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Agricultural Bank of China (ABC), formerly known as Agricultural Cooperative Bank was founded on July 10, 1951 and is headquartered at Beijing, China. It deals with commercial banking and financial services. Investment banking, Fund management, financial leasing and Life insurance are also included in its scope of business. The ABC Bank had initial public offering on the Shanghai Stock Exchange and the Hong Kong Stock Exchange on July, 2010 and this marked the completion of transformation into a public shareholding commercial bank. It was recognized as one of the Global Systemically Important Banks in 2014. It ranked No.47 in Fortune’s Global 500 and ranked No.9 in the Banker’s Top 1000 World Banks list in terms of Tier 1 capital. It is the third largest bank in lending services as per the market value in China. 
- The bank maintains a strong business portfolio of services which includes corporate loans and deposits, small and medium micro enterprises banking, investment banking, institutional banking, retail loans and deposits, bank cards, private banking business, treasury operations, money market operations, investment and trading operations, corporate and retail wealth management, pension business, asset securitization, treasury transactions on behalf of customers and has recently entered into the areas of e-commerce, mobile banking, self-service banking which are quite promising revenue streams. 
- It has wide distribution network and extends its operations across Yangtze River Delta, Pearl River Delta, Bohai Rim, Central China, North-eastern China, Western China and overseas. The bank has 23,612 domestic branch outlets, 37 tier-1 branches, 353 tier-2 branches, 3,515 tier-1 sub-branches, 19,702 other establishments, eight overseas branches and two overseas representative offices. ABC has fourteen major subsidiaries which also includes nine domestic subsidiaries and five overseas subsidiaries. 
- The bank leveraged on IT platform to provide integrated services across different channels. Using IT, it established a real-time backup centre in Shanghai and a data centre in Beijing. IT operation and management system was set up for production, contingency or disastrous matters which also catered to the requirements of massive data management. 
- The total number of the overseas institutions for the ABC bank increased to 15, and the cross-border RMB-denominated settlements has increased significantly. 
- The return on average total assets and return on weighted average net assets were 1.18% and 19.57% respectively. Innovative proposals like independent debt collection, while adopting write-offs and market-oriented disposals resulted in stable asset quality. The Bank’s outlook ratings assigned by the credit rating agencies were “stable”. 
- Credit limit management, industry-specific credit policies and customer list-based management, and implementing more effective risk prevention and control focusing on key areas, industries, businesses and customers are the key highlights of its risk management strategies.
- As per the latest UN study, which assessed the progress of 32 of the world’s largest banks towards implementing the UN Guiding Principles on Business and Human Rights and benchmarked each bank against a set of 12 criteria in four categories, that is policy commitment; due diligence commitment; reporting and access to remedy, for each criteria, Agricultural Bank of China scored overall 0 on a scale of 12 in all aspects. It requires disclosure of its services through proper channels to maintain its reputation in the long run.
- At the end of 2014, the balance of non-performing loans of the Bank was increased to RMB 124,970 million. The non-performing loan ratio increased by 0.32 percentage point to 1.54%.Non-performing loans showed an increase mostly in three industries: (1)wholesale and retail (by RMB19,155 million); (2) manufacturing (by RMB12,044 million); and (3) real estate (by RMB2,059 million). 
- Corruption issues at senior management level could weaken the company’s growth. It came into surface recently with the arrest of former senior executive of ABC, Mr Yang Kun. Yang is believed to have accepted bribe from a Beijing developer Blue Harbor in order to extend an enormous loan amount of 3 billion Yuan to the company since he became a deputy head of ABC in 2004. 
- The bank needs to speed up system upgrades, improve the customer experience and use new technologies to facilitate financial innovation. In mobile banking services specifically, bank need to focus on developing real-time services, convenience to customers, efficiency and effectiveness of service that will meet current customers’ demand while ensuring that proper safeguards are in place to maintain the security of data and information for the clients. The bank has already started innovation along these lines by including the mobile banking and personal banking services in its portfolio. 
- By directing its plans towards the implementation of the national strategy of the synchronous development of industrialization, informatization, urbanization and agricultural modernization, the Bank will help in the development of agriculture, assist the government in its regional development strategies, economy revival, and the establishment of “One Belt and One Road” and free trade zones, through which business can be transformed. 
- ABC can further work on its key strategies of serving the County Areas by extending its service model to them in new-type agricultural business. It can support the construction of high standard farmlands and agricultural irrigation projects to build upon its strength on service in infrastructure construction in County region. It can also provide support in new-type urbanization where the new-type urbanization service models can be implemented with a combination of financing and new talent introduction. Provision of inclusive financial services with advanced technology to efficiently provide banking services in the County Areas can also open a new door of opportunity for the bank. 
