Comparative Financial Analysis of ICBC and Citi Bank

This report presents a comprehensive financial analysis of the Industrial and Commercial Bank of China (ICBC) and Citibank. The analysis covers key aspects of bank management, including balance sheet structure, profitability, leverage, liquidity, capital adequacy, efficiency, asset quality, and stability. The report compares the two banks across various financial metrics, such as lending and securities composition, funding sources, concentration of lending, net interest margin, return on assets and equity, leverage ratios, liquidity ratios, Tier 1 capital ratios, cost-to-income ratios, and non-performing loan ratios. The study utilizes data from financial statements over a five-year period, providing insights into the banks' performance, risk profiles, and management strategies. The report highlights differences in their business models, funding structures, and efficiency levels, ultimately offering a comparative assessment of their financial health and stability. The conclusion summarizes the key findings and provides an overall evaluation of the banks' performance.

BANK MANAGEMENT ASSIGNMENT

1
By student name
Professor
University
Date: 07 November 2017.
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Contents
Introduction………………………………………..………....……..……………………………………….3
Review and Analysis…………………..………………....……..…………………………………………4
Conclusion…………….…………………..………………....……..…………………………………………24
Refrences.....………………………………………………………………......................................25
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Introduction
In the given assignment, the consolidated financial statements of the two global banks needs to be
analysed and checked for the efficiency and the management of the operations. Industrial and
commercial bank of China Limited is a Chinese multinational bank. This is the largest bank in thw world
in terms of the assets and the market capitalization in the world. It is the largest public company too in
terms of the assets and ranks 1 in the Forbes Global 2000 list in terms of the world’s biggest public
companies. It issued the world’s largest IPO a that time and is listed on both the Shanghai Stock
Exchange and the Hong Kong Stock Exchange. On the other hand, Citibank is the consumer division of
the multinational company Citigroup. It has 2649 branches in nearly 19 countries, majorly at United
States and Mexico. It has its headquarters in New York and is considered to be one of the premium
banks all over the world, rendering world class services in terms of credit cards, loans, mortgages and
meeting other finance needs.
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Review and Analysis
1. Balance sheet structure and percentages: Income statement and balance sheet as percentages
of total assets for each year
31/ 12/ 2011 31/ 12/ 2012 31/ 12/ 2013 31/ 12/ 2014 31/ 12/ 2015
0.15871 0.15899 0.16387 0.16343 0.15405
2.7% 3.0% 2.9% 3.0% 2.8%
0.1% 0.1% 0.1% 0.1% 0.2%
0.8% 0.8% 0.8% 0.8% 0.8%
0.2% 0.2% 0.2% 0.2% 0.2%
3.8% 4.1% 4.1% 4.1% 3.9%
1.2% 1.4% 1.4% 1.5% 1.3%
0.0% 0.1% 0.1% 0.1% 0.1%
0.2% 0.2% 0.2% 0.2% 0.2%
0.0% 0.0% 0.0% 0.0% 0.0%
1.5% 1.7% 1.7% 1.7% 1.6%
2.3% 2.4% 2.3% 2.4% 2.3%
0.7% 0.7% 0.7% 0.7% 0.7%
0.0% 0.1% 0.1% 0.1% 0.1%
0.7% 0.6% 0.6% 0.6% 0.6%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.1% 0.1% 0.1% 0.1%
3.0% 3.0% 3.1% 3.1% 3.0%
0.2% 0.2% 0.2% 0.3% 0.4%
0.0% 0.0% 0.0% 0.0% 0.0%
0.2% 0.2% 0.2% 0.3% 0.4%
2.8% 2.8% 2.9% 2.8% 2.6%
0.6% 0.5% 0.5% 0.5% 0.5%
0.2% 0.2% 0.2% 0.1% 0.1%
0.3% 0.4% 0.4% 0.4% 0.3%
1.1% 1.1% 1.1% 1.1% 1.0%
1.7% 1.7% 1.8% 1.7% 1.6%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
1.8% 1.8% 1.8% 1.8% 1.6%
0.4% 0.4% 0.4% 0.4% 0.4%
0.0% 0.0% 0.0% 0.0% 0.0%
1.3% 1.4% 1.4% 1.3% 1.3%
0.5% 0.5% 0.5% 0.4% 0.4%
0.9% 0.9% 0.9% 0.9% 0.9%
0.5% 0.5% 0.5% 0.4% 0.4%
0.0% 0.0% 0.0% 0.0% 0.0%
1.3% 1.4% 1.4% 1.3% 1.2%
0.0% 0.0% 0.0% 0.0% 0.0%
ICBC %
Preferred dividends related to the period
Profit attributable to group equity holders
Profit attributable to non- controlling interest
Net profit/ (loss) for the year from discontinued operations
Net income
Dividend paid
Retained I ncome
C ommon dividends related to the period
Equity accounted share of profits of associates and joint ventures
Non- operating income
Non- operating expenses
Profit/ (loss) on acquisition and disposal of subsidiaries
Profit before tax
I ncome tax expense
Net operating revenues
Staff expenses
Other administrative expenses
Other operating expenses
Total operating expenses
Operating profit
Net gains and losses on real estate
Other operating income
Operating revenues
I mpairment on loans and advances
I mpairment on other assets
Total I mpairment charges
Net trading income on securities and derivatives
Net gains and losses on assets & liabilities at fair value through P&L
Net gains and losses on other securities
Total net trading income and fair value gains and losses
Net insurance income
Dividend income: common stock
Other interest expenses
Total interest paid
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
I nterest and preferred stock dividends on securities (AFS and HtM)
Other interest income
Total interest received
I nterest on customer deposits
I nterest on debt securities
I nterest on bank deposits
Consolidated data in US$ million.
