November Banking Newsletter. Analysis of China Listed Banks' Results for the Third Quarter of

Transcription

1 November 2015 Banking Newsletter Analysis of China Listed Banks' Results for the Third Quarter of

2 Editorial Team: Editor in Chief: Linda Yip Deputy Editor-in-Chief:Annie Zou Members of the editorial team: Amelie Cao, Jeff Deng, Ivy Meng, Allen Ran Advisory Board: Raymond Yung, Jimmy Leung, Margarita Ho, Richard Zhu

3 Preface We are pleased to present our Banking Newsletter, s analysis of China s Listed Banks and the wider industry, which is now in its 25th edition. As of 30 October 2015, 18 Chinese Listed Banks (in A- share and/or H-share markets) announced their Q3 results, which forms the sample of our analysis. These 18 banks, as defined by the China Banking Regulatory Commission (CBRC), include: Large Commercial Banks (LCBs) Industrial and Commercial Bank of China (ICBC) China Construction Bank (CCB) Agricultural Bank of China (ABC) Bank of China (BOC) Bank of Communications (BOCOM) Joint-Stock Commercial Banks (JSCBs) China Merchants Bank (CMB) Industrial Bank (CIB) Shanghai Pudong Development Bank (SPDB) China CITIC Bank Corporation (CITIC) China Minsheng Banking Corporation (CMBC) China Everbright Bank (CEB) Ping An Bank (PAB) Hua Xia Bank (HXB) City Commercial Banks (CCBs) Bank of Beijing (BOB) Bank of Nanjing (NJB) Bank of Ningbo (NBB) Bank of Chongqing (BCQ) Rural Commercial Banks (RCBs) Chongqing Rural Commercial Bank (CQRCB) The total assets of these banks as of 30 September 2015 accounted for 75.24% of the assets of China s commercial banking sector. Unless otherwise stated, all the information in this newsletter comes from publicly available sources, such as the Listed Banks interim reports and statistics published by regulatory bodies, and are presented in RMB where applicable. For more information, please talk to your contacts or any of those listed in the Appendix as Banking and Capital Markets contacts. 3

4 Table of Contents Macro overview Operating results Financial position Capital adequacy ratio Appendix

5 1. Macro overview China s growth continues to find its bottom Policy rate & RRR are cut while restrictions on interest rates lifted Money supply growth rebounds and exchange rates fluctuate 5

6 China s growth continues to find its bottom In the first three quarters of 2015, world economies recovered slowly at different rates and in varied forms. The Q3 growth in the US showed signs of slowing, while leading indicators for Japanese and European economies all indicate a less than optimistic growth prospect. There is continued downward pressure on emerging economies. The China economy continues to find its bottom as GDP growth for the first three quarters slowed, reaching 6.90% in Q3. Growth for China, including manufacturing, investment and consumption, remained in the low single-digits. Year on year, total imports and exports also decreased in the first nine months, with a very notable QoQ drop in imports. Figure 1 China GDP growth since % 14% 12% 10% 8% 6% 4% 2% 0% Source: National Bureau of Statistics 2009 Q1, 6.60% 2015 Q3, 6.90% Note: The figures represent growth rates at the end of the quarter so that 2013 Q2 represents that of the first two quarters of 2013, and 2013 Q3 represents that of the first three quarters of Figure 2 Growth of FAI, retail sales and IP Figure 3 Trade volumes, import vs. export 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Fixed asset investments Retail sales Industrial production Total imports and exports (In RMB 100 million) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Source: National Bureau of Statistics Note: Due to the Spring Festival, the National Bureau of Statistics usually releases data for January and February at the same time. Total exports Source: General Administration of Customs Total Imports 6

7 Policy rate & RRR are cut while restrictions on interest rates are lifted Commodity prices remained stable as the economy continued to slow in the first three quarters of In September, the consumer price index (CPI) increased 1.60% on the same period last year, while the CPI for the first nine months remained at 2.00% or below. There was a QoQ drop in producer price index (PPI) of 5.90%, as it continued to move downward in the first three quarters, indicating further pressure on material prices for upstream producers and that over-capacity remains an issue to tackle. The stability in commodity prices offered further room for adjusting fiscal and monetary policies. In February, May, June and August, the PBOC cut benchmark interest rates to reduce the financing costs of the real economy. There was a fifth cut in October. Since the beginning of this cycle of interest rate cuts in November 2014, the PBOC has cut interest rates by 1.65%. The frequency of cuts surpassed that of the financial crisis in The prevailing benchmark interest rates are the lowest since the PBOC started publishing data in The PBOC also made multiple cuts to reserve requirement ratios (RRRs) to ensure sufficient liquidity for banking institutions. The lifting of deposit interest rate caps by the PBOC came in the wake of these simultaneous cuts to interest rates and RRRs, signifying that interest rate liberalisation is now basically in place in China. Figure 4 CPI & PPI 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% Figure 5 RMB benchmark interest rates 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% -5% -6% CPI Source: National Bureau of Statistics PPI 1Y deposits Source: People s Bank of China 1Y (and shorter term) loans 7

