A presentation at JPMorgan China Conference 2012 Dicky Yip, EVP Beijing, 13 June 2012 PowerPoint Template Guidelines/2007
I 1Q2012 performance PowerPoint Template Guidelines/2007
1. Further improved profitability 150 120 Net operating income (in RMB bn) CAGR:19.4% 104.7 127.8 ROAA and ROAE 90 60 30 62.8 77.3 81.6 36.6 2011 2012Q1 Growth 2007 2008 2009 2010 2011 2012Q1 60 50 40 30 20 10 0 20.3 0 第五级 Net profit (in RMB bn) CAGR:25.7% 28.5 30.1 50.7 39.0 15.9 2007 2008 2009 2010 2011 2012Q1 ROAA 1.19% 1.34% 0.15 pps ROAE 20.52% 22.69% 2.17 pps PowerPoint Template Guidelines/2007 3
2. Continued Customer-Centric Strategy Corporate Customers By the end of 2011, effective corporate customers increased by 16.7% yoy to 0.27 million, in which Win-To Fortune customers increased by 17.3%.. SME Customers By 2011, the proportion of SME customers in total corporate customers was 91.9%, increased by 2.9 pps yoy. Personal Customers Personal customers increased by 5.82% to 49 million from 2010 to 2011, in which wealth management customers increased by 6.59%. PowerPoint Template Guidelines/2007 4
3.1 Steady business growth Deposit and loan growth Deposit from customers (in RMB bn) 3.99% Loans to customers (in RMB bn) 5.58% 3,283.23 3,414.27 2, 561.75 2,704.61 2011Q4 2012Q1 2011Q4 2012Q1 Note: Loans before provisioning PowerPoint Template Guidelines/2007 5
3.2 Steady business growth Strong growth of fee-based business Net fee & commission income (in RMB 100 MLN) 49.56 2011Q1 21.89% 60.41 2012Q1 Fee income from payments & settlement service and bank cards business increased by 74.27% and 46.76% respectively YoY, (In RMB 100 MLN except for percentages) Payments and settlement service which became the major drivers for fee income growth Fee & commission income breakdown 2011Q1 2012Q1 Growth 4.47 7.79 74.27% Bank cards 14.95 21.94 46.76% Investment banking 17.88 19.00 6.26% Guarantee and commitment 5.17 5.33 3.09% Management 7.81 8.57 9.73% Funds & Insrance Sales Commissions 4.76 3.92-17.65% Other fee and commission income 0.8 1.44 80.00% PowerPoint Template Guidelines/2007 6
3.3. Steady business growth Further improvement in net interest margin YTD NIS & NIM Up by 9 bps YoY 2.51% 2.41% 2.43% 2.44% 2.46% 2.36% 2.39% 2.34% 单击此处编辑母版文本样式 2.37% 2.47% 2.43% 2.54% 2.58% 2.59% 2.60% 2.49% 2.49% 2.45% 2.47% Accumulative NIS Accumulative NIM NIS and NIM stood at 2.47% and 2.60%, up by 4 and 9 bps YoY respectively driven by the following reasons: Benchmark rate hikes by PBOC since Q4 2010 Further enhanced 第五级 pricing management Continuously improved balance sheet structure PowerPoint Template Guidelines/2007 7
4.1 Further enhancement in risk management Continued asset quality improvement Impaired loan balance and ratio 0.86% In RMB 100 MLN except percentages 219.86 0.81% 218.91 0.05 pps RMB 95 MLN Provision coverage ratio 16.06 pps 272.43% 256.37% 2011Q4 2012Q1 2011Q4 2012Q1 PowerPoint Template Guidelines/2007 8
4.2 Further enhancement in risk management Continuous implementation of Effective Risk Management Special and more focused risk management strategies were given to Government borrowing vehicles, in line with renewed guidelines from regulatory requirements A customer specific lending policy was constructed for property developers, all property security valuations were updated and after-lending control was stepped up All customers involved in Shadow Banking, either as borrowers or lenders, were monitored and action plans were designed for high-risk customers Improved procedures and management control over wealth management products, including the setting up of product accounting and custodian systems, and the strengthening of counter parties and post-investment controls PowerPoint Template Guidelines/2007 9
II Development Trend of China s Banking Industry PowerPoint Template Guidelines/2007
1. 2005-2011: a golden era for China s banking industry Rapid growth of BOCOM 人民币万亿元 Total assets (RMB tn) Owner s equity (RMB bn) 3.2 times 5 4.6 4.0 4 3.3 2.7 3 2.1 1.7 2 1.4 1 0 2005 2006 第二级 Net profit 2007 2008 (RMB 2009 bn) 2010 2011 60 50.7 50 人民币亿元 39.0 40 4.38 第三级 times 30.1 占比 28.5 30 20.3 20 12.5 第四级 9.4 10 0 2005 2006 2007 2008 2009 2010 2011 人民币亿元 300 3.4 times 272 223 200 164 145 128 80 87 100 0 2005 2006 2007 2008 2009 2010 2011 1 0.8 家数 0.6 0.4 0.19 0.2 0 Earning Per Share (RMB) 4.3 times 0.37 0.24 0.82 0.66 占比 0.53 0.51 2005 2006 2007 2008 2009 2010 2011 PowerPoint Template Guidelines/2007 11
