CHINA CITIC BANK CORPORATION LIMITED Important Notice
INTERIM REPORT
(A joint stock limited company incorporated in the People's Republic of China with limited liability)
Stock Code : 0998
The Board of Directors, the Board of Supervisors, directors, supervisors, and senior management of the Bank pledge the truthfurness, accuracy and completeness of the report, ensure that the information in this report contains no false records, misleading statements or material omissions, and assume several and joint liabilities for its truthfulness, accuracy and completeness.
The meeting of the Board of Directors of the Bank adopted the full text and summary of the 2015 Interim Report on 18 August 2015. All of the nine eligible directors attended the meeting while seven of them attended in person. Director Zhu Xiaohuang and Director Yuan Ming acted as proxy for Director Li Qingping and Director Wu Xiaoqing respectively. The supervisors of the Bank attended the meeting as non-voting delegates.
The Bank did not conduct any profit distribution or conversion of capital reserve into share capital in the first half of 2015.
The 2015 Interim Financial Reports that the Bank prepared in compliance with PRC Accounting Standards for Business Enterprises (ASBE) No. 32: Interim Financial Reporting and International Accounting Standards (IAS) No. 34: Interim Financial Reporting were reviewed by PwC Zhong Tian and PwC in accordance with Chinese CPA Standards on Review Engagements 2101 'Engagements to Review Financial Statements' and Hong Kong Standard on Review Engagements 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' respectively.
All outlooks and forward-looking statements in connection with the future financial situation, operating performance, business development and business planning do not constitute any substantial commitment to the investors. Investors are kindly reminded to pay attention to the investment risk.
For the purpose of this report, numbers are expressed in Renminbi Yuan unless otherwise stated.
Mr. Chang Zhenming, as chairman of the Board of Directors of the Bank, Ms. Li Qingping, as President of the Bank, Mr. Fang Heying, as vice president of the Bank in charge of financial affairs, and Mr. Lu Wei, as general manager of the Finance and Accounting Department of the Bank, hereby pledge the truthfulness, accuracy and completeness of the financial statements contained herein.
2 Definition
4 Financial Highlights
6 Corporate Introduction
8 Report of the Board of Directors
Economic, Financial and Regulatory Environments
Operating Performance and
Strategic Transformation Overview
Analysis of the Financial Statements
28 Business Review
38 Risk Management
Capital Management
Securities Investment
Management of Consolidated Administration
Use of Funds Raised and Material Investments with Non-Raised Funds
57 Formulation and Implementation of Cash Dividend Distribution Policy
Outlook
Significant Events
65 Changes in Share Capital and Shareholdings of Substantial Shareholders
70 Directors, Supervisors, Senior Management and Staff
72 Corporate Governance
Preference Shares
Independent Auditors' Review Report and Financial Report
185 Unaudited Supplementary Financial Information
189 List of Affiliates
For the purpose of the report, the following terms assume the implications indicated in the following table, unless otherwise explained:
Alibaba Alibaba Group Holding Limited
Articles of Association Articles of Association of China CITIC Bank Corporation Limited
BAIC Group Beijing Automotive Group Co., Ltd
Baidu Baidu Online Network Technology (Beijing) Co.,Ltd
Bank/Company/China CITIC Bank/CITIC Bank/CNCB
China CITIC Bank Corporation Limited
BBVA Banco Bilbao Vizcaya Argentaria S.A.
Board of Directors Board of directors of the Bank
Board of Supervisors Board of supervisors of the Bank
CBRC China Banking Regulatory Commission
China AMC China Asset Management Co., Ltd.
China Securities China Securities Co., Ltd.
China UnionPay China UnionPay Company Limited
CIAM CITIC International Assets Management Limited
CIFH CITIC International Financial Holdings Limited
CIFL China Investment and Finance Limited
CITIC Corporation Limited CITIC Corporation Limited (formerly known as CITIC Limited) CITIC-CP Asset Management CITIC-CP Asset Management Company
CITIC Financial Leasing CITIC Financial Leasing Co., Ltd.
CITIC Futures CITIC Futures Co., Ltd.
