中国银行(03988) - 2023 - 中期财报

Definitions This section defines key terms, company entity abbreviations, and regional divisions used in the report Key Term Definitions This section defines key terms, company entity abbreviations, and regional divisions, providing a foundation for understanding the report's content - The report clarifies that 'the Bank/the Group' refers to Bank of China Limited and all its subsidiaries, and defines terms such as A-Shares, H-Shares, various subsidiaries (e.g., BOC Hong Kong, BOC International Holdings), and regulatory bodies (e.g., National Administration of Financial Regulation)[15][16] - The report delineates geographical regions in Mainland China, such as the Eastern China region which includes branches in Shanghai, Jiangsu, and Zhejiang, providing a basis for subsequent regional business analysis[15] Important Notice This section affirms the report's integrity and outlines the dividend policy and forward-looking statement risks Statement on Report Authenticity and Dividend Policy This section affirms the truthfulness, accuracy, and completeness of the report, states the decision not to distribute interim dividends for 2023, and highlights risks associated with forward-looking statements - The Board of Directors, Board of Supervisors, and senior management guarantee the truthfulness, accuracy, and completeness of the report's content and assume corresponding legal responsibilities[17] - The Bank will not declare an interim dividend for ordinary shares for 2023, nor will it implement any capitalization of capital reserves; the 2022 final cash dividend of RMB 2.32 (pre-tax) per 10 shares has been distributed[17] - The report contains forward-looking statements that involve risks and uncertainties and do not constitute a substantive commitment to investors[17] Company Profile This section details the Bank's corporate and securities information Corporate Profile and Securities Information This section provides Bank of China's legal name, registration details, office address, legal representative, and securities information for its listings on the Shanghai and Hong Kong stock exchanges Corporate Profile and Securities Information | Item | Information | | :--- | :--- | | Legal Representative, Chairman | Ge Haijiao | | Vice Chairman, President | Liu Jin | | Registered Capital | RMB 294,387,791,241 | | A-Share Stock Name / Code | Bank of China / 601988 | | H-Share Stock Name / Code | Bank of China / 3988 | Financial Highlights This section presents the key financial data and performance ratios for H1 2023 Key Financial Data Overview In H1 2023, the Group's operating income grew by 8.92% to RMB 319.71 billion, while total assets increased by 7.59% to RMB 31.09 trillion, though net interest margin narrowed to 1.67% Key Financial Data for H1 2023 (Group, RMB million) | Indicator | H1 2023 | H1 2022 (Restated) | Change | | :--- | :--- | :--- | :--- | | Operating Income | 319,707 | 293,522 | +8.92% | | Profit After Tax Attributable to Equity Holders of the Bank | 120,095 | 119,165 | +0.78% | | Basic Earnings Per Share (RMB) | 0.37 | 0.37 | - | | Total Assets (End of Period) | 31,085,240 | 28,893,548 (Year-end 2022) | +7.59% (vs Year-end 2022) | | Total Customer Loans (End of Period) | 19,264,684 | 17,552,761 (Year-end 2022) | +9.75% (vs Year-end 2022) | | Customer Deposits (End of Period) | 22,449,314 | 20,201,825 (Year-end 2022) | +11.13% (vs Year-end 2022) | Key Financial and Risk Ratios as of June 30, 2023 | Indicator | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Return on Average Total Assets (ROA, %) | 0.85 | 0.90 (H1 2022) | | Return on Equity (ROE, %) | 10.60 | 11.56 (H1 2022) | | Net Interest Margin (NIM, %) | 1.67 | 1.76 (H1 2022) | | Cost-to-Income Ratio (%) | 25.77 | 26.34 (H1 2022) | | Non-performing Loan (NPL) Ratio (%) | 1.28 | 1.32 | | NPL Provision Coverage Ratio (%) | 188.39 | 188.73 | | Capital Adequacy Ratio (%) | 17.13 | 17.52 | Business Overview This section summarizes the Bank's operational achievements in the first half of the year H1 Business Highlights In H1 2023, the Bank achieved steady growth amid a complex environment, making progress in serving national strategies, expanding