Banking Newsletter - PwC · 2017-01-30 · Banking Newsletter. Analysis of China’s Top 10 Listed Banks’ Results for the First Half . of 2014 . ... (except for ratios). ... September

Banking Newsletter Analysis of China’s Top 10 Listed Banks’ Results for the First Half of 2014

September 2014

www.pwccn.com

Editor-in-chief: Dan Han

Deputy-editor-in-chief: Joanne Song, Jeff Deng

Macro overview: Jeff Deng

Operating performance: Nancy Yang , Jeff Ma, Sarah Mao, Alfred Chen

Financial position: Kiki Chen, Evelyn Liu, Joanne Song, Luna Liu, Amy Zhou

Capital Management: Evelyn Liu

Columns: Kiki Chen, Jeff Ma

Outlook: Joanne Song

Banking Newsletter’s Editorial Team

Advisory Board: Raymond Yung, Jimmy Leung, Margarita Ho, Richard Zhu

PwC Banking Newsletter September 2014

3

Introduction

We are pleased to present our Banking Newsletter (the Newsletter), PwC’s analysis of China’s Top 10 Listed Banks, which is now in its the 20th issue.

The Top 10 Listed Banks, as defined by the China Banking Regulatory Commission (CBRC), are as follows:

Large commercial banks (LCBs)

Industrial and Commercial Bank of China Limited (ICBC) China Construction Bank Corporation (CCB) Agricultural Bank of China Limited (ABC) Bank of China Limited (BOC) Bank of Communications Co., Ltd.(BOCOM)

Largest joint-stock commercial banks (LJSCBs)

China Merchants Bank Co., Ltd (CMB) Shanghai Pudong Development Bank Co., Limited (SPDB) Industrial Bank Corporation Limited (CIB) China CITIC Bank Corporation Limited (CITIC) China Minsheng Banking Corporation Limited (CMBC)

This newsletter presents the financial results and operating performance of the Top 10 Listed Banks for the first half of 2014. The total assets of the Top 10 Listed Banks for the first six month of 2014 accounted for 72.76% of China’s commercial banking sector. The Top 10 Banks are presented in order of their total asset size as of 31 December 2013.

Unless otherwise stated, all the information in the newsletter comes from publicly available sources, including listed banks’ annual reports and statistics from regulatoary bodies. All figures are derived from information prepared under PRC Accounting Standards and expressed in RMB (except for ratios).

For more information, please ask your PwC contacts or any of those listed in our Banking and Capital Markets Contacts in the Appendix.


4

Table of Contents

Overview of Macro Environment 5

Analysis of Operating Performance 15

Analysis of Financial Position 27

Analysis of Capital Management 53

Outlook 57

Columns

Column 1 – Credit Asset Quality Analysis 35

Column 2 – Inter-bank Business 44

Appendix 61


5

Overview of Macro Environment

• Growth slowed in China, recovery fragile in Japan & Europe

• Low inflation and ample market liquidity

• Bank lending rebounded in proportion

• Deposit growth sluggish, but surged at quarter-ends

• Faster assets expansion Vs. slower profits growth

• JSCBs facing upward pressure on asset quality

• Summary: profit growth dropped, risks risen and in preparation for rainy days


6

Growth slowed in China, recovery fragile in Japan & Europe

1998 Q2, 7.20% 2009 Q1,

6.60%

2014 Q2, 7.40%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Source: National Bureau of Statistics

The global economy recovered at different rates in 1H 2014. While the US grew steadily over the six month, Japan and the Europe continued to face headwinds. Japan’s Gross Domestic Product (GDP) shrunk in 2Q 2014. Growth was sluggish across European countries.

Emerging markets grew at a slower but relatively stable pace. China recorded GDP growth of 7.40% in 1H 2014, matching that of 1Q 2014.

Analysis of contributors to China’s GDP shows that investment fell to 48.50% in 1H 2014, as both fixed asset investment (FAI) and foreign direct investment (FDI) growth continued to drop from 2013’s level.

Graph 2 Comparison of FAI & FDI monthly growth trend

Graph 1 China’s quarterly year-on-year GDP growth

-10%

0%

10%

20%

30%

FAI FDI



7

Low inflation and ample market liquidity

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

CPI

PPI


Prices remained stable in 1H 2014, with the Consumer Price Index (CPI) remained below 2.50% and there was a slight rebounce in Producer Price Index (PPI, an indicator of production costs).

Both index suggested a stable price range for most goods and services.

The People’s Bank of China (PBOC) in early 2013 introduced a what was termed as “standing lending facility” (SLF) for commercial banks in case they need emergent liquidity.

It was this facility that provided short term liquidities to banks and stabilised the markets in late June 2013, when there was a credit crunch and led to a surge in interest rates.

Since February 2014, PBOC didn’t use this as the market liquidity was broadly ample.

Graph 3 CPI and PPI monthly changes

Graph 4 PBOC’s SLF monthly balances

0

50

100

150

200

250

300

350

400

450In billions

Source: People’s Bank of China


8

Bank lending rebounded in proportion

40%

50%

60%

70%

80%

90%

100%

0%

5%

10%

15%

20%

Corporate bonds RMB bank loans

% of RMB bank loans % of Corporate bonds


According to PBOC, total social financing was RMB 10.57 trillion in 1H 2014, a record high compared to previous periods.

A closer look at the components of social financing shows that corporate bond issuance was active whereas bank lending rebounded.

The proportion of RMB bank lending went up from 51.43% in 2013 to 54.34% in 1H 2014. So did the proportion of corporate bonds from 10.42% to 12.25%.

Loans growth in 1H 2014 amounted to RMB 6.20 trillion, up 13.70% on a year-on-year basis.

While monthly loan growth slowed in 1Q 2014, its pace picked up slightly in 2Q. That said, overall loan growth remained at a relatively low level for the first six months of 2014.

Graph 5 Change in proportion for corporate bonds and loans

Graph 6 Monthly growth of RMB loans

Note: Apart from above items, total social financing includes trust loans, entrusted loans, loans denominated in foreign currencies, undiscounted bank drafts, funds raised from equity market of non-financial companies, claims from insurance company and investment properties.

13%

14%

15%

16%

17%

-

200

400

600

800

1,000

1,200

1,400

Monthly growth volume Year-on-year growth

Monthly growth volume (In billions) Y-o-Y Growth

Loan growth rebounded slightly in 2Q



9

Deposit growth sluggish, but surged at quarter-ends

Deposit growth reached RMB 9.20 trillion in 1H 2014, representing growth of 12.60%. The pattern that deposit growth surges at the end and slumps at the beginning of each quarter has been recurring for many quarters.

As a result the PBOC, Ministry of Finance (MoF) and the China Banking Regulatory Commission (CBRC) in September jointly introduced a what was called “deposits deviation” indicator to constrain banks’ aggressive deposit taking activities at the end of each quarter.

Graph 7 Monthly growth of RMB deposits

10%

11%

12%

13%

14%

15%

16%

17%

(10,000) (5,000)

- 5,000

10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

Monthly growth volume Year-on-year-growth

Surge at the end and slump in the beginning of each quarter is significant

Monthly growth volume (In billions) Y-o-Y Growth


4.0%

4.5%

5.0%

5.5%

6.0%

Source: Chinabond.com

Graph 8 Change of yield-to-maturity of bonds Turning to market interest rates, there was a downward trend of yield-to-maturity of bonds in 1H 2014 but the yields was still relatively high compared to that in 2013.

In addition, Shanghai Inter-bank Offered Rates remained stable in 1H 2014.


10

Faster assets expansion Vs. slower profits growth

11.30%

17.40%

23.40%

34.40%

17.60%

8.01%

22.45%

18.06%

42.40%

0.90% 0%

10%

20%

30%

40%

50%

LCBs JSCBs CCBs RCBs FBs

2014 1H 2013 1H

Source: China Banking Report by CBRC

Total asset of commercial banks in China continued to expand. As of 30 June 2014, the figure reached RMB 130.93 tr, a year on year growth of 15.78%. This is slightly higher than 1H 2013.

According to the China Banking Report by the CBRC, in 1H 2014 the asset growth for large commercial banks (LCBs), city commercial banks (CCBs) and foreign banks (FBs) was speeding up. But joint-stock commercial banks (JSCBs) record a slower asset growth.

According to the CBRC, commercial banks in China saw a stable profit growth in 1H 2014, with an aggregate net profit of RMB 858.30 bn, 13.96% more than it was in 1H 2013. This growth is similar to that of 1H 2013 (13.80%).

Nevertheless, net profit growth of commercial banks in 2Q 2014 slowed to 12.07%, an aggregate amount of RMB 430.7 bn. This is the lowest year-on-year quarterly growth since 1Q 2012.

Graph 9 Asset growth by types of bank

Graph 10 Net profit growth of commercial banks

10%

13%

16%

19%

22%

25%

050

100150200250300350400450

2012Q1

2012Q2

2012Q3

2012Q4

2013Q1

2013Q2

2013Q3

2013Q4

2014Q1

2014Q2

Net profits Year-on-year growth

Net profits (In billions)

Slower growth in 2Q 2014

Y-o-Y Growth

Q1 Q2 Q3 Q4 Q1 Q2 2013 2014

Q1 Q2 Q3 Q4 2012

Source: China Banking Regulatory Commission

Note: Commercial banks refers to large commercial banks (LCBs), joint-stock commercial banks (JSCBs), city commercial banks (CCBs), rural commercial banks (RCBs) and foreign banks (FBs).


11

JSCBs facing upward pressure on asset quality

LCBs

JSCBs

CCBS

0.55%

0.65%

0.75%

0.85%

0.95%

1.05%

1.15%

1.25%

2011 Q12011 Q32012 Q12012 Q32013 Q12013 Q32014 Q1

Source: China Banking Regulatory Commission 2011 2012 2013 2014

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Commercial banks faced upward pressure in credit asset quality in 1H 2014.

As of 30 June 2014, the total balance of non-performing loans (NPLs) for commercial banks surged to RMB 694.40 bn, up for 11 consecutive quarters since 4Q 2011.

NPL ratio for commercial banks also hit a new high of 1.08% since 1Q 2011.

Large commercial banks record the highest NPL ratio among three major types of banks, followed by joint-stock commercial banks and city commercial banks.

NPL ratio for joint-stock commercial banks used to be lower than that of city commercial banks. But in recent quarters NPL ratio of the former has been rising sharply, and for the first time exceeded that of the latter’s by the end of June 2014, showing a sign of convergence of asset quality across all types of bank.

Graph 12 NPL ratio by types of bank

Graph 11 Commercial banks’ NPL balances and ratios

NPL for JSCBs is higher than that of CCBs for the first time in record

0.80%

0.85%

0.90%

0.95%

1.00%

1.05%

1.10%

-

100

200

300

400

500

600

700

2011Q1

2011Q3

2012Q1

2012Q3

2013Q1

2013Q3

2014Q1

NPL balances NPL ratios

NPL ratio NPL balances (In billions)

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2012 2013 2014

Source: China Banking Regulatory Commission


12

%

Summary: profit growth dropped, risks risen and in preparation for rainy days

Net Profit

Top 10 Listed Banks: RMB 6,41.31 bn, up 10.27%

Growth for the five large commercial banks: 9.32%

Growth for the five largest joint-stock commercial banks: 14.24%

Return on assets (ROA): 1.41%, down by 0.02 ppts Y-o-Y;

Return on equity (ROE): 21.29%, down by 0.90 ppts Y-o-Y

Profitability indicators

Interest income growth from interest earning assets

Investments

29.8%

Inter-bank

20.61%

Loans 12.72%

Net interest margin (NIM) Top 10 Listed Banks: 2.59%, up by 0.04 ppts Y-o-Y;

Most large commercial banks expanded in NIM, due to lower costs on liabilities;

3 out of largest joint-stock commercial banks expanded, 2 narrowed in NIM

Top 10 Listed Banks fee and commission income: RMB 327.40 bn, up 14.72%

Intermediary Business

Top 10 Listed Banks business & administrative expense: RMB 391.40 bn, up 8.11%

Cost to income ratio: 25.46%, down 1.40 ppts Y-o-Y

Cost control


13

Summary: profit growth dropped, risks risen but in preparation for rainy days (cont’d)

Top 10 Listed Banks total assets: RMB 95.26 trillion, up 9.59%;

Total liabilities: RMB 89.19 bn, up 9.80%;

Growth in both assets and liabilities continued to slow down

Total assets and liabilities

Write-offs Write-offs and disposals in 1H 2014: RMB 74.45 bn, as much as 80% of the amount in 2013

NPL balances of the Top 10 Listed Banks: RMB 5,19.76 bn, up by 70.60 bn

2010 2011 2012 2013 2014 1H

1.16% 1.15% 1.06%

0.99% 0.93%

1.21%

1.29%

0.99% 1.06%

1.63%

NPL ratio

Overdue loan ratio Asset quality

Manufacturing RMB 144.8 bn

Wholesale and retail RMB 92.8 bn

Industry with largest NPLs (in RMB)

Pear River Delta: RMB 56.49 bn

Yangtze Delta: RMB 109.45 bn Middle: RMB 50.80 bn

Bohai Rim: RMB 52.64 bn

West: RMB 44.74 bn

Northeast: RMB 17.04 bn

Head offices and overseas: 16.67 bn

By the end of August 2014, the Top 10 Listed Banks have taken proactive measures to address capital adequacy, with most of which planning to issue preference shares to replenish their tier-one capital.

