Summary of Annual Report 2017 of CHINA BOHAI BANK CO., LTD.

Transcription

1 Summary of Annual Report 2017 of CHINA BOHAI BANK CO., LTD. 1. Important Notice 1.1 The Board of Directors, the Board of Supervisors, directors, supervisors and senior executives of the Bank guarantee that the Annual Report 2017 contains no false records, misleading statements or material omissions, and agree to be jointly and severally responsible for the authenticity, accuracy and completeness of the report. The summary is abstracted from the Annual Report 2017 of the Bank, please refer to the full text of the report for further details. 1.2 The annual report 2017 and summary of the Bank was reviewed and approved at the 20 th Meeting of the Fourth Board of Directors and the 8 th Meeting of the Fourth Board of Supervisors on 26 March On the same date, the 45 th General Meeting of the Bank considered and approved the profit distribution plan for Please refer to "Report of the Board of Directors: 2017 Profit distribution plan" herein for details. 1.3 Mr. Li Fuan, Legal Representative and Chairman of the Bank, Mr. Fu Gang, President of the Bank, Mr. Wu Siqi, executive in charge of finance and accounting, and Mr. Zhou Yan, authorized representative of the Head of Finance Department guarantee the authenticity, accuracy and completeness of the financial reports disclosed in the Annual Report The 2017 Financial Statements of the Bank prepared under the PRC GAAP and the IFRS have been audited by KPMG Huazhen LLP in accordance with the China Standards on Auditing and the International Standards on Auditing respectively, and standard unqualified auditor's reports have been issued. 1.5 Unless otherwise specified, financial data and indicators in this summary are denominated in Renminbi (RMB). 01

2 2. Corporate Information 2.1 Basic information Legal name and abbreviation in Chinese: 渤海银行股份有限公司 ( 渤海银行 ) Legal name and abbreviation in English: CHINA BOHAI BANK CO., LTD. (CBHB) Legal Representative: Li Fuan Registered & office address: 218 Haihe East Road, Hedong District, Tianjin, PRC Postcode: Unified credit code: Website: Service & complaint hotline: (86) 95541, (86) Contact information Secretary to the Board of Directors: Zhao Zhihong Address: 218 Haihe East Road, Hedong District, Tianjin, PRC Telephone: (86) Fax: (86) Postcode: Locations where copies of the annual report are kept The Board's Office and main outlets of the Bank Summary of Annual Report 2017 is published on the Bank's website and in the Financial News. 2.4 Accounting firm for the annual audit Auditor: KPMG Huazhen LLP Address: 8 th Floor, KPMG Tower, Oriental Plaza, 1 East Chang An Avenue, Dongcheng District, Beijing , PRC CPAs signing the Auditor's Report: Shi Jian, Jin Naiwen 02

3 3. Financial Summary 3.1 Major accounting data and financial indicators Item Audited (PRC GAAP) 2017 Audited (IFRS) 2016 (Audited, PRC GAAP) Audited (PRC GAAP) Increase/ decrease 2015 (Audited, PRC GAAP) Operating results: Operating income 25,203,908 25,250,147 21,865, ,479,527 Operating profit 8,389,936 8,423,737 7,971, ,129,263 Net income before tax 8,425,428 8,425,428 7,997, ,134,650 Net profit 6,753,820 6,753,820 6,473, ,688,512 Net profit attributable to shareholders 6,753,820 6,753,820 6,473, ,688,512 Net profit attributable to shareholders after extraordinary items 6,689,304 6,689,304 6,454, ,684,472 Net cash inflow from operating activities -25,917,585-25,917,585-55,802, ,903,794 Per share data (in RMB yuan): Basic earnings per share attributable to shareholders Diluted earnings per share attributable to shareholders Basic earnings per share attributable to shareholders after extraordinary items Diluted earnings per share attributable to shareholders after extraordinary items Net cash inflow per share from operating activities Financial ratios : Return on average total assets attributable to shareholders Fully diluted ROE attributable to shareholders Return on weighted average equity attributable to shareholders Fully diluted ROE attributable to shareholders after extraordinary items Return on weighted average equity attributable to shareholders after extraordinary items Down 0.07 percentage point 0.79 Down 1.67 percentage points Down 1.65 percentage points Down 1.77 percentage points Down 1.75 percentage points

4 Item 31 December December 2016 Audited (Audited, (IFRS) PRC GAAP) Audited (PRC GAAP) Audited (PRC GAAP) Increase/ decrease 31 December 2015 (Audited, PRC GAAP) Scale: Total assets 1,002,567,049 1,002,567, ,119, ,235,440 Total loans and advances 464,889, ,889, ,681, ,576,781 -Corporate loans 343,350, ,350, ,267, ,458,074 -Discounted bills 2,737,536 2,737,536 5,757, ,594,661 -Personal loans 118,801, ,801,339 79,657, ,524,046 Allowance for impairment losses on loans 15,076,125 15,076,125 10,838, ,617,896 Total liabilities 954,101, ,101, ,656, ,678,444 Customer deposits 582,103, ,103, ,190, ,436,008 -Demand 292,456, ,456, ,444, ,810,643 -Time 289,098, ,098, ,331, ,455,486 -Others 548, ,729 2,414, ,169,879 Placements from banks and other financial institutions 37,837,151 37,837,151 12,243, ,918,918 Equity attributable to shareholders 48,465,302 48,465,302 41,463, ,556,996 Net assets per share attributable to shareholders (in RMB yuan) Total share capital 14,450,000 14,450,000 13,855, ,855, Supplementary financial indicators (In %) Item Profitability: Net interest spread Net interest margin Cost-to-income ratio Item 31 December December December 2015 Asset quality: Non-performing loan ratio Reserve coverage ratio Loan loss reserve ratio Capital adequacy: Capital adequacy ratio Tier 1 capital adequacy ratio Core tier 1 capital adequacy ratio Leverage ratio

