Bank of China Limited: history, ownership, mission, how it works & makes money

A Brief History of Bank of China Limited

Established in 1912, the Bank of China Limited (BOC) is one of the oldest and largest banks in China, as well as one of the world's largest financial institutions. The bank was originally founded to facilitate trade and support China's economic development. Over the years, it has grown significantly, both in terms of assets and international presence.

In 1949, following the founding of the People's Republic of China, the bank became the central bank responsible for foreign exchange and international trade. This marked a shift in its focus toward enhancing global financial relationships. In 1987, BOC became the first Chinese bank to issue shares publicly, listing on the Hong Kong Stock Exchange.

As of 2022, Bank of China reported a net profit of RMB 238 billion (approximately $33 billion), indicating a year-on-year increase of 6.5%. The bank's total operating income for the same period was RMB 523 billion (around $73 billion), growing by 8.2% from the previous year.

In terms of international reach, Bank of China has established branches and subsidiaries in over 60 countries and regions. By the end of 2022, its overseas assets amounted to $1 trillion, highlighting its commitment to global expansion.

Bank of China has also focused on digital transformation. In 2021, the bank allocated RMB 10 billion to enhance its digital banking services, and by mid-2023, it reported that over 50% of its retail transactions were conducted online.

Looking at its capital adequacy, Bank of China's capital adequacy ratio stood at 14.5% as of June 2023, which is above the 12.5% regulatory requirement set by the China Banking and Insurance Regulatory Commission (CBIRC).

Throughout its history, Bank of China has been instrumental in facilitating international trade and investment, and its long-standing presence in the financial sector underscores its importance in both the Chinese and global economy.

A Who Owns Bank of China Limited

Bank of China Limited (BoC), incorporated in 1912, is one of the oldest and most significant banks in China. Its ownership structure combines state influence with public investment.

The majority owner of Bank of China is the central government of the People's Republic of China, primarily through the Ministry of Finance. As of the end of 2022, the Ministry of Finance owned approximately 63.87% of the total shares, maintaining significant control over the bank's operations and strategic direction.

Public investors also play a role in the bank's ownership. The remaining shares are held by various institutional and retail investors, both domestic and international. As of September 2023, the ownership distribution is represented in the following table:

In terms of shareholding by public investors, institutional investors dominate the landscape. Notable institutional shareholders include:

• BlackRock, Inc.
• The Vanguard Group, Inc.
• China Life Insurance Co., Ltd.

Bank of China is listed on both the Hong Kong Stock Exchange and the Shanghai Stock Exchange. As of October 2023, the stock price on the Hong Kong Stock Exchange was approximately HKD 3.40, reflecting a market capitalization of about HKD 1.3 trillion.

The bank reported a net profit attributable to shareholders for the first half of 2023 of approximately RMB 67 billion, an increase of 6.5% compared to the same period in 2022. The bank's total assets reached RMB 39 trillion as of June 30, 2023.

Furthermore, Bank of China plays a crucial role in international finance, with branches in over 50 countries. This global presence allows it to cater to a diversified customer base, which also influences its ownership dynamics as foreign investments become increasingly significant in its shareholder structure.

Bank of China Limited Mission Statement

Bank of China Limited, one of the oldest and most prestigious banks in China, positions itself as a global financial institution committed to serving the needs of its customers, fostering economic growth, and contributing to social development. Its mission statement emphasizes a customer-centric approach, striving for innovation, and maintaining a high level of integrity and professionalism.

The bank's mission is encapsulated in its desire to provide comprehensive financial services while enhancing value for shareholders and serving the wider community. This is evident in its strategic initiatives, which focus on sustainable development and global expansion.

Key Elements of the Mission Statement

• Customer Focus: Aims to meet the diverse financial needs of individuals, businesses, and institutional clients.
• Global Presence: Operates in more than 60 countries, establishing a significant international footprint.
• Sustainable Development: Committed to environmental stewardship and social responsibility within its operations.
• Innovation: Leverages technology to enhance service delivery and improve customer experience.

Financial Overview

As of the latest financial reports for the fiscal year ending December 31, 2022, Bank of China Limited demonstrated solid financial performance:

In terms of stock performance, Bank of China Limited trades on the Hong Kong Stock Exchange under the ticker symbol 3988.HK. The stock's market capitalization as of October 2023 was approximately CNY 1.3 trillion. Over the past year, the stock price has exhibited volatility, with a 52-week range between CNY 2.77 and CNY 3.87.

Strategic Goals Aligned with the Mission Statement

Bank of China Limited outlines several strategic goals that align with its mission:

• Enhancing customer service: Aiming to improve customer satisfaction ratings through better service delivery.
• Expansion in international markets: Targeting growth in emerging markets to capture new customer segments.
• Digital transformation: Investing in fintech solutions and artificial intelligence to streamline operations.
• Risk management: Implementing advanced risk assessment tools to safeguard assets and mitigate potential losses.

