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Bank of China Limited Reports Robust Growth After Share Reform & Listing

(Hong Kong, 22 March 2007) ─ Bank of China Limited (“BOC”, HKEX stock code: 3988, SSE stock code: 601988) announced its annual results for the year ended 31 December 2006. This first annual report after listing fully evidenced BOC’s success in its staged reform under the goal of building itself into a world-class international bank. Net profit far exceeded the IPO profit forecast, with splendid results achieved in profitability, operational efficiency and quality of assets.

 For the year under review, BOC recorded an operating income of RMB148,378 million, a year-on-year rise of 18.60%. Net profit attributable to equity holders surged 65.23% year-on-year to RMB42,830 million. Earnings per share were RMB0.18. Return on average equity grew remarkably by 192 basis points to 14.06%, whereas return on average assets increased 26 basis points to 0.96%. The board of directors recommended a final dividend of RMB4 cents per share.

 The notable increase in profit after tax for the year was attributable to the robust growth in net interest income and net fee income, stringent control on credit cost, lower exposure to market risks, enhanced operational efficiency and a substantial reduction in effective tax rate resulted from increased tax reduction.

 Net interest income increased 20.16% year-on-year to RMB121,371 million. Net interest spread and net interest margin widened by 7 basis points and 12 basis points to 2.28% and 2.45% respectively, as a result of substantial growth of interest-earning assets and significant reduction of funding cost achieved by proactive asset and liability management.

 Non-interest income grew 12.07% to RMB27,007 million which accounted for approximately 18.20% of the operating income. Excluding the valuation loss on net foreign exchange exposure, the contribution of non-interest income to the operating income rose by 1.07% to 23.28%, in which net fee and commission income surged 54.89% against the previous year. By further extending its diverse business platform, BOC saw a remarkable growth in pre-tax profit contribution from investment banking and insurance.

 Effective control on operating expenses reduced the cost to income ratio (excluding income tax and other taxes) from 43.41% to 41.97%, while the effective tax rate decreased from 41.35% to 28.96%.

 Exercising vigilance in risk management and asset quality control, BOC achieved “dual decrease” in both impaired loan balance and impaired loan ratio. During the year, BOC’s impaired loan balance was RMB 103,232 million, down RMB 6,298 million compared with the previous year, while impaired loan ratio was 4.24%, down 0.66%. Impaired loan coverage ratio increased to 91.34% from 75.92% in the previous year. Credit cost was managed at 0.53%. Special mention loan ratio was lowered sharply to 8.15% from the previous year’s 12.71%.

 As at 31 December 2006, total assets of BOC reached RMB5,327,653 million, an increase of 12.40% against the previous year. Gross loans and advances grew steadily by 8.80% to RMB2,432,019 million, in which RMB loans surged 14.56%. Total liabilities amounted to RMB4,914,697 million, 9.59% more than the previous year. Total deposits swelled by 10.59% to RMB4,091,118 million. Shareholder’s equity (excluding minority interest) recorded a robust growth of 69.12% to RMB382,917 million.

 The listing of BOC has substantially enhanced its capital strength. As at the end of December 2006, BOC’s capital adequacy ratio was improved by 3.17% to 13.59%, while core capital adequacy ratio was raised by 3.36% to 11.44%, when compared with the position at the end of the previous year.

Mr. Xiao Gang, Chairman of BOC, said, “In 2006, BOC achieved remarkable progress in its reform in shareholding structure and became the first Chinese bank to be dual-listed in both the international and domestic capital markets. During the year, we acquired the Singapore Aircraft Leasing Enterprise Pte. Ltd, making a step forward in implementing our strategic plan of expanding financial product and service platform. Furthermore, by appointing experts from overseas to the board, we enhanced our governance structure as well as raised the operation of the board towards international standards. In the coming year, we will speed up internal reforms, proactively adjust our business strategies and continue to perfect our corporate governance mechanism, so as to respond quickly to the changed operating environment. We have also appointed a seasoned professional with more than 20 years risk management experience in international banks to be our Chief Credit Officer. With these capabilities, we will be able to realize healthy and balanced business development and maximize shareholder’s value.”

Mr. Li LiHui, Vice Chairman and President of BOC, said, “Looking ahead, we see challenges as well as opportunities. We will continue our efforts in developing Bank of China into a leading international bank by further refining our operating mechanisms and growth patterns. We will strengthen our business flow integration and implement the IT Blueprint more effectively; we will improve risk management and internal control; we will continue with superior product and service innovation. We will deepen HR reforms and build corporate culture. We will foster the innovative and competitive values one needs to be a market leader, to ensure a healthy, rapid and sustainable business growth.”

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About Bank of China Limited

Bank of China Limited (“BOC”) is one of the four largest commercial banks in China. Headquartered in Beijing, it has over 10,000 domestic branches and sub-branches. With over 600 overseas branches, subsidiaries and representative offices covering 27 countries and regions, and correspondent banking relationships with over 1,500 foreign banks, BOC also has the most extensive international network among commercial banks in the country. According to the Banker magazine, it was the 17th largest bank in the world in terms of tier 1 capital as at 31 December 2005.

BOC primarily engages in commercial banking. It also provides investment banking, insurance and equity investment services through its subsidiaries, BOC International, BOCG Insurance and BOCG Investment, thereby creating a universal financial platform that offers comprehensive integrated services to its customers. Bank of China (Hong Kong) Limited, wholly owned by BOC Hong Kong (Holdings) Limited (HKEX: 2388), BOC’s subsidiary, and the Macau branch of BOC, are one of the banknote issuing banks in their respective regions. The former is the second largest commercial bank in Hong Kong, whereas the latter is the largest commercial bank in Macau.

BOC was listed on the Hong Kong Stock Exchange on 1 June 2006 (stock code: 3988) and shortly after, on the Shanghai Stock Exchange (stock code: 601988) on 5 July 2006, thus making it the first commercial bank in China listed in the international and domestic capital markets. The listing in Hong Kong and China has further enhanced BOC’s strengths and influence in the international and domestic markets, giving this century-old brand an added splendor.

Financial Highlights

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Note: Figures of 2003 included the RMB7.4 billion net investment gain from sale of part of the shares of Bank of China (Hong Kong) held by BOC.

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