August 2017 Bank of Communications Co., Ltd. 2017 Interim Results
Agenda I Financial Highlights II Business Review III Risk Management IV Next Steps 2
Agenda I Financial Highlights 3
Further improved asset structure focusing on serving the real economy Total assets (RMB bn) 8,403.166 6.28% 8,930.838 Expanded scale of social financing by supporting national strategic initiatives Loan to customers (pre-provision, RMB bn) 6.51% 4,102.959 4,370.147 Supporting SMEs as a social responsibility Domestic SME loans (RMB bn) 683.958 8.17% 739.870 End-2016 Net profits (RMB bn) 38.975 37.661 1H2016 3.49% End-1H2017 1H2017 2016 1H2017 (RMB bn, %) End-1H2017 End-2016 Transport, storage and postal services 2016 1H2017 Optimized credit structure to support structural reform on the supply front Growth(over the beginning of 2017) 518.845 495.427 4.73% Service sector 331.002 300.929 9.99% Water conservancy, environment & public facility management Personal housing mortgage loans 240.172 188.622 27.33% 836.185 770.280 8.56% Credit card overdraft 347.610 307.857 12.91% Loan balance in severely overcapacity sectors decreased by RMB5.13 billion YTD. 4
Strengthened wealth management service spotlighted by expedited strategic evolvement Rising contribution from internationalization and universal banking operations Net profit of overseas institutions in amount and share in the Group (RMB bn, %) 0.52 pps 7.11% 2.679 2.973 7.63% 10.97% Net profit of subsidiaries in amount and share in the Group (RMB bn, %) 5.07% 0.30 pps 1.909 2.093 5.37% 9.64% 1H2016 Rising brand favorite attributable to the optimized wealth management system Personal AUM (RMB bn) 4.97% 1H2017 2,707.148 2,841.654 OTO Fortune Win-To Fortune 1H2016 1H2017 Customer base of OTO Fortune expanded by 8.97% YTD. Corporate customers of cash management service approaches 20,000. 2016 1H2017 BoCom Interbank Interbank wealth management customers increased by 13.42% YTD. 5
Bettered operational strength via continued efforts in deepening reforms Steady progress in implementing the 20+20+20 projects Actively explored the corporate governance mechanism with Chinese characteristics, carried out the reform of internal operation mechanism and promoted the transformation and innovation of operation pattern Notably higher profit growth than in the previous two years with increased contribution from non-interest income 37.661 Net profit (RMB bn) 3.49% 38.975 Branches + Divisions hybrid drive The six major divisional profit centers represented a 13.77% YoY increase in pre-tax pre-provision profit Materially enhanced capability in Headquarters-to-Headquarters direct operations 第二级 and specialized services Improved shareholding structure and corporate governance BOCOM International was listed on the Main Board of HKEx as the first Chinese bank-owned brokerage firm listed in Hong Kong 1H2016 1H2017 Net fee and commission income in amount and % (RMB bn, %) 20.23% 20.964 1H2016 20.46% 21.261 1H2017 0.23 pps 1.42% 6
Improved momentum in asset quality via relentless enhancement in risk management Favorable trends in overdue loans due to enhanced ERM efforts Descending impaired loan ratio VS ascending provision coverage ratio Overall prudent risk preference Risk control in key fields Impaired loan balance & ratio (RMB bn, %) 1.52% 1.51% Down 0.01pps Early warning system Reform of risk management system Risk resolution and disposal 62.400 End-2016 65.953 End-1H2017 Up RMB3.553 billion Overdue loans 90-day+ overdue loans Overdue loan balance decreased by RMB6.026 billion and ratio by 0.30 pps 90-day+ overdue loan balance decreased by RMB3.859 billion and ratio by 0.22 pps YTD Provision coverage ratio (%) 0.52pps 150.50% 151.02% End-2016 End-1H2017 7