5 Item 31 December December December 2015 Other indicators: Liquidity ratio RMB Foreign currencies equivalent to RMB RMB and foreign currencies Percentage of loans to the largest borrower Percentage of loans to top 10 borrowers Percentage of interbank borrowing and lending (RMB) Percentage of interbank borrowing Percentage of interbank lending Note: 1. Capital adequacy ratios are calculated according to the Capital Rules for Commercial Banks (Provisional) of CBRC. 2. Leverage ratio is calculated according to the Capital Rules for Commercial Banks (Provisional) and the Leverage Ratio Rules for Commercial Banks (Revised) issued by CBRC as well as the PRC GAAP. 3. The Bank discloses the capital information including capital composition and leverage ratio during the reporting period at the portal website ( according to related requirements of the Regulatory Requirements on Disclosure of Capital Composition Information by Commercial Banks and the Leverage Ratio Rules for Commercial Banks (Revised) issued by CBRC. 4. "Percentage of loans to the largest borrower" and "percentage of loans to top 10 borrowers" are proportions of the respective loan amount to net capital. 3.3 Extraordinary items and corresponding amount (In %) Extraordinary item Governmental subsidy 44,100 16,085 3,867 Other P/L items conforming to the definition of extraordinary item 45,337 9,670 1,520 Less: Income tax on extraordinary items 24,921 6,439 1,347 Total 64,516 19,316 4, Differences in financial accounting pursuant to the PRC GAAP and the IFRS There is no difference in the net profit for 2017 and the net assets as of 31 December 2017 presented in the financial statements of the Bank prepared pursuant to the PRC GAAP and the IFRS. 05

6 4. Changes in Share Capital and Particulars of Shareholders 4.1 Number of shareholders and particulars of shareholding As at the end of 2017, the Bank had seven shareholders. Changes in the shareholdings in 2017 are as follows: Name of shareholder 31 December /- shares 31 December 2017 In shares In % in 2017 In shares In % Tianjin TEDA Investment Holding Co., Ltd. 2,125,000, ,125,000, Standard Chartered Bank (Hong Kong) Limited 1,699,150, ,699,150, China Shipping Investment Co., Ltd. 1,161,950, ,161,950, State Development & Investment Corp., Ltd. 991,950, ,950, China Baowu Steel Group Corporation Limited 991,950, ,950, Tianjin Trust Co., Ltd. 850,000, ,000, Tianjin Shanghui Investment (Holdings) Co., LTD. 680,000, ,000, Total 8,500,000, ,500,000, Note: 1. The shares held by Oceanwide Industry Co., Ltd., Shine Enterprises (Tianjin) Co., Ltd., Tianjin Xianghe Enterprise Management Consulting Co., Ltd., Tianjin Firstwood Co., Ltd., Tianjin Shuaishan Enterprise Management Consulting Co., Ltd. and Tianjin Shanren Enterprise Management Consulting Co., Ltd. in the Bank are legally succeeded from Tianjin Trust Co., Ltd. and held by a collective fund trust plan. The above share succession has been reviewed and approved by the General Meeting of Shareholders and the Board of Directors and ratified by China Banking Regulatory Commission, but the Bank has not completed the registration of changes in the register of shareholders and industrial and commercial changes. 2. On 15 December 2017, State Development & Investment Corp., Ltd. sent the Bank a Letter in Respect of the Change of Company Name and Registered Capital, stating that upon the approval of the Beijing Administration for Industry & Commerce, State Development & Investment Corporation has been renamed "State Development & Investment Corp., Ltd." as of 5 December 2017, and the business entity and its legal relations remain unchanged. 3. The Bank launched its second capital increase in As at the end of 2017, shares subscribed for amounted to RMB14,450 million and the paid-in amount was RMB14,450 million. Relevant formalities for changes in registered capital were still ongoing as at the reporting date. After completion of the change above, the Bank's registered capital will be RMB14,450 million. 06

7 4.2 Changes in shares There was no change in share structure of the Bank in 2017, detailed as follows: 31 December /- shares in December 2017 In shares In % New shares Others Subtotal In shares In % State-owned shares Shares held by stateowned legal persons 5,270,850, ,270,850, Shares held by other domestic investors 1,530,000, ,530,000, Shares held by foreign investors 1,699,150, ,699,150, Total 8,500,000, ,500,000, Note: As at 31 December 2017, "shares held by other domestic investors" include shares held by Tianjin Trust Co., Ltd. (investing with collective trust funds) and Tianjin Shanghui Investment (Holdings) Co., LTD. 4.3 Association between shareholders as well as share transfer, share pledge, custody of shares and locked-up shares In 2017, there was no association between the shareholders of the Bank. Neither were any of their shares in the Bank pledged, locked up or under custody. There was no share transfer except for the legal succession of shares held by Tianjin Trust Co., Ltd. via a collective fund trust plan to Oceanwide Industry Co., Ltd., Shine Enterprises (Tianjin) Co., Ltd., Tianjin Xianghe Enterprise Management Consulting Co., Ltd., Tianjin Firstwood Co., Ltd., Tianjin Shuaishan Enterprise Management Consulting Co., Ltd. and Tianjin Shanren Enterprise Management Consulting Co., Ltd. 4.4 The Bank's main shareholders and their controlling shareholder, de facto controller, related parties, persons acting in concert and ultimate beneficiary as at the end of 2017 Name of shareholder Controlling shareholder De facto controller Ultimate beneficiary Tianjin TEDA Investment Holding Co., Ltd. Standard Chartered Bank (Hong Kong) Limited China Shipping Investment Co., Ltd. State Development & Investment Corp., Ltd. China Baowu Steel Group Corporation Limited SASAC of Tianjin SASAC of Tianjin Tianjin TEDA Investment Holding Co., Ltd. Standard Chartered PLC COSCO Shipping Development Co., Ltd. SASAC of the State Council SASAC of the State Council Standard Chartered PLC SASAC of the State Council SASAC of the State Council SASAC of the State Council Standard Chartered Bank (Hong Kong) Limited China Shipping Investment Co., Ltd. State Development & Investment Corp., Ltd. China Baowu Steel Group Corporation Limited 07

