Download 2006 results announcement

2006 Annual Results
8 March 2007
Forward-looking statement disclaimer

This presentation and subsequent discussion may
contain certain forward-looking statement with respect
to the financial condition, results of operations and
business of the Group. These forward-looking statement
represent the Group’s expectations or beliefs
concerning future events and involve known and
unknown risk and uncertainty that could cause actual
results, performance or events to differ materially from
those expressed or implied in such statements. Some
statements, including but not limited to those containing
words such as “potential”, “predict”, etc., or any
alternative expression equivalent or similar to such
wordings, can all be considered as forward-looking
statements.
Contents

Results summary

Financial performance

Outlook

Results summary
Key performance indicators
(RMB millions except
percentages)
2005
2006
Change
Profit after tax
9,249
12,274
3,025
ROA
0.65%
0.71%
+0.06 ppt
ROE
11.13%
13.57%
+2.44 ppt
Cost/income ratio
51.24%
47.66%
-3.58 ppt
31 Dec. 2005
31 Dec. 2006
Change
Impaired loan ratio
2.80%
2.53%
-0.27 ppt
CAR
11.20%
10.83%
-0.37 ppt
NIM
2.64%
2.75%
+0.11 ppt
Summarized income statement
(RMB millions except
percentages)
2006
31,591
39,803
8,212
25.99%
Net commission & fee
income
2,109
2,873
764
36.23%
Other non-interest income
1,453
1,162
-291
-20.03%
Net operating income
35,153
43,838
8,685
24.71%
Provision for loan and
advances impairment
4,298
5,538
1,240
28.85%
Other operating expenses
18,012
20,895
2,883
16.01%
Operating profit before tax
12,843
17,405
4,562
35.52%
Income tax
3,600
5,136
1,536
42.67%
Profit after tax
9,243
12,269
3,026
32.74%
-6
-5
9,249
12,274
Net interest income
Minor shareholder gain &
loss
Profit attributable to
shareholders
Change
%
change
2005
1
3,025
--
32.71%
Summarized balance sheet
(RMB millions except
percentages)
31 Dec.
2005
31 Dec. 2006
Change
%
Change
Loans to customers (less
provision)
758,773
910,307
151,534
19.97%
Other assets
664,666
809,176
144,510
21.74%
Total assets
1,423,439
1,719,483
296,044
20.80%
Due to customers
1,220,839
1,420,331
199,492
16.34%
Other liabilities
119,454
208,657
89,203
74.68%
Total liabilities
1,340,293
1,628,988
288,695
21.54%
Equity
45,804
45,804
0
0.00%
Other shareholders’ equity
37,342
44,691
7,349
19.68%
Total shareholders’ equity
83,146
90,495
7,349
8.84%
In which：Our company’s
shareholders’ equity
83,082
90,436
7,354
8.85%

Financial performance
Profit grew faster than business size
17,405
RMB millions
Profit before tax
12,843
12,274

9,249

Profit attributable
to shareholders
2005
RMB millions
1,719,483
1,423,439

2006
Total assets

1,420,331
1,220,839
927,405
771,374
31 Dec. 2005
31 Dec. 2006
Total
deposits
Total loans

Profit before tax grew
by 35.52% YoY;
Profit attributable to
shareholders grew by
32.71% YoY;
Total assets grew by
20.80% from the
beginning of the year;
Total loans grew by
20.23% from the
beginning of the year;
Total deposits grew by
16.34% from the
beginning of the year.
Fast business growth-corporate & retail business
Deposits from customers
755,719
RMB millions
642,735
435,718
Corporate
deposits

17.58% from the beginning of
488,599
176,013
142,386
Personal
deposits
the year;

of the year.
31 Dec. 2006
Loans to customers
RMB millions
Corporate loans
725,892