Exchange rate: C NY/ USD
I ncome statement
I nterest on loans
I nterest on bank deposits
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18.1% 18.4% 17.7% 17.6% 14.3%
3.1% 3.6% 3.8% 3.8% 3.1%
2.3% 3.1% 1.8% 2.3% 4.5%
0.1% 0.1% 0.1% 0.1% 0.4%
1.0% 1.3% 2.0% 1.7% 1.5%
5.4% 5.2% 5.3% 5.8% 6.5%
15.7% 14.7% 13.9% 12.5% 12.9%
3.2% 2.1% 1.7% 1.6% 1.6%
0.2% 0.2% 0.2% 0.1% 0.1%
7.7% 7.6% 9.1% 10.0% 11.3%
5.3% 5.4% 5.3% 4.8% 4.6%
36.6% 36.1% 37.2% 36.9% 35.4%
0.7% 1.0% 0.8% 1.7% 2.4%
50.3% 50.2% 52.5% 53.5% 53.7%
1.3% 1.3% 1.3% 1.2% 1.3%
49.1% 48.9% 51.2% 52.3% 52.5%
0.0% 0.0% 0.0% 0.0% 0.0%
0.1% 0.1% 0.2% 0.1% 0.1%
0.0% 0.0% 0.0% 0.0% 0.0%
0.8% 0.8% 0.9% 1.0% 1.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.8% 1.3% 1.2% 1.1% 1.4%
1.5% 2.1% 2.1% 2.1% 2.4%
0.0% 0.1% 0.0% 0.0% 0.0%
0.1% 0.1% 0.1% 0.1% 0.1%
0.2% 0.2% 0.2% 0.1% 0.1%
100.0% 100.0% 100.0% 100.0% 100.0%Total assets
Foreclosed / Other real estate owned
Other assets
Other assets
Goodwill
Other I ntangible assets
I ntangible assets
Deferred tax assets
I nvestment property
Fixed assets (property, plant and equipment)
I nsurance assets
C urrent tax assets
Discontinued operations
C orporate loans
Other Loans
Gross loans
Loans loss reserves
Net loans and advances to customers
Brokerage receivables
Financial assets: available for sale
Financial assets: held to maturity
Other securities
I nvestments in associated companies
Mortgage Loans
C onsumer loans
C ash & balances with central banks
Net loans and advances to banks
Reverse repos, securities borrowed & cash collateral
Derivative financial instruments
Financial assets: trading and at fair value through P/ L
Assets
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41.2% 38.7% 37.2% 35.4% 35.6%
0.0% 0.0% 0.0% 0.0% 0.0%
36.8% 38.0% 38.9% 38.5% 36.7%
1.1% 1.0% 1.2% 1.6% 1.1%
79.2% 77.8% 77.3% 75.5% 73.3%
8.7% 8.5% 6.7% 7.5% 10.2%
0.3% 0.2% 0.7% 0.9% 0.8%
0.0% 0.0% 0.0% 0.0% 0.0%
0.2% 0.3% 0.3% 0.4% 0.5%
1.1% 1.8% 2.9% 2.9% 1.4%
0.0% 0.0% 0.0% 0.0% 0.0%
1.3% 1.4% 1.6% 1.8% 1.5%
0.1% 0.1% 0.1% 0.1% 0.3%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
1.4% 2.1% 2.3% 2.2% 2.6%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.3% 0.3% 0.3% 0.3% 0.3%
0.0% 0.0% 0.0% 0.0% 0.0%
0.1% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
1.8% 2.5% 2.6% 2.6% 2.9%
1.1% 1.1% 1.0% 1.0% 0.9%
93.8% 93.6% 93.2% 92.5% 91.9%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
3.1% 2.8% 2.6% 2.4% 2.3%
0.0% 0.0% -0.2% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
-0.1% -0.1% -0.1% -0.1% -0.1%
1.2% 1.6% 1.7% 2.0% 2.4%
0.0% 0.0% 0.0% 0.0% 0.0%
2.0% 2.1% 2.7% 3.2% 3.5%
6.2% 6.4% 6.7% 7.4% 8.1%
0.0% 0.0% 0.0% 0.0% 0.0%
6.2% 6.4% 6.8% 7.5% 8.1%
100.0% 100.0% 100.0% 100.0% 100.0%
Total equity
Total liabilities and equity
Foreign Exchange Revaluation Reserves
Other Reserves
Treasury/ Own Shares
Retained earnings
S hareholders equity
Non-controlling interests
Other hybrid capital
Hybrid capital
C ommon equity: par value + capital surplus
Valuation gains/ losses on AFS securities
Valuation gains/ losses on property
C ashflow hedging reserve
Other deferred liabilities
Other liabilities and provisions
S ubordinated liabilities
Total liabilities
Preference shares accounted for as debt
Preference shares accounted as equity
