China Construction Bank Corporation (“CCB” or “the Bank”; Shanghai stock code: 601939, Hong Kong stock code: 939) today announced its operating performance for the first half of 2012. In the first half of 2012, CCB realised a net profit of RMB106.494 billion, an increase of 14.57% (unless otherwise stated, the data herein are calculated in accordance with International Financial Reporting Standards on a consolidated basis in RMB) from the same period last year.

In its interim report, CCB explained that there were four main drivers for the steady growth in net profit.

(1)    There was a moderate growth in interest-bearing assets and net interest margin moved up 5 basis points from last year to 2.71%, so net interest income grew 16.46% or RMB23.986 billion year-on-year;

(2)    Due to further strengthening in cost management and tightening in expense controls, cost-to-income ratio reached 32.73%, which was maintained at a relatively low level;

(3)    By bolstering risk management, impairment losses registered a slight increase of 5.84%;

(4)    Due to changes in interest rate movements, an exchange gain of RMB2.488 billion or an increase of RMB1.814 billion year-on-year was realised.

Financial performance grows steadily

CCB’s 2012 Interim Report revealed that all its key financial indicators maintained steady growth in the first half of 2012. As of the end of June 2012, the Bank’s total assets were up 9.97% from the end of last year to RMB13.51 trillion. Total loans and advances to customers were RMB7.06 trillion, growing 8.70% from last year; deposits from customers grew 9.55% from last year end to RMB10.94 trillion. The Bank’s loan-to-deposit ratio was maintained at 64.54%. The Bank’s capital adequacy ratio and core capital adequacy ratio were 13.82% and 11.19%, up by 0.14 and 0.22 percentage points from last year end. Its annualised return on average assets and annualised return on average equity were maintained respectively at 1.65% and 24.56%.

Asset quality remains stable

As of the end of June, CCB’s non-performing loan ratio was 1.00% or a drop of 0.09 percentage points from 2011 year end; its allowances to non-performing loans also rose 20.94 percentage points to 262.38%.

The issue of loans to local government financing platforms has raised many concerns in the sector. To address this important area, in the first half of 2012, CCB strengthened its loan withdrawal mechanism and tightened its loan approval process. As a result, the loan structure has been optimized.  As of the end of June 2012, the balance of platform loans which had been placed under monitoring was RMB442.598 billion. Loans with full coverage of cash flow accounted for 91.33% or an increase of 5.64 percentage points from the previous year end.

CCB also reported that the balance of its real estate development loans was RMB417.766 billion, which was a reduction of RMB1.394 billion from the end of last year. The Bank reviewed and adjusted its loan customer lists in the “6+1” industries with overcapacity (steel, cement, coal chemical, plate glass, wind power equipment, polysilicon and shipbuilding) and put a plan in place to work with delinquent customers and effectively controlled the credit extension. The proportion of balance of loans to industries meant for prudent support and that of loans to industries meant for gradual reduction in exposure dropped respectively by 0.80 percentage points and 0.07 percentage points.

Income from fee-based businesses records mild growth

In the period, CCB reported net fee and commission income of RMB49.243 billion, an increase of RMB1.572 billion or 3.30% year-on-year. The Bank explained that the slower growth in net fee and commission income was due to a number of reasons:

(1)      As economic growth in the mainland slowed down, income from fee-based businesses in the banking industry generally experienced a slowdown in growth;

(2)      There was a decrease in the growth rate in the number of related products affected by market factors;

(3)      The incomes of certain products declined due to regulatory policy reasons.

CCB’s income from bank card fees rose 16.64% to RMB9.132 billion in the first half of the year. In particular, the Bank’s credit card business was able to maintain a brisk pace of development and all corresponding core business indexes continued to maintain leading positions in the industry. At the end of June, the number of credit cards on book increased 3.79 million to 36.04 million; the balance of loans grew 25.62% from the end of last year to RMB122.542 billion; spending amount was RMB360.037 billion.

Sales have been booming for CCB products such as “Qianyuan”, “CCB Wealth” and “Lideying” since they appropriately reflect the risk bearing capabilities and personalised needs of different customers. In the first half of the year, CCB realised an income of RMB5.618 billion from wealth management products, a growth rate of 53.41%.

Further improvements to credit structure

In its interim report, CCB said it had, “from the standpoint of providing services to the real economy”, reasonably controlled its total credit volume and further optimized its credit structure. In the first half of the year, its new loans amounted to RMB564.932 billion or equivalent to a growth of 8.70%. Credit was mainly directed toward infrastructure loans, agriculture-related loans, residential mortgage loans and and micro-enterprise loans in which CCB has an edge over its competitors.

At the end of the reporting period, CCB’s balance in loans to infrastructure was RMB2,043.496 billion, of which RMB99.498 billion were new loans. Its balance in agriculture-related loans grew 11.47% to RMB1,170.371 billion; of which, the balance of loans for new countryside construction grew 71.26% to RMB54.2 billion.

CCB’s residential mortgage loan business continued to provide key support to the general public for buying their own homes. At the end of June, the Bank’s balance for this type of loan grew 6.94% to RMB1,404.048 billion, outranking its peers in the banking industry, both in terms of balance and new loan amounts.

In the meantime, the Bank’s and micro-enterprise loans in the first-half of the year grew at a quickened pace. At the end of June, the balance of and micro-enterprise loans was RMB681.415 billion, an increase of RMB49.525 billion compared to the end of last year. The number of customers reached 60,604 (according to the delineation standard for and medium enterprises as prescribed by four ministries, including the Ministry of Industry and Information Technology in 2011).

Steady advancement in international expansion and integrated operations

In the first half of this year, CCB added 138 banking institutions, which was 5 times the number compared to the same period last year. Meanwhile, the Bank continued to forge ahead in establishing specialised banking institutions. So far, a total of 260 private banks and wealth management centres are in operation, 949 personal loan centres have been set up and 244 business banking centres have been established.

The Bank’s e-banking channels have also been developing rapidly and leading in a number of industry indexes. The ratio of its e-banking transaction volume to counter transaction volume is now 228.50%; the number of accounts in personal Internet banking, corporate Internet banking and mobile phone banking are respectively 101.68 million, 1.73 million and 65.17 million. CCB has also been redoubling its efforts in promoting “Corporate E-Commerce Payment System”, text-message effected remittance, e-mobile terminals businesses. Income from e-banking business in the first half of 2012 grew 5.48% to RMB2.251 billion. The Bank has launched an “E-commerce Financial Service” platform to provide its customers with specialised e-commerce and financial support services.

In the area of expanding its overseas network, CCB has succeeded in securing the approval of the China Banking Regulatory Commission to set up a branch in Taipei, while the proposal to establish a branch in San Francisco has been approved by its Board of Directors. The Bank’s overseas assets have seen rapid growth and, by the end of June, have reached RMB542.34 billion. At the same time, CCB has added four rural banks to its portfolio.