交通银行(03328) - 2018 - 年度财报

Financial Summary The Group achieved steady growth with net profit attributable to parent company shareholders reaching RMB 73.63 billion, a 4.85% year-on-year increase, and total assets growing 5.45% to RMB 9.53 trillion, while asset quality remained stable with a slight decrease in NPL ratio to 1.49% and significant improvement in provision coverage ratio to 173.13%, alongside enhanced capital adequacy Key Financial Indicators for 2018 | Indicator | 2018 | 2017 | Change | | :--- | :--- | :--- | :--- | | Performance Indicators | | | | | Net Profit (Attributable to Parent Company Shareholders, RMB million) | 73,630 | 70,223 | +4.85% | | Return on Average Assets (%) | 0.80 | 0.81 | -0.01 percentage points | | Return on Average Equity (%) | 11.36 | 11.44 | -0.08 percentage points | | Cost-to-Income Ratio (%) | 31.50 | 31.85 | -0.35 percentage points | | Scale Indicators (Period-end) | | | | | Total Assets (RMB million) | 9,531,171 | 9,038,254 | +5.45% | | Customer Loans (RMB million) | 4,854,228 | 4,579,256 | +6.00% | | Customer Deposits (RMB million) | 5,724,489 | 5,545,366 | +3.23% | | Asset Quality (Period-end) | | | | | Non-Performing Loan Ratio (%) | 1.49 | 1.50 | -0.01 percentage points | | Provision Coverage Ratio (%) | 173.13 | 154.73 | +18.40 percentage points | | Capital Adequacy Ratio (Period-end) | | | | | Common Equity Tier 1 Capital Adequacy Ratio (%) | 11.16 | 10.79 | +0.37 percentage points | | Tier 1 Capital Adequacy Ratio (%) | 12.21 | 11.86 | +0.35 percentage points | | Capital Adequacy Ratio (%) | 14.37 | 14.00 | +0.37 percentage points | - The Group adopted new financial instrument accounting standards (IFRS 9) from January 1, 2018, with prior comparable data not restated and initial adoption differences adjusted to opening retained earnings and other reserves[15] Chairman's Statement Chairman Peng Chun noted that 2018, marking BoCom's 110th anniversary, saw "steady progress, better than expected" performance amidst a complex operating environment, emphasizing four core themes: serving the real economy, deepening the "Internationalization and Diversified Operations" strategy, advancing reforms in organization, fintech, and risk management, and maintaining stable asset quality, while refining the strategy into a "186" blueprint centered on building the "Best Wealth Management Bank" - Customer loans increased by RMB 274.97 billion for the full year, a 6.00% growth, primarily directed towards manufacturing and energy-saving sectors, with a steady increase in personal credit proportion[19] - Net profit from subsidiaries and overseas branches grew by 10.02%, increasing their contribution to the Group by 0.65 percentage points, while transaction-based business income surged by 123%[19] - Asset quality control targets were met, with the non-performing loan ratio decreasing to 1.49%, down 1 basis point from the end of the previous year, and the provision coverage ratio increasing by 18.40 percentage points to 173.13%[19] - The "186" strategic framework was introduced, focusing on one core goal: "Building the Best Wealth Management Bank," supported by eight guarantees and six operational strategies, outlining a clear implementation roadmap[23] President's Statement President Ren Deqi reviewed 2018 operating performance, highlighting that under the Board's leadership, the company fully achieved its annual management goals, realizing "steady improvement in efficiency, stable growth in scale, and consistent enhancement in quality," with key achievements in serving the real economy, strengthening comprehensive risk management, and leveraging technology for channel transformation 2018 Operating Performance Highlights | Indicator | Value | Year-on-Year Change | | :--- | :--- | :--- | | Total Assets | RMB 9.53 trillion | +5.45% | | Net Profit (Attributable to Parent) | RMB 73.63 billion | +4.85% | | Non-Performing Loan Ratio | 1.49% | -0.01 percentage points | | Cost-to-Income Ratio | 31.50% | -0.35 percentage points | | Overseas Branches and Subsidiaries Profit Contribution | 13.92% | +0.65 percentage points | - Overdue loans and loans overdue for more than 90 days achieved "double reduction" for three consecutive years, with the provision coverage ratio significantly increasing by 18.40 percentage points[30] - The "New 531" intelligent transformation project was fully launched, leveraging technology to empower business development, resulting in mobile banking registered customers reaching 74.14 million, a 21.42% year-on-year increase, and transaction volume reaching RMB 11.00 trillion, a 43.79% year-on-year growth[30][31] Business Overview The Group's principal businesses encompass corporate banking, personal banking, and treasury operations, with subsidiaries involved in funds, trusts, leasing, insurance, securities, and other areas, achieving a 5.45% increase in total assets to RMB 9.53 trillion during the reporting period, underpinned by strong corporate governance, a rich history, expanding global service capabilities, enhanced comprehensive financial services, a growing wealth