China Construction Bank Corporation

Announces 2008 Annual Operating Results

Meeting Challenges to Advance the Cause of Scientific Development

Setting New Performance Records to Realise Another Leap Forward

China Construction Bank Corporation (“CCB” or “the Bank”) today announced its 2008 annual operating results. In 2008, CCB adopted a proactive but moderate operating policy; achieved marked progress in its business transformation, structural adjustment and comprehensive operation; obtained sustained enhancement in its customer service and risk management capabilities; and fulfilled all its annual operational and management goals.

Consolidation of sound operating results. In 2008, the realised profit before tax amounted to RMB119.74 billion (unless otherwise stated, the Group’s data set forth herein are reckoned in RMB in accordance with International Financial Reporting Standards), a growth of 18.8% over the previous year. Its net profit was RMB92.64 billion, an increase of 34.0%. Its operating income grew by 22.2% from the previous year to RMB269.75 billion. The amount of its total assets made a historical record of exceeding USD1 trillion to reach RMB7,555.45 billion, a growth of 14.5% over the end of the previous year. Of this, total loans and advances to customers were RMB3,793.94 billion, an increase of 16.0% from the end of the previous year. Total liabilities were RMB7,087.89 billion, an increase of 14.8% from the end of the previous year. Among it, deposits from customers rose by 19.6% to RMB6,375.92 billion, maintaining adequate liquidity for the Bank.

Continuous improvement of credit asset quality. As at 31 December 2008, CCB’s non-performing loan ratio was 2.2%, which was a drop of 0.4 percentage points from the end of the previous year. The ratio of allowances for impairment losses to non-performing loans was raised to 131.6%, with an increase of 27.2 percentage points from the end of the previous year.

Significant enhancement of overall profitability. As at 31 December 2008, the net interest margin of CCB climbed six basis points from the previous year to 3.2%, while the return on average assets and the return on average equity were respectively 1.3% and 20.7%, representing a respective increase of 0.16 and 1.18 percentage points over 2007, keeping CCB’s profitability at the best level in the global banking industry. Net fee and commission income grew 22.8% over the previous year to RMB38.45 billion, and the proportion of net fee and commission income to operating income rose to 14.3%, an increase of 0.06 percentage points over the previous year. On the other hand, costs and expenses remained under effective control: in 2008, the cost-to-income ratio was lowered to 36.8%.

Stable capital adequacy ratio. As at 31 December 2008, CCB’s capital adequacy ratio was 12.2% and its core capital adequacy ratio was 10.2%, both of which were maintained within the range of management targets.

Further enhancement of social values and social image. CCB’s ranking in Fortune magazine’s “Global 500 2008” leaped from 230th to 171st, the biggest jump among its peers in China. In addition, CCB was awarded “Best Chinese Bank”, “Best Commercial Bank”, “Best Social Responsibility Enterprise Award for the 30 Years of Opening-up and Reform” by various international and domestic organisations. The Bank has also been continuously improving and fine-tuning its corporate governance and strives to attain a right mix of checks and balances and efficiency. It was granted the “Hong Kong Corporate Governance Excellence Award 2008” by The Chamber of Hong Kong Listed Companies.

CCB Chairman Mr. Guo Shuqing says, “In 2008, we further advanced the implementation of scientific concept towards our development in a spirit of reform and innovation, withstood the trial of dramatic changes in international and domestic economic situations, achieved sustained enhancement in our customer service and risk management capabilities, and obtained financial results that are satisfactory to the market and to our investors. We believe after going through reforms and opening up in recent years, we would be able to bolster our core competitiveness and value creation capability whilst dealing with severe challenges, thereby contributing further to the healthy development of China's economy.”

1.      Optimising credit structure to serve the greater good and achieve steady improvements of competitiveness

Adapting to market situations, CCB linked up its implementation of national macroeconomic control policies with the adjustment of its credit structure in 2008. Hence greater efforts were made to skew credit resources towards key strategic businesses such as small enterprises, institutional banking and agriculture-related sectors.

CCB has been continuously increasing lending resources towards sectors such as infrastructures in which it has traditional advantages. As at 31 December 2008, the balance of new infrastructure loans amounted to RMB194.11 billion, representing a year-on-year increase of 19.5%. The amount of these new loans was 56.3% of all new corporate loans, while the balance of these new loans was 44.2% of the balance of all corporate loans.

The specialised operation of CCB small enterprise business has achieved new results. As at 31 December 2008, 78 small enterprise centres operating in the “Credit Factory” mode were established. The Bank’s small enterprise loan business continued to maintain a rapid growth momentum and the growth rate of loan was significantly higher than the Bank’s average loan growth rate.

The scale of CCB agriculture-related loans have been continuously expanding. As at 31 December 2008, the total balance of its agriculture-related loans reached RMB440.67 billion, which was an increase of RMB105.23 billion or 31.4% from the end of the previous year. In December 2008, Hunan Taojiang Jianxin Rural Bank Ltd. was set up.