- Global economy is in recovery phase and the development is slow and uncertain. As per the International Monetary Fund Report, the economic growth in US would be upwards due to stability in the job market and real estate market recovery whereas European and Japanese economies would achieve slight growth. Dropping commodity prices would affect the resource-based countries and it may keep them in a dilemma of interest rate fluctuations, either upwards due to capital outflow or downwards due to economic downturn. Excessive production capacity and decreasing international commodity prices, will cause low CPI (Consumer Price Index) growth and PPI (Purchase Power Index) will continue to have negative growth in China. The CRB Spot Market Price Index decreased by 4.1% over the year 2014. The bank needs to adapt its policies according to the changing ‘new normal’ economic scenario by constantly monitoring it. 
- Interest rate liberalisation tends to increase bank’s expenses for funding. As a result, it needs to look out for better options which could provide higher margins while earning revenues. Tightened regulatory monetary policies and aggressive fiscal policies by the Chinese government to maintain a stable economy can affect the bank’s operations and interest rates. The bank needs to cope with these threats through innovation in services. 
- Competition from foreign banks would increase as they tend to benefit from interest rate liberalisation. They would be benefitted in terms of pricing risk, interest risk and liquidity risk management. Also, the internationalisation of the currency Renminbi (RMB), the official currency of the People’s Republic of China, allowed foreign banks involved in global trade with China to largely use RMB for settlement of trade and re-invest the RMB they get due to trading. 
- To achieve stable growth in the country, the government of People’s Republic of China observed tightened monetary and rigorous fiscal policies. It further relaxed the limit of interest rates on the Remnibi deposits and lowered the deposit benchmark rate. This could lead to overall negative impact on the bank’s net interest margin. But this may be partially offset by the cut in the required reserve ratio by releasing capital into higher return investments. 
- The economic conditions are stable but there is a minor cut in the growth rate. GDP of China increased by 7.4% in 2014, which is a 0.3 percentage point decrease compared to the previous year. CPI showed a slight increase of 2% whereas PPI maintained steady growth in negative units. As a result, total investment in fixed assets decreased by 3.9 percentage points; consumer goods sales decreased by 1.1 percentage points ; net export also decreased by 1.7 percentage points.  The sluggish economy with tighter government controls could lead to stable outlook for the ABC. The overall growth in profit for the ABC decelerated to 8% in 2014, down from 14.6% in 2013. 
- Chinese economy is experiencing a shift in focus from the manufacturing industry to service industry. New emerging industries have shown growth whereas the existing industries faced hindrances in their businesses. The overall economic quality shows improvement due to rise in productivity and lowered energy consumption per GDP unit. The bank could focus more on innovation in services to satisfy consumer demand. The ABC promoted the gradual transformation of traditional financial service to the e-banking services and achieved improved customer experience and satisfaction. Overall customer experience was further enhanced through other internet services like Weibo and WeChat. 
- Chinese people are gradually experiencing improvement in their livelihood and their overall consumption pattern has changed. The ABC could capitalize on this increasing household consumption needs and cater to their increasing needs of the financial services through their retail banking business. The retail loans as offered by the ABC currently include the housing loans to rural households, new business loans such as “Bao Jie Die”, and personal loan through online retail platform. Both retail loans and retail deposits have shown marked increase compared to the previous years. 
- The urban population in China, who are employed, has shown an increase by 13.22 million in 2014. This higher growth implies that there would be an increase in demand for loans and other financial services like debit cards and net banking services for convenience in banking transactions. This would ultimately bring greater revenues for the bank as well. ABC introduced innovative services like replacing the card without altering the card number and the option to select the card number for the new customers. 
- Mobile banking and e-commerce are the new buzz among the Chinese. An “integrated e-commerce payment platform” with several channels that includes suppliers, customers and business partners as well is the need of the banks.  With the use of the internet, big data and cloud services, ABC innovated and launched the “e-commerce Steward”. Leveraging this technology, it can solve the information, capital and logistic issues and satisfy all its stakeholders at once. In 2014, the Bank recorded e-commerce transaction volume of RMB1.3 trillion with 11,108 registered customers. The enterprises could connect to upstream and downstream organizations and could take advantage of various value-added services without wasting time on establishing their own platforms on e-commerce. They could connect their retail outlets with online sales too, procure from their vendors, pay online and also market their products. Application of internet finance also led to innovation of services like digital loans. Technology opened up new ways of communication for the banks with its customers like WeChat services by linking mobile SIM cards with their bank accounts and enabling them to make their payment for any transaction like shopping, movies, etc, with their mobiles. 