management focus, integrated online and offline channels, full embrace of fintech, and effective strategic cooperation with HSBC - The Group's businesses cover corporate banking, personal banking, and treasury operations, with subsidiaries involved in funds, trusts, financial leasing, insurance, overseas securities, and debt-to-equity swaps[33] - An international footprint has been established, primarily in Asia-Pacific with Europe and America as two wings, operating 22 overseas banking institutions in 16 countries and regions, with overseas assets exceeding RMB 1 trillion[36] - Wealth management features are increasingly prominent, with assets under management (AUM) for personal finance reaching RMB 3.06 trillion[36] - The "New 531" intelligent transformation project for the next-generation Group information system was launched, promoting deep integration of big data, artificial intelligence, blockchain, and other fintech technologies with banking operations[37] - Strategic cooperation with HSBC, the second-largest shareholder (holding 19.03% of shares), was upgraded to "deepen strategic cooperation and jointly create value"[39] Management Discussion and Analysis Macroeconomic and Financial Environment In 2018, China's economy maintained stable operation amidst external uncertainties, with GDP growing 6.6% year-on-year, driven by increasing contributions from the tertiary industry and final consumption, while monetary and credit aggregates grew steadily, and the central bank implemented a prudent and neutral monetary policy to ensure reasonable liquidity and enhance support for the real economy, particularly small and micro enterprises and private businesses - China's Gross Domestic Product (GDP) reached RMB 90.03 trillion in 2018, growing 6.6% year-on-year[44] - Final consumption expenditure contributed 76.2% to economic growth, an 18.6 percentage point increase year-on-year, becoming the primary driver of economic expansion[44] - By the end of 2018, the broad money supply (M2) balance increased by 8.1% year-on-year, and RMB loan balance grew by 13.5% year-on-year[44] Group's Principal Business Review In 2018, the Group achieved steady performance with net profit growing 4.85% and total assets increasing 5.45%, guided by the "186" strategy, upholding its commitment to serving the real economy with inclusive finance loans growing 29.63%, while deepening its "Internationalization and Diversified Operations" strategy, expanding wealth management to RMB 3.06 trillion AUM, and enhancing risk control and capital strength through reform and technology, reducing the NPL ratio to 1.49% and increasing the capital adequacy ratio to 14.37% - The Group redefined its "Internationalization and Diversified Operations" strategy as "pursuing internationalization and diversified operations to build the best wealth management bank," and introduced the "186" strategic implementation blueprint[46] - Inclusive finance loans under the "two increases" criteria increased by RMB 26.28 billion from the end of the previous year, a 29.63% growth, exceeding the average growth rate of all loans[46] - Assets under management (AUM) for personal finance reached RMB 3.06 trillion, a 6.11% increase from the end of the previous year[47] - Risk-weighted assets (RWA) growth was 4.67 percentage points lower than asset growth, and the capital adequacy ratio increased by 0.37 percentage points to 14.37% from the end of the previous year, without external capital replenishment[45][50] Corporate Banking Business Corporate banking business achieved a pre-tax profit of RMB 37.78 billion, with inclusive finance support significantly increasing, as "two increases" loans grew by 29.63%, while supply chain finance business rapidly expanded with a 22.42% increase in financing balance, investment banking performed strongly with bond underwriting volume growing 80.15% year-on-year, and asset custody scale surpassed RMB 8.9 trillion Corporate Banking Business Key Indicators (2018) | Indicator | Amount (RMB 100 million) | Change from Year-end | | :--- | :--- | :--- | | Pre-tax Profit | 377.79 | - | | Corporate Deposit Balance | 39,440.98 | +2.28% | | Corporate Loan Balance | 32,186.01 | +1.55% | | Corporate NPL Ratio | 1.78% | - | - Inclusive finance loans under the "two increases" criteria grew by 29.63%, exceeding the average growth rate of all loans, and the number of customers with outstanding loans increased by 15,607 from the end of the previous year[51] - Domestic branches cumulatively lead-underwrote 437 types of bonds (excluding local government bonds), with an underwriting amount of RMB 320.16 billion, a 80.15% year-on-year increase[53] - The bank's total entrusted asset management scale reached RMB 8.91 trillion, an 8.33% increase from the end of the previous year[54] Personal Banking Business Personal banking business achieved a pre-tax profit of RMB 24.62 billion, with personal loan balance growing 16.01% year-on-year, while wealth management business steadily developed with AUM reaching RMB 3.06 trillion, and bank card business showed significant