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Analysis of China Listed Banks’ Results for the First Quarter of 2017

May 2017

www.pwccn.com

Editor-in-Chief：Elaine Wang

Deputy Editor-in-Chief：Vina Guo、Jeff Deng

Members of the editorial team:

Cynthia Chen、Jamie Leng、Lilian Ling、Sisi Liu、Ariel Liu、Susan Meng、Julia Wang

(in alphabetical order of last names)

Editorial Team

Advisory Board

Jimmy Leung、Margarita Ho、Richard Zhu、Linda Yip

PwC

Preface

The total assets of these banks, as of 31 March 2017, accounted for 82.67% of the total assets of China’s commercial banking sector. Unless otherwise stated, all the information in this newsletter comes from publicly available sources.

For more information, please talk to your PwC contacts or any of those listed in the Appendix as Banking and Capital Markets Contacts.

The Banking Newsletter (the Newsletter), PwC’s analysis of China’s listed banks and the wider industry, is now in its 31st edition. Over the past one year there are a number of IPOs for small-and-medium-sized banks, which increases the universe of listed banks in China. This analysis covers 31 A-share and/or H-share listed banks that released their 2017 first quarter results.

Those banks are categorized into four groups as defined by the China Banking Regulatory Commission (CBRC):

Large Commercial Banks (6)

Industrial and Commercial Bank of

China (ICBC)

China Construction Bank (CCB)

Agricultural Bank of China (ABC)

Bank of China (BOC)

Bank of Communications (BOCOM)

Postal Savings Bank of China (PSBC)

Joint-Stock Commercial Banks (9)

China Merchants Bank (CMB)

China Industrial Bank (CIB)

Shanghai Pudong Development Bank

(SPDB)

China CITIC Bank (CITIC)

Minsheng Bank Corporation (CMBC)

China Everbright Bank (CEB)

Ping An Bank (PAB)

Huaxia Bank (HXB)

China Zheshang Bank (CZB)

Bank of Beijing (Beijing)

Bank of Shanghai (Shanghai)

Bank of Jiangsu (Jiangsu)

Bank of Nanjing (Nanjing)

Bank of Ningbo (Ningbo)

Bank of Hangzhou (Hangzhou)

Bank of Chongqing (Chongqing)

Bank of Guiyang (Guiyang)

Bank of Zhengzhou (Zhengzhou)

Rural Commercial Banks (7)

Chongqing Rural Commercial Bank (CQRCB)

Jiutai Rural Commercial Bank (JTRCB)

Changshu Rural Commercial Bank (CSRCB)

Jiangyin Rural Commercial Bank (JYRCB)

Wuxi Rural Commercial Bank (WXRCB)

Wujiang Rural Commercial Bank (WJRCB)

Zhangjiagang Rural Commercial Bank (ZJGRCB)

City Commercial Banks (9)

May 2017Banking Newsletter

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Contents

Macro Environment Overview

5

Profitability

9

FinancialPosition

13

Regulatory updates

19

4


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Macro Environment Overview

• Global and China’s economy shows positive signs

• Monetary policy remains prudent with tightening liquidity and shrinking corporate credit bond issuance

• Credit grows slower while policy fine-tuning continues


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Global and China’s economy shows positive signs

With the increasingly complex and ever-changing environment, global economy showed positive changes in 2017 Q1 in terms of growth, employment, and trade. The rebounding of the commodity prices eased deflationary risk.

The International Monetary Fund (IMF) slightly raised 2017 global economic growth forecast in April, rising from 3.40% to 3.50%.

China's economy rebounded moderately in 2017 Q1, as the gross domestic product (GDP) growth rose slightly to 6.90% from 6.80% in 2016 Q4 (Figure 1). Mainly driven by the speed up of the industrial production, export growth and domestic infrastructure investment growth.

In terms of price levels, the Consumer Price Index (CPI) was affected by the fluctuation of food prices, which was lower than that in 2016 Q4. The Producer Price Index (PPI) was affected by raw material prices (including crude oil, iron ore and nonferrous metals, etc.) which rose sharply, and also affected by the domestic supply and demand, and the rising trend continued starting from September 2016. (Figure 2).

Figure 1 Changes in China’s GDP growth

2017 Q1

6.90%

5%

6%

7%

8%

9%

10%

11%

12%

13%

Source: National Bureau of Statistics

2017.02

7.80%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

201

5.0

1

201

5.0

3

201

5.0

5

201

5.0

7

201

5.0

9

201

5.1

1

201

6.0

1

201

6.0

3

201

6.0

5

201

6.0

7

201

6.0

9

201

6.1

1

201

7.0

1

201

7.0

3

CPI PPI

Source: National Bureau of Statistics

Figure 2 Changes in CPI and PPI

Note: The growth rate in the graph shows the situation at the

end of each quarter; for example, 2016 Q1 represents the

growth rate for 2016 Q1.


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Monetary policy remains prudent with tightening liquidity and shrinking corporate credit bond issuance

In 2017 Q1, the People's Bank of China (PBoC) continued to use quantitative tools such as Standing Lending Facility (SLF) and Medium-term Lending Facility (MLF). The cumulative amount reached RMB 230 billion and RMB 1,441.50 billion respectively, compared with that in 2016 Q4.

However, the inter-bank market liquidity was still relatively tight. The interbank interest rate - the Shanghai Interbank Offered Rate (SHIBOR), increased in different degrees, and the volatility also expanded (Figure 3), by which small banks were affected significantly.

At the end of 2017 Q1, the amount of corporate credit bonds (including enterprise bonds, corporate bonds and non-financial corporate debt financing instruments) decreased significantly (Figure 4), mainly influenced by the tightening liquidity, rising costs and increasing credit risks, etc.

