The Industrial and Commercial Bank of China (ICBC) said yesterday it aims to double intermediary business income in three years to facilitate a strategic shift from an interest-based income structure to one based on other sources, such as commissions.

China's largest commercial bank said it has set a target of 21.1-24 billion yuan (US$2.5-2.9 billion) in intermediary business income for 2007, up at least 86 per cent from last year.

Total income from intermediary business such as bank cards for the three years starting this year is estimated to come in between 52.7 and 58.5 billion yuan (US$6.3 to 7 billion).

A bank spokesman said the bank is expecting a breakthrough from intermediary business in its effort to improve its development model and redesign its income structure on non-interest sources.

"Without properly changing the corporate governance structure and development model, it is difficult to achieve the maintenance or appreciation of State-owned assets and maintain a long-term appeal to various investors," the spokesman said.

The State-owned lender is awaiting regulatory approval for a key joint-stock restructuring plan, which is expected to include a massive recapitalization by the Chinese Government and an initial public offering.

The over-reliance on interest income is among the major reasons for the poor profitability of most Chinese banks.

They are also hampered by high non-performing loans and inadequate capital.

The ICBC has reported substantial progress in recent years in improving its income structure, largely as a result of an energetic campaign to promote intermediary business such as e-banking, cash management, merger and acquisition consulting, bank cards and asset custodianship.

Its intermediary business income surged by a yearly average of 38 per cent from 2.3 billion yuan (US$277 million) in 2000 to 11.5 billion yuan (US$1.4 billion) last year, making it the largest intermediary services provider in China's banking sector.

Intermediary business income was equivalent to 14 per cent of the bank's interest rate income last year, 3 percentage points higher than the previous year.

Non-interest income, 77 per cent of which came from asset management, accounted for 37 per cent of the bank's 49.3 billion yuan (US$5.9 billion) total income last year, it said earlier this year.

The spokesman said the bank plans to tilt its resource allocation towards intermediary business in the three years starting this year, upgrade existing products and develop new products, and launch a marketing campaign to enhance its influence in the market.

(China Daily March 8, 2005)