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Banking Newsletter
Analysis of China Listed Banks' Results for the Third Quarter of 2015
November 2015
www.pwccn.com
Editor in Chief: Linda Yip
Deputy Editor-in-Chief:Annie Zou
Members of the editorial team:
Amelie Cao, Jeff Deng, Ivy Meng, Allen Ran
Editorial Team:
Advisory Board:
Raymond Yung, Jimmy Leung, Margarita Ho, Richard Zhu
PwC
Banking Newsletter November 2015
3
We are pleased to present our Banking Newsletter, PwC’s analysis of China’s Listed Banks and the wider industry, which is now in its 25th edition. As of 30 October 2015, 18 Chinese Listed Banks (in A-share and/or H-share markets) announced their Q3 results, which forms the sample of our analysis.
These 18 banks, as defined by the China Banking Regulatory Commission (CBRC), include:
Large Commercial Banks (LCBs)
Industrial and Commercial Bank of China (ICBC) China Construction Bank (CCB) Agricultural Bank of China (ABC) Bank of China (BOC) Bank of Communications (BOCOM)
Joint-Stock Commercial Banks (JSCBs)
China Merchants Bank (CMB) Industrial Bank (CIB) Shanghai Pudong Development Bank (SPDB) China CITIC Bank Corporation (CITIC) China Minsheng Banking Corporation (CMBC) China Everbright Bank (CEB) Ping An Bank (PAB) Hua Xia Bank (HXB)
City Commercial Banks (CCBs)
Bank of Beijing (BOB) Bank of Nanjing (NJB) Bank of Ningbo (NBB) Bank of Chongqing (BCQ)
Rural Commercial Banks (RCBs)
Chongqing Rural Commercial Bank (CQRCB)
The total assets of these banks as of 30 September 2015 accounted for 75.24% of the assets of China’s commercial banking sector. Unless otherwise stated, all the information in this newsletter comes from publicly available sources, such as the Listed Banks’ interim reports and statistics published by regulatory bodies, and are presented in RMB where applicable.
Preface
For more information, please talk to your PwC contacts or any of those listed in the Appendix as Banking and Capital Markets contacts.
PwC
Banking Newsletter November 2015
4
Table of Contents
Macro overview
5
Operating results
9
Financial position
13
Capital adequacy ratio
19
Appendix
23
PwC
Banking Newsletter November 2015
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1. Macro overview
• China’s growth continues to find its bottom
• Policy rate & RRR are cut while restrictions on interest rates lifted
• Money supply growth rebounds and exchange rates fluctuate
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Banking Newsletter November 2015
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In the first three quarters of 2015, world economies recovered slowly at different rates and in varied forms. The Q3 growth in the US showed signs of slowing, while leading indicators for Japanese and European economies all indicate a less than optimistic growth prospect.
There is continued downward pressure on emerging economies. The China economy continues to find its bottom as GDP growth for the first three quarters slowed, reaching 6.90% in Q3.
Growth for China, including manufacturing, investment and consumption, remained in the low single-digits. Year on year, total imports and exports also decreased in the first nine months, with a very notable QoQ drop in imports.
2009 Q1,
6.60%
2015 Q3,
6.90%
0%
2%
4%
6%
8%
10%
12%
14%
16%
Source: National Bureau of Statistics
Note: The figures represent growth rates at the end of the quarter so that 2013 Q2
represents that of the first two quarters of 2013, and 2013 Q3 represents that of the
first three quarters of 2013.
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Total exports Total Imports
Total imports and exports (In RMB 100 million)
Source: General Administration of Customs
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
Industrial production
Fixed asset
investments
Retail sales
Source: National Bureau of Statistics Note: Due to the Spring Festival, the National Bureau of Statistics usually releases
data for January and February at the same time.
China’s growth continues to find its bottom
Figure 1 China GDP growth since 1992
Figure 3 Trade volumes, import vs. export Figure 2 Growth of FAI, retail sales and IP
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Banking Newsletter November 2015
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Policy rate & RRR are cut while restrictions on interest rates are lifted
Commodity prices remained stable as the economy continued to slow in the first three quarters of 2015. In September, the consumer price index (CPI) increased 1.60% on the same period last year, while the CPI for the first nine months remained at 2.00% or below. There was a QoQ drop in producer price index (PPI) of 5.90%, as it continued to move downward in the first three quarters, indicating further pressure on material prices for upstream producers and that over-capacity remains an issue to tackle.
The stability in commodity prices offered further room for adjusting fiscal and monetary policies. In February, May, June and August, the PBOC cut benchmark interest rates to reduce the financing costs of the real economy. There was a fifth cut in October.
Since the beginning of this cycle of interest rate cuts in November 2014, the PBOC has cut
interest rates by 1.65%. The frequency of cuts surpassed that of the financial crisis in 2008. The prevailing benchmark interest rates are the lowest since the PBOC started publishing data in 1991.
The PBOC also made multiple cuts to reserve requirement ratios (RRRs) to ensure sufficient liquidity for banking institutions.
The lifting of deposit interest rate caps by the PBOC came in the wake of these simultaneous cuts to interest rates and RRRs, signifying that interest rate liberalisation is now basically in place in China.
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
201
2.0
1
201
2.0
3
201
2.0
5
201
2.0
7
201
2.0
9
201
2.1
1
201
3.0
1
201
3.0
3
201
3.0
5
201
3.0
7
201
3.0
9
201
3.1
1
201
4.0
1
201
4.0
3
201
4.0
5
201
4.0
7
201
4.0
9
201
4.1
1
201
5.0
1
201
5.0
3
201
5.0
5
201
5.0
7
201
5.0
9
CPI PPI
Source: National Bureau of Statistics
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
1Y deposits 1Y (and shorter term) loans
Source: People’s Bank of China
Figure 4 CPI & PPI Figure 5 RMB benchmark interest rates
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Banking Newsletter November 2015
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In the first three quarters, the growth in broad money supply (M2) accelerated to 13.1% - 1.30ppts higher than in 1H. At the end of September, the ratio of M2 to GDP growth reverted to the historical mean of 1.90.