8 Money supply growth rebounds and exchange rates fluctuate In the first three quarters, the growth in broad money supply (M2) accelerated to 13.1% ppts higher than in 1H. At the end of September, the ratio of M2 to GDP growth reverted to the historical mean of PBOC explains in its 2015 Q3 Monetary Policies Report that this acceleration was due to commercial banks investing in local government debt. In addition to the rebound in money supply, the RMB exchange rates also demonstrated notable changes. On 11 August, PBOC said it would improve mechanisms for determining the midpoint for exchange rates. This was followed the same day by a massive fall in the exchange rate. The midpoint devalued by 4.05ppts between end- June and end-september due to continued fluctuations. The Report states that the remarkable deviation Figure 6 M2 growth Vs. GDP growth of the RMB mid-point from market rates was due to market expectation of a US$ rate rise in The general strengthening of the US dollar, the strength of the RMB against other world currencies and China s consistently large trade surpluses also contributed. This adjustment was made to build mechanisms that enable supply and demand to play a more decisive role in determining exchange rates, enabling them rates to revert to market levels. PBOC stresses that there is no basis for continued RMB devaluation given the current economic and financial situations at home and abroad. Figure 7 RMB exchange rate against USD Source:National Bureau of Statistics & the PBoC Source:China foreign exchange trading system 8

9 2. Operating performance Net profit growth slows ROE falls but cost control strengthened NIM narrows while intermediary business continues to expand 9

10 Net profit growth slows The economic downturn, cuts in interest rates, rate liberalisation and mounting pressures on the profitability meant that Listed Banks total net profit for the first three quarters of 2015 amounted to RMB 1,050 bn. This is a moderate increase of 2.26% compared to 10.02% for the same period in Compared to the same period last year, the growth rate for the five Large Commercial Banks (LCBs) fell to below 1.00%, that of the eight Joint-stock Commercial Banks (JSCBs) dropped from two digits to 5.66%, while that of the five City Commercial Banks & Rural Commercial Banks (CCBs & RCBs) shrank to 13.86%, with most retaining double digit growth. The growth rate of net profit in Q3 was 1.43% for these Listed Banks much lower than the 7.86% in Q By category, the growth rate for the five LCBs shrank from 6.18% in Q to a mere 0.16%, that of the eight JSCBs fell from 12.28% to 4.05%, while that of the five CCBs & RCBs dropped from 16.80% to 12.97%. Table 1 Net profit and growth, as at 30 September 2015 Listed Banks Net profit (in million) Growth rate (2015) Growth rate (2014) ICBC 222, % 7.33% CCB 192, % 7.81% ABC 137, % 10.48% BOC 153, % 9.16% BOCOM 52, % 5.84% LCBs total 757, % 8.31% CMB 48, % 16.28% CIB 41, % 24.24% SPDB 37, % 8.92% CITIC 33, % 5.17% CMBC 39, % 9.74% CEB 23, % 7.66% PAB 17, % 34.18% HXB 13, % 18.77% JSCBs total 255, % 13.88% BOB 14, % 14.36% NBB 5, % 16.28% NJB 5, % 21.75% BCQ 5, % CQRCB 2, % 12.61% CCBs&RCBs total 33, % 25.88% Listed Banks total 1,047, % 10.02% Note: Bank of Chongqing did not disclose its data for the first three quarters in 2013, so that the QoQ growth rate for 2014 is not available. Figure 8 Net profit growth of Listed Banks Net profit (RMB 100 billion) 3,500 3,000 2,500 2,000 1,500 1, % 7.86% 1.43% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Net profit QoQ growth QoQ growth 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% Note: Bank of Chongqing did not disclose its data for the first three quarters in 2013, so that for the purpose of comparison, Bank of Chongqing is excluded from the above Figure. 10

11 ROE falls but cost control strengthened Due to slower net profit growth, the return on equity (ROE) for the first three quarters of 2015 decreased in varying degrees for most of these Listed Banks. The five LCBs experienced the most notable decrease of 2.60ppts in their average ROE over the first three quarters of They recorded the lowest average of the Listed Banks at 17.33%. The ROE of the eight JSCBs dropped 2.09ppts to an average of 18.17%. The five CCBs & RCBs had an average ROE of 19.15%, down 1.22ppts. Figure 9 Movements in ROE of Listed Banks 26.0% 24.0% 22.0% 20.0% 18.0% 16.0% 14.0% CCB ABC ICBC BOC BOCOM CMB CIB SPDB CITIC CMBC CEB PAB HXB BOB NJB NBB BCQ CQRCB 12.0% 2015 Q1-Q Q1-Q3 Pressure on profitability drove the Listed Banks to tighten their cost controls in the first three quarters of Most banks reported a lower cost-to-income ratio, though three did not disclose. Figure 10 Movements in cost-to-income ratio of Listed Banks 38% PAB HXB 36% CQRCB 34% 32% ABC CMBC NBB 30% 28% 26% 24% CCB ICBC BOC BOCOM CMB BOB NJB BCQ 22% CIB 20% 2015 Q1-Q Q1-Q3 Note: SPDB, CITIC and CEB did not disclose their cost to income ratios for the first three quarters of