CCB has taken timely measures to provide financial support for disaster relief and post-disaster reconstruction. After the calamitous Sichuan earthquake took place, CCB applied non-restrictive lending standards for sector admission and loan approval in the earthquake-stricken areas such as Sichuan and Gansu. A cumulative total of RMB27.66 billion of loans were issued as at 31 December 2008.

Meanwhile, CCB has accelerated its withdrawal from industries and projects which are not in line with either national policies or CCB’s own risk preferences. For the whole year, the actual amount of loans withdrawn was RMB64.46 billion. Its credit and client structures were optimised. The proportion of clients with internal credit ratings of A and above has reached 89.3% of loan balance, an increase of 0.7 percentage points over 2007.

As China’s largest bank for personal housing loans, CCB has always been highly concerned with improvements in the people’s livelihood. As at 31 December 2008, the balance of personal housing loans saw a growth of 14.3% to RMB603.15 billion. In terms of both loan balance and new loans, CCB ranked first among its peers. In the same period, the balance of housing provident fund loans was RMB288.97 billion, representing an increase of RMB46.72 billion over the end of the previous year and the largest share in the domestic market.

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2.      Customer service attaining new levels in shaping a first-class retail bank in China

In 2008, CCB continued to push forward the project of retail branch transformation. As at 31 December 2008, 11,610 or 87% of CCB’s retail branches had undergone functional transformation. In the transformed branches, transaction efficiency was increased, while the customer waiting time was reduced by 35%. CCB has set up private banking centres in Beijing, Shanghai and Guangdong, while the numbers of personal finance centres and wealth management centres in operation have reached 2,068 and 106 respectively.

Huge efforts were made in developing electronic transaction channels. As at 31 December 2008, with 31,896 sets of ATMs installed and in operation, CCB became a leader in the global banking sector in this respect. The volume of completed transactions through self-service facilities were 103% of that of the front desk, up by 61 percentage points from the previous year. Meanwhile, the number of CCB’s electronic banking customers reached 111.82 million, growing by 58.2% over the previous year. The amount of electronic transaction reached RMB110.4 trillion, giving an electronic banking to front desk transaction ratio of 45.0%.

Concerned with the feelings and experience of its customers, CCB has set up “CCB Customer Experiencing Centres” in Beijing, Shanghai, Xiamen and Guangzhou while setting up problem solving centres. It is also continuously improving service quality from the angles of its customers by perfecting its “secret customer inspection system”. CCB is also insistent in implementing a “CCB Customer Day” system. In 2008, more than 28,000 customers were received and 13,000 customer problems were handled by President of CCB’s headquarters as well as general managers of branches at each level. In addition, CCB has given high priorities to the full utilisation of its “95533 Telephone Banking”. Telephone banking has gradually become a centre for promoting sales and for resolving customers’ problems.

3.      Sound advancement of comprehensive operations; frequent highlights in overseas operations

CCB has achieved material advancement in its comprehensive operations. The growth in fee and commission income of the Bank was the highest among its domestic banking peers for the third consecutive year. In 2008, CCB was able to raise RMB247.1 billion in capital for the investment and financing activities of its corporate clients, while incomes from syndicated loans and domestic factoring grew more than six folds. Sales volume of personal wealth management products were RMB383.8 billion, which was 5.2 times the corresponding figure in 2007. As the only commercial bank in China qualified to offer engineering cost advisory services, the operating income from the Bank’s businesses related to price auditing services achieved a year-on-year growth of 149.5%.

In 2008, CCB’s overseas deployments bore new results. The applications for the setting up of its New York branch and London subsidiary have won the approval of the respective local regulatory bodies. Smooth progress was also underway in the application and preparation of the setting up of CCB Ho Chi Minh City Branch in Vietnam and the upgrading of CCB’s Sydney Representative Office in Australia to a branch.

In the meantime, CCB’s overseas business achieved sound development. As at 31 December 2008, the total assets of CCB’s overseas operating branches were increased to RMB121.59 billion. In particular, the two wholly owned operating subsidiaries in Hong Kong – China Construction Bank (Asia) Corporation Limited (“CCB Asia”) and CCB International (Holdings) Limited (“CCB International”) – have undergone further capital expansion, with CCB International achieving the best results since its establishment.

4.      Redoubled efforts in strengthening internal risk controls; sustained improvement in asset quality

CCB is devoted to perfecting its internal risk control system and has put into effect the risk concept of “knowing the customers, understanding the market, involving the whole staff and focussing on key areas”. It has a smooth-running risk management system which is essentially based on a vertical management and parallel operation structure. The Bank’s liquidity management was able to withstand trials of the blizzard disaster, the Sichuan earthquake and the direction of adjustment in monetary policy. As a result, its provision level was under reasonable control. The Bank has substantially raised its provision for impairment losses to full provisioning levels, thereby further enhancing its risk mitigation capabilities. It has used the implementation of the New Basel Capital Accord as an opportunity to comprehensively optimise its customer risk rating system and the scorecard system. This has resulted in a substantial enhancement in its refined risk management. Moreover, CCB has successfully implemented the “Jianyuan 2008-1 Securitisation of Restructured Assets” project, becoming the first domestic bank to explore and implement in the area of securitisation of non-performing assets.