PBOC explains in its 2015 Q3 Monetary Policies Report that this acceleration was due to commercial banks investing in local government debt.
In addition to the rebound in money supply, the RMB exchange rates also demonstrated notable changes. On 11 August, PBOC said it would improve mechanisms for determining the mid-point for exchange rates. This was followed the same day by a massive fall in the exchange rate. The midpoint devalued by 4.05ppts between end-June and end-September due to continued fluctuations.
The Report states that the remarkable deviation
of the RMB mid-point from market rates was due to market expectation of a US$ rate rise in 2015. The general strengthening of the US dollar, the strength of the RMB against other world currencies and China’s consistently large trade surpluses also contributed. This adjustment was made to build mechanisms that enable supply and demand to play a more decisive role in determining exchange rates, enabling them rates to revert to market levels.
PBOC stresses that there is no basis for continued RMB devaluation given the current economic and financial situations at home and abroad.
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Source:National Bureau of Statistics & the PBoC
6.05
6.10
6.15
6.20
6.25
6.30
6.35
6.40
6.45
Source:China foreign exchange trading system
Money supply growth rebounds and exchange rates fluctuate
Figure 6 M2 growth Vs. GDP growth Figure 7 RMB exchange rate against USD
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Banking Newsletter November 2015
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2. Operating performance
• Net profit growth slows
• ROE falls but cost control strengthened
• NIM narrows while intermediary business continues to expand
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Banking Newsletter November 2015
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The economic downturn, cuts in interest rates, rate liberalisation and mounting pressures on the profitability meant that Listed Banks’ total net profit for the first three quarters of 2015 amounted to RMB 1,050 bn. This is a moderate increase of 2.26% compared to 10.02% for the same period in 2014.
Compared to the same period last year, the growth rate for the five Large Commercial Banks (LCBs) fell to below 1.00%, that of the eight Joint-stock Commercial Banks (JSCBs) dropped from two digits to 5.66%, while that of the five City Commercial Banks & Rural Commercial Banks (CCBs & RCBs) shrank to 13.86%, with most retaining double digit growth.
Figure 8 Net profit growth of Listed Banks
Table 1 Net profit and growth, as at 30 September 2015
Listed Banks Net profit (in million) Growth rate (2015) Growth rate (2014)
ICBC 222,291 0.65% 7.33%
CCB 192,076 0.73% 7.81%
ABC 137,874 0.79% 10.48%
BOC 153,370 0.57% 9.16%
BOCOM 52,305 1.18% 5.84%
LCBs total 757,916 0.71% 8.31%
CMB 48,786 6.24% 16.28%
CIB 41,512 7.63% 24.24%
SPDB 37,475 6.56% 8.92%
CITIC 33,434 1.77% 5.17%
CMBC 39,063 4.36% 9.74%
CEB 23,916 2.37% 7.66%
PAB 17,740 13.04% 34.18%
HXB 13,980 5.79% 18.77%
JSCBs total 255,906 5.66% 13.88%
BOB 14,177 12.47% 14.36%
NBB 5,795 16.53% 16.28%
NJB 5,344 24.60% 21.75%
BCQ 5,228 10.40% —
CQRCB 2,675 8.02% 12.61%
CCBs&RCBs total 33,219 13.86% 25.88%
Listed Banks total 1,047,041 2.26% 10.02%
12.11%
7.86%
1.43%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Net profit QoQ growth
Net profit (RMB 100 billion) QoQ growth
2013 2014 2015
Note: Bank of Chongqing did not disclose its data for the first three quarters in 2013, so that for the purpose of
comparison, Bank of Chongqing is excluded from the above Figure.
Note: Bank of Chongqing did not disclose its data for the first three quarters in 2013, so that the QoQ growth rate
for 2014 is not available.
The growth rate of net profit in Q3 was 1.43% for these Listed Banks – much lower than the 7.86% in Q3 2014.
By category, the growth rate for the five LCBs shrank from 6.18% in Q3 2014 to a mere 0.16%, that of the eight JSCBs fell from 12.28% to 4.05%, while that of the five CCBs & RCBs dropped from 16.80% to 12.97%.
Net profit growth slows
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Banking Newsletter November 2015
11
Due to slower net profit growth, the return on equity (ROE) for the first three quarters of 2015 decreased in varying degrees for most of these Listed Banks.
The five LCBs experienced the most notable decrease of 2.60ppts in their average ROE over the first three quarters of 2015. They recorded the lowest average of the Listed Banks at 17.33%. The ROE of the eight JSCBs dropped 2.09ppts to an average of 18.17%. The five CCBs & RCBs had an average ROE of 19.15%, down 1.22ppts.
ICBC CCB ABC
BOC
BOCOM
CMB
CIB
SPDB
CITIC
CMBC
CEB
PAB
HXB BOB NJB
NBB BCQ
CQRCB
12.0%
14.0%
16.0%
18.0%
20.0%
22.0%
24.0%
26.0%
2015 Q1-Q3 2014 Q1-Q3
Figure 9 Movements in ROE of Listed Banks
Pressure on profitability drove the Listed Banks to tighten their cost controls in the first three quarters of 2015. Most banks reported a lower cost-to-income ratio, though three did not disclose.
Figure 10 Movements in cost-to-income ratio of Listed Banks
ICBC CCB
ABC
BOC
BOCOM CMB
CIB
CMBC
PAB HXB
BOB
NJB
NBB
BCQ
CQRCB
20%
22%
24%
26%
28%
30%
32%
34%
36%
38%
2015 Q1-Q3 2014 Q1-Q3
Note: SPDB, CITIC and CEB did not disclose their cost to income ratios for the first three quarters of 2015.