Other liabilities
Discontinued operations
I nsurance liabilities
C urrent tax liabilities
Deferred tax liabilities
Provisions
Financial liabilities at fair value through P&L (fair value portion of debt)
Other long term borrowing
Repurchase agreements, securities loaned, cash collateral
Derivative financial instruments
Trading liabilities
Brokerage payables
Other customer deposits
C ustomer deposits
Bank deposits
Other wholesale deposits
S hort term funding and Debt Securities < 1 year
LT Borrowings and Debt Securities at Historical C ost
Liabilities
Demand deposits
Savings deposits
Time deposits
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31/ 12/ 2011 31/ 12/ 2012 31/ 12/ 2013 31/ 12/ 2014 31/ 12/ 2015
2.7% 2.6% 2.5% 2.5% 2.5%
0.1% 0.1% 0.1% 0.1% 0.0%
0.4% 0.4% 0.3% 0.4% 0.4%
0.7% 0.6% 0.5% 0.5% 0.5%
3.9% 3.7% 3.4% 3.4% 3.4%
0.4% 0.4% 0.3% 0.3% 0.2%
0.1% 0.1% 0.1% 0.1% 0.1%
0.0% 0.0% 0.0% 0.0% 0.0%
0.8% 0.6% 0.5% 0.4% 0.4%
1.2% 1.1% 0.8% 0.7% 0.7%
2.7% 2.6% 2.5% 2.6% 2.7%
0.5% 0.6% 0.7% 0.7% 0.7%
0.0% 0.0% 0.0% 0.0% 0.0%
0.5% 0.6% 0.7% 0.7% 0.7%
0.4% 0.3% 0.4% 0.4% 0.4%
0.0% -0.1% 0.1% 0.0% 0.0%
0.0% 0.2% 0.0% 0.0% 0.0%
0.4% 0.3% 0.5% 0.4% 0.4%
0.1% 0.1% 0.1% 0.1% 0.1%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.5% 0.2% 0.3% 0.4% 0.6%
4.3% 3.8% 4.2% 4.2% 4.5%
0.6% 0.6% 0.4% 0.4% 0.4%
0.0% 0.0% 0.0% 0.0% 0.0%
0.7% 0.6% 0.4% 0.4% 0.4%
3.6% 3.2% 3.7% 3.8% 4.0%
1.4% 1.4% 1.3% 1.3% 1.3%
0.4% 0.4% 0.4% 0.4% 0.5%
1.0% 1.0% 1.0% 1.3% 0.9%
2.8% 2.8% 2.7% 3.0% 2.6%
0.8% 0.4% 1.0% 0.8% 1.4%
n.a. n.a. n.a. n.a. n.a.
n.a. n.a. n.a. n.a. n.a.
n.a. n.a. n.a. n.a. n.a.
n.a. n.a. n.a. n.a. n.a.
0.8% 0.4% 1.0% 0.8% 1.4%
0.2% 0.0% 0.3% 0.4% 0.4%
0.0% 0.0% 0.0% 0.0% 0.0%
0.6% 0.4% 0.7% 0.4% 1.0%
0.0% 0.0% 0.0% 0.0% 0.1%
0.6% 0.4% 0.7% 0.4% 0.9%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.6% 0.4% 0.7% 0.4% 1.0%
0.0% 0.0% 0.0% 0.0% 0.0%
Citi %
Preferred dividends related to the period
Profit attributable to group equity holders
Profit attributable to non-controlling interest
Net profit/ (loss) for the year from discontinued operations
Net income
Dividend paid
Retained I ncome
C ommon dividends related to the period
Equity accounted share of profits of associates and joint ventures
Non-operating income
Non-operating expenses
Profit/ (loss) on acquisition and disposal of subsidiaries
Profit before tax
I ncome tax expense
Net operating revenues
Staff expenses
Other administrative expenses
Other operating expenses
Total operating expenses
Operating profit
Net gains and losses on real estate
Other operating income
Operating revenues
I mpairment on loans and advances
I mpairment on other assets
Total I mpairment charges
Net trading income on securities and derivatives
Net gains and losses on assets & liabilities at fair value through P&L
Net gains and losses on other securities
Total net trading income and fair value gains and losses
Net insurance income
Dividend income: common stock
Other interest expenses
Total interest paid
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
I nterest and preferred stock dividends on securities (AFS and HtM)
Other interest income
Total interest received
I nterest on customer deposits
I nterest on debt securities
I nterest on bank deposits
Consolidated data in US$ million.
