Doing "money" business is always the most profitable.
01
The most profitable businesses in 2021
In the early years, there was a saying that was widely circulated, saying: To make money in China, we must follow the party.
The more the times develop and the more society progresses, the more we can appreciate the true meaning of this sentence. In the case that the whole industry was not very easy to do last year, only central enterprises can "cross the bear bull" and walk out of the independent market.
Some time ago, the 2021 Fortune China Top 500 Enterprises Ranking was released, and in terms of revenue, the top companies in the list are: Sinopec, PetroChina and China State Construction.
The vast majority of the list are central enterprises.
In terms of profits, ICBC once again won the "Most Profitable Enterprise in China" without suspense, with a net profit of 315.9 billion yuan, and the profit scale was almost twice that of alibaba and Tencent, with nearly 900 million yuan per day.
It should be known that less than 100 Chinese listed companies can generate profits of more than 900 million yuan per year; in other words, ICBC can create a top 100 listed company in a day.
It can also be seen from the third quarter financial report released by ICBC itself.
In the past, as China's fastest-growing Internet industry, one giant after another was born, but this year, without exception, it has fallen into growth stagnation, and Ali's companies no longer grow or even decline in performance. ICBC announced its results for the third quarter of 2021, with operating income of approximately RMB217.489 billion, an increase of 9.9% year-on-year, and net profit attributable to shareholders of the parent company of RMB88.348 billion, an increase of 10.59% year-on-year.
Not only has the performance stabilized in the downward cycle, but the profit has also achieved double-digit growth, and the money-making effect has been directly full.
Of course, ICBC's strong ability to absorb gold is not a day or two.
In 2014, ICBC squeezed Apple off the altar, allowing it to sit firmly in the second millennium position of "the world's second money-making company", and it won the title of "the first line in the universe".
That year, ICBC achieved a net profit of 263 billion yuan, an increase of 10.2% over the previous year, equivalent to making 720 million yuan per day, equivalent to two China Mobile, two South Korean Samsung Group, three Google, 15 and a half Tencent, 25 Baidu and Facebook, and 67 Lenovo.
02
Why is it so profitable?
Remember that in 2011, Hong Qi, president of China Minsheng Bank, said at the "Global Entrepreneur Summit Forum":
"Bank profits are too high, and we are embarrassed to announce them."
Ten years later, it's still the same.
When the economic environment is good, all walks of life expand production, people start a business, they want to borrow money; the economy is down, the enterprise turnover pressure is large, or to find them to borrow money.
Whether his environment is good or not, the banks make money.
From the perspective of ICBC's profit structure, more than half of it comes from the interest rate difference income of deposits and loans, followed by the net fee and commission income of the intermediate business and the investment and trading business from the financial market.
The most traditional profit model is to "buy" and "sell" by low.
For example, if you go to a bank to make a five-year deposit, the bank only gives you an annualized interest rate of 2.75%. Then the bank lends you this money and charges the other party 7% interest. In this way, the empty glove white wolf earned a 4.25% interest margin.
Since the interest rates on the mainland are not completely market-oriented, the interest rates on deposits and loans of state-owned commercial banks are stipulated by the state, and it can be said that this is the money that the state stipulates that banks must earn.
People have already written on the signboard: ICBC - Love does not exist.
Secondly, the intermediate business is also an important source of its income.
You can basically understand it as a handling fee - such as transferring money, agency business, buying a U shield, etc., the bank does not need to use its own money, just use its own system, manpower, etc. can do a good job. In addition, consulting fees, guarantee fees, annual fees, card fees, management fees, check fees, etc. will be charged.
Don't underestimate these fees, as long as it is money, they will be charged a fee, and this kind of business is very frequent, so in general it is also a considerable income for the bank.
The so-called "wind over the traces, geese over the hair", used to describe the bank's various charges is not exaggerated at all.
Another financial market investment and trading business, which basically has nothing to do with users.
Banks will have some of their own spare money, which may come directly from depositors or from other gains. Banks themselves will not be stupid to let the money go, they will also manage their money, they will use this part of the money to invest in the financial market, so as to obtain income.
In addition, banks have a lesser-known source of income – turning in reserve requirements.
Banks will deposit money in Chinese Bank, and Chinese Bank will pay the bank a high interest rate, generally more than double our deposit information.
Suppose that the interest rate of our existing banks is 2%, then the interest rate of the Chinese banks where they exist is 4%.
From this point of view, the banks represented by ICBC are lying down to make money, doing the work of earning interest spreads and commissions, which is the so-called making money with money.
That the bank mainly relies on loans to make profits, is not afraid that the money will not be recovered, resulting in operational risks?
In fact, the risk of bank loans is not as great as we think, and a concept called "drawer agreement" must be popularized here.
Although banks will ask the other party to provide collateral or various guarantees when lending money to enterprises or individuals, for the sake of insurance, banks often privately sign a non-public agreement with the enterprise.
This agreement is often different from the one that is published, for example, stipulating that in case you don't pay for it, another person will bear the responsibility.
In this way, the bank is more at ease to lend you the money, because this private agreement also has legal effect, but it is not usually disclosed.
Once a company defaults in the future, this agreement will be taken out, so it is called a drawer agreement.
Of course, they can also resolve risks by securitizing non-performing assets through a series of financial means of debt packaging.
