On 21 August 2011, China Construction Bank Corporation (“CCB” or “the Bank”) announced its interim results for 2011. In the first half of this year, it continued to uphold a strategy of prudent development, actively pursued business transformation and innovation, intensified risk management and relentlessly improved services. Consequently there was steady development in all lines of business and excellent operating results were achieved.
Sound operating performance reported
As at 30 June, CCB’s total assets were RMB11,754.766 billion (unless otherwise stated, the data herein are calculated in accordance with the IFRS on a consolidated basis), up 8.74% from the end of last year. Total loans and advances to customers were RMB6,140.387 billion while deposits from customers were RMB9,892.108 billion, growing respectively by 8.31% and 9.00% from the end of the previous year. The deposit-to-loan ratio was kept at a reasonable level.
In the first half of 2011, the Bank realised an operating income of RMB197.246 billion or a year-on-year increase of 28.31%; its profit before tax and net profit were respectively RMB120.789 billion and RMB92.953 billion, which represented rapid growth rates of 31.02% and 31.33% respectively from 1H2010. In the same period, the Bank’s annualised return on average assets at 1.65% and annualised return on average equity at 24.98% remained the top level among major international commercial banks. As it continued to reinforce its cost management, CCB’s cost-output efficiency was further raised and its cost-to-income ratio dropped 1.92 percentage points from 1H2010 to 31.72%.
Further optimisation in credit structure
In the first half of the year, CCB continued to optimise its credit structure in line with the state macroeconomic policy to change the national development mode and adjust the industrial structure. It was able to ensure that its credit placements were sound in volume, reasonable in tempo, optimised in structure and superior in quality. During the period, CCB recorded a balance of RMB4,248.62 billion in corporate loans with RMB271.755 billion in newly released loans. It also continued to implement the credit policy of “increasing and guaranteeing loans into some sectors while controlling, compressing, and withdrawing from others”, in which loans to sectors with higher potential risks were strictly controlled. The Bank managed to lower the balance of loans to industries with overcapacities and reduce the balance of loans to corporate customers in its withdrawal list by RMB48.5 billion. The Bank also implemented stringent controls in new loans to local government financing vehicles by reducing old loans and controlling new placements and ensured such new loans met the requirements of the State and regulatory authorities. The balance of the Bank’s loans to the real estate sector had a growth of 4.09% from the end of last year.
CCB continued to expand its credit support for small enterprises and various livelihood areas. 237 “credit factories” have been set up to streamline the process of SME loans, covering all major cities across the country. Loans to small enterprises grew rapidly to RMB825.899 billion with the growth rate of 12.62%, which was 5.79 percentage points higher than the growth rate for all corporate loans. The number of SME customers served at 68,557 represented an increase of 6,858 from last year end. At a balance of RMB973.31 billion, agriculture-related loans maintained a relatively fast pace of growth. The number of pilot branches for rural development reached eight, while the balance of loans in this area grew RMB12.409 billion from the end of last year to RMB19.824 billion. Steady progress was made in the promotion of “Livelihood Oriented” financial products, with the balance of loans to key livelihood areas including education and healthcare reaching RMB224.156 billion. Loans to private start-ups increased by RMB16.789 billion from last year end to RMB64.871 billion, mainly placed in economically developed areas like the Yangtze River Delta and the Pearl River Delta to support privately-owned businesses from professional markets or industrial clusters.
In the period, active support was given to meet the individual needs for housing. The balance of residential mortgage loans increased by RMB128.718 billion from last year end to RMB1,219.834 billion, mainly supporting the purchase of owner-occupied housing by residents. Loans released to support indemnificatory housing amounted to a total of RMB31.143 billion. CCB continued to maintain the lead in the banking industry in terms of the entrusted housing finance business. It recorded a balance of RMB562.624 billion in provident housing fund loans.
Strong growth in intermediary business
With its traditional interest-based business consolidated, CCB was able to maintain a fast pace of growth in its intermediary business. In the first half of 2011, a net fee and commission income of RMB47.671 billion was realised, up 41.70% from the same period last year, in which the proportion to operating income increased by 2.29 percentage points year-on-year to 24.17%.
A number of products in CCB’s intermediary business outperformed its peers in the market. The Bank’s business in underwriting debt financing instruments maintained its leading advantage: with the underwriting of RMB74.615 billion in short-term financing bills, CCB ranks first in terms of underwriting volume. With the margin of trading account bond greatly exceeding the benchmark index, and with its over-the-counter transaction volume in book-entry treasury bonds jumping to the first position, the Bank was able to maintain its leading position in the overall treasury bond underwriting market. The Bank had under its custody the largest number and size of collective financing products from securities firms. In the period, it realised an international settlement volume of US$419.513 billion, up 35.04% from the same period last year. It also carried out RMB112.711 billion worth in RMB cross-border settlement, which was a growth of RMB106.24 billion year-on-year. The Bank’s domestic factoring business also grew rapidly, recording a balance of RMB99.199 billion in factoring advances, an increase of 46.97% from the end of last year. Its business in overseas guarantees maintained a trend of robust development and realised 32.38% in income growth year-on-year. The size of its asset custodial service exceeded RMB1.6 trillion. The number of signed-up enterprise annuity customers was 3.35 million, which was an increase of 690,000 customers from last year end, while the value of signed-up assets under custody increased by RMB847 million from last year end.