By geographical regions (in RMB)


14

Financial overview of the Top 10 Listed Banks

Income Statement Aggregate of the Top 10 Listed Banks (In billion) Year-on-year change

Net interest income 1,116.83 +12.13%

Non-interest income 420.62 +19.49%

Net fee and commission income 327.38 +14.72%

Other non-interest income 93.24 +39.94%

Operating income 1,537.45 +14.05%

Operating & administrative expenses 391.40 +8.11%

Net Profit 641.31 +10.27%

Balance Sheet Aggregate of the Top 10 Listed Banks (In billion) Change from previous year

Total assets 95,257.30 +9.59%

Loans and advances to customers 49,102.80 +8.04%

Including: NPL balances 519.80 +15.71%

Total liabilities 89,187.10 +9.80%

Customer deposits 70,959.10 +9.04%

Profitability Indicators Overall for the Top 10 Listed Banks Year-on-year change (ppts)

Return on total assets (ROA) 1.41% -0.02

Return on equity (ROE) 21.29% -0.90

Net interest margin (NIM) 2.59% +0.04

Cost-to-income ratio 25.46% -1.40

Asset Quality Indicators Overall for the Top 10 Listed Banks Year-on-year change (ppts)

NPL ratio 1.06% +0.07

Overdue loan ratio 1.63% +0.34

Provision coverage ratio 255% -20.00

Liquidity Indicators Overall for the Top 10 Listed Banks Year-on-year change (ppts)

Loan-to-deposit ratio 69.20% -0.64

Capital Adequacy Indicators Overall for the Top 10 Listed Banks Year-on-year change (ppts)

Tier 1 capital adequacy ratio 9.58% -0.09

Capital adequacy ratio 12.50% -0.02

Table 1 Financial overview of the Top 10 Listed Banks

Presenter

Presentation Notes

补充说明: 自2013 年1 月1 日起, 我国银行业正式实施《商业银行资本管理办法（试行）》。根据新办法, 商业银行（不含外国银行分行, 下同）2013 年末加权平均一级资本充足率为9.95%, 较年初上升0.14 个百分点; 加权平均资本充足率为12.19%, 较年初下降0.29个百分点。


15

Analysis of Operating Performance

• Profitability: net profit growth slowed, ROA & ROE fell

• Income mix: interest income fell in proportion, net fee and commission income rose for 5 LJSCBs

• Interest income mix: income from loans fell, from investments & inter-bank activities rose

• Net interest margin (NIM): expansion for most LCBs

• Lower growth in net fee and commission income

• Stronger cost control for most banks


16

Growth of net profit continued to slow

The Top 10 Listed Banks generated a total net profit of RMB641.31 bn in 1H 2014, a year on year growth of 10.27%. Growth continued to slow down compared to previous years.

The five large commercial banks (LCBs) recorded single digit profit growth (9.32%) for the first time. Profit growth for the five largest joint-stock commercial banks (LJSCBs) also recorded a relatively low growth of 14.24%.

Seven out of the Top 10 Listed Banks experienced a slowdown in net profit growth, with exception for CMB, SPDB and CITIC which achieved higher year on year growth as a result of expansion in the volume of interest-earning assets as well as rapid growth in net fee and commission income.

Graph 13 Net profit and growth for Top 10 Listed Banks

Table 2 Top 10 Listed Banks’ profit growth in 1H 2014

327,222

433,880

513,219 581,604

641,314

0%

10%

20%

30%

40%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2010 1H 2011 1H 2012 1H 2013 1H 2014 1H

Net profit Year-on-Year growth

Net profit (In millions) Y-O-Y growth

Banks Net profit growth

CIB 17.93%

SPDB 17.25%

CMB 16.19%

ABC 12.65%

CMBC 11.05%

BOC 10.97%

CCB 9.17%

CITIC 8.63%

ICBC 7.15%

BOCOM 5.66%

Presenter

Presentation Notes

中信银行本年的净利润大幅度增长主要来自于规模因素（14.0%）和拨备贡献（8.7%）; 浦发和兴业的净利润增长主要来自于生息资产规模稳步扩大、中间业务收入同比增加、成本费用有效控制。所以在文字描述中, 突出了这三家银行净利润本期增长较快的共同因素, 没有提及拨备贡献。


17

Both ROA & ROE fell

The return on average assets (ROA) for the Top 10 Listed Banks fell by 0.02 percentage points year on year in 1H 2014 to 1.41%.

The weighted average return on equity (ROE) for the Top 10 Listed Banks fell by 0.90 percentage points year on year in 1H 2014 to 21.29%.

Graph 14 Comparison of ROA for Top 10 Listed Banks

Graph 15 Comparison of ROE for Top 10 Listed Banks

ICBC

CCB

ABC BOC BOCOM

CMB

SPDB

CIB CITIC

CMBC

1.00%

1.10%

1.20%

1.30%

1.40%

1.50%

1.60%

1.70%

20141H 20131H 2014 average

Note: The ratios were annualised.

ICBC CCB

ABC

BOC

BOCOM

CMB

SPDB

CIB

CITIC

CMBC

16%

18%

20%

22%

24%

26%

28%

20141H 20131H 2014 average

Note: The ratios were annualised.


18

Income mix: marked change for 5 LJSCBs

Top 10 Listed Banks recorded an aggregate operating income of RMB 1,537.45 bn in 1H 2014, up 14.05% year on year. The growth for the five largest joint-stock commercial banks (21.21%) was much higher than that for the five large commercial banks (12.24%).

From an income structure perspective, net interest income still accounted for the largest portion, followed by net fee and commission income. When it comes to growth, the latter (14.72%) was higher than the former (12.13%).

Further analysis shows that while the proportion of net interest income for the five large commercial banks was broadly the same in 1H 2014, net fee and commission income fell slightly in proportion.

For the five largest joint-stock commercial banks, the picture was the opposite, i.e. the proportion of net interest income dropped significantly, net fee and commission income rose accordingly.

Graph 16 Operating income mix for 5 LCBs

Graph 17 Operating income mix for 5 LJSCBs

Note: Other non-interest income includes income from changes in fair value, foreign exchange and other businesses.

73.04%

21.37% 1.39% 4.20%

73.06%

20.63%

0.14% 6.17%

2014 1H

2013 1H

Net interest income

Net fee and commission income

Investment income

Other non-interest income

77.22%

20.39% 2.16% 0.23%

71.10%

23.73%

2.61% 2.55%

2014 1H

2013 1H

Investment income

Net fee and commission income

Other non-interest income

Net interest income

Note: Other non-interest income includes income from changes in fair value, foreign exchange and other businesses.


19

Faster growth in interest income

Aggregate interest income for Top 10 Listed Banks was RMB 2.06 trillion in 2014 1H, an increase of 16.02% year on year, which is significantly higher than it was in 1H 2013 (6.57%).

CMBC was the only bank among Top 10 Listed banks that saw slower interest income growth.

All interest-earning businesses of Top 10 Listed Banks recorded higher growth in 1H 2014 than in 1H 2013, with investments growing fastest (up by 15.20 percentage points year on year).

Graph 18 Comparison of interest income growth

Graph 19 Comparison of interest income growth by businesses

ICBC CCB ABC

BOC BOCOM

CMB

SPDB CIB

CITIC

CMBC

-10%

0%

10%

20%

30%

40%

2014 1H 2013 1H

29.80%

20.61%

12.72% 9.83%

14.60% 11.64%

4.68%

1.18% 0%

10%

20%

30%

Investments Deposit andplacementswith banks

Customer loans Deposit withcentral banks

2014 1H 2013 1H

Presenter

Presentation Notes

补充说明: 图19 2013年存拆放同业利息收入增速下降主要是股份制商业银行增长放缓引起的。 2012年, 五家大型商业银行的增幅为42.62%, 五大股份制商业银行增幅为45.47%, 增幅相若; 2013年五家大型商业银行存拆放同业款项利息收入增长19.47%, 占比为48%; 而五大股份制商业银行增长11.27%, 占比为52%。


20

Interest income mix: income from loans fell, from investments & inter-bank activities rose

Interest income from loans was the largest portion of interest income in 1H 2014 for Top 10 Listed Banks, but the proportion was slightly lower than in 1H 2013 due to relatively slower growth in interest income from loans compared to other interest-generating businesses.

As a result of faster growth, interest income from investments rose in proportion by 1.88 percentage points.

A cross sectional comparison reveals a dramatic difference between the five large commercial banks and the five largest joint-stock commercial banks in interest income mix.

While the proportion of interest income from loans for the five large commercial banks was much higher than that of the five largest joint- stock commercial banks, the proportion of interest income from investments and inter-bank activities combined was higher for the latter, exceeding 30%. This trend continued in 1H 2014.

Graph 20 Comparison of interest income mix

Graph 21 Comparison of interest income mix, 5 LCBs Vs. 5LJSCBs

69.33%

15.80%

9.54% 5.32%

67.36%

17.68%

9.92% 5.04%

Investments

Deposit with central bank

Deposit and placements with banks

Customer loans

2014 1H

2013 1H

70.82% 71.75% 56.97% 61.47%

17.02% 16.51%

19.66% 13.48%

6.58% 5.98% 19.94% 21.14%

5.58% 5.76% 3.42% 3.91%

2014 1H 2013 1H 2014 1H 2013 1H

5 LCBs 5 LJSCBs

Deposit and placements with banks

Deposit with central banks

Investments

Customer loans

Presenter

Presentation Notes

补充说明: 十大上市银行MD&A中有4家提及债券市场利率走高; 其他银行均扩大投资规模工行: 本行把握市场收益率逐步上升时机, 加大对收益率相对较高债券品种投资力度建行: 优化投资组合结构, 抓住市场利率高点时机, 加大高品质、高收益债券投资力度, 投资占比上升1.71个百分点至22.23% 农行: 平均收益率上升主要是由于: （1）债券市场利率走高, 本行把握有利投资机会, 提升了非重组类债券投资整体收益水平; 兴业: 2013 年债券收益率逐步走高, 公司把握市场行情适当增加持有至到期类和可供出售类债券投资规模, 期末债券投资规模较期初较快增长


21

Interest expense mix: higher inter-bank interest expenses for 5 LJSCBs

Interest expense for Top 10 Listed Banks reached RMB 941.70 bn, an increase of 21.00% year on year, which was significantly higher than 1H 2013 (3.44%).

Interest expense from deposits increased by 13.52% year on year. But interest expense from other borrowing funds saw the fastest increase (66.38%), mainly due to debt issuance.

The proportion of interest expense from deposits fell, as opposed to 1H 2013.

Interest expense mix remained stable for the five large commercial banks, with interest expense for customer deposits, inter-bank borrowings and due to central bank fell slightly. Interest expense from other borrowing funds rose proportionately.

It changed markedly for the five largest joint-stock commercial banks. Interest expense on deposits dropped by 6.53 percentage points to 51.50%, interest expense on inter-bank borrowing and liabilities from central bank rose accordingly.

Graph 22 Comparison of interest expense mix

Graph 23 Comparison of interest expense mix, 5 LCBs Vs. 5 LJSCBs

78.07% 80.88%

51.50% 58.03%

15.40% 16.26% 43.81% 34.06%

6.53% 2.85% 4.69% 7.91%

2014 1H 2013 1H 2014 1H 2013 1H

5 LCBs 5 LJSCBs

74.81%

20.99% 4.20%

70.19%

23.83%

5.98%

Deposits

Inter-bank liabilities and due to Central Bank

Other borrowing funds

2014 1H

2013 1H

Note: Other borrowing funds mainly come from debts issued.

Note: Other borrowing funds mainly come from debts issued.

Deposits

Inter-bank liabilities and due to Central Bank

Other borrowing funds


22

Net interest margin (NIM): Expansion for most LCBs

NIM for Top 10 Listed Banks rose by 0.04 percentage points to 2.59% in 1H 2014.

Four out of five large commercial banks saw their NIM expand relative to 1H 2013.

For the five largest joint-stock commercial banks the picture was mixed, with three narrowing and two expanding compared to 1H 2013.

Eight out of the Top 10 Listed Banks disclosed breakdowns of the changes in interest income and expense, which suggested that the increase in interest income for most banks was led by increases in interest rates and interest-earning assets. The same applies for interest expenses.