604,611
31 Dec. 2005
year;
126,128
75,385

31 Dec. 2006
Discounted bills
& interest
receivable
Corporate loans grew 20.06%
from the beginning of the
Personal loans
104,053
62,710
Personal deposits grew by
12.14% from the beginning
Other deposits
31 Dec. 2005
Corporate deposits grew by
Personal loans grew by
21.22% from the beginning
of the year.
Fast business growth-treasury operation
Fast growth of business size
(RMB millions except
percentages)
Due from central bank
and other banks
31 Dec. 2005
31 Dec. 2006
Change
% Change
310,410
372,564
62,154
20.02%
Tradable assets & investment
securities
317,571
400,868
83,297
26.23%
Total
627,981
773,432
145,451
23.16%
Revenue from treasury operation grew by 38.95%
Substantial
revenue
growth
18,512
RMB Millions
13,323
2005
2006
Continued improvement of loan portfolio (1)
% of Loans＜1 year decreased while % of loans＞1 year increased
(RMB millions
except percentages)
31 Dec. 2005
31 Dec. 2006
Balance
%
Balance
%
＜1 month
57,479
7.58%
64,025
7.03%
1-3 months
111,693
14.72%
129,257
14.20%
3-12 months
346,722
45.70%
387,041
42.52%
1-5 years
112,901
14.88%
170,539
18.73%
＞5 years
113,799
15.00%
143,649
15.78%
Overdue
16,179
2.12%
15,796
1.74%
Total
758,773
100.00%
910,307
100.00%
Continued improvement of loan portfolio (2)
Manufacturing
Trend of loan sector m ix
25.96%
27.27%
Trade
Real estate
9.46%
Improved
sector mix
7.26%
8.24%
7.90%
6.72%
8.84%
7.11%
10.03%
8.59%
6.82%
Transportation
Public utilities
31 Dec. 2005
Optimized
customer
structure
31 Dec. 2006
Service
31 Dec. 2005
31 Dec. 2006
Change
1-5
67.60%
71.90%
4.30 ppt
6-7
26.70%
20.60%
-6.10 ppt
8-10
2.40%
2.20%
-0.20 ppt
Unrated
3.30%
5.30%
2.00 ppt
100.00%
100.00%
0.00 ppt
Total
Continued improvement of loan portfolio (3)
Increased weight of
personal loans
Personal loans as % of real loans
14.76%
Proactive development of
small business loans
RMB Millions
150,000
100,000
14.65%
50,000
31 Dec. 2005
31 Dec. 2006
Small business loans
102,091
79,923
11.00%
11.01%
10.36%
-
10.50%
10.00%
31 Dec. 2005
Balance
Note: Real loans are total loans after carving out discounted bills.
11.50%
31 Dec. 2006
%
Improved deposit base
Steady growth of key deposit items
(RMB
millions
percentages)
except
31 Dec. 2005
31 Dec. 2006
Change
% Change
Corporate demand deposit
407,228
457,839
50,611
12.43%
Corporate savings deposit
4,232
5,878
1,646
38.89%
Corporate term deposit
231,275
292,002
60,727
26.26%
Personal demand deposit
162,757
185,521
22,764
13.99%
Personal savings despot
9,725
14,182
4,457
45.83%
Personal term deposit
263,236
288,896
25,660
9.75%
Other deposits
142,386
176,013
33,627
23.62%
1,220,839
1,420,331
199,492
16.34%
Total
Achievements in product innovation
Corporate business
Retail business


Introduced a corporate
consolidated account “Yingtong
Account” under our “Yingtong
Fortune” brand to our business
customers

Created “Zhan Ye Tong” (Small
Enterprise Credit Easy) , a
market leading credit facility
and service for the small
business market

Launched a Nationwide
Centralized Bank-Futures
Transfer System to facilitate the
real-time fund transfer between
personal account and futures
brokerage account
Successfully launched 2
customer service propositions
branded as “OTO Fortune” and
“BoCom Fortune” to satisfy the
need of our different customer
segments

Re-packaged and re-branded
our mortgage product to our
preferred home owner
customers

Included in our “Wai Hui Bao”
(FX Easy) foreign exchange
services a series of wealth
management products covering
pledge loans and savings bonds
Other business

Introduced an improved foreign
exchange service “Man Jin Bao”
(Gold Treasury) to our more
sophisticated customers to deal
in foreign exchange

Launched “Express Remittance”
to our corporate customers to
offer convenience and speed in
worldwide money transfer

Provided new and the widest
array of custodian service
among Chinese banks for
financial assets, including QDII,
Industrial Fund, Insurance Fund
ABS and Equity Trust
Fast growth of net fee & commission income
Net fee & commission income
2,873
RMB millions
2,109
1,675
2004
2005

Drivers
of NFCI
growth
2006
Growth in both banking cards number and in force and
transaction volume per card;

Great growth of international settlement volume;

Revenue from CP underwriting grew remarkably YoY;

Steady growth of funds under custody.
Improved NIS and NIM
Drivers of NIM improvement
Both NIS and NIM rose
2.75%

2.70%
RMB loan benchmark rate
was raised twice, and US
2.64%
Dollar interest rate rose;
2.58%

Structural adjustment of
loan portfolio with increase
of medium & long-term
loans and small business
2005
NIS
2006
NIM
loans;

