
Corporate Profile Our Vision and Mission The Bank of East Asia aims to be the trusted and preferred banking partner for customers in Greater China and beyond, providing excellent financial products and services for a satisfying customer experience - Vision: To be the trusted and preferred banking partner for customers in Greater China and other regions7 - Mission: To provide outstanding financial products and services, ensuring every customer enjoys a satisfying service experience at all times7 Company Overview Established in 1918, The Bank of East Asia is a leading Hong Kong financial services group with total consolidated assets of HK$865.2 billion as of December 31, 2019, operating nearly 200 outlets globally and offering comprehensive banking, wealth management, and insurance services with a commitment to sustainability - The Bank of East Asia, established in 1918, is a leading Hong Kong financial services group8 - 2019 The Bank of East Asia Consolidated Total Assets | Metric | Amount (HK$) | | :--- | :--- | | Consolidated Total Assets | 865.2 billion | - Operations span Greater China, Southeast Asia, the UK, and the US, with nearly 200 outlets worldwide and over 9,800 employees8 - Offers corporate banking, personal banking, wealth management, and investment services, expanding into insurance through BEA Life Insurance Company Limited and Blue Cross (Asia-Pacific) Insurance Limited8 Financial Highlights 2019 Financial Performance Overview In 2019, The Bank of East Asia recorded a significant 15.1% increase in pre-impairment operating profit, but profit attributable to shareholders fell 49.9% due to a substantial rise in mainland impairment losses, with declines in EPS and DPS despite asset and equity growth - 2019 Key Financial Indicators and Year-on-Year Changes | Metric | 2019 (HK$ million) | 2018 (HK$ million) | Change (%) | | :--- | :--- | :--- | :--- | | Operating Profit Before Impairment Losses | 9,793 | 8,509 | +15.1 | | Profit Attributable to Group Shareholders | 3,260 | 6,509 | -49.9 | | Total Assets | 865,198 | 839,451 | +3.1 | | Total Shareholders' Equity | 109,638 | 103,575 | +5.9 | | Basic Earnings Per Share | HK$0.89 | HK$2.07 | -57.0 | | Dividend Per Share | HK$0.46 | HK$1.18 | -61.0 | | Impaired Loan Ratio | 1.2% | 0.7% | +0.5pp | - Return on average assets decreased from 0.7% in 2018 to 0.3% in 2019, and return on average shareholders' equity fell from 6.3% to 2.7%10 - The cost-to-income ratio remained at 50.2%, while the loan-to-deposit ratio slightly decreased to 78.6%10 Five-Year Financial Summary Key Financial Trends (2015-2019) Over the past five years, The Bank of East Asia saw fluctuating growth in total shareholders' equity, deposits, customer loans, and total assets, but profit attributable to shareholders, EPS, and DPS significantly declined in 2019 - Five-Year Financial Summary (2015-2019) | Metric | 2015 (HK$ million) | 2016 (HK$ million) | 2017 (HK$ million) | 2018 (HK$ million) | 2019 (HK$ million) | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Shareholders' Equity | 85,641 | 86,636 | 101,214 | 103,575 | 109,638 | | Total Deposits | 578,020 | 564,646 | 608,150 | 632,604 | 647,586 | | Customer Loans and Advances | 441,506 | 454,242 | 473,776 | 500,631 | 509,105 | | Total Assets | 781,364 | 765,706 | 808,942 | 839,451 | 865,198 | | Loan-to-Deposit Ratio | 76% | 80% | 78% | 79% | 79% | | Profit Attributable to Group Shareholders | 5,522 | 3,723 | 9,347 | 6,509 | 3,260 | | Earnings Per Share | HK$1.95 | HK$1.21 | HK$3.21 | HK$2.07 | HK$0.89 | | Dividend Per Share | HK$0.88 | HK$0.56 | HK$1.28 | HK$1.18 | HK$0.46 | - The report notes that the five-year financial summary was not prepared on a consistent basis due to the adoption of Hong Kong Financial Reporting Standards this year12 Executive Chairman's Statement Leadership Transition and 2019 Challenges Sir David Li Kwok-po transitioned to Executive Chairman on July 1, 2019, with Mr. Adrian Li and Mr. Brian Li appointed Co-Chief Executives, ensuring continuity amidst global economic uncertainty, financial industry transformation, intensified market competition, US-China trade tensions, and Hong Kong social unrest - Sir David Li Kwok-po retired as Chief Executive on July 1, 2019, transitioning to Executive Chairman, while Mr. Adrian Li and Mr. Brian Li were appointed Co-Chief Executives1619 - 2019 presented multiple challenges, including intensified market competition, a slowdown in the mainland economy due to US-China trade tensions, and social unrest in Hong Kong1619 Strategic Focus: Customer Centricity, Sustainable Growth, and Efficiency The Bank of East Asia confirmed its medium- and long-term strategies in 2019, focusing on customer centricity, sustainable growth, and operational efficiency, establishing a Digital Innovation Office to enhance data analytics and fintech solutions, expand fee income, upgrade wealth management platforms, and optimize branch and back-office operations - A Digital Innovation Office was established on January 1, 2020, to enhance data analytics, understand customer preferences, and develop fintech solutions2330 - In a low-interest rate environment, the bank is committed to expanding fee income, enhancing its retail wealth management platform, and strengthening cross-border collaboration to capture regional wealth growth opportunities2431 - Measures are being implemented to boost productivity, optimize Hong Kong branch and back-office operations, and reposition branches as sales centers using end-to-end technology2632 - BEA China is reallocating resources to high-potential areas, investing in network infrastructure, and centralizing key workflows such as risk management2631 Outlook and Future Initiatives In 2019, The Bank of East Asia saw an increase in its impaired loan ratio due to mainland loan impairments and implemented contingency measures for the COVID-19 pandemic in early 2020; long-term plans include leveraging the Greater Bay Area network, fintech solutions, strategic partnerships, and investing in staff development to meet diverse customer needs - In 2019, due to difficulties with mainland customers, the bank accelerated loan downgrades and made provisions, leading to an increase in the impaired loan ratio2832 - In early 2020, contingency measures were implemented to address the COVID-19 pandemic, including work-from-home arrangements and temporary branch closures2932 - Long-term, the bank will benefit from Greater Bay Area policies, leverage mainland service platforms and fintech solutions, and strengthen ties with strategic partners like CaixaBank and Sumitomo Mitsui Banking Corporation3336 - Investing in staff development and new resources to