OREANDA-NEWS. August 23, 2012. Ping An Bank (PAB, with the stock code of 000001 at SZSE) submitted its 2012 half-year result report to the Shenzhen Stock Exchange. In 1H of 2012, former SDB successfully merged the old PAB and was formally renamed as PAB on July 27th, reported the press-centre of PAB.

In 1H of 2012, PAB witnessed stable asset scale growth, higher deposit growth than FI average level, fast fee business income growth, good overall profitability, continuous favorable overall asset quality, and YoY increase of 45% in net profit (hitting 6.870bn),YoY increase of 43% in net profit attributable to parent company (hitting 6.761bn).

Specifically:
 
In 1H of 2012, the net profit attributable to parent company was 6.761bn, YoY increase of 43%; the operating income was 19.626bn, YoY jump of 61.7%, in which, net non-interest income reached 3.469bn, up by 98.8% vs. the same period of last year.

In 1H of 2012, the bank’s total assets hit 1.4906 trillion, a rise of 18.5% vs. BoY; total loans were 682.9bn, up by 10% vs. BoY; total deposits were 949.6bn, up by 11.6% vs. BoY.

As of Jun 30th, 2012, the bank’s NPL balance was 4.971bn, NPL ratio was 0.73%, up by 0.2 percentage points vs. BoY, and total NPA recovered in 1H was896mn.

As of Jun 30th, 2012, the bank’s CAR and CCAR were 11.4% and 8.44% respectively, both of which met the regulatory standards.

The bank’s strategic businesses: Trade Finance and Micro Finance businesses saw stable growth, and CC business achieved rapid development. Specifically, Trade Finance credit balance was 277.5bn, up by 18.9% vs. BoY; Micro Finance loan balance was 53.55bn, up by 11.6% vs. BoY; and credit cards in circulation hit 9.89mn.
 
PAB announced its mid-year profit distribution proposal, according to which, the bank will distribute RMB0.1 (incl. tax) per share in cash based on the bank’s total shares on Jun 30th, 2012, and a total of RMB512mn will be actually used for profit distribution this time. The remaining undistributed profit is RMB18.27bn. Relevant proposal still requires deliberation at Shareholders’ Meeting.
 
For the full text of the report and the announcement, please log on to PAB’s official website (www.bank.pingan.com) or www.cninfo.com.cn. In this press release, 2012 1H financial data and management analysis were summarized and abstract of 1H P/L statement is also attached. 
 
Profitability improved steadily

In 1H of 2012, overshadowed by credit demand slowdown due to macro economy cooling, decreased benchmark interest rate and interest rate deregulation trend, banks suffered from narrowed spread and bigger pressure from deposit growth. In the face of the complex and ever-changing macro economy situation and fiercer market competition, PAB fully took advantage of the integration opportunity to push cross-selling around deposit growth, strengthen portfolio management, improve ALM level and perfect risk management mechanism, and achieved sound business performance by realizing 6.761bn net profit attributable to parent company, a YoY increase of 43%, based on consolidated data of the original two banks.

In 1H of 2012, thanks to the growth of interest-bearing asset scale and the improved asset and liability structure, the merger, etc, the bank realized the net interest income of 16.157bn, up by 55% vs. same period of last year. Due to the lagged effect of PBOC interest rate rise in 2011, the average interest rates of various assets and liabilities in 1H of 2012 were higher than that in same period of last year. With the guidance of portfolio management and pricing strategy, loan/deposit spread saw sound growth. However, impacted by FI scale expansion, NIM decreased by 21bps YoY to 2.42%.
 
From Jan to Jun 2012, the bank realized the net non-interest income of 3.469bn, up by 98.8% vs. same period of last year. Specifically, net income from fees and commissions was 2.779bn, up by 133.9%. In 1H of 2012, the bank strictly followed relevant regulatory discipline about “7 prohibitions” and saw remarkable decrease in consultation/advisory fee. However, due to the factors after the 2-bank merger such as scale and customer growth, rapid bank card business development, innovation of WM products and improved service quality, the bank’s net fee income witnessed sound overall growth momentum. In 1H of 2012, the bank’s net amount of other operating income (mainly the income from bonds and bill discounting price difference) was 690mn, up by 23.9% vs. same period of last year. In 1H of 2012, the bank realized the operating income of 19.626bn in total, up by 61.7% vs. same period of last year.  

In 1H of 2012, the bank’s operating expenses were 7.483bn, up by 69.8% vs. same period of last year, mainly because of consolidated script, staff and business scale growth, and continuous input into 2-bank merger and management process and IT system optimization. The cost/income ratio (excl. business tax) was 38.13%, up by 1.83 percentage points vs. same period of last year. In 1H of 2012, the bank accrued 1.57bn provision for asset impairment, up by 114.9% YoY. 
 
Businesses all saw favorable growth, and strategic businesses showcased strengths

In 1H of 2012, the bank’s various businesses maintained healthy growth momentum. As of Jun 30th, the bank’s total assets were 1.4906 trillion, up by 18.5% vs. BoY; specifically, total loans (incl. discount) were 682.9bn, up by 10% vs. BoY; total deposits were 949.6bn, up by 11.6% vs. BoY. Deposit growth was faster than FI average level. The liquidity ratio was 59.38%, with important liquidity indicators all meeting or higher than regulatory requirements. After 2-bank merger, the bank introduced the regional management mechanism, and divided the whole bank into East/South/West/North Regions. The introduction of regional management helped improve branches/ outlets productivity and work efficiency. By 1H of 2012, the bank has had a total of 404 outlets.

