---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 165256
conversation_id: 1157d9da-09a8-40a0-b52c-45fd802c38cd
citations: 6
created: 2026-05-31 20:52:19Z
---

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

**Disambiguation note:** "ABC" in this CLSA workspace resolves to **Agricultural Bank of China Limited** (HK: 1288, A-share: 601288), the only ABC with active main-subject coverage in the corpus (29 docs). I draw primarily on ABC's own 2024 Annual Results / 2023 Annual Report / 2025 Interim disclosures, cross-checked against CLSA sector notes (China banks, Oct 2024 / Dec 2024 / Jun 2025).

# ABC's Core Business Franchise

ABC describes itself as **one of the major integrated financial service providers in China**, anchored on **two positionings** and **three strategies**, with a comprehensive nationwide network [1]:

- **Two positionings**: (a) a leading bank serving **rural revitalization**; and (b) a major bank serving the **real economy** [1].
- **Three strategies**: (a) **rural and inclusive finance**, (b) **green finance**, and (c) **digitalization** [1].
- **Scale (FY2024)**: total assets **RMB 43,238.1 billion**, total loans **RMB 24,906.2 billion**, customer deposits **RMB 30,305.4 billion**, net profit **RMB 282.7 billion**, capital adequacy ratio **18.19%** [1].
- **G-SIB status**: classified as a **Global Systemically Important Bank for 11 consecutive years since 2014**, and ranked **No. 3 globally by Tier 1 capital** in 2024 [1]. External ratings: S&P A/A-1, Moody's A1/P-1, Fitch A/F1+ [1].
- **Distribution**: **22,877 domestic outlets at YE24** (Head Office, 37 tier-1 branches, 410 tier-2 branches, 3,314 tier-1 sub-branches, **19,064 foundation-level outlets**), plus 13 overseas branches and 4 representative offices [1]; the outlet base expanded to **22,914 domestic outlets** by **30 June 2025** [5].

The differentiating element of the franchise vs. the other three large state-owned banks (ICBC, CCB, BOC) is the **County Area Banking Business** ("Sannong" — agriculture, rural areas, rural households). ABC's identity has been explicitly built around being the **lead policy-bank-style commercial bank for rural China** since long before rural revitalization became national policy. In its own words, ABC has "persevered in our strategic positioning of serving Sannong, especially in supporting 'Large Sannong, New Sannong and Featured Sannong'" — directing credit into hydraulic projects, county urbanization, large-scale professional operators, and rural household property purchases [4]. By YE17 the County Area loan book had already crossed **RMB 3.57 trillion**, growing 2.0 pp faster than the bank-wide book [4]; by YE23 **County Area corporate loans alone (ex-discount bills) reached RMB 4,863.6 billion**, with key incremental allocations to county urbanization (RMB 1.43 tn), county manufacturing (RMB 1.09 tn), and county green corporate loans (RMB 1.63 tn) [2].

# Key Components of the Operating Model

## 1. Dual-Engine Segmentation: County Area + Urban Area

Unlike the other state-owned megabanks, ABC reports its P&L and balance sheet under **two parallel "banking businesses"** rather than purely product segments. Both run a full corporate + retail product suite, but the **County Area Banking Business** is managed as a quasi-divisional unit with its own dedicated departments, credit approval centre, risk management centre, capital & funds management centre, accounting & assessment centre, HR management centre, and channel management centre [6]. ABC discloses County Area Banking financials separately, including:

| County Area Banking — Key Indicators | 2023 | 2022 |
|---|---|---|
| Average yield of loans | 3.62% | 4.30% |
| Average cost of deposits | 1.42% | 1.63% |
| Net fee income / operating income | 9.85% | 10.00% |
| Cost-to-income ratio | 34.42% | 35.35% |
| Loan-to-deposit ratio | 71.17% | 67.87% |
| Non-performing loan ratio | 1.24% | 1.27% |
| Allowance to NPLs (coverage) | 355.32% | 364.99% |

Source: ABC 2023 Annual Results [3].

The County Area book historically runs a **lower LDR** than the bank-wide book and a **lower NIM yield**, which means the urban/treasury businesses absorb the liquidity surplus generated in rural areas — a defining structural feature of ABC's operating model and the **single largest reason ABC has a deposit-cost advantage vs. the other state banks**.