achieve the vision of becoming the trusted and preferred banking partner for customers in Greater China and other regions3436 Report of the Senior Management Financial Review In 2019, The Bank of East Asia's pre-impairment operating profit grew strongly by 15.1% to HK$9.793 billion, but profit attributable to shareholders fell 49.9% to HK$3.260 billion due to a significant increase in impairment losses from mainland operations, despite growth in net interest and non-interest income - 2019 Financial Performance Summary | Metric | 2019 (HK$ million) | 2018 (HK$ million) | Change (%) | | :--- | :--- | :--- | :--- | | Profit Attributable to Group Shareholders | 3,260 | 6,509 | -49.9 | | Operating Profit Before Impairment Losses | 9,793 | 8,509 | +15.1 | | Net Interest Income | 14,500 | 12,959 | +11.9 | | Net Fee and Commission Income | 2,941 | 2,653 | +10.8 | | Non-Interest Income | 5,184 | 4,113 | +26.0 | | Operating Income | 19,684 | 17,072 | +15.3 | | Total Operating Expenses | 9,891 | 8,563 | +15.5 | | Net Impairment Losses on Financial Assets | 7,253 | 1,188 | +510.5 | | Profit After Tax | 3,336 | 6,554 | -49.1 | - Net interest margin expanded from 1.73% to 1.85%, with average interest-earning assets growing by 4.9%3839 - Increased impairment losses from mainland operations led to the Group's impaired loan ratio rising from 0.70% at end-2018 to 1.22% at end-201939 Financial Position As of end-2019, The Bank of East Asia's total consolidated assets grew 3.1% to HK$865.198 billion, with increases in customer advances and investment securities, a slight decrease in customer deposits, and robust capital adequacy ratios and liquidity coverage - 2019 Balance Sheet Key Indicators | Metric | 2019 (HK$ million) | 2018 (HK$ million) | Change (%) | | :--- | :--- | :--- | :--- | | Consolidated Total Assets | 865,198 | 839,451 | +3.1 | | Total Customer Advances | 509,105 | 500,631 | +1.7 | | Investment Securities | 163,514 | 144,729 | +13.0 | | Total Equity Attributable to Group Shareholders | 95,307 | 91,826 | +3.8 | | Additional Tier 1 Capital | 13,963 | 8,894 | +57.0 | | Debt Securities in Issue | 3,181 | 564 | +464.1 | | Total Customer Deposits | 573,527 | 574,114 | -0.1 | | Total Deposits (including Certificates of Deposit) | 647,586 | 632,604 | +2.4 | | Loan-to-Deposit Ratio | 78.6% | 79.1% | -0.5pp | | Common Equity Tier 1 Capital Ratio | 15.6% | 15.7% | -0.1pp | | Tier 1 Capital Ratio | 18.4% | 17.8% | +0.6pp | | Total Capital Ratio | 20.4% | 20.8% | -0.4pp | - The average liquidity coverage ratio for the quarter ended December 31, 2019, was 175.7%, significantly exceeding the 100% statutory minimum4345 Ratings The Bank of East Asia maintains stable ratings from S&P Global Ratings and Moody's Investors Service, reflecting its sound financial position and outlook - The Bank of East Asia Credit Ratings | Rating Agency | Metric | Rating | Outlook | | :--- | :--- | :--- | :--- | | S&P Global Ratings | Long-Term Counterparty Credit (HK$ & Foreign Currency) | A- | Stable | | | Short-Term Counterparty Credit (HK$ & Foreign Currency) | A-2 | Stable | | Moody's Investors Service | Long-Term Bank Deposits (HK$ & Foreign Currency) | A3 | Stable | | | Short-Term Bank Deposits (HK$ & Foreign Currency) | Prime-2 | Stable | Major Recognition In 2019, The Bank of East Asia and its subsidiaries received numerous awards across SME services, digital banking, wealth management, fintech, insurance, and investment management, highlighting their excellence and innovation - The Bank of East Asia received the "Best SME Partner Gold Award" from the Hong Kong General Chamber of Small and Medium Business for the second consecutive year50 - Recognized in Global Brands Magazine's Global Brands Awards as "Best Digital Bank Hong Kong" and "Best Retail Bank Hong Kong" in 2018, and "Best Private Bank Greater China" and "Best Wealth Management Partner North Asia Pacific" in 201950 - The Bank of East Asia (China) Limited received awards including "2019 China Outstanding Brand Foreign Bank" from 21st Century Business Herald51 - Blue Cross (Asia-Pacific) Insurance Limited received the IFTA FinTech Achievement Award 2018 "InsurTech Platinum Award" and the Banking & Finance Awards 2019 "Outstanding Travel Insurance Award"52 - BEA Union Investment Management Limited was named "One of the Best Asia G3 Bond Houses (Hong Kong)" in The Asset Triple A Asset Servicing, Institutional Investors and Insurance Awards 201953 Business Review Global Economic Overview Global economic growth remained sluggish in 2019 due to US-China trade tensions, with Hong Kong's economy contracting 1.2% and mainland China's growth slowing to 6.1%; the COVID-19 pandemic is expected to further impact both economies in 2020 - Global economic growth was sluggish in 2019, impacted by escalating US-China trade tensions5658 - Hong Kong's economy contracted by 1.2% in 2019, with exports falling 4.1% year-on-year, retail sales down 11.1%, and the unemployment rate rising to 3.3%5658 - Mainland China's economic growth slowed to 6.1%, exports increased by 0.5%, and retail sales growth decelerated to 8.0%5658 - Looking ahead to 2020, both Hong Kong and mainland economies will face impacts from the COVID-19 pandemic5658 Business – Hong Kong Despite social instability, The Bank of East Asia's Hong Kong retail banking business performed strongly in 2019 with 11.4% operating income growth, stable corporate banking, robust wealth management, record life insurance new premiums, double-digit general insurance underwriting profit growth, and MPF assets reaching HK$27.8 billion - Hong Kong retail banking business recorded strong results in 2019, with operating income increasing by 11.4% year-on-year60 - Hong Kong Retail Banking Business Income Growth | Metric | Growth (%) | | :--- | :--- | | Operating Income | +11.4 | | Net Interest Income | +8.4 | | Net Fee and Commission Income | +30.5 | - Corporate banking business performed steadily, with operating income increasing by 3.2% year-on-year and corporate loans growing by 6.9%6263 - Private banking assets under management increased by 11.0% compared to end-2018, with investment product sales income growing by 5.1%6571 - Core insurance business performance continued to improve, rising by 21.8% year-on-year; BEA Life's new policy premium income grew by 50.8%, and Blue Cross recorded double-digit underwriting profit growth676871 - Total MPF scheme members increased to over 825,000, with assets under management growing to HK$27.8 billion6971 Business – China In 2019, BEA China's pre-impairment operating profit grew strongly by 15.6% to HK$2.22 billion, but recorded a net loss of HK$3.55 billion due to impairment losses on early