Effective escalation of brand image spurred by achievements in transformation and innovation Adhering to the low-capital-consumption and lowcost-expansion way of transformation and development RWA growth VS Asset growth (%) 6.28% 6.10% Honored in FORTUNE s Top 500 Global Companies in nine consecutive years, and ranked No. 171 in terms of revenue RWA Assets Accelerated product innovation by applying the latest Fintech Promoted the innovation in key products such as mobile banking and 第三级 interbank platform based on project system reform Led the industry to launch Mobile Phone Credit Card, enabling the card approval, card utilization or loan extension to complete within seconds of waiting. Within the reporting period 1.42第五级 million applications for Mobile Phone Credit Card were submitted, among which 1.03 million were issued. Ranked a record-high 11 th among the global top 1,000 banks in terms of Tier 1 Capital rated by The Banker, among the top 20 in four consecutive years 8
Balance sheet summary (RMB bn, %) End-1H2017 End-2016 YTD YTD% Loans to customers (less provision) 4,270.542 4,009.046 261.496 6.52% Investment securities 2,385.108 2,252.392 132.716 5.89% Cash & due from central banks 963.575 991.435-27.860-2.81% Due from banks and other financial institutions 854.775 715.787 138.988 19.42% Lease financing receivables 120.502 114.457 6.045 5.28% Other assets 336.336 320.049 16.287 5.09% Total assets 8,930.838 8,403.166 527.672 6.28% Due to customers 4,938.694 4,728.589 210.105 4.44% Due to banks and other financial institutions 2,349.366 2,231.060 118.306 5.30% Other liabilities 994.370 811.110 183.260 22.59% Total liabilities 8,282.430 7,770.759 511.671 6.58% Share capital 74.263 74.263 0.00 0.00% Other equity 574.145 558.144 16.001 2.87% Total equity 648.408 632.407 16.001 2.53% 9
Profit and loss summary (RMB bn, %) 1H2017 1H2016 YOY YOY% Net interest income 62.708 68.148-5.440-7.98% Net fee & commission income 21.261 20.964 0.297 1.42% Insurance business income 10.768 8.764 2.004 22.87% Other income 9.203 5.734 3.469 60.50% Net operating income 103.940 103.610 0.330 0.32% Impairment losses for loans 14.646 14.807-0.161-1.09% Insurance business expenses 9.862 8.161 1.701 20.84% Other operating expenses 32.077 32.145-0.068-0.21% Include: Business cost 27.020 25.175 1.845 7.33% Profit before tax 47.355 48.497-1.142-2.35% Income tax 8.133 10.574-2.441-23.08% Net profit 39.222 37.923 1.299 3.43% Include: Profit attributable to the shareholders of the Bank 38.975 37.661 1.314 3.49% Note 1: Insurance business income and expenses are mainly referable to the insurance business income and expenses of BoCommlife Insurance. 2. With accounting factors ruled out, the net operating income increased by 4.16% on a year-on-year basis; net interest income dropped by 2.67%; net fee and commission income increased by 4.83% on a year-on-year basis. 10
On-balance-sheet and off-balance-sheet business Scale of on-balance-sheet assets and off-balance-sheet business Assets under management (RMB, bn) End-1H2017 End-2016 YTD% On-balance-sheet assets Off-balance-sheet guarantees and commitments Include: Loan commitments Credit card commitments 8,930.838 8,403.166 6.28% 1,327.835 1,252.469 6.02% 67.915 86.125-21.14% 678.800 528.199 28.51% L/C commitments 114.389 126.885-9.85% L/G & guarantees 275.318 279.694-1.56% Acceptance bills 191.413 231.566-17.34% (RMB, bn) Assets custody Personal AUM AUM by fund mgmt company Trust AUM Off-thesheet wealth mgmt End- 1H2017 End- 2016 YTD% 7,642.101 7,009.589 9.02% 2,841.654 2,707.148 4.97% 495.571 532.864-7.00% 792.851 709.768 11.71% 647.187 689.131-6.09% 11
Performance highlights (RMB bn, %) 1H2017 1H2016 YOY Attributable profit 38.975 37.661 3.49% NIM 1.57% 1.97% -40bps Net fee & commission income 21.261 20.964 1.42% Share of net fee & commission income 20.46% 20.23% 23bps Cost-to-income ratio 26.96% 24.85% 211bps End-1H2017 End-2016 YTD ROAA 0.91% 0.87% 4bps ROAE 13.06% 12.18% 88bps Impaired loan ratio 1.51% 1.52% -1bps Provision coverage ratio 151.02% 150.50% 52bps Provision rate 2.28% 2.29% -1bps CAR 13.86% 14.02% -16bps Tier 1 CAR 11.71% 12.16% -45bps Core Tier 1 CAR 10.62% 11.00% -38bps 12
Agenda II Business Review 13
Corporate financial service: offering one-stop financing service to customers Corporate deposits (RMB, bn) 4.02% Corporate customers of domestic branches 3,206.241 3,335.198 4.5% End-2016 End-1H2017 Corporate loans (RMB, bn) 2,916.772 5.49% 3,076.970 2016 1H2017 End-2016 End-1H2017 14