12 NIM narrows while intermediary business continues to expand Eleven of the 18 Listed Banks disclosed their net interest margin (NIM) for the first three quarters of For most, NIM shrank compared to 1H The three LCBs reported a negligible reduction; there was a mixed picture for the four JSCBs. Of the four CCBs & RCBs, three saw a reduction, while Bank of Ningbo reported no change. Figure 11 Movement in NIM of Listed Banks 3.4% 3.2% 3.0% CMB 2.8% PAB CCB NJB 2.6% CITIC 2.4% NBB BCQ CQRCB 2.2% BOC BOCOM CMBC 2.0% 2015 Q1-Q H Note: All data have been annualized, and ICBC, ABC, SPDB, CIB, CEB, HXB and BOB did not disclose their NIM for the first three quarters of In response to the economic downturn and the lowering of interest rates, all Listed Banks increased efforts to expand their intermediary business. In the first three quarters of 2015, 17 Listed Banks (excluding Bank of Chongqing) reported total fee and commission income of RMB bn, growing 16.41% on a QoQ basis, against 13.10% for Growth in this income was 5.71% for the five LCBs, 40.03% for the eight JSCBs, and 51.25% for the four CCBs & RCBs. Figure 12 Fee and commission income growth 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% ICBC CCB ABC BOC BOCOM CMB CIB CITIC SPDB CMBC CEB PAB HXB BOB NJB NBB BCQ CQRCB -10% 2015 Q1-Q Q1-Q3 Note: No comparison can be made for Bank of Chongqing as it did not disclose its fee and commission income for the first three quarters of

13 3. Financial position Assets continue to grow steadily, with investments increasing in proportion Loan growth slows as credit demand weakens Non-performing loans continue to emerge Liabilities continue to grow steadily, with bonds payable increasing in proportion 13

14 Assets continue to grow steadily, with investments increasing in proportion At the end of September 2015, total assets of the listed banks were RMB118,220 bn - up 10.84% from end-2014 and 1.22% from end-june Listed Banks maintained their main asset structures. In response to the lowering of the RRR and the overhaul of non-standard interbank transactions by regulators, the five LCBs and eight JSCBs generally reduced their cash, deposits with the central bank and financial assets purchased under resale agreements; the proportion of investments also continued to rise. Given their relatively limited size of loan portfolio and lower risk appetites, the interbank assets of the five CCBs & RCBs accounted for a higher percentage of their total assets compared to the LCBs and JSCBs. At the end of September 2015, total investments of the Listed Banks amounted to RMB 28,970 bn, up 4.72% from the end of the previous quarter. Their main investment structures remained roughly the same, as the five LCBs continued to focus on held-to-maturity investments, while the eight JSCBs and most of the CCBs & RCBs retained their interest in investments in receivables. This is most manifest in the case of the eight JSCBs, as their total investments in receivables amounted to RMB5,630 bn at the end of September, up 4.46% from end-june and up % from end In Q3 2015, the diversion of more funds to longer term bonds by the majority of Listed Banks and the increase in local government debt swaps led to a higher proportion of held-to-maturity investments. Month-end balances for the five LCBs were RMB10,210 bn (+6.58%) and for the eight JSCBs were RMB1,770 bn (+13.71%). Figure 13 Changes in the asset structures of Listed Banks 3.85% 3.42% 3.65% 3.51% 1.87% 1.91% 7.40% 8.54% 11.88% 11.91% 17.45% 15.78% 14.49% 15.24% 10.63% 11.25% 10.04% 10.76% 22.24% 21.36% 29.13% 28.49% 33.55% 33.62% 52.02% 51.44% 44.71% 44.85% 37.09% 37.92% Five LCBs Eight JSCBs Five CCBs & RCBs Loans and advances Investments Cash and deposits with central bank Interbank assets Others 14