commercial real estate loans; the impaired loan ratio improved in H2, retail loans increased to 30.6%, and a Greater Bay Area headquarters is planned in Qianhai, Shenzhen - 2019 BEA China Business Financial Performance | Metric | 2019 (HK$ million) | Change (%) | | :--- | :--- | :--- | | Operating Profit Before Impairment Losses | 2,220 | +15.6 | | Net Interest Income | 5,353 | +30.6 | | Net Loss | 3,550 | - | | Impaired Loan Ratio | 3.81% | -108 basis points (vs H1) | | Customer Loans | 131,371 | -12.2 | | Customer Deposits | 146,963 | -14.0 | - Retail loans as a proportion of BEA China's business portfolio increased to 30.6%, exceeding expectations7375 - The Bank of East Asia is establishing a Greater Bay Area headquarters in Qianhai, Shenzhen, to enhance business synergies75 - As of end-2019, BEA China had 98 outlets in mainland China, including its headquarters, 31 branches, and 66 sub-branches75 Business – International, Macau and Taiwan In 2019, The Bank of East Asia's overseas operations remained stable in challenging markets, with a 7.9% decline in pre-impairment operating profit and an increased cost-to-income ratio; US and UK businesses performed robustly, Singapore saw high single-digit loan growth, and future focus includes asset quality, cross-border expansion, and operational optimization - Overseas business pre-impairment operating profit decreased by 7.9% in 2019, with the cost-to-income ratio rising from 32.7% to 35.2%7778 - US operations recorded solid operating results, while UK operations saw loan growth and improved profitability7779 - Singapore branch loans recorded high single-digit growth, with continued efforts to reduce risk77 - Future overseas branches will prioritize asset quality, expand cross-border banking, and optimize physical networks, streamline operations, and implement process automation80 BEA Union Investment Management Limited Despite a subdued investment climate, BEA Union Investment Management Limited achieved 29% year-on-year growth in assets under management (AUM) in 2019 with strong inflows, launched innovative products, expanded distribution in mainland China and Europe, and plans to apply for a private fund management company license in mainland China - Assets Under Management (AUM) grew by 29% year-on-year in 2019, with high client asset retention rates7779 - Launched innovative products such as the Asia Bond Target Maturity Fund 2022 and Asia Corporate Target Maturity Fund 20237779 - Continued to expand distribution networks for flagship funds in mainland China and Europe, with plans to register for a private fund management company license with mainland authorities8287 Our People As of December 31, 2019, The Bank of East Asia Group employed 9,846 staff, fostering a culture of prudent risk management and customer service, implementing a new talent development framework, and offering training programs to cultivate leaders and enhance collaboration - The Bank of East Asia Group Employee Count (as of December 31, 2019) | Region | December 31, 2019 | December 31, 2018 (Restated) | | :--- | :--- | :--- | | Hong Kong | 5,564 | 5,227 | | Mainland China | 3,681 | 3,970 | | Macau & Taiwan | 158 | 164 | | Overseas | 443 | 435 | | Total | 9,846 | 9,796 | - Fostering a corporate culture based on prudent risk management and customer service, promoting the "Staff Recognition Programme" and organizing interactive sharing sessions8488 - Implemented a new talent development framework to identify high-potential employees and optimize succession planning for future leaders8588 - Conducted performance management training for senior management and executives to enhance strategic goal setting and collaborative thinking8689 Risk Management The Bank of East Asia has established a "three lines of defense" risk management framework, overseen by the Board Risk Committee, covering credit, interest rate, market, liquidity, operational, reputational, strategic, legal, compliance, technology, business continuity, and new product risks; in 2019, asset quality monitoring was enhanced, and a cautious credit approach was adopted for 2020 due to market uncertainties, including COVID-19, with mitigation measures for cyber threats, economic conditions, China corporate bond defaults, Hong Kong social unrest, US interest rate policy, legal and regulatory changes, and external fraud - A risk governance and management framework compliant with the Hong Kong Monetary Authority and other regulators has been established, adopting a "three lines of defense" risk management model9192 - Key risks include credit risk, interest rate risk, market risk, liquidity risk, operational risk, reputational risk, strategic risk, legal risk, compliance risk, technology risk, business continuity risk, and new product and business risk9194 - In 2019, strategic initiatives were taken to improve asset quality for real estate-related loans, overcapacity industries, potentially high-risk areas, and loan portfolios affected by political uncertainties9598 - In 2020, in response to market uncertainties (including the COVID-19 outbreak), a prudent credit approval approach will be adopted, and credit controls will be strengthened to prevent asset quality deterioration9598 - A cybersecurity strategy and effective control and response framework have been developed to address cyber threats, with continuous enhancement of cyber resilience115124 - To mitigate the impact of China corporate bond defaults, lending strategies are continuously reviewed, high-risk loans reduced, and customer due diligence and credit monitoring strengthened128129 - Monitoring of borrowers has been enhanced in response to Hong Kong social unrest, and a "Major Hong Kong Social Unrest" scenario has been incorporated into stress tests128129 Compliance The Bank of East Asia views compliance as a critical component of corporate governance, with a dedicated Compliance Division monitoring regulatory frameworks and risks, and anticipating continued high compliance demands, particularly in anti-money laundering, counter-terrorist financing, cross-border business, and personal data protection - Compliance is a crucial component of the Group's corporate governance, with a Compliance Division responsible for monitoring the regulatory compliance framework and risks139142 - Future compliance requirements are expected to remain high, especially in anti-money laundering and counter-terrorist financing, international standards, cross-border business, and personal data protection140142 Biographical Details of Directors and Senior Management Directors This section provides detailed biographical information for The Bank of East Asia's Board