8 Name of shareholder Controlling shareholder De facto controller Ultimate beneficiary Tianjin Trust Co., Ltd. Tianjin Hi-Tech Holding Group Co., Ltd. Tianjin Shanghui Investment (Holdings) Co., LTD. Administration Committee of Tianjin Binhai High-tech Industrial Development Zone Oceanwide Industry Co., Ltd. Shine Enterprises (Tianjin) Co., Ltd. Tianjin Xianghe Enterprise Management Consulting Co., Ltd. Tianjin Firstwood Co., Ltd. Tianjin Shuaishan Enterprise Management Consulting Co., Ltd. Tianjin Shanren Enterprise Management Consulting Co., Ltd. - - Tianjin Shanghui Investment (Holdings) Co., LTD. Note: 1. The shares held by Tianjin Trust Co., Ltd. in the Bank via a collective fund trust plan have been legally succeeded by six companies, including Oceanwide Industry Co., Ltd., but the registration of changes in the register of shareholders and industrial and commercial changes have not been completed. 2. None of the shareholders above are persons acting in concert. 3. For particulars of related parties of shareholders, please refer to "Significant Events: Material related party transactions" of this summary. 4.5 Related party transactions between the Bank and its main shareholders and their controlling shareholder, de facto controller, related parties, persons acting in concert and ultimate beneficiary For the related party transactions between the Bank and its main shareholders and their controlling shareholder, de facto controller, related parties, persons acting in concert and ultimate beneficiary in 2017, please refer to "Significant Events: Material related party transactions" of this summary. 4.6 Controlling shareholder, de facto controller and employee shares In 2017, the Bank had no controlling shareholder, de facto controller or employee share. 4.7 Share issue in 2017 According to the resolutions of the 43 rd General Meeting of the Bank and the Reply of China Banking Regulatory Commission to Share Transfer and Private Placement of CHINA BOHAI BANK CO., LTD. (Y.J.F.[2017]No.363), six companies, namely, Oceanwide Industry Co., Ltd., Shine Enterprises (Tianjin) Co., Ltd., Tianjin Xianghe Enterprise Management Consulting Co., Ltd., Tianjin Firstwood Co., Ltd., Tianjin Shuaishan Enterprise Management Consulting Co., Ltd. and Tianjin Shanren Enterprise Management Consulting Co., Ltd., participated in the Bank's rights issue to subscribe for seven shares, at RMB1 per share, for every ten shares held by them. These companies purchased 595 million ordinary shares in the Bank that Tianjin Trust Co., Ltd. subscribed for in the Bank's second equity financing. According to the Capital Verification Report (KPMG Huazhen Yan Zi No ) issued by KPMG Huazhen on 24 November 2017, the capital contribution of RMB595 million made by the six companies above had been received as at that date. As at the end of 2017, the Bank's paidin capital was RMB14.45 billion. The final completion of the capital increase is subject to the approval of CBRC and the registration of change with competent authorities. The registered capital of the Bank was still RMB8.5 billion as at the end of

9 5. Directors, Supervisors and Senior Executives 5.1 Basic information of directors, supervisors and senior executives as at the release date of the annual report Name Position Gender Date of birth Term of office Li Fuan Fung, Joi Lun Alan Zhang Bingjun Shen Xiaolin Wan Min Ye Baishou Hu Aimin Zhang Yunji Fu Gang Li Yi Wang Jinhong Director Representing Shareholder, Chairman Director Representing Shareholder, Vice Chairman Director Representing Shareholder Director Representing Shareholder Director Representing Shareholder Director Representing Shareholder Director Representing Shareholder Director Representing Shareholder Executive Director President Executive Director Vice President Chief Risk Officer Executive Director Vice President Male December /06/ /04/2019 Male April /08/ /04/2019 Male August /02/ /04/2019 Male July /03/ /04/2019 Male June /02/ /04/2019 Male June /04/ /04/2019 Male December /02/ /04/2019 Male August /02/ /04/2019 Male March /04/ /04/ /02/ /04/2019 Male December /04/ /04/ /12/ /04/ /08/ /04/2019 Male December /04/ /04/ /02/ /04/2019 Zhang Junxi Independent Director Male August /02/ /04/2019 Li Xiwen Independent Director Male August /04/ /04/2019 Mao Zhenhua Independent Director Male January /04/ /04/2019 Chi Guotai Independent Director Male July /04/ /04/2019 Yuan Fuhua Bai Jie Employee Supervisor, Chairman of the Board of Supervisors Supervisor Representing Shareholder Male January /12/ /04/2019 Female March /09/ /04/2019 Qi Ershi External Supervisor Male February /04/ /04/2019 Diao Qinyi External Supervisor Male March /04/ /04/2019 Wang Wei Employee Supervisor Female July /04/ /04/