15 Loan growth slows as credit demand weakens Due to a lack of deposit growth and weak demand for loans, the loan growth of Listed Banks slowed down in Q3 2015, as the combined total loan balance increased only 1.83% to RMB58,530 bn compared to the end of June. By category, the five LCBs reported a combined total of RMB42,660 bn, up 1.73% from the end of June; the combined total of the eight JSCBs was up 1.91% to RMB14,310 bn; the five CCBs & RCBs delivered fast loan growth of 3.67% over the same period. The change in the pace of loan growth in Q was mainly due to the combined effects of the increasing economic downturn, structural adjustments to the economy, the onslaught of Internet-based financial options, and the volume of seasonal lending. Figure 14 Changes in growth rates of loan balances, QoQ 10% NJB 8% 6% CQRCB BOB 4% ICBC ABC CMB CITIC CEB NBB BCQ 2% 0% CCB BOC BOCOM CIB PAB CMBC SPDB HXB vs vs

16 Non-performing loans continue to emerge At the end of Q3, total NPLs of the Listed Banks amounted to RMB bn, up 6.91% from the end of Q2; the NPL ratio rose 0.07% to 1.51% QoQ. NPLs continued to increase both in terms of balance and ratio. Relative to NPL ratios at the end of June, the five LCBs reported a rise of 0.07ppts in their NPL ratio to 1.56%; the eight JSCBs saw their NPL ratio raised by 0.1ppt to 1.46%; the five CCBs & RCBs maintained the same level of NPL ratio at 0.91%. Figure 15 Changes in NPLs, end of Q3 vs. end of Q2 2.1% 1.9% 1.7% 1.5% 1.3% 1.1% 0.9% 0.7% CCB ICBC ABC BOC CMB CEB CIB CITIC BOCOM CMBC SPDB PAB HXB BOB NJB NBB BCQ CQRCB In terms of growth in NPL balance, the eight JSCBs topped the list with a total NPL balance of RMB bn at the end of September, up 9.39% from the end of June; the total NPL balance of the five LCBs amounted to RMB bn, up 6.21% from the end of June; the growth in NPL balance was slowest for the five CCBs & RCBs at 4.38% compared to Q2. Figure 16 Growth of NPL balances, 2015 Q3 Vs H ICBC CCB ABC BOC BOCOM CMB CIB SPDB CITIC CMBC CEB PAB HXB BOB NJB NBB BCQ CQRCB 4.84% 3.89% 12.29% 3.21% 5.43% 9.55% 7.52% 10.79% 8.82% 4.43% 2.99% 1.98% 2.20% 5.25% 3.15% 13.25% 7.21% 23.80% 16

17 Higher pressure on provisions Two key ratios of a bank s position with respect to its allowance for loan losses are provisions-to-loans ratio and provision coverage ratio. These indicate that provisioning for loan losses at these Listed Banks demands attention. Figure 17 Provisions-to-loans ratio 5.0% 4.5% ABC 4.0% CQRCB There have been no significant changes to the provisions-toloans ratios of the five LCBs, while the eight JSCBs have experienced more noticeable increases in their provisions-toloans ratios. 3.5% 3.0% 2.5% 2.0% SPDB CMB CCB BOC CIB PAB CMBC CITIC ICBC BOCOM CEB HXB BOB NJB NBB BCQ 1.5% The provision coverage ratios of Listed Banks have continued to fall as a consequence of their NPLs continuing to grow and their profit growth levelling out. This leaves the banks under greater pressure to increase their provisions. At the end of September 2015, the provision coverage ratios of the five LCBs, the eight JSCBs and the five CCBs & RCBs were %, % and % respectively. Figure 18 Provision coverage ratio 450% 400% 350% 300% 250% 200% 150% 100% SPDB ABC CMB CCB CITIC PAB CIB BOCOM CMBC ICBC BOC CEB CQRCB BOB NJB NBB BCQ HXB

18 Liabilities continue to grow steadily, with bonds payable increasing in proportion In Q3 2015, total liabilities of these Listed Banks continued to grow steadily, amounting to RMB109,850 bn at the end of September. This is up 10.75% from end-2014 and up 0.99% on the previous quarter. There were slight changes to the liability structures of Listed Banks at the end of September In Q3, a host of measures were adopted by PBOC to maintain liquidity in the monetary market, including interest rate cuts, reserve requirement ratio cuts, reverse repo, short-term liquidity operations (SLOs), mid-term lending facilities (MFLs), and pledged supplementary lending (PSL), which further brought down the proportions due to banks and central bank borrowing. In Q3 2015, the volume of interbank certificates of deposits further expanded and the balance of bonds payable continued to grow as a proportion. The growth was most evident among JSCBs. Bonds payable were higher in proportion among CCBs & RCBs than they were in JSCBs or LCBs. Figure 19 Changes in the liability structures of Listed Banks 5.86% 5.48% 3.12% 2.75% 3.37% 3.23% 1.83% 1.46% 5.73% 4.23% 9.60% 8.05% 13.37% 14.54% 25.15% 26.70% 22.72% 22.81% 78.94% 78.51% 66.00% 66.32% 64.31% 65.91% Five LCBs Eight JSCBs Five CCBs & RCBs Deposits Due to banks and central bank borrowing Bonds payable Others Note: Other liabilities mainly include financial liabilities and derivative financial liabilities at fair value through profit or loss. 18