members, including Executive Chairman Sir David Li Kwok-po, Deputy Chairmen Professor Arthur Li Kwok-cheung and Dr. William Fung Kwok-lun, and other Non-executive and Independent Non-executive Directors, covering their age, education, professional qualifications, tenure, other listed company directorships, and public service - Sir David Li Kwok-po retired as Chief Executive on July 1, 2019, transitioning to Executive Chairman, responsible for leading the Board and managing stakeholder relationships144147 - Mr. Adrian Li and Mr. Brian Li were appointed Co-Chief Executives on July 1, 2019, focusing on Hong Kong business and China & International business, respectively169171175 - Board members possess diverse backgrounds spanning finance, technology, and corporate management, with several serving as independent non-executive directors in other listed companies153155159161165178180183186190191193194 Senior Management This section lists The Bank of East Asia's senior management, including Co-Chief Executives Mr. Adrian Li and Mr. Brian Li, and Deputy Chief Executives Mr. Joseph Li and Mr. Patrick Tang, detailing their professional qualifications and key responsibilities - Mr. Joseph Li is Deputy Chief Executive and Chief Investment Officer, primarily responsible for the bank's investment activities, treasury, and brokerage operations199200 - Mr. Patrick Tang is Deputy Chief Executive and Chief Operating Officer, primarily responsible for the bank's planning and control, operational support, compliance, human resources, and corporate communications201 Corporate Information Board and Committee Composition The Bank of East Asia's Board comprises 3 executive, 7 non-executive, and 6 independent non-executive directors, with Audit, Nomination, Remuneration, and Risk Committees, all chaired or significantly staffed by independent non-executive directors to ensure independence and effective governance - The Board of Directors consists of 16 directors, including 3 executive directors, 7 non-executive directors, and 6 independent non-executive directors203 - The Audit, Nomination, Remuneration, and Risk Committees all have independent non-executive directors serving as chairmen or key members204205206207 - Sir David Li Kwok-po was re-designated Executive Chairman on July 1, 2019, and Mr. Adrian Li and Mr. Brian Li were appointed Co-Chief Executives on the same day203 Key Executives and Auditors This section lists The Bank of East Asia's Executive Chairman, Senior Advisor, Co-Chief Executives, Deputy Chief Executive & Chief Investment Officer, Deputy Chief Executive & Chief Operating Officer, Company Secretary, and auditor KPMG - The Executive Chairman is Sir David Li Kwok-po, and the Co-Chief Executives are Mr. Adrian Li and Mr. Brian Li209211 - The Senior Advisor is Mr. Chan Tze-ching, and the Company Secretary is Mr. Ricky Lo Chun-tak210211 - The auditor is KPMG, a registered public interest entity auditor under the Financial Reporting Council Ordinance211 List of Outlets Global Network Overview The Bank of East Asia operates nearly 200 outlets globally, spanning Hong Kong, Greater China, Southeast Asia, the UK, and the US, offering a wide range of banking services - The Bank of East Asia currently operates nearly 200 outlets globally, with an extensive international network covering Hong Kong, other parts of Greater China, Southeast Asia, the UK, and the US224 Hong Kong Branch Network The Bank of East Asia maintains an extensive branch network in Hong Kong, including its Head Office, Kowloon, New Territories, and Outlying Islands branches, along with SupremeGold and i-Financial Centres, providing diverse services to customers - The Hong Kong branch network includes the Head Office, Kowloon branches, New Territories branches, and Outlying Islands branches216217218219220 - Some branches feature SupremeGold Centres and i-Financial Centres220221222223224 Greater China (ex-Hong Kong) and Overseas Outlets The Bank of East Asia's Greater China (ex-Hong Kong) outlets span over 40 cities, including major hubs like Shanghai, Beijing, Guangzhou, and Shenzhen, while overseas outlets are located in Singapore, Malaysia (Labuan, Kuala Lumpur), the UK (London, Birmingham, Manchester), and the US (New York, Los Angeles) - Greater China (ex-Hong Kong) outlets are located in over 40 cities, including Shanghai, Beijing, Guangzhou, and Shenzhen215 - Overseas outlets are situated in Singapore, Malaysia (Labuan, Kuala Lumpur), the UK (London, Birmingham, Manchester), and the US (New York, Los Angeles)215 Corporate Governance Report Statement of Compliance The Bank of East Asia is committed to high corporate governance standards, fully complying with the Corporate Governance Code since the separation of Chairman and Chief Executive roles on July 1, 2019; the Board oversees bank affairs, ensuring reliable and safe operations, and adheres to HKMA guidelines, publishing various policy statements to support prudent risk management and high ethical standards - Since Sir David Li Kwok-po's re-designation as Executive Chairman and the appointment of Co-Chief Executives on July 1, 2019, the bank has complied with all code provisions of the Corporate Governance Code231237 - The Board is responsible for leading and overseeing the bank, ensuring reliable and safe operations, and considering the interests of shareholders, customers, employees, and other stakeholders232237 - Adheres to HKMA guidelines such as CG-1 and CG-5, and has published policy statements on anti-bribery, slavery and human trafficking, whistleblowing, and anti-money laundering and counter-terrorist financing233237 Board of Directors The Bank of East Asia's Board comprises 16 directors, including 3 executive, 7 non-executive, and 6 independent non-executive directors, ensuring independence and objectivity; the Board meets regularly with high attendance, provides continuous professional development, and maintains clear policies on conflicts of interest and inside information - The Board currently has 16 directors, including 3 executive directors, 7 non-executive directors, and 6 independent non-executive directors, with over one-third being independent non-executive directors234237 - Six Board meetings were held in 2019, with an average attendance rate of 94%263265 - 39 training activities were arranged for directors, covering corporate governance, risk management, regulatory updates, banking operations, fintech/cybersecurity, and other areas226229272277 - Has a "Code of Conduct for Directors and Conflict of Interest Policy" and a "Policy on Handling and Dissemination of Inside Information" to ensure directors' conduct adheres to ethical standards and information