2.1 China s 12th 5-year Plan Targeting the 3rd 10-year high growth period. Economic Model switching from investment / export driven to domestic demand / consumption. Continued and accelerated urbanization trend. Managing 第二级 a rapidly aging population. Going Out, Market-Driven & Go West strategies. Sustainable and efficient development policies. PowerPoint Template Guidelines/2007 12
2.2 China s 12th 5-year Plan 1.The rapid growth of private wealth 2.The financial needs from an aging population 3.The switch from savings to spending 5.The rapid development of new technology Factors 4.The growth of small families in large cities 6. The internationalization of RMB PowerPoint Template Guidelines/2007 13
3. Opportunities still abound for banks Stable policy environment Industry policy Banks are to benefit from government-supported sectors including transportation, energy saving and environmental protection, strategic emerging industries, infrastructure in rural and western areas, education and healthcare fields Monetary policy Credit policy Policy constraints on business growth are to alleviate due to fine-tuning of monetary policy, RRR cuts and relaxation of credit policy SME Bonds Asset To alleviate the pressure of LTD ratio and provide opportunities to optimize loan structure PowerPoint Template Guidelines/2007 14
III Development Strategies of BOCOM PowerPoint Template Guidelines/2007
1. Bocom s Five-Year Plan Aiming to double both net profit and total assets in 2011-1015 To realize the synergy between domestic and overseas branches and between the Bank and its subsidiaries To lay a foundation for international and universal banking To grow wealth management clients and AUM To expedite the strategic transformation and business re-structuring To increase the brand value and product innovation capacity To further improve the key financial indicators and return to shareholders To take advantage of our market positioning and maximize the use of technology to create differentiation in the market. PowerPoint Template Guidelines/2007 16
2. Speeding up the BoCom Strategy implementation Overseas Branches Subsidiaries Wealth management Total assets of overseas institutions reached 388.405 bn Yuan Contributed a net profit of 627 million Yuan, 第四级 representing a YoY growth of 33.40% Total assets of subsidiaries reached 73. 9 bn Yuan, increasing by 18.50% YTD Innovate one-stop financial services to our customers Enhance and promote our global Financial Planning & Asset Allocation Service to our wealth management customers By the end of March, the customer number of Private Banking and OTO Fortune increased by 7.74% and 8.31% YTD PowerPoint Template Guidelines/2007 17
3. Optimizing business structure Focus on SMEs Adapted to China s economy restructuring Reducing exposures to high-risk sectors Adapted to China s strategic growth sectors SME loan balance grew by 53.785 bn Yuan YTD, representing 60% of the incremental loans Share of SME loans rose to 40.14% Loans extended to resources, life-style, consumption, service sectors etc. grew by 24.18 bn Yuan in Q1, accounting for 27% of the total newly increment loan Share of Real Estate loans declined by 0.11 percentage points YTD Share of loans to heavilypolluting, highly-energyconsuming and overcapacity sectors dropped by 0.12 percentage points YTD Overseas loans grew by 21.88% Loan balance in Mid and West China representing 27.87% of total loans PowerPoint Template Guidelines/2007 18
4. Strategy in fulfilling Bocom s Five-Year targets Efficient operation Accelerate reform Enhance business focuses Differentiated development Improving effectiveness of business operations focus on risk management increase the proportion of non-fund income optimize the allocation of credit resources universal banking operation wealth management making the best use of branch outlets, electronic delivery and sales force implement the mediumsized customer development strategy deepen the strategic cooperation with HSBC PowerPoint Template Guidelines/2007 19
Thank you! PowerPoint Template Guidelines/2007