19 4. Capital adequacy ratio Capital raising increasingly reliant on external sources 19

20 Capital raising increasingly reliant on external sources At the end of September 2015, thanks to the issuing of shortterm capital instruments to top up capital, most of the Listed Banks reported a slight rise in their capital adequacy ratios compared to the end of June. However, due to the continued rise of credit exposures and the manifest slowdown in profit growth, internal forces are less able to drive the capital adequacy of these listed commercial banks. Supplementary capital instruments, including preferred stock, tier-2 capital bonds and follow-on offerings of common stock, are expected to become the norm when listed commercial banks opt to top up their capital. Figure 20 Tier-one core capital adequacy ratios of Listed Banks 14% 13% 12% 11% 10% 9% 8% 7% ICBC CCB CCB ABC BOCOM BOC CMB BCQ CEB CITIC PAB NBB CIB SPDB CQRCB CMBC HXB NJB Figure 21 Changes in capital adequacy ratios of Listed Banks 15% 14% ICBC BOC BOCOM 13% 12% 11% ABC CMB SPDB CITIC CEB CMBC CIB PAB NBB NJB CQRCB HXB BCQ 10%

21 Capital raising increasingly reliant on external sources (Cont d) At the end of Q3, a host of Listed Banks topped up their capital through tier-2 capital bonds and the offering of preferred and common stock, among other methods. As seen from announcements made as of the date of this report, quite a few Listed Banks expect to issue various capital instruments in the near future. Issuances of capital instruments are summarised as follows: Table 2 Issuances of capital instruments by Listed Banks (in RMB unless otherwise specified) Banks Issuances in Q1-3Q of 2015 Future issuances announced ICBC Overseas issuance of tier-2 capital bonds: RMB 2 bn Domestic issuance of no more than 450 m shares of preferred stock: less than RMB 45 bn CCB Overseas issuance of tier-2 capital bonds: USD 2 bn Domestic issuance of preferred stock: RMB 60 bn Overseas issuance of preferred stock: RMB 20 bn ABC Domestic issuance of 400 m shares of preferred stock: RMB 40 bn N/A BOC Domestic issuance of 280 m shares of preferred stock: RMB 28 bn N/A BOCOM Overseas issuance of preferred stock: USD 2.45 bn Domestic issuance of no more than 450 m shares of preferred stock: less than RMB 45 bn CIB Domestic issuance of 130 m shares of preferred stock: RMB 13 bn N/A SPDB Domestic issuance of 150 m shares of preferred stock: RMB 15 bn Overseas issuance of tier-2 capital bonds: RMB 30 bn CITIC N/A Domestic issuance of no more than 350 m shares of preferred stock: less than RMB 35 bn CMBC Domestic issuance of tier-2 capital bonds: less than RMB Domestic issuance of no more than 200 m preferred stock: 20 bn less than RMB 20 bn CEB Domestic issuance of no more than 300 m preferred stock: less than RMB 30 bn N/A PAB Issuance of 599 m shares of A-share common stock: Issuance of no more than 200 m shares of preferred stock: RMB 9.94 bn less than RMB 20 bn HXB N/A Issuance of no more than 200 m shares of preferred stock: less than RMB 20 bn BOB N/A Domestic issuance of tier-2 capital bonds: less than RMB 18 bn NJB Domestic non-public offering of A-shares: less than RMB Domestic issuance of no more than 100 m preferred stock: 8 bn RMB 10 bn NBB Domestic issuance of tier-2 capital bonds: RMB 7 bn Domestic issuance of preferred stock: RMB 4.85 bn BCQ N/A Private placement of 810 m shares of H-share common stock: HKD bn SJB N/A Domestic issuance of tier-2 capital bonds: RMB 10 bn HSB N/A Overseas placement of m shares of H-share common stock, with issue price to be determined N/A 21

22 Banking Newsletter November

23 5. Appendix Financial highlights of Listed Banks Banking and Capital Markets Contacts Offices in China 23