CITIC Group CITIC Group Corporation, formerly known as CITIC Group which was renamed CITIC Group Corporation on 27 December 2011 after restructuring
CITIC Limited CITIC Limited (the Bank was notified on 6 August 2014 that CITIC Limited had changed its name into CITIC Corporation Limited)
CITIC Medical & Health CITIC Medical & Health Group Co., Ltd.
CITIC Press CITIC Press Corporation
CITIC-Prudential Fund Management CITIC-Prudential Fund Management Company Limited CITIC-Prudential Insurance CITIC-Prudential Life Insurance Company Ltd.
CITIC Real Estate CITIC Real Estate Corporation Limited
Definition
CITIC Securities CITIC Securities Co., Ltd.
CITIC Securities (Shandong) CITIC Securities (Shandong) Co., Ltd. CITIC Securities (Zhejiang) CITIC Securities (Zhejiang) Co., Ltd.
CITIC Tourism CITIC Tourism Group Co., Ltd.
CITIC Trust CITIC Trust Co., Ltd.
CNCBI CITIC Bank International Limited (formerly known as CITIC Ka Wah Bank Limited)
CSRC China Securities Regulatory Commission
CTBC CTBC Financial Holding Co., Ltd
Group China CITIC Bank Corporation Limited and its subsidiaries
HNIG Henan Investment Group
joint-stock banks Including China CITIC Bank, China Merchants Bank, Minsheng Bank, Industrial Bank, Pudong Development Bank, China Everbright Bank, Huaxia Bank, Ping'an Bank, Guangdong Development Bank, China Zheshang Bank, China Bohai Bank and Evergrowing Bank
Lin'an CITIC Rural Bank Zhejiang Lin'an CITIC Rural Bank
MI Beijing Xiaomi Science Technology Co., Ltd
NSSF National Council for Social Security Fund
PBC People's Bank of China
PwC Zhong Tian PricewaterhouseCoopers Zhong Tian LLP
reporting period The six months ended 30 June 2015
RMB RMB Yuan
SEHK The Stock Exchange of Hong Kong Limited
S.F. Express S.F. Express (Group) Co., Ltd
SFC Hong Kong Securities and Futures Commission
Shanghai Listing Rules Rules Governing the Listing of Stock on Shanghai Stock Exchange
SSE Shanghai Stock Exchange
State Council State Council of the People's Republic of China
Tencent Tencent Holdings Limited
Tianan Property Insurance Tianan Property Insurance Co., Ltd.
Financial Highlights
Operating Performance
Item | January- June 2015 | January- June 2014 | Growth rate (%) | January- June 2013 |
Operating Income | 69,957 | 62,101 | 12.65 | 50,074 |
Total profit | 30,120 | 29,503 | 2.09 | 27,243 |
Net profit attributable to the Bank's | ||||
shareholders | 22,586 | 22,034 | 2.51 | 20,391 |
Net cash flows from operating activities | 38,180 | 90,072 | (57.61) | 47,381 |
Per share data | ||||
Basic earnings per share (RMB) | 0.48 | 0.47 | 2.13 | 0.44 |
Diluted earnings per share (RMB) | 0.48 | 0.47 | 2.13 | 0.44 |
Net cash flows from operating activities per | ||||
share (RMB) | 0.82 | 1.93 | (57.61) | 1.01 |
Unit: RMB million
Profitability Indicators
Item | January- June 2015 | January- June 2014 | Increase/ (decrease) | January- June 2013 |
Return on average assets (ROAA) | 1.06% | 1.14% | (0.08) | 1.30% |
Return on average equity (ROAE, | ||||
excluding minority interests) | 16.79% | 18.96% | (2.17) | 19.92% |
Cost-to-income ratio (excluding business | ||||
tax and surcharges) | 26.05% | 26.95% | (0.90) | 28.66% |
Credit cost | 1.39% | 1.09% | 0.30 | 0.54% |
Net interest spread | 2.14% | 2.14% | - | 2.39% |