I ncome statement
I nterest on loans
I nterest on bank deposits
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1.5% 2.0% 1.6% 1.8% 1.2%
8.3% 5.5% 9.0% 7.0% 6.5%
14.7% 14.0% 13.7% 13.2% 12.7%
3.3% 2.9% 2.8% 3.4% 3.2%
12.2% 14.3% 12.4% 12.7% 11.2%
14.2% 15.5% 15.2% 16.3% 17.3%
0.6% 0.5% 0.6% 1.3% 2.1%
0.0% 0.0% 0.0% 0.0% 0.0%
1.3% 0.9% 0.5% 0.4% 0.5%
7.3% 6.9% 6.0% 5.8% 5.9%
12.3% 11.8% 11.4% 10.8% 10.4%
6.8% 7.5% 8.0% 8.2% 9.1%
9.6% 9.8% 10.7% 11.0% 11.6%
36.1% 36.1% 36.0% 35.9% 37.0%
1.6% 1.4% 1.0% 0.9% 0.7%
34.5% 34.7% 35.0% 35.0% 36.2%
0.0% 0.0% 0.0% 0.0% 0.0%
2.8% 3.0% 2.8% 2.7% 2.8%
0.0% 0.0% 0.0% 0.0% 0.0%
0.4% 0.4% 0.4% 0.4% 0.4%
0.5% 0.5% 0.5% 0.5% 0.5%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
3.7% 4.0% 3.9% 3.8% 3.8%
4.6% 4.9% 4.7% 4.7% 4.7%
1.4% 1.4% 1.3% 1.3% 1.3%
0.5% 0.4% 0.4% 0.3% 0.3%
1.8% 1.8% 1.7% 1.6% 1.6%
100.0% 100.0% 100.0% 100.0% 100.0%Total assets
Foreclosed / Other real estate owned
Other assets
Other assets
Goodwill
Other I ntangible assets
I ntangible assets
Deferred tax assets
I nvestment property
Fixed assets (property, plant and equipment)
I nsurance assets
C urrent tax assets
Discontinued operations
C orporate loans
Other Loans
Gross loans
Loans loss reserves
Net loans and advances to customers
Brokerage receivables
Financial assets: available for sale
Financial assets: held to maturity
Other securities
I nvestments in associated companies
Mortgage Loans
C onsumer loans
C ash & balances with central banks
Net loans and advances to banks
Reverse repos, securities borrowed & cash collateral
Derivative financial instruments
Financial assets: trading and at fair value through P/ L
Assets
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2.6% 3.0% 3.7% 4.5% 5.5%
14.2% 16.2% 16.1% 15.9% 17.2%
1.5% 1.0% 2.2% 2.0% 1.6%
28.1% 29.7% 29.6% 27.5% 28.2%
46.4% 49.9% 51.5% 49.9% 52.4%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
7.4% 5.0% 5.2% 4.8% 3.6%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
10.5% 8.8% 8.1% 9.2% 7.5%
10.6% 11.3% 10.8% 9.4% 8.5%
3.0% 2.8% 2.5% 3.4% 3.3%
3.7% 3.4% 3.3% 4.1% 3.5%
0.0% 0.0% 0.0% 0.0% 0.0%
6.5% 6.6% 6.0% 6.3% 6.5%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.1% 0.1% 0.1% 0.1% 0.1%
0.0% 0.0% 0.0% 0.0% 0.0%
6.6% 6.7% 6.0% 6.3% 6.6%
1.3% 1.3% 1.4% 1.2% 1.6%
89.6% 89.2% 88.8% 88.4% 87.0%
0.9% 0.5% 0.2% 0.1% 0.1%
0.0% 0.1% 0.4% 0.6% 1.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.9% 0.7% 0.6% 0.7% 1.1%
5.6% 5.7% 5.7% 5.9% 6.3%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0% 0.0% 0.0% 0.0%
-1.0% -1.0% -1.1% -1.4% -2.1%
0.0% 0.0% 0.0% 0.0% 0.0%
4.8% 5.2% 5.9% 6.4% 7.7%
9.5% 10.0% 10.5% 10.8% 11.9%
0.1% 0.1% 0.1% 0.1% 0.1%
9.6% 10.1% 10.6% 10.9% 11.9%
100.0% 100.0% 100.0% 100.0% 100.0%
Total equity
Total liabilities and equity
Foreign Exchange Revaluation Reserves
Other Reserves
Treasury/ Own Shares
Retained earnings
S hareholders equity
Non- controlling interests
Other hybrid capital
Hybrid capital
C ommon equity: par value + capital surplus
Valuation gains/ losses on AFS securities
Valuation gains/ losses on property
C ashflow hedging reserve
Other deferred liabilities
Other liabilities and provisions
S ubordinated liabilities
Total liabilities
Preference shares accounted for as debt
Preference shares accounted as equity
Other liabilities
Discontinued operations
I nsurance liabilities
C urrent tax liabilities
Deferred tax liabilities
Provisions
Financial liabilities at fair value through P&L (fair value portion of debt)
Other long term borrowing
Repurchase agreements, securities loaned, cash collateral
Derivative financial instruments
Trading liabilities
Brokerage payables
Other customer deposits
C ustomer deposits
Bank deposits
Other wholesale deposits
S hort term funding and Debt Securities < 1 year
LT Borrowings and Debt Securities at Historical C ost
Liabilities
Demand deposits
Savings deposits
Time deposits
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1a: Lending and securities
In the ICNC Bank, the company generally earns revenue from the loans, the bank deposits and other
fees and commission income. It deals in all the 4 types of loans mostly being corporate loans comprising
37% of the assets, followed by Mortgage loans at 8%, consumer loans at 5% and then other loans at 1%.
It also holds financial assets to the extent of 22% and cash with central bank comprising of 18%. On the
other hand, the Citi bank mostly deals in Consumer loans at 12% followed by mortgage loans at 7%,
corporate loans at 7% and other loans at 10%. Furthermore, it holds financial assets to the tune of 27%
and cash reserves at 2% (Alexander, 2016). It also has assets in the form of cash collateral at 15%. The
year wise data and ratio of the assets for both the banks for all the 5 years has been attached above.
This shows that there is a sharp contract in the composition of the loan and the type of business
structure being followed by both the companies as ICNC deals more in corporate and mortgage loan and
hold huge amount of liquid cash reserves with central bank whereas Citi bank has a total loan portfolio
of 35% out of the total assets. It focuses more on the financial assets and the cash collateral reserves.
The similarity is however in terms of the products that both the companies deal in (Belton, 2017).
