九台农商银行(06122) - 2019 - 年度财报

Chairman's Statement The Chairman reviews the Bank's strategic focus on credit, private enterprises, and SMEs, achieving stable performance in 2019 - In 2019, facing complex economic and financial conditions, the Bank maintained strategic focus, promoting structural adjustment, risk prevention, strengthened management, and transformation, achieving stable and improving performance. The Bank remained committed to its core lending business, allocating more resources to the private economy, SMEs, and agriculture, rural areas, and farmers sectors[22] Key Financial Data of the Group as of End of 2019 | Indicator | Amount (RMB billion) | | :--- | :--- | | Total Assets | 173.28 | | Total Deposits | 122.84 | | Total Loans and Advances | 96.10 | | Net Profit | 1.20 | President's Statement The President highlights the Bank's steady progress in 2019 through its "four-in-one" strategy, optimizing asset-liability structure - In 2019, the Bank's management fully implemented the "four-in-one" strategy of "agriculture, rural areas, and farmers finance, community finance, cooperation platform, and public welfare and charity," maintaining stable and improving operational momentum. Business transformation yielded significant results, reducing interbank business scale and further optimizing the asset-liability structure[26] Key Financial Data of the Bank as of End of 2019 | Indicator | Amount (RMB billion) | | :--- | :--- | | Total Assets | 124.79 | | Total Deposits | 77.85 | | Total Loans and Advances | 64.24 | | Net Profit | 0.95 | Chapter 1 Definitions and Technical Terms This chapter provides definitions of key terms and technical vocabulary used throughout the report Chapter 2 Company Profile This chapter outlines the Bank's fundamental information, historical development, and key achievements in 2019 I. Basic Information of the Bank This section provides key details of Jilin Jiutai Rural Commercial Bank, including registration, address, contact, listing, and advisors - The company's Chinese abbreviation is "Jiutai Rural Commercial Bank," and its H shares are listed on the Hong Kong Stock Exchange with stock code 06122[42][43] II. History of the Bank The Bank was restructured from the former Jiutai City Rural Credit Cooperative Union on December 16, 2008, and its H shares were listed on the HKEX on January 12, 2017 - The Bank was formally established on December 16, 2008, through the restructuring of the former Jiutai City Rural Credit Cooperative Union[46] - The Bank's H shares were listed on the Main Board of the Hong Kong Stock Exchange on January 12, 2017[46] III. Major Awards and Honors in 2019 In 2019, the Group received multiple important industry awards for its outstanding performance in agriculture, inclusive finance, and targeted poverty alleviation - The Bank received numerous accolades, including "2019 Excellent Competitiveness Agriculture, Rural Areas, and Farmers Financial Service Bank," "2019 Inclusive Finance Business Bank of the Year," and "2019 Golden Precision Poverty Alleviation Bank Institution of the Year"[49] - In interbank market trading, the Bank was recognized as "2018 Top 300 Interbank Local Currency Market Trader" and "2018 Top 100 Interbank RMB Foreign Exchange Market Trader"[48] Chapter 3 Financial Highlights This chapter presents a summary of the Group's key financial performance and ratios for 2018 and 2019 2018-2019 Group Financial Performance Highlights | Indicator (RMB million) | 2019 | 2018 | YoY Change | | :--- | :--- | :--- | :--- | | Operating Performance | | | | | Operating Income | 5,311.4 | 5,037.6 | +5.4% | | Net Interest Income | 4,165.4 | 3,520.1 | +18.3% | | Profit for the Year | 1,195.7 | 1,183.6 | +1.0% | | Profit Attributable to Owners of the Bank | 1,042.2 | 982.9 | +6.0% | | Assets/Liabilities | | | | | Total Assets | 173,275.5 | 164,253.2 | +5.5% | | Net Loans and Advances to Customers | 93,394.2 | 75,354.5 | +24.0% | | Deposits from Customers | 122,840.4 | 109,521.2 | +12.2% | | Total Equity | 15,660.1 | 15,107.5 | +3.7% | 2018-2019 Key Financial Ratios | Indicator (%) | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Profitability | | | | | Return on Assets | 0.71% | 0.67% | +0.04pp | | Return on Equity | 7.77% | 7.45% | +0.32pp | | Net Interest Margin | 2.74% | 2.36% | +0.38pp | | Net Interest Spread | 2.75% | 2.22% | +0.53pp | | Cost-to-Income Ratio | 51.08% | 54.72% | -3.64pp | | Capital Adequacy | | | | | Core Tier 1 Capital Adequacy Ratio | 9.55% | 9.40% | +0.15pp | | Capital Adequacy Ratio | 11.98% | 11.83% | +0.15pp | | Asset Quality | | | | | Non-performing Loan Ratio | 1.68% | 1.75% | -0.07pp | | Provision Coverage Ratio | 167.58% | 160.41% | +7.17pp | Chapter 4 Management Discussion and Analysis This chapter provides