Net interest margin | 2.32% | 2.36% | (0.04) | 2.58% |
Scale Indicators
Item | 30 June 2015 | 31 December 2014 | Growth rate (%) | 31 December 2013 |
Total assets | 4,561,277 | 4,138,815 | 10.21 | 3,641,193 |
Total loans and advances to customers | 2,308,003 | 2,187,908 | 5.49 | 1,941,175 |
Total liabilities | 4,270,195 | 3,871,469 | 10.30 | 3,410,468 |
Total deposits from customers | 3,081,463 | 2,849,574 | 8.14 | 2,651,678 |
Placements from banks and | ||||
non-bank financial institutions | 20,601 | 19,648 | 4.85 | 41,952 |
Total equity attributable to | ||||
the Bank's shareholders | 283,001 | 259,677 | 8.98 | 225,601 |
Net asset per share attributable to | ||||
the Bank's shareholders (RMB) | 6.05 | 5.55 | 8.98 | 4.82 |
Unit: RMB million
F inancial H ighlights
Asset Quality Indicators
Item | 30 June 2015 | 31 December 2014 | Growth rate(%)/ increase/(decrease) | 31 December 2013 |
Performing loans | 2,277,527 | 2,159,454 | 5.47 | 1,921,209 |
Non-performing loans ('NPL') | 30,476 | 28,454 | 7.11 | 19,966 |
Allowance for impairment of loans | 54,410 | 51,576 | 5.49 | 41,254 |
NPL ratio | 1.32% | 1.30% | 0.02 | 1.03% |
Provision coverage ratio | 178.53% | 181.26% | (2.73) | 206.62% |
The ratio of allowance for impairment | ||||
of loans to total loans | 2.36% | 2.36% | - | 2.13% |
Unit: RMB million
Note: Performing loans include normal loans and special mention loans; and non-performing loans include sub-standard loans, doubtful loans and loss loans.
Capital Adequacy Indicators
Item | 30 June 2015 | 31 December 2014 | Increase/ (decrease) | 31 December 2013 |
Core tier-one capital adequacy ratio | 8.98% | 8.93% | 0.05 | 8.78% |
Tier-one capital adequacy ratio | 9.03% | 8.99% | 0.04 | 8.78% |
Capital adequacy ratio | 11.88% | 12.33% | (0.45) | 11.24% |
Leverage Ratio
30 June 2015 | 31 December 2014 | Increase (%)/ increase/(decrease) | 31 December 2013 | |
Leverage ratio | 5.25% | 5.19% | 0.06 | 4.81% |
Net tier-one capital | 287,530 | 264,582 | 8.67 | 228,380 |
On and off-balance-sheet assets | 5,474,273 | 5,096,499 | 7.41 | 4,746,753 |
Unit: RMB million
afteradjustment
Notes: (1) The data for 2013 was calculated based on the Administrative Measures for Leverage Ratio of Commercial Banks (Yin Jian Hui Ling (2011) No. 3) while the data since 2014 was calculated based on the Administrative Measures for Leverage Ratio of Commercial Banks (Revised) (Yin Jian Hui Ling (2015) No. 1).
(2) According to Administrative Measures for Leverage Ratio of Commercial Banks (Revised) (Yin Jian Hui Ling (2015) No. 1), please refer to Investor Relations column of the official website of the Bank (http://bank.ecitic.com/eabout/inves/in_4_4.shtml).
Supplementary Financial Indicators
Major indicator(1) | Standard (%) | 30 June 2015 | 31 December 2014 | 31 December 2013 |
Liquidity ratio | ≥25 | 49.55 | 51.82 | 46.40 |
Including: RMB | ≥25 | 45.54 | 52.59 | 43.45 |
Foreign currencies | ≥25 | 146.24 | 40.45 | 106.78 |
Loan-to-deposit ratio(2) | ≤75 | 71.14 | 73.08 | 72.79 |
Including: RMB | ≤75 | 71.55 | 74.44 | 72.35 |
Foreign currencies | ≤75 | 65.28 | 56.47 | 79.83 |
Bank data (%)
Notes: (1) The data above was calculated in accordance with the regulatory standards of Chinese banking industry.
(2) Discounted bills are included in loans.