ROE falls but cost control strengthened
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Banking Newsletter November 2015
12
NIM narrows while intermediary business continues to expand
Figure 12 Fee and commission income growth
ICBC CCB
ABC BOC
BOCOM
CMB
CIB
SPDB CITIC
CMBC
CEB
PAB
HXB
BOB
NJB
NBB
BCQ
CQRCB
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2015 Q1-Q3 2014 Q1-Q3
In response to the economic downturn and the lowering of interest rates, all Listed Banks increased efforts to expand their intermediary business. In the first three quarters of 2015, 17 Listed Banks (excluding Bank of Chongqing) reported total fee and commission income of RMB 580.2 bn, growing 16.41% on a QoQ basis, against 13.10% for 2014.
Growth in this income was 5.71% for the five LCBs, 40.03% for the eight JSCBs, and 51.25% for the four CCBs & RCBs.
Figure 11 Movement in NIM of Listed Banks
CCB
BOC
BOCOM
CMB
CITIC
CMBC
PAB
NJB
NBB
BCQ
CQRCB
2.0%
2.2%
2.4%
2.6%
2.8%
3.0%
3.2%
3.4%
2015 Q1-Q3 2015 1H
Note: All data have been annualized, and ICBC, ABC, SPDB, CIB, CEB, HXB and BOB did not disclose their NIM for
the first three quarters of 2015.
Eleven of the 18 Listed Banks disclosed their net interest margin (NIM) for the first three quarters of 2015. For most, NIM shrank compared to 1H 2015.
The three LCBs reported a negligible reduction; there was a mixed picture for the four JSCBs. Of the four CCBs & RCBs, three saw a reduction, while Bank of Ningbo reported no change.
Note: No comparison can be made for Bank of Chongqing as it did not disclose its fee and commission income for
the first three quarters of 2013.
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Banking Newsletter November 2015
13
3. Financial position
• Assets continue to grow steadily, with investments increasing in proportion
• Loan growth slows as credit demand weakens
• Non-performing loans continue to emerge
• Liabilities continue to grow steadily, with bonds payable increasing in proportion
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Banking Newsletter November 2015
14
Assets continue to grow steadily, with investments increasing in proportion
At the end of September 2015, total assets of the listed banks were RMB118,220 bn - up 10.84% from end-2014 and 1.22% from end-June 2015. Listed Banks maintained their main asset structures. In response to the lowering of the RRR and the overhaul of non-standard interbank transactions by regulators, the five LCBs and eight JSCBs generally reduced their cash, deposits with the central bank and financial assets purchased under resale agreements; the proportion of investments also continued to rise.
Given their relatively limited size of loan portfolio and lower risk appetites, the interbank assets of the five CCBs & RCBs accounted for a higher percentage of their total assets compared to the LCBs and JSCBs.
At the end of September 2015, total investments of the Listed Banks amounted to RMB 28,970 bn, up 4.72% from the end of the previous quarter. Their main investment structures remained
roughly the same, as the five LCBs continued to focus on held-to-maturity investments, while the eight JSCBs and most of the CCBs & RCBs retained their interest in investments in receivables. This is most manifest in the case of the eight JSCBs, as their total investments in receivables amounted to RMB5,630 bn at the end of September, up 4.46% from end-June and up 110.34% from end-2014.
In Q3 2015, the diversion of more funds to longer term bonds by the majority of Listed Banks and the increase in local government debt swaps led to a higher proportion of held-to-maturity investments. Month-end balances for the five LCBs were RMB10,210 bn (+6.58%) and for the eight JSCBs were RMB1,770 bn (+13.71%) .
Figure 13 Changes in the asset structures of Listed Banks
52.02% 51.44% 44.71% 44.85%
37.09% 37.92%
22.24% 21.36% 29.13% 28.49%
33.55% 33.62%
14.49% 15.24% 10.63% 11.25% 10.04% 10.76%
7.40% 8.54% 11.88% 11.91% 17.45% 15.78%
3.85% 3.42% 3.65% 3.51% 1.87% 1.91%
2015.09.30 2015.06.30 2015.09.30 2015.06.30 2015.09.30 2015.06.30
Five LCBs Eight JSCBs Five CCBs & RCBs
Loans and advances Investments Cash and deposits with central bank Interbank assets Others
PwC
Banking Newsletter November 2015
15
Due to a lack of deposit growth and weak demand for loans, the loan growth of Listed Banks slowed down in Q3 2015, as the combined total loan balance increased only 1.83% to RMB58,530 bn compared to the end of June.
By category, the five LCBs reported a combined total of RMB42,660 bn, up 1.73% from the end of June; the combined total of the eight JSCBs was up 1.91% to RMB14,310 bn; the five CCBs & RCBs delivered fast loan growth of 3.67% over the same period.
The change in the pace of loan growth in Q3 2015 was mainly due to the combined effects of the increasing economic downturn, structural adjustments to the economy, the onslaught of Internet-based financial options, and the volume of seasonal lending.
Figure 14 Changes in growth rates of loan balances, QoQ
ICBC
CCB
ABC
BOC
BOCOM
CMB
CIB
SPDB
CITIC
CMBC
CEB
PAB
HXB
BOB
NJB
NBB
BCQ
CQRCB
0%
2%
4%
6%
8%
10%
2015.09.30 vs 2015.06.30 2015.06.30 vs 2015.03.31
Loan growth slows as credit demand weakens
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Banking Newsletter November 2015
16
Non-performing loans continue to emerge
At the end of Q3, total NPLs of the Listed Banks amounted to RMB911.580 bn, up 6.91% from the end of Q2; the NPL ratio rose 0.07% to 1.51% QoQ. NPLs continued to increase both in terms of balance and ratio.
Relative to NPL ratios at the end of June, the five LCBs reported a rise of 0.07ppts in their NPL ratio to 1.56%; the eight JSCBs saw their NPL ratio raised by 0.1ppt to 1.46%; the five CCBs & RCBs maintained the same level of NPL ratio at 0.91%.
In terms of growth in NPL balance, the eight JSCBs topped the list with a total NPL balance of RMB214.401 bn at the end of September, up 9.39% from the end of June; the total NPL balance of the five LCBs amounted to RMB682.484 bn, up 6.21% from the end of June; the growth in NPL balance was slowest for the five CCBs & RCBs at 4.38% compared to Q2.