its customer base, and strengthening risk controls - Achieved new growth in financial performance: total assets reached RMB 31.09 trillion, up 7.59% from the previous year-end, and operating income reached RMB 319.71 billion, a year-on-year increase of 8.92%[24] - Supported high-quality development: loans to strategic emerging industries and medium-to-long-term manufacturing loans grew by 45.46% and 22.56% respectively; green loan balance exceeded RMB 2.62 trillion, up 31.99%; inclusive finance loans to SMEs exceeded RMB 1.55 trillion, up 40.35% YoY[25] - Expanded and upgraded the customer base: the number of active corporate and personal customers grew by 10.52% and 4.85% year-on-year, respectively[26] - Advanced technological innovation and risk control: the distributed architecture's daily transaction processing capacity exceeded 2 billion; NPL ratio stood at 1.28% with a provision coverage ratio of 188.39%, indicating overall manageable risks[28][29] Management Discussion and Analysis This section provides a detailed analysis of the Bank's financial performance, business operations, risk management, and future outlook Financial Review In H1 2023, the Group's profit after tax grew 3.35% to RMB 127.69 billion, driven by a 22.20% rise in non-interest income, while net interest margin narrowed by 9 bps to 1.67% Income Statement Analysis H1 operating income grew 8.92% YoY, primarily driven by a 22.20% surge in non-interest income from net trading gains, while net interest income increased by 4.75% Key Income Statement Items for H1 2023 (Group) | Item (RMB million) | H1 2023 | H1 2022 | Change Ratio | | :--- | :--- | :--- | :--- | | Net Interest Income | 233,992 | 223,380 | 4.75% | | Non-interest Income | 85,715 | 70,142 | 22.20% | | Of which: Net Fee and Commission Income | 46,376 | 44,446 | 4.34% | | Operating Income | 319,707 | 293,522 | 8.92% | | Operating Expenses | (104,300) | (89,777) | 16.18% | | Impairment Losses on Assets | (60,581) | (52,725) | 14.90% | | Profit After Tax | 127,688 | 123,555 | 3.35% | | Profit After Tax Attributable to Equity Holders of the Bank | 120,095 | 119,165 | 0.78% | - The Group's net interest margin was 1.67%, a decrease of 9 basis points YoY, mainly due to the impact of domestic LPR cuts on RMB asset yields and rising costs of foreign currency liabilities[37] - Non-interest income grew by 22.20% YoY, primarily driven by a 53.09% increase in net trading gains resulting from market interest rate and exchange rate fluctuations[40][41] - The cost-to-income ratio (per PBoC standards) was 25.77%, a year-on-year decrease of 0.57 percentage points, remaining at a relatively low level[42] Balance Sheet Analysis As of June 2023, total assets and liabilities reached RMB 31.09 trillion and RMB 28.42 trillion respectively, driven by strong growth in customer loans and deposits Key Balance Sheet Items (Group, RMB million) | Item | June 30, 2023 | December 31, 2022 | Growth vs Year-end 2022 | | :--- | :--- | :--- | :--- | | Total Assets | 31,085,240 | 28,893,548 | 7.59% | | Net Customer Loans | 18,799,939 | 17,116,005 | 9.84% | | Investments | 6,732,627 | 6,435,244 | 4.62% | | Total Liabilities | 28,423,477 | 26,330,247 | 7.95% | | Customer Deposits | 22,449,314 | 20,201,825 | 11.13% | - Total customer loans grew by 9.75% to RMB 19.26 trillion, reflecting increased support for the real economy, with RMB loans up 10.38% and foreign currency loans up 3.10%[46] - Total customer deposits grew by 11.13% to RMB 22.45 trillion, with the increase in domestic RMB deposits reaching a record high for the same period, demonstrating a strong customer base and deposit-gathering capability[52] Segment Information Mainland China remains the primary source of revenue at 80.27%, while personal and corporate banking are the two main business pillars, contributing 44.11% and 41.28% of operating income respectively Operating Income by Geographical Segment for H1 2023 (Before Elimination) | Region | Amount (RMB million) | Percentage | | :--- | :--- | :--- | | Mainland China | 258,293 | 80.27% | | Hong Kong, Macao and Taiwan | 49,100 | 15.26% | | Other Countries and Regions | 14,391 | 4.47% | Operating Income by