Corporate Introduction
Registered Name in Chinese: 中信銀行股份有限公司
Chinese abbreviation: 中信銀行
Registered Name in English: CHINA CITIC BANK CORPORATION LIMITED English abbreviation: CNCB
Legal Representative: Chang Zhenming
Authorized Representatives: Li Qingping, Wang Kang Secretary to the Board of Directors: Wang Kang
Joint Company Secretaries: Wang Kang, Wendy KAM MeHa (ACS, ACIS) Representative of Securities Affairs: Wang Junwei
Registered Address: Block C, Fuhua Mansion, No. 8 Chaoyangmen Beidajie, Dongcheng District, Beijing
Postal Code of the Registered Address: 100027
Office Address: No. 9 Chaoyangmen Beidajie, Dongcheng District, Beijing
Postal Code of the Office Address: 100010
Official Website: bank.ecitic.com
Telephone Number: +86-10-89938900
Fax Number: +86-10-85230081
Email Address: ir_cncb@citicbank.com
Principal Place of Business in Hong Kong: Level 54, Hopewell Center, 183 Queen's Road East, Hong Kong Newspapers for Information Disclosure: China Securities Journal, Shanghai Securities News, Securities Time Websites for Information Disclosure: Website designated by the CSRC to publish interim reports of A-share
issuers: www.sse.com.cn
Website designated by SEHK to publish interim reports of H-share issuers: www.hkexnews.hk
Place Where the Interim Report is Kept: Office of Board of Directors and Board of Supervisors, CITIC Bank Legal Advisor as to PRC Laws: King & Wood Mallesons (PRC)
Legal Advisor as to Hong Kong Laws: Clifford Chance
PRC Auditor: PricewaterhouseCoopers Zhong Tian LLP 11/F., PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 Hu Bin Road, Huangpu District, Shanghai, China
International Auditor: PricewaterhouseCoopers 22/F, Prince's Building, 10 Chater Road, Central, Hong Kong
Corporate I ntr oduction
A-share Registrar: Shanghai Branch of China Securities Depository and Clearing Corporation Limited 36/F, China Insurance Building, No. 166 East Lujiazui Road, Pudong New District, Shanghai
H-share Registrar: Computershare Hong Kong Investor Services Limited 1712-1716, Level 17, Hopewell Center, 183 Queen's Road East, Hong Kong
Listing Venue, Stock Name and Stock Code:
A-share: Shanghai Stock Exchange CITIC Bank 601998
H-share: The Stock Exchange of Hong Kong Limited CITIC Bank 00998
Date of First Registration: 20 April 1987
Date of Changing Registration: 8 December 2014
Authority of First Registration and Changing Registration:
State Administration for Industry & Commerce, PRC
Registration Number of Business License: | 100000000006002 |
Institution Number of Finance License: | B0006H111000001 |
Tax Registration Number: | 110105101690725 |
Certificate of Organization Code: | 10169072-5 |
Report of the Board of Directors
Economic, Financial and Regulatory Environments
In the first half of 2015, recovery of the global economies continued to divide, lingering on in deep post-crisis adjustment. In the U.S., although the economy continued to recover, when to raise interest rates was still undetermined and international capital flows remained largely uncertain. The EU economy edged up as the European Central Bank increasingly expanded its monetary easing policy. The emerging economies performed diversely with some decelerating growth and experiencing bigger fluctuations in the financial market. Adjust the complicated international and domestic economic environments and the increasing pressure of economic downturn, the Chinese government adhered to the general principle of seeking progress while maintaining stabilization of growth, carried out macro-regulation scientifically and precisely, and pushed forward system reform and policy innovation. As a result, the national economy performed within a reasonable range and major indicators picked up gradually. In the first half of 2015, gross domestic product (GDP) reached RMB29.6868 trillion, representing a growth of 7.0% year-on-year. Investment in fixed assets reached RMB23.7132 trillion, with a growth rate of 11.4% year- on-year. Commodity consumption rose steadily, with total retail sales of consumer goods reached RMB14.1577 trillion, up 10.4% year-on-year. Foreign trade surplus widened further, import and export of goods registered RMB11.5316 trillion, a decrease of 6.9% year-on-year, with trade surplus standing at RMB1.6128 trillion. Consumer price index (CPI) remained stable, up 1.3% year-on-year. Producer's price index (PPI) declined by 4.6% year-on-year, while purchasing price index of raw material (PPIRM) decreased by 5.5% year-on-year.