The shrinking size of corporate credit bond issuance has also led to tight credit resources and is expected to affect the pricing of credit assets in the future.

Figure 3 Changes in SHIBOR

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Overnight 1 week 2 weeks1 month 3 months 6 months9 months 1year

%

Source: People’s Bank of China

Figure 4 Changes in corporate credit bond issuance

191.8 133.9 199.2 207.7 59.3

599.8 513.6

783.8 444.5

215.9

1,549

1,188

1,298

1,101

770

0

500

1,000

1,500

2,000

2,500

2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1

non-financial corporate debt financing instrumentscorporate bondsenterprise bonds

RMB billion

Source: People’s Bank of China

Note: Non-financial corporate debt financing instruments include

convertible bonds, separable debt, small and medium-sized

private debt


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Credit grows slower while policy fine-tuning continues

In 2017 Q1, the balance of loans increased slower compared with that in 2016 (Figure 5). The rapid expansion of individual housing loans in 2016 cooled downed in 2017 Q1, due to the real estate market regulations newly issued by the central and local governments and the tightened mortgage policy.

At the end of 2016, the Central Economic Working Conference regarded controlling financial risks as top priority, and the leadership paid more attention to financial security. In 2017 Q1, financial regulators carried out a series of new regulations on to control potential risks in various financial fields. The Central Political Bureau noted to safeguard the national financial security on April 25th through a high-level conference, President Xi Jinping urged to ensure financial security based on six tasks.

Currently, the potential domestic financial risks are mainly concentrated in non-performing loans (NPLs), bond defaults, shadow banking, and Internet finance. At the same time, asset price bubbles continued to expand in the real estate and some other areas, along with the rise of corporate and local government debt level, and the economy turns more towards “virtual sectors” instead of “real sectors” , which accelerated the accumulation of risks. In order to curb financial risks, in the future, controls on monetary supply and credit growth will be more further tightened, and the intensity of supervision is expected to continue.

Figure 5 RMB loans growth

12.44%

0%

2%

4%

6%

8%

10%

12%

14%

16%

-

0.5

1.0

1.5

2.0

2.5

3.0

Newly issued amount Growth rate

Newly issued amount (RMB trillion) Growth

Source：People’s Bank of China


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Profitability

• Net interest income increased slightly excluding the effects of VAT reform

• Provision levels present divergent trends

• Profitability indicators worsen


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Net interest income increased slightly excluding the effects of VAT reform

Total Profit of

2017 Q1 (In

RMB billion)

Growth

in 2017

Q1

Growth

in

2016 Q1

Change in

growth rate

(percentage

points)

19 listed

banks396.40 3.55% 2.96% 0.59

Six LCBs 285.61 2.83% 1.37% 1.46

Eight JSCBs 96.92 4.87% 7.04% -2.17

Four CCBs 11.42 9.19% 10.68% -1.49

One RCBs 2.46 11.47% 7.54% 3.94

Table 1 Overview of net profit of listed banks in 2017 Q1

Notes: 12 banks did not disclose their net profit of 2016 Q1, the table above only

presented 19 listed banks’ net profit growth.

-7.68%

-2.18%

6.06%

6.76%

3.20%

12.61%

LCBs

JSCBs

CCBs

RCBs

before after

0.04%

-0.53%

Figure 6 Net interest rate growth, before and after the effects of VAT reform

Note: The growth rate used in the first quarter of 2016 is a net interest income that

does not include a business tax

The 31 A-share and/or H-share listed banks that released their 2017 Q1 results, recorded a total net profit of RMB 411.80 billion, a year-on-year increase of 3.88%. Table 1 compares the net profit growth in 2016 Q1 and 2017 Q1 of the 19 listed banks.

Since 1 May 2016, VAT reform began to take effect in financial industry. As the scope of the taxable revenue expanded, while deductible input tax was relatively limited, the effective tax rate increased. With some follow-up policies, tax incentives policy was clarified, such as income from interbank business of financial institutions exempts VAT, This policy showed effects on the banking industry.

In 2017 Q1, the net interest income of LCBs remained still, while that of the JSCBs and the CCBs decreased. The net interest income of the RCBs continued to grow at a high rate.

Figure 6 shows the average growth of banks’ net interest income was more than 5%, excluding the impact of VAT reform, of which nearly half of the banks saw net interest income growth rate increased from negative to positive.

In addition, the exchange rate fluctuation and precious metals business prominently affected banks’ bottom line.


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Provision levels present divergent trends

Operating profit growth before the provision of four categories of banks reflect their various profitability.

The profitability of LCBs has rebounded, but the asset impairment loss increased rapidly, which was an important factor restricting net profit growth.

JSCBs had greater pressure on earning profit, and their operating profit is close to zero.

CCBS maintained a double-digit net profit growth, while pre-provision operating profit growth fell to below 5%.

RCBs' net profit and pre-provision operating profit growth increased rapidly, but bank's profitability were different to each other, reflecting the regional differences.

Figure 7 Comparison of net profit growth and pre-provision operating profit growth

2.83%

5.39%

10.13%

9.60%

7.72%

0.56%

4.76%

11.31%

LCBs

JSCBs

CCBs

RCBs

Net profit growth

Pre-provision operating profit growth

Figure 8 Changes in the amount of asset impairment losses

125,968

82,521

14,604

1,731

93,519

83,898

14,204

1,539

LCBs

JSCBs

CCBs

RCBs

2017 Q1

2016 Q1

(In RMB million)


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Profitability indicators worsen

Most of the listed banks’ annualized return on equity (ROE) in 2017 Q1 dropped slightly. This was mainly due to the impact of the issuance of preferred shares (such as BoCOM, CITIC, CEB and Bank of Beijing) since 2016 Q2, resulting the net asset growth was faster than the net profit growth.

