On May 31, Bank of China formally released its 2004 annual report with approval from its Board of Directors.
The year 2004 was a watershed in terms for BOC’s development and reform. Significantly, Bank of China Limited was incorporated as a joint-stock bank. The Bank took full advantage of expanding market opportunities, strengthened its corporate governance and enjoyed steady growth. In 2004, Bank of China Group (the “Group”) had an operating profit RMB 57.8 billion, and net profit for the year was RMB 20.9 billion. Excluding the effect of the net gain from sale of shares in Bank of China Hong Kong (Holdings) Limited in 2003, operating profit increased by 21.3%, and net profit kept nearly the same compared to year 2003. The key ratios of return on average total assets and return on average shareholders’ funds were 0.61% and 10.04%, respectively.
At the end of 2004, BOC’s capital adequacy ratio was 10.04%, which reflects a strengthening of the Group’s capital position. The disposition of NPLs has, through wirte-offs and sales, been substantially completed. Asset quality has improved significantly, with a non-performing loan ratio of 5.12% and NPL provision coverage of 68.02%.
During 2004, the Group’s operating income was RMB104.7 billion. Excluding the effect of the net gain from sale of shares in Bank of China Hong Kong (Holdings) Limited in 2003, operating income increased 22.2%. The Group’s net interest income increased by RMB 13.1 billion, or 18.2%, to RMB 85.0 billion in 2004. This increase was attributable to the effects of steady growth in the average balance of interest-earning assets and a widening of the net interest spread. Income from intermediary business activities grew steadily. Net fee and commission income rose by 16.4% to RMB 8.6 billion and net trading income increased by 96.4% to RMB8.8 billion.
At 31 December 2004, the Group’s total assets were RMB 4,270.4 billion, 7.3% more than the previous year-end. The Group’s outstanding balance of loans was RMB 2,146.5 billion. After excluding the effect of the write-offs and sales of NPLs as part of Joint Stock Reform, loan growth was 11.3% during 2004. Consumer lending experienced robust growth as a result of continued market expansion and BOC’s introduction of innovative new products. At 31 December 2004, the Group’s balance of deposits was RMB 3,342.5 billion, an increase of 10.1% over the previous year-end.
Bank of China’s 2004 Annual Report reflects its commitment to continuing improvement in financial reporting and disclosure in many areas. First, the Bank’s 2004 financial statements reflect the adoption of the Accounting System for Financial Institutions (2001), which is more consistent with international practice. Notably in this regard, the financial statements reflect provisions for all impaired assets that are based on their estimated recoverable amounts. Management believes that these financial statements properly reflect BOC’s financial position and results of operations. PricewaterhouseCoopers has audited these financial statements and issued an unqualified opinion.
Next, these financial statements reflect the adoption of the classification provisions of International Accounting Standard No. 39. In this regard, BOC’s investments in debt securities have been accounted for at either fair value or amortised cost. In addition, all derivatives have been accounted for at fair value. Furthermore, the bank is substantially consistent with the requirements on disclosure and presentation of financial instruments of IAS 39.
Finally, consistent with the CSRC disclosure requirements for listed banks, the financial statements include significantly expanded disclosures and more detailed account break-downs.
The abstract of the 2004 Annual Report is available through newspapers and can also be viewed through Bank of China’s website.
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