In 1H of 2012, the bank’s traditional strength corporate business continued to grow steadily, with an increase of 10.7% in corporate deposit balance vs. BoY and a rise of 9% in general corporate loan balance vs. BoY. Trade Finance, one of the strategic businesses, witnessed credit balance of 277.5bn, up by 18.9% vs. BoY; the NPL ratio was 0.29%, still at a relatively low level; international trade finance balance was 38.67bn, up by 25.2% vs. BoY. After 2-bank merger, the bank actively pushed the implementation of the former SDB’s Trade Finance edge products at branches/outlets of the old PAB, and enabled customers of the old PAB to enjoy more diversified trade finance products and services; at the same time, it sped up the implementation of online SCF, with the aim of improving service efficiency and customer experience. In 1H of 2012, thanks to PAG’s integrated finance advantage, the bank’s net custody scale exceeded 250bn, doubling vs. BoY; as to corporate WM business, two new products, i.e. “structured deposit product” and “package WM product”, were designed and issued. About 1200 products were issued and established accumulatively, with the sales scale of over 90bn.    
 
As to Retail business, in 1H of 2012, the bank conducted cross-selling through Micro Finance channel, auto loan channel, personal loan channel and CC channel to increase settlement and savings deposits; in the meantime, it strengthened WM products sales’ driving effect towards savings deposits by developing diversified WM products and portfolio; as of end of June, the bank’s retail deposit balance increased by 16% vs. end of previous year and net fee income surged by 221.8% YoY. Moreover, the bank took the initiative to adjust the retail loan business development direction and put focus on personal credit loans, auto loans and Micro Finance entrepreneur loans. At present, personal credit loan has become an important engine for the bank’s loan business growth, while auto loan channel brands saw continuous expansion, with auto consumption loan balance of nearly 14bn, ranked No. 3 among banks in China in respect of market share, and NPL ratio lower than 0.3%.   
 
In 1H of 2012, both Micro Finance and CC, strategic businesses of PAB, achieved rapid development. As of 1H 2012, PAB’s Micro Finance loan balance was 53.55bn, up by 11.6% vs. BoY, with the NPL ratio of 0.72%. 1.85mn PAB credit cards were newly issued this year, and accumulative credit cards in circulation reached 9.89mn, with the loan balance of 30.6bn, up by 24% vs. BoY, and the NPL ratio of 1.09%, a decline vs. same period of last year. Incremental cards from PAG cross-selling accounted for 56% of the total sold by all channels. The number of integrated finance products held by customers increased gradually.
 
CAR met regulatory requirements, and asset quality was still at a favorable level

As of Jun 30th, 2012, PAB’s core capital adequacy ratio and capital adequacy ratio were 8.44% and 11.4% respectively, both of which met the regulatory requirements. In the meantime, the bank’s capital supplementation plan is waiting for deliberation at Shareholders’ Meeting. After completion of the NPO, the bank’s CCAR and CAR will further improve, which will effectively enhance the bank’s ability to resist risks and is beneficial to the bank’s further asset and business scale growth based on sufficient capital, thus realizing sustainable profit growth. 
 
In terms of asset quality, in 1H of 2012, due to the impact of such external environment as Euro debt crisis and domestic economic growth slow-down, some small/medium sized privately-owned enterprises in the Yangtze River Delta and the Pearl River Delta encountered difficulties in business operation and saw weaker ability to repay debts, which exerted a certain impact on the bank’s stable credit asset quality. As of the end of the reporting period, the bank’s NPL balance was 4.971bn and NPL ratio was 0.73%, up by 0.2 percentage points vs. BoY. The bank’s NPLs mainly lay in manufacturing industry and commercial industry. Seen from the geographic perspective, the bank’s incremental NPLs in 1H of 2012 were mainly from Wenzhou Branch, whose EOP NPL balance accounted for 27.6% of the total of the bank. Fortunately, Wenzhou Branch’s total loans accounted for only 2.7% of the total of the bank, most of NPLs have collaterals, and the overall risks are controllable. So the impact on the bank’s normal business operation is small. In 1H of 2012, the bank achieved a good collection performance, with the recovered NPA of 896mn in total, in which 99.7% was recovered in cash and the rest was recovered by way of debts paid in kind.  
 
Walked a differentiated development road, and served customers with integrated finance

Despite the dual pressures from integration and development, PAB still delivered a satisfying result to its shareholders and the public. In the future, PAB will focus its attention to key business fields, boost the former SDB’s edge Trade Finance business, vigorously expand upstream/downstream enterprises along the SCF, and roll out cross-selling greatly. In respect of Retail business, it will build a synergic consumer business operation platform to orderly implement the integrated business operation strategy of “one customer, one account, multiple products, and one-stop service”. The bank will also leverage PAG’s about 70mn retail customers, over 2mn corporate customers and 0.5mn sales force to push the rapid, healthy and sustainable business development so as to create more value to customers, shareholders and the public. It is believed that in the future PAB will take advantage of PAG’s integrated finance service platform to further realize the leap-forward development. As the first JS commercial bank with integrated finance concept in China, it will directly benefit from the banking industry transformation/upgrading and financial consumption reform, and march towards the target of “Best Commercial Bank in China” finally.