growth, with credit card issuance exceeding 70 million, annual consumption increasing 35.19% year-on-year, and credit card overdraft NPL ratio decreasing by 0.32 percentage points to 1.52% Personal Banking Business Key Indicators (2018) | Indicator | Amount (RMB 100 million) | Change from Year-end | | :--- | :--- | :--- | | Pre-tax Profit | 246.20 | - | | Personal Deposit Balance | 17,764.88 | +5.38% | | Personal Loan Balance | 16,356.27 | +16.01% | | Personal NPL Ratio | 0.94% | - | - Assets under management (AUM) for personal finance reached RMB 3.06 trillion, a 6.11% increase from the end of the previous year, with the number of qualified Wealth Management and Private Banking clients growing by 9.40% and 11.09% respectively[57] Bank Card Business Performance (2018) | Item | Value | Year-on-Year Growth | | :--- | :--- | :--- | | Credit Cards in Circulation | 71.55 million cards | - | | Annual Credit Card Consumption | RMB 3.07 trillion | +35.19% | | Credit Card Overdraft Balance | RMB 505.19 billion | +26.61% | | Annual Debit Card Consumption | RMB 1.01 trillion | +7.21% | Interbank and Financial Markets Business Interbank and financial markets business achieved a pre-tax profit of RMB 20.83 billion, with financial investment scale reaching RMB 2.82 trillion, an 11.61% increase from the end of the previous year, and an investment yield of 3.58%, while asset management business actively transformed, with the balance of RMB off-balance sheet wealth management products growing 11.83% to RMB 769.67 billion, and the proportion of net-value products increasing Interbank and Financial Markets Business Key Indicators (2018) | Indicator | Amount (RMB 100 million) | Change from Year-end | | :--- | :--- | :--- | | Pre-tax Profit | 208.29 | - | | Financial Investment Scale | 28,219.09 | +11.61% | | Securities Investment Yield | 3.58% | Largely stable | - The balance of RMB off-balance sheet wealth management products reached RMB 769.67 billion, an 11.83% increase from the end of the previous year, with the average daily scale of net-value wealth management products increasing by 4.83 percentage points to 15.52% of off-balance sheet wealth management products[66] Dual-Line Channel Development The Group adhered to an "online-first, mobile-priority" channel transformation strategy, increasing its e-banking diversion rate to 96.59%, with mobile banking experiencing rapid growth, as registered customers increased by 21.42% and transaction volume grew by 43.79%, while optimizing its offline branch network, reducing the total number of branches by 29 to 3,241, and promoting intelligent and lightweight branch construction - The e-banking diversion rate reached 96.59%, an increase of 2.05 percentage points from the end of the previous year[69] - Mobile banking registered customers reached 74.14 million, a 21.42% increase from the end of the previous year, with transaction volume reaching RMB 11.00 trillion, a 43.79% year-on-year growth[70] - The total number of domestic banking institution branches was 3,241, a net decrease of 29 from the end of the previous year, including 41 new openings and 70 integrated low-performing branches[69] Internationalization and Diversified Operations Internationalization and diversified operations yielded significant results, with overseas banking institutions' net profit growing 7.47% year-on-year, total assets increasing 10.83%, and the non-performing loan ratio remaining low at 0.25%, while net profit from controlled subsidiaries grew 13.14% year-on-year, increasing their contribution to the Group's profit, and core subsidiaries like BoCom Leasing and BoCom International Trust achieved steady growth International Operations Key Indicators (2018) | Indicator | Amount (RMB 100 million) | Year-on-Year Change | | :--- | :--- | :--- | | Net Profit of Overseas Banking Institutions | 55.07 | +7.47% | | Total Assets of Overseas Banking Institutions | 10,691.86 | +10.83% | | NPL Ratio of Overseas Banking Institutions | 0.25% | - | Diversified Operations Key Indicators (2018) | Indicator | Amount (RMB 100 million) | Year-on-Year Change | | :--- | :--- | :--- | | Net Profit Attributable to Parent of Controlled Subsidiaries | 47.45 | +13.14% | | Total Assets of Controlled Subsidiaries | 3,677.85 | +16.02% | - BoCom Leasing achieved a net profit of RMB 2.74 billion, a 13.62% year-on-year increase, while BoCom International Trust achieved a net profit attributable to parent of RMB 899 million, a 7.92% year-on-year increase[80] Financial Statement Analysis The Group's financial performance in 2018 was robust, with pre-tax profit growing 3.37% year-on-year to RMB 86.07 billion, net interest income increasing 4.83%, and net interest margin (NIM) stable at 1.51% with a quarterly upward trend, while net fee and commission income grew 1.69%, primarily driven by bank card business, and asset and liability scale expanded steadily, with total assets growing 5.45% and total liabilities growing 5.55%, and capital adequacy and leverage ratios meeting regulatory requirements and showing improvement Analysis of Key Income