Industrial & Commercial Bank of China Competing for INFORMS Edelman Prize

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HANOVER, MD, March 21, 2011 – Industrial and Commercial Bank of China Limited and IBM Research – China’s joint analytics team is among six finalists that will compete for the INFORMS 2011 Franz Edelman Award for Achievement in Operations Research and the Management Sciences in Chicago on April 11 at the Marriott Chicago Downtown.

The finalists for the competition, sponsored by the Institute for Operations Research and the Management Sciences (INFORMS®), include:

Industrial and Commercial Bank of China Limited (ICBC) with IBM Research - China for “Branch Reconfiguration Practice through Operations Research in ICBC.”

Industrial and Commercial Bank of China Limited (ICBC) is the largest publicly traded bank in the world measured by market capitalization, deposit volume, and profitability. ICBC, with a vast branch network of over 16,000 branches, serves over 200 million individual customers and 3.6 million corporate clients.

The financial market in China is rapidly changing with the increased economic level, modernization, urbanization, and globalization of China. Many new urban districts and satellite cities are emerging in this rapid urbanization process. As personal wealth increases, people require more financial services. A critical strategic problem for ICBC was the reconfiguration of the branch locations and service capabilities to match the regional economy and customer distribution, along with the quick identification and relocation to new high-potential market areas. It was necessary for ICBC to develop a systematic methodology and analytical system to support the branch network optimization for all ICBC branches.

ICBC wanted a scalable, quantitatively rigorous branch reconfiguration methodology tailored for the specific needs of ICBC to optimize the branch networks to improve branch performance and to increase the return on investment of branch rebuilding and personnel allocation.

In 2006, ICBC partnered with IBM to customize a branch network optimization system known as branch reconfiguration (BR) by applying operations research and management science techniques while considering the practical business needs of banks.

BR matches advanced operations research and management science techniques to the practical managerial issues of ICBC. BR has a customer resource model built with preference data and formulates a large-scale branch network optimization problem that is solved by a hybrid nested partition algorithm. Branch reconfiguration:

1. allocates branch resources to match the economic situation and financial potential of the local area

2. models the financial potential of a market based on geographic and demographic data and identifies new high-potential market areas and good branch locations

3. determines the right locations and personnel arrangements of new, relocated, and rebuilt branches, and helps improve branch management

4. improves the decision making of branch reconfiguration to minimize capital costs, allows quicker decision making, and reduces the chances of costly mistakes caused by poor branch investment choices

The ICBC BR project has achieved significant results:

1. Deployment across China. Beginning in 2006, BR was implemented and tested in seven representative cities. In 2009, ICBC started deploying the system to 100 cities with completion expected by the middle of 2011.

2. Improved branch performance. So far, BR has been implemented in over 40 major cities in China. The increase in deposits attributable to BR in a typical major city like Suzhou was RMB 7 billion (or US$1.04 billion). Over time it is expected that ICBC will continue to experience additional deposits.

3. Increased efficiency of branch rebuilding. This project provides a quantitative basis for making reconfiguration decisions. It helps minimize the cost and risks associated with opening low-profit branches.

4. Improved methodology and efficiency of branch management. BR provides a quantitative view of how each branch and area is performing that helps management more reliably make branch planning decisions.

Industrial and Commercial Bank of China Limited (ICBC) is the largest publicly traded bank in the world measured by market capitalization, deposit volume, and profitability. At the end of 2009, ICBC was the top bank in the world with a market capitalization of $269 billion, and it defended its position as the world's most profitable bank, reporting a net profit of RMB 129.35 billion, up by 16.4% from 2008.

IBM Research - China was established in Beijing in 1995 as one of the 9 IBM research laboratories worldwide.

The six 2011 Franz Edelman finalists are:

  1. CSAV
  2. Fluor Corporation
  3. The Industrial and Commercial Bank of China Limited (ICBC)
  4. IHG (InterContinental Hotels Group)
  5. Midwest Independent Transmission System Operator
  6. New York State Department of Taxation and Finance

This is the 40th year of the prestigious Franz Edelman competition. The winner will be announced at a special awards banquet on April 11, 2011 during the INFORMS Conference on Business Analytics & Operations Research. The conference takes place at the Marriott Chicago Downtown from April 10-12.

About INFORMS

The Institute for Operations Research and the Management Sciences (INFORMS®) is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, financial engineering, and telecommunications. INFORMS serves the scientific and professional needs of operations research analysts, experts in analytics, consultants, scientists, students, educators, and managers, as well as their institutions, by publishing a variety of journals that describe the latest research in operations research. INFORMS Online (IOL) is at www.informs.org. Further information about operations research can be found at www.scienceofbetter.org.

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