1b: Funding
The funding structure of both of the companies can be seen via the below table:
31/ 12/ 2011 31/ 12/ 2012 31/ 12/ 2013 31/ 12/ 2014 31/ 12/ 2015
Core deposits
Customer deposits 79.2% 77.8% 77.3% 75.5% 73.3%
Non-core liabilities 19.0% 19.7% 20.1% 22.0% 23.7%
31/ 12/ 2011 31/ 12/ 2012 31/ 12/ 2013 31/ 12/ 2014 31/ 12/ 2015
Core deposits
Customer deposits 46.4% 49.9% 51.5% 49.9% 52.4%
Non-core liabilities 47.1% 43.4% 42.5% 43.7% 41.0%
Consolidated data in US$ million.
Consolidated data in US$ million.
ICBC
Citi
The funding for ICBC is generally done by the customer deposits which are the core and non volatile
liabilities and a very small proportion of the assets is being funded by the non core liabilities, whereas in
the case of Citi Bank, most of the funding comes from non core or volatile deposits / liabilities which is
around 47% and the rest 46% comes from the customer deposits (Linden & Freeman, 2017). This shows
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that ICBC is in a less riskier position as itw would be able to pay off the customer deposit in time and
hence is more secured as compared to the Citi bank.
1c: Concentration of lending and securities
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Mortgage Loan 15.27 15.23 17.34 18.78 21.09
Consumer loans 10.60 10.75 10.15 9.01 8.59
Corporate loans 72.75 71.93 71.02 69.04 65.95
Other Loans 1.38 2.09 1.49 3.18 4.37
Gross Loans 100 100 100 100 100
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Mortgage Loan 20.24 19.14 16.61 16.12 15.90
Consumer loans 34.13 32.76 31.56 30.25 28.26
Corporate loans 18.97 20.85 22.23 22.98 24.56
Other Loans 26.65 27.25 29.61 30.66 31.28
Gross Loans 100.00 100.00 100.00 100.00 100.00
Loans Proportion
ICBC
Citi
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Financial assets: trading and at fair value through P/L 3.89 5.43 8.62 7.82 6.85
Financial assets: available for sale 21.45 22.55 23.15 26.80 28.83
Financial assets: held to maturity 61.92 63.09 60.72 57.89 57.29
Other securities 12.74 8.93 7.51 7.48 7.03
Gross Loans 100.00 100.00 100.00 100.00 100.00
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Financial assets: trading and at fair value through P/L 45.33 47.12 43.96 41.86 36.64
Financial assets: available for sale 52.40 51.08 54.04 53.85 56.51
Financial assets: held to maturity 2.27 1.79 2.00 4.29 6.84
Other securities - - - - -
Gross Loans 100.00 100.00 100.00 100.00 100.00
Securities of Bank
ICBC
Citi
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Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Total earning assets 1,960,802 2,204,108 2,470,924 2,692,805 2,837,829
Net loans 1,205,228 1,364,680 1,586,493 1,759,887 1,795,088
Ratio of net loans to earning assets 61.5% 61.9% 64.2% 65.4% 63.3%
Total Assets 2,456,295 2,789,083 3,100,051 3,368,190 3,421,363
Ratio of total earning assets to total assets 79.8% 79.0% 79.7% 79.9% 82.9%
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Total earning assets 1,540,519 1,567,387 1,527,054 1,534,348 1,457,278
Net loans 645,915 647,564 657,485 644,645 627,100
Ratio of net loans to earning assets 41.9% 41.3% 43.1% 42.0% 43.0%
Total Assets 1,873,878 1,864,660 1,880,382 1,842,181 1,731,210
Ratio of total earning assets to total assets 82.2% 84.1% 81.2% 83.3% 84.2%
Structure Balance Sheet
Citi
ICBC
From the above HHI Index, it can be seen that for ICBC, the proportion of mortgage loan has increased
over time whereas the proportion of the consumer loan and the corporate loan has declined over the
years but still the corporate loan comprises the major portion at 65% (Chongsoo, et al., 2017). In case of
Citi bank, however, the proportion of corporate and other loans have increased whereas the consumer
and the mortgage loans have decreased over time. This shows stronger position of the ICBC bank in
terms of the consoldation.
In terms of the financial assets being dealt with by the company, ICBC has most of the securities held till
maturity (62%) followed by those available for sale at 22% and then trading at fair value, whereas in the
case of the Citi Bank, the it holds most of the securities either for sale or trading at fair value through
P&L. It hold very small proportion of the securities which are held till maturity and also deoesn’t deals in
any other securities. This shows that the Citi Bank deals mostly in the short term securities whereas on
the other hand, ICBC deals mostly in the long term securities (Fay & Negangard, 2017).
On analysis of the net loans to the earning assets, we find that the same has been in the range of 60-
65% for ICBC Bank in the last 5 years which means that out of the total earning assets, 65% comprises of
the loans. The same is in the range of 40-43% for Citi Bank which shows that the loans are not the major
portion through which it earns, rather it is the cash collateral. Further, on analysing the ratio of total
earning assets to the total assets, it can be seen that ICBC Bank is optimally utilising the assets as more
than 75% - 80% of the total assets is earning assets and in case of Citi Bank, this ratio goes further up to
84%. This ratio shows that most of the assets of both the companies are being effectively utilised.
