Bank of Communications Co., Ltd. 2014 Annual Results March 2015
Agenda I Financial Highlights II Business Operations III Risk Management IV Next Step 2
Agenda I Financial Highlights 3
Performance Highlights (RMB bn, %) 2014 2013 Change Attributable profit 65.850 62.295 5.71% NIM 2.36% 2.52% -16bps Net fee & commission income 29.604 25.968 14.00% Share of net fee & commission income 16.57% 15.73% 84bps Cost/income Ratio 30.52% 29.68% 84bps End-2014 End-2013 Change ROAA 1.08% 1.11% -3bps ROAE 14.79% 15.58% -79bps Impaired loan ratio 1.25% 1.05% 20bps Provision coverage ratio 178.88% 213.65% -3477bps Provision rate 2.24% 2.24% 0.00bps CAR 1 14.04% 12.08% 196bps Tier 1 CAR 1 11.30% 9.76% 154bps Note 1: Based on the Provisional Measures on Capital Management of Commercial Banks issued by the CBRC. As approved by the regulators in April 2014, the Group began to measure the CAR under the Advanced Measurement Approach. The changes of CAR and Tier 1 CAR in the reporting period include the impacts from the alteration of measurement approaches. 4
On-balance-sheet and off-balance-sheet business Size of on-balance-sheet assets and off-balance-sheet business (RMB bn) On-the-sheet assets Off-the-sheet guarantees and commitments Include: Loan commitments L/G & Guarantees Acceptance bills End- 2014 End- 2013 YTD 6,268.3 5,960.9 5.16% 1,534.5 1,550.7-1.04% 616.2 491.3 25.42% L/C 50.8 70.4-27.70% 310.5 376.2-17.46% 557.0 612.8-9.11% (RMB bn) Assets custody Personal AUM AUM by fund mgmt company End- 2014 End- 2013 YTD 4,160.1 2,813.7 47.85% 2,152.1 1,903.2 13.08% 191.8 60.4 217.55% Trust AUM 399.0 283.7 40.64% Off-thesheet wealth mgmt Assets under management 459.6 254.2 80.80% 5
Balance Sheet Summary (RMB bn, %) End-2014 End-2013 Growth Growth % Loans to customers (less provision) 3,354.787 3,193.063 161.724 5.06% Investment securities 1,162.876 1,070.677 92.199 8.61% Cash & due from central banks 938.055 896.556 41.499 4.63% Due from banks and other financial institutions 525.033 566.429-41.396-7.31% Lease financing receivables 99.130 86.848 12.282 14.14% Other assets 188.418 147.364 41.054 27.86% Total assets 6,268.299 5,960.937 307.362 5.16% Due to customers 4,029.668 4,157.833-128.165-3.08% Due to banks and other financial institutions 1,408.275 1,126.563 281.712 25.01% Other liabilities 356.751 255.057 101.694 39.87% Total liabilities 5,794.694 5,539.453 255.241 4.61% Share capital 74.263 74.263 0.000 0.00% Other equity 399.342 347.221 52.121 15.01% Total equity 473.605 421.484 52.121 12.37% 6
Profit and Loss Summary (RMB bn, %) 2014 2013 Growth Growth % Net interest income 134.776 130.658 4.118 3.15% Net fee & commission income 29.604 25.968 3.636 14.00% Insurance business income 2.547 1.357 1.190 87.69% Other income 11.699 7.087 4.612 65.08% Net operating income 178.626 165.070 13.556 8.21% Impairment losses for loans 20.439 18.410 2.029 11.02% Insurance business expenses 2.528 1.173 1.355 115.52% Other operating expenses 70.732 65.578 5.154 7.86% Include: Business cost 54.020 47.350 6.670 14.09% Profit before tax 84.927 79.909 5.018 6.28% Income tax 18.892 17.448 1.444 8.28% Net profit 66.035 62.461 3.574 5.72% Include: Profit attributable to the shareholders of the bank 65.850 62.295 3.555 5.71% 7
Performance Consistent with Expectations Stable quality of development Group s total assets (RMB bn) 5.16% 5,960.937 6,268.299 (RMB bn, %) End-2014 End-2013 Growth Deposit from customers Loans to customers 4,029.668 4,157.833-3.08% 3,431.735 3,266.368 5.06% Total assets of overseas institutions exceeded US$100 billion for the first time (RMB bn, %) Deposit from customers Loans to customers and receivables 2014 Daily Average 2013 Daily Average Growth 3,984.424 3,764.700 5.84% 3,400.175 3,179.693 6.93% 8
Performance Consistent with Expectations Profit structure further optimised Net fee & commission income (RMB bn) 14.00% The proportion of net fee and commission income in net operating income was 16.57%, up 0.84 pps YoY Income from management services, bank card and agency services, being major drivers to intermediary business, increased by 24.70%, 16.91% and 14.42% YoY, respectively 25.968 29.604 Share of net fee & commission income 16.57% 9
Performance Consistent with Expectations Strong execution of strategic transformation Share of total assets of subsidiaries and overseas offices (%) Share of net profit of subsidiaries and overseas offices (%) 1.61 pps 10.78% 12.39% 0.55 pps 7.95% 8.50% Steady progress towards divisional / quasi-divisional structure: Net operating income contributed by 6 profit centres within the divisional structure grew by 23.44% YoY Faster AM business expansion: On- and off-balance-sheet wealth management scale denominated in RMB exceeded 1 trillion, ranking the leading position among peers with an effective enhancement 10
