---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 163743
conversation_id: 45756d36-57bf-4351-8a51-375317b1f6e9
citations: 5
created: 2026-05-31 20:15:41Z
---

# What is ICBC’s core business franchise and the key components of its operating model?

# ICBC (1398 HK / 601398 CH) — Core Business Franchise & Operating Model

Industrial and Commercial Bank of China is the world's largest commercial bank by assets, structured as a universal bank around three principal customer-facing segments plus a residual "Others" bucket, supported by a vast domestic distribution footprint, an expanding overseas network, and a portfolio of non-bank financial subsidiaries. The Bank is majority state-controlled by Central Huijin (34.7%) and the Ministry of Finance (34.6%) [6].

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## 1. The Three Core Operating Segments

ICBC's group is organised, for both management and external reporting, into three core business segments — corporate banking, personal banking, and treasury operations — plus an "Others" residual. The segmentation reflects ICBC's internal organisational structure, management requirements and internal reporting system [2].

| Segment | Core Activities (per ICBC's own definitions) |
|---|---|
| **Corporate Banking** | Provision of financial products and services to **corporations, government agencies and financial institutions**: corporate loans, trade financing, deposit-taking, corporate wealth management, custody activities and corporate intermediary services [2]. |
| **Personal Banking** | Provision of financial products and services to **individual customers**: personal loans (incl. mortgages), deposit-taking, card business, personal wealth management and personal intermediary services [2]. |
| **Treasury Operations** | Money-market transactions, investment securities, foreign exchange transactions and the holding of derivative positions, **for own account and on behalf of customers** [2]. |
| **Others** | Insurance and leasing services, equity investments and head-office assets/liabilities/income/expenses not directly attributable to a segment [2]. |

### Segment economics — what actually drives the P&L

The structural pattern that defines ICBC's operating model is visible in the segment P&L: **corporate banking is the dominant earner pre-2024, personal banking is the deposit gathering engine, and treasury operates the bank's massive securities/funding book**.

**FY2024 segment results (RMB millions)** [1]:

| | Corporate Banking | Personal Banking | Treasury Operations | Others | Total |
|---|---:|---:|---:|---:|---:|
| External NII | 351,117 | 24,889 | 261,399 | — | 637,405 |
| Internal NII transfer | (43,280) | 243,001 | (199,721) | — | — |
| Net F&C income | 66,602 | 41,725 | 1,070 | — | 109,397 |
| Operating income | 382,329 | 310,138 | 89,675 | 3,984 | **786,126** |
| Impairment | (39,043) | (87,636) | 1,532 | (1,516) | (126,663) |
| Operating profit | **244,892** | **98,710** | **75,270** | (1,564) | **417,308** |

Read-through:
- **Corporate banking** generates the bulk of *external* net interest income (Rmb351bn) and the bulk of operating profit (~59% of pre-tax) — it is the franchise's primary loan-origination and fee-generating engine [1].
- **Personal banking** is a structural net funds-provider: it generates only Rmb25bn of external NII but receives Rmb243bn of *internal* NII via the funds transfer pricing mechanism — i.e., the retail deposit base is funding the corporate and treasury books [1]. This is the classic state-bank model: cheap retail deposits cross-subsidising corporate lending.
- **Treasury operations** is the second-largest external NII contributor (Rmb261bn from investment securities and money-market activity) and represents roughly 18% of operating profit [1].

**1H 2025 (RMB millions)** [3] shows a structural rebalancing:

| | Corporate Banking | Personal Banking | Treasury Operations | Others | Total |
|---|---:|---:|---:|---:|---:|
| Operating income | 197,723 | 162,093 | 47,916 | 1,350 | 409,082 |
| Operating profit | 63,568 | **92,769** | 39,075 | 571 | **195,983** |

In 1H25, personal banking operating profit (Rmb92.8bn) actually overtook corporate banking (Rmb63.6bn) — reflecting heavier impairment booked against the corporate book (Rmb91bn vs Rmb13.8bn for retail) and softer corporate NII margins [3].

### Inter-segment funds flow — the FTP backbone

The mechanical glue of the operating model is **internal net interest income transfer**. Transactions between segments represent the provision of funding to and from individual segments, conducted at terms referenced to the average cost of funding [2]. In practice:
- Personal banking *contributes* funding (deposit-rich) → receives positive internal NII.
- Corporate banking and Treasury *absorb* funding (asset-heavy) → pay negative internal NII.

This FTP plumbing explains why personal banking can look profitable on a P&L view even though its external loan yields are below corporate yields — the segment is effectively monetising its deposit franchise.

---

## 2. Distribution and Network Architecture

ICBC operates one of the largest physical banking networks in the world, organised in three tiers domestically plus a multi-jurisdiction overseas presence (as of end-2024) [4]:

**Domestic branches**
- 36 Tier-one branches (including directly managed branches)
- 460 Tier-two branches
- **15,107 grassroots branches** [4]

**Overseas footprint**
- 55 overseas branches and their institutions
- 353 overseas subsidiaries and their institutions [4]

**Head Office governance and operating departments** include Corporate Banking, Personal Banking, Institutional Banking, Inclusive Finance (Rural Revitalization), Settlement & Cash Management, Internet Finance, Credit Approval, Risk Management, Asset Management, Asset Custody, Investment Banking, Pension Finance, Bank Card (ICBC Peony Card Center), Private Banking, Precious Metals, ICBC Bills Discounting, International Banking, Financial Technology, Global Market, and Data Management [4]. The board is supervised through specialist committees covering Strategy, Risk Management, Audit, Asset & Liability Management ("Five Priorities" Committee), Personal Banking, Corporate Banking (including Technology Finance), Institutional Banking (including Pension Finance), and Digital Finance — mirroring the segment structure [4].