an in-depth review of the Group's operating environment, strategic direction, business performance, and risk management in 2019 4.1 Environment and Outlook Looking ahead to 2020, despite economic downturn and COVID-19 impacts, China's long-term economic fundamentals remain positive, guiding the Bank's stable development - The world economy is expected to slow down in 2020, but China's long-term positive economic fundamentals remain unchanged, with the government implementing various counter-cyclical policies to address the pandemic and downward pressure[55] - The Bank will adhere to the principle of seeking progress while maintaining stability, deeply implementing the "four-in-one" strategy of "agriculture, rural areas, and farmers finance, community finance, cooperation platform, and public welfare and charity," focusing on its core business, adjusting structure, and preventing risks[55] 4.2 Development Strategy The Group aims to become a leading modern and branded rural commercial bank, consolidating its strengths in agriculture and SME services while expanding retail and new businesses - The Group's strategic goal is to build a leading modern and branded rural commercial bank in China[56] - To achieve its goals, the Group plans to: - Consolidate its advantages in "agriculture, rural areas, and farmers" and SME banking services - Develop retail banking business - Expand emerging businesses and promote transformation of growth models - Strengthen risk management and internal control - Recruit, cultivate, and incentivize high-quality talent[56] 4.3 Overall Business Review In 2019, the Group maintained stable and progressive development, with operating income growing 5.4% and net profit increasing 1.0%, alongside asset expansion and improved asset quality 2019 Key Operating Indicators | Indicator | 2019 | YoY Growth | | :--- | :--- | :--- | | Total Operating Income | RMB 5.31 billion | +5.4% | | Net Profit | RMB 1.20 billion | +1.0% | | Total Assets | RMB 173.28 billion | +5.5% | | Total Loans and Advances | RMB 96.10 billion | +24.0% | | Total Deposits | RMB 122.84 billion | +12.2% | | Non-performing Loan Ratio | 1.68% | -0.07 percentage points | 4.3 (a) Consolidated Income Statement Analysis In 2019, the Group's pre-tax profit grew 4.4% to RMB 1.50 billion, and profit for the year increased 1.0% to RMB 1.20 billion, driven by strong net interest income growth - Net interest income, the largest component of operating income, increased by 18.3% to RMB 4.17 billion, rising from 69.9% to 78.4% of total operating income, serving as the primary driver of profit growth[60][61] - Net interest margin expanded from 2.36% to 2.74%, and net interest spread increased from 2.22% to 2.75%, primarily due to a rise in the average yield on interest-earning assets and a slight decrease in the average cost of interest-bearing liabilities[83] - Net fee and commission income decreased by 15.7% year-on-year, mainly due to reduced fee income from syndicated loans, settlement and clearing, and wealth management businesses[86] - Asset impairment losses increased by 22.2% year-on-year to RMB 1.09 billion, primarily due to increased provisions corresponding to loan growth and higher impairment provisions for financial assets measured at amortized cost in response to the economic environment[100] 4.3 (b) Consolidated Statement of Financial Position Analysis As of end-2019, the Group's total assets reached RMB 173.28 billion, with a significant shift towards credit business, and deposits remaining the primary funding source - Total loans and advances increased by 24.0% year-on-year to RMB 96.10 billion, with corporate loans growing by 28.9% and retail loans by 10.5%[105][107][108] - Investment securities and other financial assets decreased by 15.6% year-on-year to RMB 39.22 billion, primarily due to reduced investments in bonds and asset management plans in accordance with regulatory policies and market conditions[115] - Total deposits increased by 12.2% year-on-year to RMB 122.84 billion, primarily benefiting from strengthened pricing management, improved service levels, and increased marketing efforts[120] 4.3 (c) Asset Quality Analysis The Group's asset quality remained stable with slight improvement, as the non-performing loan ratio decreased, though loan concentration increased Loan Five-Category Classification and NPL Ratio | Classification | Amount as of 2019-end (RMB million) | Proportion (%) | Amount as of 2018-end (RMB million) | Proportion (%) | | :--- | :--- | :--- | :--- | :--- | | Normal | 92,902.1 | 96.8 | 75,021.0 | 96.8 | | Special Mention | 1,584.9 | 1.6 | 1,151.9 | 1.5 | | Substandard | 521.0 | 0.5 | 363.6 | 0.5 | | Doubtful | 1,067.1 | 1.1 | 965.0 | 1.2 | | Loss | 28.9 | 0.0 | 26.2 | 0.0 | | Total