Performance Consistent with Expectations Asset quality stabilised with efficiency gains (RMB bn, %) Impaired loan balance Impaired loan balance and ratio End-2014 End- 2013 Change 43.017 34.310 25.38% Impaired loan ratio 1.25% 1.05% 0.20 pps 34.77 pps Provision coverage ratio 213.65% 178.88% Provision rate Pressure on asset quality was effectively alleviated by restructuring legacy credit assets and defusing risky loans, mainly through size control, reduction and buffering in key areas; and recovery, write-off and disposal of non-performing assets Stayed flat 2.24% 2.24% 11
Performance Consistent with Expectations Capital strength significantly enhanced Brand strength continued to improve 12.08% Capital adequacy ratio 1.96 pps 1.54 pps 14.04% Again included in the Fortune Global 500 Ranking No. 217 in terms of revenue, moving up 26 places from last year 9.76% Tier 1 CAR CAR 11.30% Ranking No. 19 in terms of Tier 1 capital among the Top 1000 World Banks selected by The Banker magazine, moving up 4 places from last year and the first time to be on the top 20 list worldwide One of the first domestic commercial banks for implementation of the Advanced Measurement Approach both at the bank and group levels, as approved by the CBRC 12
Agenda II Business Operations 13
Corporate Financial Service Highlights Net fee & commission income (RMB bn) Profit before tax (RMB bn) 8.42% 14.996 16.259 53.981 4.14% 单击此处编辑母版文本样式 56.214 No. of Winto Fortune customers 6.67% 14
Corporate Finance Service Corporate & Institutional Business Investment Banking Increased the support to key projects under the "One Belt and One Road", "Integration of Beijing-Tianjin-Hebei", New Countryside, Sustainable Development of Central and West China and other national strategies Roadshows of "Winto Fortune Accompany You" and strategic cooperation agreements with leading players in telecom, agriculture, transportation and aviation sectors Credit asset securitization progressed steadily, with credit ABS totalling RMB10 billion issued successfully Lead underwriting: 253 bonds (including local government debt), up 69.80% YoY; principal amount totalling RMB451.524 billion, up 45.46% YoY A winner of the "Best Investment Banking Award" by CFO WORLD Financial services for business circles: targeting customers clustered in professional circles, industrial chains and parks Supply chain financial services: targeting small and micro enterprises such as upstream and downstream of hospitals Merchant financial services: "POS loans", a flagship product based on settlement services Assets under custody amounted to RMB4.16 trillion, up 47.85% YTD Secured the leadership in pension custody sector with faster paces in developing overseas custody services The first QDLP depositary bank and the first overseas investment custodian bank for sovereign fund in China A winner of the "Best Asset Custody Award" by CFO WORLD MSME Business Asset Custody 15
Corporate Finance Service Supply Chain Finance Improved functions of the receivables service platform to promote "E-Collection" and "E-Discounting" Covering over 1,200 industry chain networks for 10,000+ enterprises up to standard Secured the "Best Supply Chain Finance Award" by CFO WORLD Cash Management Offering cash management service for 17,400 group corporate customers through 94,000 cash management accounts "Competitive Cash Management Bank 2014" by China Business Journal; "Best Service Provider, Cash Management, China Rising Star" by The Asset International Settlement & Trade Finance International settlement volume by domestic branches reached RMB3,746.431 billion, up 9.95% YoY International trade finance volume reached RMB183.08 billion International factoring volume reached RMB9.038 billion, among which the FCI international dual factoring volume amounted to RMB7.147 billion, up 42.61% YoY "Best Trading Partner Bank", named by the Finance Committee of China Banking Association for 3 consecutive years 16
Personal Financial Service & Wealth Management Highlights No. of personal customers 10% Personal AUM (RMB bn) 13.08% 2,152.145 1,903.223 Net fee & commission income (RMB bn) 27.22% 9.207 11.713 4.18% Profit before tax (RMB bn) 6.346 6.611 17