Business Segment for H1 2023 | Business Segment | Amount (RMB million) | Percentage | | :--- | :--- | :--- | | Corporate Banking | 131,974 | 41.28% | | Personal Banking | 141,030 | 44.11% | | Treasury Operations | 25,950 | 8.12% | | Investment Banking and Insurance | 13,615 | 4.26% | Business Review In H1 2023, the Bank's various business lines developed comprehensively, with strong performance in Mainland China, steady growth in overseas operations, and a good recovery in diversified business segments Mainland China Commercial Banking Mainland China operations achieved operating income of RMB 251.85 billion, up 4.12% YoY, with significant growth in corporate lending, personal banking, and leading positions in financial markets - In Mainland China commercial banking, RMB corporate deposits grew 12.32% from the previous year-end, with the net increase hitting a near-decade high for the period; foreign currency corporate deposit market share ranked first among peers[65] - The balance of inclusive finance loans to SMEs reached RMB 1.55 trillion, a YoY increase of 40.35%, outpacing the Bank's overall loan growth[69] - The Group's total financial assets of personal customers approached RMB 14 trillion, with financial assets of private banking clients reaching RMB 2.69 trillion[74][77] - Monthly active users of mobile banking reached 81.71 million, with transaction volume increasing by 38.27% YoY[81] Global Operations As China's most internationalized bank, global operations advanced steadily, with overseas pre-tax profit growing 23.09% YoY to USD 4.54 billion, contributing 20.22% to the Group's total - In H1, overseas commercial banks achieved a pre-tax profit of USD 4.54 billion, a YoY increase of 23.09%, contributing 20.22% to the Group's pre-tax profit[91] - Customer deposits and total loans of overseas commercial banks reached USD 544.31 billion and USD 442.34 billion, up 4.78% and 2.65% from the previous year-end, respectively[91] - In H1, the Group's cross-border RMB clearing volume reached RMB 370.88 trillion, maintaining its global leadership[95] BOC Hong Kong BOC Hong Kong achieved sustainable, high-quality development by focusing on Hong Kong, the Greater Bay Area, and Southeast Asia, with notable progress in green and cross-border finance - In H1, BOC Hong Kong achieved a profit after tax of HKD 18.08 billion[97] - The number of contracted customers for Cross-boundary Wealth Management Connect "Southbound" and "Northbound" totaled 40,200, holding a leading market share[93] - Launched the first ETF in the Hong Kong market tracking the GBA Climate Transition Index, actively promoting green finance[97] Diversified Operations The Bank's diversified business platforms, including investment banking, asset management, insurance, and leasing, experienced a comprehensive recovery, enhancing their market competitiveness and contribution to the Group Performance of Major Diversified Companies in H1 2023 | Company | Business Type | H1 2023 Performance/Scale | | :--- | :--- | :--- | | BOC International Holdings | Investment Banking | Profit after tax of HKD 746 million | | BOC Wealth Management | Asset Management | Profit after tax of RMB 919 million, AUM of RMB 1.61 trillion | | BOC Aviation | Aircraft Leasing | Profit after tax of USD 262 million | | BOC Consumer Finance | Consumer Finance | Profit after tax of RMB 282 million, loan balance of RMB 66.28 billion | Risk Management The Bank maintains a comprehensive risk management system, with stable asset quality, a declining NPL ratio, and manageable market and liquidity risks, all supported by an enhanced digital risk control framework Credit Risk Management The Bank actively managed credit risk by optimizing its loan structure and resolving non-performing assets, resulting in a lower NPL ratio of 1.28% and a reduced NPL ratio in the real estate sector Group Loan Quality Indicators | Indicator | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | NPL Balance (RMB million) | 246,882 | 231,677 | | NPL Ratio (%) | 1.28 | 1.32 | | NPL Provision Coverage Ratio (%) | 188.39 | 188.73 | NPL Ratios of Major Industries in Mainland China (%) | Industry | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Real