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 China Construction Bank Releases the Operating Results of H1 2019

Beijing/Hong Kong, 28 August 2019 – China Construction Bank (“the Bank” or “CCB”) (A-share stock code: 601939(SH); H-share stock code: 00939(HK)) released its operating results for the first half of 2019 (The data herein was prepared under the International Financial Reporting Standards on a consolidated basis and expressed in RMB unless otherwise stated). According to the interim report, as of the end of June, the total assets of CCB amounted to RMB24.38 trillion, an increase of RMB1.16 trillion or an increase of 5.00% from the end of the previous year. The profitability saw a steady growth. The profit before tax reached RMB191.18 billion, an increase of 5.38% over the same period last year. The net profit reached RMB155.71 billion, increasing by 5.59% over the same period last year. The annualized return on average assets (ROA) and annualized return on average equity (ROE) were 1.31% and 15.62% respectively. Capital adequacy ratio was 17.06%, of which the tier 1 capital adequacy ratio and the common equity tier 1 ratio was 14.25% and 13.70% respectively. The non-performing loan ratio was 1.43%, declining by 0.03 percentage point from the end of the previous year, and the provision coverage was 218.03%.

Since the beginning of the year, guided by its original aspiration and mission, adhering to the requirement of Three Capabilities building proposed by General Secretary Xi Jinping for CCB, and focusing on supporting China’s socioeconomic development and meeting the financial needs of the people, the Bank deepened the supply side structure reform in financial sector, continuously explored the development path of new finance, took solid moves to implement the Three Major Strategies of House Rental, Inclusive Finance and Fintech and launched the Second Curve. As a result, a good development momentum has been consolidated, and new development advantages have been fostered.

Stepping up Efforts to Implement the Three Major Strategies; Achieving High-quality Business Development

The open source ecology of house rental is taking shape. The House Rental Strategy has been further advanced with efforts made in the comprehensive house rental service platform, house rental index, supporting financial services for house rental, etc. CCB is committed to building a nationwide comprehensive service platform, which can help the government strengthen regulation and monitoring as well as better serve market players. Through its subsidiary, CCB Housing Services Co., Ltd., CCB has been actively participating in establishing China’s house rental market by innovating house rental products, making good use of houses in idle in the private sector, and increasing the supply of rental houses from the private sector. As of the end of June, the comprehensive house rental service platform has been operating in more than 300 prefecture-level administrative regions and above with over 16 million listings cumulatively and more than 10 million registered users. The house rental index has been adopted in 52 cities, which basically covers major cities and pilot cities of house rental in China.

Inclusive financial innovation leads and drives the market. Focusing on addressing the problem of SMEs being unable to access loans or having to pay high interest to secure loans, the Bank enriched product supplies, expanded service content and improved service model. The Bank continuously explored innovations related to small and micro businesses, mass entrepreneurship and innovation, agriculture, farmers and rural areas, and poverty alleviation efforts. Leveraging technologies of big data and Internet, the Bank enriched the product system of SME Quick Loan. The Bank optimized the functions of Huidongni (CCB Understands U) Platform and actively collaborated with the government, embedding financial services to the business scenarios of SMEs. The Bank also provided assistance for SMEs with its online supply chain financing services. As of the end of June, an accumulative amount of RMB679.42 billion of network supply chain financing has been distributed to 46,500 enterprises, and the number of network supply chain cooperation platforms reached 1,939. Advances have been made in promoting the construction of Yunongtong service bases with 224,000 newly established Yunongtong service bases. Mingonghui (Benefiting Migrant Workers) has been further promoted, helping resolve the problem of employers defaulting on migrant workers’ wages. The Bank optimized the Three Ones model including One-minute financing, One-stop services and One-time charge to support inclusive finance and put in place the five-pronged approach for implementing inclusive finance including Batched Customer Acquisition, Precise Profile Portraying, Automatic Review and Approval, Intelligent Risk Control as well as Comprehensive services. Policy and resource support has been enhanced. Special-funding scale, cost incentives policy and assessment indicators system have been improved. The Bank promoted the online business risk screening system and stepped up efforts in business risk monitoring and analysis, which ensured the prudent and stable operation of its inclusive finance business. As of the end of June, balance of CCB's Inclusive Finance Loan reached RMB831.12 billion, increasing by RMB 221.05 billion from the end of the previous year; the number of Inclusive Finance Loan borrowers reached 1.23 million, increasing by 207,900 from the end of the previous year.

