Bank of China (BOC) published its operating results for the first half of 2019 on August 30. It recorded profit for the period of RMB121.4 billion and profit attributable to equity holders of RMB114 billion, representing a year-on-year increase of 5.08% and 4.55% respectively.
In the first half of the year, BOC, deepening financial supply-side structural reform and focusing on the strategic goal of “building a world-class bank in the new era”, earnestly served the real economy, forestalled and defused risks, deepened reform and innovation, and continued to advance the development strategy. It registered a stable performance with good momentum for growth.
Upholding high-quality development, enhancing ability to create value
Business performance kept stable while securing progress. At the end of June, the group reported total assets of RMB22.27 trillion, up 4.70% from the end of 2018. The operating income amounted to RMB276.7 billion, an increase of 10.02% year on year. It recorded profit of RMB121.4 billion, a year-on-year increase of 5.08%. The Group managed to keep the asset quality stable. The non-performing loans ratio was 1.40%, down 0.02 percentage points from the beginning of the year. The provision coverage ratio was 177.52%.
Main financial indicators continued to improve. Net interest margin was 1BP up from the first quarter, the return on average total assets (ROA) was 1.12% and return on equity (ROE) was 14.56%. It completed the offerings of RMB40 billion of perpetual bonds and RMB73 billion of preference shares, and the capital adequacy ratio reached 15.33%, about 0.36 percentage points higher than the beginning of the year, creating an all-time high. The operating efficiency was further improved with cost to income ratio (calculated under domestic regulations) standing at 24.63%.
Brand value steadily increased. Standard & Poor’s raised BOC’s Stand-alone Credit Profile and preferred stock ratings, which remained to be the highest among Chinese banks. BOC ranked 4th in Top 1000 World Banks and was listed in the Fortune Global 500 for 30 consecutive years. It ranked 8th in the Global 2000 Companies, up from 9th in 2018. The Bank won the award of World’s Best Bank in the Emerging Markets 2019 by Euromoney.
Shouldering responsibilities to better serve the real economy
Increasing its financial resource inputs in serving the real economy. At the end of June, the Group’s balance of domestic loans increased by RMB638.3 billion, or 7.1%, from the end of last year, with a focus on the high-quality development of the manufacturing industry, infrastructure, consumer finance, and agriculture-related industries. The investment in local government bonds rose by RMB158.9 billion, up 9.6% from the end of last year. It supported the implementation of the country’s regional coordinated development strategy.The balance of loans to the Yangtze River Delta, the Pearl River Delta, and the Beijing-Tianjin-Hebei region remained at a relatively high level.
Serving private enterprises, inclusive finance and the high-quality development of the manufacturing industry. It continued to advance the implementation of the 20 Articles in Support of Private Enterprises, with the loans newly granted to private enterprise accounting for 36.4% of newly granted corporate loans. The inclusive finance loans to small and micro enterprises significantly increased from the end of last year, and the comprehensive financing cost of loans declined steadily. It held a total of 55 SME cross-border matchmaking conferences to build a platform for inter-connectivity and cooperation worldwide. The Bank supported the transformation and upgrade of the manufacturing industry, with its ratio of balance of manufacturing industry to corporate loans above 20%, a relatively high level among peers.
Supporting key areas and weak spots of the national economy with innovative services. Addressing to the needs of the transformation of economic structure and in line with the principle of “adopting customer-specific policies for ladder-style advancement”, the Bank made great efforts to promote the building of a variety of scenarios, including cross-border, government affairs, old-age and transport, and supported digital transformation of related areas. The Bank developed an Action Plan for Supporting the Development of Silver Economy, which included measures to increase credit support, expand financing channels, enhance special products development and strengthen matchmaking of projects both at home and abroad. The Bank aimed to work with partners in the elderly care service industry and become a pioneer and leader in serving the development of silver economy.
Enabling advancement through technology, accelerating the building of a digital bank
Making fruitful achievements in digitalized development of key areas. BOC picked up speed in digitalization by bringing the critical role of mobile baking, transaction banking and smart counters into play. It launched the brand-new version of mobile banking 6.0, with better customer experience and reputation. It achieved a 64% YOY growth in the first half of 2019 in terms of mobile banking transaction while extended the mobile banking service to 18 foreign countries and regions. It steadily advanced the development of the first phase of the transaction banking platform. It comprehensively advanced the transformation of outlets with smart counters at the core by quickly expand the coverage of mobile smart counters and cash version of smart counters.
Initiating reform on the Personal Banking Organizational Structure. BOC established the Personal Digital Banking Department (with two sub-departments: Digital Platform Center and Private Banking Center) and Consumer Finance Department in order to integrate digital elements into the whole process of personal banking business, improving the efficiency of tech-business collaboration, stimulating the vitality of business lines, and building an agile “Central Command”. In the first half of 2019, BOC saw a continuously higher contribution from domestic personal banking business. Both the increase speed and amount of personal effective customers hit a 3-year new high.
Expediting technology research and application process. BOC improved its innovation mechanism by promoting pilot programs and failure tolerance for new products. It set up a 5G joint innovation application lab and a transportation finance technology innovation lab. BOC pioneered the offline banking intelligent ecology development, becoming the first in the industry to open up a 5G+ smart outlet. It continuously improved the research and application capabilities of new technologies, put in place cloud computing, big data and artificial intelligence platforms, and vigorously sought expansion in key areas such as intelligent investment advisory, intelligent customer service, intelligent risk control, and quantitative trading.