Estate | 5.11 | 7.23 | | Manufacturing | 1.70 | 1.89 | | Commerce and Services | 1.66 | 1.70 | Market Risk Management The Bank manages market risk using tools like VaR and stress testing, with the average VaR for the trading book significantly decreasing in H1 2023, indicating reduced market risk exposure Value at Risk (VaR) of the Bank's Trading Book (1-day holding period, 99% confidence level) | Risk Type (RMB million) | H1 2023 Average | H1 2022 Average | | :--- | :--- | :--- | | Interest Rate Risk | 13.22 | 19.19 | | Exchange Rate Risk | 32.86 | 41.89 | | Total VaR | 28.22 | 52.24 | - Interest rate sensitivity analysis shows that a parallel upward shift of 25 basis points in interest rates would have a negative impact of approximately RMB 5.32 billion on net interest income[445] Liquidity Risk Management The Bank's liquidity risk management system is robust, with all indicators meeting regulatory requirements and stress tests confirming sufficient payment capacity under adverse scenarios Liquidity Ratios (%) | Indicator | June 30, 2023 | Regulatory Standard | | :--- | :--- | :--- | | RMB Liquidity Ratio | 48.3 | ≥25 | | Foreign Currency Liquidity Ratio | 70.4 | ≥25 | Capital Management The Bank maintains a sound and reasonable capital position, with all capital adequacy ratios meeting regulatory requirements for a systemically important bank, further strengthened by recent bond issuances Group Capital Adequacy Ratios (%) | Indicator | June 30, 2023 | December 31, 2022 | Regulatory Requirement | | :--- | :--- | :--- | :--- | | Core Tier 1 Capital Adequacy Ratio | 11.29 | 11.84 | ≥9.00 | | Tier 1 Capital Adequacy Ratio | 13.56 | 14.11 | ≥10.00 | | Capital Adequacy Ratio | 17.13 | 17.52 | ≥12.00 | - Successfully issued RMB 30 billion in perpetual bonds and RMB 60 billion in Tier-2 capital bonds in H1 to supplement its capital base[140] - As of June 30, 2023, the Group's leverage ratio was 7.39%, meeting regulatory requirements[142] Outlook Looking ahead, the Bank will continue to serve the real economy, strengthen its customer base and unique advantages, and pursue high-quality development through digital transformation and enhanced risk control - Focus on serving the real economy: increase support for key areas such as technology, manufacturing, SMEs, and green transition[143] - Solidify business fundamentals: collaboratively expand customer accounts, secure low-cost funding, and optimize the loan structure[143] - Consolidate distinctive advantages: strengthen specialized business segments, reinforce global leadership, and expand the value contribution of diversified operations[143] - Promote digital transformation: advance enterprise-level architecture, unlock data value, and accelerate model innovation[143] - Enhance risk prevention and control capabilities: deepen comprehensive risk management and improve the proactiveness and sensitivity of risk management practices[144] Environmental and Social Responsibility This section details the Bank's ESG practices and contributions ESG Practices and Contributions The Bank actively implements its ESG philosophy, achieving significant results in environmental protection, social contribution, and corporate governance, particularly in green finance and rural revitalization - Outstanding performance in green finance: as of the end of June, the balance of green credit in Mainland China reached RMB 2.62 trillion, a YoY increase of 51.22%; underwriting scale of domestic and overseas green bonds remained a market leader in H1[147] - Supporting rural revitalization: as of the end of June, the balance of agriculture-related loans was RMB 2.41 trillion, and the balance of inclusive agriculture-related loans was RMB 321.5 billion[153] - Supporting inclusive finance: as of the end of June, the balance of inclusive loans to SMEs reached RMB 1.55 trillion, a YoY increase of 40.35%, serving nearly 900,000 customers[157] - Enhanced consumer rights protection: handled 138,000 customer complaints in H1 with a 100% resolution rate; conducted nearly 46,000 financial literacy campaigns, reaching over 550 million consumers[159] Changes in Share Capital and Information on