OREANDA-NEWS. September 03, 2013. Bank of China Limited (“the Bank”: Hong Kong Stock Exchange stock code: 3988; Shanghai Stock Exchange Stock code: 601988) announced its 2013 interim results on 29 August. According to International Financial Reporting Standard (“IFRS”), the Bank recorded a profit after tax of RMB84.172 billion and profit attributable to equity holders of RMB80.721 billion, increased 12.4% and 12.9% year-on-year respectively.

Continuous improvement of key financial indicators
As at the end of June 2013, the Bank’s total assets, liabilities and capital and reserves attributable to equity holders amounted to RMB13.26 trillion,RMB12.37 trillion and RMB849.978 billion, and increased 4.54%,4.66% and 3.07% respectively from the prior year-end. Profit after tax and profit attributable to equity holders of the Bank reached RMB84.172 billion and RMB80.721 billion, representing year-on-year increases of 12.40% and 12.92% respectively. Return on average total assets and return on average equity stood at 1.30% and 18.93% respectively, up by 0.11 and 0.80 percentage point compared with last year. Capital base remained solid. Capital adequacy ratio and core capital adequacy ratio stood at 13.33% and 10.47% respectively. Basic earnings per share was RMB0.29, an increase of RMB0.03 compared with the first half of last year.

Effective business structure optimisation
The Bank optimised its deposits structure and reduced funding cost. As at the end of June 2013, the Group’s customer deposits totalled RMB9.88 trillion, up by RMB702.201 billion or 7.65% compared with the prior year-end. The domestic RMB customer deposits grew by RMB647.428 billion or 9.24% from the end of last year. The average funding cost of domestic RMB and FX customer deposits dropped by 18 and 36 basis points respectively compared with last year.

The Bank also optimised its assets structure and increased the proportion of high-yield assets. As at the end of June 2013, loans and advances to customers reached RMB7.44 trillion, grew by 8.38% compared with the prior year-end, and the proportion to total assets increased 1.95 percentage points. Domestic RMB-denominated customer loans grew by RMB302.323 billion, or 5.96% from the prior year-end. RMB-denominated small enterprises loans by "BOC Credit Factory" grew by 20.46% from the prior year-end, about 17 percentage points higher than the average growth rate of total domestic RMB-denominated corporate loans. Domestic RMB-denominated personal loans increased 11.27% from the end of last year, and the proportion to domestic RMB loans reached 33.50%.

In the first half of 2013, Group’s net interest margin expanded 8 basis points since prior year-end to 2.23%. Domestic RMB net interest margin stood at 2.51%, and overseas FX net interest margin was 1.25%, up by 12 basis points compared with last year respectively.

The Bank’s non-interest income grew fast with further optimised structure. In the first half of 2013, non-interest income increased by 24.01% year-on-year to RMB68.963 billion. This represented 33.44% of total operating income, an increase of 2.49 percentage points compared with the first half of last year. The net fee and commission income recorded RMB45.481 billion, an increase of 32.79%. Agency commissions, bank card fees, settlement and clearing fees, custodian and other fiduciary service fees grew by 59.69%, 24.84%, 12.70% and 46.45% respectively.

Leading cross-border and overseas RMB businesses
As at the end of June 2013, total overseas assets was USD523.945 billion, an increase of 5.03% from the prior year-end, accounting for 23.12% of Group’s total assets. Overseas profit before tax was USD3.250 billion, an increase of 10.57% year-on-year, accounting for 18.38% of the Group’s total profit before tax. The customer deposits and loans conducted by overseas commercial banking operations increased by 5.28% and 15.79% respectively to USD277.266 billion and USD238.267 billion compared with the prior year-end.

The Bank improved its leading edges of cross-border and overseas RMB businesses. In the first half of 2013, total cross-border RMB settlement transaction volume reached RMB1.71 trillion, up by 63.48% year-on-year. In the past four years, the Bank conducted over RMB6 trillion cross-border RMB settlement business, maintaining the leading position both in business volumes and market share. The Bank has established and further improved the globally integrated overseas and cross-border RMB clearing system based on BOCHK and Shanghai Headquarters. The Bank ensured its position as main RMB clearing channels in Hong Kong, Macau, and Taiwan, and led peers in cross-border RMB settlement business in Southeast Asia market. The Luxembourg Branch began to provide RMB clearing business in Euro Zone as the first RMB clearing bank authorised by the government of Luxembourg. The application of clearing bank status in London, Frankfurt and Paris were steadily pushed forward. The Bank further enriched the services and function of overseas RMB products such as bond underwriting, trading, cash wholesale and personal remittance.