The financial industry in China operated in a prudent and healthy manner, with the scale of monetary credit and total social financing both enjoyed steady moderate growth. In the first half of 2015, total social financing increased RMB8.81 trillion, RMB1.46 trillion less than the same period of the previous year. As at the end of June 2015, the balance of broad money (M2) supply and narrow money (M1) supply reached RMB133.34 trillion and RMB35.61 trillion respectively, a growth of 11.8% and 4.3% year-on-year respectively. Renminbi loan and deposit balance registered RMB88.79 trillion and RMB131.83 trillion respectively. The first half of 2015 recorded RMB6.56 trillion incremental Renminbi loans, up RMB537.1 billion year-on-year; and RMB11.09 trillion incremental Renminbi deposits, down RMB375.6 billion year-on-year.
The financial regulators adhered to the principle of progressing with stability, reform and innovation. While stringently safeguarding the bottom line of financial risk, the regulators rendered vigorous support to economic structural adjustment, transformation and upgrading and focused on enhancing financial services to the real economy. At its executive meeting, the State Council passed the Draft Amendment to China's Law on Commercial Banks by removing the 75% loan-to-deposit ratio stipulation. The ratio would be seen as a liquidity-monitoring indicator instead of a regulatory indicator and has filed to the National People's Congress for review. The PBC adopted a sound monetary policy with more attention to equilibrium between loose and tight, targeted regulation, reform and innovation. Meanwhile, it took a series of actions such as lifting the ceiling of deposit interest floating range to 1.5 times, promulgating the Deposit Insurance Ordinance and the Interim Administrative Measures for Large Certificate of Deposit Management and incorporating deposits and placements with financial institutions of non-bank financial institutions into the statistics of deposits and loans, which accelerated the liberalization of interest rates. The CBRC released the Guidelines on Financial Services to Micro and Small-Sized Enterprises in 2015 in order to improve this kind of financial services.
R epor t of the Boar d of D ir ectors
Operating Performance and Strategic Transformation Overview
Performance overview
With the complicated domestic and international economic financial situations, the Group placed a firm focus on its new development strategy and the annual working guidelines, kept promoting strategy transformation, reinforced risk management and consequently enjoyed an overall sound and steady development.
Steady growth of profitability: During the reporting period, the Group realized net profit attributable to the Bank's shareholders of RMB22.586 billion, representing an increase of 2.51% year-on-year; profit before provisioning of RMB46.811 billion, representing an increase of 13.84% year-on-year; net interest income of RMB49.744 billion, representing an increase of 9.05% year-on-year; and net non-interest income of RMB20.213 billion, representing an increase of 22.60% year-on-year.
Rapid growth of business scale: As at the end of the reporting period, the Group's total assets reached RMB4.561277 trillion, up 10.21% over the end of the previous year, of which total loans and advances to customers stood at RMB2.308003 trillion, up 5.49% over the end of the previous year; and total deposits from customers amounted to RMB3.081463 trillion, up 8.14% over the end of the previous year.
Overall controllability of asset quality: As at the end of the reporting period, the Group's balance of NPLs stood at RMB30.476 billion, up RMB2.022 billion or 7.11% over the end of the previous year; and its NPL ratio was 1.32%, up 0.02 percentage point over the end of the previous year. The Group registered a provision coverage ratio of 178.53%, down 2.73 percentage points compared with the end of the previous year and a ratio of allowance for impairment of loans to total loans of 2.36%, the same with the end of the previous year.
Progress in Strategic Transformation
During the reporting period, the Bank strengthened strategic management by developing the strategic management measures and the assessment plan, defining the strategic indicators and the projects of strategic importance and demarcating the division of responsibilities for implementation of strategies. The Strategy Publicity & Guiding Group was established at the Head Office and it provided guidance in a variety of forms, e.g. presentation on strategies, online learning and special training, to the branches and the subsidiaries to assist them to in developing sub-plans. In general, the Bank's strategic arrangements were effectively carried out and the operational transformation was efficient and effective in practice.
Effective construction of an integrated platform: The Bank strengthened top-level design and organizational promotion of the integrated platform construction, improved the internal synergetic business management system, lead to set up six synergetic working groups specialized in comprehensive financing, bank-securities, bank-trust, bank-insurance, bank-bank and industry-financial among subsidiaries of CITIC Group, and also successfully developed typical comprehensive financing models for BAIC Group and HNIG, etc. During the reporting period, the Bank promoted capital operation and subsidiaries development through entering into an equity cooperative agreement with Taiwan-based CTBC, commencing the operation of CITIC Financial Leasing which is established by the Bank, successfully acquiring Rocks Asia by CIFL and approving the corporate restructuring of the credit card company by the Board of Directors.
