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Bank Of China Announces 2008 Annual Results


Profit Attributable to Shareholders up 14.42% Year-On-Year to RMB 64.36 Billion

2009-03-24

(24 March 2009) ─Bank of China Limited (“BOC” or “the Bank”, HKEx stock code: 3988, SSE stock code: 601988) announced its 2008 annual results today.

In accordance with International Financial Reporting Standards (“IFRS”), as of 31 December 2008, the total assets of BOC had grown by 16.03% to RMB 6,951.68 billion as compared with the end of 2007. Total liabilities and shareholders’ equity increased by 16.63% and 10.42% to RMB 6,461.793 billion and RMB 464.258 billion respectively, of which gross loans and advances rose by 15.63% to RMB 3,296.146 billion and customer deposits grew year-on-year by 15.95% to RMB 5,102.111 billion. BOC achieved 14.42% growth year-on-year in profit attributable to shareholders to RMB 64.36 billion. Return on equity (ROE) increased from 14% to 14.55%. The profit growth is mainly due to continuous growth in operating income, and a decrease of the cost to income ratio and income tax rate.

In 2008, confronted with a challenging international and domestic macroeconomic environment, BOC continued to firmly adhere to its strategic positioning as “A large multinational banking group focusing on commercial banking as core business while developing diversified service capabilities and focusing on home market while integrating domestic and overseas operations”. The bank continued its effort to expand  assets/liabilities base and business operation, proactively adjust  business and income structure, enhance management ability and steadily improve its core competitiveness. As a result, the Bank better weathered the international financial crisis and earthquake disasters and maintained steady growth across all business lines and achieved continuous improvement in operating performance. During the severe earthquake in Wenchuan of Sichuan province, the Bank endeavoured to provide full-range financial services to local residents and supported the effort of corporate production restore and residential reconstruction in the quake-stricken region. The Bank and its employees donated over RMB 150 million in total. As the sole official banking partner of Beijing 2008 Olympic Games and Paralympic Games, Bank of China provided outstanding financial services during the Games with unprecedented zero error and zero customer complaint which were widely acclaimed by both foreign and domestic customers.  Thus the Bank’s intangible franchise value and its international reputation were significantly elevated.

In the second half of 2008, the Bank strengthened its credit support to key sectors and industries sponsored by national economic stimulation policies and measures and accelerated its pace of credit extension. Gross loans to customers grew 15.63% compared with the previous year-end. The Bank also took advantage of capital market correction to attract personal deposits and corporate deposits, thereby its market share among major domestic peers increased. The Bank increased the size of RMB denominated securities investment by taking advantage of market opportunities, reduced the size of its foreign currency denominated securities investment and,improved the yield of securities investment . Due to the significant drop of interest rate in global major economies, the Bank’s 2008 net interest margin narrowed by 13 basis point year on year to 2.63%. Accordingly, the Bank intensified its efforts to optimize its asset structure by increasing the weight of high-yield interest-earning assets. As result, the Bank’s net interest income still grew 6.67% year-on-year to RMB 162.936 billion.

The Bank’s fee-based businesses remain on the course of rapid growth. Since the beginning of the year, to cope with the changes of economic environment, the Bank fully utilized its strengths in traditional advantageous areas, such as trade finance and international settlement, to meet customer needs by offering more innovative products and improving service quality. Though these efforts, the Bank was able to achieve significant increase of fee income from international settlement, exchange settlement and financial advisory services, as well as from loan commitments. The Bank also integrated personal foreign exchange settlement business and introduced one-stop financial services concept which help maintain the Bank’s leading role in domestic personal foreign exchange business market. Spread income from foreign exchange conversion business grew 16.32% year-on-year. Olympic-related services brought remarkable return to the Bank. For example, just the sale of Olympic consigned products and precious metals alone contributed more than RMB 1.1 billion to the Bank’s net income. The Bank earned a net fee and commission income of RMB 39.947 billion, an increase of 12.42%, of which, domestic operations recorded a 28.18% year-on-year growth. As a result, non-interest income accounted for 28.82% of the operating income, remain the highest among domestic peers.

