China Construction Bank SWOT and PESTLE Analysis

Strengths

1. Strong Brand Value: China Construction Bank (CCB) has been given numerous awards. The Asian Banker awarded it “the best mortgage and home loans business in China”. Brandz ranked it 22nd (on a list of 100) of the most valuable Global brands in 2013. It also received an award from Corporate Governance Asia. These awards are indicative of the strength of the brand of China Construction Bank both globally as well as locally. This brand value helps it to not only gain customer recognition but also helps it to attract and retain talent within the organisation.

2. Comprehensive Product Offerings: CCB offers a broad portfolio of products that addresses all of the consumers banking and investment requirements. It offers most of the traditional banking products such as mortgages, deposits, personal loans and business loans. It also offers wealth management products for individual investors as well. The bank has also diversified into innovative new banking services. It has launched a mobile banking platform that as of 2013 accounted for 1,192 million transactions. The bank has even started securitising its loans in order to de-risk its loan portfolio.

3. Integration with e-commerce: Taking account the growing popularity of e-commerce, it has also upgraded its e-commerce platform and improved customer service. The transaction volume on the retail side was RMB 1,035 million and on the corporate side it was RMB 26,747 million. The number of internet merchants was also increased by 8,297; which included 3,333 for the retail segment and 4,964 for the corporate segment.

4. Large Market Capitalization:CCB’s market capitalisation was USD 187.8 billion at the end of 2013. That made it the 5th largest bank in the world in terms of market capitalisation. This large equity base is very important as it acts as a safety cushion that enables the bank to borrow at a lower rate. It also acts as a safety reserve in case of times of a liquidity or financial crisis.

Weaknesses

1. Over-exposure to real estate and construction: Mortgages account for nearly 76% of Personal Loans and Advances. Construction and Real estate sectors amount to nearly 13% of corporate loans. In total that accounts for an exposure of nearly 30% of total gross loans that have an exposure to the housing market. As housing prices have begun to reduce, it is distinctly possible that a slowdown could result in a rise in Non-performing Liabilities (NPL).

2. Reduced Capital Adequacy Ratio: The Capital Adequacy Ratio has reduced from 11.32 in 2012 to 10.75 in 2013. This has been due to the rise of NPL in the bank’s loan portfolio especially in case of loans to the manufacturing sector. The Chairman was also quoted as saying that the portion of NPL’s would probably increase in the near term rather than get better.

3. Exodus of Middle level managers: The recent change in pay structure at state owned Chinese banks has resulted in large number of middle level banking officials leaving banks such as CCB. This has weakened the operational capabilities of CCB and if unresolved could impact the competitive capabilities of the company going forward.

Opportunity

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Threat

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