Online Banking

BOC’s Profit Attributable to Equity Holders for the 1st Half of 2010 Increased by 27% Year-On-Year

Profit After Tax by Domestic Operations Increased by over 30%

Bank of China Limited ("BOC": Hong Kong Stock Exchange stock code: 3988; Shanghai Stock Exchange stock code: 601988) announced its 2010 interim results on August, 26th.

According to International Financial Reporting Standard ("IFRS"), BOC has achieved a profit before tax of RMB70.29 billion, up by 25.39% as compared with the same period of 2009. Profit after tax and profit attributable to the equity holders reached RMB54.38 billion and RMB52.02 billion, an increase of 25.77% and 26.87% respectively year-on-year. Domestic operations maintained fast growth, with a profit after tax of RMB43.05 billion, up by 30.57% year-on-year.

Key Financial Indicators Continued to Improve

In the first half of 2010, BOC's earnings per share reached RMB0.20, up by RMB0.04 compared with the same period of 2009. Return on average total assets (ROA) and return on average equity (ROE) were 1.18% and 19.79% respectively, an increase of 0.04 percentage point and 2.40 percentage points respectively compared with the same period of 2009. The ratio of non-interest income to total operating income was 30.87%, an increase of 0.16 percentage point compared with the same period of 2009. The non-performing loan ratio dropped by 0.32 percentage point to 1.20% as compared with the prior year-end, while NPL coverage ratio increased by 37.27 percentage points to 188.44%. The cost to income ratio decreased by 1.63 percentage points to 29.79%. The capital adequacy and core capital adequacy ratio were 11.73% and 9.33%, up by 0.59 and 0.26 percentage point respectively, as compared with the prior year-end.

Fast Growth and Further Structure Optimization in All Business Lines

The scale of assets and liabilities recorded steady growth. As at the end of June 2010, the Bank's total assets and liabilities amounted to RMB9.69 trillion and RMB9.12 trillion, representing an increase of 10.67% and 11.11% from the prior year-end respectively. The Bank's loans and advances to customers and deposits from customers amounted to RMB5.39 trillion and RMB7.22 trillion, up by 9.81% and 9.04% from the prior year-end, among which, RMB-denominated loans and deposits increased by RMB384.02 billion and RMB545.99 billion, or an increase of 10.89% and 10.21% from the prior year-end respectively.

Trade finance business maintained leading market position. In the first half of 2010, the transaction volume of BOC's international settlement reached USD840.1 billion, up by 39.90% as compared with the same period of 2009. The balance of trade finance in RMB increased by RMB35.94 billion or 45.82% as compared with the prior year-end. Dual-factoring export business amounted to USD987 million and continued to rank first in the world. The Bank also continued to lead the market in cross-border RMB trade settlement transactions. The settlement transaction volume achieved by domestic operations exceeded RMB23.0 billion.

Overseas operations and diversified business platforms maintained stable growth. In the first half of 2010, profit after tax from overseas operations was RMB11.33 billion, up by 10.35% compared with the first half of 2009. BOCHK realized after-tax profit of RMB 6.46 billion, up by 6.35% compared with the first half of 2009. The income from our non-commercial banking business including investment banking, direct investment, insurance, fund management, BOC aviation etc as percentage of our total operating income has increased by 2.1 percentage points. The Bank has continued to extend its overseas network. In the first half of 2010, four branches were established, and preparation for the establishment of more branches is being actively pushed forward.

The Bank further optimized its asset and business structure. As at the end of June 2010, the proportion of the Bank's interest-earning assets to total assets was 96.61%, up by 0.12 percentage point compared with the prior year-end. Meanwhile, loans represented 57.84% of the average balance of interest-earning assets, an increase of 7.31 percentage points as compared with the same period of 2009. The Bank's RMB-denominated investment securities represented 73.14% of total investment securities, up by 2.66 percentage points compared with the prior year-end. The proportion of the Bank's RMB-denominated assets accounted for 74.75% of total assets, an increase of 2.30 percentage points compared with the prior year-end. Significant progress has been achieved in the optimization of credit structure. The proportion of loans granted to key industries including transportation, water conservation and electric power increased by almost 1 percentage point compared with the prior year-end, whereas that to the manufacturing industry dropped by 1 percentage point and that to other industries with overcapacity also decreased continuously. The Bank's small enterprises business advanced steadily. As at the end of June 2010, the number of small enterprise customers reached 18.2 thousand, an increase of 8.85% from the prior year-end. The Bank's outstanding loans extended to small enterprises rose by 21.11% from the prior year-end to RMB214.56 billion.