CMBC was an exceptional case with interest expenses partially off-set by a decrease in interest-bearing liabilities.

Graph 24 Change in NIM for Top 10 Listed Banks

ICBC

CCB

ABC

BOC

BOCOM

CMB

SPDB

CIB

CITIC

CMBC

2.0%

2.1%

2.2%

2.3%

2.4%

2.5%

2.6%

2.7%

2.8%

2.9%

3.0%

2014 1H 2013 1H

Note: In the graph, the left column represents the impact of the volume of assets and variation of interest rates on interest income; the right column represents the impact of the volume of liabilities and variation of interest rates on interest expenses. SPDB and CIB did not disclose the relevant information.

Graph 25 Analysis of change in interest income and expense

9.37% 10.71%

8.87%

12.05% 8.89%

27.81% 29.60%

1.63%

1.40% 3.05% 5.08% 5.69% 5.76% 4.41% 6.31% 4.16%

7.40%

11.83%

8.22%

13.10%

11.05%

43.51%

29.65%

-4.67%

4.34% 3.68% 2.03% 9.05% 15.78% 15.62% 33.54%

9.06%

Volume Interest rate

Interest income

Interest expense

Presenter

Presentation Notes

补充说明: 中行净利差与净息差均上升, 主要是由于付息付息率下降0.23个百分点, 而生息资产收益率下降0.13个百分点; 在利率因素均下降的同时, 计息负债结构变化使得平均付息率进一步下降, 其中存款占比提高0.7个百分点, 同业负债占比下降0.9个百分点。摘自中行MD&A: NIM上升的原因第一, 加强主动负债管理, 提高客户存款稳定性, 有效控制负债成本。2013 年末, 集团客户存款余额较上年增长10.07%, 在负债总额中占比较上年末提高0.58 个百分点; 集团客户存款（剔除结构性存款）日均余额较上年增长11.78%, 高于集团客户存款余额的增长; 集团付息负债平均利率比上年下降23 个基点。第二, 以节约资本为导向, 加快客户结构调整。2013 年, 中国内地人民币中型企业贷款和“中银信贷工厂”模式中小企业贷款分别增长18.19%和32.00%, 增速均高于整体公司贷款; 内地新增人民币贷款中个人贷款占比为51.09%, 年末个人贷款在全部贷款中的占比提高1.69 个百分点至30.80%。第三, 持续优化境外业务结构, 提高净息差。面对低利率国际金融市场环境, 本行主动优化境外资产结构, 适度加大贷款投放力度, 压缩低息资产, 提升收益水平。2013 年境外机构净息差比上年上升15 个基点。


23

Yields on interest-earning assets rose rapidly

Average yield on interest-earning assets for Top 10 Listed banks rose by 0.23 percentage points year on year to 4.77% in 1H 2014.

Yield on interest-earning assets rose rapidly for the five largest joint-stock commercial banks due to much higher yields earned from inter-bank assets.

Five large commercial banks experienced a relatively slow rise in yields on interest-earning assets.

Average cost on interest- bearing liabilities for Top 10 Listed banks rose by 0.21 percentage points year on year to 2.36% in 1H 2014.

Unlike ICBC, ABC, BOC and CCB; BOCOM and the five largest joint-stock commercial banks experienced a surge in cost on interest-bearing liabilities as a result of inter-bank liabilities.

Generally speaking, the rise in yield on interest-earning assets was faster than that of cost on interest-bearing liabilities.

Graph 26 Change of yields on interest-earning assets

Graph 27 Change of costs on interest-bearing liabilities

Note: SPDB did not disclose its yield and the figures shown above were calculated by PwC in accordance with available data

ICBC CCB ABC

BOC

BOCOM CMB

CIB

CMBC

SPDB CITIC

4.0%

4.5%

5.0%

5.5%

6.0%

2014 1H 2013 1H

ICBC CCB ABC

BOC

BOCOM

CMB

CIB

CMBC

SPDB

CITIC

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2014 1H 2013 1H

Note: SPDB did not disclose its yield and the figures shown above were calculated by PwC in accordance with available data.


24

Lower growth in net fee and commission income

Top 10 Listed Banks recorded an aggregate net fee and commission (also referred as “intermediary business”) income of RMB 327.4 bn in 1H 2014, representing an year on year increase of 14.72%. Growth fell sharply compared to 2013 (27.72%), with most banks seeing lower year-on-year growth.

The fee and commission income structure for Top 10 Listed Banks remained broadly unchanged, with the top 3 businesses being: 1) consulting and investment banking; 2) bank cards; 3) settlement, clearing and forex trading.

Across businesses, the income proportion of bank cards and guarantees & commitments rose by 2.01 and 2.18 percentage points respectively, whereas e- banking and others fell by 1.20 percentage points.

Graph 28 Comparison of net fee and commission income growth

Graph 29 Comparison of fee and commission income structure

ICBC CCB

ABC

BOC

BOCOM

CMB SPDB

CIB

CITIC

CMBC

0%

10%

20%

30%

40%

50%

60%

70%

80%

2014 1H 2013 1H

Note: No data for e-banking in 1H 2013 as the it wasn’t listed as a separate business segment for most listed banks.

22.70%

19.49%

17.32%

13.45%

12.09%

12.23% 2.72% 22.94%

21.50%

16.41%

12.78%

10.89%

10.57% 4.90%

Guarantees & commitments

Settlement, clearing & forex trading

E-banking and others

WMPs, private banking and custodian

Consultancy and investment banking

Agency service

Bank cards

2014 1H

2013 1H


25

Different structures for intermediary businesses

An in-depth analysis of fee and commission income suggests that all components experienced slower growth in 1H 2014, with the exception of guarantees and commitments.

Wealth management products (WMPs), private banking and custodian businesses recorded negative growth for the first time.

The difference in fee and commission income structure between the five large commercial banks and five largest joint-stock commercial banks was significant.

Top 3 businesses for the five large commercial banks were: 1)consultancy and investment banking; 2) bank cards; 3)settlement and clearing.

Top 3 businesses for the five largest joint-stock commercial banks were: 1) WMPs, private banking and custodian; 2) bank cards; 3)E-banking and others.

Graph 30 Comparison of growth in intermediary businesses

Graph 31 Comparison of intermediate income, 5 LCBs Vs. 5 LJSCBs

5.54% 2.90%

6.57% 23.25% 8.50%

18.48%

12.67%

13.14%

19.43%

6.85% 21.22%

22.41%

26.08% 12.97%

5 LCBs 5 LJSCBs

107.54%

27.07% 16.32% 9.42%

9.07% 3.80% -0.47%

22.08% 30.91% 30.61%

36.73%

12.40%

35.20%

-10%

10%

30%

50%

70%

90%

110%

2014 1H 2013 1H

Presenter

Presentation Notes

　


26

Stronger cost control for most banks

As business continued to expand, Top 10 Listed Banks recorded an aggregate operating & administrative expense of RMB 391.40 bn in 1H 2014, 8.11% more than it was in 1H 2013.

Four out of Top 10 Listed Banks saw an year on year cost increase in double digits.

Overall cost to income ratio for Top 10 Listed Banks declined by 1.40 percentage points to 25.46% in 1H 2014, with most banks seeing a lower reading.

That said, BOCOM and CMBC recorded a higher cost to income ratio in 1H 2014 than in 1H 2013. This was because growth in operating income was slower than that of operating & administrative expenses in 1H 2014.

Graph 32 Change in business & administrative expense

Graph 33 Change in cost-to-income ratio for Top 10 Listed Banks

8.22% 9.38%

5.42% 5.25%

12.98% 12.12%

4.59%

13.47%

3.19%

16.45%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

ICBC CCB

ABC

BOC

BOCOM

CMB

SPDB

CIB

CITIC CMBC

20%

22%

24%

26%

28%

30%

32%

34%

2014 1H 2013 1H

Presenter

Presentation Notes

补充说明: 图36 图中的数字为同比增幅图37 中信银行的成本收入比图上看起来是持平的, 但实际是2012年31.51%, 2013年是31.41%, 还是呈下降趋势的。所以在wording里面说的是除了建行和兴业, 其他八家成本收入比都下降。建行的成本收入比由2012年的29.21%升至2013年的29.24%; 兴业的成本收入比由2012年的26.11%升至2013年的26.31%


27

Analysis of Financial Position

• Total asset growth slowed, inter-bank assets rose in proportion

• Asset quality: “double increase” for NPL balances & ratio

• Investment structure: marked change for 5 LJSCBs

• Investments：slower growth in TBR products & AMS

• Slower growth in total liabilities and deposits

• Loan to deposit ratio: notable decline for 5 LJSCBs


28

Total asset growth slowed, inter-bank assets rose in proportion

Total assets for Top 10 Listed Banks amounted to RMB 95.26 trillion as of 30 June 2014, up 9.59% from the end of 2013. Growth continued to slow.

The five largest joint-stock commercial banks experienced an aggregate growth of 13.99%, higher than that of the five large commercial banks (8.42%).

Graph 34 Total asset growth for Top 10 Listed Banks

Graph 35 Change of asset structure for Top 10 Listed Banks

17.38% 15.82%

14.44%

10.46% 9.59%

0%

5%

10%

15%

20%

0102030405060708090

100

Total Assets Year-on-Year growth

Total assets (In trillions) Year-on-Year growth

50.87%

20.24%

15.80%

9.93% 3.16%

50.16%

20.09%

15.66%

10.85%

3.24%

2014.06.30.

2013.12.31.

Cash and balances with central bank

Others

Investment

Deposits, placements with banks and other financial institutions, and financial assets held under resale agreements

Loans and advances to customers

Note: Others mainly includes precious metals, Derivative financial assets, fixed assets, intangible assets , deferred tax assets

As of 30 June 2014, asset structure of Top 10 Listed Banks remained stable.

The proportion of deposits, placements with banks and other financial institutions, and financial assets held under resale agreements rose. The proportion of loans and advances to customers and investment fell slightly.


29

Loans growth slower but structure remain stable

Loan portfolio of Top 10 Listed Banks in 1H 2014 remained stable, with corporate loans increasing by 8.67% compared to 2013: higher than growth in personal loans (7.63%). This led to a slight rise in corporate loans in proportion and fall in personal loans.

Aggregate loan balances for Top 10 Listed Banks amounted to RMB 49.10 trillion as of 30 June 2014, an increase of 8.04% compared to 31 December 2013. This is broadly the same as it was in 1H 2013 (8.09%), but slower than previous years. The slowdown trend in loan growth is evident over the years.

Graph 36 Loan growth for Top 10 Listed Banks

Graph 37 Loan portfolio by businesses for Top 10 Listed Banks

69.99%

28.26% 1.75%

70.40%

28.15%

1.45%

2013.12.31.

2014.06.30.

Corporate loans

Discounted bills

Personal loans

18.57%

13.99% 13.76% 12.81%

8.04%

0%

5%

10%

15%

20%

0

10

20

30

40

50

Loan balances Year-on-Year growth

Loan balances (in trillions)

Year-on-Year growth


30

Personal business loans, residential mortgages, and credit cards accounted for the largest proportion of personal loans for the five largest joint-stock commercial banks.

As of 30 June 2014, the proportion of residential mortgages and personal business loans fell whereas credit cards rose.

Residential mortgages and credit cards accounted for the largest proportion of personal loans for the five large commercial banks.

As of 30 June 2014, the proportion of residential mortgages rose while personal consumer loans fell.

Personal loans: different changes for LCBs & JSCBs

67.51%

11.33%

8.16%

6.64% 6.36%

68.90%

11.41%

8.01%

6.21% 5.47%

2013.12.31.

Credit card

Residential mortgages

Personal business loans

Personal consumer loans

Others

2014.06.30.

Graph 38 Change of personal loan portfolio for 5 LCBs

Graph 39 Change of personal loan portfolio for 5 LJSCBs

Note: others include personal consumer loans, student loans, etc.

35.57%

39.42%

17.28%

7.72%

33.87%

37.99%

18.38%

9.77% 2013.12.31.

2014.06.30. Others

Personal business loans

Residential mortgages

Credit card


31

Manufacturing and Yangtze River Delta region recorded highest proportion of corporate loans As of 30 June 2014, the five largest industries for corporate loans for the Top 10 Listed Banks were: 1) manufacturing; 2) transportation, storage and postal services; 3) wholesale and retail; 4) real estate; 5) leasing and business services.

Loans from these five industries accounted for 69.99% of the corporate loan portfolio, similar to 2013. Loans balances of manufacturing amounted to RMB 8.59 trillion, which is larger than the sum of the second and third placed industries.

Graph 40 Corporate loans by industries for Top 10 Listed Banks

Graph 41 Loans by geographical regions for Top 10 Listed Banks Geographically, loan balances of Top 10 Listed Banks was concentrated in the Yangtze River Delta region, which accounted for over a quarter of total loans, followed by that of the Bohai Rim region. Western China’s loan balances were also relatively large as a result of rapid growth.