Corporate financial service Corporate & institutional business Leveraging its advantages in international operation and universal banking service, the Bank proactively served the major national strategies, infrastructure projects and sectors via enhanced integration of diversified financing channels. The Bank accelerated the build-up of a hierarchical and categorized customer system and promoted the vertical customer marketing management to strengthen the HO-branch integrated operation. The Bank adapted to customer needs to actively roll out the structural comprehensive financing, and launched Court Case Money Management service. Launched customer manager competency model to improve their capability in assisting corporate customers with business expansion. SME service Mobile terminal channels kept expanding with continuous launches of POS Loan, Express Mortgage Loan and YOUDAITONG and other competitive online and offline products. Inclusive Finance Division was established to enhance the top-down design of the business growth. SME loans by domestic branches 8.17% RMB bn 683.958 739.870 2016 1H2017 Note: SME loans fall within the definitions of the four state ministries and commissions. 15
Corporate financial service Investment banking The Bank fully supported corporate customers in issuing cross-border bonds. The amount of overseas bonds issued was equivalent to approximately 300 billion Hong Kong dollars, a significant increase over the same period of last year. The Bank successfully enrolled in the list of leading underwriters for Huijin Credit Debt and acted as a leading underwriter in the first round of issuance. The Bank replenished the project reserve in poverty alleviation debts, innovation & entrepreneurship debts and green debts, and actively promoted the pilot of Bond Connect and USD bond connectivity. Honored with the 2017 Bank of All-round Excellence (China) - Junding Award Investment Banking sponsored by the Securities. Acted as the leading underwriter of 108 bonds (not including local government bonds). Bonds (not including local government bonds ) undertaken by the Bank totaled RMB79.728 billion in terms of issuance amount. Asset custody business Striving for in an integrated and diversified business growth via exploring new business fields and products Scale of asset custody 7,009.589 End-2016 9.02% 7,642.101 End-1H2017 RMB bn 16
Corporate financial service International settlement & trade financing International settlement volume processed by domestic branches amounted to RMB 2,306.634 billion. International trade finance amounted to RMB 52.892 billion. External guarantees processed by domestic branches amounted to RMB 75.709 billion. Cash management One Branch Offering Nationwide Service industrial chain finance E-commerce platform service solution was launched to embrace Internet+ tides Financial management system service for financial companies was launched to meet the needs of large enterprises for business-finance integration. Product line of cash management service was extended via the launch of Account Manager, a one-stop account management service. Win-to Fortune Cash Management customers approached 20,000 in number, involving 280,000+ cash management accounts. The Bank launched online finance products covering payment, settlement and trade finance to follow major customers transformation towards industrial internetization. Opened up intensive cooperation with targeted customers in construction, medical treatment & public health, petrochemical industry and other preferred sectors. Domestic branches developed a total of over 2,500 qualified networks of industrial chains, involving 30,000+ enterprises. 17
Personal financial service: enhanced brand influence of wealth management Personal deposits (RMB, bn) 5.44% 1,600.136 1,517.560 Personal loans (RMB, bn) 9.02% 1,293.177 1,186.187 Personal customers of domestic branches 4.99% End-2016 30.128 End-1H2017 Net operating income (RMB, bn) 8.83% 32.788 End-2016 End-1H2017 Net fee & commission income (RMB, bn) 8.06% 10.199 9.438 End-2016 End-1H2017 Profit before tax (RMB, bn) 8.63% 13.356 14.509 1H2016 1H2017 1H2016 1H2017 1H2016 1H2017 18