Statement Items During the reporting period, the Group's pre-tax profit reached RMB 86.07 billion, a 3.37% year-on-year increase, with net interest income of RMB 130.91 billion, up 4.83% year-on-year, net interest spread of 1.39%, and net interest margin of 1.51%, while net fee and commission income was RMB 41.24 billion, up 1.69% year-on-year, with bank card fee income growing 23.65%, and credit impairment losses amounted to RMB 43.45 billion, with loan credit impairment losses increasing 40.90% year-on-year, and the cost-to-income ratio decreased by 0.35 percentage points to 31.50% Key Income Statement Items (RMB million) | Item | 2018 | 2017 | | :--- | :--- | :--- | | Net Interest Income | 130,908 | 124,873 | | Net Fee and Commission Income | 41,237 | 40,551 | | Net Operating Income | 213,055 | 196,520 | | Credit Impairment Losses | (43,454) | Not applicable | | Pre-tax Profit | 86,067 | 83,265 | | Net Profit | 74,165 | 70,691 | - Net interest spread was 1.39%, down 1 basis point year-on-year, while net interest margin was 1.51%, flat year-on-year, and showed a quarterly upward trend[87] - Bank card fee income was RMB 20.11 billion, an increase of RMB 3.85 billion year-on-year, representing a 23.65% growth, making it the primary driver of growth in intermediary business[99] Analysis of Key Balance Sheet Items As of the end of the reporting period, the Group's total assets reached RMB 9.53 trillion, a 5.45% increase from the end of the previous year, with customer loans being the largest asset item, accounting for 49.76%, and growing 6.00% to RMB 4.85 trillion, of which personal loans increased 16.01%, raising their proportion to 33.69%, while financial investments grew 11.61% to RMB 2.82 trillion, and total liabilities reached RMB 8.83 trillion, an increase of 5.55%, with customer deposits as the primary funding source, accounting for 64.86%, and growing 3.23% Asset Structure (RMB million) | Item | Balance as of 2018 Year-end | Proportion (%) | | :--- | :--- | :--- | | Customer Loans | 4,742,372 | 49.76 | | Financial Investments | 2,821,909 | 29.61 | | Cash and Deposits with Central Banks | 840,171 | 8.81 | | Due from and Placements with Banks and Other Financial Institutions | 848,067 | 8.90 | | Total Assets | 9,531,171 | 100.00 | - Personal loan balance was RMB 1.64 trillion, a 16.01% increase from the end of the previous year, with its proportion in customer loans rising by 2.90 percentage points to 33.69% from the end of the previous year[110] - Customer deposits are the primary funding source, accounting for 64.86% of total liabilities, with the balance increasing by RMB 179.12 billion, a 3.23% growth from the end of the previous year[121][122] Capital Adequacy Ratio At the end of the reporting period, the Group's capital strength significantly improved, with all capital adequacy ratio indicators meeting regulatory requirements and increasing from the end of the previous year, as the Group's capital adequacy ratio reached 14.37%, Tier 1 capital adequacy ratio was 12.21%, and Common Equity Tier 1 capital adequacy ratio was 11.16% Group Capital Adequacy Ratio (%) | Indicator | 2018 Year-end | 2017 Year-end | | :--- | :--- | :--- | | Common Equity Tier 1 Capital Adequacy Ratio | 11.16 | 10.79 | | Tier 1 Capital Adequacy Ratio | 12.21 | 11.86 | | Capital Adequacy Ratio | 14.37 | 14.00 | Business Innovation and New Products During the reporting period, the Group continuously advanced business innovation across corporate, retail, and interbank sectors, launching the "YunTong e-Finance Service Platform" and applying blockchain technology in supply chain finance and investment banking, introducing the "YouYi Platinum Credit Card" and "WanJinHua" consumer credit product in personal finance, and optimizing intelligent wealth management services like "Wealth Management Advisor," while actively participating in "Bond Connect" and creating Credit Risk Mitigation Warrants (CRMW) to support private enterprise financing in interbank and financial markets - Corporate Banking: Launched the "YunTong e-Finance Service Platform" and introduced "Chain-BoCom Finance," the market's first blockchain-based asset securitization system, in investment banking business[55][150] - Personal Banking: Issued the YouYi Platinum Credit Card for young high-end customers, with issuance exceeding 2 million cards, and launched the innovative consumer credit product "WanJinHua"[154] - Interbank and Financial Markets: Created Credit Risk Mitigation Warrants (CRMW) to provide credit enhancement services for private enterprises[162] Risk Management The Group aims to establish a "comprehensive, differentiated, specialized, intelligent, and accountability-based" risk management system, deepening reforms in risk and credit management, with an overall risk appetite defined as "prudent, balanced, compliant, and innovative," achieving stable and improving asset quality indicators during the reporting period, with the non-performing loan ratio decreasing by 1 basis point to 1.49% from the end of the previous year, and the provision coverage ratio increasing