Figure 9 Changes of ROE of listed banks

15.43% 15.32%

16.59%

11.41%

16.95% 17.00%

17.90%

12.20%

10%

11%

12%

13%

14%

15%

16%

17%

18%

19%

20%

LCBs JSCBs CCBs RCBs

2017 Q1 2016 Q1

Note: China Zheshang Bank, Bank of Zhengzhou, Jiutai Rural Commercial Bank did

not disclose the weighted average ROE of 2017 Q1, so the JSCBs, CCBs and RCBs

are not included in the relevant ratios of these banks.


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Financial Position

• Total asset growth divergent, while growth in investment classified as securities and non-standard assets slows

• Corporate loans rise in proportion while retail loans remain stable

• NPL ratios drop moderately

• Allowance to total loan ratios remain stable, while provision coverage ratios rise slightly

Banking Newsletter

13

May 2017

Banking Newsletter

14

May 2017

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Total asset growth divergent, while growth in investment classified as securities and non-standard assets slows

In accordance with the requirements of the Macro-Prudential Assessment (MPA), that is to focus on a broader credit (including loans, bonds, equity and other investments, repurchase financial assets, deposits of non-banking financial institutions, and off-balancing finance) instead of narrow loans. Macro-prudent capital adequacy ratio was added into assessment of bank capital constraints, leading to a result that in 2017 Q1, the asset growth of listed banks slowed down compared to 2016 Q1. The growth of different types of banks showed a trend of differentiation.

Figure 10 Comparison of the securities and non-standard asset growth

2.89%

2.48%

2.07%

5.46%

3.19%

10.28%

17.07%

6.29%

LCBs

JSCBs

CCBs

RCBs

2017Q1

2016Q1

Total assets

(In RMB

trillions)

Growth

of 2017

Q1

Growth

of 2016

Q1

Change in

growth rate

(percentage

points)

31 listed banks 155.06 2.92% 3.84% -0.92

Six LCBs 103.06 3.59% 3.32% +0.27

Nine JSCBs 40.78 0.94% 4.65% -3.71

Nine CCBs 9.66 4.37% 8.07% -3.69

Seven RCBs 1.57 2.69% 1.43% +1.25

Table 2 Growth of total assets of listed banks

In terms of securities and non-standard investment, in addition to the MPA constraints, the adjustment of the bond market, the increase of the cost of issuance, as well as the intensive introduction of financial institutions, regulatory policies have led to the decelerating tendency of the securities and non-standard investment of listed banks in 2017 Q1 compared to the same period last year.

Note: Securities and non-standard assets includes financial assets at fair value through

profit or loss, available-for-sale financial assets, held-to-maturity investments and

receivables.


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59% 57%62% 62%

70% 67% 65% 64%

36% 36%

37% 36% 24%24% 28% 28%

5% 7%1% 2%

6% 9% 7% 8%


Corporate Personal discounted bills

Figure 11 Loan structure changes in 2017 Q1

In 2017 Q1, China's economy rebounded mildly and the demand for corporate lending increased. However, the liquidity of the market was still tight, the direct financing costs of the bond market rose, while the enterprises turned to indirect financing, and the bank's credit resources were tight, leading to an upward expectation of credit asset pricing.

Meanwhile, MPA new rules also added broad credit growth into the assessment, banks also adjust the business strategies accordingly, taking the initiative to adjust the credit.

Compared the loans of 15 listed banks that have disclosed the structure to the same period of 2016, the company's loan balance in size and proportion

increased, while discount bill decreased, corresponding compression, the size of the two has a mutual replacement relationship.

In terms of retail loans, with the introduction of more real estate tightening policy, it is estimated that personal mortgage loans will be affected in the second quarter and beyond, with credit flowing back to the real economy.

Corporate loans rise in proportion while retail loans remain stable


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NPL ratios drop moderately

Graph 12 Change in NPL ratio of listed banks

1.63%

1.72%

1.22% 1.28%

1.66%

1.74%

1.21%

1.29%


1.20%

1.30%

1.40%

1.50%

1.60%

1.70%

1.80%

2017.03.31 2016.12.31

NPL of 2017 Q1

Growth in

2016 Q1

Change in

growth rate

(percentage

point)

Balance

(In RMB

billion)

Growth

20 Listed Banks 12,21.33 2.99% 7.39% -4.40

Six LCBs 8,78.64 2.64% 7.15% -4.51

Eight JSCBs 3,24.41 3.82% 8.22% -4.40

Four CCBs 14.47 6.35% 8.12% -1.77

Two RCBs 3.81 2.67% 2.34% 0.33

Note: Since five banks did not disclose bad debt data of 2017 Q1. The graph shows the

date excluding these five banks of the 26 listed banks. The above data are obtained by

weighted average calculation method.

According to the 26 listed banks that have disclosed NPL information, the balance of NPL reached RMB1.24 trillion in 2017 Q1, increased by 3.01% compared to the end of 2016.

As some banks did not disclose the NPL of 2016 Q1, Table 3 showed the 20 listed banks’ data in 2017 Q1 and 2016 in a comparable manner.

At the end of 2017 Q1, the NPL ratio of LCBs, JSCBs and RCBs declined slightly , while the NPL ratio of CCBs increased slightly compared to the same period of 2016.

Although the listed banks did not disclose NPL information by geographical regions, indications suggested that the NPL ratio differed from place to place. Especially in Shandong and Northeast, the risk was still relatively high.

Note: Since 11 banks did not disclose the bad debt data of 2016 Q1. The table shows

the change in the amount of bad debt loans of 20 listed banks excluding the 11 banks.