Shareholders This section provides details on the Bank's share structure and major shareholders Ordinary Shares As of June 30, 2023, the Bank's total number of ordinary shares remained unchanged at 294,387,791,241, with Central Huijin Investment Ltd as the controlling shareholder holding 64.02% Top Three Ordinary Shareholders (as of June 30, 2023) | Shareholder Name | Number of Shares Held | Shareholding Percentage (%) | | :--- | :--- | :--- | | Central Huijin Investment Ltd | 188,461,533,607 | 64.02 | | HKSCC Nominees Limited | 81,743,792,613 | 27.77 | | China Securities Finance Corporation Limited | 7,941,164,885 | 2.70 | Preference Shares As of June 30, 2023, the Bank had 67 preference shareholders, with no redemption, conversion, or restoration of voting rights occurring during the reporting period - As of June 30, 2023, there were a total of 67 preference shareholders, including 66 domestic and 1 overseas shareholder[169] - During the reporting period, the Bank distributed preference share dividends as resolved, with no instances of redemption or conversion into ordinary shares[172] Directors, Supervisors, Senior Management and Employees This section outlines changes in key personnel and provides an overview of the Bank's organizational and human resources structure Changes in Directors, Supervisors, and Senior Management During the reporting period, several changes occurred among the Bank's directors, supervisors, and senior management, including the appointment of a new Chairman and other key executives - Mr. Ge Haijiao was appointed as the Chairman of the Board and an Executive Director of the Bank, effective April 25, 2023[173] - During the reporting period, Non-executive Directors Chen Jianbo, Xiao Lihong, and Wang Xiaoya, as well as Vice Presidents Wang Zhiheng, Chen Huaiyu, and Wang Wei, resigned for various reasons[173][174][178] - Zhang Yong and Liu Hui were appointed as Non-executive Directors, while Zhang Xiaodong and Zhang Yi were appointed as Vice Presidents[173][178] Organizational and Human Resources Management As of June 30, 2023, the Bank had 11,468 domestic and overseas institutions and 304,245 employees, with a strong focus on continuous talent development Distribution of Institutions and Employees (as of June 30, 2023) | Item | Total Institutions | Total Employees | | :--- | :--- | :--- | | Total | 11,468 | 304,245 | | Mainland China | 10,936 | 279,371 | | Hong Kong, Macao, Taiwan and Others | 532 | 24,874 | Corporate Governance This section describes the Bank's corporate governance framework and practices Corporate Governance Practices The Bank strictly complied with all applicable listing rules and corporate governance codes, holding regular shareholder and board meetings to ensure effective governance and decision-making - The Bank's corporate governance practices are fully compliant with legal regulations and there are no deviations; it strictly adheres to the Corporate Governance Code in Appendix 14 of the Hong Kong Listing Rules[183] - During the reporting period, 2 shareholders' general meetings were held to approve resolutions such as director elections, profit distribution, and capital instrument issuance[184] - During the reporting period, 6 Board of Directors meetings were held to review annual reports, quarterly reports, internal control reports, and social responsibility reports; all six specialized committees under the Board convened and diligently performed their duties[186][187] Significant Events This section covers important matters including profit distribution, major transactions, and auditor appointments Profit Distribution and Significant Events This section details the Bank's profit distribution policy, confirming the completion of the 2022 dividend payment and the decision against an interim dividend for 2023, while noting no major corporate actions - The 2022 profit distribution plan was approved and implemented: a cash dividend of RMB 2.32 (pre-tax) per 10 shares was distributed, totaling approximately RMB 68.30 billion[194] - The Bank decided not to declare an interim dividend for ordinary shares for 2023 and not to implement any capitalization of capital reserves[194] - During