10 Name Position Gender Date of birth Term of office Feng Jiankuan Secretary of Discipline Inspection Commission Male November 1960 From 21/05/2015 Wu Siqi Vice President Male February /02/ /04/2019 Zhao Zhihong Board Secretary Male January /04/ /04/2019 Wang Chengran Director Representing Shareholder Male April /01/ /02/2018 Note: Mr. Hu Aimin s directorship is still subject to the approval of regulatory authority. 5.2 Remuneration of directors, supervisors and senior executives The Bank keeps improving remuneration management and performance evaluation of directors, supervisors and senior executives under the guidance of the central and local governments. Remuneration policies are submitted to the Nomination & Remuneration Committee of the Board of Directors for deliberation. In 2017, directors, supervisors and senior executives received a total pretax remuneration of RMB3,334.5 thousand from the Bank. The total remuneration of the Chairman of the Board of Directors, the President, the Chairman of the Board of Supervisors and other senior executives for 2017 is subject to the approval of competent authority and will be disclosed when determined. The total pre-tax appraisal-based remuneration of the Chairman of the Board of Directors, the President, the Chairman of the Board of Supervisors and other senior executives for 2016 approved by competent authority is RMB4,750.2 thousand (excluding benefits). 10

11 6. Report of the Board of Directors 6.1 Discussion and analysis of business performance Business performance During the reporting period, the Bank went further in structural adjustment, seized opportunities to develop business, and saw its total assets exceeding RMB1 trillion. Its traditional business lines like deposit taking and loan extending developed at a stable pace, retail banking grew into a much larger size, and financial market business transformed itself as scheduled. In one word, the Bank built up a momentum for robust growth as a whole, and became more capable of serving the real economy. Total assets exceeded RMB1 trillion and all business lines developed steadily. As at the end of 2017, total assets of the Bank stood at RMB1,002,567 million, an increase of 17.11% over the year beginning, of which total loans (including discounted bills) recorded RMB464,890 million, a rise of 31.44%, and investments and other financial assets registered RMB412,898 million, up 5.96%. Total liabilities were RMB954,102 million, a rise of 17.12% over the year beginning, of which total deposits (excluding due to banks) increased 18.75% to RMB582,103 million and due to banks and other financial institutions decreased 13.37% to RMB151,789 million. Total retail loans of the Bank as at the year end stood at RMB118,801 million with the growth rate as high as 49.14%. The proportion of outstanding loans in the total (including discounted bills) reported 25.55%, a level higher than that over the same period of the previous year. The transformation of retail banking started to take effect. Profitability increased remarkably. In 2017, the Bank's operating income increased 15.27% year-onyear to RMB25,204 million, net fee and commission income rose 47.21% to RMB8,686 million, while cost-to-income ratio decreased 0.33 percentage point to 34.28%. Net profit reached RMB6,754 million, up by 4.33% over Asset quality remained stable. As at the end of 2017, the Bank's NPLs stood at RMB8,110 million, an increase of RMB2,142 million over the year beginning. The NPL ratio stood at 1.74%, a rise of 0.05 percentage point. Provisions for loan losses were sufficient, as witnessed by an allowance for impairment losses on loans of RMB15,076 million, up RMB4,238 million, and an allowance for impairment losses on investment receivables of RMB4,654 million. The Bank secured a loan loss reserve ratio of 3.24% and a reserve coverage ratio of %. Asset quality and provisions maintained at acceptable levels. Business performance improved steadily. As at the end of 2017, the Bank's net profit grew by 4.33% year-on-year to RMB6,754 million, demonstrating a solid momentum and increased profitability Items of income statement Changes in items of income statement In 2017, the Bank's net income before tax reached RMB8,425 million, an increase of 5.35% over the previous year, while its net profit stood at RMB6,754 million, an increase of 4.33%. The profit growth was primarily attributed to the increase of operating income. In 2017, the Bank reaped an operating income of RMB25,204 million, a year-on-year increase of 15.27%. This was mainly due to the remarkable growth of net fee and commission income. The table below sets forth the changes in major items of the Bank's income statement for the periods indicated. 11

12 Item Increase/ decrease Operating income 25,203,908 21,865, Incl.: Net interest income 17,020,397 15,992, Net fee and commission income 8,686,031 5,900, Investment gain/(loss) 122, , Gain/(loss) on changes in fair value -2,010, , Foreign exchange gain/(loss) 1,322, ,810-1, Other operating income 62,467 15, Operating expenses 16,813,972 13,893, Incl.: Tax and surcharges 263, , General and administrative expenses 8,639,406 7,568, Impairment losses on assets 7,755,012 5,693, Other operating expenses 156,510 89, Net non-operating income 35,492 25, Net income before tax 8,425,428 7,997, Less: Income tax expense 1,671,608 1,523, Net profit 6,753,820 6,473, Net interest income In 2017, the Bank recorded a net interest income of RMB17,020 million, an increase of 6.43% from the previous year Interest income In 2017, the Bank reaped an interest income of RMB40,865 million, a year-on-year increase of 6.21%. Of it, interest income from loans and advances was RMB18,905 million, up 24.55% from 2016; interest income from debt investments reported RMB3,732 million, up 15.45% from 2016; interest income from financial assets purchased under resale agreements posted RMB515 million, down 32.22% from 2016; and interest income from investment receivables totaled RMB16,153 million, down 9.49% from The table below sets forth the composition of the Bank's interest income for the periods indicated. Item Increase/ decrease Interest income from loans and advances 18,904,769 15,178, Incl.: Interest income from corporate loans and advances 14,459,099 11,947, Interest income from personal loans and advances 4,368,683 2,664, Interest income from discounted bills 76, , Interest income from investment receivables 16,153,155 17,845, Interest income from debt investments 3,731,888 3,232, Interest income from balances with the central bank 1,313,209 1,193, Interest income from financial assets purchased under resale agreements 514, , Interest income from due from banks and other financial institutions 125, , Interest income from placements with banks and other financial institutions 121, , Total interest income 40,865,165 38,476,