Non-performing Loans | 1,617.0 | 1.68 | 1,354.8 | 1.75 | - The non-performing loan ratio for corporate loans decreased from 1.88% to 1.60%, while for retail loans it increased from 1.38% to 1.94%, mainly due to the impact of slowing economic growth causing difficulties for some customers[134] - The loan concentration for the top ten single borrowers increased to 46.62% from 42.79% in 2018, approaching the 50% regulatory limit[129][131] 4.4 Business Review The Group's business is primarily divided into corporate banking, retail banking, and treasury operations, with corporate banking becoming the main growth driver in 2019 Operating Income Proportion by Business Segment | Business Segment | 2019 Income Proportion | 2018 Income Proportion | | :--- | :--- | :--- | | Corporate Banking Business | 63.9% | 49.7% | | Retail Banking Business | 10.7% | 19.7% | | Treasury Business | 21.8% | 26.3% | | Other | 3.6% | 4.3% | - Corporate banking business pre-tax profit significantly increased by 196.1% to RMB 1.11 billion, primarily due to strong growth in net interest income[144] - Retail banking business shifted from a pre-tax profit of RMB 240 million in 2018 to a pre-tax loss of RMB 130 million in 2019, mainly due to a 44.5% decrease in net interest income and a 137.7% increase in asset impairment losses[155] - Treasury business pre-tax profit decreased by 32.0% year-on-year to RMB 390 million, primarily affected by a decrease in other operating net income and an increase in asset impairment losses[165] 4.5 Risk Management The Group has established a comprehensive risk management system covering various risks, with the Board bearing ultimate responsibility and implementing a three-line defense model - Credit Risk Management: Managed through four mechanisms—customer access, credit exit, risk early warning, and non-performing asset disposal; in 2019, the focus was on optimizing credit allocation and intensifying efforts to recover and dispose of non-performing assets[195][196] - Market Risk Management: Primarily exposed to interest rate risk and exchange rate risk. The Bank enhances interest rate risk control through internal funds transfer pricing (FTP) and loan pricing systems, and manages exchange rate risk using foreign exchange exposure analysis and sensitivity analysis[198][199][206] - Liquidity Risk Management: Ensures stable liquidity indicators and sufficient standby capacity by optimizing asset-liability structure (increasing deposits, reducing interbank liabilities), strengthening position management, and conducting stress tests[210] - Anti-Money Laundering Management: Integrates AML risk into the comprehensive risk management system; in 2019, the Bank conducted risk self-assessments, customer information governance, specialized training, and public awareness campaigns to enhance risk prevention and control capabilities[222][223] 4.6 Capital Adequacy Ratio Analysis As of end-2019, the Group's capital adequacy ratios met regulatory requirements and showed slight improvements, maintaining a robust capital base Capital Adequacy Ratio Indicators | Indicator | December 31, 2019 | December 31, 2018 | Regulatory Requirement (2019) | | :--- | :--- | :--- | :--- | | Core Tier 1 Capital Adequacy Ratio | 9.55% | 9.40% | ≥ 7.50% | | Tier 1 Capital Adequacy Ratio | 9.66% | 9.50% | ≥ 8.50% | | Capital Adequacy Ratio | 11.98% | 11.83% | ≥ 10.50% | Chapter 5 Board of Directors' Report The Board of Directors reports on the Bank's financial performance, dividend proposals, capital plans, and significant transactions for the year - The Board of Directors recommends a final dividend of RMB 0.18 per share (tax inclusive) for the year ended December 31, 2019, totaling an estimated RMB 753 million[244] - The Board of Directors proposes a capitalization issue of 5 shares for every 100 shares from capital reserves, which will increase the total share capital to 4.393 billion shares upon completion[246] - During the reporting period, the Bank sold part of its equity in Jilin Dehui Rural Commercial Bank, reducing its stake from 45% to 9.9%, primarily to optimize its external investment portfolio[293] - The Bank plans to issue Tier 2 capital bonds not exceeding RMB 1.3 billion and capital replenishment bonds not exceeding RMB 4 billion to supplement its capital[286] - The Bank intends to conduct a non-public offering of not more than 50 million overseas preference shares to raise funds equivalent to not more than RMB 5 billion for supplementing other Tier 1 capital[287] Chapter 6 Supervisory Board Report The Supervisory Board reports on its oversight activities in 2019, including meetings, review of proposals, and independent opinions on the Bank's operations - During the reporting period, the Supervisory Board held 4 meetings, reviewed 