Corporate banking offers examples for Chinese banks: McKinsey report

Chinese banks should closely follow several trends of corporate banking, including the provision of professional services based on industries and client groups and the large-scale application of digital operations, as well as big data and advanced analytics, said a report issued by McKinsey & Company on Tuesday.

"Digitization will significantly improve the transformation of corporate banking," said Han Feng, partner at McKinsey. "Those banks that could truly realize digital transformation and large-scale digitization will considerably widen the gap between themselves and other banks."

Driven by such factors as digitized customer journeys and pricing based on advanced analysis, a bank's operating income will increase by 10 to 20 percent. Its staff efficiency will increase by 10 to 20 percent and the customer satisfaction ratio will increase by 10 percentage points, according to an analysis conducted by the global management consulting firm.

Leading international banks took action to transform by focusing on certain industries and corporate clients after the 2008 financial crisis. For instance, a large multinational bank put its focus on 5,000 large corporate clients worldwide and provided financial services to nearly 50,000 medium-sized upstream and downstream enterprises around the core enterprises.

These banks also concentrated on building professional competence in selected industries. They built industry-based research teams and data analytics teams to create knowledge graphs for supply chains, carry out in-depth industry analyses, and help themselves identify potential clients more accurately, in addition to creating more comprehensive customer profiles for smart marketing and cross-selling, Han said.

"Banks with high professional competence in selected industries will build their moat over time, which will help them navigate through business cycles and achieve growth in the corporate banking business," said John Qu, senior partner at McKinsey.

He highlighted the importance of the establishment of an industry research team at the head office of a bank, the industry specialization of client managers, and the creation of data-driven digital platforms at banks.

During the development of corporate banking amid rising economic uncertainties, risk management strategies must closely fit the overall business strategies, which means a bank's choice of strategic industries and industry-based tactics should be aligned with risk management, said Tong Xiangyun, associate partner at McKinsey.

As a result, risk management must make transitions along with the corporate banking business. The transitions will include the implementation of digital transformation through financial technologies to strengthen post-loan management and build early warning systems for financial risks, Tong said.