13 Interest income from loans and advances In 2017, the Bank achieved an interest income of RMB18,905 million from loans and advances, a year-on-year increase of 24.55%. The increase was mainly attributed to the greater expansion of the average balance of loans (including discounted bills) compared with that of the previous year. The table below sets forth the average balance, interest income and average rate of return of the Bank's loans and advances for the periods indicated. Item Average balance Interest income Average rate of return Average balance Interest income Average rate of return Corporate loans and discounted bills 317,247,074 14,536, ,502,116 12,513, Personal loans 99,398,303 4,368, ,155,695 2,664, Total loans and advances 416,645,377 18,904, ,657,811 15,178, Interest income from balances with the central bank, due from and placements with banks and other financial institutions, and interest income from financial assets purchased under resale agreements In 2017, the Bank's interest income from balances with the central bank and due from and placements with banks and other financial institutions totaled RMB1,561 million, an increase of 6.85% over And interest income from financial assets purchased under resale agreements stood at RMB515 million, down by 32.22%. Interest income from debt investments and from investment receivables In 2017, the Bank recorded an interest income of RMB3,732 million from debt investments and an interest income of RMB16,153 million from investment receivables, representing an increase of 15.45% and a decrease of 9.49% respectively over the previous year Interest expenses In 2017, the Bank's interest expenses were RMB23,845 million, an increase of 6.05% over The table below sets forth the composition of the Bank's interest expenses for the periods indicated. Item Increase/ decrease Interest expenses on customer deposits 10,797,340 9,731, Interest expenses on due to banks and other financial institutions 6,179,262 8,353, Interest expenses on debt securities in issue 4,808,429 3,129, Interest expenses on placements from banks and other financial institutions 828, , Interest expenses on due to the central bank 622, , Interest expenses on financial assets sold under repurchase agreements 609, , Total interest expenses 23,844,768 22,483,

14 Interest expenses on customer deposits In 2017, the Bank recorded interest expenses on customer deposits of RMB10,797 million, up 10.96% over the previous year. The table below sets forth the average balance, interest expenses and average cost ratio of the Bank's customer deposits for the periods indicated. Item Average balance Interest expense Average cost ratio Average balance Interest expense Average cost ratio Corporate deposits 516,908,743 10,267, ,350,599 9,021, Incl.: Demand 238,602,345 1,679, ,416,946 1,132, Time 278,306,398 8,588, ,933,653 7,888, Deposits from individuals 26,650, , ,073, , Incl.: Demand 14,129,247 50, ,843,082 39, Time 12,521, , ,230, , Other deposits 1,337,569 48, ,299, , Total customer deposits 544,897,208 10,797, ,723,865 9,731, Interest expenses on due to the central bank, due to and placements from banks and other financial institutions, and on financial assets sold under repurchase agreements In 2017, the Bank's interest expenses on due to the central bank, and due to and placements from banks and other financial institutions declined by 17.30% from the previous year to RMB7,630 million, and interest expenses on financial assets sold under repurchase agreements rose by 53.49% to RMB609 million. Interest expenses on debt securities in issue In 2017, the Bank recorded interest expenses of RMB4,808 million on debt securities in issue, an increase of 53.63% over the previous year Net interest spread and net interest margin In 2017, the Bank's net interest spread was 1.60%, a decrease of 0.10 percentage point from the previous year. The net interest margin decreased by 0.10 percentage point to 1.77% Net fee and commission income In 2017, the Bank recorded a net fee and commission income of RMB8,686 million, an increase of 47.21% from the previous year. The rise was mainly attributed to the considerable increase in the agency service and custodian service fees. The table below sets forth the major components of the Bank's net fee and commission income for the periods indicated. 14

15 Item Increase/ decrease Fee and commission income 8,900,943 6,053, Incl.: Agency service commission 4,254,943 1,795, Consulting service fee 2,574,944 2,662, Custodian service fee 1,284, , Credit commitment and asset management fee 335, , Settlement and clearing fees 284, , Bank card fee 50,500 32, Others 116,478 40, Fee and commission expenses 214, , Incl.: Agency service commission 86,741 55, Bank card fee 54,019 20, Consulting service expenses 34,634 33, Settlement fee 26,018 33, Others 13,500 9, Net fee and commission income 8,686,031 5,900, Investment gain/(loss) In 2017, the Bank's investment gain/(loss) amounted to RMB123 million, representing an increase of RMB329 million from the previous year. The table below sets forth the major components of the Bank's investment gain/(loss) for the periods indicated. Item Increase/ decrease Derivative financial instruments -25, , Available-for-sale investments -13,693 18, Trading financial assets -1,434-85, Others 163,216-2,789-5, Total 122, , General and administrative expenses In 2017, the general and administrative expenses totaled RMB8,639 million, up 14.15% over The table below sets forth the major components of the Bank's general and administrative expenses for the periods indicated. Item Increase/ decrease Staff costs 5,132,595 4,048, Business expenses 2,181,907 2,290, Operating lease expenses 774, , Depreciation and amortization 550, , Total 8,639,406 7,568,

