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Bank of China Announced 2015 Interim Results


Profit After Tax Reached RMB94.99 billion, up by 1.69%

2015-08-28

Bank of China Limited (“the Bank”: Hong Kong Stock Exchange stock code: 3988, 4601(Offshore Preference Share); Shanghai Stock Exchange stock code: 601988, 360002 and 360010 (Domestic Preference Share)) announced its 2015 interim results on 28 August. According to International Financial Reporting Standard (“IFRS”), the Bank recorded a profit after tax of RMB94.986 billion and profit attributable to equity holders of RMB90.746 billion, increasing 1.69% and 1.14% year-on-year respectively.

From the beginning of 2015, facing complex operating environment, the Bank continuously adhered to the strategic goal of “Serving Society, Delivering Excellence” and persisted in international development. Leveraging on rapid overseas business growth and advantages in diversified operations, the overall business realised steady growth and achieved new development under the economic “new normal”.

Steady performance in key financial indicators with rising international status

As at the end of June 2015, the Bank’s total assets, liabilities and capital and reserves attributable to equity holders amounted to RMB16.30 trillion,RMB15.03 trillion and RMB1.22 trillion, increased 6.87%,6.85% and 6.94% respectively from the prior year-end. The ROA and ROE recorded 1.20% and 16.31% respectively. Net interest margin realised 2.18%, while non-interest income ratio stood at 31.60%. Cost to income ratio (calculated under domestic regulations) decreased 69 basis points year-on-year to 24.85%, further improving its operating efficiency. Asset quality control was continuously strengthened and provision remained sufficient. The NPL ratio stood at 1.41% and the allowance for loan impairment losses to total loans of domestic institutions recorded 2.68%. In the first half of 2015, the Bank successfully issued RMB28 billion of preference shares and completed the conversion and redemption of its convertible bonds. As a result, the Bank’s capital adequacy was strengthened with its tier 1 capital adequacy ratio and capital adequacy ratio reaching 11.62% and 13.69% respectively.

The Bank’s tier 1 capital base became the fourth largest among the world top 1000 banks by the Banker in 2015. The Bank also ranked No.4 in “Forbes Global 2000” in terms of assets, market value and other indicators. On top of that, the Bank was the only Chinese enterprise enrolled in “Fortune Global 500” for 27 consecutive years with 14 places upgrade from 2014.

Support real economy with steady business development

The Bank actively supported China’s economic restructuring and industrial transformation and upgrading based on the demand from real economy, and continuously optimised the asset and liability mix with steady business development. As at the end of June 2015, the Bank’s loans and advances to customers amounted to RMB8.90 trillion, increased RMB413.879 billion or 4.88% compared with the prior year-end. The domestic RMB loans increased RMB340.377 billion or 5.58% from the prior year-end. Guided by the “Made in China 2025” plan, the Bank fully supported the nation’s industrial policy, loans to high-end equipment manufacturing, new energy resources, energy saving and environmental protection, biological industries rose 7.73% from last year-end. The Bank also actively supported SMEs development and proactively exempt related service fee. The Bank innovated the cross-border matchmaking services for global SMEs, and successfully held China-US, China-Central and Eastern Europe, China-Germany, China-ASEAN, China-France, and China-Netherlands SME cross-border trade and investment matchmaking events, to realised the interaction and communication among global SMEs. The Bank actively served the people’s livelihood and their consumption needs, and supported their demand for the first-house mortgages. The domestic personal RMB loans increased 7.06% with its proportion to total domestic RMB loans up 0.48 percentage point from the last year-end.