77 proposals, and effectively supervised the performance of the Board of Directors and senior management, financial status, internal control, risk management, and compliance operations[299] - The Supervisory Board issued an independent opinion, affirming that the Bank's operations were legal and compliant, the directors and senior management diligently performed their duties, the financial reports were true and fair, related-party transactions did not harm the Bank's interests, and the internal control system had no significant defects[303][304] Chapter 7 Share Capital Changes and Shareholder Details This chapter details the Bank's share capital structure and major shareholders as of December 31, 2019 Share Capital Structure as of December 31, 2019 | Share Class | Number of Shares | Approximate Percentage (%) | | :--- | :--- | :--- | | Domestic Shares | 3,387,087,577 | 81.0 | | H Shares | 796,950,000 | 19.0 | | Total | 4,184,037,577 | 100.0 | Top Three Domestic Shareholders as of December 31, 2019 | Shareholder Name | Number of Shares Held | Proportion of Total Share Capital (%) | | :--- | :--- | :--- | | Jilin Province Trust Co., Ltd. | 402,076,412 | 9.61 | | Changchun Huaxing Construction Co., Ltd. | 344,459,136 | 8.23 | | Changchun Huamei Tourism Culture Media Co., Ltd. | 189,115,914 | 4.52 | - The Bank's equity structure is dispersed, with no controlling shareholder or actual controller. The largest shareholder is Jilin Province Trust Co., Ltd., holding 9.61% of the shares[314] Chapter 8 Directors, Supervisors, Senior Management, Employees, and Organization This chapter provides an overview of changes in the Bank's Board, senior management, and employee structure in 2019 - Changes in Board members during the reporting period: Ms. Guo Yan resigned, and Mr. Cui Qiang was appointed as a non-executive director; Mr. Li Beiwei resigned, and Ms. Zhang Qiuhua was appointed as an independent non-executive director[322] - Changes in senior management: Mr. Zhang Haishan no longer served as President, with Executive Director Mr. Liang Xiangmin taking over. Mr. Chen Xinzhe was appointed as Vice President[323] - As of December 31, 2019, the Group had 6,219 full-time employees, with retail banking staff accounting for the highest proportion (48%). Over 59% of employees held a bachelor's degree or above[350][351] Chapter 9 Corporate Governance Report This chapter details the Bank's adherence to corporate governance principles, including Board and Supervisory Board structures and their respective committees - During the reporting period, the Bank fully complied with all code provisions contained in the Hong Kong Corporate Governance Code[361] - The Board of Directors comprises 13 members, including 3 executive directors, 5 non-executive directors, and 5 independent non-executive directors, meeting regulatory requirements. The Board has eight specialized committees: Strategy and Development, Audit, Connected Transactions Control, Risk Management, Nomination, Remuneration, Consumer Rights Protection, and Agriculture, Rural Areas, and Farmers Financial Services[367][386] - The Supervisory Board consists of 7 supervisors and has a Nomination Committee and a Supervision Committee, overseeing the Bank's financial activities, risk management, internal control, and the performance of directors, supervisors, and senior management[401][402][410] Chapter 10 Risk Management, Internal Control, and Internal Audit This chapter describes the Group's comprehensive risk management framework, internal control systems, and internal audit functions - The Group has established a comprehensive risk management system covering front, middle, and back offices. The Board of Directors bears ultimate responsibility, with specialized oversight by committees such as the Risk Management Committee and Audit Committee. The Supervisory Board oversees the Board of Directors and senior management's performance in risk management[436][439][444] - The senior management has five specialized committees: Risk Management and Control, Credit Approval, Information Technology, Asset-Liability Management, and Financial Management, responsible for implementing specific risk management measures[446] - The Bank has established an authorization management system and a credit management system, implementing separation of credit approval and strengthening management of credit business processes, loan classification, and corporate clients[452][453] Chapter 11 Environmental, Social, and Governance Report This chapter outlines the Group's commitment and performance in environmental protection, social responsibility, and corporate governance - The Group established an ESG task force, coordinated by the President, responsible for identifying, reviewing, and