by 18.40 percentage points, while credit risk management optimized the credit approval system, focused on key areas, and intensified non-performing asset disposal, and market and liquidity risk management systems were refined, with all indicators meeting regulatory requirements - The Group's overall risk appetite was established as "prudent, balanced, compliant, and innovative"[165] - The entire Group continued to achieve "double reduction" in overdue loans and loans overdue for more than 90 days, with the non-performing loan ratio decreasing by 1 basis point from the end of the previous year, and the provision coverage ratio increasing by 18.40 percentage points[164] Loan Five-Category Classification (RMB million) | Five-Category Classification | Balance as of 2018 Year-end | Proportion (%) | | :--- | :--- | :--- | | Normal Loans | 4,662,605 | 96.06 | | Special Mention Loans | 119,111 | 2.45 | | Total Non-Performing Loans | 72,512 | 1.49 | | Of which: Substandard | 13,711 | 0.28 | | Of which: Doubtful | 38,456 | 0.79 | | Of which: Loss | 20,345 | 0.42 | | Total | 4,854,228 | 100.00 | Principal Subsidiaries The Group's principal subsidiaries achieved good development in their respective fields, with BoCom Leasing's net profit growing 13.62% to RMB 2.74 billion, prominently featuring aviation and shipping businesses, while BoCom International Trust managed assets of RMB 883 billion, with net profit growing 7.92%, and several public funds under BoCom Schroders Fund performed excellently, and BoCom Life Insurance's total assets exceeded RMB 40 billion, with a comprehensive investment yield of 6.31%, and the newly established BoCom Investment has begun implementing market-oriented debt-to-equity swap projects Principal Subsidiaries Performance (2018) | Subsidiary Name | Business Area | Net Profit (RMB 100 million) | Asset Scale/AUM (RMB 100 million) | | :--- | :--- | :--- | :--- | | BoCom Leasing | Financial Leasing | 27.37 | 2,317.43 (Total Assets) | | BoCom International Trust | Trust | 10.57 | 8,830.47 (Managed Assets) | | BoCom Schroders Fund | Fund Management | 4.78 | 4,388.76 (Managed Assets) | | BoCom Life Insurance | Life Insurance | 3.22 | 405.83 (Total Assets) | | BoCom Investment | Debt-to-Equity Swap | 0.53 | 203.70 (Total Assets) | Outlook Looking ahead to 2019, despite increased global economic uncertainty, conditions for China's high-quality economic development continue to improve, presenting both opportunities and challenges for the banking industry, and the Group will focus on five key areas guided by its "186" strategic blueprint: integrating into national development strategies to enhance service quality for the real economy, winning the battle against risk by deepening risk and credit management reform, focusing on customer experience to deepen wealth management, adhering to the "Internationalization and Diversified Operations" strategy to improve operating efficiency, and strengthening fintech empowerment to facilitate digital and intelligent transformation - The Group anticipates steady growth in assets, liabilities, and various businesses in 2019[183] - Future work priorities include: serving the real economy, preventing risks, enhancing customer experience, advancing internationalization and diversified operations strategies, and strengthening fintech empowerment[183] BoCom-HSBC Strategic Cooperation The 14-year strategic cooperation between BoCom and HSBC deepened in 2018, with the strategic positioning upgraded to "deepen strategic cooperation and jointly create value," yielding fruitful results across global business, technical exchange, and social welfare, with business cooperation focusing on the "Belt and Road" initiative and the "Guangdong-Hong Kong-Macao Greater Bay Area" to jointly serve Chinese enterprises "going global," involving significant project amounts, and technical exchange upgraded to "resource and experience sharing," strengthening communication in fintech and overseas compliance - The strategic cooperation positioning was upgraded to "deepen strategic cooperation and jointly create value," and Technical Exchange Cooperation (TCE) was upgraded to Resource and Experience Sharing (RES)[184] - Global business cooperation yielded fruitful results: serving Chinese enterprises' foreign currency financing needs in a "1+1" model, with total cooperation project amounts of approximately USD 4.7 billion, and significant total amounts in bond issuance and syndicated loan projects in Hong Kong, Sydney, London, and other locations[185] - In-depth two-way technical exchanges included executive training, risk expert secondments, and specialized exchanges in areas such as net interest margin management and human resources[186] Changes in Ordinary Shares and Major Shareholdings At the end of the reporting period, the total number of ordinary shares of the Bank was 74.26 billion, with a stable share capital structure, and major shareholders included the Ministry of Finance, The Hongkong and Shanghai Banking Corporation Limited, and the National Council for Social Security Fund, while