The Bank leveraged fintech to gather talents, instill energy and release vitality for innovation. It continued to increase its investment in fintech innovation, and coordinated efforts in research and development, infrastructure construction and system operation and maintenance. Within the Group, the Bank fostered collaborative and evolutionary smart finance, realised the centralised management and control of supply chain services, and promoted the development of a new corporate banking featuring “seamless integration of trading business and emerging business”. The Bank promoted the group-wide smart operation system construction and built “multi-entries and integrated” smart channels. It broke through the information barrier between its corporate banking and personal banking, and established a “comprehensive, smart, accurate, timely, proactive and forward-looking" risk control system. The Bank extended the open and shared intelligent ecosystem, and promoted the construction of the data concentration platform for housing funds and the rural land management right circulation platform entrusted by the Ministry of Housing and Urban-Rural Development. The Bank preliminarily established a fintech product system for financial institutions, expanding its offerings from banking sector to other non-banking services. The Bank assisted the sharing of financing information across the banking industry through projects such as joint credit granting led by China Banking Association. The Bank promoted the smart city government service project to be launched in Ankang City, Shaanxi Province, and empowered Digital Tianjin project. It introduced a blockchain service platform with five application scenarios, nine areas and 61 applications in place, which realised initial stage of cloud ecosystem. It actively explored cutting-edge 5G technology applications, built a dual 5G service network of “internet + production network” for outlets, and launched the first batch of “5G⁺ smart banks”.

The Bank undertook its mission as a large bank, and empowered the society by opening up and sharing its capabilities. The Bank deepened the operation and management of “Workers’ Harbours” and provided thoughtful and convenient services for the public. As at the end of June 2019, the Bank set up 14,349 “Workers’ Harbours”, 10,654 of which provided restroom facilities. The number of registered users of “Workers’ Harbours” APP exceeded 7.5 million. In partnership with trade unions, sanitation, transportation, traffic management and urban construction departments, medical and other institutions, the Bank organised various themed activities, including “Workers’ Harbour takes workers home for Spring Festival”, “cheer station for students participating in college entrance examinations”, “services at construction sites”, “bringing financial knowledge to rural areas” and “helping the disabled”. The Bank also built 261 special Harbours, covering comprehensive government services, daily conveniences, poverty alleviation, IT smart services, the CPC culture, education and training, and special group services. CCB University is a corporate university for the new era, new finance and new ecosystem. By taking specialisation, sharing, technological excellence and internationalisation as its school philosophy, CCB University formed the Industry-Education Integration Alliance for New Financial Talents, launched the “2019-2021 Shanghai Action Plan” and gathered efforts from all parts of the society to build an ecosystem that creates synergy among finance, technology, education, industry plus government. In the first half of the year, the Bank organised 4,614 on-site training sessions with a total enrolment of 292,000. The online training enabled 178,000 people to complete a total of 1.76 million courses, and 69,000 people completed learning through live stream. The Bank also brought financial knowledge and services to rural areas and farmers by organising the activity “ten thousand students” going to the countryside during summer vacation.

Drip Irrigating the Real Economy, Serving the Country’s Construction with Precision and Strength

The Bank actively supported the development of the real economy, took active part in major national strategies and key construction areas with precision, and continuously optimized its credit structure. As at the end of June 2019, the Group’s gross loans and advances to customers stood at RMB14.54 trillion, increasing by RMB756.79 billion or 5.49% over the end of 2018. The loans to infrastructure sectors reached RMB3.61 trillion, an increase of RMB149.25 billion or 4.31% over the end of last year, accounting for 52.71% of the corporate loans and advances.

CCB enhanced the support for emerging industries and green credit. The balance of loans for emerging strategic industry reached RMB530.47 billion, increasing by RMB 144.89 billion or 37.58% compared with the end of previous year. CCB strengthened the approval of green credit, continued to promote the development of traditional green fields with competitive edges, such as green transportation, green energy and so on, and actively engage in emerging green industries. CCB proactively expanded the credit business of energy-efficiency, accelerated the promotion of green credit products such as “Energy-saving Loans”, “Carbon Finance”, “Loans for Sponge City Construction” and “Loans for Utility Tunnel Construction”.

CCB fully implemented 26 measures to serve the private economy and boosted the bailout for private enterprises. The balance of loans for private enterprises reached RMB2.32 trillion, increasing by RMB202.50 billion or 9.58% compared with the end of previous year; CCB was among the first group of custodian banks which are designated for the asset management plan launched by securities industry to support the development of private enterprises. CCB utilized Credit Risk Mitigation Certificate (CRMW) and other means to underwrite debt financing instrument of RMB11.88 billion for private enterprises, and undertook the asset securitization project of RMB3.15 billion for private enterprises.

CCB boosted the supply side structural reforms in the financial industry and served the upgrading of household consumption. CCB has realized debt-to-equity and other comprehensive deleveraging related businesses for RMB90.70 billion. CCB used means of investment bank to actively connect with direct financing and indirect financing markets, and provided enterprises with comprehensive financial solutions of “Financing + Intelligence Financing”. CCB Wealth Management became China’s first wealth management subsidiary of a commercial bank. The Bank’s balance of loans for domestic individuals reached RMB6,132.85 billion, increasing by RMB293.05 billion or 5.02% compared with the end of previous year, ranking first among peers. The balance of loans for self-service loans through electronic channel --“CCB Quick Loan” reached RMB151.87 billion, which accumulatively serves more than 10 million customers. The cumulative number of issued credit cards reached 128 million, with 94.60 million customers in total. The core indicators, such as total number of customers, loan balance, asset quality, continue to lead in the industry. "Long Pay" business continues to be optimized and upgraded with the number of customers reached 104 million. In the first half of the year, the cumulative transaction volume reached 180 million, a 21.94% increase year-on-year, leading among peers.