Majority of deposits was
within 1 year, which was
less impacted by the
benchmark rate hikes.
Improved yield of interest-bearing assets
Average interest-bearing assets
Earning/cost rate
2005
2006
818,166
Cash & due from
PBOC
1.45%
1.43%
112,776
125,179
142,158
146,190
2,005
2,006
Due from banks &
other financial
institutions
2.99%
4.32%
Loans to
customers &
discounted bills
5.22%
5.54%
Investment
securities & others
3.08%
3.12%
Deposit from
customers
1.51%
1.63%
Due to PBOC and
banks
1.91%
2.97%
Issued bonds
4.56%
4.78%
RMB millions
351,993
265,921
694,903
Investment securities&others
Loans to customers&discounted bills
Banks&others
Cash&due from PBOC
Average interest-bearing liabilities
RMB millions
12,210
51,793
1,095,578
2,005
Deposit from customers
Issued bonds
12,000
100,215
1,303,524
2,006
Due to PBOC and banks
Continued improvement of operating efficiency
Operating cost grew by 16.01% YoY, 8.70 ppt
lower than the growth of operating income.
Cost/income ratio declined by 3.58 ppt YoY.
Cost/income ratio
Operating cost & income
EMB Millions
51.24%
43,838
35,153
18,012
2005
Operating cost
Others
33.61%
Depreciation&
rental
17.22%
20,895
47.66%
2006
Operating income
Operating cost breakdown
for 2005
Staff cost
32.07%
2005
Others
30.69%
General&
administrative Depreciation&
expenses
rental
17.10%
16.03%
2006
Operating cost breakdown Staff cost
for 2006
35.37%
General&
administrative
expenses
17.91%
Impaired loan ratio declined and provision coverage rose
Provision coverage for loan impairment
Impaired loan ratio
72.83%
2.80%
58.39%
2.53%
31 Dec. 2005
31 Dec. 2006
31 Dec. 2005
31 Dec. 2006
31 Dec. 2005
31 Dec. 2006
Change
%
Change
Balance of impaired loans
21,579
23,477
1,898
8.80%
Balance of provision for
loan impairment
12,601
17,098
4,497
35.69%
(RMB millions except
percentages)
NPL and special mention loans declined in both balance and ratio
NPL declined in balance & ratio
NPL balance and ratio
RMB millions
18,068
18,100
18,065
2.37%
18,030
17,995
17,960
31 Dec. 2005
NPL balance
18,034
2.01%
31 Dec. 2006
NPL ratio
2.50%
2.30%
2.10%
1.90%
1.70%
1.50%
SM declined in balance & ratio
SM balance and ratio
RMB Millions 92,473
90,000
72,303
70,000
12.11%
50,000
8.06%
30,000
10,000
31 Dec. 2005 31 Dec. 2006
SM balance
14.00%
11.00%
8.00%
5.00%
2.00%
SM ratio
CAR in compliance with regulatory standards
Steady
operation & management
Continued
Good
perfection of business structure
Despite no external capitalization, CAR
decline was effectively slowed.
performance and results
Capital adequacy
11.20%
8.78%
10.83%
8.52%
8%
Regulatory
CAR
standard
4%
Tier-1 ratio
31 Dec.
2005
31 Dec.
2006
Enhanced internal management
Management structure consolidated

Data Centralization completed

HR reforms rolled out bank-wide

Management Accounting Phase I rolled
out successfully

Breakthroughs achieved in Corporate
Customer Internal Rating System,
Pricing Management and Management
Accounting Phase II

Corporate culture and brand building
under way

A corporate culture focused on
“responsibility” and “innovation” is
being established

Became a global partner of Expo 2010
Shanghai

Brand among leading institutions
Cooperation with HSBC
continued to evolve

A win-win cooperation model has been
put in place with efficient communication
and coordination mechanism

Progress made in various business lines
Business Process Re-engineering
initiated

Outlook
Outlook-challenges and positive factors
Challenges




Positive factors
Structural conflicts still exist in
China’s economic development

Macro adjustment may bring
challenges to risk management
Positive drivers of economic
development still prevail

Our strategy is being well
implemented and gaining momentum

Continued rationalization of
management will further the
improvement of resources allocation
Development of capital market will to
some extent replace the need of
corporate finance
Intensified competition will bring
pressure on business growth
Outlook-our measures
We will take the following measures to keep
and expand our competitive edge

Following the innovation-driven principle, to increase the investment in
product and service innovation

To continue investing more resources in personal financial service,
small business service, fee-income based business and other
innovative business areas so as to carry forward our strategic
transformation

To expedite management integration and business process reengineering and strengthen network management and e-banking
channels build-up so as to improve our service efficiency and
capability
Thank you!
8 March 2007