressed smoothly
In order to ensure the proper and efficient operation of various businesses, the Fundamental Management Improvement Project was launched to improve the policies and procedures, amend standard contracts and reinforce teller management and performance. The Post-lending Management Project is building a team of risk managers, and enhancing risk control over the entire credit process at the Bank. The Technology Innovation Project driven by client needs, has intensified efforts in product research and development, and product integration. The Human Resources Building Project was launched to carefully nurture and build a quality team that is able to satisfy customers and excel in a competitive environment through intensified EMBA training programs and overseas study.
On 23 February 2004, the Agricultural Bank of China celebrated the 25th anniversary of its re-establishment. In the past 25 years, under the enlightened leadership of the Central Party Committee and the State Council and with strong support from various sectors, the Bank has taken concerted action to modernize. We have realized remarkable success in the reform of the Bank. Achievements include separation from Agricultural Development Bank of China ("ADBC") and transfer to ADBC certain business including policy banking and rural credit cooperatives, and spinning off non-performing assets to the China Great Wall Asset Management Corporation. With these efforts and achievements, the Bank has completed its transformation from a specialized bank to a modern commercial bank. The continued growth of the Bank is evidenced by the increase of its capital strength, expansion of business scope, improved operating structure, significant rise in profit and returns and the on-going enhancement of management. This demonstrates that the Bank is better equipped to support the economic development of society and provide better quality services to its clients.
The above achievements are the results of the devotion and collective wisdom of several generations of hundreds of thousands of ABC employees, backed by the support and trust of the public and our valued clients. I hereby pay my sincerest tribute to those who are working hard in different posts and those who have retired with their lives devoted to the Bank. Without their perseverance and unselfishness, the glory of today would only be a dream. I also extend my sincere thanks to our customers and the public for their trust and support over the years, which are the firm ground of our survival and development. The Bank will exert its utmost effort to provide better services to its existing and new customers from home and abroad.
2005 is the last year of the transitional period for the banking industry after China's accession to the WTO, and is also a critical year for comprehensive reform of state-owned commercial banks in China. It is anticipated that market competition will become fiercer, financial needs of the customers will continue to diversify, and the reform of state-owned commercial banks will march into a new stage. In the new year, we will continue to transform the Bank for growth. We will continue to streamline internal operating mechanisms, improve business management and performance measurement and implement bank-wide risk management processes in order to further improve the Bank's asset quality and operating performance and achieve an appropriate balance between the pace of development, structure, quality, efficiency and performance.
I have a firm belief that with the concerted and consistent endeavour of our people, our achievements in the new year will be more fruitful and substantial, as we continue a steady pace of reform and development.
- 2004 Annual Report
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