In summary, Bank of China Limited's mission statement reflects its commitment to being a leader in the global banking sector while ensuring the highest standards of service and ethical conduct.

How Bank of China Limited Works

Bank of China Limited (BoC), established in 1912, stands as one of the oldest and most prominent banks in China. It primarily serves its customers through a vast domestic and international network, offering a variety of financial services. As of 2022, BoC had assets totaling approximately ¥39.2 trillion (around $5.5 trillion), making it the fourth largest bank in the world by total assets.

BoC operates on various fronts, including personal banking, corporate banking, and investment banking. The personal banking segment offers services such as savings accounts, consumer loans, and credit cards. In 2022, retail banking contributed to roughly 42% of BoC's total revenue.

The corporate banking division provides services to businesses, including loans, trade finance, and treasury management. Corporate banking represented approximately 48% of total revenue in the same year.

Investment banking involves underwriting, advisory services, and asset management. In 2022, this segment accounted for about 10% of the bank’s total revenue.

BoC's geographical presence is extensive, with branches in over 60 countries and regions. As of June 2023, the bank had more than 3,000 domestic branches and over 500 overseas branches. This international network allows the bank to cater to both Chinese enterprises venturing abroad and foreign companies looking to invest in China.

In terms of financial performance, BoC reported a net profit of approximately ¥245.8 billion (around $34.1 billion) for the year ending December 2022, which reflects an increase of 4.6% year-over-year. Also, the bank's non-performing loan (NPL) ratio stood at 1.44% as of mid-2023, indicating stable asset quality.

Regarding capital adequacy, BoC's capital adequacy ratio was at 16.07% as of June 2023, well above the regulatory minimum of 10.5%. This highlights the bank's strong capital position and its ability to withstand financial shocks.

BoC participates actively in the financial markets, issuing bonds, and utilizing derivatives for risk management. In 2022, the bank issued approximately ¥200 billion in bonds. This funding strategy allows BoC to maintain liquidity and financial flexibility.

Moreover, the bank heavily invests in technology. In 2022, BoC allocated about ¥60 billion for IT infrastructure and digital banking enhancements, aiming to improve customer experience and operational efficiency.

Bank of China Limited consistently emphasizes risk management and compliance with regulatory requirements. Its internal governance framework involves a board of directors overseeing risk control measures, supported by specialized committees focusing on audit, risk, and compliance functions.

In summary, Bank of China Limited's operational framework integrates traditional banking services with modern financial strategies, risk management practices, and a focus on technological advancement, solidifying its position as a leading global banking institution.

How Bank of China Limited Makes Money

Bank of China Limited (BoC), one of the largest financial institutions in China, generates revenue through a multifaceted business model. Its primary income streams include interest income, fee-based services, and international operations.

Interest Income

Interest income is the backbone of BoC's profitability, accounting for a significant portion of its total revenue. In 2022, the bank reported an interest income of approximately RMB 557.2 billion, representing a 9.1% increase from the previous year. This growth is largely attributed to increased lending and higher interest rates.

Loan Portfolio

As of 2022, BoC's total loan portfolio stood at RMB 13.6 trillion, with a non-performing loan (NPL) ratio of 1.39%, a slight increase from 1.35% in 2021. The composition of the loan portfolio includes:

Corporate loans significantly contribute to BoC's income, particularly in sectors such as infrastructure and real estate.

Fee-Based Services

Fee-based services, including wealth management, advisory services, and transaction fees, represent another vital revenue stream. In 2022, BoC generated approximately RMB 120.5 billion from fees, up by 8.4% year-on-year. The breakdown of fee-based income includes:

International Operations

BoC's international operations are crucial for revenue diversification, encompassing branches and subsidiaries in regions like Asia, Europe, and North America. In 2022, international business accounted for 30% of the bank's total income. The bank's overseas net profit reached approximately RMB 80 billion, with major contributions from trade finance and foreign exchange services.

Investment Banking

Investment banking activities, including underwriting and securities trading, also contribute to BoC's revenue. The bank reported investment banking income of around RMB 42.8 billion in 2022, reflecting an increase of 6.0% compared to 2021. This segment's growth is driven by more robust capital markets and increased equity issuance.

Overall Financial Performance

In summary, Bank of China Limited's financial performance showcases a solid foundation across various income streams. The bank's total revenue in 2022 was approximately RMB 734 billion, reflecting a growth of 8.5% year-on-year. The bank's net profit attributable to shareholders rose to RMB 250 billion, indicating a healthy return on equity of 12.8%.