Morningstar | China Citic Bank Continues Its Retail Banking Transformation
China Citic Bank, or Citic, has an inherent advantage in the corporate banking market, boasting a solid customer base of large-scale state-owned enterprises. This is thanks to its strong connection with its parent China Citic Group, one of the largest SOE conglomerates, with businesses covering financial, real estate, infrastructure, energy, resources, manufacturing, and construction. Serving more than 600,000 corporate customers, the bank specializes in trade finance, cash management, and custodian services. Citic has good relationships with strategic corporate customers. These large and financially strong companies concentrate in auto, Internet, real estate, household appliance, and liquor industries. They contribute about 25% of total deposits and nearly 18% of total revenue. Institutional customers in public sectors--including municipal construction, transportation, education, science, culture and health--contribute about 31% of total deposits and 9% of total loans. The credit quality of these two customer groups is good, with the bad-debt ratio lower than 0.15%. Citic also continues to optimize loan portfolio geographically. Loans granted through branches in key cities including Tier 1 cities, Nanjing and Hangzhou represented 44% of total corporate loans. Private enterprise loan accounted for nearly 40% of corporate loans, but credit quality risks still exist, with the bad-debt ratio standing at over 2.6%.Investment banking and retail banking are two primary focuses for its strategic transitioning. Leveraging its relationship with Citic Group, it aims to establish an integrated platform to provide various financing and financial advisory services to its corporate customers, through cooperation with the group's subsidiaries: Citic Securities, Citic Trust, Citic Prudential Life Insurance, and Hua Xia Fund. We are positive about this move, as these financial subsidiaries are well positioned in their respective markets. Retail banking (wealth management, retail lending, and card business) is another focal point. The retail deposit base remains weak and we have yet to see good strategies to achieve cost savings or differentiate the bank from superior peers.