the Bank had no controlling shareholder or actual controller Top Three Ordinary Shareholder Holdings (as of 2018 Year-end) | Shareholder Name | Number of Shares Held | Percentage of Total Share Capital (%) | | :--- | :--- | :--- | | Ministry of Finance of the People's Republic of China | 19,702,693,828 | 26.53 | | The Hongkong and Shanghai Banking Corporation Limited | 14,135,636,613 | 19.03 | | National Council for Social Security Fund | 10,923,154,783 | 14.71 | - At the end of the reporting period, the total number of ordinary shareholders of the Bank was 341,373[191] - The Bank has no controlling shareholder or actual controller[194] Preferred Shares Information During the reporting period, the Bank's outstanding preferred shares included domestic preferred shares "BoCom Pref 1" and overseas USD preferred shares, with the Bank timely distributing dividends for both types of preferred shares in 2018, totaling RMB 1.755 billion for domestic preferred shares and USD 136.11 million for overseas preferred shares, and no preferred share repurchases or conversions occurred during the period 2018 Preferred Share Dividend Distribution | Preferred Share Type | Dividend Payment Date | Total Dividend (Pre-tax) | Dividend Rate | | :--- | :--- | :--- | :--- | | Domestic Preferred Shares | September 7, 2018 | RMB 1,755,000,000 | 3.9% | | Overseas Preferred Shares | July 30, 2018 | USD 136,111,111 | 5.0% | - At the end of the reporting period, there were 42 domestic preferred shareholders and 1 overseas preferred shareholder (custodian)[204] - The preferred shares issued by the Bank are accounted for as equity instruments[210] Directors, Supervisors, Senior Management, and Human Resources Management During the reporting period, the Bank's Board of Directors and senior management team underwent significant adjustments, with Mr. Peng Chun taking over as Chairman and Mr. Ren Deqi joining as President, ensuring a smooth transition in operations and management, while at the end of the period, the Board of Directors comprised 18 members and the Board of Supervisors 12 members, and in human resources management, the Bank continued to advance reforms in employment, compensation, and appraisal mechanisms, improved its performance management and training systems, and strengthened the cultivation and储备 of expert and international talent, with a total of 89,542 employees in the Group at the end of the reporting period - Significant adjustments occurred in the Board of Directors and senior management team during the reporting period: Mr. Peng Chun took over as Chairman in February 2018, and Mr. Ren Deqi joined in June 2018, serving as President from August[21][231] - At the end of the reporting period, the Bank had a total of 89,542 employees across domestic and overseas branches, with female employees accounting for 53.28%[242][338] - The Bank continuously advanced reforms in compensation and performance management, adhering to efficiency-first while balancing fairness, and implemented a deferred performance-based compensation system for employees in key positions[249][250] Board of Directors' Report The Board of Directors' report outlines the Group's principal businesses, financial position, and profit distribution for 2018, noting that due to ongoing work on issuing A-share convertible corporate bonds, no 2018 profit distribution plan has been formulated yet, and confirms the Bank's compliance with the public float requirements of the Hong Kong Listing Rules, disclosing ongoing connected transactions with major shareholder HSBC Group, which have been annually reviewed and confirmed by independent non-executive directors and auditors - Due to ongoing work on issuing A-share convertible corporate bonds, the 2018 profit distribution plan has not yet been formulated and will be promptly drafted and submitted to the general meeting of shareholders for consideration[258] - Ongoing connected transactions with major shareholder HSBC Group were conducted in the ordinary course of banking business, with transaction amounts not exceeding annual caps, and have been annually reviewed by independent non-executive directors and auditors[267][268] Board of Supervisors' Report During the reporting period, the Board of Supervisors lawfully and compliantly fulfilled its supervisory duties, holding six meetings and focusing on supervising the Bank's strategic transformation, risk internal control, capital and financial management, and the performance of directors and senior management, concluding that the Bank operated lawfully, its decision-making procedures were compliant, financial reports were true and fair, proceeds from fundraising were used as committed, and connected transactions did not harm the Bank's interests, with no objections to the proposals submitted by the Board of Directors or the Bank's "2018 Internal Control Evaluation Report" - The Board of Supervisors held 6 meetings throughout the year, deliberating 23 proposals, with an attendance rate of 94.05% for supervisors[276] - The Board of Supervisors' performance evaluations for directors