The Bank proactively strengthened liability management and strictly applied deposit deviation control. As a result, the deposit quality was substantially improved. The Bank’s customer deposits amounted to RMB11.54 trillion, an increase of RMB651.324 billion or 5.98% compared with the prior year-end. The Bank strove to enhance product innovation to expand funding sources. Deposits from administrative institutions and funding of salary payment agency business increased 9% and 23%. Grasping the advantages from internationalisation and Shanghai FTZ, the Bank actively promoted the cash management business of multinational companies with its cash management platform’s sedimentary fund increasing 22%. The Bank strove to expand the third-party custodian business, and maintained leading position with total RMB6.7 trillion assets under custody. The Bank successfully won several competitive bids for corporate annuity custodian services, and the total number of individual pension accounts and assets under custody increased 14% and 21% respectively. The Bank also took advantage of its internationalisation edges to expand overseas funding sources. As at the end of June 2015, the overseas funding balance reached USD61.2 billion.

The Bank pushed forward its infrastructure construction. It continued to enhance the efficiency and effectiveness of its channels and accelerated the construction of smart outlets. Its e-banking transaction volume grew 15% year-on-year and the proportion of business conducted via e-channel to overall business increased to 86%. The Bank continued to improve the competitiveness of its E-finance offerings and consolidated its leading position in online cross-border service system. It led its domestic peers in cross-border trade tariff payment volume and e-tariff payment letter of guarantee balance. It also achieved progress in the construction of a smart E-Community, with registered users and transaction amount increasing substantially.

Accelerate development of overseas business and diversified platform business with strong start in serving the “Belt and Road” initiative

The Bank resolutely honoured its social responsibilities and entwined its own development with national strategies. It supported the implementation of national strategies while further sharpening its internationalisation and diversification advantages. As at the end of June 2015, the Bank’s total overseas assets was USD795.982 billion, an increase of 6.83% compared to the prior year-end, and accounted for 27.53% of the Bank’s total assets. Overseas profit before tax was USD4.652 billion, an increase of 5.46% year-on-year, accounted for 22.91% of the Bank’s total profit before tax, leading major peers. Its diversified businesses including investment banking, insurance, fund, investment and leasing made a new progress. BOC Insurance successfully completed the acquisition of Samsung Air China Life Insurance Co., Ltd. The profit before tax from the diversified business platforms increased 41.64% compared with the first half of last year, becoming the vital propeller for the group’s profit growth.

The Bank improved organisational design, coordinated all of the efforts to push forward, and made a strong start in building a financial artery for the “Belt and Road” initiative. The Bank successfully issued the first “Belt and Road” bond denominated in RMB, USD, EUR and SGD, which were listed on exchanges in Dubai, Singapore, Taipei, Hong Kong and London simultaneously. These bonds totaled USD4 billion equivalent, setting a new record as the largest overseas bond issuance by a Chinese bank. The Bank actively supported the key projects along the “Belt and Road”, and followed up nearly 300 projects with intentional credit about USD68 billion. The Bank continued to improve service for “Going Global” enterprises. As at the end of June 2015, it cumulatively extended USD136.5 billion loan commitment to “Going Global” projects. The Bank deepened cooperation with financial institutions along the “Belt and Road”, and proactively pushed forward cooperation with bilateral development institutions such as AIIB,New Development Bank and Silk Road Fund. The Bank enhanced foreign exchange quotation capability for countries along the “Belt and Road”, and became the first bank providing forward exchange and swap services for the Russian Ruble and Kazakhstani Tenge against RMB. The Bank continued to expand its global service network. As at the end of June 2015, the Bank owned 635 overseas institutions in 42 countries and regions.

The Bank consolidated its leading position in traditional advantages such as international settlement business and expanded its competitive edges in RMB internationalisation business. In the first half of 2015, international settlement volume recorded USD1.96 trillion, cross-border RMB settlement volume reached RMB2.63 trillion, while cross-border RMB clearing volume reached RMB148 trillion, maintaining a leading position globally. It was successfully designated as an RMB clearing bank in Hungary, South Africa and formally launched its Hong Kong Offshore RMB Centre. Its market share in underwriting the offshore RMB-denominated bonds ranked top among its domestic peers. It became the settlement bank for Hong Kong Stock Exchange, Chicago Mercantile Exchange, Singapore Exchange, Deutsche B?rse AG, London Clearing House and London Metal Exchange, basically forming a global network of settlement bank services for major exchanges. The Bank’s key business platforms in Shanghai FTZ ran smoothly, leading peers in terms of free trade account numbers and deposit and loan balance. It also established market-leading positions in new FTZs in Guangdong, Tianjin and Fujian.