Table 3 Growth of NPL of 2017 Q1


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Allowance to total loan ratios remain stable, while provision coverage ratios rise slightly

As of the end of 2017 Q1, the allowance to total loans ratio of listed banks was stable, while the provision coverage ratio was generally higher than the end of 2016. Both of these two indicators of the JSCBs increased obviously.

“Debt-to-equity swap” continued to advance

In 2017 Q1, the "debt-to-equity swap“, aimed at reducing corporate leverage, continued to advance. For example, ICBC, CCB, and ABC’s related financial assets investment subsidiaries were approved by the regulator to set up recently for carrying out the “debt-to-equity swap” scheme.

At the end of 2017 Q1, the amount of market-oriented “debt-to-equity swap” that issued by CCB has reached RMB300 billion, which was in a leading position in the industry.

It is expected that other banks will also push forward "debt-to-equity swap" in 2017.

Figure 13 Allowance to total loans ratio of listed banks

Figure 14 Provision coverage ratio of listed banks

2.65%

3.01%3.08%

3.81%

2.64%

2.9…

3.06%

3.80%

2.5%

2.7%

2.9%

3.1%

3.3%

3.5%

3.7%

3.9%


2017.03.31 2016.12.31

161.88%

174.89%

252.33%

298.22%

159.05%168.50%

252.02%

293.52%

150%

170%

190%

210%

230%

250%

270%

290%

310%


2017.03.31 2016.12.31

Note: Since five banks did not disclose bad debt data of 2017 Q1. The figure shows the

date excluding these five banks of the 26 listed banks. The above data are obtained by

weighted average calculation method.


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Regulatory updates

• Macro prudential assessment (MPA) gradually takes effect

• Financial risk control remains top priority


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Banking Newsletter

20

May 2017

PwC

Macro prudential assessment (MPA) gradually takes effect

In 2017 Q1, the MPA added off-balance sheet financial products into the broad range of credit, aiming to strengthen supervision on financial institutions’ off-balance sheet business and control risks.

Although the listed banks are all satisfied the regulation requirement to meet the minimum capital adequacy ratio of 8%, the MPA requires a higher level of capital for those banks that has faster credit growth. Due to the relatively large credit balance as the base, MPA has limited effects on LCBs, while small and medium-sized banks’ capital pressure is increasingly prominent.

Based on abovementioned pressure, listed banks continued supplement capital in recent years through issuing preferred shares, tier-2 capital bonds, convertible bonds, common stocks and other external financing channels.

Figure 15 Capital adequacy ratio of listed banks

Note: Since Zheshang bank, Bank of Beijing, and Wujiang rural commercial bank did

not disclose data of March 2017. The graph shows below excluding these three banks

of the 26 listed banks.

13.67%

12.10%12.74% 13.02%

13.67%

11.80%12.48%

13.33%

0%

2%

4%

6%

8%

10%

12%

14%


2017.03.31 2016.12.31


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Financial risk control remains top priority

Since 2017 Q1, the CBRC has issued a number of regulatory requirements. Also, CBRC with the local banking bureau carried out on-site inspections, with the banks’ active cooperation. Banks’ business model is expected to be adjusted, for example, the complex nested investment business will shrink, and the credit resources will continue to be tightened.

Table 4 New regulations issued by CBRC in 2017 Q1

Title Key messages

CBRC

[2017]

No.5

The notice on regulating the

market conducted of the

banking industry

CBRC

[2017]

No.6

The guidelines on risk

controlling of banking industry

CBRC

[2017]

No.7

The notice on making up

shortness of supervision and

enhancing the effectiveness of

regulation

CBRC

[2017]

No.45

The notice on regulating illegal

behavior of banking industry

CBRC

[2017]

No.46

The notice on regulating

arbitrage behavior of banking

industry

CBRC

[2017]

No.53

The notice on regulating

improper innovation, transaction,

incentive and charges behavior

of banking industry

Focus on remediation ten chaos:

• Equity and foreign investment;

• Institutions and executives;

• Rules and regulations;

• Business;

• Product;

• Employee behavior;

• Industry risk of clean government;

• Supervise duties

• Internal and external collusion illegal

acts;

• Illegal financial activities.

“Six enhanced" requirements:

• Strengthen the supervision system

construction;

• Strengthen the source of risk

containment;

• Strengthen off-site and on-site

supervision;

• Strengthen the supervision of

information disclosure;

• Strengthen supervision and

punishment;

• Strengthen accountability.

Focus on prevention and control of ten

types of risk:

• credit risk;

• Liquidity risk;

• Bond investment risk;

• Interbank business risk;

• Bank financing products risk;

• Real estate risk

• Local government debt risk;

• Network financial risk;

• External risk;

• Major case risk.

Six points:

• System Construction;

• Compliance management;

• Risk Management;

• Process and system control;

• "Three violations" prominent areas;

• Rectification accountability

Seven points：• Avoid arbitrage on supervision target

• Avoid arbitrage on supervision policy

• Credit "idle";

• Bill "idle";

• Financial products "idle“

• Violation of credit to related parties,

transfer of assets or other;

• Violation or circumvention and

management.

Eleven Points：• Financial innovation governance

mechanism;

• Financial innovation system and

process;

• Improper interbank trade;

• Improper trading of financing products;

• Improper trading of trust;

• Evaluation index;

• Evaluation mechanism;

• Salary payment

• Charge;

• Price information disclosure

• Internal management procedures.