disclosure is timely and accurate268270 Board Composition and Skill Matrix Board members possess diverse expertise and experience in accounting, banking, investment management, industry knowledge, senior management, legal and public policy, China experience, global business, and technology, ensuring effective board performance - Board Skill Matrix (2019) | Skill Area | Number of Directors | Percentage (%) | | :--- | :--- | :--- | | Accounting | 12 | 75 | | Banking | 10 | 63 | | Investment Management | 10 | 63 | | Insurance | 5 | 31 | | Industry Expertise | 9 | 56 | | Senior Management Role | 16 | 100 | | Legal & Public Policy | 7 | 44 | | China Experience | 12 | 75 | | Global Business Experience | 14 | 88 | | Technology | 6 | 38 | Executive Chairman and Co-Chief Executives The Executive Chairman leads the Board and manages stakeholder relations, while the Co-Chief Executives jointly oversee the Group's overall management, control, and strategic direction, with Mr. Adrian Li focusing on Hong Kong and Mr. Brian Li on China and international businesses - The Executive Chairman is responsible for leading the Board and managing relationships with regulators, strategic partners, and key clients259261 - The Co-Chief Executives are jointly responsible for the Group's overall management and control, setting strategic direction and vision, and reviewing key risk matters259261 - Mr. Adrian Li is responsible for managing Hong Kong business, while Mr. Brian Li is responsible for managing China and international business259261 Board Delegation The Board has established five Board Committees and seven Management Committees to assist in fulfilling its duties, each with clear terms of reference and regular reporting to the Board, ensuring effective financial reporting, talent management, remuneration incentives, and risk control - The Board has established 5 Board Committees (Audit, Nomination, Remuneration, Risk, Seal) and 7 Management Committees (Executive, Investment, Crisis Management, Risk Management, Asset and Liability Management, Credit, Operational Risk Management)285286325326327 - Each committee regularly reviews and updates its composition and terms of reference to ensure compliance with regulatory requirements and the Group's business development285287 - The Audit Committee is responsible for reviewing financial reporting, auditing, internal controls, and corporate governance functions290295 - The Nomination Committee is responsible for the nomination, appointment, removal, and succession planning of directors and senior management, as well as evaluating Board performance and diversity299301 - The Remuneration Committee is responsible for formulating remuneration policies and reviewing the remuneration packages of directors and senior management, ensuring alignment with business objectives, risk management, and corporate culture311312314316317 - The Risk Committee is responsible for addressing the Group's risk management matters, including risk appetite, strategy, governance, and risk profile319320322323 Remuneration of Directors and Senior Executives The Bank of East Asia's remuneration structure for directors and senior executives includes fixed and variable components, adhering to HKMA guidelines to align with risk management, long-term financial stability, and corporate culture; in 2019, senior executive remuneration decreased, with strict vesting and clawback mechanisms for deferred compensation - Annual Remuneration of Board Members (2019) | Position | Annual Amount (HK$) | | :--- | :--- | | Chairman of the Board | 550,000 | | Deputy Chairman of the Board | 425,000 | | Other Directors | 400,000 | | Chairman of Audit Committee | 250,000 | | Other Members of Audit Committee | 140,000 | | Chairman of Nomination Committee | 90,000 | | Other Members of Nomination Committee | 60,000 | | Chairman of Remuneration Committee | 90,000 | | Other Members of Remuneration Committee | 60,000 | | Chairman of Risk Committee | 250,000 | | Other Members of Risk Committee | 140,000 | - The remuneration policy aims to promote effective risk management and encourage employee behavior that supports the Group's business objectives, long-term financial soundness, and corporate values335337 - Total Remuneration of Senior Executives (2019 vs 2018) | Category | 2019 Non-Deferred (HK$) | 2019 Deferred (HK$) | 2018 Non-Deferred (HK$) | 2018 Deferred (HK$) | | :--- | :--- | :--- | :--- | :--- | | Senior Management | | | | | | Number of Employees | 5 | | 5 | | | Fixed Remuneration (Cash) | 32,054,590 | 0 | 27,594,730 | 0 | | Variable Remuneration (Cash) | 10,341,860 | 4,453,435 | 24,671,494 | 17,742,521 | | Variable Remuneration (Share Options) | 0 | 9,287,068 | 0 | 12,761,654 | | Key Management Personnel | | | | | | Number of Employees | 21 | | 20 | | | Fixed Remuneration (Cash) | 57,633,282 | 0 | 54,156,659 | 0 | | Variable Remuneration (Cash) | 22,717,002 | 11,414,932 | 27,363,815 | 12,484,987 | | Variable Remuneration (Share Options) | 0 | 3,729,737 | 0 | 6,138,670 | | Total Remuneration | 122,746,734 | 28,885,172 | 133,786,698 | 49,127,832 | - Deferred remuneration vesting and payment will be phased over 3 years, with clawback mechanisms for misconduct, data errors, or severe negative impact on Group profitability357358 Accountability and Audit The Board is responsible for a balanced, clear, and comprehensive assessment of the bank's performance, condition, and prospects, ensuring proper accounting records and fair financial statements; the bank maintains comprehensive risk management and internal control systems, independently reviewed by the Audit Division, with KPMG's 2019 audit and non-audit fees totaling approximately HK$19 million each - The Board is responsible for a balanced, clear, and comprehensive assessment of the bank's performance, condition, and prospects, ensuring proper accounting records and the preparation of true and fair financial statements357358 - The bank maintains comprehensive risk management and internal control systems, adopting a "three lines of defense" risk management model, with independent review by the Audit Division360361 - 2019 Auditor's Remuneration | Service Category | Amount (HK$ million) | | :--- | :--- | | Audit Services | 19 | | Total Non-Audit Services | 19 | | - Review and Advisory Services | 11 | | - Services Required by Regulators | 5 | | - Tax Services | 2 | | - Other Services | 1 | Company Secretary The Company Secretary ensures compliance with Board procedures, bank articles, and relevant regulations, assisting the Executive Chairman and Board in implementing and strengthening corporate governance practices, reporting directly to the Executive Chairman, and