16 Impairment losses on assets The Bank prudently sets aside provisions in strict compliance with regulatory requirements. In 2017, RMB7,755 million was recognized as impairment losses on assets, up by 36.20% over Specifically, RMB5,756 million was recognized as impairment losses on loans and advances and RMB1,999 million as impairment losses on non-credit assets Income tax expenses In 2017, the Bank's income tax expense was RMB1,672 million, with an effective tax rate of 19.84%, up by 0.79 percentage point from Items of balance sheet Asset items As at the end of 2017, the Bank's total assets were RMB1,002,567 million, an increase of 17.11% over the year beginning. The growth of assets was primarily attributed to the rapid increase of loans and advances as well as of cash and balances with the central bank Loans and advances As at the end of 2017, the Bank's loans and advances (including discounted bills) amounted to RMB464,890 million, an increase of 31.44% over the year beginning. The table below sets forth the Bank's loans and advances by product type on the dates indicated. 31 December December 2016 Increase/ Item Percentage Percentage decrease Amount Amount Corporate loans and advances 343,350, ,267, Discounted bills 2,737, ,757, Personal loans and advances 118,801, ,657, Total loans and advances 464,889, ,681, Placements with banks and other financial institutions and financial assets purchased under resale agreements As at the end of 2017, the Bank's placements with banks and other financial institutions totaled RMB10,168 million, up by % over the year beginning. To be specific, placements with domestic banks increased by 1,056.92% to RMB8,842 million, placements with domestic non-banking financial institutions decreased by 5.77% to RMB1,001 million, and placements with overseas banks amounted to RMB325 million. 16

17 The table below sets forth the composition of the Bank's placements with banks and other financial institutions on the dates indicated. Item 31 December December 2016 Amount Percentage Amount Percentage Increase/ decrease Placements with domestic banks 8,841, , , Placements with domestic non-banking financial institutions 1,000, ,061, Placements with overseas banks 325, Total 10,167, ,826, Less: Allowance for impairment losses Net book value 10,167, ,826, As at the end of 2017, the Bank's balance of financial assets purchased under resale agreements was zero Investments and other financial assets As at the end of 2017, the Bank's investments and other financial assets reached RMB412,898 million, an increase of 5.96% over the year beginning. Specifically, financial assets at fair value through profit or loss stood at RMB12,861 million, up by %, available-for-sale financial assets dropped by 4.67% to RMB36,496 million, held-to-maturity investments were up by 32.20% to RMB87,365 million, and investment receivables went down by 2.25% to RMB275,927 million. The table below sets forth the composition of the Bank's investments and other financial assets on the dates indicated. Item 31 December December 2016 Increase/ Percentage Percentage decrease Amount Amount Financial assets at fair value through profit or loss 12,860, ,564, Derivative financial assets 198, , Available-for-sale financial assets 36,495, ,283, Held-to-maturity investments 87,364, ,085, Investment receivables 275,927, ,266, Long-term equity investments 51, , Total 412,898, ,667,

18 Top 10 government bonds held by the Bank as at the end of 2017 Bond Amount Rate of return Maturity date Government Bond A 3,000, Government Bond B 2,570, Government Bond C 2,530, Government Bond D 2,500, Government Bond E 2,500, Government Bond F 2,500, Government Bond G 2,500, Government Bond H 2,390, Government Bond I 2,000, Government Bond J 1,910, Top 10 financial bonds held by the Bank as at the end of 2017 Bond Amount Rate of return Maturity date Financial Bond A 4,245, Financial Bond B 3,840, Financial Bond C 2,460, Financial Bond D 1,650, Financial Bond E 1,590, Financial Bond F 1,550, Financial Bond G 1,550, Financial Bond H 1,530, Financial Bond I 1,360, Financial Bond J 1,300, Financial derivatives trading The Bank's financial derivatives trading includes interest rate swaps, forex forwards, forex swaps, precious metal swaps, and credit derivatives. In 2017, the nominal principal of interest rate swaps reported RMB41,757 million, the balance of forex swaps was around RMB35,989 million, and the balance of precious metal swaps stood at RMB19,100 million. In addition, to facilitate bank-wide liquidity management, it vigorously leveraged derivative financial instruments to hedge against risk exposure of transactions and to manage liability structure. 18