Personal financial service Number of qualified BOCOM Fortune customers 2.58% Number of qualified OTO Fortune customers 8.97% Number of private banking customers 6.31% 2016 1H2017 2016 1H2017 2016 1H2017 The Intelligent Investment Advisory System was introduced to work out customized asset allocation plan for customers to meet their needs for differential wealth management. The Bank held the private banking forum entitled 10 Years Dedication Bears Fruitful Results to enhance market influence. Improved the capability to provide private banking customers with global asset allocation service via giving full play to the Bank s advantages in international and universal banking operation. Personal AUM amounted to RMB 2,841.654 billion, representing an increase of 4.97% YTD. 19
Personal financial service Domestic credit cards in force (unit:10,000 pieces) Up 567 million 5,043 5,610 Spending volume of domestic credit cards (RMB bn) 885.2 15.18% 1,019.5 End-2016 End-1H2017 Note: Including quasi-credit cards 1H2016 1H2017 Issuance of domestic debit cards (unit:10,000 pieces) Up 635 million 12,652 12,017 Spending volume of domestic debit cards (RMB bn) 0.81% 436.0 432.5 End-2016 End-1H2017 1H2016 1H2017 20
Mobile Phone Credit Card makes an industry-leading leap in Fintech Mobile Phone Credit Card was Officially launched on April 17, 2017. Led the industry to realize Immediate Approval, Immediate Use, Immediate Loan. Quick Approval After the card application is approved, use the cell phone to log on Pay the Bill APP, and the card can be used by taking two steps only. Swipe the cell phone for consumption at online and offline stores. 1.42 million Total applications Cards issued 1.03 million Cards approved on the day of application 730,000 Approval rate 第三级 on the day of application 51% Card swiped on the day of application 280,000 Card swiping rate on the day of application 38% Within the Reporting Period Deepened platform innovation, improved customer experience, and enriched ecosystem of mobile phone credit cards. 21
Interbank & financial market business: urged transformation for a trading Bank Investment securities (RMB, bn) 5.89% 2,385.108 2,252.392 Interest income from investment securities (RMB, bn) 22.58% 40.787 33.273 End-2016 End-1H2017 1H2016 1H2017 RMB-denominated on and off-balancesheet wealth management (RMB, bn) 1,450.326 10.28% 1,599.492 Number of interbank wealth management customers 13.42% End-2016 End-1H2017 End-2016 End-1H2017 22
Interbank & financial market business Interbank cooperation: The number of customers through interbank cooperation reached 337. The corresponding average balance of provision and deposit fund increased by 26.94% on a year-on-year basis. Bank-securities cooperation: The number of third-party depository securities companies was 100, with 100% coverage of business cooperation. Bank-futures cooperation The deposit balance from futures trading companies amounted to RMB 81.389 billion, defending the Bank s leading market share. Money market business: Volume of RMB-denominated money market transactions by domestic branches totaled RMB 9.61 trillion. Volume of foreign currency money market transaction totaled USD 125.538 billion. Trading account business: Trading volume of RMB-dominated bonds reached RMB1.03 trillion. FX trading volume at interbank FX market FX reached USD 621.796 billion. Precious metal business Volume of precious metal trading by domestic branches amounted to RMB 92.097 billion. The sales of physical precious metal products reached RMB 936 million. 23
Cut the first deal through active involvement in Bond Connect Business introduction Bond Connect A mechanism allowing investors at home and abroad to buy and sell negotiable bonds in the two markets by connecting the infrastructure in Hong Kong and mainland bond markets. Another milestone in the opening of China s capital market. Bond Connect Development status The Bond Connect was put into operation on July 3, 2017. The Bank took the lead in cutting the first deal in the entire market. The Bank has been comprehensively qualified for various operations of Bond Connect and was put on the list of the first batch of market makers of Bond Connect. BOCOM Hong Kong Branch, Bank of Communications International Trust and BOCOM International are global custodians of Bond Connect ; and the Hong Kong Branch was approved as one of the 14 local clearing banks. Development strategy BoCom Strategy: Focusing on Asia Pacific and extending to Europe and America Promote overseas investors to engage in Bond Connect and enhance the Bank s international involvement 24