The Pearl River Delta region and “Overseas and others” experienced a slow growth rate compared to 2013.

-10%

-5%

0%

5%

10%

15%

20%

25%

(2)

-

2

4

6

8

10

12

Gross loan balance Y-O-Y growth 1H 2014Y-O-Y growth 1H 2013

Loan balance (In trillions) Y-O-Y growth

0123456789

As of 30 June 2014, (In trillions)

Presenter

Presentation Notes

Response to Margarita’s comments ”同比增速meaningful？” 还是有意义的, 结合page 39不良贷款按行业和地区的分析。通常不良率高的行业或者地区, 银行对其授信总额会实施一定的限制, 因此其贷款余额的增长会放缓。但这也不是绝对的, 例如某个子行业的授信增长、或者某个地区的特殊原因。


32

Deterioration in both NPL ratio and balances

The Top 10 Listed Banks experienced deterioration in both NPL ratio and balances in 1H 2014. The aggregate amount of NPL balances as of 30 June 2014 was RMB 519.76 bn, an increase of 70.60 bn or 15.71% from 2013, almost as much as the full year increase in 2013 (73.23 bn).

NPL increase for the five largest joint-stock commercial banks was much higher than that of the five large commercial banks.

NPL ratio of the Top 10 Listed Banks rose by 0.07 percentage points to 1.06% as of 30 June 2014.

The NPL ratios of all banks went up, with the five largest joint-stock commercial banks rose much higher than that of the five large commercial banks.

All banks are facing increasing stress on asset quality.

Graph 42 NPL balances growth for Top 10 Listed Banks

Graph 43 Change of NPL ratios for Top 10 Listed Banks

ICBC

CCB

ABC

BOC

BOCOM

CMB SPDB CIB

CITIC CMBC

0.70%

0.80%

0.90%

1.00%

1.10%

1.20%

1.30%

2014.06.30. 2013.12.31.

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

200

400

600

800

1,000

1,200

2014.06.30 2013.12.31. Y-O-Y growth

NPL balance (In billions) Y-O-Y growth

Presenter

Presentation Notes

Response to Margarita’s comments （1）图48 中, 农行不良贷款余额从2012年末的858亿升到2013年末的878亿元, 同比增速2.25%。（2）“Really? Very high!" and "I doubted this figure" 经核实, 数字无误。（3）图49中, "How much, pls double check" 农行的不良率2012年末是1.33%, 2013年末是1.22% （4）图51左边的文字我们根据Margarita的意见做了修改, 请参见:


33

NPL on the rise in most regions

A breakdown of NPL by industry for corporate customers of the Top 10 Listed Banks suggests that the manufacturing sector and the wholesale and retail trade sector recorded the highest proportion of NPL balance in 30 June 2014, increasing year on year by 13.39% and 19.43%, respectively from 31 December 2013.

Note: Only 7 of the Top 10 Listed Banks disclosed their NPL breakdown by industries. As a result NPL balance presented in the graph above was an aggregate of 7 banks.

Note: Only 5 of the Top 10 Listed Banks disclosed their NPL breakdown by geographical regions. As a result, NPL balance presented above was an aggregate of 5 banks.

Geographically, the Yangtze River Delta Region was still the most concentrated area for NPLs. The NPL balance reached RMB 109.45 bn, increased by 7.71% in 1H 2014 compared to year end 2013.

The balance of Yangtze River Delta Region was even higher than the subtotal of Pearl River Delta Region and Bohai Rim Region which ranking second and third, indicating that asset quality in the region continued to deteriorate.

Although the NPL of the Pearl River Delta Region was less than 50% of NPL of Yangtze River Delta Region, the rapid growth of 30.69% in the past six months should raise vigilance.

Graph 44 NPL balances by industries, as of 30 June 2014

Graph 45 NPL balances by geographical regions, as of 30 June 2014

0%

5%

10%

15%

20%

25%

30%

35%

0

20

40

60

80

100

120

NPL balances Growth rate

Growth rate NPL balances (In billions)

-20%

-10%

0%

10%

20%

30%

-60

-30

0

30

60

90

120

150

Manufacturing Transportation,Storage and Postal

Services

Production and Supplyof Electric Power,Gas and Water

NPL balance Y-O-Y growth

NPL balances (In billions) Y-O-Y growth

Others Real Estate Wholesale & retail

Presenter

Presentation Notes

总行的不良主要: ICBC增长45%, 建行增长35%


34

Write-offs and disposals of NPLs have been on the rise since 2012. The total amount of write-offs and transfer in 1H2014 came close to 80% of the total amount of whole year of 2013.

Given the acceleration of NPLs, write-offs and disposals were major means of proactive NPL management for banks. The Administrative Measures for Write-offs of Bad Loans of Financial Enterprises (2013 revised) issued by MoF in early 2014 eased the criteria for write-offs.

Loan impairment provisions have been on the rise since 2010.

As the increase in NPLs and the deterioration of credit asset quality, there has been a greater proportion of allowance charged on individual assessment basis.

Graph 46 NPLs write-offs and disposals for Top 10 Listed Banks

Graph 47 Loan impairment charges for Top 10 Listed Banks

29,946

16,745

33,056

91,546

74,446

0

20,000

40,000

60,000

80,000

100,000

2010 2011 2012 2013 1H 2014

In millions

7,310 (2,771)

35,786

91,496 73,826

138,574

192,548

169,355 142,563

100,780

(50,000)

-

50,000

100,000

150,000

200,000

250,000

2010 2011 2012 2013 1H 2014

Individually Collectively

In millions

Note: The above figures didn’t include data from BOC as provisions based on individual and collective assessments are not publicly available.

Higher write-offs, more individual impairment provisions

Presenter

Presentation Notes

Response to Margarita’s comments （1）图48 中，农行不良贷款余额从2012年末的858亿升到2013年末的878亿元，同比增速2.25%。（2）“Really? Very high!" and "I doubted this figure" 经核实，数字无误。（3）图49中，"How much, pls double check" 农行的不良率2012年末是1.33%，2013年末是1.22% （4）图51左边的文字我们根据Margarita的意见做了修改，请参见：


35

Column 1 - Credit asset quality analysis

According to CBRC’s statistics, as of 30 June 2014, total loan balances for commercial banks in China amounted to RMB 64.14 trillion, an growth of 8.79%. At the same time, there were significant increases in overdue loans and non-performing loans (NPLs).

1.15% 1.06% 1.21% 1.29% 1.63%

1.16% 0.99% 0.93% 0.99% 1.06%

3.23% 2.98%

2.69%

2.25% 2.33%

-

10

20

30

40

50

60

0%

1%

1%

2%

2%

3%

3%

4%

2010 2011 2012 2013 2014June

Top 10 listed banks total loans

Top 10 listed banks overdue loans

Top 10 listed banks non-performing loans

Top 10 listed banks special mention loans

RMB trillion

Data source: Bank’s annual reports and interim reports

Banks’ credit risk management

Statistics on overdue, non-performing and special mention loans for the top 10 listed banks suggested that the overdue loan ratio increased at a much faster rate than the NPL ratio, and the increase of special mention loans was far slower than the overdue ratio and the NPL ratio.

During the economic downturn, timely risk identification is top priority for commercial banks’ credit risk management. In particular, a proper control of moral hazard of frontline credit officers is the bedrock upon which all other work shall be based, given the pressure of performance assessment.

China’s growth potential downward shifting

China GDP growth has been slowing since 2010, with annual growth rate fell from 12% to 7% to 8%. This is a clear sign that China’s growth potential is shifting downward. Nevertheless, loan balances of commercial banks have still been growing at an annual rate of over 10%.

During the economic downturn, commercial banks face increasingly challenging environments and even more sophisticated risks in business. As a result both non-performing loan ratios and balances have been on the rise since 2013.

Real estate industry under stress

According to National Bureau of Statistics, in July 2014, prices for newly-built houses declined in 64 out of the 70 large and medium-sized cities in China, as compared to the fact that only three cities experienced price decline in July 2013. The fear of a collapse of housing prices expanded from regional risk to a wider level of bust.

Of a total loan balance of RMB 47.28 trillion for the Top 10 as of 30 June 2014, corporate real estate loans and personal residential mortgage loans accounted for as much as 24% or RMB 11.93 trillion. The figure suggested a high correlation between banking industry and real estate market, thus an alarming signal for borrowers in real estate industry and commercial banks.


36

It takes time to address over-capacity industries

Over-capacity is a very common issue in manufacturing industry that takes time to address given the large pre-operating investments, long business cycles and relative high difficulties in business transformations. It is believed that the risks associated with over-capacity is likely to be passed on to upstream and downstream sectors along the value chain, which will in turn damage asset quality.

As disclosed by CBRC, the NPL balance and ratio for manufacturing industry have been on the rise since 2011, with NPL balances from the industry accounted for 40.83% of total NPLs, slightly up from 38.19% in 2011. For the Top 10 Listed banks, corporate loans from manufacturing sectors amounted to RMB 8.59 trillion as of 30 June 2014, an increase of RMB 0.28 trillion from 31 December 2013, as much as 18.17% of total corporate and personal loans balances.

The development of local government debts and the risks

According to National Audit Office, total debts that local governments were obligated to repay amounted to RMB 10.9 trillion, as of 30 June 2013, an increase 1.3 trillion from the end of 2012. In addition, debts under local governments’ implicit and explicit guarantee has also increased from previous year. From an economic growth-supportive mentality, the finance needs for local governments might prevail in foreseeable future.

Turning to funding sources, bank loans and Build-Transfer (BT) projects of local governments amounted to RMB 6.7 trillion, representing approximately 12% of commercial banks loan balance as of 30 June 2014. As the majority of the local governments’ fund is invested in infrastructure projects that are both long term and low return in nature, the risks associated need special attention. The downturn in real estate industry will have considerable impact on local governments which rely heavily on land sales, and in turn affect their solvency.

Rising credit risks on privately –owned businesses & individual borrowers

The economic downturn has seen a large number of bankruptcies and frauds among privately-owned businesses in middle and eastern coastal regions, especially in manufacturing and wholesale & retail industry in Jiangsu, Zhejiang, Guangdong, Fujian and Shandong provinces. Given the impact of commodity prices fluctuations, funding strains for trading companies, joint & mutual guarantees among enterprises, small and medium-sized enterprises (SMEs) who engaged in irregular businesses may easily and quickly pass the risks to the business community or along supply chain, with the steel trading industry being a recent victims. In trade finance, there have been cases now and then in which fraudulent contracts and warehouse receipts are used to obtain loans.

There has been a noticeable rise in NPL ratios for loans to privately-owned business, consumer loans and credit cards, partially due to the weakening solvency of the owner of private businesses or self-employed borrowers. CBRC introduced a new policy in July to allow refinancing for pass loans to small and micro-sized enterprises without downgrading the loans.

Given the economic environment and policy directions, it remains a challenge for commercial banks to balance the need between supporting the real economy and improving credit risk management.


37

216% 193%

306%

268%

251% 204%

217%

346%

249%

238%

0% 100% 200% 300% 400%

CMBC

CITIC

CIB

SPDB

CMB

BOCOM

BOC

ABC

CCB

ICBC

2014.06.30. 2013.12.31.

Regulatory threshold is 150%

Stable LLR ratio and LLR/total loan coverage

The aggregate loan loss reserve (LLR) coverage ratio (also referred as “reserve coverage ratio”) for the Top 10 Listed Banks was 255%, a decrease of 20 percentage points from that of 2013 year end.

LLR coverage ratios for all the banks were higher than the regulatory threshold. While the average LLR coverage ratio of the five large commercial banks fell slightly, the five largest joint-stock commercial banks saw larger falls.

As required by CBRC, the regulatory threshold of LLR/total loan coverage for systemically important banks is 2.50% and all such banks were supposed to complied by the end of 2013.

Other banks are expected to meet this requirement by 2016.

Graph 48 LLR coverage ratio for Top 10 Listed Banks

Graph 49 Provision-to-loan ratio for Top 10 Listed Banks

2.01%

2.30%

2.96%

2.49%

2.46%

2.30%

2.71%

4.31%

2.59%

2.51%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00%

CMBC

CITIC

CIB

SPDB

CMB

BOCOM

BOC

ABC

CCB

ICBC

2014.06.30. 2013.12.31.

Regulatory requirement is 2.5%

Note: According to these banks’ annual reports, the ratios are calculations for domestic operations in the case of ICBC and BOC and for group operations for other banks.


38

Investments: notable change for 5 LJSCBs

For the five large commercial banks, debt securities investment were approximately 90% of total investment portfolio. The proportion of other investments were relatively small.

Investments for the five largest joint-stock commercial banks were more diversified. Apart from debt securities, these banks also invested in trust beneficiary right (TBR) products and assets management schemes (AMS).