Continuously strengthen risk management and effectively controlled credit cost

The Bank closely monitored changes in the economic situation and continuously improved its comprehensive risk management. It  strengthened risk prevention, early warning and resolution to avoid systemic and regional risk and maintained asset quality in the reasonable range. As at the end of June 2015, its non-performing loans ratio was 1.41%, and special-mention loan ratio was 2.30%. The allowance for loan impairment losses to total loans of domestic institutions was 2.68% and group’s credit cost was 0.63%. In the first half, the non-performing assets resolved by its domestic institutions amounted to RMB43.4 billion, up RMB16.5 billion year-on-year, in which cash recovery accounted for RMB19 billion, up RMB5.9 billion year-on-year. The Bank continued to enhance risk management on overall credit exposures, and strengthened risk control of key fields, such as local government financing vehicles, overcapacity industries and real estate sectors. The Bank intensified country risk management and risk management on collaborative businesses between domestic and overseas institutions. The Bank comprehensively enhanced liquidity risk management and market risk management. Its monthly averaged liquidity coverage ratio in second quarter of 2015 was 122.71%, above regulatory requirement.

In the second half of 2015, the Bank will adhere to the strategic goal of “Serving Society, Delivering Excellence”, and bring its competitive advantages of internationalisation and diversification into full play. It will focus upon increasing operational efficiency, developing momentum, quality and potential, and will thus push forward the sustainable and healthy growth of its businesses.

Financial Highlights
(IFRS)

Key Performance Figures

Unit: RMB million Change 1H 2015 1H2014
Net interest income 4.29% 163,391 156,675
Non-interest income -3.47% 75,487 78,197
Including: Net fee & commission income -4.00% 50,044 52,131
Operating expenses 1.56% (87,234) (85,897)
Impairment losses on assets 2.86% (28,576) (27,782)
Profit for the period ?1.69% 94,986 93,409
Profit attributable to the equity holders of the Bank ?1.14% 90,746 89,724

Key Assets and Liabilities Figures

Unit: RMB million Change As at 30 Jun 2015 As at 31 Dec 2014
Total assets 6.87% 16,298,593 15,251,382
Loans, gross 4.88% 8,897,154 8,483,275
Total liabilities 6.85% 15,031,444 14,067,954
Due to customers 5.98% 11,536,547 10,885,223
Capital and reserves attributable to equity holders of the Bank 6.94% 1,220,085 1,140,859

Key Ratios

  Change (PPT) 1H2015 1H2014
Return on average total assets -0.07 1.20% 1.27%
Return on average equity -2.26 16.31% 18.57%
Net interest margin -0.09 2.18% 2.27%
Cost to income ratio
(calculated under domestic regulations)
-0.69 24.85% 25.54%
Credit Cost ?-0.06 0.63% 0.69%
  ?Change (PPT) As at 30 Jun 2015 As at 31 Dec 2014
Non-performing loans to total loans 0.23 1.41% 1.18%
Allowance for loan impairment losses to non-performing loans -30.23 157.37% 187.60%
Common equity tier 1 CAR 0.02 10.63% 10.61%
Tier 1 CAR 0.27 11.62% 11.35%
Capital adequacy ratio (CAR) -0.18 13.69% 13.87%

Per Share Information

Unit: RMB Change (RMB) 1H2015 1H2014
Basic earnings per share -0.01 0.31 0.32
  Change (RMB) As at 30 Jun 2015 As at 31 Dec 2014
Net assets per share 0.11 3.81 3.70

Note:The capital ratios are calculated in accordance with Capital Rules for Commercial Banks (Provisional) and related regulations.

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