As global financial crisis spread from financial sector to real economy and from the developed countries to emerging markets, risks associated with corporate asset quality were increasing. The Bank further enhanced its close watch and tight controls on high-risk industries and accounts, intensified its efforts in risk management and further improved its risk management systems and mechanism. At the end of 2008, the Bank’s core capital adequacy ratio and capital adequacy ratio improved to 10.81% and 13.43%. It remains one of the highest among domestic peers and implies the Bank’s stronger ability to resist risks. While NPL ratio further declined, NPL coverage ratio reached 121.72%. If the general provision charged in shareholder’s equity is included, the coverage of all loan related provisions over balance of NPL exceed 165%. To survive the critical market changes, the Bank enhanced its centralized group securities investment management function, reduced the size of its foreign currency-denominated securities investment while optimising its structure by significantly reducing structured and credit-related securities together with prudent and sufficient impairment provisioning to improve the risk of securities investment portfolio.

Bank of China further enhanced its cost management and allocated resources according to the need of the group’s strategic development. The bank continued to invest in branch renovation, channel construction, marketing, and IT blueprints implementation. At the same time, inspired by the needs of mitigating the impact of quakes-disasters and global financial crisis, the Bank optimized its cost structure and fortified its efforts to cut costs and reduce administrative expenses. In 2008, the Bank’s cost to income ratio further dropped by 1.67 percentage points to 37.59%.

As a large state-owned bank with strong sense of social responsibility, Bank of China’s management, though had fulfilled their annual performance target, unanimously decided to cut down their remuneration under current critical international and domestic financial and economic situation.

In 2009, under the guidance of scientific development approach, the Bank will proactively meet the challenges with a view to seizing any opportunities, manage the risks while improving performance and efficiency, and accelerate innovation to gain market share. In this respect, Bank of China will capitalise on the government’s policy to “expand domestic demand, promote restructuring and maintain growth”. By fully implementing the strategic development plan, the Bank will focus on expansion of scale and accelerate our restructuring of the Bank’s service and growth model. Moreover, the Bank will further enhance risk management and internal control, speed-up overseas expansion, and promote infrastructure development and human resources management. Bank of China will emphasize brand name and corporate culture construction so as to improve its competitiveness, profitability and the sustainability of development. With all of these measures, the Bank is confident to achieve quality and rapid development of various lines of business and to further promote its centenary-old brand image.

Note: Prepared based on IFRS

 Financial Highlights

Key Operating Figures

Unit: RMB million Change 2008 2007
Net interest income +6.67% 162,936 152,745
Non-interest income +56.19% 65,960 42,230
-Net fee & commission income +12.42% 39,947 35,535
Operating expenses +14.23% (97,412) (85,278)
Impairment losses on assets +122.23% (45,031) (20,263)
Profit after income tax +6.22% 65,894 62,036
Profit attributable to
the equity holders of the Bank
+14.42% 64,360 56,248

Key Assets and Liabilities Figures

Unit: RMB million Change As at 31 December 2008 As at 31 December 2007
Total assets +16.03% 6,951,680 5,991,217
Loans,net +15.80% 3,189,652 2,754,493
Total liabilities +16.63% 6,461,793 5,540,560
Due to customers +15.95% 5,102,111 4,400,111
Capital and reserves attributable to the equity holders of the Bank Share capital +10.42% 464,258 420,430

Key Ratios

. Change
(percentage points)
2008 2007
Earnings per share (RMB) +0.03 0.25 0.22
Return on average assets -0.08 1.02% 1.10%
Return on average equity +0.55 14.55% 14.00%
Net interest margin -0.13 2.63% 2.76%
Non-interest income ratio +7.16 28.82% 21.66%
Cost to income ratio(excluding income tax and other taxes) -1.67 37.59% 39.26%
Credit Cost +0.24 0.55% 0.31%
  Change
(percentage points)
As at 31
December 2008
As at 31
December 2007
Net assets per share (RMB) +0.17 1.83 1.66
Impaired loan ratio -0.41 2.76% 3.17%
Impaired loan coverage ratio +10.81 117.18% 106.37%
NPL ratio -0.47 2.65% 3.12%
NPL coverage ratio +13.54 121.72% 108.18%

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