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2. Profitability analysis
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Net Interest Margin% 2.94% 3.01% 2.94% 3.00% 2.76%
Return on assets 2.34% 2.38% 2.34% 2.39% 2.29%
Return on equity 37.87% 37.03% 34.68% 32.10% 28.21%
Profit % 57.46% 57.13% 59.32% 55.98% 54.68%
Total earning assets 1,960,802 2,204,108 2,470,924 2,692,805 2,837,829
Total interest received 93,571 114,703 125,706 138,892 134,295
Total interest Paid 35,997 48,272 53,057 58,238 56,060
Ratio of “Total interest received”-to-“Total earning assets" 4.77% 5.20% 5.09% 5.16% 4.73%
Ratio of “Total interest paid”-to-“Total liabilities” 1.84% 2.19% 2.15% 2.16% 1.98%
Interest Spread 2.94% 3.01% 2.94% 3.00% 2.76%
Interest on Loans 66,084 82,653 89,906 100,586 94,977
Gross Loans 1,236,156 1,399,722 1,625,979 1,801,983 1,838,322
Interest on Customer deposits 29,940 39,656 44,867 48,855 45,908
Customer Deposits 1,945,947 2,169,122 2,395,914 2,542,344 2,508,194
“Interest on loans”-to-“Gross loans" 5.35% 5.90% 5.53% 5.58% 5.17%
“Interest on customer deposits”-to-“Customer deposits" 1.54% 1.83% 1.87% 1.92% 1.83%
Loan Spread
ICBC
Interest Spread
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Net Interest Margin% 3.25% 3.10% 3.14% 3.17% 3.24%
Return on assets 2.67% 2.61% 2.55% 2.64% 2.73%
Return on equity 27.90% 25.81% 24.00% 24.14% 22.89%
Profit % 22.43% 15.96% 29.03% 15.44% 36.66%
Total earning assets 1,540,519 1,567,387 1,527,054 1,534,348 1,457,278
Total interest received 72,961 68,418 63,596 61,935 58,795
Total interest Paid 22,951 19,783 15,713 13,332 11,513
Ratio of “Total interest received”-to-“Total earning assets" 4.74% 4.37% 4.16% 4.04% 4.03%
Ratio of “Total interest paid”-to-“Total liabilities” 1.49% 1.26% 1.03% 0.87% 0.79%
Interest Spread 3.25% 3.10% 3.14% 3.17% 3.24%
Interest on Loans 50,950 49,187 46,679 45,429 42,493
Gross Loans 676,030 673,019 677,133 660,639 639,726
Interest on Customer deposits 7,368 6,760 5,362 4,979 4,263
Customer Deposits 868,813 930,560 968,273 919,937 907,972
“Interest on loans”-to-“Gross loans" 7.54% 7.31% 6.89% 6.88% 6.64%
“Interest on customer deposits”-to-“Customer deposits" 0.85% 0.73% 0.55% 0.54% 0.47%
Loan Spread
Interest Spread
Citi
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31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Chart Title
Net Interest Margin% Return on assets Return on equity
31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Chart Title
Net Interest Margin% Return on assets Return on equity
From the above analysis and the graph, it can be seen that the net interest margin for ICBC has been less
as compared to Citi Bank, but both of them have the margin less than 3%. Further, the return on the
assets has also been in the similar range for 2-3% which is as per the iudustry average (Davis, 2017). The
return on equity has decreased considerably from 37% to 28% for ICBC whereas for Citi Bank, this has
decreased but at a slower rate from 28% to 23% over the period of 5 years. Still it can be said from the
aove graph that ICBC is comprehensively beating the Citi Bank.
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On the interest rate spread front, the ratio of interest received to the total earning assets has been
stagnant for both the companies hovering at around 4.5%- 4.75%, but Citi Bank is still behind ICBC in this
aspect. Interest paid to total liabilities ratio has increased for ICBC over the years and is nearly 2%
whereas the same has decreased for Citi bank over the years from 1.5% to 0.8%, which shows that Citi
bank is efficiently managing the funds at low cost (Goldmann, 2016). Therefore, the interest spread has
been below 3% for ICBC bank whereas for Citi Bank, the same has been above 3% since 2011. The rate of
earning is more than the interest being paid.
Furthermore, on calculating the loan spread for both the companies, we see that the interest on loand
to the gross loan ratio for ICBC is more than 5% whereas for Citi the same is 6.5%-7%, which shows that
Citi is earning at a higher rate (Johnson, 2017). Also, interest on customer deposits to customer deposits
for ICBC is in the range of 1.8-1.9% since the last 4 years whereas the same has been 0.47% for Citi Bank
which again shows why the profitability for Citi is higher.
3. Leverage
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Leverage ratio (total assets-to-equity) 16.16 15.55 14.80 13.41 12.34
ROE 37.87% 37.03% 34.68% 32.10% 28.21%
ROA 2.34% 2.38% 2.34% 2.39% 2.29%
ICBC
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Leverage ratio (total assets-to-equity) 10.45 9.90 9.43 9.15 8.38
ROE 27.90% 25.81% 24.00% 24.14% 22.89%
ROA 2.67% 2.61% 2.55% 2.64% 2.73%
Citi
31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
Chart Title
Leverage ratio (total assets-to-equity) ROE
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31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
-
2.00
4.00
6.00
8.00
10.00
12.00
Chart Title
Leverage ratio (total assets-to-equity) ROE
From the above analysis on the leverage ratio, we can see that in ICBC, the ratio is higher than 12 times
but has dropped in the last few years which implies that the company is using debt capital in the capital
structure and the proportion of equity is less as compared to Citi where the ratio is 8.38 times.