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Appendix

• Financial highlights of listed banks

• Banking and capital markets contacts


23

Banking Newsletter

24

May 2017

PwC

Financial highlights of listed banks (I)-Large Commercial Banks

2017（In RMB million） ICBC CCB ABC BOC BoCom PSBC Total

Operating performance (January-March)

Operating income 189,525 170,798 148,388 129,295 54,885 52,450 745,341

Net interest income 121,970 106,923 103,206 78,608 31,217 41,949 483,873

Net fee & commission income 40,958 38,767 25,471 25,751 11,279 4,083 146,309 Other non-interest income 26,597 25,108 19,711 24,936 12,389 6,418 115,159 Operating expenses (91,122) (83,543) (80,600) (64,981) (30,907) (36,605) (387,758)

Business tax and surcharges (1,839) (1,322) (1,049) (1,205) (584) No data (5,999)

Business & administration expenses (36,608) (33,602) (38,409) (31,262) (12,741) (32,035) (184,657)

Allowance for impairment losses (31,505) (36,162) (23,629) (22,243) (7,859) (4,570) (125,968)Other business expenses (21,170) (12,457) (17,513) (10,271) (9,723) 0 (71,134)

Operating profit 98,403 87,255 67,788 64,314 23,978 15,845 357,583

Profit before tax 98,796 87,773 68,944 64,633 24,012 15,845 360,003 Income tax expense (22,769) (17,542) (13,165) (14,306) (4,562) (2,052) (74,396)

Net profit 76,027 70,231 55,779 50,327 19,450 13,793 285,607 Non-controlling interests 241 219 69 3,678 127 (3) 4,331

Profit attributable to shareholders 75,786 70,012 55,710 46,649 19,323 13,796 281,276 Financial Position (as of 31 March)

Total assets 24,904,936 21,695,204 20,323,984 18,917,549 8,733,711 8,486,867 103,062,251

Loans and advances, net 13,267,798 11,877,235 9,703,407 10,124,969 4,244,850 3,114,506 52,332,765

Loans and advances 13,572,444 12,171,546 10,112,685 10,364,753 4,343,741 3,189,914 53,755,083 Less: Allowance for impairment losses (304,646) (294,311) (409,278) (239,784) (98,891) (75,408) (1,422,318)

Investments 5,664,974 5,160,524 5,687,722 4,169,309 2,408,858 3,283,451 26,374,838

Interbank assets 1,554,511 967,438 1,506,394 1,185,351 696,503 593,130 6,503,327

Cash & deposits with central bank 3,437,830 2,981,283 2,831,875 2,540,457 1,010,524 1,366,773 14,168,742

Others assets 979,823 708,724 594,586 897,463 372,976 129,007 3,682,579

Total liabilities 22,859,965 20,044,597 18,957,939 17,388,917 8,081,553 8,126,724 95,459,695

Deposits from customers 18,565,009 16,232,198 15,961,893 13,759,960 4,937,673 7,780,555 77,237,288

Interbank liabilities 2,545,150 1,899,223 1,334,432 1,676,821 1,768,473 138,932 9,363,031

Debt securities issued 604,162 466,060 448,340 382,439 603,829 74,922 2,579,752

Due to central bank 534 492,736 405,027 849,786 498,614 0 2,246,697

Other liabilities 1,145,110 954,380 808,247 719,911 272,964 132,315 4,032,927

Total owners’ equity 2,044,971 1,650,607 1,366,045 1,528,632 652,158 360,143 7,602,556 Non-controlling interests 12,223 13,199 3,301 77,184 3,369 355 109,631

Total equity attributable to shareholders 2,032,748 1,637,408 1,362,744 1,451,448 648,789 359,788 7,492,925 Major financial indicators

Profitability (January-March)

Return on average total assets (ROA) 1.24% 1.32% 1.12% 1.09% 0.91% 0.67%Return on weighted average equity (ROE) 15.80% 17.63% 17.49% 13.74% 12.10% 15.83%

Net Interest Spread (NIS) No data 2.01% No data No data No data 2.31%

Net Interest Margin (NIM) 2.12% 2.13% No data 1.80% 1.57% 2.24%Cost to income ratio 19.32% No data 25.88% 24.18% 24.14% 60.35%Asset quality (as of 31 March)

Non-performing loan ratio 1.59% 1.52% 2.33% 1.45% 1.52% 0.85%

Overdue loan ratio No data No data No data No data No data No data

Allowance to total loans ratio 141.51% 159.51% 173.60% 159.52% 150.26% 279.75%

Provision coverage ratio 2.24% 2.42% 4.05% 2.31% 2.28% 2.36%Capital adequacy (as of 31 March)

Common Equity Tier 1 capital adequacy ratio 12.98% 12.98% 10.50% 11.16% 10.92% 8.88%Tier 1 capital adequacy ratio 13.51% 13.14% 11.16% 12.04% 12.03% 8.88%Capital adequacy ratio 14.66% 14.82% 13.21% 13.77% 13.64% 11.88%

Leverage ratio 7.54% 7.01% 6.13% 6.94% 6.81% 4.05%

Note：1. Investment include: financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity investments and receivables;

2. Interbank assets include: deposits with banks and other financial institutions, demolition of funds and buy back financial assets;

3. Interbank liabilities include: deposits with banks and other financial institutions, capitalization of borrowed funds and repurchase of financial assets;

4. Issued debt securities include: subordinated debt, two capital debt, convertible corporate bonds, green bonds, financial bonds, mixed capital debt,

deposit certificates and interbank deposits.