Within these banks, the proportion of investment were different. In 1H 2014, SPDB and CIB fell in proportion for investment in TBR products and AMS. CMB, CITIC and CMBC on the other hand rose in proportion of investment in those products.

Graph 50 Investments by assets class for 5 LCBs

Graph 51 Investments by asset class for 5 LJSCBs

91.07%

88.83%

91.89%

91.55%

93.01%

91.93%

91.25%

90.81%

94.12%

94.35%

0% 20% 40% 60% 80% 100%

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

BO

CO

MB

OC

ABC

CC

BIC

BC

Others Debt Securities

90.01%

77.06%

55.75%

38.24%

49.21%

52.01%

39.80%

39.85%

71.74%

56.51%

9.84%

22.21%

32.92%

50.63%

49.96%

47.51%

56.37%

53.84%

28.01%

43.27%

0% 20% 40% 60% 80% 100%

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

CM

BCC

ITIC

CIB

SPD

BC

MB

Debt Securities

Trust beneficiary right products and asset management schemes

Others

Note: Others investments of SPDB and CITIC mainly included wealth management products purchased from other banks.

Note: Other investments mainly included debt and equity instruments for ICBC and CCB; trust assets and other debt instruments for ABC; trust beneficiary right products and equity instruments & funds for BOC; trust investment plans for BOCOM.

Presenter

Presentation Notes

由于五家大型商业银行的投资背景资产中, 除债券外, 其他投资类型各不相同且年报中披露的详细程度不同, 所以无法归纳图表中其他项的组成。


39

Investment structure stable by holding purposes

For the distribution of financial assets by holding purposes, the five large commercial bank’s financial assets classification remain stable, while the five largest joint-stock commercial banks’ classification slightly changed according to change of holding purposes.

Except CIB, four out of five largest joint-stock commercial banks saw their proportion of financial assets classified as receivable raised due to increased investment in trust beneficiary right (TBR) products, asset management schemes (AMS) and wealth management products (WMPs).

CIB’s proportion of financial assets classified as available for sale and held to maturity increased due to increased investment in debt securities.

Graph 52 Investment portfolio for 5 LCBs by holding purposes

Graph 53 Investment portfolio for 5 LJSCBs by holding purposes

62.68%

58.96%

50.36%

52.25%

47.32%

47.97%

61.52%

63.24%

60.72%

58.58%

20.60%

20.70%

29.17%

27.44%

24.26%

24.23%

22.27%

22.06%

23.15%

25.21%

11.19%

13.33%

17.34%

16.80%

18.39%

17.49%

5.56%

5.47%

7.51%

7.57%

0% 20% 40% 60% 80% 100%

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

BO

CO

MB

OC

ABC

CC

BIC

BC

43.69%

36.35%

24.05%

17.10%

15.64%

18.78%

17.19%

13.98%

27.58%

23.48%

36.60%

33.14%

27.63%

20.03%

35.05%

36.49%

18.88%

17.81%

38.27%

26.43%

12.41%

23.94%

46.61%

60.71%

43.69%

41.71%

60.57%

64.57%

31.08%

46.30%

0% 20% 40% 60% 80% 100%

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

CM

BCC

ITIC

CIB

SPD

BC

MB

Held to maturity Available for sale

Investments classified as receivables

Held to maturity Available for Sale

Investment classified as receivables

Note: Others refer to financial assets measured at fair value through profit or loss.

Note: Others refer to financial assets measured at fair value through profit or loss.

Others

Others


40

Growth slowed for TBR products and AMS

As of 30 June, 2014, growth rate of investments in trust beneficiary right (TBR) products and asset management schemes (AMS) slowed down for the five largest joint-stock commercial banks. But in general growth in these products were still robust.

Table 3 Growth of TBR products and AMS balances for 5 LJSCBs

Graph 54 Classification of TBR and AMS for 5 LJSCBs

62.31%

26.67%

55.00% 8.47%

100.00%

37.69%

99.48%

73.33%

36.52%

0% 20% 40% 60% 80% 100%

CITIC

CMBC

SPDB

CMB

CIB

Finacial assets held under resale agreementsAvailable for sale financial assetsInvestment classifed as receivables

Banks Balances (in millions) Growth % in total assets

CIB 870,772 -6.35% 22.05%

CMB 597,407 62.50% 11.87%

SPDB 532,131 8.29% 13.54%

CMBC 246,075 18.85% 6.89%

CITIC 119,595 23.30% 2.77%

In terms of classification by holding purposes, CITIC put all of its investments in TBR products and AMS as receivables. CMB and SPDB classified most of those investments as receivables. CMBC and CIB classified most of those investments as financial assets held under resale agreements.


41

Impairment expected to increase for investments classified as receivables

Table 4 Impairment loss on receivable investments for 5 LCBs

Table 5 Impairment loss on receivable investments for 5 LJSCBs

ICBC CCB ABC BOC BOCOM

Corporate bonds No disclosure

No disclosure 31,758 10 -

Trust products/ AMS/ WMPs

No disclosure

No disclosure 8,765 157,040 122,229

Impairments - (868) (713) (65) (758)

CMB CITIC SPDB CIB CMBC

Corporate bonds - 1,000 11,365 15,758 3,546 Trust products/

AMS/WMPs 438,055 562,797 580,159 321,040 92,744

Impairments (68) (100) (3,213) (1,534) -

SPDB, CIB and CCB are the top three among the Top 10 Listed Banks in terms of the amount of allowance for impairment loss of investments classified as receivables, which target at non-standardrized assets, such as corporate bonds, trust products, asset management schemes (AMS) and wealth management products (WMPs).

In early September 2014, PBOC issued a consultation document regarding improving Loan Loss Provisioning of Commercial Banks. As a result, future impairment allowance is expected to increase for investments in non-standardrized assets classified as receivable investments.

Note: Other investments for ICBC mainly included treasury bonds, financial institution bonds, corporate bonds and debt instruments, totalling RMB 107.96 bn. Other investments for CCB include other corporate bonds of RMB 38.99 bn.

Presenter

Presentation Notes

本年五大股份制银行的信托受益权和资管计划类投资增长迅速, 此类业务近年来发展较快, 此页根据年报做数据分析和类别描述, 如不需要可删除此页。


42

Robust growth in inter-bank business

As of 30 June 2014, the balance of placement and financial assets held under resale agreements amounted to RMB 7.75 trillion, an increase of 25.22% compared to the end of 2013.

The proportion of placement and financial asset held under resale agreement for the five largest joint-stock commercial banks were relatively different compared to the five large commercial banks. The five large commercial bank’s proportion of placement and financial asset held under resale agreement distributed fairly similar while the five largest joint-stock commercial banks’ were relatively large.

The growth rate of financial assets held under resale agreements was higher than that for placement for Top 10 Listed Banks. The proportion of the placement and financial assets held under resale agreements remain stable compared to it was in 2013.

Graph 55 Breakdown of inter-bank business for 5 LCBs

42.02% 50.00%

41.58% 36.19%

29.52% 42.15%

35.08% 42.29%

55.36% 43.27%

57.98% 50.00%

58.42% 63.81%

70.48% 57.85%

64.92% 57.71%

44.64% 56.73%

0% 20% 40% 60% 80% 100%

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

BO

CO

MB

OC

ABC

CC

BIC

BC

Placement Finacial assets held under resale agreement

Graph 56 Breakdown of inter-bank business for 5 LJSCBs

15.92%

22.48%

29.90%

22.28%

31.70%

21.52%

84.08% 77.52%

70.10% 77.72%

91.36% 89.56%

91.69% 92.30%

68.30% 78.48%

0% 20% 40% 60% 80% 100%

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

CM

BCC

ITIC

CIB

SPD

BC

MB

Placement Finacial assets held under resale agreement

8.31%

7.70%


43

Robust growth in inter-bank business (Cont’d.)

Financial assets held under resale agreements invested by the five large commercial banks are mainly collateralized by debt securities and bills.

Since the issuance of Notice on Standardizing Inter-bank Businesses of Financial Institutions (YinFa No. 127 ), low liquidity financial assets held under resale agreement decreased, hence decreased the proportion of collaterals in trust beneficiary right (TBR) products and asset management schemes (AMS) for the five largest joint-stock commercial banks.

Graph 57 Financial assets held under resale agreements for 5 LCBs

67.15% 51.92%

93.80% 89.78%

54.60% 47.61%

92.37% 36.14%

68.80% 74.30%

32.40%

47.58%

45.17%

51.75%

63.86%

18.64%

15.38%

0% 20% 40% 60% 80% 100%

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

BO

CO

MB

OC

ABC

CC

BIC

BC

Debt securities Bills

Other

Graph 58 Financial assets held under resale agreements for 5 LJSCBs

16.67% 30.37%

37.43% 33.17%

67.23% 72.55%

78.48% 68.21%

38.28% 49.68%

86.66% 80.11%

13.70% 42.76%

31.04% 27.32%

60.15% 48.14%

48.76% 23.83%

0% 20% 40% 60% 80% 100%

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

CM

BCC

ITIC

CIB

SPD

BC

MB

Debt securities

Bills

TBR products and AMS

Other

Note: ICBC’s other assets under resale agreement mainly included securities lending guarantees.


44

Column 2 — Inter-bank business

Inter-bank businesses of financial institutions have witnessed active innovation and relatively rapid growth in recent years, playing a significant role in facilitating liquidity management, optimizing allocation of financial resources, and serving the real economy. Nevertheless, there are still some problems, such as lack of standardisation in business operations, inadequate information disclosure, and avoidance of financial supervision and macro-controls.

On the asset side, the total balance of due from other banks and financial institutions, placement and financial assets held under resale agreements for the Top 10 Listed Banks amounted to RMB 10.34 trillion as of 30 June 2014, up 15.51% from the end of 2013.

In terms of growth, ICBC and CMB had the largest increase in financial assets held under resale agreement due to the rapid growth in such deals on debt securities and bills.

Credit related inter-bank investments classified as receivables had also increased significantly as compared to the end of 2013, especially for CMB, SPDB and CMBC.

Circular No. 127 to improve supervision in inter-bank activities

In order to improve supervision of financial institutions in inter-bank activities, the PBOC, CBRC, China Securities Regulatory Commission (CSRC), China Insurance Regulatory Commission (CIRC) and State Administration of Foreign Exchange (SAFE) recently jointly issued the Circular regarding Improving Supervision in inter-bank Operations of Financial Institutions (Yinfa [2014] No.127, hereafter referred to as “Circular 127”) to regulate the major inter-bank business types and set out relevant rules and requirements.

Circular 127 stated that for inter-bank deposit business, only eligible and authorized financial institutions can collect and manage deposits from other financial institutions. And for inter-bank loan and lending services, only financial institutions that are eligible for inter-bank loan business can provide such service to other financial institutions within the corresponding scope subject to laws and legislations.

Circular 127 also stated that for financial assets held under resale agreement (sometimes also referred as “repurchase agreement”) can be only traded between two counterparties. Any resale agreement involved a third counterparty such as trust beneficial right products were not eligible for such classification. By definition, financial assets held under resale agreement are assets with high liquidity and a mark-to-market value. Repurchase agreements collateralized by non-standardized financial assets are not eligible to be classified as financial assets held under resale agreement. After the implementation of this notice, non-standard financial assets used as collaterals for financial assets held under resale agreement will decrease significantly.


45

Substance over form

Circular 127 has also introduced the concept of inter-bank investments to regulate inter-bank activities. It sets out the scope of inter-bank investments as including but not limited to those carried out by commercial banks through the vehicles of structured entities, such as wealth management products, trust investment schemes, investment funds, asset management scheme of securities firms or fund management companies and their subsidiaries, asset management products issued by insurance companies, etc.

Circular 127 also emphasizes that commercial banks should follow the “substance over form” principle in measuring risks and calculate capital and allowance based on the nature of underlying assets in inter-bank investments.

In practice, there is a variety of types of account to record investment activities. The bank should confirm the proper accounting treatment of the investment activities in accordance with the accounting standard before initiating the investment according to substance and nature of the investment. When preparing the consolidated financial statements, the bank should judge whether it has control on its structured entity, and make sufficient disclosures.

Greater centralization in managing inter-bank activities

To standardize inter-bank businesses and ensure healthy development in inter-bank market, the CBRC also issued the Circular of the General Office of CBRC regarding Improving Governance over inter-bank Activities of Commercial Banks (Circular 140) in May 2014, requiring commercial banks to adopt the counterparty list approach in their inter-bank operations, centralizing authorizations and controls over operations, implementing a risk control process across front, middle and back offices, and centralizing accounting function.

Greater attention to address high funding costs for real economies

The State Council issued the Guidelines for Implementing a Combination of Measures to Alleviate High Funding Costs for Business Enterprises in August 2014. Ten thoughts & measures has been raised to PBOC, CBRC, CSRC, CIRC and SAFE respectively for implementation.