Therefore, in Citi, the bank is using more equity capital as compared to ICBC Bank (Bromwich & Scapens,
2016). This is the reason why the return on the assets has increased marginally whereas the return on
the equity has decreased. The similarity is that both the companies have higher proportion of high
proportion of debt capital however, both of these are trying to reduce that.
4. Liquidity
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Cash & balances with central banks 444,560 513,594 549,919 591,530 488,986
Net loans and advances to banks 75,862 101,191 117,656 127,925 105,337
Reverse repos, securities borrowed and cash collateral 55,458 86,584 54,389 76,559 153,483
Total Assets 2,456,295 2,789,083 3,100,051 3,368,190 3,421,363
customer deposits 1,945,947 2,169,122 2,395,914 2,542,344 2,508,194
liquid assets-to-total assets 23.45% 25.15% 23.29% 23.63% 21.86%
liquid assets-to-customer deposits 29.59% 32.33% 30.13% 31.31% 29.81%
ROE 37.87% 37.03% 34.68% 32.10% 28.21%
ICBC
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Cash & balances with central banks 28,764 36,550 29,905 32,259 20,925
Net loans and advances to banks 155,792 102,138 169,005 128,089 112,197
Reverse repos, securities borrowed and cash collateral 275,812 261,214 257,017 242,570 219,650
Total Assets 1,873,878 1,864,660 1,880,382 1,842,181 1,731,210
customer deposits 868,813 930,560 968,273 919,937 907,972
liquid assets-to-total assets 24.57% 21.45% 24.25% 21.87% 20.38%
liquid assets-to-customer deposits 52.99% 42.97% 47.09% 43.80% 38.85%
ROE 27.90% 25.81% 24.00% 24.14% 22.89%
Citi
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31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Chart Title
liquid assets-to-customer deposits ROE
31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Chart Title
liquid assets-to-customer deposits ROE
From the aboe graph, it can be seen that the proportion of the liquid assets out of the total assets for
both the companies have been fairly constant at over 20%, which shows that the company would be
able meet its short term obligations on time (Werner, 2017). Further, the ratio of liquid assets to the
total deposits have been 29% for ICBC Bank whereas the same has been nearly 40% for Citi Bank, which
implies that Citi prefers to keep more proportion of its deposits in the liquid form to meet the
obligations but this may lead to assets and funds being underutilised at times (Meroño-Cerdán, et al.,
2017).
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5. Capital
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Tier 1 capital ratios 13.17 13.66 13.12 14.53 15.22
Tier 1 capital 140,028 166,078 207,600 248,608 274,368
Total risk weighted assets – transitional 1,340,644 1,512,211 1,963,520 2,038,885 2,035,999
Solvency (tier 1 ratio) 10.44% 10.98% 10.57% 12.19% 13.48%
ROE 37.87% 37.03% 34.68% 32.10% 28.21%
ICBC
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Tier 1 capital ratios 16.99 17.26 16.65 18.15 18.54
Tier 1 capital n.a. n.a. n.a. 166663 176420
Total risk weighted assets – transitional 973,369 971,253 1,092,707 1,274,672 1,190,853
Solvency (tier 1 ratio) 0.00% 0.00% 0.00% 13.07% 14.81%
ROE 27.90% 25.81% 24.00% 24.14% 22.89%
Citi
31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Chart Title
Solvency (tier 1 ratio) ROE
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31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Chart Title
Solvency (tier 1 ratio) ROE
The Tier 1 ratio or the solvency ratio shows the solvency, the financial health of the company, it core
capital and the risk weighted assets of the company. It generally includes the equity capital, the
shareholder’s wealth and the retained earnings (Heminway, 2017). It shows the risk exposure of the
bank. ICBC Bank hass maintained it over 10% over the last 5 years and now it is nearly 13% which shows
that the company is well capitalized. Similarly, for Citi, the ratio has increased to 15% which shows that
Citi is financially more stable.
6. Efficiency
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Total operating expenses 26,919 30,199 33,452 35,737 34,019
Operating Revenues 74,688 84,222 94,864 103,752 103,017
Cost-to-income ratio 36.04% 35.86% 35.26% 34.44% 33.02%
ICBC
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Total operating expenses 52,637 51,994 50,169 55,998 44,902
Operating Revenues 79,947 71,634 78,075 78,282 77,492
Cost-to-income ratio 65.84% 72.58% 64.26% 71.53% 57.94%
Citi
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31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
31.50%
32.00%
32.50%
33.00%
33.50%
34.00%
34.50%
35.00%
35.50%
36.00%
36.50%
Cost-to-income ratio
Cost-to-income ratio
31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Cost-to-income ratio
Cost-to-income ratio
On comparing the efficiency ratio of both the company, it can be seen that the cost to income ratio has
been decreasing for ICBC Bank from 36% to 33%, which shows that the company is steadily improving on
the cost front. On the other hand, for Citi Bank, the same is nearly double as compared to the ICBC Bank
at around 60%. This shows that the cost for Citi is much more and hence the efficiency of ICBC is more
than that of Citi Bank (Kok, et al., 2017). For Citi, the graph has been flat whereas for ICBC, the same is
showing a downwatrd movement.