Personal Financial Service & Wealth Management Personal wealth management 9.53% No. of BOCOM fortune standard customers 18.85% No. of OTO fortune standard customers 16.63% No. of private banking customers Cross-board finance and private trust offerings through 70+ OTO cross-border financial service centers Established the first private family trust according to inheritance demand of high-end private banking clients "Golden Wealth Management - Best Brands", by Shanghai Securities News 18
Financial Market Business Highlights Unit: RMB bn, % Interest income of investment securities Profit before tax 13.55% 23.69% 36.506 45.154 20.661 18.196 Interest income of due from banks and other financial institutions 22.94% 15.358 18.881 19
Financial Market Service Institutional business Asset management One of the first cross-board settlement banks for the "SH-HK Stock Connect" One of the first settlement banks for NEEQ One of the first clearing banks for RMB interest rate, iron ore and thermal coal swaps on the Shanghai Clearing House Connecting 20,747 outlets of 114 member banks through the Interbank Cooperation Platform Market coverage: 96% for third-party depositary business, and 第二级 82% for financing and securities loans depository business "BoCom Tongye", a series of institutional offbalance-sheet wealth management products, posted sales RMB895.2 billion from 200+ financial institutions Launched the first active NAV-based product, and the first CSI300-linked structured personal product Accelerated development of RMB offshore AM services; set up an AM sub-center in Hong Kong Issued 12,488 wealth management products and raised RMB15,410.3 billion, up 56.83% and 38.95% YoY, respectively On- and off-balance-sheet RMB-denominated wealth management scale took a leading position in the industry with the amount exceeding 1 trillion Staying ahead of peers in the "CNBenefit" ranking for bank wealth management 20
Financial Market Service Money market business Accumulative trading volume in RMB money market by domestic branches amounted to RMB13.08 trillion Accumulative trading volume in foreign currency money market amounted to US$176.1 billion Trading book business Banking book business Precious metals business Trading volume of RMB-denominated bonds by domestic branches reached RMB1.73 trillion Foreign currency trading volume by domestic branches in domestic interbank market amounted to US$661.5 billion Bond investment of the Group amounted to RMB1,159.622 billion, up 8.54% YTD Yield of investment securities was 4.16%, up 30 bps YoY Personal precious metal trading volume via domestic branches was RMB98.965 billion, up 15.09% YoY Accumulative proprietary gold trading volume was 845.45 tons, up 46.01% YoY Precious metal contract trading volume ranked No. 2 among non-futures members of the Shanghai Futures Exchange 21
Service Channels Physical channel E-channels 2,785 outlets in total with a net increase of 95 YTD, including 98 newly opened and merger of 3 low-productivity outlets Presence covers 230 cities at or above prefecture level, an increase of 15 YTD Coverage ratio at prefecture and municipal-level cities reached 68.86%, up 4.49 pps YTD, with the coverage ratio in West China rising by 5.35 pps YTD to 42.75% Diversion rate of e-banking 4.80 pps 83.13% 78.33% 22
Service Upgrading: An Unchanged Theme Service is an integral foundation for the Bank to compete in pursuit of comprehensive growth, as well as the key to core competitiveness currently and in the future. At BoCom, service upgrading is highly valued and taken as an integral part and long-term strategy for transformation. Significantly decreased customer complaints vs. improving recognition among customers 4,153 complaints in 2013, down 54% from 2012; 3,698 complaints in 2014, down 11% from 2013 Rising customer satisfaction with reputation of service being established Ranked 1st in the China Retail Banking Customer Satisfaction Survey 2014, together with the largest gain in the score for 2 consecutive years Ranking among peers to ascend with increasing influence of service brand 127 outlets, a record high of the Bank which ranked 2nd among peers, were included in the "Top 1000" model units by the China Banking Association, up 39 YoY Leveraged upon consumer protection to fuel service upgrading "Popularisation of Financial Knowledge", "Month of Financial Literacy", "Publicity of Financial Knowledge", and consumer review organised by China Consumer Association 23