24 Banking Newsletter 普华永道 November

25 Financial highlights of Listed Banks (I) Five Large Commercial Banks (In RMB millions) Operating Results, Q1-Q ICBC CCB ABC BOC BOCOM LCBs Total Operating income 524, , , , ,413 1,892,481 Net interest income 379, , , , ,975 1,403,748 Non-interest income 144, ,583 78, ,493 38, ,733 Net fee & commission income 111,183 88,686 66,612 71,484 27, ,393 Other non-interest income 33,500 27,897 11,924 39,009 11, ,340 Operating expenses (235,754) (214,519) (211,461) (178,761) (79,281) (919,776) Business tax and surcharges (32,266) (27,174) (22,187) (20,392) (10,921) (112,940) Business & administration expenses (120,815) (105,784) (123,794) (94,777) (41,209) (486,379) Allowance for impairment losses (61,569) (64,123) (57,365) (44,893) (20,878) (248,828) Other business expenses (21,104) (17,438) (8,115) (18,699) (6,273) (71,629) Operating profit 288, , , ,012 67, ,705 Profit before tax 290, , , ,396 67, ,904 Income tax expense (68,230) (52,508) (43,646) (40,522) (15,082) (219,988) Net profit 222, , , ,874 52, ,916 Non-controlling interests , ,803 Profit attributable to shareholders 221, , , ,545 52, ,113 Financial Position, as of 30 September 2015 ICBC CCB ABC BOC BOCOM LCBs Total Total assets 22,104,917 18,321,375 17,709,510 16,672,018 7,206,866 82,014,686 Loans and advances, net 11,610,463 10,091,195 8,482,659 8,837,177 3,639,712 42,661,206 Investments 5,039,814 3,939,542 4,261,708 3,460,414 1,537,758 18,239,236 Interbank assets 1,420,374 1,118,205 1,723,018 1,089, ,244 6,071,797 Cash & deposits with central bank 3,273,308 2,667,037 2,724,711 2,278, ,642 11,883,604 Others assets 760, , ,414 1,005, ,510 3,158,843 Total liabilities 20,414,265 16,946,975 16,534,383 15,362,957 6,684,766 75,943,346 Deposits from customers 16,521,828 13,827,713 13,554,404 11,548,697 4,493,337 59,945,979 Interbank liabilities 2,379,867 2,084,394 1,757,025 2,316,163 1,618,020 10,155,469 Debt securities issued 278, , , , ,401 1,390,608 Due to central bank ,128 16, ,737 78, ,647 Other liabilities 1,233, , , , ,814 3,898,643 Total owners equity 1,690,652 1,374,400 1,175,127 1,309, ,100 6,071,340 Non-controlling interests 10,624 11,025 1,622 50,214 3,089 76,574 Total equity attributable to equity shareholders 1,680,028 1,363,375 1,173,505 1,258, ,011 5,994,766 25

26 Financial highlights of Listed Banks (II) Eight Joint-stock Commercial Banks (In RMB millions) Operating Results, Q1-Q CMB CIB SPDB CITIC CMBC CEB PAB HXB JSCBs Total Operating income 156, , , , ,170 70,047 71,152 43, ,204 Net interest income 101,159 88,008 82,529 76,746 70,489 49,658 48,206 35, ,853 Non-interest income 55,065 24,346 26,103 30,707 45,681 20,389 22,946 8, ,351 Net fee & commission income 44,977 23,479 21,222 26,068 37,952 20,261 20,223 8, ,402 Other non-interest income 10, ,881 4,639 7, ,723 (106) 30,949 Operating expenses (92,637) (60,230) (60,271) (63,722) (65,565) (38,436) (47,847) (24,585) (453,293) Business tax and surcharges (9,268) (9,428) (6,701) (7,470) (7,534) (5,293) (5,046) (3,197) (53,937) Business & administration expenses (39,204) (22,846) (22,109) (27,787) (32,352) (18,519) (22,866) (15,313) (200,996) Allowance for impairment losses (43,952) (27,576) (30,950) (28,465) (24,844) (14,550) (19,935) (6,061) (196,333) Other business expenses (213) (380) (511) - (835) (74) - (14) (2,027) Operating profit 63,587 52,124 48,361 43,731 50,605 31,611 23,305 18, ,911 Profit before tax 63,990 52,372 48,990 43,842 50,926 31,664 23,286 18, ,708 Income tax expense (15,204) (10,860) (11,515) (10,408) (11,863) (7,748) (5,546) (4,658) (77,802) Net profit 48,786 41,512 37,475 33,434 39,063 23,916 17,740 13, ,906 Non-controlling interests ,193 Profit attributable to shareholders 48,500 41,221 37,162 32,926 38,377 23,875 17,740 13, ,713 Financial Position, as of 30 September 2015 CMB CIB SPDB CITIC CMBC CEB PAB HXB JSCBs Total Total assets 5,222,292 5,289,398 4,822,629 4,653,138 4,374,847 3,086,815 2,599,060 1,950,115 31,998,294 Loans and advances, net 2,633,672 1,701,725 2,113,767 2,317,329 1,932,309 1,433,869 1,182, ,110 14,306,007 Investments 1,329,212 2,380,429 1,609,087 1,429, , , , ,502 9,321,210 Interbank assets 489, , , , , , , ,789 3,802,911 Cash & deposits with central bank 616, , , , , , , ,393 3,400,333 Others assets 153, , , , ,185 89, ,499 32,321 1,167,833 Total liabilities 4,872,327 4,983,559 4,519,009 4,357,002 4,074,112 2,869,908 2,441,924 1,837,244 29,955,085 Deposits from customers 3,467,658 2,431,748 3,001,090 3,148,587 2,708,015 1,958,935 1,723,328 1,332,133 19,771,494 Interbank liabilities 1,004,639 2,034,639 1,070, ,632 1,060, , , ,200 7,534,092 Debt securities issued 203, , , , , , ,325 41,913 1,715,652 Due to central bank 31,000 51,800 43,825 18,550 17,979 14,040 3,600 30, ,844 Other liabilities 165,114 94,925 90,104 98,999 92,282 72,551 70,080 38, ,003 Total owners equity 349, , , , , , , ,871 2,043,209 Non-controlling interests 1,003 3,415 3,355 1,952 8, ,214 Total equity attributable to equity shareholders 348, , , , , , , ,162 2,023,995 26