The guidance, inter alia, requires management on the shadow banking system, inter-bank business, wealth management products to be strengthened with unnecessary funding layers and procedures cleared. By directly addressing issues that burden real economies with high funding costs, the guiding principles demonstrate the resolution and actions in rectifying the malpractices of imposing extra charges along the funding channels, reducing regulatory arbitrage, and promoting the robust development of business activities.

In future, commercial banks should centralise and integrate management on inter-bank businesses and play a more major role by serving the real economy, lowering the financing cost for enterprises, managing the liquidity of the inter-bank market and preventing inconspicuous credit risks.


46

Growth in liabilities slowed

16.62% 15.66%

14.15%

10.22% 9.80%

0%2%4%6%8%10%12%14%16%18%

0102030405060708090

Total liablities Y-O-Y growth

Total liabilities (In trillions)

Y-O-Y growth

80.11%

9.78%

6.29%

79.56%

10.16%

6.18% 2014.06.30.

2013.12.31.

Others

Customer deposits

Deposits from banks and other financial institutions

Debt securities issued Inter-bank borrowings

Total liabilities of the Top 10 Listed Banks amounted to RMB 89.19 trillion as of 30 June 2014, an increase of 9.80% compared to the end of 2013.

The five largest joint-stock commercial banks had an aggregate growth of 14.33%, higher than that for the five large commercial banks (8.58%).

Since 2010, growth of total liabilities of the Top 10 Listed Banks has been slowing down, which is consistent with the growth trend for total assets.

As of 30 June 2014, the liabilities structure of the Top 10 Listed Banks remained stable.

The proportion of customer deposits fell slightly, while the proportion of deposits from banks and other financial institutions rose accordingly.

Graph 59 Total liabilities growth for Top 10 Listed Banks

Graph 60 Composition of liabilities for Top 10 Listed Banks

Note: Others refer to financial liabilities at fair value through profit or loss, borrowing from central banks, derivatives financial liabilities and financial assets held under resale agreements.

Presenter

Presentation Notes

其他类负债中主要是以公允价值计量且其变动计入当期损益的金融负债、向央行借款、衍生金融负债、卖出回购金融资产款占比分别上升0.84个、0.34个、0.04个和0.02个百分点。 Belinda Zhang:10家银行中, 仅有5家存在FVTPL, 分别是工、建、农、交及招行。5家中, 除交行外, 其他4家的占比均出现上升。 1、同业及其他金融机构存放款项占比有所下降, 主要是五家大型商业银行下降1.79个百分点, 而五家股份制商业银行上升了0.9个百分点。 2、同业、拆入加总: 五家商业银行上升0.6个百分点, 五家股份银行下降1.35个百分点; 3、同业、拆入及卖出回购加总: 五家商业银行下降1.2个百分点, 五家股份银行下降0.45个百分点。由于上述分析, 不同维度有不同结论, 因此我没有在PPT正文中写分拆商业银行和股份制后的不同结果。


47

Growth in deposits slowed

ICBC CCB

ABC

BOC

BOCOM

CMB

SPDB

CIB

CITIC CMBC

0%

5%

10%

15%

20%

25%

2014.06.30. 2013.12.31.

17.06%

11.51% 12.10%

9.53% 9.04%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

10

20

30

40

50

60

70

80

2010 2011 2012 2013 2014 1H

Total deposits Y-O-Y growth

Total deposits ((in trillions)

Y-O-Y growth

Total deposits for the Top 10 Listed Banks were RMB 70.96 trillion as of 30 June 2014, increased by 9.04% compared to 2013. The growth rate slowed slightly.

The growth for the five large commercial banks was 7.84%, lower than that of the five largest joint-stock commercial banks (14.26%).

Over a longer timeframe, total deposit of the Top 10 Listed Banks showed a slow down in growth.

Seven out of Top 10 Listed Banks showed a stable growth in 1H 2014 compared to that in 2013. However, the growth for BOCOM, CMB and CITIC fluctuated significantly.

Graph 61 Total deposits growth for Top 10 Listed Banks

Graph 62 Change in deposits growth for Top 10 Listed Banks

Presenter

Presentation Notes

Belinda Zhang: 我们看了中行、中信及兴业银行的年报, 没有发现特别的可以解释存款变动的原因。因此, 我们在这里仅提了中行和中信两家银行的名字。至于兴业银行, 我们在后面的存贷比章节会有相应描述。具体的年报内容, 请见下面我们贴的NOTES。中国银行: 2013年中国银行充分激发各级机构自我发展的动力和活力, 通过积极拓展供应链、产业链上下游客户, 大力拓展行政事业客户, 推动代发薪、代收付等基础业务发展, 客户基础不断扩大。中信银行: 坚持“抓存款规模、推结构转型、上管理台阶”的经营方针, 积极转变对公负债业务增长模式, 拓宽多元化的公司类存款来源渠道, 借助供应链金融、现金管理、投资银行、托管等业务产品, 积极拓展机构存款、结算存款等低成本存款。兴业银行: 我们查看了兴业银行的年报, 其中未对存款增速放缓原因进行解释。


48

48.33%

48.52%

55.51%

55.68%

48.12%

49.37%

39.43%

41.56%

3.56%

2.11%

5.05%

2.75%

Time Deposit Demand Deposit Others

5 LCBs

5 LJSCBs

Graph 63 Change of deposit mix by tenure , 5 LCBs Vs. 5 JSCBs

Demand deposits declined in proportion

As of 30 June 2014, the proportion of demand deposits of the Top 10 Listed Banks declined compared to 2013. The proportion of demand deposits for the five largest joint-stock commercial banks fell by 2.13 percentage points, which was higher than that of the five large commercial banks (fell by 1.25 percentage points).

In 1H 2014 the proportion of time deposits did not have any apparent increase, the decrease in demand deposits was due to the change of proportion of other deposits (including margin deposits, outward remittance and remittance in transit).

Note: Other deposits comprise margin deposits, outward remittance and remittances outstanding.

2014.06.30

2013.12.31

2014.06.30

2013.12.31

The customer deposits structure of the Top 10 Listed Banks remained stable in 1H 2014.

The proportion of corporate deposits and personal deposits of four large commercial banks were balanced, whereas BOCOM and the five largest joint-stock commercial banks were relying more on corporate deposits.

Advantages were in place for the five large commercial banks in absorbing more personal deposits as a result of their extensive branch networks and customer bases.

Graph 64 Change of deposit mix by customers

0%10%20%30%40%50%60%70%80%90%

100%

2014

.06.

3020

13.1

2.31

2014

.06.

3020

13.1

2.31

2014

.06.

3020

13.1

2.31

2014

.06.

3020

13.1

2.31

2014

.06.

3020

13.1

2.31

2014

.06.

3020

13.1

2.31

2014

.06.

3020

13.1

2.31

2014

.06.

3020

13.1

2.31

2014

.06.

3020

13.1

2.31

2014

.06.

3020

13.1

2.31

ICBC CCB ABC BOC BOCOM CMB SPDB CIB CITICCMBC

Corporate Personal Others


49

Fall in L/D ratio for 5 LCBs

The loan-to-deposit (L/D) ratio for the Top 10 Listed Banks in 1H 2014 reached 69.20%, fell by 0.64 percentage points compared to previous year.

The five large commercial banks’ L/D ratio rose by 0.09 percentage points, while the five largest joint- stock commercial banks fell by 3.81 percentage points.

In September 2014, the CBRC, MoF and PBOC jointly introduced what was called a “deposits deviation” indicator to constrain commercial banks’ aggressive deposit taking activities at the end of each quarter. That rule requires banks to keep month end deposit balance deviation ratio within 3%. The notice aims to constrain commercial banks’ aggressive deposit-taking activities and mitigate relevant risks effectively.

Graph 65 Loan-to-deposit ratio for Top 10 Listed Banks

ICBC

CCB

ABC

BOC

BOCOM

CMB

SPDB

CIB

CITIC

CMBC

60%

63%

66%

69%

72%

75%

2014.06.30. 2013.12.31.

Presenter

Presentation Notes

Emma J Sun: 我们查看了兴业银行年报中关于“贷款行业分布”的披露信息, 进行了数据分析, 得出的结论。其在年报里仅对这两个行业贷款不良率上升的原因进行了披露。具体的解释, 请见我们从MD&A里面摘录的文字, 请见下面的NOTES. 兴业银行贷款增速放缓的原因: 根据兴业银行发布的年报, 其对公贷款行业分布中占比最大的分别是制造业(占比20.71%)和批发零售业(占比15.02%)。2013年制造业贷款增速7.52%, 远低于2012年49.34%的增速。2013年批发零售业贷款增速22.91%, 远低于2012年88.12%的增速。这两类行业贷款的增速放缓是造成其总体贷款增速下降的原因。其在年报中披露: 制造业、批发和零售业不良贷款比率较期初有所上升, 主要原因是此两类行业受经济增长放缓、产业结构调整等影响相对较大, 且此两类行业客户中集中了较多中小民营企业。


50

Rapid growth in inter-bank liabilities

The balance of borrowings from central banks, inter- bank borrowings and financial assets held under resale agreements amounted to RMB 3.21 trillion as of 30 June 2014 for the Top 10 Listed Banks, increased by 13% compared to 2013.

The five large commercial banks focused on placements, while the five largest joint-stock commercial banks, except CITIC, preferred financial assets held under resale agreements .

Graph 66 Change in composition of money market liabilities, 5 LCBs

Graph 67 Change in composition of money market liabilities, 5 LJSCBs

84.07% 81.47%

68.56% 64.68%

51.10% 65.99%

55.97% 54.43%

55.04% 46.60%

0% 20% 40% 60% 80% 100%

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

CM

BCC

ITIC

CIB

SPD

BC

MB

Inter-bank borrowingsFinancial assets sold under repurchase agreementsBorrowings from central banks

56.48% 71.26%

49.59% 60.37%

86.64% 65.07%

52.51% 89.84%

57.27% 70.91%

0% 20% 40% 60% 80% 100%

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

2013.12.312014.06.30

BO

CO

MB

OC

ABC

CC

BIC

BC

Inter-bank borrowingsFinancial assets sold under repurchase agreementsBorrowings from central banks

Note: Borrowings from central banks in the case of BOC mainly included foreign reserve deposits (for head office only) and central bank bill repurchases; they were mainly standby credit facilities in the case of CCB.

Presenter

Presentation Notes

此页为同业资金业务的负债部分, 为了与P49的连续性所以在此处描述。根据各家年报按照货币市场业务持有目的进行分类, 并分作五家大型商业银行和五大股份制银行做客观描述, 如不需要可删除此页。


51

Continued growth in WMP issuance

Five out of Top 10 Listed Banks disclosed their WMPs issuance in 1H 2014, with an aggregate volume increased by 48.00% to RMB 14.48 trillion.

Since 2014, the major direction of reform push by regulators is to restructure the bank’s management of WMPs business.

Graph 68 Comparison of WMPs issuance for listed banks

Note: No disclosure from ABC, BOC, BOCOM, CIB and CMBC.

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

ICBC CCB CMB SPDB CITIC

2014 H1 2013 H1

In billions

As of June 2014, there were 51,560 outstanding wealth management products (WMPs) in the market, according to Half year report of China wealth management products (1H 2014), representing a total outstanding balance of RMB 12.65 trillion, an increase of 23.54% compared to the end of 2013. In 1H 2014, 87,718 new WMPs were issued, with RMB 49.41 trillion raised. The total amount of issuance continued to grow. The WMPs has been playing an active role in supporting the real economy as well as testing the water for interest rate liberalization.

银行业快讯 52 2013年9月


53

Analysis of Capital Management

• The implementation of the advanced approach helps to improve capital

adequacy ratio (CAR)

• Innovative capital instruments poised to go


54

The implementation of the advanced approach helps to improve capital adequacy ratio (CAR)

In April 2014, the CBRC gave the green light as to the implementation of Advanced Approach of Capital Management (“advanced approach”) to six (ICBC, ABC, BOC, CCB, BOCOM and CMB) out of Top 10 Listed Banks. During the parallel period, those six banks are supposed to comply with both the advanced approach as well as the regulatory requirements of other approach (those adopted for the period ended as at 31 December 2013), and meet the minimum capital requirements.

Under the advanced approach, risk-weighted assets are calculated based on the actual default data of the bank, i.e. the probability of default, loss given default and other related information for each credit asset. As such, as opposed to the risk-weighted approach with fixed weightings, the advanced approach can effectively reduce the risk-weighted assets provided the banks have more high-quality assets, achieving capital savings.

In addition, while only collaterals and guarantees

Graph 69 CAR of 6 banks that implemented advanced approach

ICBC

ABC

BOC

CCB

BOCOM

CMB

11%

12%

13%

14%

2014.06.30 2013.12.31

provided by governments and highly-rated banking financial institution are deemed qualified risk mitigates under the risk-weighted approach, the advanced approach expands the scope of risk mitigates to all qualified pledges, collaterals, and guarantees in calculating the risk-weighted assets. As a result, capital adequacy ratio can be improved.