Breakthroughs in marketing and promotion of great individual items: The Bank quickened the construction for the development mode of 'great individual items' and put more resources and efforts in the innovation of products or products combination which have strong appeals to customers, high profit contribution, good brand effect and which are easy to copy and promote. The Bank strengthened the marketing and promotion of major products including integrated financial solutions for governments, supply chain finance business for e-commerce traders, auto finance, cash management, e-commerce, custody, cross-border trade finance, interest/exchange rate services, direct financing, bills business, financial services for going abroad, credit cards, 'Loans Backed with Home Mortgage', 'Xin Jin Bao' and mobile banking, thus the scale of relevant businesses grew rapidly.
R epor t of the Boar d of D ir ectors
Steady development of the great asset management system: The Bank actively probed into the great asset management and operation model, propelled the reform of exclusive operating institutions of wealth management business and defined the direction of asset management under the wealth management business. The Bank formulated the internal regulation governing corporate asset management and asset flows, established a platform for transfer of non-CNCB assets, developed innovative product series of 'CITIC Zi Bao', and actively promoted the inception of the first direct financing product for wealth management.
Promotion of domestic and international strategic planning: The Bank steadily promoted international outlet construction and applied for the establishment of the London Branch and the Sydney Branch after setting up our London Representative Office. The Bank joined hands with CNCBI to set up the Bank-Bank Cooperation Working Group to strengthen cooperation in the PRC and overseas businesses. The Bank, together with the other subsidiaries of CITIC Group, took efforts actively to support China's 'One Belt, One Road' initiative and 'Beijing-Tianjin-Hebei integration' development strategy. In this process, the Bank sped up the reserve of important projects and expected to have financings of over RMB400 billion.
Big strides in internet finance: The Bank accelerated the upgrade of the mobile-banking application, diversified the applications of e-channels and rolled out, among others, T-bond, large CDs and 'Xin Jin Bao' online, with obvious increase in the share of wealth management product and fund sales via e-channels. The Bank expedited innovative payment business and the intermediary business income in relation to e-payment soared. The Bank reinforced cooperation with other sectors, releasing the B2C supply chain finance platform 'CITIC E Pay' and the online investment & financing platform 'Zhao Cai Bao'. Meanwhile, the Bank launched strategic cooperation with Baidu, Xiaomi and S.F. Express, and fully sharing customers, data and channels between each other. The Bank consolidated the data platform construction and initiated the analysis of user behaviors and the activation of dormant accounts to deeply explore customers' preferences and potential value, which enhanced our precision of marketing capability.
Optimize the management innovation: The Bank enhanced the system innovation reform, defined the roles of departments, optimized the innovation management process, devised the 2015 product innovation plan and established an interactive mechanism between the head office and branches for product innovation. The Bank also took great efforts on key innovative projects, and successfully launching the first real estate medium-term note, the first M&A bond and first session of CDs. The Bank provided the interest rate risk management solution based on the interest swap for the first time, piloted the cross-border direct lending in RMB business, direct lending business under domestic guarantee and financial asset-pledged loan business. Thus, the Bank's products innovation capability was enhanced further.
Analysis of the Financial Statements
Income Statement Analysis
Item | January- June 2015 | January- June 2014 | Year-on-year increase/decrease | Year-on-year growth rate (%) |
Net Interest Income | 49,744 | 45,614 | 4,130 | 9.05 |
Net non-interest income | 20,213 | 16,487 | 3,726 | 22.60 |
Operating income | 69,957 | 62,101 | 7,856 | 12.65 |
Operating expenses | (23,290) | (21,086) | 2,204 | 10.45 |
Asset impairment loss | (16,691) | (11,617) | 5,074 | 43.68 |
Profit before taxation | 30,120 | 29,503 | 617 | 2.09 |
Income tax | (7,151) | (7,078) | 73 | 1.03 |
Net profit | 22,969 | 22,425 | 544 | 2.43 |
Including: Net profit attributable to | ||||
the Bank's shareholders | 22,586 | 22,034 | 552 | 2.51 |
Unit: RMB million
theBank'sshareholders
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