27 Financial highlights of Listed Banks (III) Five City Commercial Banks & Rural Commercial Banks (In RMB millions) Operating Results, Q1-Q BOB NJB NBB BCQ* CRCB* CCBs & RCBs total Operating income 32,974 16,605 14,124 6,398 16,155 86,256 Net interest income 26,132 13,714 11,636 5,176 14,919 71,577 Non-interest income 6,842 2,891 2,488 1,222 1,236 14,679 Net fee & commission income 5,775 2,627 2,906 1,122 1,111 13,541 Other non-interest income 1, (418) ,138 Operating expenses (15,127) (9,962) (7,495) (2,733) (8,475) (43,792) Business tax and surcharges (2,140) (1,267) (777) - - (4,184) Business & administration expenses (7,602) (3,957) (4,292) (2,112) (6,421) (24,384) Allowance for impairment losses (5,372) (4,679) (2,414) (621) (2,054) (15,140) Other business expenses (13) (59) (12) - - (84) Operating profit 17,847 6,643 6,629 3,665 7,680 42,464 Profit before tax 17,845 6,669 6,625 3,666 7,680 42,485 Income tax expense (3,668) (1,441) (1,281) (991) (1,885) (9,266) Net profit 14,177 5,228 5,344 2,675 5,795 33,219 Non-controlling interests Profit attributable to shareholders 14,136 5,178 5,321 2,675 5,740 33,050 *SJB, HSB, HRB, BCQ, CRCB are listed in Hong Kong Exchanges. Financial Position, as of 30 September 2015 BOB NJB NBB BCQ* CRCB* CCBs & RCBs total Total assets 1,787, , , , ,409 4,206,883 Loans and advances, net 730, , , , ,033 1,560,319 Investments 409, , ,763 94, ,951 1,411,601 Interbank assets 458,561 63,317 27,413 38, , ,014 Cash & deposits with central bank 161,699 77,009 61,101 36,691 85, ,434 Others assets 28,015 18,039 13,764 6,041 12,656 78,515 Total liabilities 1,679, , , , ,477 3,950,623 Deposits from customers 1,020, , , , ,285 2,540,557 Interbank liabilities 465, ,463 99,917 61, , ,525 Debt securities issued 130,120 76, ,205 12,472 32, ,252 Due to central bank 20,025 2,400 1,000-2,755 26,180 Other liabilities 43,498 15,337 31,594 6,143 10, ,109 Total owners equity 108,103 44,659 38,483 18,083 46, ,260 Non-controlling interests ,575 2,300 Total equity attributable to equity shareholders 107,847 44,287 38,386 18,083 45, ,960 27

