Bank of China Limited (“the Bank”, Hong Kong Stock Exchange ordinary stock code: 3988, Offshore Preference Share: 4601; Shanghai Stock Exchange ordinary stock code: 601988, Domestic Preference Share code: 360002 and 360010) announced its 2016 interim results on 30 August. According to International Financial Reporting Standards (“IFRS”), the Bank recorded a profit after tax of RMB107.308 billion and a profit attributable to equity holders of RMB93.037 billion, increasing by 12.97% and 2.52% year-on-year respectively.
Specifically, the Bank’s operating performance in the first half of 2016 is featured by the following respects:
Steadily improved operating performance with continuously enhanced operating efficiency
As at the end of June 2016, the Bank’s total assets, liabilities and capital and reserves attributable to equity holders amounted to RMB17.60 trillion，RMB16.18 trillion and RMB1.35 trillion, increasing by 4.67%，4.68% and 3.32% respectively from the prior year-end. The ROA and ROE recorded 1.25% and 14.78% respectively. Net interest margin stood at 1.90%. Leveraging its competitive edges in internationalization and diversification, the Bank proactively expanded the non-interest income sources to achieve an increase of 42.75% for non-interest income in the first half, accounting for 41.03% of the total operating income, far outpacing peers. Cost to income ratio (calculated under domestic regulations) declined 60 basis points year-on-year to 24.25%, further enhancing its operating efficiency. The Bank’s capital adequacy was strengthened with its capital adequacy ratio and tier 1 capital adequacy ratio reaching 13.91% and 11.98% respectively.
Relatively stable assets quality with further optimized loan portfolio
Focusing on crucial areas and key businesses, the Bank innovated modes for resolving, managing and controlling distressed assets, achieving remarkable effects. The assets quality maintained relatively stable with sufficient provisions, which strengthened the Bank’s risk compensation mitigation capability. In the first half of 2016, the Bank’s NPL ratio was 1.47%, lower than the average level of commercial banks. The NPL coverage ratio stood at 155.10% and the allowance for loan impairment losses to total loans of domestic institutions recorded 2.74%, both above the regulatory minimum. By stepping up efforts on NPLs resolution, the Bank’s domestic institutions resolved RMB63.78 billion of distressed assets, up RMB20.33 billion or 46.78% year-on-year. In the meantime, the Bank devoted in taking innovative measures to resolve distressed assets, and has successfully issued the first NPL-backed securities.
The Bank actively supported the supply-side structural reform and increased its support to real economy. The outstanding domestic RMB loans reached RMB7.26 trillion, growing RMB459.36 billion from the last year-end, an increase of 6.76%. Loans to the supportive and selectively supportive industries saw a rise compared with the last year-end. The balance of the Bank’s domestic RMB personal loans was RMB2.70 trillion, growing RMB299.88 billion from the last year-end, representing 65.28% of the total new domestic RMB loans for the first half, up 22.08 percentage points for the same period in last year.
Further promotion of internationalization strategies to continuously raise overseas contributions
Closely coordinating with the nation’s strategies to promote a new round of high-level reform and opening up, the Bank continued to promote its overseas businesses development and strengthen its operations under global integration, with further improved internationalization level. In the first half of 2016, the Bank’s overseas institutions realized a profit before tax of USD8.568 billion, up 84.16% and representing 43.22% of the Bank’s total profit before tax. The outstanding deposits and loans of the overseas commercial banks reached USD365.2 billion and USD316.3 billion, up USD15.0 billion and USD20.5 billion respectively.
Adapting to the volatile operating environment, the Bank timely pushed forward its key overseas strategic adjustments. The smooth sale of Nanyang Commercial Bank helped eliminate the overlapping of the Bank’s businesses and reduce the management cost, further enhancing capital efficiency. The successful IPO of BOC Aviation highlighted the Bank’s competitive edges in its diversification strategies, enhancing the Bank’s overall value, as well as preserving and increasing state-owned assets value. The Bank also actively pressed ahead the reconstruction of the ASEAN institutions wherein BOCHK entered into acquisition agreements with Bank of China (Thai) Public Company and Bank of China (Malaysia) Berhad, and was approved to set up a branch in Brunei Darussalam, with these the BOCHK’s regional radiations were substantially strengthened.