25

PwC

Financial highlights of listed banks (II)-Joint-Stock Commercial Banks

2017（In RMB million） CIB CMB CMBC SPDB CITIC CEB PAB HXB CZB Total


Operating income 34,546 57,075 36,229 42,360 37,778 23,657 27,712 16,331 8,524 284,212

Net interest income 21,739 34,914 20,680 26,519 25,108 15,203 18,869 12,445 6,213 181,690

Net fee & commission income 8,890 18,640 12,681 12,191 10,805 8,208 8,150 3,666 2,122 85,353 Other non-interest income 3,917 3,521 2,868 3,650 1,865 246 693 220 188 17,168 Operating expenses (14,731) (31,751) (18,666) (23,963) (22,967) (12,213) (19,484) (10,290) (4,012) (158,077)

Business tax and surcharges (260) (505) (353) (314) (408) (249) (246) (190) (51) (2,576)

Business & administration expenses (8,516) (13,868) (8,962) (9,541) (9,769) (6,396) (6,804) (5,664) (2,718) (72,238)

Allowance for impairment losses (5,887) (17,315) (9,001) (13,961) (12,790) (5,486) (12,434) (4,405) (1,242) (82,521)Other business expenses (68) (63) (350) (147) 0 (82) 0 (31) 0 (741)

Operating profit 19,815 25,324 17,563 18,397 14,811 11,444 8,228 6,041 4,512 126,135

Profit before tax 19,882 25,502 17,582 19,017 14,810 11,447 8,230 6,059 4,517 127,046

Income tax expense (2,958) (5,410) (3,076) (4,370) (3,418) (2,848) (2,016) (1,514) (1,138) (26,748)Net profit 16,924 20,092 14,506 14,647 11,392 8,599 6,214 4,545 3,379 100,298

Non-controlling interests 100 115 307 185 3 20 0 46 (24) 752 Profit attributable to shareholders 16,824 19,977 14,199 14,462 11,389 8,579 6,214 4,499 3,403 99,546

Financial Position (as of 31 March)

Total assets 6,229,171 6,000,674 5,956,607 5,889,663 5,751,862 4,126,980 3,006,195 2,399,055 1,418,599 40,778,806

Loans and advances, net 2,122,930 3,308,271 2,543,720 2,840,944 2,871,468 1,850,311 1,504,184 1,222,020 479,661 18,743,509

Loans and advances 2,198,641 3,434,526 2,611,888 2,934,867 2,949,235 1,896,333 1,548,162 1,257,570 No data 18,831,222 Less: Allowance for impairment losses (75,711) (126,255) (68,168) (93,923) (77,767) (46,022) (43,978) (35,550) No data (567,374)

Investments 3,259,532 1,565,887 2,256,562 2,177,444 1,877,435 1,387,544 801,995 651,694 695,712 14,673,805

Interbank assets 161,253 350,557 374,246 229,837 323,697 376,711 242,885 196,610 84,227 2,340,023

Cash & deposits with central bank 444,229 599,101 453,510 457,304 519,072 360,597 269,541 286,176 123,439 3,512,969

Others assets 241,227 176,858 328,569 184,134 160,190 151,817 187,590 42,555 35,560 1,508,500

Total liabilities 5,832,427 5,578,850 5,589,864 5,504,392 5,358,696 3,863,247 2,798,456 2,242,727 1,331,754 38,100,413

Deposits from customers 2,885,353 3,929,544 3,050,541 3,097,527 3,430,435 2,243,298 1,912,082 1,393,517 747,407 22,689,704

Interbank liabilities 1,897,398 838,406 1,511,791 1,412,568 1,174,915 717,227 472,421 384,538 417,312 8,826,576

Debt securities issued 719,884 355,577 474,836 690,921 464,831 606,074 317,079 310,593 122,777 4,062,572

Due to central bank 226,500 274,978 319,432 177,199 173,600 211,500 25,074 107,005 0 1,515,288

Other liabilities 103,292 180,345 233,264 126,177 114,915 85,148 71,800 47,074 44,259 1,006,274

Total owners’ equity 396,744 421,824 366,743 385,271 393,166 263,733 207,739 156,328 86,845 2,678,393 Non-controlling interests 5,434 1,190 9,783 5,210 5,270 633 0 834 1,446 29,800

Total equity attributable to shareholders 391,310 420,634 356,960 380,061 387,896 263,100 207,739 155,494 85,400 2,648,594 Major financial indicators


Return on average total assets (ROA) 1.12% No data 0.98% 1.00% 0.79% No data 0.83% 0.76% No dataReturn on weighted average equity (ROE) 18.80% 19.42% 16.71% 15.84% 13.25% 15.30% 12.35% 10.92% No data

Net Interest Spread (NIS) No data 2.36% No data No data No data No data 2.37% No data No data

Net Interest Margin (NIM) No data 2.49% No data No data 1.79% No data 2.53% No data No dataCost to income ratio 24.85% 23.65% 24.74% No data No data No data 24.55% 34.68% No dataAsset quality (as of 31 March)

Non-performing loan ratio 1.60% 1.76% 1.68% 1.92% 1.74% 1.54% 1.74% 1.69% No data

Overdue loan ratio No data No data No data No data No data No data No data No data No data

Allowance to total loans ratio 215.16% 208.67% 155.70% 166.82% 151.54% 157.64% 163.32% 167.71% No data

Provision coverage ratio 3.44% 3.68% 2.61% 3.20% 2.64% 2.43% 2.84% 2.83% No dataCapital adequacy (as of 31 March)

Common Equity Tier 1 capital adequacy

ratio9.01% 12.40% 8.91% 8.72% 8.86% 8.25% 8.28% 8.37% No data

Tier 1 capital adequacy ratio 9.65% 12.40% 9.19% 9.49% 9.88% 9.32% 9.23% 9.61% No dataCapital adequacy ratio 12.26% 14.43% 11.63% 11.77% 12.08% 11.78% 11.48% 11.36% No data

Leverage ratio No data 6.01% 5.40% 5.64% 5.51% 5.58% 5.58% 5.66% No data


26






PwC

Financial highlights of listed banks (III)-City Commercial Banks

2017（In RMB million） Beijing Shanghai Jiangsu Nanjing Ningbo Hangzhou Chongqing Guiyang Zhengzhou Total