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## 3. Subsidiary & Equity Participation Layer

The "Others" residual hides a meaningful non-bank franchise that extends ICBC beyond pure commercial banking:

**Wholly/majority-owned domestic subsidiaries**: ICBC Leasing, ICBC Credit Suisse Asset Management, ICBC-AXA (life insurance), ICBC Investment, ICBC Wealth Management, Rural Banks, and Bank of Jinzhou [4].

**Major equity participation — Standard Bank Group (South Africa)**: ICBC continues to hold 324,963,464 shares, or **19.74% of Standard Bank**, the largest commercial bank in Africa, and remains its single largest shareholder. As at end-June 2025, Standard Bank reported total assets of ZAR3,412bn and net assets of ZAR302.9bn, generating ZAR27.4bn of net profit in 1H25 [5].

This subsidiary stack means ICBC's franchise is genuinely universal: leasing, asset management, wealth management, life insurance, investment banking and overseas commercial banking are all under the group umbrella, with the Standard Bank stake providing an African banking proxy.

---

## 4. Profitability Architecture (per CLSA's framework)

CLSA's coverage frames ICBC's economics through a Gordon-growth lens: **a single-stage P/B model anchored on sustainable ROE of ~8%, a cost of equity of 13.6%, and a 4% long-term growth rate**, justifying a 0.42x 12-month forward P/B [7 — embedded in CLSA valuation note]. The recent earnings trajectory CLSA models is essentially flat-to-modestly-positive [7]:

| Year | Net profit (Rmb bn) | EPS growth | Dividend yield | ROE | P/B |
|---|---:|---:|---:|---:|---:|
| 2022A | 346.3 | +2.2% | 8.1% | 10.7% | 0.4x |
| 2023A | 349.0 | +0.8% | 7.6% | 10.0% | 0.4x |
| 2024CL | 351.4 | +0.7% | 7.7% | 9.4% | 0.4x |
| 2025CL | 376.0 | +7.0% | 8.2% | 9.4% | 0.3x |
| 2026CL | 405.7 | +7.9% | 8.8% | 9.5% | 0.3x |

The CLSA NDR (18 Jul 2024) crystallised the operating-model pressures: continued downward pressure on NIM (with the YoY decline narrowing), persistent pressure on 2Q net fee income, broadly stable NPL ratio and provision coverage; CLSA maintained an Outperform call on a ~7.7% dividend yield [6].

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## 5. Synthesis — The Operating Model in One View

ICBC's operating model is a **three-engine, deposit-funded, state-anchored universal-banking machine**:

1. **Funding engine**: a personal-banking deposit franchise running through 15,107+ grassroots branches gathers cheap retail deposits, generating large internal NII flows to the rest of the group [3][4].
2. **Earnings engine**: corporate banking deploys those funds into loans to corporations, government agencies and financial institutions, producing the majority of external NII and historically the bulk of operating profit [1][2].
3. **Balance-sheet engine**: treasury operations runs the investment-securities book, money-market and FX positions for own account and clients, providing the third profit pillar and absorbing surplus liquidity from the deposit franchise [1][2].
4. **Distribution & subsidiary halo**: a tiered 36 / 460 / 15,107 domestic branch grid, 55 overseas branches and 353 overseas subsidiaries/institutions, plus group subsidiaries (leasing, AM, wealth, insurance, investment) and a 19.74% Standard Bank stake, extend the franchise beyond plain-vanilla commercial banking [4][5].
5. **Sensitivities**: returns are structurally exposed to NIM (rate-cycle and CASA regulation), credit costs (especially mortgage/property and corporate), fee-business regulation, and the asset/liability mix the bank chooses in response to policy [6].

---

**Sources**
[1] Industrial & Commercial Bank of China Ltd. (1398-CN) — Annual Report for period ended 31-Dec-2024 (FY2024 segment table)
[2] Industrial and Commercial Bank of China Limited — Annual Report 2014 (segment definitions; identical operating segment construct used through 2024)
[3] Industrial and Commercial Bank of China Limited — H1 2025 Interim Report (1H25 segment table)
[4] Industrial and Commercial Bank of China Limited — H2 2024 Annual Report (organisation chart, branch counts, subsidiaries)
[5] Industrial and Commercial Bank of China Limited — 2025 Interim Report (Standard Bank equity participation)
[6] CLSA — ICBC: NDR Takeaways — "Minor changes in fundamentals and momentum in 2Q" (18 Jul 2024) — 607934099LinqAlpha.PDF
[7] CLSA — ICBC: NDR Takeaways — Financial estimates table (18 Jul 2024) — 607934099LinqAlpha.PDF

## Citations

- [1] **Industrial & Commercial Bank of China Ltd. (1398-CN) - Annual Report for period end 31-Dec-2024 (English) - PDF - 1 / 2** · external
- [2] **Industrial and Commercial Bank of China Limited, H2 2014 Report** · external
- [3] **Industrial and Commercial Bank of China Limited - H1 2025 Results.pdf** · external
- [4] **Industrial and Commercial Bank of China Limited - H2 2024 Results.pdf** · external
- [5] **Industrial and Commercial Bank of China Limited - 2025 Interim Report.pdf** · external