Figure 15 Changes in NPLs, end of Q3 vs. end of Q2
Figure 16 Growth of NPL balances, 2015 Q3 Vs. 2015 1H
ICBC
CCB
ABC
BOC
BOCOM
CMB
CIB
SPDB
CITIC
CMBC
CEB
PAB
HXB
BOB
NJB
NBB BCQ
CQRCB
0.7%
0.9%
1.1%
1.3%
1.5%
1.7%
1.9%
2.1%
2015.09.30 2015.06.30
4.84%
3.89%
12.29%
3.21%
5.43%
9.55%
23.80%
7.52%
10.79%
8.82%
4.43%
2.99%
1.98%
2.20%
5.25%
3.15%
13.25%
7.21%
ICBC
CCB
ABC
BOC
BOCOM
CMB
CIB
SPDB
CITIC
CMBC
CEB
PAB
HXB
BOB
NJB
NBB
BCQ
CQRCB
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Banking Newsletter November 2015
17
Higher pressure on provisions
Two key ratios of a bank’s position with respect to its allowance for loan losses are provisions-to-loans ratio and provision coverage ratio. These indicate that provisioning for loan losses at these Listed Banks demands attention.
There have been no significant changes to the provisions-to-loans ratios of the five LCBs, while the eight JSCBs have experienced more noticeable increases in their provisions-to-loans ratios.
The provision coverage ratios of Listed Banks have continued to fall as a consequence of their NPLs continuing to grow and their profit growth levelling out. This leaves the banks under greater pressure to increase their provisions.
At the end of September 2015, the provision coverage ratios of the five LCBs, the eight JSCBs and the five CCBs & RCBs were 178.11%, 189.20% and 352.47% respectively.
Figure 17 Provisions-to-loans ratio
Figure 18 Provision coverage ratio
ICBC
CCB
ABC
BOC
BOCOM
CMB
CIB
SPDB
CITIC
CMBC
CEB
PAB
HXB
BOB
NJB
NBB
BCQ
CQRCB
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
2015.09.30 2015.06.30
ICBC
CCB
ABC
BOC
BOCOM
CMB
CIB
SPDB
CITIC
CMBC CEB
PAB
HXB
BOB
NJB
NBB
BCQ
CQRCB
100%
150%
200%
250%
300%
350%
400%
450%
2015.09.30 2015.06.30
PwC
Banking Newsletter November 2015
18
In Q3 2015, total liabilities of these Listed Banks continued to grow steadily, amounting to RMB109,850 bn at the end of September. This is up 10.75% from end-2014 and up 0.99% on the previous quarter.
There were slight changes to the liability structures of Listed Banks at the end of September 2015. In Q3, a host of measures were adopted by PBOC to maintain liquidity in the monetary market, including interest rate cuts, reserve requirement ratio cuts, reverse repo, short-term liquidity operations (SLOs), mid-term lending facilities (MFLs), and pledged supplementary lending (PSL), which further brought down the proportions due to banks and central bank borrowing.
In Q3 2015, the volume of interbank certificates of deposits further expanded and the balance of bonds payable continued to grow as a proportion. The growth was most evident among JSCBs. Bonds payable were higher in proportion among CCBs & RCBs than they were in JSCBs or LCBs.
78.94% 78.51%
66.00% 66.32% 64.31% 65.91%
13.37% 14.54%
25.15% 26.70% 22.72% 22.81%
1.83% 1.46% 5.73% 4.23% 9.60% 8.05%
5.86% 5.48% 3.12% 2.75% 3.37% 3.23%
2015.09.30 2015.06.30 2015.09.30 2015.06.30 2015.09.30 2015.06.30
Five LCBs Eight JSCBs Five CCBs & RCBs
Deposits Due to banks and central bank borrowing Bonds payable Others
Figure 19 Changes in the liability structures of Listed Banks
Note: Other liabilities mainly include financial liabilities and derivative financial liabilities at fair value through profit or loss.
Liabilities continue to grow steadily, with bonds payable increasing in proportion
PwC
Banking Newsletter November 2015
19
4. Capital adequacy ratio
• Capital raising increasingly reliant on external sources
PwC
Banking Newsletter November 2015
20
Capital raising increasingly reliant on external sources
At the end of September 2015, thanks to the issuing of short-term capital instruments to top up capital, most of the Listed Banks reported a slight rise in their capital adequacy ratios compared to the end of June.
However, due to the continued rise of credit exposures and the manifest slowdown in profit growth, internal forces are less able to drive the capital adequacy of these listed commercial banks.
Supplementary capital instruments, including preferred stock, tier-2 capital bonds and follow-on offerings of common stock, are expected to become the norm when listed commercial banks opt to top up their capital.