Operating income 13,606 8,185 8,535 6,231 6,433 3,254 2,555 2,893 2,441 54,133

Net interest income 9,440 5,234 6,861 5,078 4,806 2,877 2,028 2,572 2,129 41,024

Net fee & commission income 4,032 1,682 1,669 844 1,658 403 410 290 376 11,364

Other non-interest income 134 1,269 5 308 (30) (26) 118 32 (64) 1,745 Operating expenses (6,803) (4,058) (5,007) (3,163) (3,573) (1,720) (1,089) (1,781) (1,061) (28,253)

Business tax and surcharges (142) (89) (59) (89) (25) (29) No data (14) (7) (454)

Business & administration expenses (2,895) (1,685) (2,306) (1,683) (1,924) (738) (580) (767) (582) (13,160)

Allowance for impairment losses (3,761) (2,279) (2,641) (1,375) (1,623) (949) (509) (997) (470) (14,604)Other business expenses (5) (4) (1) (16) (2) (3) 0 (3) (2) (35)

Operating profit 6,803 4,128 3,528 3,068 2,860 1,534 1,467 1,113 1,380 25,880

Profit before tax 6,803 4,155 3,563 3,077 2,849 1,535 1,467 1,118 1,385 25,951 Income tax expense (1,322) (275) (554) (598) (487) (225) (372) (145) (310) (4,287)

Net profit 5,481 3,880 3,009 2,479 2,362 1,310 1,095 973 1,075 21,664 Non-controlling interests 36 5 21 25 3 0 0 6 24 120

Profit attributable to shareholders 5,445 3,874 2,988 2,453 2,359 1,310 1,095 967 1,052 21,544 Financial Position (as of 31 March)

Total assets 2,174,459 1,782,347 1,749,021 1,122,566 919,583 740,265 399,435 392,401 375,370 9,655,447

Loans and advances, net 929,171 572,667 656,133 333,197 303,052 255,704 152,794 101,229 114,011 3,417,957

Loans and advances No data 589,971 673,610 346,828 313,668 263,746 157,235 105,212 No data 2,450,269 Less: Allowance for impairment losses No data (17,305) (17,477) (13,632) (10,616) (8,041) (4,441) (3,982) No data (75,494)

Investments 741,025 889,182 690,911 529,669 469,220 331,639 130,063 217,318 169,562 4,168,590

Interbank assets 293,029 152,894 214,805 131,617 39,414 88,516 68,385 8,670 33,319 1,030,649

Cash & deposits with central bank 168,888 135,022 139,782 103,802 81,838 55,885 39,586 46,401 41,376 812,579

Others assets 42,346 32,582 47,390 24,282 26,060 8,520 8,608 18,782 17,102 225,673

Total liabilities 2,025,858 1,662,057 1,662,571 1,058,187 867,874 700,532 373,178 369,535 352,435 9,072,228

Deposits from customers 1,188,444 864,012 987,827 729,656 541,085 371,114 232,396 271,482 219,345 5,405,361

Interbank liabilities 384,854 391,855 340,376 68,147 129,648 116,293 50,601 38,154 68,606 1,588,535

Debt securities issued 339,030 249,859 259,425 198,054 137,022 185,894 84,287 54,080 57,219 1,564,870

Due to central bank 51,521 122,070 47,030 41,090 27,500 0 0 475 1,077 290,763

Other liabilities 62,009 34,261 27,912 21,241 32,619 27,231 5,893 5,344 6,188 222,699

Total owners’ equity 148,601 120,290 86,451 64,378 51,709 39,732 26,257 22,866 22,935 583,218 Non-controlling interests 1,691 452 1,563 481 98 0 1,470 869 589 7,213

Total equity attributable to shareholders 146,910 119,838 84,888 63,897 51,611 39,732 24,787 21,997 22,346 576,005 Major financial indicators


Return on average total assets (ROA) No data 0.88% No data 0.90% 1.05% 0.72% 1.15% 1.02% No dataReturn on weighted average equity (ROE) 17.20% 13.16% 14.27% 18.52% 20.48% 13.40% 17.74% 17.92% No data

Net Interest Spread (NIS) No data No data No data 1.67% 2.08% No data No data No data No data

Net Interest Margin (NIM) No data No data No data 1.83% 2.14% No data 2.22% No data No dataCost to income ratio No data No data 27.02% 27.01% 29.90% No data 22.50% 26.60% No dataAsset quality (as of 31 March)

Non-performing loan ratio No data 1.15% 1.43% 0.87% 0.91% 1.61% 1.15% 1.47% No data

Overdue loan ratio No data No data No data No data No data No data No data No data No data

Allowance to total loans ratio No data 255.30% 180.88% 449.42% 372.62% 189.29% 245.99% 258.10% No data

Provision coverage ratio No data 2.93% 2.59% 3.93% 3.38% 3.05% 2.82% 3.79% No dataCapital adequacy (as of 31 March)

Common Equity Tier 1 capital adequacy ratio No data 11.50% 8.67% 8.14% 8.57% 9.94% 9.71% 11.03% 9.30%

Tier 1 capital adequacy ratio No data 11.50% 8.67% 9.63% 9.46% 9.94% 9.72% 11.05% 9.33%Capital adequacy ratio No data 13.48% 10.99% 13.38% 12.15% 11.89% 13.70% 13.16% 13.19%

Leverage ratio 5.85% 6.21% 4.32% 5.03% 5.01% 5.01% No data 4.85% No data


27






PwC

Financial highlights of listed banks (IV)-Rural Commercial Banks

2017（In RMB million） CQRCB JTRCB CSRCB WXRCB JYRCB ZJGRCB WJRCB TotalOperating performance (January-March)