the reporting period, the Bank had no material acquisitions, asset disposals, major litigations, arbitrations, or significant related-party transactions[195][196] - The Bank appointed PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers as its domestic and international auditors for 2023, respectively[204] Interim Financial Information This section presents the reviewed interim financial statements and supplementary information Review Report on Interim Financial Information The Bank's 2023 interim financial information has been reviewed by PricewaterhouseCoopers, which concluded that nothing suggests the information was not prepared in accordance with IAS 34 - PricewaterhouseCoopers has reviewed this interim financial information and issued an unmodified review conclusion report[210][211] Condensed Consolidated Interim Financial Statements This section contains the unaudited condensed consolidated interim financial statements, showing steady growth in revenue and assets, stable profitability, and a healthy cash flow position for H1 2023 Condensed Consolidated Interim Income Statement (RMB million) | Item | H1 2023 | H1 2022 (Restated) | | :--- | :--- | :--- | | Net Interest Income | 233,992 | 223,380 | | Operating Income | 319,707 | 293,522 | | Operating Profit | 154,826 | 151,020 | | Profit After Tax | 127,688 | 123,555 | | Profit Attributable to Equity Holders of the Bank | 120,095 | 119,165 | Condensed Consolidated Interim Statement of Financial Position (RMB million) | Item | June 30, 2023 | December 31, 2022 (Restated) | | :--- | :--- | :--- | | Total Assets | 31,085,240 | 28,893,548 | | Net Loans and Advances to Customers | 18,799,939 | 17,116,005 | | Financial Investments | 6,732,627 | 6,435,244 | | Total Liabilities | 28,423,477 | 26,330,247 | | Customer Deposits | 22,449,314 | 20,201,825 | | Total Equity | 2,661,763 | 2,563,301 | Condensed Consolidated Interim Statement of Cash Flows (RMB million) | Item | H1 2023 | H1 2022 (Restated) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 635,282 | (135,438) | | Net Cash used in Investing Activities | (258,776) | (76,840) | | Net Cash (used in)/from Financing Activities | (254,636) | 77,116 | | Net Increase in Cash and Cash Equivalents | 166,779 | (93,317) | Notes to the Financial Statements (Abstract) The notes detail the basis of preparation, accounting policy changes like IFRS 17, major statement items, and comprehensive financial risk management information - The Group adopted IFRS 17 Insurance Contracts from January 1, 2023, and retrospectively adjusted comparative period data, affecting the recognition and measurement of insurance contract liabilities[231][234] - As of June 30, 2023, the Group's NPL balance was RMB 246.88 billion with an NPL ratio of 1.28%; the loan impairment allowance balance was RMB 465.11 billion, with a provision coverage ratio of 188.39%[123][124] - The Bank engages in extensive financial transactions with its controlling shareholder, Central Huijin Investment Ltd, and its affiliates in the ordinary course of business, all conducted on normal commercial terms[321][327] - The Group uses advanced approaches under the "Capital Rules for Commercial Banks (Provisional)" to measure capital adequacy, including the internal ratings-based approach for corporate and retail exposures and the internal models approach for market risk[414] Supplementary Information This section provides unaudited supplementary financial information as required by regulators, including LCR, NSFR, currency concentration, and detailed capital adequacy calculations Key Liquidity and Capital Indicators | Indicator | Q2 2023 | Q1 2023 | | :--- | :--- | :--- | | Liquidity Coverage Ratio (LCR) Average | 130.99% | 135.17% | | Net Stable Funding Ratio (NSFR) End of Period | 123.88% | 124.98% | | Leverage Ratio (End of Period) | 7.39% | 7.46% | - Total international claims amounted to RMB 4.64 trillion, primarily distributed in the Asia-Pacific region (Mainland China, Hong Kong, etc), the Americas, and Europe[434] - Total overdue loans and advances amounted to RMB 187.38 billion, accounting for 0.98% of total loans, a decrease from 1.10% at the previous year-end[436]