The Bank continued to build up the "Belt and Road" financial artery and prioritized to expand its network in the countries and regions alongside the "Belt and Road". Currently the Bank’s network has covered 18 countries alongside the "Belt and Road", thus its global service network was further improved. A total new credit of USD17.4 billion was extended to countries alongside the "Belt and Road" while 392 projects with a total intentional credit of USD82.6 billion were followed up. The Bank actively supported Chinese enterprises "Going Global", with an aggregate of 23 "SMEs Matchmaking" events held wherein over 4,500 letters of intent were agreed.
The Bank's cross-border RMB businesses continued to maintain its leading position in market. The Bank’s cross-border RMB settlement volume and clearing volume reached RMB2.04 trillion and RMB150 trillion respectively, maintaining first place among peers in terms of market shares. In the first half of 2016, the Bank actively promoted RMB in emerging areas, continuously enhancing its offshore RMB quotation ability.
Continued to deepen reform with great progress in serving the nation's economic development for key regions
The Bank closely followed the nation's strategies and increased its support to the key regions including the Beijing-Tianjin-Hebei region, the Yangtze River Delta and Guangdong-Hong Kong-Macau area. In the first half, the foresaid key regions realized operating income of RMB149.4 billion, up 19% year-on-year, with its weight for the Bank's total operating income increased to 57%. They recorded a profit after tax of RMB74.9 billion, increasing to 70% of the Bank’s total profit after tax.
The Bank extended loans to 206 linkage projects in the Beijing-Tianjin-Hebei region with a balance of RMB115.7 billion. The borrowers included the key national strategies guided sectors relating to transportation integration, new-type urbanization, industry upgrade and transformation. A first mover advantage in the Bank’s innovative businesses in Shanghai FTZ was further transformed to a scale advantage. As at the end of June 2016, there were 11,498 corporate FT accounts opened and the outstanding loans for FT were RMB71.0 billion. An aggregate of 73 both-way cross-border RMB funding pools were approved.
For purpose of better serving the economic development in the Bohai Rim, in the first half of 2016, the Bank successfully completed structural adjustments to the four tier-1 branches in Liaoning province, Shandong province, Dalian and Qingdao, realizing comprehensive optimization and upgrade of management and services in the Bohai Rim.
Promoted innovation and transformation to form new internet competitive edges
The Bank fully implemented on the nation’s “Internet Plus” action plan. With a profound understanding of the nature of financial services and an aim to continuously improve customer experience, the Bank actively seized the commanding leadership position in the mobile internet era to sharpen new competitive edges.
E-finance businesses expanded rapidly, with a continuous rising of “E-BOC” brand. The E-finance customer number and transaction amount increased by 78% and 56% year-on-year respectively. The Bank cooperated with over 60 e-commerce institutions on “BOC Global E-Commerce” platform, and the “BOC Easy-trade Cyber-tariff” businesses continued to lead market. It upgraded the “one-stop” online financial supermarket products with new transaction amount exceeding RMB64.3 billion.
Online and offline coordinated services were continuously enhanced. The Bank accelerated its constructions of smart outlets, having completed intelligence upgrades for 4,112 domestic outlets. 89.71% of transactions were conducted through e-channel, with an amount of RMB75.4 trillion, out of which the mobile transaction amount grew by 30.54% year-on-year. The Bank continued to promote its technology innovation and pushed forward the integration and transformation of the overseas information system, being the first among the domestic peers establishing a 7x24 hours non-stop globally integrated system for operations and maintenance.
In the second half of 2016, the Bank will take on responsibilities for serving the nation’s strategies and stick to the strategic aim of “Serving Society, Delivering Excellence”, continuing to deepen reform and promote innovation and transformation. The Bank will step up its efforts on NPL resolutions and strengthen the group’s management and control, continuously striving for a higher level of operation management.