Operating income 5,674 1,526 1,146 674 551 603 622 10,796

Net interest income 5,109 588 1,040 600 484 519 581 8,920

Net fee & commission income 559 256 91 55 16 37 23 1,037 Other non-interest income 7 681 15 19 51 47 19 838 Operating expenses (2,397) (740) (733) (374) (376) (397) (411) (5,429)

Business tax and surcharges No data (13) (9) (6) (6) (3) (6) (43)

Business & administration expenses (1,818) (543) (442) (197) (225) (230) (198) (3,653)

Allowance for impairment losses (579) (185) (282) (171) (144) (164) (207) (1,731)Other business expenses 0 (0) 0 (0) (1) 0 0 (2)

Operating profit 3,278 785 413 299 174 206 211 5,366

Profit before tax 3,278 803 431 301 174 209 213 5,408 Income tax expense (818) (162) (95) (65) 4 (4) (38) (1,179)

Net profit 2,459 641 335 236 179 205 174 4,229 Non-controlling interests 31 135 19 (2) 4 1 4 191

Profit attributable to shareholders 2,428 506 316 238 175 204 170 4,038

Financial Position (as of 31 March)

Total assets 824,434 195,368 137,786 129,732 104,340 91,623 82,559 1,565,842

Loans and advances, net 299,642 67,940 66,234 60,927 51,347 44,450 45,252 635,792

Loans and advances 312,337 No data 68,476 62,644 53,717 46,122 No data 543,296 Less: Allowance for impairment losses (12,695) No data (2,242) (1,717) (2,370) (1,672) No data (20,696)

Investments 263,770 53,173 48,257 41,806 38,466 33,104 17,141 495,716

Interbank assets 151,752 41,719 5,598 9,294 2,402 2,248 6,082 219,095

Cash & deposits with central bank 94,717 25,456 14,210 14,844 9,617 8,616 11,030 178,489

Others assets 14,554 7,081 3,487 2,861 2,508 3,205 3,055 36,750

Total liabilities 767,836 178,665 127,085 120,708 95,404 83,332 74,524 1,447,555

Deposits from customers 556,668 128,533 94,096 100,551 75,742 66,102 65,757 1,087,449

Interbank liabilities 74,303 16,034 13,925 10,106 14,196 13,664 6,185 148,414

Debt securities issued 93,808 30,742 13,626 5,612 2,556 456 300 147,101

Due to central bank 30,470 573 2,521 100 285 160 353 34,463

Other liabilities 12,587 2,784 2,917 4,338 2,625 2,950 1,929 30,129

Total owners’ equity 56,599 16,703 10,700 9,025 9,103 8,290 8,034 118,454 Non-controlling interests 1,586 3,389 597 98 265 123 103 6,161

Total equity attributable to shareholders 55,013 13,314 10,103 8,926 8,838 8,167 7,932 112,294

Major financial indicators


Return on average total assets (ROA) 1.21% No data 1.00% No data 0.69% 0.90% No dataReturn on weighted average equity (ROE) 18.05% No data 12.68% 10.76% 7.96% 10.32% 8.68%

Net Interest Spread (NIS) No data No data No data No data 1.89% 2.24% No data

Net Interest Margin (NIM) 2.66% No data No data No data 2.14% 2.45% No dataCost to income ratio 31.92% No data 38.60% 29.25% 40.83% 38.19% No dataAsset quality (as of 31 March)

Non-performing loan ratio 0.96% No data 1.36% 1.31% 2.41% 1.96% No data

Overdue loan ratio No data No data No data No data No data No data No data

Allowance to total loans ratio 424.57% No data 241.04% 209.00% 174.88% 183.96% No data

Provision coverage ratio 4.06% No data 3.27% 2.74% 4.21% 3.61% No dataCapital adequacy (as of 31 March)

Common Equity Tier 1 capital adequacy ratio 9.92% 10.61% 10.32% 9.66% 12.68% 12.40% No dataTier 1 capital adequacy ratio 9.93% 10.80% 10.35% 9.67% 12.69% 12.40% No dataCapital adequacy ratio 12.72% 13.56% 12.56% 11.83% 13.87% 13.56% No data

Leverage ratio 6.52% No data 6.18% 6.38% 8.10% 7.60% No data


28






PwC

Banking and capital markets contacts

Assurance Advisory Tax

Jimmy Leung– Shanghai James Chang – Beijing Oliver Kang –Beijing

+86 (21) 2323 3355 +86 (10) 6533 2755 +86 (10) 6533 3012

[email protected] [email protected] [email protected]

Margarita Ho– Beijing Addison Everett – Beijing Matthew Wong – Shanghai

+86 (10) 6533 2368 +86 (10) 6533 2345 +86 (21) 2323 3052


Richard Zhu –Beijing William Gee– Beijing Florence Yip – Hong Kong

+86 (10) 6533 2236 +86 (10) 6533 2269 +852 2289 1833


Linda Yip – Beijing William Yung – Shanghai

+86 (10) 6533 2300 +86 (21) 2323 1984

[email protected] [email protected]

Michael Hu – Shanghai Matthew Phillips – Hong Kong Assurance –Risk & Quality

+86 (21) 2323 2718 +852 2289 2303

[email protected] [email protected] Tracy Chen – Shanghai

+86 (21) 2323 3070

Shirley Yeung – Guangzhou Chris Chan – Hong Kong [email protected]

+86 (20) 3819 2218 +852 2289 2303

[email protected] [email protected] Nigel Dealy – Hong Kong

+852 2289 1221

Vincent Yao – Shenzhen [email protected]

+86 (755) 8261 8293

[email protected]


29

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