Overseas Operation and Universal Operation Internationalization strategy Amount and share of total assets of overseas offices (RMB bn) 8.72% 519.876 1.13 pps 617.552 9.85% 18.79% Amount and share of net profit of overseas offices (RMB bn) 1.01 pps 5.50% Offering integrated and high-quality financial services both domestic and overseas to corporate customers The synergy business volume amounted to US$50.74 billion, with income up 30.04% YoY Appointed as the clearing bank for RMB business in Seoul Granted the first China-Singapore cross-border RMB loan Launched "Rong Yuan Tong", a cross-border RMB financial service brand Cross-border RMB settlement volume by domestic and overseas banking institutions amounted to RMB1,099.737 billion, up 20.87% YoY 4.49% 2.800 3.622 29.36% Number of offshore customers increased by 31.55% YTD Offshore trade finance and international settlement volume: both ranked 1st among Chinese peers 24
Overseas Operation and Universal Operation Universal operation Highlights of subsidiaries BOCOM Financial Leasing: ranked within top 3 among peers in terms of growth of assets and net profit; leasing assets balance reached RMB110.502 billion, up 23.96% YTD BOCOM International Trust: AUM amounted to RMB399.047 billion, up 40.66% YTD BOCOM Schroder: AUM amounted to RMB191.758 billion, up 218% YTD BoComLife: original premium income increased by 96.43% YoY BOCOM Int'l: awarded with the "Best Chinese Investment Bank in Hong Kong" and the "Best Broker Brand in Hong Kong" by Hexun.com BOCOM Insurance: outperformed the market average in premium growth and net loss ratio 0.46 pps Total assets of subsidiaries and share in the Group (RMB bn) 0.48 pps 2.54% 2.06% 122.502 159.451 30.16% Net profit of subsidiaries and share in the Group (RMB bn) 3.46% 3.00% 2.158 1.975 8.48% 25
Agenda III Risk Management 26
Risk Management Loan structure optimisation Incremental credit: focused on sectors consistent with national economic plan and transformation direction; livelihood and spending upgrade loans grew faster than the average Loan balance in Central and West China represented 29.69%, up 0.87 pps YTD Personal loans of the Group represented 25.31%, up 2.31 pps YTD LGFV loans represented 6.55%, down 0.25 pps YTD Loan balance in heavily-polluting, highly energy-consuming and over-capacity sectors represented 2.15%, down 0.37 pps YTD Risk management tools Our implementation of the advanced capital measurement approach was approved by the regulators, allowing us to become one of the first commercial banks for implementation both at the parent company and group levels and demonstrating our domestic leadership given our risk measurement, risk management and capital management in line with international advanced practices Innovative data mining and information integration helped to effectively combine Big Data tools with traditional risk review, allowing more accurate risk identification, positioning and alerts to improve asset risk management 27
Risk Management Credit risk Market & liquidity risk Operational risk Optimised the centralised credit Combining upper limit management, management system. Credit review has risk hedging, etc. for effective covered traditional (corporate & management of market risk institutional business) as well as assets Strengthened post-investment of transformational (investment banking, management on credit bonds, and wealth management) and emerging businesses Attaching great importance to key areas of credit risk, with strengthened duration management Pressed ahead with reduction, buffering and restructuring of non-performing assets via, among others, disposal and stress test for early signalling of credit risk improved management over counterparty credit exposure Improved rules and guidelines on liquidity risk management A multi-level monitoring mechanism covering the head office and sub-branches in place to enhance alerting against external fraud and other risks Business continuity plans well established for major lines and products, to upgrade emergency response capacity to business interruption Overseas branches and subsidiaries developed recovery and disposition plan, to enhance risk control on the consolidated basis 28
Agenda IV 4 Next Step 29
Next Step The Group is poised to ford through the changing economic environment and market to seek progress with stability, embracing transformation-oriented reforms with an aim at new success in the new normal Realign the Bank with the new economic normal to optimise credit resource allocation for serving the real economy through multiple channels Seek breakthroughs in transformation towards divisional structure to upgrade our business model for organic growth Build up our cross-border, cross-industry and cross-market capacities under the "BoCom Strategy" Advance the reform on risk management system, with a focus on key areas to stabilise asset quality Draw upon our technological strengths to upgrade product innovations and service upgrading 30
Q & A