7. Asset quality
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Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Total impaired/Nonperforming loans 11,587 11,857 15,353 20,346 27,654
Gross loans 1,236,156 1,399,722 1,625,979 1,801,983 1,838,322
“Total impaired/nonperforming loans" to Gross Loans Ratio 0.94% 0.85% 0.94% 1.13% 1.50%
Net charge off s 553 1,055 2,544 6,025 9,121
Net income + Total impairment charges 38,021 43,315 49,372 54,423 56,183
Ratio of “Net charge offs”-to-“Net income + Total impairment charges” 1.46% 2.44% 5.15% 11.07% 16.23%
ICBC
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
Total impaired/Nonperforming loans 20,261 19,280 15,622 12,254 9,896
Gross loans 676,030 673,019 677,133 660,639 639,726
“Total impaired/nonperforming loans" to Gross Loans Ratio 3.00% 2.86% 2.31% 1.85% 1.55%
Net charge off s 21,888 15,602 12,847 10,008 9,705
Net income + Total impairment charges 23,901 19,464 22,309 15,085 25,096
Ratio of “Net charge offs”-to-“Net income + Total impairment charges” 91.58% 80.16% 57.59% 66.34% 38.67%
Citi
31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
Chart Title
“Total impaired/nonperforming loans" to Gross Loans Ratio
Ratio of “Net charge offs”-to-“Net income + Total impairment charges”
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31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
Chart Title
“Total impaired/nonperforming loans" to Gross Loans Ratio
Ratio of “Net charge offs”-to-“Net income + Total impairment charges”
On looking at the asset quality for both the companies, it can been seen Total impaired or non
performing loans to the total loans ratio for ICBC Bank has been increasing from 1% in 2011 to 1.5% in
2015 whereas for Citi bank, it has been exactly opposite as the ratio has decreased from 3% in 2011 to
1.55% in 2015. This shows the control on the collection and the type of customer approval being given in
Citi is more better than at ICBC bank (Trieu, 2017). The level of internal control at Citi is considered to be
better looking at the ratio. Further more, the ratio of net charge off to net income+ total impairment
charges has increased considerably for ICBC over the years which shows the chances of recovery is less
once the loans has been declared as bad. On the other hand, the same has decreased considerably for
Citi Bank which shows that the bank has been able to recover back the loans that were earlier written
off which is a positive sign for the company (Linden & Freeman, 2017).
8. Stability analysis
Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
ROA 2.34% 2.38% 2.34% 2.39% 2.29%
Total equity 152,014 179,417 209,502 251,235 277,366
Total assets 2,456,295 2,789,083 3,100,051 3,368,190 3,421,363
“Total equity”-to-“Total assets" ratio 6.19% 6.43% 6.76% 7.46% 8.11%
Standard Deviation 0.04%
Z score = ROAt + Equity-to-assetst / stdev ROA 147.02 152.82 160.54 177.19 192.58
ICBC
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Consolidated data in US$ million. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
ROA 2.67% 2.61% 2.55% 2.64% 2.73%
Total equity 179,261 188,435 199,488 201,352 206,521
Total assets 1,873,878 1,864,660 1,880,382 1,842,181 1,731,210
“Total equity”-to-“Total assets" ratio 9.57% 10.11% 10.61% 10.93% 11.93%
Standard Deviation 0.07%
Z score = ROAt + Equity-to-assetst / stdev ROA 139.23 147.08 154.40 159.08 173.62
Citi
31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
-
50.00
100.00
150.00
200.00
250.00
Z score = ROAt + Equity-to-assetst / stdev ROA
Z score = ROAt + Equity-to-assetst / stdev ROA
31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015
-
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
Z score = ROAt + Equity-to-assetst / stdev ROA
Z score = ROAt + Equity-to-assetst / stdev ROA
Z score is the measure of the deviation of an element from its mean. The lesser it is, the better it is for
the company. It may be positive as well as negative. It also indicates the overall financial health of the
company. For ICBC, we can see that the Z-Score has increased 147 to 192 over a period of 5 years which
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means that the chances of deviation from the profitability has increased whereas the same for Citi bank
has increased from 139 in 2011 to 173 in 2015. But this is still less than ICBC (Jefferson, 2017).
Conclusion
On the detailed analysis with the help of the ratios, the trends and the graphs, it can be concluded that
the fundamentals of both the companies are strong but ICBC bein more established has been more
steady and that’s the reason why ICBC is a market leader. However, Citi Bank is on the growing path and
is giving tough competition to its peers. Furthermore, the internal control and the strategy of capital
structure of Citi has been completely dynamic as compared to ICBC which gives it an edge is some of the
variable.
Therefore, both the companies have been instrumental and steadily growing in terms of profitability but
it will take a long time for Citi to give competition to ICBC because of the huge market share being held
by ICBC.
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411-431.
Belton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat
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Bromwich, M. & Scapens, R., 2016. Management Accounting Research: 25 years on. Management
Accounting Research, Volume 31, pp. 1-9.
Chongsoo, A., Cheh, J. & Kim, I., 2017. Do Value Stocks Outperform Growth Stocks in the U.S. Stock
Market?. Journal of Applied Finance and Banking, pp. 99-112.
Davis, P., 2017. Value Investing: Do Quant Strategies Measure Up?. Financial Analysts Journal, pp. 1-172.
Fay, R. & Negangard, E., 2017. Manual journal entry testing : Data analytics and the risk of fraud. Journal
of Accounting Education, Volume 38, pp. 37-49.
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