The global network of the Bank was further expanded. In the first half of 2013, the Bank established 7 new overseas institutions including Ulaanbaatar Representative Office, Lisbon Branch and other 5 tier-two institutions and opened 4 China Desks within its correspondent banks. As at the end of June 2013, the Bank had established 623 overseas institutions in Hong Kong, Macau, Taiwan and 37 countries,further expanding its cross-border service capabilities.

Enhanced profitability of diversified business
The Bank fully leveraged its diversified business advantages to provide customers with comprehensive and high quality financial services.  In the first half of 2013, the Bank’s comprehensive business income stood at RMB28.1 billion, an increase of 37.5% from the same period of 2012, accounting for 13.6% of the Group's operating income, up 2.3 percentage points.
BOCI’s bond underwriting businesses continued to maintain a leading position in the Hong Kong market, ranking first in the overseas investment grade bonds issuing by Chinese enterprises. It also led the Chinese capital peers in equity underwriting, financial advisory, investment management and global commodities businesses. BOCIM maintained excellent investment performance and held a leading position on both equity and fixed income products, with total assets under management of RMB100 billion. BOCG Insurance stood at the forefront of the general insurance market and ranked first amongst all Chinese capital insurance companies in Hong Kong. BOC Insurance recorded net profit growth by multiples with enhanced profitability. BOC Aviation owned and managed a fleet of 223 aircrafts operating for 57 airliners worldwide, ranking the 5th among the global peers.

Improved service channels and product functionalities
The Bank enhanced its infrastructure development with the aim to improve customer experience. As at the end of June 2013, the Bank owned 10,623 domestic commercial banking outlets with near 2,000 medium-to-large-sized fully functional outlets, 39,700 ATMs, 22,000 self-service terminals, and more than 12,000 self-service banks in operation. The Bank’s e-banking transaction volume increased by 24.47% compared to the same period of 2012 and the substitution ratio of e-banking channels for traditional outlets rose to 77.22%. The Bank continued to optimise its service process, including reduction of application forms for opening personal accounts, optimisation of the counter service process to improve customer experience. The Bank continuously improved its IT system and promoted transformation and integration of overseas information system. The Bank also steadily advanced the project to centralise intra-city back-office operation and accelerated the construction of an integrated customer service platform.

Controlled cost of risk
Taking active measures to address the challenges and pressures arising from a changing economic situation, the Bank strengthened the risk management of key areas and maintained a stable asset quality. As at the end of June 2013, the Group’s non-performing loans ratio was 0.93%, down 0.02 percentage point from the prior year-end. Special-mention loan ratio was 2.56%, down 0.46 percentage point from the prior year-end. The Bank continued to carry out prudent provision policy and enhanced risk management in a more proactive and forward-looking manner. The Bank strictly controlled the total loan balance to local government financing vehicles and strengthened risk control for real estate sector, sector with overcapacity and others. The non-performing loans coverage ratio was 238.96%, up 2.66 percentage points from the prior year-end. The ratio of allowance for loan impairment losses to total loans for domestic institutions was 2.62%, maintaining the same level as that of the prior year-end.

The Bank strengthened the management and control on various risks. The liquidity management was proactive and efficient to balance the security, liquidity and profitability. Operational risk losses were well controlled and remained a lower level both in terms of frequency and loss amount.

Mr. Tian Guoli, Chairman of the Bank, said , “Facing a complex and challenging economic and financial situation at home and abroad, the Bank will firmly seize the important opportunities from RMB internationalisation, interest rate liberalisation and mobile internet development, take social responsibility and strive to be a good bank, which will play a major role in national revival, maintain leading advantages in globalisation, lead new life styles during technology revolution, acquire customer in market competition and satisfy the expectations of our shareholders, staff and society through sustainable development.”

Mr. Li Lihui, President of the Bank, said, “In the second half of 2013, with the aim to provide a superior customer experience, enhance its market competitiveness and improve its profitability, the Bank will be dedicated to become a good bank by seeking profit from structural adjustments, seeking efficiencies from improved methodologies, seeking new markets by operating globally, seeking asset quality through risk management, and seeking growth impetus from infrastructure development.”