19 The contractual amount and fair value of outstanding derivative financial instruments held by the Bank as at the end of 2017 are as follows. 31 December December 2016 Item Contractual/ Fair value Contractual/ Fair value nominal nominal amount Assets Liabilities amount Assets Liabilities Exchange rate derivatives 37,186,762 39,135 (1,511,630) 10,516, ,853 (123,175) Incl.: Currency swaps 35,988,707 28,941 (1,503,832) 8,674, ,397 (4,299) Currency forwards 1,198,055 10,194 (7,798) 1,841, ,456 (118,876) Interest rate derivatives 41,756,987 20,723 (35,139) 45,492,113 26,885 (65,908) Incl.: Interest rate swaps 41,756,987 20,723 (35,139) 45,492,113 26,885 (65,908) Precious metal derivatives 19,099, ,242 (562,996) 6,959,003 55,457 (57,788) Incl.: Gold swaps 15,661,144 - (489,039) 6,959,003 55,457 (57,788) Silver swaps 3,438, ,242 (73,957) Total 98,043, ,100 (2,109,765) 62,967, ,195 (246,871) Items related to fair value measurement The table below sets forth items related to fair value measurement of the Bank. Item 31 December 2016 Gain/Loss from changes in fair value in 2017 Cumulative changes in fair value recognized in equity Impairment made in December 2017 Financial assets 40,960, , ,122-49,250,071 Incl.: 1. Financial assets at fair value through profit or loss 2,564,073 72, ,860, Derivative financial assets 418, , , Available-for-sale financial assets 37,978, ,122-36,191,057 Financial liabilities 246,871 1,862, ,109,765 Incl.: Derivative financial liabilities 246,871 1,862, ,109,765 Note: 1. "Available-for-sale financial assets" do not include equity investments. 2. Changes in the assets and liabilities mentioned above are not necessarily interrelated Liability items As at the end of 2017, the Bank's total liabilities reached RMB954,102 million, an increase of 17.12% over the year beginning. The growth was primarily driven by the increase of customer deposits and debt securities in issue Customer deposits As at the end of 2017, the Bank's customer deposits stood at RMB582,103 million, an increase of 18.75% over the year beginning. 19

20 The table below sets forth the Bank's customer deposits by product type and customer type on the dates indicated. Item 31 December December 2016 Increase/ Percentage Percentage decrease Amount Amount Corporate deposits 555,925, ,175, Incl.: Demand 280,546, ,560, Time 275,379, ,614, Deposits from individuals 25,628, ,600, Incl.: Demand 11,909, ,883, Time 13,719, ,716, Other deposits 548, ,414, Total 582,103, ,190, The table below sets forth the Bank's customer deposits by currency on the dates indicated. Item 31 December December 2016 Increase/ Percentage Percentage decrease Amount Amount RMB 541,900, ,488, Foreign currencies equivalent to RMB 40,202, ,702, Total 582,103, ,190, The table below sets forth the Bank's customer deposits by residual maturity on the dates indicated. Item 31 December December 2016 Amount Percentage Amount Percentage Demand (spot) 281,579, ,048, Less than 1 month 39,148, ,172, to 3 months 42,129, ,871, to 12 months 124,709, ,878, to 3 years 79,655, ,452, Over 3 years 14,882, ,766, Total 582,103, ,190, Financial assets sold under repurchase agreements As at the end of 2017, the Bank's financial assets sold under repurchase agreements totaled RMB2,214 million, down by 72.33% over the year beginning. 20

21 The table below sets forth the particulars about the Bank's financial assets sold under repurchase agreements on the dates indicated. Item 31 December December 2016 Increase/ Percentage Percentage decrease Amount Amount Bonds 2,084, ,500, Incl.: Government bonds 1,486, ,440, Financial bonds 598, , Bills 129, , Total 2,213, ,999, Shareholders' equity As at the end of 2017, the Bank's shareholders' equity was RMB48,465 million, up by RMB7,002 million or 16.89% over the end of the previous year. The increase was mainly because the Bank finished its second capital replenishment in the amount of RMB595 million and generated more profits in The table below sets forth the composition of the shareholders' equity of the Bank on the dates indicated. Item 31 December December December 2015 Share capital 14,450,000 13,855,000 13,855,000 Capital surplus 20,000 20,000 20,000 Other comprehensive income -469, , ,820 Surplus reserve 3,468,043 2,792,661 2,145,318 General reserve for risk assets 12,562,941 10,486,754 9,505,261 Retained earnings 18,433,440 14,431,189 9,586,597 Total 48,465,302 41,463,367 35,556, Off-balance sheet items that might exert material impact on financial position and business performance of the Bank The table below sets forth the balance of the Bank's major off-balance sheet items as at the end of Item 31 December December 2016 Bank acceptances 94,054,166 92,997,845 Letters of credit 51,660,338 66,614,270 Letters of guarantee 26,991,075 27,601,086 Credit card overdraft commitments 3,335,207 1,705,667 Irrevocable loan commitments 6,724,050 16,864,594 Operating lease commitments 4,615,739 4,211,545 Capital commitments 625, ,271 21

22 Market share of major products and services According to the Summary of Sources & Uses of Credit Funds of December 2017 issued by PBC, the Bank's market share among 12 national joint-stock commercial banks in Chinese Mainland in terms of deposits and loans as at the end of 2017 is shown below. Item Market share Total deposits 2.26 Incl.: Total savings deposits 0.60 Total loans Items of cash flow statement In 2017, the Bank's net cash outflow from operating activities, net cash inflow from investing activities and net cash inflow from financing activities were RMB25,918 million, RMB3,456 million and RMB33,802 million, respectively. The year-end balance of cash and cash equivalents was RMB45,663 million Other financial information Changes in interest receivables on and off the balance sheet and bad debt provisions Change in on-balance sheet interest receivables Item 31 December 2016 Increase Recovery 31 December 2017 On-balance sheet interest receivables 4,534,128 46,631,206 45,887,368 5,277, Change in off-balance sheet interest receivables Item 31 December 2016 Increase Recovery 31 December 2017 Off-balance sheet interest receivables 1,059, , ,889 1,593, Bad debt provisions The Bank did not set aside any bad debt provisions for loan interest receivables or other receivables Foreclosed assets The Bank had no foreclosed assets in Allowance for impairment losses on assets In 2017, the Bank set aside allowance for impairment losses on credit and some of its investments Overdue debts The Bank had no overdue debts as at the end of