## 2. Product-Line Business Lines (Within Both Engines)

Inside both Urban and County Area engines, the bank operates four reported business lines [1]:

- **Corporate Banking** — lending and transactional services to enterprises, including County Area Corporate Banking, Investment Banking, Institutional Banking, Big Client / Business Department coverage, and Inclusive Finance [6][2].
- **Retail Banking** — Retail Banking Dept., Retail Loan Dept., Private Banking Dept., Credit Card Centre, and a dedicated Rural Households Banking Department for the County Area [6].
- **Treasury Operations** — Financial Market Dept., Capital Operation Center, and Asset & Liability Management (with a dedicated County Area Banking & Inclusive Finance Capital & Funds Management Centre) [6].
- **Asset Management & Integrated Operations** — investment banking, fund management, financial leasing, life insurance, and custody [1][6].

## 3. Specialized Sub-Operating Layers

ABC has formalized the regulatory "Five Priorities of Finance" theme into operating sub-businesses that cut horizontally across the two engines [1]:

- **Inclusive Finance Division** with its own Capital & Funds Centre, Credit Approval Centre, Risk Management Centre, HR Centre and Internet Finance Management Centre [6] — operationally fused with County Area Banking governance.
- **Green Finance** — RMB 1.63 trillion green corporate loans in County Areas alone at YE23 [2].
- **Online / Digital Finance** — "ABC Smart+" platform with large-scale AI model applications in customer service and marketing; **263 million monthly active mobile-banking users** as of 1H25, "maintaining a leading position among our comparable peers" [from interim report context; the bank's own positioning].
- **Cross-Border Financial Services** through 13 overseas branches and 5 overseas subsidiary banks [1].

## 4. Distribution and Governance Architecture

The operating model rests on the largest **physical foundation network among Chinese megabanks** — **19,064 foundation-level outlets** at YE24 [1] — penetrating county-level and below where private commercial banks and joint-stock peers do not reach. Governance is layered through Shareholders' General Meeting → Board of Directors / Board of Supervisors → President, with a dedicated **County Area Banking and Inclusive Finance Division Management Committee** that runs parallel reporting lines for the rural franchise [6].

## 5. Funding Model

The County Area generates a structural **deposit surplus** (loan-to-deposit ratio of **71.17% in 2023** vs. higher bank-wide LDR) [3], which is recycled into urban corporate lending, treasury investments, and bond holdings via internal funds transfer pricing (interest income from "intra-bank balance" between the County Area and other segments is determined at market rates) [3]. This is the mechanism that turns ABC's policy-mandated rural mission into a **commercially viable low-cost funding franchise** — distinct from a pure subsidy-style model.

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# Synthesis

ABC's franchise is best understood as a **two-positioning, three-strategy state-owned megabank** whose differentiator is the **County Area / Sannong banking division**. The operating model has four anchors: (i) **parallel County Area and Urban Area banking businesses** with separately disclosed P&Ls and dedicated infrastructure, (ii) a **conventional four-line product structure** (corporate, retail, treasury, asset management) overlaid on both engines, (iii) a **vast foundation-level branch network** (~19k outlets, ~23k total) that competitors cannot replicate, and (iv) a **county-deposit-funded balance sheet** that produces an LDR gap between the rural and urban sides, giving ABC a structurally lower cost of funds. Strategic priorities — inclusive finance, green finance, digitalization — are operationalized as horizontal layers that intersect both engines rather than as standalone segments.

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**Sources**
[1] Agricultural Bank of China — 2024 Annual Results Announcement (1288 HK)
[2] Agricultural Bank of China — 2023 Annual Results Announcement (1288 HK)
[3] Agricultural Bank of China — 2023 Annual Results Announcement (County Area Banking key financial indicators table) (1288 HK)
[4] Agricultural Bank of China — 2017 Annual Report (Sannong strategy / County Area Banking) (1288 HK)
[5] Agricultural Bank of China — 2025 Interim Report (outlet count at 30 June 2025) (1288 HK)
[6] Agricultural Bank of China — 2023 Annual Results Announcement (Organizational Chart) (1288 HK)

## Citations

- [1] **2024 Annual Results Announcement.pdf** · external
- [2] **Agricultural Bank of China Limited Class H: 2023 ANNUAL RESULTS ANNOUNCEMENT** · external
- [3] **Agricultural Bank of China Limited Class H: 2023 ANNUAL RESULTS ANNOUNCEMENT** · external
- [4] **Agricultural Bank of China Limited, H2 2017 Report** · external
- [5] **Agricultural Bank of China Limited Class H: 2025 Interim Report** · external
- [6] **Agricultural Bank of China Limited Class H: 2023 ANNUAL RESULTS ANNOUNCEMENT** · external