Presenter

Presentation Notes


55

Innovative capital instruments poised to go

Commercial banks in China have been heavily relying on issuing equity, subordinated bonds and retained earnings to strengthen their capital, a model that is a single capital structure with narrow channels of capital replenishment. It was against this backdrop the CBRC issued the Guidance on the Innovation of Capital Instruments of Commercial Banks (“the Guidance”) in December 2012, to promote and standardize the innovation of the capital instruments by commercial banks, expanding the capital replenishing channels.

The Guidance encourages commercial banks to actively explore possibilities in issuing innovative capital instruments in different markets, and introduce new types of debt and equity capital instruments as appropriate.

Looking at Top 10 Listed Banks’ financial results, most banks face increasing pressure on Tier-1 capital, given slower net profit growth as well as rapid business expansion.

By the end of September 2014, many of Top 10 Listed Banks have announced their plans on preference shares issuance to replenish their tier-1 capital, with the plans of SPDB, ABC, BOC and CIB approved by regulators.

According the approved plans, both SPDB and ABC will adopt incremental dividend pay-outs; BOC will adopt fixed dividend pay-outs. Based on the interim data and designated dividend pay-outs, it is projected that SPDB, ABC and BOC’s Tier-1 capital adequacy ratio can be raised by 1.24, 0.83 and 0.64 percentage points respectively; and capital adequacy ratio by 1.25, 0.83 and 0.63 respectively. This helps to alleviate their capital shortages.

Apart from SPDB, ABC and BOC, some of their competitors are also in the progress in issuing innovative capital instruments or have proposed such plans. We summarised such activities of Top 10 Listed Banks in the table next page.

The issuance of innovative capital instruments will enhance the diversification of listed banks’ capital structure.

Presenter

Presentation Notes


56

Innovative capital instruments poised to go (Cont’d)

Table 6 Overview of Top 10 Listed Banks’ innovative capital instrument issuance in 2014 (In RMB)

Bank Preference Shares Tier 2 Capital Bonds Medium-term Notes

ICBC Proposed issuance of RMB 60bn, including RMB 20bn issued in August 2014.

CCB Proposed issuance of RMB 60bn, including RMB 20bn issued in August 2014.

ABC

Approval in August 2014 to issue RMB 80bn, with maximal issuance of RMB 40bn within 2014.

RMB 30bn issued in August 2014.

Proposed issuance of USD15bn (RMB 93bn), including RMB 29bn issued in 2014.

BOC Approval in August 2014 to issue RMB 100bn.

Proposed issuance of RMB 60bn, including RMB 30bn already issued in August 2014.

BOCOM Proposed issuance of RMB 40bn, including RMB 28bn issued in August 2014.

CMB RMB 11.3bn issued in the first half year and RMB 1bn common financial bonds issued in Hong Kong in April.

SPDB

Approval in August 2014 to issue RMB 30bn, with maximal issuance of RMB 15bn within 2014.

CIB

Approval in September 2014 to issue RMB 30bn, with maximal issuance of RMB 13bn within 2014.

RMB 20bn issued in June 2014.

CITIC RMB 37bn already issued in August 2014.

CMBC RMB 20bn issued in March 2014.

Source: Announcements of banks for issuance of capital bonds and preference shares.

Presenter

Presentation Notes


57

Outlook

• Divergent global recovery

• Keeping up with times to tackle challenges


58

Divergent global recovery

International Organisations Growth Projections (%)

International Monetary Fund (IMF) 7.40

The World Bank 7.60

Asia Development Bank 7.50

OECD 7.40

The US continued to recover since 2Q 2014, with Europe improving slightly. However, emerging markets continued to slow down. The escalation of geopolitical conflicts between Russia and Ukraine might undermine recovery.

Most international organisations lowered their projections for China's growth as the country is entering a period of slower growth as a result of structural reform and side effect of previous proactive growth measures. This downward pressure will prevail for a while.

In 1H 2014, China’s growth slowed due to lower growth potential, sluggish domestic consumption growth and over-capacity. The defaults of corporate issuers and trust products are another signs of economic downturn.

The purchasing managers' index (PMI) went down again in August after rebounding consecutively for months.

Table 7 China’s GDP growth projections in 2014

Graph 70 Change PMI in China

Source: Publicly available information released by above international organizations

51.10%

48%

49%

50%

51%

52%

53%

54%


50% demarcation line between contraction and expansion


59

Keeping up with times to tackle challenges

In 1H 2014, China’s banking sector maintained relatively sufficient liquid, and the banks’ total assets continued to increase, but ROA and ROE declined. Facing a combined challenge of slower growth and structural reforms, banks need to improve their risk management capability.

1) Fully understanding changes in business environment; adjusting credit risk management

In the first half of 2014, credit asset quality continued to decline. The increase in NPLs was mainly due to increase in real economy risk brought about by the economic slowdown and adjustment of economic structure.

According to the various risk factors and the great change of the banks operating environment , we recommend commercial banks should consider:

• Understand changes to risks in the credit market and adjust lending and approving policies;

• Improve comprehensive management of on- and off-balance sheet industry exposure risk. Check the background of trade finance and strictly monitor fund

flow to prevent a shift of risk from off-balance sheet to on-balance sheet;

• Timely post-lending management based on risk indicators; monitoring the source and trend of risks;

•Understand borrowers' risks thoroughly; prevent fraudulent loans and funding from loans being used in areas other than agreed purposes 2) Improve proactive management of interest rates

Interest income remains the main source of income for all commercial banks. Following the slow-down in profit growth in the banking industry and interest rate reform, it will be more difficult for banks to improve NIM. Banks need to improve proactive management of interest rates and better balance risk and rewards.

3) Digest policy implications and develop channels for intermediary income

After the State Council’s guidelines on lower businesses funding cost, commercial banks cut fees and increased discounts. Lower growth in intermediary business

income is expected in 2H 2014, especially in fees for financial consulting and guarantee services to SMEs.

Income from wealth management, bank cards and e-banking will be focused areas for banks to improve profitability. Investments should be made in customer service and operations so that banks are not left behind by competitors.

4) Regulation leads to changes in inter-bank products

Since 2014, there have been frequent new regulatory policies in connection with inter-bank business. Banks adapt to these regulatory requirements will anticipate significant changes in the types, structures, accounting and process management for inter-bank businesses, which will revert inter-bank activities to traditional liquidity management functions.

Conclusion

Facing multiple challenges, banks need to deepen transformation. While exploring ways in achieving this, they need to control risks and stay innovative in order to provide support to the real economy.


60 Banking Newsletter

60 September 2014


61

Appendix

• Financial highlights of the Top 10 Listed Banks

• Graph index

• Definitions

• Banking and Capital Markets Contacts

• PwC Offices in China


62 Banking Newsletter

62 September 2014


63

Financial Highlights of the Top 10 Listed Banks

In RMB millions ICBC CCB ABC BOC BOCOM CMB SPDB CIB CITIC CMBC

1. Net Interest Income 237,607 211,292 209,438 156,675 67,211 53,858 46,498 45,036 45,614 43,600 2. Non-interest income 90,818 75,805 57,197 78,249 23,212 30,402 12,545 14,372 16,492 21,529 2.1. Net fee and commission income 73,228 60,180 47,848 52,131 15,701 23,702 10,401 12,948 12,807 18,438 2.2. Other non-interest income 17,590 15,625 9,349 26,118 7,511 6,700 2,144 1,424 3,685 3,091 3. Operating income 328,425 287,097 266,635 234,924 90,423 84,260 59,043 59,408 62,106 65,129

4. Operating expenses (134,919) (118,554) (132,042) (113,495) (43,605) (44,245) (29,286) (26,163) (32,627) (30,801)

5. Operating & administrative expenses (78,674) (66,588) (79,229) (60,010) (22,620) (22,561) (13,437) (12,650) (16,660) (18,966)

6. Business tax and surcharges (20,493) (17,231) (14,457) (13,226) (6,478) (5,201) (3,953) (4,320) (4,350) (4,371)

7. Other operating cost (11,585) (11,613) (9,417) (12,477) (1,330) N/A (190) (137) N/A (246)

8. Asset impairment losses (24,167) (23,122) (28,939) (27,782) (11,082) (16,320) (11,706) (9,056) (11,617) (7,218) 9. Operating profit 193,506 168,543 134,593 121,429 46,818 40,015 29,757 33,245 29,479 34,328 10. Profit before tax 194,090 169,516 135,584 121,950 47,195 40,265 29,829 33,429 29,503 34,397 11. Income tax expenses (45,709) (38,546) (31,517) (28,541) (10,300) (9,746) (6,962) (7,739) (7,078) (8,306) 12. Net profit 148,381 130,970 104,067 93,409 36,895 30,519 22,867 25,690 22,425 26,091

In RMB millions ICBC CCB ABC BOC BOCOM CMB SPDB CIB CITIC CMBC

Total Assets 20,303,677 16,399,790 16,006,612 15,469,096 6,283,936 5,033,122 3,930,217 3,948,200 4,311,187 3,571,451 Total loans and advances to customers

10,394,435 8,952,511 7,503,254 8,238,260 3,354,657 2,362,544 1,851,119 1,388,553 2,070,500 1,662,137

Net investment 4,476,040 3,511,470 3,411,571 2,487,978 1,108,234 1,012,877 956,440 824,774 928,446 419,545

Cash and deposits with central bank 3,607,404 2,578,036 2,851,344 2,387,651 932,763 593,971 507,149 416,033 597,719 442,434

Inter-bank assets 1,182,372 958,417 1,821,949 1,610,816 622,708 943,037 534,380 1,195,818 632,226 837,988

Others 643,066 399,356 418,494 744,391 265,574 120,693 81,129 123,022 82,296 209,347

Total Liabilities 18,944,174 15,252,778 15,098,875 14,462,640 5,841,390 4,746,758 3,708,898 3,724,944 4,064,489 3,342,152

Deposits from customers 15,728,332 12,956,956 12,809,504 11,190,569 4,375,920 3,420,748 2,756,783 2,246,522 3,053,213 2,420,577

Inter-bank liabilities 1,612,057 1,057,553 1,267,762 2,260,116 1,145,695 1,082,314 723,912 1,293,484 838,691 637,712 Debt securities issued 255,640 428,524 151,952 254,102 95,378 99,981 93,016 104,853 88,086 117,078

Others 1,348,145 809,745 869,657 757,853 191,068 143,715 135,187 80,085 84,499 166,785

Table 1 - Income Statements

Table 2 - Balance Sheets


64

Table 3 – Financial Ratios

ICBC CCB ABC BOC BOCOM CMB SPDB CIB CITIC CMBC

Profitability

Return on average assets (ROA) 1.51% 1.65% 1.36% 1.27% 1.21% 26.12% 1.20% 0.67% 1.14% 1.54%

Weighted average return on equity (ROE) 21.77% 22.97% 23.04% 18.57% 16.79% 20.63% 21.04% 11.90% 18.79% 12.11%

Net interest spread (NIS) 2.43% 2.62% 2.77% 2.15% 2.20% 2.37% 2.22% 2.15% 2.14% 2.42%

Net interest margin (NIM) 2.62% 2.80% 2.93% 2.27% 2.39% 2.57% 2.47% 2.40% 2.36% 2.62%

Cost-to-income ratio 23.95% 24.17% 29.71% 25.54% 25.39% 26.78% 22.76% 21.52% 26.83% 29.12%

Asset Quality

NPL Ratio 0.99% 1.04% 1.24% 1.02% 1.13% 0.98% 0.93% 0.97% 1.19% 0.93%

NPL balances (in millions)

105,741 95,668 97,473 85,860 38,750 23,697 17,632 14,122 13,875 15,818

Provision Coverage ratio 238.02% 248.87% 346.41% 217.02% 204.16% 251.29% 267.84% 305.74% 192.68% 215.87%

Capital Adequacy

Core tier 1 capital adequacy ratio 11.36% 11.21% 8.65% 9.36% 10.70% 9.47% 8.48% 9.35% 8.71% 8.76%

Tier 1 capital adequacy ratio 11.36% 11.21% 8.65% 9.37% 10.70% 9.47% 8.48% 9.35% 8.77% 8.77%

Capital adequacy ratio 13.67% 13.89% 11.89% 11.78% 12.75% 11.45% 10.72% 12.18% 10.98% 11.05%

Operations

Loan-to-deposit ratio 66.30% 70.93% 61.21% 72.29% 72.37% 66.23% 68.72% 63.37% 68.67% 70.17%