23 6.1.6 Analysis of capital adequacy ratio (CAR) The Bank calculates its capital adequacy ratios according to CBRC's Capital Rules for Commercial Banks (Provisional) and other pertinent regulations. As at the end of 2017, core tier 1 CAR, tier 1 CAR and CAR of the Bank stood at 8.12%, 8.12% and 11.43% respectively, with core tier 1 CAR and CAR meeting regulatory requirements and tier 1 CAR meeting regulatory requirements for the transitional period. The calculation of capital adequacy ratios covers the Bank and financial institutions directly or indirectly invested by the Bank as specified in the capital rules. The table below sets forth the items concerning CAR calculation at all tiers in accordance with the capital rules. Item 31 December December 2016 Core tier 1 capital 48,465,302 41,463,367 Regulatory deductions from core tier 1 capital -90,561-80,548 Net core tier 1 capital 48,374,741 41,382,819 Other tier 1 capital - - Net tier 1 capital 48,374,741 41,382,819 Tier 2 capital 19,840,084 18,843,062 Incl.: Recognizable part of tier 2 capital entitled to preferential policy in the transitional period 946,088 1,892,449 Regulatory deductions from tier 2 capital -150, ,000 Net capital 68,064,825 60,025,881 Capital adequacy ratio Tier 1 capital adequacy ratio Core tier 1 capital adequacy ratio The table below sets forth the risk-weighted assets measured according to the capital rules. To be specific, credit risk weighted assets, market risk weighted assets and operational risk weighted assets are measured by method of weighting, the standardized method and the basic indicator approach, respectively. Item 31 December December 2016 Credit risk weighted assets 551,758, ,305,310 Incl.: On-balance sheet credit risk 480,806, ,652,276 Off-balance sheet credit risk 70,656,027 60,520,983 Credit risk of counterparties 296, ,051 Market risk weighted assets 2,608,661 2,283,462 Operational risk weighted assets 41,186,414 35,184,891 Total 595,553, ,773,663 23

24 The table below sets forth the particulars of the CAR and core CAR of the Bank calculated according to CBRC's Regulation Governing Capital Adequacy Ratio of Commercial Bank. Item 31 December December December 2015 Core capital 48,797,109 41,251,812 34,929,333 Incl.: Share capital 14,450,000 13,855,000 13,855,000 Reserves 34,347,109 27,396,812 21,074,333 Supplementary capital 22,571,699 21,607,062 19,642,031 Incl.: General provisions for impairment losses on loans 9,543,452 7,422,376 5,323,309 Long-term subordinated bonds 13,028,247 13,973,130 13,976,508 Other supplementary capital - 211, ,214 Total capital base before deductions 71,368,808 62,858,874 54,571,364 Deductions 206, , ,030 Incl.: Unconsolidated equity investments 206, , ,000 Others - 49,030 49,030 Net capital 71,162,457 62,709,844 54,422,334 Net core capital 48,693,933 41,177,297 34,854,818 Risk-weighted and market risk assets adjustment 559,473, ,090, ,438,978 Capital adequacy ratio Core capital adequacy ratio Note: 1. According to the Regulation Governing Capital Adequacy Ratio of Commercial Banks, "reserves" includes recognizable parts of capital surplus and of retained earnings as well as surplus reserve and general reserve for risk assets, "unconsolidated equity investments" shall be deducted by 100% and 50% respectively when calculating net capital and net core capital. 2. "Deductions: others" includes gain/loss on trading financial assets, changes in fair value of available-for-sale financial assets and subordinated bonds issued by other commercial banks Leverage ratio In 2017, the Bank measured the leverage ratio according to the Leverage Ratio Rules for Commercial Banks (Revised) and other applicable regulations, detailed as follows. Item 31 December December 2016 Tier 1 capital 48,465,302 41,382,819 Deductions from tier 1 capital -90,561 - Total on- and off-balance sheet assets after adjustments 1,139,881, ,465,868 Incl.: Total on-balance sheet assets after adjustments 1,002,278, ,828,398 Total off-balance sheet assets after adjustments 136,515, ,061,611 Others 1,087, ,859 Leverage ratio Note: "Others" include the balances of derivatives and securities margin trading. 24

25 6.1.8 Loan quality analysis Distribution of loans by five-category classification Category 31 December December December 2015 Amount Percentage Amount Percentage Amount Percentage Normal 441,782, ,567, ,620, Special-mention 14,996, ,145, ,243, NPLs 8,110, ,968, ,713, Incl.: Substandard 4,070, ,172, ,655, Doubtful 3,537, ,547, , Loss 501, , , Total 464,889, ,681, ,576, Note: The amount of loans above includes the amount of discounted bills Loan migration (In %) Item 31 December December December 2015 Normal loan migration ratio Special-mention loan migration ratio Substandard loan migration ratio Doubtful loan migration ratio Distribution of loans and NPLs by product type Category Loans 31 December December 2016 Percentage NPLs NPL ratio Loans Percentage Note: The percentage of personal auto loans for 2017 and 2016 was % and %. 25 NPLs NPL ratio Corporate loans 343,350, ,673, ,267, ,504, Incl.: Short-term corporate loans 114,672, ,621, ,642, ,621, Medium and long-term corporate loans 228,678, ,051, ,625, , Discounted bills 2,737, ,757, Incl.: Bank acceptances 2,574, ,805, Commercial acceptances 163, , Personal loans 118,801, , ,657, , Incl.: Housing loans 95,366, , ,458, , Auto loans 1, , Business loans 13,192, , ,968, , Credit cards 1,103, , , Others 9,138, , ,760, , Total 464,889, ,110, ,681, ,968,