receiving over 15 hours of professional training in 2019 - The Company Secretary is responsible for ensuring compliance with Board procedures, the bank's articles of association, and relevant rules and regulations, and assists the Executive Chairman and Board in strengthening corporate governance366 - The Company Secretary reports directly to the Executive Chairman and received over 15 hours of professional training in 2019366 Shareholders' Rights and Investor Relations The Bank of East Asia prioritizes continuous communication with shareholders through its Shareholder Communication Policy, ensuring fair and timely access to information via annual reports, website, press conferences, and investor meetings; shareholders can submit inquiries and suggestions to the Board in writing or by email - The bank has a "Shareholder Communication Policy" to ensure open and continuous communication with shareholders and investors367 - Provides timely and transparent public disclosure through channels such as its website, annual reports, press conferences, and investor meetings367369 - Shareholders can submit inquiries and suggestions to the Company Secretary in writing or via email367 - The Annual General Meeting serves as a platform for shareholder engagement, where all important matters are presented as separate resolutions and voted on by poll369370 Dividend Policy The Bank of East Asia's dividend policy aims to balance long-term growth with shareholder returns, projecting annual total dividends (excluding special dividends) between 30% and 70% of annual attributable net profit, paid semi-annually, with options for scrip dividends or special dividends - The dividend policy aims to balance the Group's long-term growth with shareholder interests, with annual total dividends (excluding special dividends) projected to be 30% to 70% of annual attributable net profit374379 - Dividends are paid semi-annually, with consideration for scrip dividends in lieu of cash or special dividends375379 - Dividend decisions consider statutory and regulatory restrictions, Group financial performance, shareholder expectations, market conditions, long-term business growth and strategy, and capital adequacy ratios373379 Related Party Transactions This section discloses significant related party transactions entered into by The Bank of East Asia in the ordinary course of business on normal commercial terms, complying with relevant Listing Rules disclosure requirements - Significant related party transactions are entered into in the ordinary course of business on normal commercial terms and comply with relevant disclosure requirements of the Listing Rules376379 Responsibilities of Directors for the Consolidated Financial Statements The Bank of East Asia's directors acknowledge their responsibility for preparing the consolidated financial statements, strictly adhering to relevant regulations, and timely publishing annual and interim reports - Directors acknowledge their responsibility for preparing the consolidated financial statements, strictly adhering to relevant regulations, and timely publishing the 2018 Annual Report and 2019 Interim Report377379 Corporate Social Responsibility ESG Integration and Employee Well-being The Bank of East Asia Group is committed to integrating ESG objectives into its business and operations, enhancing employee medical benefits, organizing numerous recreational activities to promote work-life balance, and providing health seminars to alleviate stress - The Bank of East Asia Group is committed to integrating Environmental, Social, and Governance (ESG) objectives into its business and operations380386 - Enhanced employee medical benefits, with the Staff Recreation Club organizing 65 recreational activities attracting nearly 6,700 employees and their families382387 - Provided special health seminars for employees to help alleviate workplace stress caused by social unrest in Hong Kong382387 Customer Satisfaction and Responsible Procurement The Bank of East Asia conducted its fourth consecutive customer satisfaction survey, revealing approximately 90% satisfaction with relationship manager services, and implemented "Procurement and Payment Guidelines" requiring suppliers to adhere to a code of conduct and providing training on ESG risks - Conducted its fourth consecutive customer satisfaction survey, with over 1,000 customers and non-customers participating, and approximately 90% of customers satisfied with relationship manager services383388 - Implemented "Procurement and Payment Guidelines", requiring potential suppliers to adhere to a "Supplier Code of Conduct" and providing training to understand ESG risks384389 Community Investment and Environmental Protection The Bank of East Asia's community investment focuses on education, social welfare, and environmental protection, hosting senior luncheons, promoting financial literacy, supporting youth well-being through its Charitable Foundation, reducing energy consumption and waste, and becoming a signatory to the Green Investment Principles for the Belt and Road - Community investment initiatives are built upon three pillars: education, social welfare, and environmental protection385390 - Hosted community luncheons for approximately 1,200 elderly individuals, and organized or co-organized multiple financial education programs, earning the "Financial Education Award 2020"385390391396 - Supported the "Teen Café Youth Physical and Mental Wellness Promotion Programme" through The Bank of East Asia Charitable Foundation392396 - Reduced electricity consumption by 1.4% in 2019, exceeding the 1.1% target; plastic and metal recycling volumes increased by 9.2% and 7.8%, respectively393397 - Became a signatory to the "Green Investment Principles for the Belt and Road", integrating low-carbon and sustainable development into Belt and Road projects394397 Major Recognition (CSR) The Bank of East Asia Group received multiple CSR accolades, including the Community Chest's "Honorary Award" and "Diamond Award," the Hong Kong Council of Social Service's "Caring Company" recognition, and the China Banking Association's "Best Social Responsibility Practice Case Award" and "Best Poverty Alleviation Contribution Award" - Received multiple awards from The Community Chest of Hong Kong, including the "Honorary Award" (20th consecutive year) and "Diamond Award" (25th consecutive year)401405 - Recognized as a "Caring Company" by The Hong Kong Council of Social Service for 16 consecutive years401405 - BEA China received the "2018 China Banking Industry Best Social Responsibility Practice Case Award" and "2019 Best Poverty Alleviation Contribution Award" from the