ICBC
CCB
ABC
BOC BOCOM
CMB
CIB SPDB
CITIC
CMBC
CEB PAB
HXB NJB
NBB
BCQ
CQRCB
7%
8%
9%
10%
11%
12%
13%
14%
2015.09.30 2015.06.30
ICBC
CCB
ABC
BOC
BOCOM
CMB
CIB
SPDB
CITIC
CMBC
CEB
PAB
HXB
NJB
NBB
BCQ
CQRCB
10%
11%
12%
13%
14%
15%
2015.09.30 2015.06.30
Figure 20 Tier-one core capital adequacy ratios of Listed Banks
Figure 21 Changes in capital adequacy ratios of Listed Banks
PwC
Banking Newsletter November 2015
21
Capital raising increasingly reliant on external sources (Cont’d)
Table 2 Issuances of capital instruments by Listed Banks (in RMB unless otherwise specified)
Banks Issuances in Q1-3Q of 2015 Future issuances announced
ICBC Overseas issuance of tier-2 capital bonds: RMB 2 bn Domestic issuance of no more than 450 m shares of
preferred stock: less than RMB 45 bn
CCB Overseas issuance of tier-2 capital bonds: USD 2 bn Domestic issuance of preferred stock: RMB 60 bn
Overseas issuance of preferred stock: RMB 20 bn
ABC Domestic issuance of 400 m shares of preferred stock:
RMB 40 bn N/A
BOC Domestic issuance of 280 m shares of preferred stock:
RMB 28 bn N/A
BOCOM Overseas issuance of preferred stock: USD 2.45 bn Domestic issuance of no more than 450 m shares of
preferred stock: less than RMB 45 bn
CIB Domestic issuance of 130 m shares of preferred stock:
RMB 13 bn N/A
SPDB
Domestic issuance of 150 m shares of preferred stock:
RMB 15 bn
Overseas issuance of tier-2 capital bonds: RMB 30 bn
N/A
CITIC N/A Domestic issuance of no more than 350 m shares of
preferred stock: less than RMB 35 bn
CMBC Domestic issuance of tier-2 capital bonds: less than RMB
20 bn
Domestic issuance of no more than 200 m preferred stock:
less than RMB 20 bn
CEB Domestic issuance of no more than 300 m preferred
stock: less than RMB 30 bn N/A
PAB Issuance of 599 m shares of A-share common stock:
RMB 9.94 bn
Issuance of no more than 200 m shares of preferred stock:
less than RMB 20 bn
HXB N/A Issuance of no more than 200 m shares of preferred stock:
less than RMB 20 bn
BOB N/A Domestic issuance of tier-2 capital bonds: less than RMB 18
bn
NJB Domestic non-public offering of A-shares: less than RMB
8 bn
Domestic issuance of no more than 100 m preferred stock:
RMB 10 bn
NBB Domestic issuance of tier-2 capital bonds: RMB 7 bn Domestic issuance of preferred stock: RMB 4.85 bn
BCQ N/A Private placement of 810 m shares of H-share common stock:
HKD 6.1965 bn
SJB N/A Domestic issuance of tier-2 capital bonds: RMB 10 bn
HSB N/A Overseas placement of 632.5 m shares of H-share common
stock, with issue price to be determined
At the end of Q3, a host of Listed Banks topped up their capital through tier-2 capital bonds and the offering of preferred and common stock, among other methods.
As seen from announcements made as of the date of this report, quite a few Listed Banks expect to issue various capital instruments in the near future. Issuances of capital instruments are summarised as follows:
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5. Appendix
• Financial highlights of Listed Banks
• Banking and Capital Markets Contacts
• PwC Offices in China
普华永道
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November 2015
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Financial highlights of Listed Banks (I)
Operating Results, Q1-Q3 2015 ICBC CCB ABC BOC BOCOM LCBs Total
Operating income 524,628 457,391 407,276 356,773 146,413 1,892,481
Net interest income 379,945 340,808 328,740 246,280 107,975 1,403,748
Non-interest income 144,683 116,583 78,536 110,493 38,438 488,733
Net fee & commission income 111,183 88,686 66,612 71,484 27,428 365,393
Other non-interest income 33,500 27,897 11,924 39,009 11,010 123,340
Operating expenses (235,754) (214,519) (211,461) (178,761) (79,281) (919,776)
Business tax and surcharges (32,266) (27,174) (22,187) (20,392) (10,921) (112,940)
Business & administration
expenses (120,815) (105,784) (123,794) (94,777) (41,209) (486,379)
Allowance for impairment losses (61,569) (64,123) (57,365) (44,893) (20,878) (248,828)
Other business expenses (21,104) (17,438) (8,115) (18,699) (6,273) (71,629)
Operating profit 288,874 242,872 195,815 178,012 67,132 972,705
Profit before tax 290,521 244,584 197,016 178,396 67,387 977,904
Income tax expense (68,230) (52,508) (43,646) (40,522) (15,082) (219,988)
Net profit 222,291 192,076 153,370 137,874 52,305 757,916
Non-controlling interests 530 519 160 6,329 265 7,803
Profit attributable to
shareholders 221,761 191,557 153,210 131,545 52,040 750,113
Five Large Commercial Banks (In RMB millions)
Financial Position,
as of 30 September 2015 ICBC CCB ABC BOC BOCOM LCBs Total
Total assets 22,104,917 18,321,375 17,709,510 16,672,018 7,206,866 82,014,686
Loans and advances, net 11,610,463 10,091,195 8,482,659 8,837,177 3,639,712 42,661,206
Investments 5,039,814 3,939,542 4,261,708 3,460,414 1,537,758 18,239,236
Interbank assets 1,420,374 1,118,205 1,723,018 1,089,956 720,244 6,071,797
Cash & deposits with central bank 3,273,308 2,667,037 2,724,711 2,278,906 939,642 11,883,604
Others assets 760,958 505,396 517,414 1,005,565 369,510 3,158,843
Total liabilities 20,414,265 16,946,975 16,534,383 15,362,957 6,684,766 75,943,346
Deposits from customers 16,521,828 13,827,713 13,554,404 11,548,697 4,493,337 59,945,979
Interbank liabilities 2,379,867 2,084,394 1,757,025 2,316,163 1,618,020 10,155,469
Debt securities issued 278,277 389,523 308,323 277,084 137,401 1,390,608
Due to central bank 338 36,128 16,250 421,737 78,194 552,647
Other liabilities 1,233,955 609,217 898,381 799,276 357,814 3,898,643
Total owners’ equity 1,690,652 1,374,400 1,175,127 1,309,061 522,100 6,071,340
Non-controlling interests 10,624 11,025 1,622 50,214 3,089 76,574