There are both stable profit channels and sufficient insurance risk control means, and the basic business is "stable profit and no loss".
In the entire Chinese economy, the banking industry is also in a hegemonic position. Among all A-share listed companies, the net profit of the banking industry accounts for 48%, while listed banks account for less than 1% of the total number of listed companies.
The current state of the banks is the result of the Government's intentions. Why put banks in a position where they can make money "lying down"? The reason is very simple, the bank is required to serve the policy, so it is necessary to "protect" the bank.
In a highly market-oriented economy, the banking industry has a high rate of profit, and the threshold of entry is very low, then a large amount of capital began to enter the banking industry, into the shadow banking industry, intensifying competition, resulting in a decline in the industry's profit margin, and finally making the return on investment in various industries linked to its investment risk.
Therefore, under the guidance of market competition and profit maximization, funds will flow to the places with the highest risk-adjusted investment returns, not necessarily the areas where the government wants them to flow the most. That is, the government cannot control the financial system and cannot determine the allocation of funds. From the government's point of view, who is going to provide low funding for projects with policy purposes?
Obviously, if you want to control the financial system for your own use, you cannot maintain a market-oriented financial system.
That's why Chinese banks are able to achieve stronger profitability than other countries.
03
Why ICBC?
The four state-owned banks are actually doing similar business, why is only ICBC so prominent? The ability to absorb gold far exceeds that of its peers.
In fact, let alone the same bank in China, the market value of ICBC = Barclays Bank + Wells Fargo + Deutsche Bank + Royal Bank of Scotland + Standard Chartered + UBS + Bank of East Asia + Kookmin Bank, which bundles together well-known banks in Eurasia and is not as big as ICBC.
The gap between banks and banks is sometimes larger than the gap between people and dogs.
Speaking of fundamentals, there are four core reasons why ICBC can become a "cosmic line".
First, the foundation is good.
When it was established in 1984, it completely inherited the commercial banking business of the People's Bank of China, which was the only commercial bank business in China that year, and the corresponding customer groups and talent teams were not comparable to other banks, so the foundation and foundation of development were already good.
Second, the bank restructuring is successful and corporate governance is successful.
Although ICBC inherited a good foundation, it was still about to fail in the case of no separation between government and enterprises in that year.
Before the shareholding system of state-owned banks at the beginning of this century, China's banking system was technically bankrupt in accounting. As bona fide banking took the lead in introducing war investment to start restructuring, ICBC also successfully implemented the shareholding system reform and went public.
ICBC's listing scale is very large, and relatively speaking, ICBC has not introduced strong strategic partners with more shares, and there is not such a serious restructuring and internal friction in the transformation of enterprises.
Another very important point is that since the restructuring, ICBC's senior management has been stable and hard-working. Jiang Jianqing, in particular, is one of the few bankers in the Chinese banking system, not a politician.
Third, ICBC has grasped the trend of the times in the national economy, financial industry reform and information technology outbreak.
After the founding of the People's Republic of China, the Industrial and Commercial Bank of China was the third or last to be separated, and the Agricultural Bank of China was younger than his personnel structure, and the assets were also divided into urban industrial and commercial assets.
For more than ten years, foreign trade, real estate, government investment, iron public foundation, RMB internationalization... And so on, without exception, the greatest benefit to ICBC. The financial industry has been greatly reformed and developed, and all kinds of new financial businesses have not been left behind.
The fourth is to pay the most attention to financial technology innovation.
From a macro point of view, in the strategic planning of all large banks, personal financial business is the focus of banks.
However, in the past, to be a large household, you can still rely on people to keep an eye on people, and now to be a retail household, you have to rely on advanced technical means.
It can be seen from the annual reports of several major banks last year that the frequency of their mention of "financial technology" has increased significantly.
Some media have commented on the technology business of "Space Line" as:
ICBC not only has the largest investment in financial technology talents, but also has a scientific and technological iron army of more than 30,000 people. It has also increased investment in the field of financial technology through the establishment of a special form of "one department, three centers, one company, and one research institute".
ICBC's financial technology strength can create a risk control moat that all the industry has emulated, and can also give strong support to personal financial banks.
These four advantages are difficult for other banks to replicate, or want to do but fail to do, so ICBC shows stronger business capabilities and profitability than other state-owned banks.
04
End
The ultra-high profits and profitability of state-owned banks like ICBC are actually in line with China's basic situation – the financial industry is a barometer of the real economy, benefiting from China's rapid growth and serving the needs of national economic decision-making.
However, this kind of format is not reasonable.
The high profits are mainly due to the monopoly of China's financial resources by the banking industry.
The development of China's capital market is not perfect, China's economic development is still in the stage of monetary promotion, banks in this period of economic development in the core role, is China's financial structure determines the high profits of banks. The financing channels of enterprises and individuals are extremely single, and there is no monopoly in a single bank, but the banking industry as a whole is a monopoly.
In a certain historical period, this monopoly will bring certain economic benefits; however, with the increase of economic volume and the deepening of economic restructuring, banks monopolize financial resources excessively, which may become an obstacle to development.
After all, high profits are largely plundered from the profits of the real economy.
In the future, if China's transformation is to be successful, it will depend on whether it can break the monopoly of financial resources and remove financial institutions such as banks from the comfort zone of profitability.