CCB has actively served the country's strategy for rural revitalization, and solidly promote the financial services for “agriculture, rural areas and farmers” and targeted poverty alleviation. CCB provided county-level rural customers with convenient and affordable village financial services such as special agriculture-aid withdrawal, exclusive wealth management, and farmer insurance. The balance of agriculture-related loans reached RMB1.80 trillion, increasing by RMB39.09 billion over that of the end of 2018. CCB formulated the “Crossing 2020” action plan for financial targeted poverty alleviation, and provided policy and resource support to impoverished areas and targeted poverty alleviation areas under the assistance of CCB headquarters and branches. The total number of poverty alleviation merchant outlets on CCB Shanrong Commerce platform reached 4,108, covering 872 impoverished counties. In the first half of the year, the transaction volume for poverty alleviation reached RMB 5.16 billion, increasing by 44.88% year on year. The balance of loans for targeted poverty alleviation reached RMB195.51 billion, increasing by RMB4.75 billion compared with the beginning of this year.

Improving Risk Management System, Preventing Financial Risks Proactively and Effectively

Since the beginning of this year, CCB has continuously carried out comprehensive and proactive risk management, promoted the adjustment of credit structure, strengthened the management of credit basis and improved the refined management of the whole process, maintaining an overall stable asset quality. As of the end of June, the balance of non-performing loans reached RMB208.07 billion, with the non-performing loan ratio reaching 1.43%, declining by 0.03 percentage point from the end of 2018. The proportion of special mention loans was 2.80%, dropping by 0.02 percentage point compared with the end of the previous year.

CCB adheres to the principle of steady and prudent liquidity management, further improving refined management through fintech, with liquidity indicators maintaining solid. CCB actively coped with the fluctuations of bond market, foreign exchange market, commodity market and stock market, and further strengthened market risk management. The Bank continuously promoted the application of operational risk management tools, focusing on strengthening the statistics compiling, analyzing, monitoring and reporting of certain data such as regulatory penalties. The Bank’s reputational risk management has been steadily improved, which effectively guarded the good image and reputation of the Bank. CCB incorporated country risk management into the comprehensive risk management system, utilizing rating assessment, risk limitation check, stress testing, monitoring and early warning, emergency response management and other measures to manage country risks. The Bank continued to strengthen the management of consolidated financial statement, improving the management of consolidated financial statement factors such as group business synergy, corporate governance, risk management, capital management and etc.. It also continuously strengthened internal audit and problem rectification, enhancing the function and capability of auditing.

Coping Calmly with International Economy and Trade Situation, Participating in International Competition in a More Open and Confident Way

CCB continued to innovate in trade finance products and models. The Bank took the lead in signing a cooperation agreement for pilot connection with the General Administration of Customs in the industry, to provide financial services through the “International Trade Single Window”. Based on the “Tax Refund Loan”, the Bank released the innovative “Cross-border Quick Loan” series products, including “Export Loan” and “Credit Insurance Loan”, providing convenient financing services for small and micro import and export enterprises. The influence of its blockchain trade finance platform application grew in the industry, as the Bank signed cooperation agreements with 34 domestic and overseas financial institutions. As of the end of June, the transaction amount of the platform has exceeded RMB300 billion. In the first half of the year, the international settlement volume has reached USD545.53 billion, and the cross-border RMB settlement has amounted to RMB838.22 billion; the accumulated settlement amount of London institutions has exceeded RMB36 trillion, and CCB continued to be the largest RMB clearing bank outside Asia.

CCB steadily expanded its overseas business and institutional network, broadened its service channels, and expanded its financial products, with enhanced globalised customer service capability and international competitiveness. Astana and Labuan branches were granted licenses in March and June respectively; As of the end of June, the Bank had established overseas institutions in 30 countries and regions, and wholly owned CCB Asia, CCB London, CCB Russia, CCB Europe, CCB New Zealand, CCB Brazil, CCB Malaysia and held 60% of the total share capital of CCB Indonesia .In the first half of the year, net profit achieved by overseas commercial banking institutions was RMB4.34 billion.

Given the complex economic and financial situation, CCB would further push forward the "Three Major Strategies", fulfill the original aspiration, accelerate the exploration of new financial development paths, and take advantages of a state-owned bank in the new era; CCB would continuously enhance the capability of serving the social and economic development, improve the adaptability to the construction of a modern economic system, focus on enhancing the effective supply capability of finance; continuously enhance the financial risk prevention capability by early risk identification and intervention , improve the smart risk control system, and take advantage of the risk control capability which holds a leading position in the industry; Continuously enhance the ability to participate in international competitions, and solidly excel in financial services in important areas such as the construction of Belt and Road Initiative (BRI), and further improve capabilities in areas like cash management, trading business, wealth management and capital market. CCB would celebrate the 70th anniversary of the founding of People’s Republic of China with its excellent business results and market performance.