supervising significant ESG matters, and reporting regularly to the Board of Directors[467] - In environmental protection, the Group promotes a low-carbon culture and green office practices. In 2019, total greenhouse gas emissions were 13,005 tonnes of CO2 equivalent, a year-on-year decrease of approximately 12.3%. Total electricity consumption and total water consumption also decreased by approximately 12.1% and 9.9%, respectively[496][503][506] - In social responsibility, the Group practices inclusive finance, serving "agriculture, rural areas, and farmers" and small and micro enterprises; it aids targeted poverty alleviation, forming a new model of "enterprise linkage, financial support, industry cultivation, and farmer benefit"; and actively engages in charitable activities, investing over RMB 7.5 million during the reporting period[513][518][525] Independent Auditor's Report The independent auditor, Shinewing (HK) CPA Limited, issued an unmodified opinion on the Group's 2019 consolidated financial statements - Shinewing (HK) CPA Limited, the auditor, issued a standard unmodified opinion on the Group's 2019 consolidated financial statements[539] - Key audit matters included: - Basis of Consolidation: Reviewing management's assessment of control over non-principal subsidiaries, particularly the effectiveness of concerted action agreements - Impairment of Loans and Advances: Evaluating the expected credit loss (ECL) model, including the reasonableness of methodologies, assumptions, and data - Goodwill Impairment: Questioning key assumptions in the value-in-use calculation for cash-generating units, such as future cash flow forecasts, growth rates, and discount rates - Information Technology System Outsourcing Arrangements: Assessing the Group's controls over IT outsourcing arrangements and monitoring procedures for service providers[542][543][545][549][551] Consolidated Financial Statements This section presents the Group's consolidated financial statements, including the income statement, statement of financial position, statement of changes in equity, and cash flow statement Consolidated Income and Other Comprehensive Income Statement For the year ended December 31, 2019, the Group's operating income reached RMB 5.31 billion, a 5.4% increase, with net profit of RMB 1.20 billion, up 1.0% 2019 Consolidated Income Statement Summary | Item (RMB thousand) | 2019 | 2018 | | :--- | :--- | :--- | | Net Interest Income | 4,165,427 | 3,520,049 | | Net Fee and Commission Income | 316,466 | 375,604 | | Operating Income | 5,311,438 | 5,037,577 | | Operating Expenses | (2,787,448) | (2,851,399) | | Asset Impairment Losses | (1,088,080) | (890,169) | | Profit Before Tax | 1,503,474 | 1,439,740 | | Profit for the Year | 1,195,695 | 1,183,664 | | Profit Attributable to Owners of the Bank | 1,042,146 | 982,940 | Consolidated Statement of Financial Position As of December 31, 2019, the Group's total assets were RMB 173.28 billion, total liabilities RMB 157.62 billion, and total equity RMB 15.66 billion 2019 Consolidated Statement of Financial Position Summary | Item (RMB thousand) | December 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Loans and Advances to Customers | 93,394,198 | 75,354,549 | | Investment Securities and Other Financial Assets | 39,218,160 | 46,453,676 | | Total Assets | 173,275,544 | 164,253,276 | | Liabilities | | | | Deposits from Customers | 122,840,400 | 109,521,161 | | Debt Securities Issued | 14,220,057 | 20,552,182 | | Total Liabilities | 157,615,368 | 149,145,638 | | Total Equity | 15,660,176 | 15,107,638 | Consolidated Statement of Changes in Equity As of end-2019, equity attributable to owners of the Bank increased to RMB 13.34 billion from RMB 12.96 billion at the beginning of the year - Equity attributable to owners of the Bank increased from RMB 12.96 billion at the beginning of the year to RMB 13.34 billion at year-end[561] - Key changes included: an increase of RMB 1.042 billion from profit for the year, a decrease of RMB 717 million from dividend distribution, and an increase of RMB 199 million from capitalization of reserves[561] Consolidated Cash Flow Statement In 2019, the Group generated a net cash inflow of RMB 7.24 billion from operating activities, a significant improvement from the prior year's net outflow 2019 Consolidated Cash Flow Statement Summary | Item (RMB thousand) | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash from/(used in) Operating Activities | 7,236,044 | (2,450,438) | | Net Cash from Investing Activities | 1,450,464 | 3,429,586 | | Net Cash used in Financing Activities | (7,962,418) | (1,237,757) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 724,090 | (258,609) | | Cash and Cash Equivalents at Year-end | 16,820,070 | 16,095,980 |