OREANDA-NEWS. August 30, 2012. Bank of China Limited (“BOC”: Hong Kong Stock Exchange stock code: 3988; Shanghai Stock Exchange stock code: 601988) announced its 2012 interim results. According to International Financial Reporting Standard (“IFRS”), BOC has achieved profit after tax of RMB75 billion, a year-on-year growth of 6.79%. After eliminating the one-off impact of Lehman Brothers-related products etc. during the first half of 2011, the after-tax profit actually increased by 12.28%, reported the press-centre of BOC.

Since the beginning of 2012, the banking industry has faced increasing operational pressures due to complex economic and financial trends at home and abroad. BOC has continued to adopt a scientific outlook on development and remained faithful to its proven century-old tradition of excellence. The Bank has strongly encouraged innovative, transformative and cross-border development while following its path of constant and balanced growth based on its unique characteristics. The Bank has steadily enhanced its operating efficiency and financial results.

Asset and Liability Steadily Increased and Key Financial Indicators Continued to Improve

As at the end of June 2012, the Bank’s total assets and liabilities amounted to RMB12.83 trillion and RMB12.03 trillion, an increase of 8.42% and 8.68% respectively from the prior year-end. Return on average equity (“ROE”) and return on average total assets (“ROA”) stood at 18.99% and 1.22% respectively, representing increases of 0.72 percentage point and 0.05 percentage point compared with the prior year. The Group’s net interest margin was 2.10%, slightly decreased by 0.01 percentage point compared with the first half of 2011. The Bank continued to lead its domestic peers in its ratio of non-interest income to operating income, which increased by 0.42 percentage point from the prior year to 30.95%. Cost to income ratio was 29.23%, a decrease of 3.84 percentage points from the prior year. As at the end of June, the Group’s capital adequacy ratio and core capital adequacy ratio stood at 13.00% and 10.15% respectively, an increase of 0.02 and 0.07 percentage point compared with the prior year-end.

Deepening Business Transformation with a Focus on Effective Operation

During the first half of 2012, the Bank continued to strengthen the integrated and balanced management of its assets and liabilities by proactively enhancing business structure. As at the end of June, the Group’s total loans amounted to RMB6,753.7 billion, increased by 6.5% from the prior year-end, among which domestic RMB-denominated loans amounted to RMB4,972.6 billion, an increase of 7.3% from the prior year-end. The proportion of newly increased RMB-denominated personal loans to total newly increased domestic RMB-denominated loans increased by 6 percentage points to 40% compared with the prior year, while RMB-denominated small-and-medium enterprise (“SMEs”) loans under the “BOC Credit Factory” model grew by 24%, 18 percentage points higher than the growth in total RMB-denominated corporate loans. Debt investment structure improved.

The proportion of RMB-denominated debt securities accounted for 76.7% of total debt securities, up by 1.9 percentage points from the prior year-end. The average yield of Group debt securities was 3.13%, up by 18 basis points from the prior year.

In the first half of 2012, the Bank continued to enhance its service capability, strived to expand core deposits and strictly controlled funding cost. As at the end of June, the Group’s total deposits amounted to RMB9,482.6 billion, increased by 7.5% from the prior year-end, among which domestic RMB-denominated core deposits increased by RMB205 billion. The proportion of domestic RMB-denominated personal deposits increased by 2 percentage points to 47% compared with prior year-end.

The Bank continued to increase its efforts on product innovation and promotion, optimized fee-based business structure and expanded development of less capital-intensive fee-based business. The Bank’s traditional businesses such as international settlement and foreign exchange settlement continued to maintain leading positions in the market, while bank card, bancassurance, debt underwriting and distribution, custodian businesses developed rapidly. During the first half of 2012, net income from the Bank’s domestic fee-based business was RMB32.9 billion. Of the total, net income from less capital-intensive fee-based business increased by 13% to RMB26.9 billion compared with the first half of 2011, accounting for 81.8% of total net income from the Bank’s fee-based business.

Accelerated Overseas Business Development and Consolidated Diversified Business Strength

In the first half of 2012, the Bank leveraged its overall advantages, coordinated business development in domestic and overseas operations, improved global service capabilities and accelerated growth in overseas business. As at the end of June, total assets of the Bank’s overseas commercial banking operations increased by 19.8% from the prior year-end to USD490.8 billion. Profit before tax was USD2.6 billion, increased by 22.7% year-on-year. The growth rate of profit before tax was faster than that of asset. Customer deposits and total loans of overseas commercial banking business increased by 11.6% and 12.4% respectively from the prior year-end to USD243.4 billion and USD 200.4 billion. New progress was achieved in the Bank’s overseas network expansion with the successful establishment of the Taipei Branch, Poland Branch, Stockholm Branch and Nairobi Representative Office. Currently, the Bank’s overseas operations cover Hong Kong, Macau, Taiwan and 35 countries and extend financial services to countries such as Oman, Peru, Ghana and Chile through “China Desk” business model.