CCB has voluntarily reduced its holdings in foreign exchange bonds of relatively large risk. As at 31 December 2008, the carrying amount of the portfolio of foreign currency bonds held by the Bank dropped by USD22.31 billion approximately from the end of the previous year, and the proportion of foreign currency bonds was 4.96% of the Bank’s bond investments and 1.4% of its total assets. During this time, its net foreign exchange exposure was RMB15.76 billion, a mere 0. 2% of total assets in the same period.

5.      Deepening of strategic cooperation in creating multiple-win situations

16 strategic assistance projects were implemented with Bank of America, and 42 experience sharing and training projects were established. In addition to the cooperation in advancement of branch transformation in the retail banking area, loan products for small amount unsecured revolving credit loans were successfully developed for the Bank’s small enterprise business. In electronic banking, CCB was able to raise its call centres’ average human-assisted services access rate to above 90%. In the area of risk control, co-developed scorecards for use in processing applications for mortgage loans and credit cards and for assessment of credit card usage behaviour have been launched for bank-wide adoption. CCB was also assisted by Fullerton Financial of Temasek in Singapore in promoting the “Credit Factory” mode of operation for small enterprise loan processing. Small enterprise clients can now enjoy one-stop services. Furthermore, Temasek has provided advisory service and training for CCB in the areas of wealth management, private banking, investment banking and risk management. CCB has already created a multiple-win development situation with its strategic investors.

Bank of America increased its holding of CCB shares in two occasions in 2008 and they have full confidence in the development of China’s banking industry and that of CCB.

6.      Undertaking corporate social responsibility in fostering a harmonious development of society

After the calamitous earthquake in Sichuan, the Bank launched more than 10 special service measures, such as allowing withdrawals in the absence of bank cards or passbooks; issued loans for disaster relief and for post-disaster reconstruction; and donated a cumulative amount of RMB179 million. A donation of RMB12 million was also made to the areas affected by the blizzard and frost in southern China early in the year.

CCB had designated 2008 as an “Olympic Service Year” and offered various related financial services to foreigners. Meanwhile, CCB strictly enforced a “single-vote veto system” in support of environmental protection, while projects conducive to environmental protection were given loan support. As at 31 December 2008, the balance of green credit project loans reached RMB154.14 billion, with RMB28.93 billion of new loans from the beginning of the year, representing a surge of 23.1%.

During the year, in support of social welfare causes, CCB and its staff contributed and donated a sum of approximately RMB211 million for various projects.

CCB President Zhang Jianguo says, “In 2009, there will still be a lot of international and domestic uncertainties in economic and financial operations, and CCB will be facing daunting challenges. But we will continue to adopt a scientific approach towards development and conscientiously implement the State’s macroeconomic policies to ‘guarantee economic growth, expand domestic demands and adjust economic structures’. We will redouble our efforts to provide financial support and services for economic and social development. We will strengthen our internal risk controls, raise our service levels, and calmly respond to crises and challenges. And we will endeavour to achieve quick, effective, quality and safe development in all lines of business.”

Background Information:

The history of the China Construction Bank Corporation (“the Bank”) dates back to 1954 when the People’s Construction Bank of China was founded. This entity was renamed China Construction Bank in 1996. China Construction Bank Corporation was formed in September 2004 when it separated from its predecessor, China Construction Bank, and assumed its commercial banking business and related assets and liabilities. Headquartered in Beijing, CCB had a network of 13,374 branches and sub-branches in Mainland China as of 31 December 2008, and maintained overseas branches in Hong Kong, Singapore, Frankfurt, Johannesburg, Tokyo and Seoul, as well as representative offices in New York, London and Sydney. The Bank holds a 100% interest of China Construction Bank (Asia) Corporation Limited, CCB International (Holdings) Co., Ltd., and holds a controlling interest of Sino-German Bausparkasse Corporation Ltd, CCB Principal Asset Management Co., Ltd. and CCB Financial Leasing Corporation Ltd. It has a total of approximately 300,000 staff.

The Bank was listed on the Stock Exchange of Hong Kong Limited (Stock Code: 939) on 27 October 2005 and was listed on the Shanghai Stock Exchange (SSE Code: 601939) on 25 September 2007.

Principal business segments:

-          Corporate banking, which provides financial products and services to corporations, government agencies and financial institutions, including corporate loans, trade financing, deposit taking, agency services, consulting and advisory, cash management, remittance, settlement, custody and guarantee services;

-          Personal banking, which provides financial products and services to individual customers, including personal loans, deposit taking, bank cards, personal wealth management, remittance and securities agency services; and

-          Financial operations, which involves money market businesses, consisting of inter-bank placement transactions and repurchase transactions; covers investment portfolio management, including securities held for both trading and investment purposes; and conducts trading on behalf of customers, including foreign currency and derivatives.