and senior management were all rated as "competent"[276] - The Board of Supervisors issued independent opinions without objection on the Bank's lawful operation, the truthfulness of financial reports, the use of raised funds, connected transactions, and information disclosure[279][280] Corporate Governance Report The Bank is committed to building the "Best Corporate Governance Bank," having completed the incorporation of Party building into its Articles of Association during the reporting period, perfecting a governance mechanism of "Party Committee as the leadership core, Board of Directors for strategic decision-making, Board of Supervisors for lawful oversight, and Senior Management for authorized operation," with five specialized committees under the Board of Directors, independent non-executive directors accounting for one-third, all operating effectively, and strictly enforcing information disclosure and insider information management systems, being rated as an A-class information disclosure company by the Shanghai Stock Exchange for five consecutive years, with detailed disclosure of auditor fees and internal control status - The Bank's corporate governance mechanism is "Party Committee as the leadership core, Board of Directors for strategic decision-making, Board of Supervisors for lawful oversight, and Senior Management for authorized operation," with Party building incorporated into the Articles of Association during the reporting period[281][283] - The Board of Directors has five specialized committees: Strategy, Audit, Risk Management and Connected Transaction Control, Human Resources and Remuneration, and Social Responsibility and Consumer Rights Protection[291] - The Bank has been rated as an A-class information disclosure company by the Shanghai Stock Exchange for five consecutive years[315] 2018 Auditor Fees (RMB 10,000) | Service Type | Fees | | :--- | :--- | | Financial Statement Audit Services | 5,687 | | Internal Control Audit Services | 223 | | Total Audit Fees | 5,910 | | Non-Audit Professional Services Fees | 1,028.7 | Fulfillment of Corporate Social Responsibility The Bank actively fulfills its corporate social responsibility, with social contribution per share reaching RMB 4.72, an 11.32% year-on-year increase, and in targeted poverty alleviation, it formulated a five-year plan and invested RMB 21.169 million in three designated poverty-stricken counties, while in supporting the real economy, it actively served national strategies, increasing support for private enterprises and inclusive finance, and in green finance, green credit accounted for 99.79%, while also committed to optimizing customer service, caring for employees, and engaging in social welfare - During the reporting period, the Bank's social contribution per share reached RMB 4.72, an 11.32% year-on-year increase[318] 2018 Targeted Poverty Alleviation Achievements (RMB 10,000) | Indicator | Quantity | | :--- | :--- | | Total Capital Investment | 2,815.79 | | Designated Poverty Alleviation Loan Balance | 1,585 | | Assisted Registered Impoverished Individuals (persons) | 252 | - The balance of financial targeted poverty alleviation loans (including those for already lifted out of poverty) was RMB 27.74 billion[325] - Green credit balance accounted for 99.79%, with credit for energy conservation and emission reduction reaching RMB 283.05 billion[334] Significant Events During and after the reporting period, the Bank advanced several significant matters, including the official opening of its wholly-owned subsidiary BoCom Investment, the progress of issuing A-share convertible corporate bonds not exceeding RMB 60 billion which has received regulatory approval, the approval to establish its wealth management subsidiary BoCom Wealth Management, participation in the establishment of the National Financing Guarantee Fund, and post-reporting period, the Board of Directors approved proposals for issuing perpetual bonds, ordinary financial bonds, and increasing capital to subsidiaries - Wholly-owned subsidiary BoCom Financial Asset Investment Co., Ltd. officially commenced operations in February 2018, primarily engaging in debt-to-equity swap business[351] - The plan to publicly issue A-share convertible corporate bonds not exceeding RMB 60 billion has been approved by the general meeting of shareholders and regulatory authorities[351] - The Bank plans to invest no more than RMB 8 billion to establish BoCom Wealth Management Co., Ltd., which received approval for establishment in January 2019[352] Independent Auditor's Report PricewaterhouseCoopers issued an unqualified audit opinion on the Group's consolidated financial statements as of December 31, 2018, stating that the consolidated financial statements truly and fairly present the Group's consolidated financial position, performance, and cash flows in accordance with International Financial Reporting Standards, and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance, with key audit matters being: 1) measurement of expected credit losses for customer loans, certain financial