CITIC Industrial Bank is expected to receive 8 billion yuan (US$986 million) in a capital top-up from parent company CITIC Group to boost its capital adequacy ratio above 8 percent, the industry watchdog's baseline for joint-stock banks.

"The capital injection is likely to be completed by the end of this year," Cao Tong, assistant president of CITIC Industrial Bank one of the 19 joint-stock banks in the country told China Daily yesterday.

Another top manager who did not want to be named said that CITIC Group would raise the money by issuing bonds in the second half of this year; and that CITIC Industrial Bank is also considering issuing subordinated bonds if necessary.

CITIC Group's move follows a capital injection of some 3.7 billion yuan (US$457 million) into the banking unit last year, including 2.5 billion yuan (US$309 million) of core capital and 1.258 billion yuan (US$155 million) subordinated capital, taking the lender's capital adequacy ratio to 6.02 percent by the end of 2004.

However, the figure is still below 8 percent, the China Banking Regulatory Commission's (CBRC) requirement for joint-stock commercial banks.

By the end of last year, CITIC Industrial Bank had 18 billion yuan (US$2.22 billion) of non-performing loans (NPLs), accounting for 5.8 percent of its total lending, above the average 5 percent for joint-stock banks and way above the average 3 percent for listed banks.

"We have two ways to raise our capital adequacy ratio: more capital and more profits," Chen Xiaoxian, president of CITIC Industrial Bank told China Daily in an interview.

Besides the capital injection from CITIC Group, the bank is also in discussions with foreign strategic investors.

"They can not only boost our capital but also improve corporate governance and risk management" said Chen, without revealing any details.

Meanwhile, the bank is striving to change its business structure.

"The credit card business will be our focus, and we'd like to strengthen personal banking business," said Chen.

After launching CITIC Star credit cards two years ago, the bank last Wednesday issued Magic credit cards targeting women; and the number of users for the former is likely to exceed 1 million in the autumn.

Late last month, the bank joined hands with Sohu, a renowned Chinese portal, for co-operation in online payment, online bank cards and online advertisements, which is set to give a fillip to the personal banking business.

"We are striving to make the personal banking business account for 20 percent of our business," Chen said.

The average for commercial banks hovers around 10 percent.

Insiders said the bank has set a target of chalking up 100 billion yuan (US$12.3 billion) in personal banking business in three years 20 billion yuan (US$2.47 billion) this year and 40 billion yuan (US$4.94 billion) each in 2006 and 2007.

The bank classifies its customers into low, middle and high-end, with the threshold for the latter two at 500,000 yuan (US$61,700) and 1 million yuan (US$123,450) respectively.

"We are focused on middle-end customers, " Cao explained. "For instance, VIP Wealth Management, a newly launched product, is targeted at middle-end customers."

To signify its transformation into a retail bank, CITIC Industrial Bank will also change its name and logo.

"We have got the green light from the CBRC to change our name to China CITIC Bank (CCB)," said Cao.

"The 'Industrial' in the original name will be got rid of to reflect our changing profile."

The name is expected to be changed in November.

(China Daily September 6, 2005)