Total equity attributable to equity
shareholders 1,680,028 1,363,375 1,173,505 1,258,847 519,011 5,994,766
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Financial highlights of Listed Banks (II)
Operating Results, Q1-Q3 2015 CMB CIB SPDB CITIC CMBC CEB PAB HXB JSCBs Total
Operating income 156,224 112,354 108,632 107,453 116,170 70,047 71,152 43,172 785,204
Net interest income 101,159 88,008 82,529 76,746 70,489 49,658 48,206 35,058 551,853
Non-interest income 55,065 24,346 26,103 30,707 45,681 20,389 22,946 8,114 233,351
Net fee & commission income 44,977 23,479 21,222 26,068 37,952 20,261 20,223 8,220 202,402
Other non-interest income 10,088 867 4,881 4,639 7,729 128 2,723 (106) 30,949
Operating expenses (92,637) (60,230) (60,271) (63,722) (65,565) (38,436) (47,847) (24,585) (453,293)
Business tax and surcharges (9,268) (9,428) (6,701) (7,470) (7,534) (5,293) (5,046) (3,197) (53,937)
Business & administration
expenses (39,204) (22,846) (22,109) (27,787) (32,352) (18,519) (22,866) (15,313) (200,996)
Allowance for impairment losses (43,952) (27,576) (30,950) (28,465) (24,844) (14,550) (19,935) (6,061) (196,333)
Other business expenses (213) (380) (511) - (835) (74) - (14) (2,027)
Operating profit 63,587 52,124 48,361 43,731 50,605 31,611 23,305 18,587 331,911
Profit before tax 63,990 52,372 48,990 43,842 50,926 31,664 23,286 18,638 333,708
Income tax expense (15,204) (10,860) (11,515) (10,408) (11,863) (7,748) (5,546) (4,658) (77,802)
Net profit 48,786 41,512 37,475 33,434 39,063 23,916 17,740 13,980 255,906
Non-controlling interests 286 291 313 508 686 41 - 68 2,193
Profit attributable to
shareholders 48,500 41,221 37,162 32,926 38,377 23,875 17,740 13,912 253,713
Eight Joint-stock Commercial Banks (In RMB millions)
Financial Position,
as of 30 September 2015 CMB CIB SPDB CITIC CMBC CEB PAB HXB JSCBs Total
Total assets 5,222,292 5,289,398 4,822,629 4,653,138 4,374,847 3,086,815 2,599,060 1,950,115 31,998,294
Loans and advances, net 2,633,672 1,701,725 2,113,767 2,317,329 1,932,309 1,433,869 1,182,226 991,110 14,306,007
Investments 1,329,212 2,380,429 1,609,087 1,429,932 818,882 835,491 526,675 391,502 9,321,210
Interbank assets 489,449 545,653 457,161 314,697 917,094 376,631 466,437 235,789 3,802,911
Cash & deposits with
central bank 616,953 429,398 492,380 469,535 444,377 351,074 297,223 299,393 3,400,333
Others assets 153,006 232,193 150,234 121,645 262,185 89,750 126,499 32,321 1,167,833
Total liabilities 4,872,327 4,983,559 4,519,009 4,357,002 4,074,112 2,869,908 2,441,924 1,837,244 29,955,085
Deposits from customers 3,467,658 2,431,748 3,001,090 3,148,587 2,708,015 1,958,935 1,723,328 1,332,133 19,771,494
Interbank liabilities 1,004,639 2,034,639 1,070,233 889,632 1,060,843 627,315 452,591 394,200 7,534,092
Debt securities issued 203,916 370,447 313,757 201,234 194,993 197,067 192,325 41,913 1,715,652
Due to central bank 31,000 51,800 43,825 18,550 17,979 14,040 3,600 30,050 210,844
Other liabilities 165,114 94,925 90,104 98,999 92,282 72,551 70,080 38,948 723,003
Total owners’ equity 349,965 305,839 303,620 296,136 300,735 216,907 157,136 112,871 2,043,209
Non-controlling interests 1,003 3,415 3,355 1,952 8,234 546 - 709 19,214
Total equity attributable
to equity shareholders 348,962 302,424 300,265 294,184 292,501 216,361 157,136 112,162 2,023,995
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Financial highlights of Listed Banks (III)
Operating Results, Q1-Q3 2015 BOB NJB NBB BCQ* CRCB* CCBs & RCBs total
Operating income 32,974 16,605 14,124 6,398 16,155 86,256
Net interest income 26,132 13,714 11,636 5,176 14,919 71,577
Non-interest income 6,842 2,891 2,488 1,222 1,236 14,679
Net fee & commission income 5,775 2,627 2,906 1,122 1,111 13,541
Other non-interest income 1,067 264 (418) 100 125 1,138
Operating expenses (15,127) (9,962) (7,495) (2,733) (8,475) (43,792)
Business tax and surcharges (2,140) (1,267) (777) - - (4,184)
Business & administration expenses (7,602) (3,957) (4,292) (2,112) (6,421) (24,384)
Allowance for impairment losses (5,372) (4,679) (2,414) (621) (2,054) (15,140)
Other business expenses (13) (59) (12) - - (84)
Operating profit 17,847 6,643 6,629 3,665 7,680 42,464
Profit before tax 17,845 6,669 6,625 3,666 7,680 42,485
Income tax expense (3,668) (1,441) (1,281) (991) (1,885) (9,266)
Net profit 14,177 5,228 5,344 2,675 5,795 33,219
Non-controlling interests 41 50 23 - 55 169
Profit attributable to shareholders 14,136 5,178 5,321 2,675 5,740 33,050
Five City Commercial Banks & Rural Commercial Banks (In RMB millions)
Financial Position,
as of 30 September 2015 BOB NJB NBB BCQ* CRCB* CCBs & RCBs total
Total assets 1,787,799 770,197 658,505 292,973 697,409 4,206,883
Loans and advances, net 730,084 207,080 235,464 116,658 271,033 1,560,319
Investments 409,440 404,752 320,763 94,695 181,951 1,411,601
Interbank assets 458,561 63,317 27,413 38,888 145,835 734,014
Cash & deposits with central bank 161,699 77,009 61,101 36,691 85,934 422,434
Others assets 28,015 18,039 13,764 6,041 12,656 78,515
Total liabilities 1,679,696 725,538 620,022 274,890 650,477 3,950,623
Deposits from customers 1,020,520 490,996 359,306 194,450 475,285 2,540,557
Interbank liabilities 465,533 140,463 99,917 61,825 129,787 897,525
Debt securities issued 130,120 76,342 128,205 12,472 32,113 379,252
Due to central bank 20,025 2,400 1,000 - 2,755 26,180
Other liabilities 43,498 15,337 31,594 6,143 10,537 107,109
Total owners’ equity 108,103 44,659 38,483 18,083 46,932 256,260
Non-controlling interests 256 372 97 - 1,575 2,300
Total equity attributable to equity
shareholders 107,847 44,287 38,386 18,083 45,357 253,960
*SJB, HSB, HRB, BCQ, CRCB are listed in Hong Kong Exchanges.