investments, and off-balance sheet commitments; and 2) assessment of consolidation for structured entities - The auditor issued a standard unqualified opinion on the Group's 2018 consolidated financial statements[404] - Key audit matters included: (1) Measurement of expected credit losses for customer loans, debt investments measured at amortized cost in financial investments, and financial guarantee contracts and loan commitments; (2) Assessment of consolidation for structured entities[407] Consolidated Financial Statements This section includes the Group's consolidated income statement and other comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cash flows, and detailed notes to the financial statements, which show that the Group achieved steady financial growth in 2018, with expanded asset and liability scales, stable profitability, and continuous growth in shareholders' equity, while the notes provide detailed explanations of changes in accounting policies (such as the first-time adoption of IFRS 9), the composition of various items, risk management, and related party transactions Consolidated Income Statement and Other Comprehensive Income For 2018, the Group achieved net interest income of RMB 130.91 billion, a 4.83% year-on-year increase, and net fee and commission income of RMB 41.24 billion, a 1.69% year-on-year increase, with pre-tax profit of RMB 86.07 billion, a 3.37% year-on-year increase, and full-year net profit of RMB 74.17 billion, of which net profit attributable to bank shareholders was RMB 73.63 billion, a 4.85% year-on-year increase, and basic earnings per share was RMB 0.96 Consolidated Income Statement Summary (RMB million) | Item | 2018 | 2017 | | :--- | :--- | :--- | | Net Interest Income | 130,908 | 124,873 | | Net Fee and Commission Income | 41,237 | 40,551 | | Pre-tax Profit | 86,067 | 83,265 | | Net Profit | 74,165 | 70,691 | | Net Profit Attributable to Bank Shareholders | 73,630 | 70,223 | | Basic Earnings Per Share (RMB) | 0.96 | 0.91 | Consolidated Statement of Financial Position As of the end of 2018, the Group's total assets were RMB 9.53 trillion, a 5.45% increase from the end of the previous year, with net customer loans at RMB 4.74 trillion and total financial investments at RMB 2.82 trillion, while total liabilities were RMB 8.83 trillion, a 5.55% increase from the end of the previous year, with customer deposits at RMB 5.79 trillion, and total equity attributable to the Bank's shareholders was RMB 698.41 billion Consolidated Statement of Financial Position Summary (RMB million) | Item | December 31, 2018 | December 31, 2017 | | :--- | :--- | :--- | | Assets | | | | Customer Loans | 4,742,372 | 4,473,255 | | Financial Investments | 2,821,909 | 2,528,276 | | Total Assets | 9,531,171 | 9,038,254 | | Liabilities | | | | Customer Deposits | 5,793,324 | 5,545,366 | | Due to and Placements from Banks and Other Financial Institutions | 2,162,293 | 2,106,192 | | Total Liabilities | 8,825,863 | 8,361,983 | | Shareholders' Equity | | | | Total Equity Attributable to the Bank's Shareholders | 698,405 | 671,143 | | Total Shareholders' Equity | 705,308 | 676,271 | Consolidated Statement of Cash Flows For 2018, the Group's net cash flow from operating activities was a net inflow of RMB 123.89 billion, a significant year-on-year increase, primarily due to a net decrease in deposits with central banks and interbank placements, while net cash flow from investing activities was a net outflow of RMB 100.14 billion, a year-on-year decrease, and net cash flow from financing activities was a net outflow of RMB 13.48 billion, with the year-end cash and cash equivalents balance at RMB 243.49 billion, a net increase of RMB 14.57 billion from the beginning of the year Consolidated Statement of Cash Flows Summary (RMB million) | Item | 2018 | 2017 | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 123,892 | 10,727 | | Net Cash Flow from Investing Activities | (100,140) | (122,959) | | Net Cash Flow from Financing Activities | (13,476) | 30,482 | | Net Increase/(Decrease) in Cash and Cash Equivalents | 14,573 | (87,477) | Unaudited Supplementary Financial Information This section provides unaudited supplementary financial information disclosed as per regulatory requirements, including detailed information on liquidity ratios, currency concentration, international claims, overdue and restructured assets, and loan distribution, with data showing the Group's liquidity ratio increased from 58.86% to 68.73%, total overdue loans decreased from RMB 99.5 billion to RMB 89.2 billion, and international claims were primarily concentrated in the Asia-Pacific region - The liquidity ratio increased from 58.86% at the end of 2017 to 68.73% at the end of 2018[904] - Total overdue customer loans decreased from RMB 99.50 billion at the end of 2017 to RMB 89.16 billion at the end of 2018, with the proportion of total loans decreasing from 2.17% to 1.84%[907] - Total international claims amounted to RMB 1.26 trillion, with the Asia-Pacific region accounting for the highest proportion at RMB 1.05 trillion[906]