The Bank continued to actively develop its cross-border RMB business and further consolidated market-leading advantage. In the first half, the Bank has achieved cross-border RMB settlement transaction volume of RMB1.05 trillion, up by approximately 20% year-on-year. Since 2009, cumulative cross-border RMB settlement transaction volume exceeded RMB3 trillion, ranking first in the market. The Bank established 758 cross-border RMB clearing accounts for overseas participating banks, and ranked first among its peers. The Bank made full use of its competitive advantages of international and diversified platforms, and established a cross-border and overseas RMB product portfolio including deposit, loans, international settlement, cash distribution, clearing services, treasury operations, credit card, insurance and funds etc, so as to provide efficient and extraordinary cross-border RMB services to global customers.

In the first half of 2012, the Bank fully leveraged advantage of diversified platform and earnestly implemented comprehensive operation. BOCI obtained clearing membership at the Chicago Mercantile Exchange and London Metal Exchange as the only Chinese financial institution and further increased market influence. BOCIM achieved 20% increase of assets under management for publicly offered funds compared with the prior year-end, continuing to outperform the market. BOC Aviation maintained its stable growth and was assigned long term corporate credit ratings of A- and BBB by Fitch and S&P respectively, leading global aircraft leasing companies.

Improve ManagementCapabilities with a Focus on Risk Control

The Bank maintained a close watch on changes in the macro economy, financial environment, and regulatory requirement, and enhanced its asset quality control and monitoring systems. It strengthened post-lending risk management and periodic risk investigation and promoted the re-examination of risk classifications and proactively detected potential risks, and asset quality remains stable. As at the end of June 2012, the Group’s non-performing loans totalled RMB63.6 billion. The ratio of non-performing loans to total loans stood at 0.94%, down by 0.06 percentage point compared with the prior year-end. The allowance for loan impairment losses to non-performing loans was 233%, an increase of 12 percentage points from the prior year-end. The Bank continued to enforce risk control for key business areas, and the proportion of loans granted to local government financing vehicles and real estate sector decreased. Meanwhile, the Bank strengthened market and country risk management, reduced its exposures to high-risk European sovereign debt and improved business control over high-risk countries and regions. The Bank also placed strong emphasis on internal control and operational risk management. As a result, operational risk loss cases remain at a low occurrence rate.

Comprehensively Strengthen Infrastructure Construction Supported by Advanced Information Technology

In the first half of 2012, BOC enhanced service capability of various channels and achieved coordinated development in both traditional outlets and e-banking service. As at the end of June 2012, the Bank’s outlets within the Chinese mainland totalled 10,310, including more than 1,600 large and medium-sized full service outlets. The number of ATMs, self-service terminals and self-serviced banks reached 34 thousand, 17 thousand and 10 thousand, increased by 10%, 13% and 10% respectively compared with the prior year-end. Deposits and operating income per domestic outlet increased by 5% and 8% respectively. The Bank’s outlet business processes have been continuously optimized. Service efficiency and quality further improved.

The Bank continuously improved its e-banking service.The number of e-banking customers exceeded 180 million or up by 37% from the prior year-end. Number of corporate online banking, personal online banking, mobile banking and telephone banking customers increased by 39%, 40%, 92% and 17% respectively compared with the prior year-end.

After launching the IT Blueprint new core banking system across all domestic operations, the Bank has continually optimized the functionality of this core banking system and fully utilized the information technology advantages to support and lead business development. The Bank has launched the IT system integration and transformation project for overseas institutions in order to apply the progress of the IT Blueprint overseas, thus achieving an integrated global IT structure, promoting integrated development of domestic and overseas operations and improving the Bank’s global customer service capabilities.

Looking forward, the global economic and financial environment is expected to remain complex and challenging. The operating environment for banking industry is experiencing significant and profound changes, including more pressure from market liberalization, more competition from globalization and challenges from more advanced intellectualization. The Bank will proactively respond to the operating challenges arising from market liberalization, globalization and intellectualization. We will develop a truly smart bank led by information technology, transform development model with a focus on effective operation, accelerate the integrated development of global service capabilities and improve risk management with an emphasis on quality. The Bank will steadily promote various development initiatives and strive to achieve stable, healthy and sustainable growth.