PwC
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Financial highlights of Listed Banks (IV)
Financial Ratios for Q1-Q3 2015 ICBC CCB ABC BOC BOCOM
Profitability (Jan - Sep 2015)
Return on average total assets (ROA) 1.39% 1.46% 1.21% 1.15% 1.04%
Return on weighted average equity (ROE) 18.60% 19.45% 19.41% 15.02% 14.15%
Net Interest Spread (NIS) - 2.47% - - 2.08%
Net Interest Margin (NIM) - 2.64% - 2.14% 2.24%
Cost to income ratio 23.03% 24.04% 30.40% 26.57% 28.57%
Income Mix (Jan - Sep 2015)
Net interest income* 72% 75% 81% 69% 74%
Other non-interest income* 6% 6% 3% 11% 8%
Fee and commission income* 21% 19% 16% 20% 19%
Asset Quality (As of 30 Sep, 2015)
Non performing loan (NPL) balance, in millions 171,408 149,971 179,158 129,072 52,875
NPL ratio 1.44% 1.45% 2.02% 1.43% 1.42%
Allowance to total loans ratio 2.27%* 2.59%* 4.41%* 2.20%* 2.35%
Provision coverage ratio 157.63% 178.99% 218.30% 153.72% 165.33%
Capital Adequacy (As of 30 Sep, 2015)
Common Equity Tier 1 capital adequacy ratio 12.41% 12.73% 9.72% 10.71% 10.97%
Tier 1 capital adequacy ratio 12.67% 12.73% 10.43% 11.68% 11.29%
Capital adequacy ratio 14.43% 14.97% 13.21% 13.65% 13.30%
Total equity to total assets ratio* 8% 8% 7% 8% 7%
Risk-weighted assets to total assets ratio* - 61% 63% - 64%
Financial Ratios for Q1-Q3 2015 CMB CIB SPDB CITIC CMBC CEB PAB HXB
Profitability (Jan - Sep 2015)
Return on average total assets (ROA) - 0.86% 0.83% 1.02% - - 0.74% - Return on weighted average equity (ROE) 19.50% 15.75% 14.37% 15.89% 19.29% 16.83% 12.39% 12.90%
Net Interest Spread (NIS) 2.59% - - - - - 2.59% -
Net Interest Margin (NIM) 2.75% - - 2.33% 2.29% - 2.73% -
Cost to income ratio 25.09% 20.67% - - 27.85% - 32.14 35.47%
Income Mix (Jan - Sep 2015)
Net interest income* 65% 78% 76% 71% 61% 71% 68% 81%
Other non-interest income* 6% 1% 4% 4% 7% 0% 4% 0%
Fee and commission income* 29% 21% 20% 24% 33% 29% 28% 19%
Asset Quality (As of 30 Sep, 2015)
Non performing loan (NPL) balance, in millions 43,397 27,487 29,829 33,763 28,753 21,034 16,199 13,939
NPL ratio 1.60% 1.57% 1.36% 1.42% 1.45% 1.43% 1.34% 1.37%
Allowance to total loans ratio 3.12% 2.97% 3.39% 2.53% 2.35% 2.36%* 2.24% 2.57%
Provision coverage ratio 195.47% 189.64% 248.67% 178.42% 161.62% 164.75% 166.97% 187.31%
Capital Adequacy (As of 30 Sep, 2015)
Common Equity Tier 1 capital adequacy ratio 10.83% 8.45% 8.42% 8.99% 9.00% 9.23% 9.14% 8.82%
Tier 1 capital adequacy ratio 10.83% 9.23% 9.38% 9.04% 9.02% 10.18% 9.14% 8.82%
Capital adequacy ratio 12.79% 11.20% 12.33% 12.00% 11.36% 11.91% 11.08% 10.87%
Total equity to total assets ratio* 7% 6% 6% 6.36% 7% 7% 6% 6%
Risk-weighted assets to total assets ratio* 59% 62% 65% 69.86% - 68% 61.35% 66%
Five Large Commercial Banks
Eight Joint-stock Commercial Banks
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Financial highlights of Listed Banks (V)
Financial Ratios for Q1-Q3 2015 BOB NJB NBB BCQ* CRCB*
Profitability (Jan - Sep 2015)
Return on average total assets (ROA) - 1.08% 1.17% 1.26% 1.17%
Return on weighted average equity (ROE) 13.88% 14.77% 14.65% 21.04% 16.99%
Net Interest Spread (NIS) - 2.45% 2.41% - -
Net Interest Margin (NIM) - 2.61% 2.39% 2.56% 3.22%
Cost to income ratio 23.00% 23.83% 30.39% 26.59% 32.95%
Income Mix (Jan - Sep 2015)
Net interest income* 79% 83% 82% 81% 92%
Other non-interest income* 3% 2% -3% 2% 1%
Fee and commission income* 18% 16% 21% 18% 7%
Asset Quality (As of 30 Sep, 2015)
Non performing loan (NPL) balance, in millions 6,936 2,044 2,117 1,177 2,421
NPL ratio 0.94% 0.95% 0.88% 0.98% 0.86%
Allowance to total loans ratio 3.30%* 3.59%* 2.62% 2.15%* 3.65%*
Provision coverage ratio 359.23%* 377.41% 299.26% 217.26% 424.32%
Capital Adequacy (As of 30 Sep, 2015)
Common Equity Tier 1 capital adequacy ratio - 9.14% 8.92% 9.73% 9.57%
Tier 1 capital adequacy ratio - 9.14% 8.92% 9.73% 9.57%
Capital adequacy ratio - 12.11% 12.53% 10.78% 11.76%
Total equity to total assets ratio* 6% 6% 6% 6% 7%
Risk-weighted assets to total assets ratio* - - - - -
Five City Commercial Banks & Rural Commercial Banks
Note: the ratio marked with * are calculated by PwC.