- For ensuring scalability and reliability of network while providing services to huge customer base, virtualization and cloud services offer unique advantages. They help in energy conservation and reduce maintenance expenses. Thus, ABC partnered with Huawei to build a 24/7 data center architecture and preferred Software-Defined Networking while upgrading its systems. This would help create additional capacity for the networks without any extra equipment loads. It would also save administration time and costs. ABC currently operates in 5 zones as opposed to 13 service zones earlier, that clearly reduced the time-to-market for new services and lowered maintenance costs by more than 50%.Even the network capacity was upgraded to 10Gbit/s and there is room for further expansion to 100Gbit/s as the requirements evolve. 
- Fraud among Chinese banks is prevalent in the news. To curb the menace, there is an enhanced need to make all the customer transactions secure. Advanced technology and IT systems could be used to monitor and control the insecure transactions that might occur in the banks. 
- To save time on unsettled legal cases and carry out hassle-free work, technology could be of immense help. The ABC, in cooperation with the Supreme People’s Court began the operation of “Head-to-Head” online service system which would assist in faster execution of the cases. It topped among the rankings listed in the “Top 10 Listed Banks with Outstanding Legal Risk Management” of 2014 provided by the Legal Daily and Research Centre on Management of Legal Affair of Enterprises of China University of Political Science and Law. It was also acclaimed as one of the “Best Banks with Outstanding Legal Risk Management in China” by the China Banking Association. 
- Heavy energy consuming and pollution causing industries must be limited in their financial provisions as they are deterrent to the environment and may shut down. Also, the chances of default due to natural disaster can be high for loans provided to the rural households in the County areas. In order to avoid this, the bank is strategizing to observe standardized procedures and limit the tolerance level of loans through the use of technology. 
- The legal issues may arise as a result of counterfeit account holders or bad debts. Chinese banks are believed to be safe haven for the counterfeiters due to lack of coordination between the Western countries and China .Besides that, in order to recover the unpaid loan amount, the bank may get itself entangled in legal cases as it had happened in the past between the Rushan City Shipbuilding Co. and the ABC in 2010.  This could lead to rise in nonperforming assets for the bank. The ABC needs to observe strict risk management policies to keep such situations in check. Also new methods of inspection in terms of law were put in place to ensure the compliance of legal standards for various financing operations including internet and international financing businesses. 
- The staffs need to be aware of the law that is prevalent in the country in order to avoid breaching it. Lack of awareness of law could lead to legal rights violations, liabilities and reputational damage for the bank. Proper training programs like “Lecture on Laws” and speech in public forums called “ABC Lecture” are some of the initiatives taken by the ABC in this direction to familiarize the staff with the matters of law. 
- Author, ABC Ltd. (24th Mar, 2015). “2014 Annual Results Announcement” [pdf]. Retrieved from (http://www.abchina.com/en/aboutus/annualreport/201503/P020150326402006728756-.pdf)
- Author, Ryan Brightwell.(Dec,2014). “Banking with Principles?” [pdf].Retrieved from (http://www.banktrack.org/download/bankingwithprinciples_humanrights_dec2014_pdf/hr_banking_with_principles_digital.pdf)
- Author, Ernst & Young Global Ltd. (14th May, 2013). “EY issues China Banking Industry Report: Opportunities abound in e-finance and mobile banking platforms” [webpage].Retrieved from (http://www.ey.com/CN/en/Newsroom/News-releases/2013_EY-issues-China-Banking-Industry-Report)
- Author, PWC. (14th Jan, 2014). “Foreign banks seek opportunities as China reforms its financial sector” [webpage].Retrieved from (http://www.pwccn.com/home/eng/pr_1401-14.html)
- Author, Erika Kinetz. (7th May, 2015). “AP Exclusive: Chinese banks a haven for web counterfeits” [webpage].Retrieved from (http://www.cnbc.com/id/102660898)
- Author, Pang Jiaoming and Wu Jing.( 8th Oct, 2013). “Shandong Shipyard’s Lesson: Don’t Rock the Bank” [webpage].Retrieved from( http://www.chinafile.com/reporting-opinion/caixin-media/shandong-shipyards-lesson-dont-rock-bank)
- Author, Lisa R. Melsted. (24th Feb, 2015).“Agricultural Bank Of China Installs AgileNetwork” [webpage].Retrieved from (http://www.forbes.com/sites/huawei/2015/02/24/-agricultural-bank-of-china-installs-agile-network/)
- Author, Iryst Tan.(11th May, 2015). “Increasing ABC’s fair value estimate to reflect less NIM pressure thanks to policy initiatives”. [webpage].Retrieved from (http://analysisreport.morningstar.com/stock/research?t=601288®ion=CHN&culture=en-US&productcode=MLE)
- Author, Engen Tham. (4th Feb, 2015). “China jails former Agricultural Bank VP for life for taking bribes” [webpage].Retrieved from (http://www.reuters.com/article/2015/02/04/us-china-corruption-idUSKBN0L80W520150204)
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