China Banking Association403406 Report of the Directors Business Overview and Financial Performance The Bank of East Asia and its subsidiaries primarily provide banking and financial services; the 2019 business review, financial performance, and future developments are detailed in the Executive Chairman's and Senior Management's reports, while environmental policy and stakeholder relations are covered in the Corporate Social Responsibility section - The principal activities of the Bank and its subsidiaries are the provision of banking and related financial services409422 - The 2019 business review, financial performance analysis, and future developments are disclosed in the Executive Chairman's Statement and the Report of the Senior Management410422 - The Group's environmental policy and key stakeholder relationships are elaborated in the Corporate Social Responsibility section and the 2019 Environmental, Social and Governance Report411423 Financial Statements and Capital Activities In 2019, the Group's profit attributable to shareholders was HK$3.26 billion, allocated to reserves; the bank paid interim and second interim dividends, issued new shares in lieu of cash dividends, and issued undated additional Tier 1 capital securities and senior notes while early redeeming hybrid Tier 1 capital securities and subordinated notes - In 2019, the Group's profit attributable to shareholders was HK$3.26 billion, which has been transferred to reserves415422 - 2019 Dividend Distribution | Dividend Type | Amount Per Share (HK$) | | :--- | :--- | | Interim Dividend | 0.11 | | Second Interim Dividend | 0.35 | - Issued 51,215,955 and 9,740,885 new shares in lieu of the 2018 second interim dividend, centenary special dividend, and 2019 interim dividend, respectively418422 - 2019 Issuance of Debt Securities | Category | Amount Issued (HK$ equivalent) | | :--- | :--- | | Undated Additional Tier 1 Capital Securities | 5,083,000,000 | | Senior Notes | 234,716,000 | | Total | 5,317,716,000 | - Completed early redemption of US$318.345 million in hybrid Tier 1 capital securities and US$500 million in 4.25% subordinated notes419423 Directors and Their Interests This section details changes in Board members, including Sir David Li Kwok-po's re-designation as Executive Chairman and the appointment of Mr. Adrian Li and Mr. Brian Li as Co-Chief Executives; several directors will retire and seek re-election at the 2020 AGM, and the report lists directors' and Co-Chief Executives' interests in bank shares, related shares, debt securities, and share options - Sir David Li Kwok-po was re-designated Executive Chairman, and Mr. Adrian Li and Mr. Brian Li were appointed Co-Chief Executives432437 - Several directors will retire at the 2020 Annual General Meeting and offer themselves for re-election426428 - Interests of Directors and Co-Chief Executives in the Bank's Ordinary Shares as at December 31, 2019 | Name | Capacity and Nature | Number of Shares | Total | Percentage (%) | | :--- | :--- | :--- | :--- | :--- | | David Li Kwok-po | Beneficial Owner, Spouse's Interest, Corporate Interest, Executor of Estate | 86,208,360 | 100,102,091 | 3.44 | | Arthur Li Kwok-cheung | Beneficial Owner, Corporate Interest, Executor of Estate | 13,085,663 | 41,742,338 | 1.44 | | William Fung Kwok-lun | Beneficial Owner, Spouse's Interest, Settlor and Beneficiary of Discretionary Trust | 464,393 | 17,879,763 | 0.62 | | Robert Li Kwok-sing | Beneficial Owner, Spouse's Interest, Corporate Interest | 1,226,599 | 18,482,570 | 0.64 | | Ronald Li Kwok-sze | Beneficial Owner, Administrator of Estate | 11,752,581 | 13,575,104 | 0.47 | | Adrian Li Man-kiu | Beneficial Owner, Children's Interest, Grantor/Settlor of Discretionary Trust | 1,085,277 | 3,177,361 | 0.11 | | Brian Li Man-bun | Beneficial Owner, Corporate Interest | 2,479,902 | 3,300,184 | 0.11 | - Sir David Li, Mr. Adrian Li, and Mr. Brian Li were granted share options to subscribe for the Bank's ordinary shares under the Approved Employee Share Option Scheme442449451453 Interests of Substantial Shareholders and Other Persons As of December 31, 2019, Sumitomo Mitsui Banking Corporation, Criteria Caixa, S.A., Sociedad Unipersonal, and Guoco Management Limited were The Bank of East Asia's substantial shareholders, holding approximately 19.01%, 17.30%, and 14.15% of share interests, respectively - Interests of Substantial Shareholders in the Bank's Ordinary Shares as at December 31, 2019 | Name | Capacity and Nature | Number of Shares | Percentage (%) | | :--- | :--- | :--- | :--- | | Sumitomo Mitsui Banking Corporation | Beneficial Owner | 510,003,673 | 19.01 | | Sumitomo Mitsui Financial Group | Corporate Interest | 510,003,673 | 19.01 | | Criteria Caixa, S.A., Sociedad Unipersonal | Beneficial Owner | 464,287,319 | 17.30 | | Fundación Bancaria Caixa d'Estalvis i Pensions de Barcelona, "la Caixa" | Corporate Interest | 464,287,319 | 17.30 | | Guoco Management Limited | Beneficial Owner | 369,755,978 | 14.15 | | Guoco Group Limited | Corporate Interest | 369,755,978 | 14.15 | | Elliott Capital Advisors, L.P. | Corporate Interest | 218,080,742 | 8.00 | - Sumitomo Mitsui Financial Group wholly owns Sumitomo Mitsui Banking Corporation, and la Caixa wholly owns Criteria Caixa484487 Connected Transaction In November 2019, The Bank of East Asia entered into a participation agreement with major shareholder Sumitomo Mitsui Banking Corporation to transfer a US$40 million letter of credit facility, constituting a connected transaction under the Listing Rules and duly disclosed - In November 2019, The Bank of East Asia entered into a participation agreement with Sumitomo Mitsui Banking Corporation (a substantial shareholder) to transfer a US$40 million letter of credit facility490497 - This transaction constituted a connected transaction under the Listing Rules, as its applicable percentage ratio exceeded 0.1% but was less than 5%, and was disclosed in the annual report491497 Other Disclosures As of the reporting date, The Bank of East Asia maintained the public float required by the Listing Rules; in 2019, the Group's charitable donations totaled approximately HK$9 million, and the annual report complies with the Banking (Disclosure) Rules, with shareholders to approve the re-appointment of KPMG as auditor - As of the reporting date, the Bank maintained the public float stipulated by the Listing Rules492498 - In 2019, the Group's charitable and philanthropic donations amounted to approximately HK$9 million493498 - The annual report complies with the applicable disclosure requirements of the Banking (Disclosure) Rules495498 - Shareholders will be asked to approve the re-appointment of KPMG