Proactive Risk Management

The Bank further strengthened the management of credit extension to local government financing platforms. It centralized approval of new loans to Head Office, raised the entry threshold and approval criteria, and strictly controlled the total scale. The Bank strengthened the management of existing loans extended to local government financing platforms, organized reassessment of current credit, and took an array of mitigation measures against loans with potentially high risk exposure. As at the end of June, the balance of local government financing platforms loans decreased compared with the prior year-end. The percentage as of total domestic corporate loans declined by 1.08 percentage points, with NPL ratio at only 0.07%.

The Bank reinforced the risk management of credit extended to real estate industry. It strictly complied with capital requirements for real estate projects, and increased the standards for loan collaterals. It also rigorously executed the closed-off management of development loans, strengthened the monitoring of sales revenue collection, and required borrowers to repay loans in accordance with the sales and time schedule of projects. The Bank strictly executed a dynamic and differentiated personal housing loan policy, and intensified scrutiny on personal mortgage application to verify borrower's identify and ensure the authenticity of the transaction. As at the end of June, the NPL ratio of the Bank's real estate corporate loans was only 0.72%, and the NPL ratio of the Bank's personal mortgage loans was at 0.61%.

The Bank tightened the risk management of credit extended to overcapacity industries. It continued to adhere to high entry threshold and strictly prohibited lending to projects of low efficiency and redundant construction. The Bank pursued a deeper restructuring of existing loans, and proactively withdrew from industries that are not in compliance with the State's industrial policy.

Solid Development of Infrastructure Construction

In 2010, the Bank achieved significant progress in its IT Blueprint implementation. New Core Banking System Version has been successfully rolled out in 20 tier-1 branches. The implementation of IT Blueprint project will fully renovate the original IT system, rebuild business processes in all aspects and promote a breakthrough in the management concept and business model at the Bank.

Remarkable progress was achieved in outlet transformation and overall performance of outlets continued to improve. As at the end of June, the average balance of RMB deposits per outlet increased by nearly 10% compared with the prior year-end. The Bank sped up the construction of e-banking channels, the number of e-banking customers increased by 23.86% compared with the prior year-end, among which the number of personal online banking customers increased by 46.78%.

Enhance Effective Capital Management

In the first half of 2010, the Bank has further intensified capital budgeting and enhanced the monitoring and evaluation of the economic capital budget implementation. Meanwhile, the Bank effectively optimized both on-balance-sheet and off-balance-sheet assets structure to reduce capital charges and improve capital efficiency. In the first half, the Bank has achieved progress in its capital replenish plan and successfully completed the issuance of RMB40 billion convertible bond. The proposal of up to RMB60 billion A and H share rights issue has also been approved by the Extraordinary General Meeting, and the Bank is actively pushed forward relevant preparation.

China's economy is now in a crucial stage of transforming from fast recovery to stable growth. The government will continue to deal well with the relationship between stimulating smooth and fast economy growth, promoting restructuring and managing inflation expectation, and will intensify the pertinence, pace and focus of macro-control measures, with an aim to push forward economic development towards the anticipated goal that macro-economic policies strive for. China's economy is expected to continue its healthy trend in the second half of 2010, which provides a favorable environment for banking industry's continuous development.

Looking into the second half of 2010, as stated by Chairman Xiao Gang, the Bank will continue to adopt the scientific outlook on development, implement the State's macro-economic policies, vigorously strengthen its core competitiveness, further deepen structural adjustment and business transformation, improve its asset and liability management, strengthen risk management capability, consolidate development foundations and speed up the development of its professional workforce to improve competitiveness, thus ensuing healthy and rapid business development.

Financial Highlights

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Key Assets and Liabilities Figures

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