Trinity network construction: building a new all-channel intelligent service pattern Deposit per outlet (RMB, bn) 5.63% 1.820 1.723 2016 1H2017 Note: 单击此处编辑母版文本样式 excluding inclusive outlets Annualized profits per capita (RMB 10,000) 3.13% 82.87 第三级 85.46 1H2016 1H2017 Physical outlets Business outlets of domestic branches totaled 3,280, down 5 YTD. Among these, 25 were newly opened and 30 low-yield outlets closed or merged. A total of 239 prefecture-level cities and above were covered. Coverage rate of outlets in prefecture-level cities increased to 71.56%, up 0.90 pps YTD. Coverage rate in West China reached 63.06%. Acceleration of categorized construction of grassroots outlets: the number of comprehensive outlets reached 577, up 3 YTD. The number of inclusive outlets totaled 632, up 27 YTD. 25
Trinity network construction E-channels E-banking diversion rate (%) 2.36 pps 93.78% 91.42% 6.74% Number of corporate e-banking customers 23.60% Number of corporate e- banking transactions 2016 1H2017 E-banking transactions in number and amount 3.160 Number of transactions (billion) 113.57 Transaction amount (RMB trillion) 9.94% 11.54% 19.88% 5.25% Number of personal e-banking customers 68.25% Number of personal e-banking transactions (excluding mobile banking) 55.1457 million registered mobile banking customers 145 million mobile banking transactions completed Mobile banking transaction volume amounted to RMB3.86 trillion. 26
Internationalization and universal banking: improving cross-border, industry and market service capacity Total assets of overseas institutions and share in the Group (RMB bn, %) 0.95pps 11.14% 10.19% 994.999 16.25% 855.914 End-2016 End-1H2017 Net profit of overseas institutions and share in the Group (RMB bn, %) 7.11% 0.52pps 2.679 1H2016 2.973 1H2017 7.63% Internationalization strategy 10.97% The number of overseas outlets (excluding representative offices) reached 65. The Bank established correspondent banking relations with 1,591 banks in 142 countries and regions. The synergy business between domestic and overseas branches amounted to RMB 29.657 billion, yielding a revenue of RMB 2.146 billion. The cross-border RMB settlement volume of domestic and overseas branches amounted to RMB 1,186.596 billion, representing a YOY increase of 33.41%. 27
Internationalization and universal banking Universal banking Main financial indexes of BoCom Leasing came out on top of the industry. The balance of leasing assets stood at RMB 190.316 billion, representing an increase of 14.61% YTD. Asset under management of BoCom International Trust amounted to RMB 792.851 billion, representing an increase of 11.71% YTD. In terms of performance, multiple funds issued by BoCom Fund were among industry s top 25%. AUM amounted to RMB 495.571 billion (including that of its domestic and Hong Kong branches). BoCommLife Insurance generated an original premium revenue of RMB10.885 billion, increasing by 23.50% YOY. Total assets of subsidiaries and share in the Group (RMB bn, %) 0.23pps 3.26% 3.03% 254.958 End-2016 290.881 End-1H2017 14.09% Net profit of subsidiaries and share in the Group (RMB bn, %) 0.30pps 5.37% 5.07% 2.093 9.64% 1.909 1H2016 1H2017 28
IPO of the first Chinese bank owned broker in HKEx: subsidiaries pioneering role to mark the Group s 2 nd anniversary of deepening reforms Enhanced brand value and market influence by taking the lead to land in international capital market BOCOM International s IPO issued 734 million shares, raising approximately HKD1968 million. BOCOM International was listed on the Main Board of HKEx on May 19, 2017 as the first Chinese bank owned broker listed in Hong Kong. Optimized operating management and governance structure via spin-off and listing Established the corporate governance mechanism of higher standards and more market-oriented management mechanism. Providing customers with the full range of professional financial products and services. A perfect demonstration of BoCom s achievements in the Deepening Reforms The IPO contributes materially to the subsidiary s transformation and the value preservation and accrual of the Group s 第五级 equity in the subsidiary. Produced a good effect of demonstration for other subsidiaries on deepening reforms and capital operations. 29