as auditor496498 Independent Auditor's Report Auditor's Opinion and Basis KPMG issued an unmodified opinion on The Bank of East Asia Group's consolidated financial statements for the year ended December 31, 2019, affirming they present a true and fair view of the Group's financial position, performance, and cash flows in accordance with HKFRSs and the Hong Kong Companies Ordinance, based on an audit conducted under HKSA and maintaining independence - KPMG issued an unmodified opinion on the consolidated financial statements501504 - The consolidated financial statements present a true and fair view of the Group's financial position, performance, and cash flows, in accordance with Hong Kong Financial Reporting Standards and the Hong Kong Companies Ordinance501504 - The audit was conducted in accordance with Hong Kong Standards on Auditing, maintaining independence502505 Key Audit Matters Key audit matters include impairment provisions for customer loans and advances and the fair value assessment of financial instruments, both significantly impacting financial statements due to uncertain economic outlook, increased mainland impairment losses, and the complexity and judgment involved in valuation models - Impairment provisions for customer loans and advances are a key audit matter due to uncertain economic outlook, increased mainland impairment losses, and the judgmental nature of assessing collateral recoverability508509515 - The fair value assessment of financial instruments is a key audit matter due to the complexity of valuation models, the significance of management judgment, and the lower transparency of some input parameters518519 - Audit procedures include evaluating internal controls, model reliability, data accuracy, the appropriateness of management's judgments, and compliance with disclosures512515518519 Responsibilities of Directors and Auditor Directors are responsible for preparing true and fair consolidated financial statements and ensuring effective internal controls, while the auditor's role is to obtain reasonable assurance that the financial statements are free from material misstatement and to communicate audit scope, timing, and significant findings to the Audit Committee - Directors are responsible for preparing true and fair consolidated financial statements and for internal controls necessary to ensure the statements are free from material misstatement, whether due to fraud or error521527 - The auditor's objective is to obtain reasonable assurance that the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error523527 - The auditor communicates with the Audit Committee regarding the audit scope, timing, significant audit findings, and matters related to independence529530 Financial Statements Consolidated Income Statement In 2019, The Bank of East Asia's net interest income grew 11.9% to HK$14.50 billion, and net fee and commission income rose 10.8% to HK$2.941 billion; however, a significant increase in impairment losses on financial instruments to HK$7.253 billion led to a 49.9% decline in profit attributable to shareholders, reaching HK$3.260 billion - 2019 Consolidated Income Statement Summary | Metric | 2019 (HK$ million) | 2018 (HK$ million) | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | 14,500 | 12,959 | +11.9 | | Net Fee and Commission Income | 2,941 | 2,653 | +10.8 | | Non-Interest Income | 5,184 | 4,113 | +26.0 | | Operating Income | 19,684 | 17,072 | +15.3 | | Operating Expenses | (9,891) | (8,563) | +15.5 | | Operating Profit Before Impairment Losses | 9,793 | 8,509 | +15.1 | | Impairment Losses on Financial Instruments | (7,253) | (1,188) | +510.5 | | Profit Attributable to Group Shareholders | 3,260 | 6,509 | -49.9 | | Basic Earnings Per Share | HK$0.89 | HK$2.07 | -57.0 | Consolidated Statement of Comprehensive Income In 2019, The Bank of East Asia reported a net profit of HK$3.336 billion and other comprehensive income of HK$1.630 billion, primarily from net changes in the fair value reserve (debt instruments), resulting in a total comprehensive income of HK$4.966 billion, with HK$4.909 billion attributable to Group shareholders - 2019 Consolidated Statement of Comprehensive Income Summary | Metric | 2019 (HK$ million) | 2018 (HK$ million) | | :--- | :--- | | Net Profit | 3,336 | 6,554 | | Other Comprehensive Income | 1,630 | (2,576) | | Total Comprehensive Income | 4,966 | 3,978 | | Total Comprehensive Income Attributable to Group Shareholders | 4,909 | 3,928 | - Net change in fair value reserve (debt instruments) of HK$1.709 billion was the primary contributor to other comprehensive income540 Consolidated Statement of Financial Position As of December 31, 2019, The Bank of East Asia's total assets reached HK$865.198 billion, a 3.1% increase from 2018, with customer loans and advances growing to HK$505.336 billion and investment securities to HK$163.514 billion; total liabilities were HK$755.560 billion, and total shareholders' equity was HK$109.638 billion - 2019 Consolidated Statement of Financial Position Summary | Metric | 2019 (HK$ million) | 2018 (HK$ million) | | :--- | :--- | | Assets | | | | Total Assets | 865,198 | 839,451 | | Customer Loans and Advances | 505,336 | 498,284 | | Investment Securities | 163,514 | 144,729 | | Shareholders' Equity and Liabilities | | | | Total Liabilities | 755,560 | 735,876 | | Total Shareholders' Equity | 109,638 | 103,575 | | Total Equity Attributable to Group Shareholders | 95,307 | 91,826 | | Additional Capital Instruments | 13,963 | 8,894 | - Customer deposits amounted to HK$573.527 billion, and certificates of deposit in issue were HK$74.059 billion542 Consolidated Statement of Changes in Equity In 2019, The Bank of East Asia's total shareholders' equity increased from HK$103.575 billion at end-2018 to HK$109.638 billion, driven by profit for the year, other comprehensive income, issuance of additional capital instruments, scrip dividends, and redemption of hybrid Tier 1 capital instruments - 2019 Consolidated Statement of Changes in Equity Summary | Metric | January 1, 2019 (HK$ million) | December 31, 2019 (HK$ million) | | :--- | :--- | :--- | | Total Shareholders' Equity | 103,575 | 109,638 | | Profit for the Year | - | 3,336 | | Other Comprehensive Income | - | 1,630 | | Issuance of Additional Capital Instruments | - | 5,069 | | Shares Issued for Scrip Dividends | - | 1,454 | | Redemption of Hybrid Tier 1 Capital Instruments | - | (2,495) | - In 2019, HK$5.083 billion of undated non-cumulative subordinated additional Tier 1 capital instruments were issued, and HK$2.495 billion of hybrid Tier 1 capital instruments were redeemed545546 [Consolidated Cash Flow Statement](index=174&