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BANK OF CHINA ANNOUNCES 2009 THIRD QUARTER RESULTS

(29 October, 2009) - Bank of China Limited (“BOC” or “the Bank”, HKEx stock code: 3988, SSE stock code: 601988) announces its results for the third quarter of 2009.

During the first three quarters of 2009, the Bank continued to improve its market competitiveness, profitability and risk management capabilities, and achieved robust and sustainable growth based on prudent operation. In accordance with International Financial Reporting Standards (“IFRS”), during the first three quarters ended 30 September 2009, BOC recorded RMB 62.23 billion in profit attributable to shareholders, up by 3.82% year-on-year. Earnings per share for the first three quarters reached RMB 0.25, up by RMB 0.01 year-on-year. Return on equity (ROE) was 17.36%. During the first three quarters, BOC maintained the trend of improvement in its operation, successfully reversed the trend of year-on-year decrease for the first half and achieved growth for the profit during the first three quarters. The Bank achieved RMB 21.107 billion in profit attributable to shareholders for the third quarter of 2009, an increase of 18.83% year-on-year.

As at the end of September 2009, the total assets and total liabilities reached RMB 8.34 trillion and RMB 7.82 trillion, an increase of 19.95% and 20.99% respectively from the end of last year.

During the first three quarters of 2009, BOC earned a net interest income of RMB 115.61 billion, down by 5.43% year-on-year. Domestic RMB-denominated net interest income reached RMB 88.4 billion, up by 8.4% year-on-year. Net fee and commission income grew by 8.39% year-on-year to RMB 34.513 billion. Impairment losses on assets decreased significantly by 55.42% year-on-year to RMB 11.73 billion.

Maintained stable loan growth and further optimized loan structure

Since October 2008, adhering to the government’s strategic direction to “maintain growth, expand domestic demand and adjust structure” along with a moderately relaxed monetary policy, BOC leveraged on its overall competitive advantage and strengthened its marketing efforts to attract high-quality customers and projects. While maintaining effective risk management, BOC increased its efforts in loan growth. As at the end of September 2009, the balance of total customer loans rose by RMB 1,405.119 billion or 42.63% to RMB 4,701.265 billion compared with the end of last year. Domestic RMB-denominated loans increased by RMB 1,051.746 billion or 44.97% to RMB 3,390.43 billion from the end of 2008. Market share of RMB-denominated loans rose by 0.98 percentage point to 8.69% from last year-end.

With the strong loan growth achieved in the first half of the year, BOC has maintained reasonable loan growth in the third quarter, and at the same time, increased its efforts in optimizing the credit structure through further lowering the share of low-yield discounted bills to achieve balanced growth. Share of discounted bills in new RMB-denominated loans has dropped significantly from 22% in the interim of 2009 to 7% at the end of September, lower than the market average level. Industry-mix of the loan book has further optimized while customer mix further improved.

NIM maintained stable while net interest income further improved

In 2009, the Bank recorded steady quarterly rebound in net interest income. Net interest income in the third quarter was RMB 40.888 billion, an increase of 7.93% compared with the second quarter of 2009, or flat compared with the third quarter of 2008.

Net interest margin (NIM) for the first three quarters was 2.03%, slightly dropped by 1 basis point compared with the first half of 2009. The main reason is the further decline of NIM of domestic foreign currency business, which is mainly due to the lower interest rate environment around the globe and lack of improvement in the yield of foreign currency-denominated investment securities etc. As the global economy starts to recover and the rate-cut cycle has primarily completed, the adverse factors which influence NIM will gradually weaken and the effects of the Bank’s efforts in improving loan and investment structure will further emerge.

Solidify the advantage in traditional business while exploring new drivers aggressively. Growth was maintained in net fee and commission income

In order to mitigate the negative impact of the external operating environment, BOC has endeavoured to maintain its leading position in international settlement business by reinforcing its customer base, enhancing product innovation, promoting development of its network and improving service quality. In addition, the Group actively sought new growth drivers, and achieved fast growth in domestic settlement fee, consultancy and advisory fee and bank card fee income. Agency commission income has started to record year-on-year growth in the third quarter; the rate of decrease in settlement and clearing fees has narrowed. Net fee and commission income in the third quarter reached RMB 11.558 billion, similar to the level in the second quarter but increased significantly by 21.97% year-on-year. In the first three quarters, net fee and commission income represented 20.45% of total operating income, an increase of 2.51 percentage points year-on-year.

Credit asset quality remains sound; small writeback in investment securities provision was recorded

In the third quarter, the Bank adhered to its moderate risk appetite and continued to uphold independence, centralization and professionalism in its risk management system. The Bank has continuously strengthened post-credit management and has implemented a comprehensive examination and research on its credit business. As at 30 September 2009, non-performing loans of the Bank amounted to RMB 75.309 billion, a decrease of RMB 12.181 billion and RMB 2.178 billion compared with last year-end and interim of 2009, respectively. NPL ratio was 1.6%, dropped by 1.05 percentage points from last year-end, or 0.2 percentage point from interim of 2009 respectively. NPL coverage ratio increased by 22.94 percentage points from the end of 2008 to 144.66%, or 5.7 percentage points compared with the interim of 2009. In the first three quarters of 2009, the Group’s impairment losses on loans amounted to RMB 10.576 billion, an increase of RMB 1.144 billion year-on-year, with a credit cost of 0.35%.

In the third quarter of 2009, affected by factors including the repayment of principal and interest, the carrying value of the US subprime mortgage-related debt securities, Alt-A mortgage-backed securities, Non-agency mortgage-backed securities, and Fannie Mae & Freddie Mac related bonds has further decreased by US$1.016 billion compared with the interim period of 2009, and a small writeback of impairment provision was recorded.

In the fourth quarter of 2008, BOC has prudently recognized a large amount of impairment losses based on market condition. Now, the impairment pressure in foreign currency-denominated investment securities has decreased significantly. The Bank will continue to closely monitor the latest development of the market and assess impairment on related debt securities in a prudent manner in accordance with IFRS.

Operating expenses in the first three quarters of 2009 amounted to RMB 72.553 billion, an increase of 2.95% year-on-year. Cost to income ratio increased by 3.02 percentage points year-on-year to 37.90%. One of the reasons for the increase of operating expenses is due to BOCHK’s charges in connection with Lehman Brothers related products which amounted to HK$3.242 billion (RMB2.857 billion). Among the total, HK$3.008 billion were recorded in the third quarter.

In the fourth quarter of 2009, under the guiding principles of a scientific approach to development, BOC will continue to implement national macro-economic policies, and adhere to our working plan to optimize structure, expand scale, enhance brand name, strengthen infrastructure, improve proactive risk management, control cost and improve competitiveness. The Bank will maintain reasonable pace in expansion of business scale and increase efforts in structure adjustment, expand customer and deposit base, increase market efforts to reserve high-quality projects, and also enhance risk management efforts to build a solid foundation for future sustainable growth. The Bank is confident to achieve solid results for the full year.

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