Agenda III Risk Management 30
Risk management Credit risk Market and liquidity risks Operation risk Continued to optimize the structure of credit assets. In the first half of the year, corporate assets were mainly oriented towards infrastructure and urban construction and services; financing of public utilities and livelihood consumption maintained rapid development; loans related to agriculture, farmers and rural areas continued to grow, as well as loans offered to small & micro businesses; loan balance of overcapacity industry witnessed a continual decline. Strengthened the risk control in key fields, put more effort into risk monitoring and investigation, improved the level of Early 第三级 Identification, Early Alert, Early Solving. Strengthened risk disposal. Pushed forward and consolidated 第四级 the project, conducted hierarchical management and list system management of risky assets, took various 第五级 measures to minimize non-performing loans. Continuously improved the market risk management system and optimized the market risk management information system. As at the end of Reporting Period, the open position of gross foreign exchange stood at 11.95%, in line with regulatory requirements. Strengthened the management of balance -sheet liquidity risk and put more effort into the overall coordination of liquidity management. Within the Reporting Period, the overall liquidity risk of the Bank remained stable, with 121.02% of liquidity coverage rate (corporate caliber), in line with regulatory requirements. Strengthened the application of assessment and monitoring results of operation risk management instrument and established the improvement tracing mechanism Conducted an investigation of cooperation business at illegal trading places, along with risk investigation of private customer information and cash deposits. Standardized the management of business outsourcing and strengthened the risk examination and assessment of information technology events during business outsourcing Promoted the comprehensive emergency drill of disaster backup switch city-wide, sorted out and improved the key business emergency plan and business continuity plan. 31
Risk management Asset quality Impaired loan balance and ratio Provision rate (%) (RMB bn, %) End- 1H2017 End- 2016 YTD 2.29% 2.28% Impaired loan balance 65.953 62.400 5.69% Impaired loan ratio 1.51% 1.52% -0.01pps 2016 1H2017 Provision coverage ratio (%) Corporate impaired loan balance Corporate impaired loan ratio Individual impaired loan balance Individual impaired loan ratio 50.588 48.097 5.18% 1.64% 1.65% -0.01pps 15.365 14.303 7.43% 1.19% 1.21% -0.02pps 0.52pps 150.50% 151.02% 2016 1H2017 32
Agenda IV 4 Next Steps 33
Next Steps Key tasks: Follow up the key national strategies, support the structural reform of the supply front, adopt the differentiated credit policy, promote inclusive finance and further improve the capacity of serving the real economy. Dynamically optimize the asset/liability allocation tactics, and explore the sources of noninterest income through expedited transformation and enhanced innovations to ensure the steady profit growth. Continue to deepen the reforms, accelerate reform initiatives involving divisional structure, personnel & compensation, performance assessment and incentives and resources allocation, and, by means of reforms and innovations, supplement the growth sustainability and foster the new driving force of development by reform and innovation. Stick to the bottom line of risk control and improve the capability to prevent and eliminate risks to maintain the overall stability of asset quality. 34
谢谢! Q & A