PwC
Banking Newsletter November 2015
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Banking and Capital Markets Contacts
Assurance Advisory Tax
Raymond Yung – Beijing James Chang – Beijing Oliver Kang – Beijing
Tel: +86 (10) 6533 2121 Tel: +86 (10) 6533 2755 Tel:+86 (10) 6533 3012
[email protected] [email protected] [email protected]
Margarita Ho – Beijing Addison Everett – Beijing Matthew Wong – Shanghai
Tel: +86 (10) 6533 2368 Tel: +86 (10) 6533 2345 Tel: +86 (21) 2323 3052
[email protected] [email protected] [email protected]
Richard Zhu – Beijing William Gee – Beijing Florence Yip – Hong Kong
Tel: +86 (10) 6533 2236 Tel:+86 (10) 6533 2269 Tel:+852 2289 1833
[email protected] [email protected] [email protected]
Jimmy Leung – Shanghai William Yung – Shanghai
Tel: +86 (21) 2323 3355 Tel:+86 (21) 2323 1984
[email protected] [email protected]
Michael Hu -Shanghai Matthew Phillips – Hong Kong Assurance – Risk & Quality
Tel: +86 (21) 2323 2718 Tel: +852 2289 2303
[email protected] [email protected] Tracy Chen – Shanghai
Tel: +86 (21) 2323 3070
Shirley Yeung – Guangzhou Chris Chan – Hong Kong [email protected]
Tel:+86 (20) 3819 2218 Tel:+852 2289 2824
[email protected] [email protected] Nigel Dealy – Hong Kong
Tel: +852 2289 1221
Charles Chow – Shenzhen [email protected]
Tel: +86 (755) 8261 8988
PwC
Banking Newsletter November 2015
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PwC Offices in China
Beijing Shanghai Hong Kong 26/F, Office Tower A, Beijing Fortune Plaza 11/F, PricewaterhouseCoopers Center, 2 Corporate Avenue 22/F, Prince's Building
7 Dongsanhuan Zhong Road, Chaoyang District 202 Hu Bin Road, Huangpu District Central, Hong Kong
Beijing, P.R.C Shanghai, P.R.C Tel: +852 2289 8888
Zip: 100020 Zip: 200021 Fax: +852 2810 9888
Tel: +86 (10) 6533 8888 Tel: +86 (21) 2323 8888
Fax: +86 (10) 6533 8800 Fax: +86 (21) 2323 8800
Shenzhen Guangzhou Tianjin 34/F, Tower A, Kingkey100 18/F, PricewaterhouseCoopers Centre 36/F, The Exchange Tower Two,
5016 Shennan East Road, Luohu District 10 Zhujiang Xi Road, Pearl River New City, Tianhe District 189 Nanjing Road, Heping District
Shenzhen, P.R.C Guangzhou, P.R.C Tianjin, P.R.C.
Zip: 518001 Zip: 510623 Zip: 300051
Tel: +86 (755) 8261 8888 Tel: +86 (20) 3819 2000 Tel: +86 (22) 2318 3333
Fax: +86 (755) 8261 8800 Fax: +86 (20) 3819 2100 Fax: +86 (22) 2318 3300
Dalian Qingdao Hangzhou 8F Senmao Building 37/F, Tower One, HNA IMC Centre Unit 3205, Canhigh Center
147 Zhongshan Road, Xigang District 234 Yanan Third Road, Shinan District 208 North Huancheng Rd
Dalian, P.R.C Qingdao, P.R.C Hangzhou, P.R.C
Zip: 116011 Zip: 266071 Zip: 310006
Tel: +86 (411) 8379 1888 Tel: +86 (532) 8089 1888 Tel: +86 (571) 2807 6388
Fax: +86 (411) 8379 1800 Fax: +86 (532) 8089 1800 Fax: +86 (571) 2807 6300
Chongqing Ningbo Xiamen Room 1905, 19/F Metropolitan Tower Room 1203, Tower E, Ningbo International Financial Center Unit B, 11/F, International Plaza
68 Zou Rong Road 268 Min An Road East, Jiangdong District 8 Lujiang Road, Siming District
Chongqing, P.R.C. Ningbo, P.R.C Xiamen, P.R.C.
Zip: 400010 Zip: 315040 Zip: 361001
Tel: +86 (23) 6393 7888 Tel: +86 (574) 8187 1788 Tel: +86 (592) 210 7888
Fax: +86 (23) 6393 7200 Fax: +86 (574) 8187 1700 Fax: +86 (592) 210 8800
Suzhou Nanjing Xi'an
Room 1501, Genway Tower Unit 12A01, Nanjing International Centre 7/F, Block D, Chang'an Metropolis Center
188 Wang Dun Road, Suzhou Industrial Park 201 Zhongyang Road, Gulou District 88 Nanguan Street
Suzhou, P.R.C Nanjing, P.R.C Xi'an, P.R.C
Zip: 215028 Zip: 210009 Zip: 710068
Tel: +86 (512) 6273 1888 Tel: +86 (25) 6608 6288 Tel: +86 (29) 8469 2688
Fax: +86 (512) 6273 1800 Fax: +86 (25) 6608 6210 Fax: +86 (29) 8469 2600
Macau Wuhan Shenyang 29/F, Bank of China Building Unit 04, 41/F Wuhan Wanda Centre Room 705, EnterpriseSquare Tower A
323 Avenida Doutor Mario Soares, Macau 96 Linjiang Avenue, Jiyuqiao, Wuchang District 121 Qingnian Avenue, Shenhe District
Tel: +853 8799 5111 Wuhan, P.R.C Shenyang, P.R.C
Fax: +853 8799 5222 Zip: 430060 Zip: 110013
Tel: +86 (27) 5974 5818 Tel: +86 (24) 2332 1888
Fax: +86 (27) 5974 5800 Fax: +86 (24) 2326 3888
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