65

Graph Index

No. Title Page Graph 1 China’s quarterly year-on-year GDP growth 6 Graph 2 Comparison of FAI & FDI monthly growth trend 6 Graph 3 CPI and PPI monthly changes 7 Graph 4 PBOC’s SLF monthly balanc 7 Graph 5 Change in proportion for corporate bonds and loans 8 Graph 6 Monthly growth of RMB loans 8 Graph 7 Monthly growth of RMB deposits 9 Graph 8 Change of yield-to-maturity of bonds 9 Graph 9 Asset growth by types of bank 10 Graph 10 Net profit growth of commercial banks 10 Graph 11 Commercial banks’ NPL balances and ratios 11 Graph 12 NPL ratio by types of bank 11 Graph 13 Net profit and growth for Top 10 Listed Banks 16 Graph 14 Comparison of ROA for Top 10 Listed Banks 17 Graph 15 Comparison of ROE for Top 10 Listed Banks 17 Graph 16 Operating income mix for 5 LCBs 18 Graph 17 Operating income mix for 5 LJSCBs 18 Graph 18 Comparison of interest income growth 19 Graph 19 Change in interest income growth by business 19 Graph 20 Comparison of interest income mix 20 Graph 21 Comparison of interest income mix, 5 LCBs Vs. 5LJSCBs 20 Graph 22 Comparison of interest expense mix 21 Graph 23 Comparison of interest expense mix, 5 LCBs Vs. 5 LJSCBs 21 Graph 24 Change in NIM for Top 10 Listed Banks 22 Graph 25 Analysis of change in interest income and expense 22 Graph 26 Change of yields on interest-earning assets 23 Graph 27 Change of costs on interest-bearing liabilities 23 Graph 28 Comparison of net fee and commission income growth 24 Graph 29 Comparison of fee and commission income structure 24 Graph 30 Comparison of growth in intermediary businesses 25 Graph 31 Comparison of intermediary income, 5 LCBs Vs. 5 LJSCBs 25 Graph 32 Change in business & administrative expense 26 Graph 33 Change in cost-to-income ratios for Top 10 Listed Banks 26 Graph 34 Total asset growth for Top 10 Listed Banks 28 Graph 35 Change of asset structure for Top 10 Listed Banks 28 Graph 36 Loan growth for Top 10 Listed Banks 29 Graph 37 Loan portfolio by businesses for Top 10 Listed Banks 29 Graph 38 Change of personal loan portfolio for 5 LCBs 30 Graph 39 Change of personal loan portfolio for 5 LJSCBs 30 Graph 40 Corporate loans by industries for Top 10 Listed Banks 31 Graph 41 Loans by geographical regions for Top 10 Listed Banks 31 Graph 42 NPL balances growth for Top 10 Listed Banks 32 Graph 43 Change of NPL ratios for Top 10 Listed Banks 32 Graph 44 NPL balances by industries, as of 30 June 2014 33


66

No. Title Page Graph 45 NPL balances by geographical regions, as of 30 June 2014 33 Graph 46 NPLs write-offs and disposals for Top 10 Listed Banks 34 Graph 47 Loan impairment charges for Top 10 Listed Banks 34 Graph 48 LLR coverage ratio for Top 10 Listed Banks 37 Graph 49 Provision-to-loan ratio for Top 10 Listed Banks 37 Graph 50 Investments by assets class for 5 LCBs 38 Graph 51 Investments by asset class for 5 LJSCBs 38 Graph 52 Investment portfolio for 5 LCBs by holding purposes 39 Graph 53 Investment portfolio for 5 LJSCBs by holding purposes 39 Graph 54 Classification of TBR products and AMS for 5 LJSCBs 40 Graph 55 Breakdown of inter-bank business for 5 LCBs 42 Graph 56 Breakdown of inter-bank business for 5 LJSCBs 42 Graph 57 Breakdown of inter-bank business for 5 LCBs 43 Graph 58 Financial assets held under resale agreements for 5 LJSCBs 43 Graph 59 Total liabilities growth for Top 10 Listed Banks 46 Graph 60 Composition of liabilities for Top 10 Listed Banks 46 Graph 61 Total deposits growth for Top 10 Listed Banks 47 Graph 62 Change in deposits growth for Top 10 Listed Banks 47 Graph 63 Change of deposit mix by tenure , 5 LCBs Vs. 5 JSCBs 48 Graph 64 Change of deposit mix by customers 48 Graph 65 Loan-to-deposit ratio for Top 10 Listed Banks 49 Graph 66 Change in composition of money market liabilities, 5 LCBs 50 Graph 67 Change in composition of money market liabilities, 5 LJSCBs 50 Graph 68 Comparison of WMPs issuance for listed banks 51 Graph 69 CAR of 6 banks that implemented advanced approach 54 Graph 70 Change of PMI in China 58 Table 1 Financial overview of the Top 10 Listed Banks 14 Table 2 Comparison of the Top 10 Listed Banks’ net profit growth 40 Table 3 Growth of TBR products and AMS of the five JSCBs 41 Table 4 Impairment loss of receivables of five large commercial banks 41 Table 5 Impairment loss of Receivables of five JSCBs 56 Table 6 Announcement of new type capital instruments issuance 58 Table 7 China’s GDP growth projections in 2014 58


67

Definitions

Terms Definition or formula

NPL balance Refers to the sum of Substandard, doubtful and loss loans in accordance with 5-tier classification

NPL ratio NPL balance / Total loans and advances to customers × 100%

Overdue loan balance In case of one day overdue for any principal or interest, the whole loan is classified as overdue

Overdue loan ratio Overdue loan balance / Total loans and advances to customers ×100%

Provision coverage ratio / Loan loss reserves ratio Allowance for impairment losses on loans / NPL balance ×100%

Return on average assets (ROA) Net profit / average balance of total assets × 100% × annualised coefficient

Return on equity (ROE) Net profit / average balance of the sum of owner's equity and minority's interest × 100% × annualised coefficient

Net interest margin (NIM) Net interest income / average balance of interest-earning assets × 100% × annualised coefficient

Net interest spread (NIS) Average yield of interest-earning assets - average cost of interest-bearing liabilities x annualised coefficient

Other non-interest income Non-interest income other than net fee and commission income, including net income from treasury business, fair value gains and losses of financial assets, income from other businesses, etc.

Cost-to-income ratio Business and Administration expenses / operating income x 100%

Current ratio Current assets / current liabilities× 100%

Loan to deposits ratio Balance of loans / Balance of Deposits × 100%

Net capital base Net capital base calculated as stipulated by the Capital Rules for Commercial Banks (Provisional) and other regulations

Tier-1 capital after deductions Tier-1 capital after deductions caculated as stipulated by the Capital Rules for Commercial Banks (Provisional) and other regulations

Net core tier-1 capital Net core tier-1 capital calculated as stipulated by the Capital Rules for Commercial Banks (Provisional) and other regulations

Capital adequacy ratio (CAR)

Net capital base / (credit risk-weighted assets + market risk-weighted assets + Operational risk-weighted assets + capital floor adjustment <only applicable to those who use Internal Ratings-Based Approach for credit risk weighted average assets caculation> × 100%

Tier-1 CAR

Tier-1 capital after deductions / (credit risk-weighted assets + market risk-weighted assets + Operational risk-weighted assets + capital floor adjustment <only applicable to those who use Internal Ratings-Based Approach for credit risk weighted average assets calculation> × 100%

Core tier-1 CAR

Net core tier-1 capital / (credit risk-weighted assets + market risk-weighted assets + Operational risk-weighted assets + capital floor adjustment <only applicable to those who use Internal Ratings-Based Approach for credit risk weighted average assets calculation> × 100%


68

Banking and Capital Markets Contacts

Assurance Advisory Tax

Raymond Yung – Beijing James Chang – Beijing Danny Yiu – Beijing

Tel: +86 (10) 6533 2121 Tel: +86 (10) 6533 2755 Tel: +86 (10) 6533 2787

[email protected] [email protected] [email protected]

Margarita Ho – Beijing Addison Everett – Beijing Oliver Kang – Beijing

Tel: +86 (10) 6533 2368 Tel: +86 (10) 6533 2345 Tel: +86 (10) 6533 3012


Richard Zhu – Beijing William Gee – Beijing Matthew Wong – Shanghai

Tel: +86 (10) 6533 2236 Tel: +86 (10) 6533 2269 Tel: +86 (21) 2323 3052


Jimmy Leung – Shanghai William Yung – Shanghai Florence Yip – Hong Kong

Tel: +86 (21) 2323 3355 Tel: +86 (21) 2323 1984 Tel: +852 2289 1833


Michael Hu －Shanghai Matthew Phillips – Hong Kong Assurance – Risk & Quality Tel: +86 (21) 2323 2718 Tel: +852 2289 2303

[email protected] [email protected] Tracy Chen – Shanghai

Tel: +86 (21) 2323 3070

Shirley Yeung – Guangzhou Chris Chan – Hong Kong [email protected]

Tel: +86 (20) 3819 2218 Tel: +852 2289 2824

[email protected] [email protected] Nigel Dealy – Hong Kong

Tel: +852 2289 1221

Charles Chow – Shenzhen [email protected]

Tel: +86 (755) 8261 8988

[email protected]


69

PwC Offices in China

Beijing Shanghai Hong Kong 26/F, Office Tower A, Beijing Fortune Plaza 11/F, PricewaterhouseCoopers Center, 2 Corporate Avenue 22/F, Prince's Building

7 Dongsanhuan Zhong Road, Chaoyang District 202 Hu Bin Road, Huangpu District Central, Hong Kong

Beijing, P.R.C. Shanghai Tel: +852 2289 8888

Zip: 100020 Zip: 200021 Fax: +852 2810 9888

Tel: +86 (10) 6533 8888 Tel: +86 (21) 2323 8888

Fax: +86 (10) 6533 8800 Fax: +86 (21) 2323 8800

Shenzhen Guangzhou Tianjin 34/F, Tower A, Kingkey100 18/F, PricewaterhouseCoopers Center 36/F, The Exchange Tower Two,

5016 Shennan East Road, Luohu District 10 Zhujiang Xi Road, Pearl River New City, Tianhe District 189 Nanjing Road, Heping District

Shenzhen, P.R.C Guangzhou, P.R.C. Tianjin, P.R.C.

Zip: 518001 Zip: 510623 Zip: 300051

Tel: +86 (755) 8261 8888 Tel: +86 (20) 3819 2000 Tel: +86 (22) 2318 3333

Fax: +86 (755) 8261 8800 Fax: +86 (20) 3819 2100 Fax: +86 (22) 2318 3300

Dalian Qingdao Hangzhou 8F Senmao Building 37/F, Tower One, HNA IMC Center Unit 3205, Canhigh Center

147 Zhongshan Road, Xigang District 234 Yanan Third Road, Shinan District 208 North Huancheng Rd

Dalian, P.R.C. Qingdao, P.R.C. Hangzhou, P.R.C.

Zip: 116011 Zip: 266071 Zip: 310006

Tel: +86 (411) 8379 1888 Tel: +86 (532) 8089 1888 Tel: +86 (571) 2807 6388

Fax: +86 (411) 8379 1800 Fax: +86 (532) 8089 1800 Fax: +86 (571) 2807 6300

Chongqing Ningbo Xiamen Room 1905, 19/F Metropolitan Tower Room 1203, Tower E, Ningbo International Financial Center Unit B, 11/F, International Plaza

68 Zou Rong Road 268 Min An Road East, Jiangdong District 8 Lujiang Road, Siming District

Chongqing, P.R.C. Ningbo, P.R.C. Xiamen, P.R.C.

Zip: 400010 Zip: 315040 Zip: 361001

Tel: +86 (23) 6393 7888 Tel: +86 (574) 8187 1788 Tel: +86 (592) 210 7888

Fax: +86 (23) 6393 7200 Fax: +86 (574) 8187 1700 Fax: +86 (592) 210 8800

Suzhou Nanjing Xi'an

Room 1501, Genway Tower Unit 12A01, Nanjing International Center 7/F, D Block, Chang'an Metropolis Center

188 Wang Dun Road, Suzhou Industrial Park 201 Zhongyang Road, Gulou District 88 Nanguan Street

Suzhou, P.R.C. Nanjing, P.R.C. Xi'an, P.R.C.

Zip: 215028 Zip: 210009 Zip: 710068

Tel: +86 (512) 6273 1888 Tel: +86 (25) 6608 6288 Tel: +86 (29) 8469 2688

Fax: +86 (512) 6273 1800 Fax: +86 (25) 6608 6210 Fax: +86 (29) 8469 2600

Macau Wuhan 29/F, Bank of China Building Unit 04, 41/F Wuhan Wanda Center

323 Avenida Doutor Mario Soares, Macau 96 Linjiang Avenue, Jiyuqiao, Wuchang District,

Tel: +853 8799 5111 Wuhan, PRC

Fax: +853 8799 5222 Zip: 430060

Tel: +86 (27) 5974 5818

Fax: +86 (27) 5974 5800

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. © 2014 PricewaterhouseCoopers Zhong Tian LLP. All rights reserved. PwC refers to the China member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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