28 Financial highlights of Listed Banks (IV) Five Large Commercial Banks Financial Ratios for Q1-Q ICBC CCB ABC BOC BOCOM Profitability (Jan - Sep 2015) Return on average total assets (ROA) 1.39% 1.46% 1.21% 1.15% 1.04% Return on weighted average equity (ROE) 18.60% 19.45% 19.41% 15.02% 14.15% Net Interest Spread (NIS) % % Net Interest Margin (NIM) % % 2.24% Cost to income ratio 23.03% 24.04% 30.40% 26.57% 28.57% Income Mix (Jan - Sep 2015) Net interest income* 72% 75% 81% 69% 74% Other non-interest income* 6% 6% 3% 11% 8% Fee and commission income* 21% 19% 16% 20% 19% Asset Quality (As of 30 Sep, 2015) Non performing loan (NPL) balance, in millions 171, , , ,072 52,875 NPL ratio 1.44% 1.45% 2.02% 1.43% 1.42% Allowance to total loans ratio 2.27%* 2.59%* 4.41%* 2.20%* 2.35% Provision coverage ratio % % % % % Capital Adequacy (As of 30 Sep, 2015) Common Equity Tier 1 capital adequacy ratio 12.41% 12.73% 9.72% 10.71% 10.97% Tier 1 capital adequacy ratio 12.67% 12.73% 10.43% 11.68% 11.29% Capital adequacy ratio 14.43% 14.97% 13.21% 13.65% 13.30% Total equity to total assets ratio* 8% 8% 7% 8% 7% Risk-weighted assets to total assets ratio* - 61% 63% - 64% Eight Joint-stock Commercial Banks Financial Ratios for Q1-Q CMB CIB SPDB CITIC CMBC CEB PAB HXB Profitability (Jan - Sep 2015) Return on average total assets (ROA) % 0.83% 1.02% % - Return on weighted average equity (ROE) 19.50% 15.75% 14.37% 15.89% 19.29% 16.83% 12.39% 12.90% Net Interest Spread (NIS) 2.59% % - Net Interest Margin (NIM) 2.75% % 2.29% % - Cost to income ratio 25.09% 20.67% % % Income Mix (Jan - Sep 2015) Net interest income* 65% 78% 76% 71% 61% 71% 68% 81% Other non-interest income* 6% 1% 4% 4% 7% 0% 4% 0% Fee and commission income* 29% 21% 20% 24% 33% 29% 28% 19% Asset Quality (As of 30 Sep, 2015) Non performing loan (NPL) balance, in millions 43,397 27,487 29,829 33,763 28,753 21,034 16,199 13,939 NPL ratio 1.60% 1.57% 1.36% 1.42% 1.45% 1.43% 1.34% 1.37% Allowance to total loans ratio 3.12% 2.97% 3.39% 2.53% 2.35% 2.36%* 2.24% 2.57% Provision coverage ratio % % % % % % % % Capital Adequacy (As of 30 Sep, 2015) Common Equity Tier 1 capital adequacy ratio 10.83% 8.45% 8.42% 8.99% 9.00% 9.23% 9.14% 8.82% Tier 1 capital adequacy ratio 10.83% 9.23% 9.38% 9.04% 9.02% 10.18% 9.14% 8.82% Capital adequacy ratio 12.79% 11.20% 12.33% 12.00% 11.36% 11.91% 11.08% 10.87% Total equity to total assets ratio* 7% 6% 6% 6.36% 7% 7% 6% 6% Risk-weighted assets to total assets ratio* 59% 62% 65% 69.86% - 68% 61.35% 66% 28

29 Financial highlights of Listed Banks (V) Five City Commercial Banks & Rural Commercial Banks Financial Ratios for Q1-Q BOB NJB NBB BCQ* CRCB* Profitability (Jan - Sep 2015) Return on average total assets (ROA) % 1.17% 1.26% 1.17% Return on weighted average equity (ROE) 13.88% 14.77% 14.65% 21.04% 16.99% Net Interest Spread (NIS) % 2.41% - - Net Interest Margin (NIM) % 2.39% 2.56% 3.22% Cost to income ratio 23.00% 23.83% 30.39% 26.59% 32.95% Income Mix (Jan - Sep 2015) Net interest income* 79% 83% 82% 81% 92% Other non-interest income* 3% 2% -3% 2% 1% Fee and commission income* 18% 16% 21% 18% 7% Asset Quality (As of 30 Sep, 2015) Non performing loan (NPL) balance, in millions 6,936 2,044 2,117 1,177 2,421 NPL ratio 0.94% 0.95% 0.88% 0.98% 0.86% Allowance to total loans ratio 3.30%* 3.59%* 2.62% 2.15%* 3.65%* Provision coverage ratio %* % % % % Capital Adequacy (As of 30 Sep, 2015) Common Equity Tier 1 capital adequacy ratio % 8.92% 9.73% 9.57% Tier 1 capital adequacy ratio % 8.92% 9.73% 9.57% Capital adequacy ratio % 12.53% 10.78% 11.76% Total equity to total assets ratio* 6% 6% 6% 6% 7% Risk-weighted assets to total assets ratio* Note: the ratio marked with * are calculated by. 29

30 Banking and Capital Markets Contacts Assurance Advisory Tax Raymond Yung Beijing James Chang Beijing Oliver Kang Beijing Tel: +86 (10) Tel: +86 (10) Tel:+86 (10) Margarita Ho Beijing Addison Everett Beijing Matthew Wong Shanghai Tel: +86 (10) Tel: +86 (10) Tel: +86 (21) Richard Zhu Beijing William Gee Beijing Florence Yip Hong Kong Tel: +86 (10) Tel:+86 (10) Tel: Jimmy Leung Shanghai William Yung Shanghai Tel: +86 (21) Tel:+86 (21) Michael Hu -Shanghai Matthew Phillips Hong Kong Assurance Risk & Quality Tel: +86 (21) Tel: Tracy Chen Shanghai Tel: +86 (21) Shirley Yeung Guangzhou Chris Chan Hong Kong Tel:+86 (20) Tel: Nigel Dealy Hong Kong Tel: Charles Chow Shenzhen Tel: +86 (755)

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