In the first half of 2011, CCB’s bank card business demonstrated a good momentum. The number of new debit cards issued was 36.57 million, while the transaction amount for consumption of RMB828.404 billion represented a growth of 51.57% year-on-year. The number of new credit cards issued was 2.34 million, and the transaction amount for consumption of RMB261.74 billion achieved a growth of 45.20% on the year. In particular, the transaction amount in the instalment payment business reached RMB18.8 billion or a jump of 360% from the same period last year. By enhancing refinement in credit management, credit record examination and verification, anti-fraud risk management and continuous improvements in risk prevention technologies and measures, the quality of CCB’s credit card remained sound.
Further optimisation of layout in business channels
To offer more convenience to its customers, CCB has been continuously improving customer experience through optimising the layouts of its business channels. Refurbishment in a total of 1,087 retail outlets has started since the beginning of this year, resulting in sustained improvements in the layout and overall appearance of its retail outlets. As of June 30, a total of 40,949 ATMs and 10,114 self-service banks were installed and in operation. Construction of specialised set-ups has been further advanced. The Bank now boasts 195 wealth management centres and ten private banks are in operation.
CCB’s e-banking channels have improved markedly. The volume of financial account transaction through e-banking has reached 1.125 billion, with more and more customers using CCB’s high quality e-banking services anytime anywhere. In particular, the number of online banking customers grew 21.14% from the end of last year to 69.11 million, while the number of mobile phone banking customers grew 32.93% to 29.83 million. There are now nine e-commerce cooperation platforms in CCB’s online banking business, generating new business loans of more than RMB10 billion.
Further enhancement in the distribution of overseas branches and in integrated operation was obtained. With its representative offices in Taipei and Moscow successively opened for business, CCB’s overseas branches now cover 13 countries and regions. Thus the Bank’s capability in offering 24-hour non-stop services as well as basic service framework is taking initial shape. CCB Life Insurance Co.Ltd is already opened for business officially and has become the first life insurance company under the holding of a major state-owned bank. The businesses of CCB’s subsidiaries in investment banking, funds, trusts, leasing and housing savings also maintained steady growth, while 33 rural banks are now either in business or in preparation.
Solid advancement in basic management
CCB has been able to achieve steady improvements in the quality of its credit assets through various means including continuing the entrenchment of internal risk management, further consolidating the achievements of the “Post-lending Management Year”, comprehensive reinforcing of post-lending management, stepping up credit risk controls in areas such as government financing vehicles and the real estate sector, and by strengthening management in off-balance sheet businesses and overseas businesses. As at 30 June, its balance of non-performing loans was RMB63.417 billion, down RMB1.295 billion from last year end while its non-performing loan ratio was down 0.11 percentage points from last year end to 1.03%. Thus a “double-down” trend has been maintained. Its allowances to non-performing loans of 244.68% was an increase of 23.54 percentage points from last year end, and was at a high level in the domestic banking sector. In the period, the Bank was able to maintain a steady capital adequacy level; it recorded a capital adequacy ratio of 12.51% and a core capital adequacy ratio of 10.42%.
The Bank has boosted support and protection for its information systems. It has developed a basic structure plan and initiated research in the next generation of core systems. It has developed a finance IC card, worked on second-generation application systems for payments and other items, promoted the adoption of third-party payments, overseas core systems and a system separating front-and back-office separations, and integrated the application systems of domestic branches and overseas branches. It has carried out risk assessments for 53 key systems, increased the level of automation in operation maintenance and increased guarantees for safe operations.
The Bank has also raised effectively its capabilities in product innovation and service level. In the first half of the year, 3,120 innovative product ideas were collected and 80 product innovations and 105 process optimisation projects were completed. It has set up five product innovation laboratories to drive innovations in the areas of logistic finance, cash management, technology finance, private banking and banking insurance. In the first half of 2010, the service quality score of CCB’s retail outlets as obtained through ”Mystery Customer” surveys was 93.6, indicating continued improvement in service standards.
CCB’s operating and management performance has been fully recognised by various media and organisations. In the first half of 2011, its positions in major international rankings were raised continuously and it was bestowed with more than 50 key awards by famous domestic and overseas institutions. Its ranking in the “Top 500 Banking Brands 2011” from the British magazine The Banker advanced by three positions to the 10th place. In American magazine Fortune’s Global 500, CCB’s ranking advanced eight places to the 108th position. For the third consecutive year, the Bank has been the recipient of Corporate Governance Asia annual “Corporate Governance Asia Recognition Award”. It has successively been recognised as the “Best Bank in China”, “Best Domestic Bank in China”, “Best Private Bank in China” and “Best Trade Finance Bank in China” etc by FinanceAsia, The Asset, Euromoney and Global Finance.
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