Delivering performance through transformation, sharpening competitive edges in globalization and comprehensive operation
Maintaining a leading position in global business in the Chinese banking industry. By the end of June, BOC had 553 overseas institutions, covering 57 countries and regions. It made persistent efforts to build “the Belt and Road” financial artery, providing credit of more than 140 billion for over 600 major projects under the Initiative. It now owns 12 of 26 authorized RMB clearing business center after kicking off the Japan RMB clearing business in its Tokyo Branch. BOC continued to be the front-runner among Chinese peers in areas of global clearance, foreign exchange trading, cross-border institutional investor bond trading, cross-border RMB clearing, cross-border custody. BOC became the first Chinese clearing member of London Clearance House. BOCHK obtained the license for virtual bank.
Enhancing the quality of comprehensive operation It established a comprehensive operation coordination committee to optimize the comprehensive operation governing structure. It sought to build a cross-border, cross-sector ecosystem, and develop a comprehensive service system that is featured by all-round functions, smooth cooperation and strong competitiveness. At the regional level, BOC promoted a comprehensive operation coordination mechanism with commercial banking as the main body and deepen the two-way synergy between commercial banks and comprehensive operation companies. It established BOC Fintec Limited and BOC Wealth Management Limited. The Group was approved to open up investment management community bank in Xiong’an New Area, consolidating the market role as the largest community bank in China.
Accelerating transformation and upgrading in domestic business. BOC witnessed the rapid development of debt capital market business with a 54% YOY growth in the amount of domestic bond underwriting. It saw the steadily growing green credit in parallel with the continuous falling of lending to industries with overcapacity. BOC reported the largest increase in domestic assets under custody among major peers, and the deposits in custody accounts grew by 28%. BOC made debut the “Easy Account Opening” product in the Guangdong-Hong Kong-Macau Greater Bay Area. The Bank became one of the first pilot banks in the free trade account system of Hainan.
Holding the bottom line, focusing on forestalling and defusing financial risks
Improving risk control and management. BOC swiftly adapt to market changes by amending the four kinds of “50-point Rules” for the Head Office departments, outlets, overseas institutions and integrated operating subsidiaries, installing the pillars for the Group’s governance. It conducted in-depth study into the external situations and financial market fluctuations to establish and improve working mechanisms. BOC closely followed key time points, key regions, key customers and key events, to comprehensively enhance the management of liquidity risks, reputation risks, market risks, country risks. It made quick responses and effectively settled risk events. The Group amended the provisions on consolidated management and streamlined organizational structure. BOC’s major risk indicator remained stable.
Increasing the efforts in recovering non-performing assets. New non-performing loans of domestic institutions dropped on YOY basis with new non-performing loan rate declined by 0.41 percentage points compared to last year. The overdue loan balance and overdue ratio dropped significantly, and the gap between overdue loans and non-performing loans shrank dramatically. BOC practiced centralized recovering methods and has recovered 59.6 billion RMB non-performing assets in the first half of 2019. It signed market-based debt-for-equity swap contracts worth RMB54.8 billion, of which RMB34.8 billion has been in place, both ranking No.1 among major peers.
Improving internal control and compliance and case prevention management. The Bank adjusted its internal control regulations and upgraded the Group’s risk appetite and related policies in line with regulators’ latest requirements and changes both at home and abroad. It strengthened the supervision and examining of high-risk bonds and strengthened the management of commissioned investment business. Efforts were made to strengthen compliance and AML work of domestic and overseas institutions, and the Bank ranked No. 1 among all domestic financial institutions in the AML rating of the People’s Bank of China in 2019. The Bank launched the Case-based Education and Awareness Campaign in accordance with the requirement of the government. Efforts were made to strengthen consumer protection, the regulators’ assessment results of which made significant improvement. The Bank solidly promoted the remediation of issues found in the inspections of auditors and regulators, and the quality and effectiveness of remediation of issues kept improving. The Bank advanced the building of the security system and vigorously developed online security.
Contributing to the society, brand value constantly increasing
Working intensively to alleviate poverty. The bank practiced social responsibility and carried out targeted poverty alleviation in the “Four Northern Counties” in Xianyang, Shaanxi Province for 17 years in a row. The Bank endeavored in helping combat extreme poverty, in increasing poverty alleviation quality and in integrating poverty alleviation with rural rejuvenation.
Providing strong support for education. It continued to provide government-sponsored student loans. By the end of June, it granted a total of RMB23.734 billion worth of student loans to help 1.8 million students with financial difficulties complete their studies. It sponsored the Tan Kah Kee Science Award for 16 consecutive years by honoring outstanding Chinese scientists who have made significant original scientific and technological achievements. It conducted strategic cooperation with the National Center for the Performing Arts for 11 consecutive years to help promote art.
Promoting development of green finance. The Bank implemented the nation’s green credit policies and its green credit balance reached RMB630 billion, aiming to support the transformation of economic development model, optimization of economic structure and development of green economy. It comprehensively push forward green operation by reducing the use of paper in counters and offices and promoting concepts of environmental protection among its employees.
Providing financial services to the Olympic Games. As the official partner of the Beijing 2022 Olympic and Paralympic Winter Games, BOC actively carried out publicity activities for Olympic theme events such as the Olympic Day and 1000-Day Countdown to 2022 Winter Olympics. The Bank launched the world debut of Beijing Winter Olympic themed credit card and debit card. It made great advancements in financial service for Olympic related industries and worked together with its partners to facilitate development of the ice and snow industry.
BOC will advance financial supply-side structural reform and work in line with the road map, timetable and plan of the development strategy of building a world-class bank in the new era. The Bank will activate vitality and make agile reaction to make breakthroughs in key areas, and promote the in-depth implementation of the development strategy, so as to pay tribute to the 70th anniversary of the founding of the People’s Republic of China and make more contribution to the realization of the Chinese Dream-the great rejuvenation of the Chinese nation.
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