中信银行(601998) - 2020 Q2 - 季度财报

Company Overview Company Profile and Core Businesses CITIC Bank, founded in 1987 and A+H listed in 2007, provides comprehensive financial solutions across corporate, retail, and financial markets - The company was founded in 1987, one of the earliest emerging commercial banks established during China's reform and opening-up, and achieved simultaneous A+H share listing in 2007[8] - The company's business covers corporate and individual clients, offering comprehensive financial solutions including corporate banking, international business, financial markets, retail banking, credit cards, and wealth management[8][9] Core Competencies Analysis CITIC Bank's core strengths include governance, balanced business, risk control, fintech innovation, and brand influence, ranking 21st in "The Banker" 2020 "Top 500 Banking Brands" - Corporate Governance: Established a sound "Three Meetings and One Layer" corporate governance structure, integrating Party leadership into governance[11] - Business Structure: Centered on corporate banking, with retail banking and financial markets as two wings, gradually evolving towards balanced development across three pillars[11] - Risk Management: Aims to build an effective risk management system that controls risks and promotes development, accelerating the construction of an intelligent risk control system[12] - Fintech: Highly values financial technology innovation, achieving rapid development in core capabilities and new technology applications, accelerating the release of tech-enabled dividends[12] - Brand Influence: Ranked 21st in "The Banker" magazine's 2020 "Top 500 Banking Brands" and 24th in "Top 1000 World Banks" by Tier 1 capital[12] Financial Highlights Operating Performance In H1 2020, operating income grew 9.51% to CNY 102.01 billion, but net profit declined 9.77% to CNY 25.54 billion due to higher provisions, while operating cash flow surged 682.18% H1 2020 Key Operating Performance | Indicator | H1 2020 | H1 2019 | Growth (%) | | :--- | :--- | :--- | :--- | | Operating Income (Million CNY) | 102,013 | 93,150 | 9.51 | | Net Profit Attributable to Bank Shareholders (Million CNY) | 25,541 | 28,307 | (9.77) | | Net Cash Flow from Operating Activities (Million CNY) | 66,853 | 8,547 | 682.18 | | Basic Earnings Per Share (CNY) | 0.52 | 0.58 | (10.34) | Profitability Ratios Profitability ratios declined, with ROAA and ROAE falling, net interest margin and spread narrowing, but cost-to-income ratio improved significantly to 22.08% H1 2020 Key Profitability Ratios | Indicator | H1 2020 | H1 2019 | Change (percentage points) | | :--- | :--- | :--- | :--- | | Return on Average Assets (ROAA) | 0.76% | 0.93% | (0.17) | | Return on Average Equity (ROAE) | 11.34% | 13.73% | (2.39) | | Cost-to-Income Ratio | 22.08% | 25.37% | (3.29) | | Net Interest Spread | 1.91% | 2.02% | (0.11) | | Net Interest Margin | 1.99% | 2.11% | (0.12) | Scale Indicators As of June 30, 2020, Group total assets grew 4.89% to CNY 7.08 trillion, with loans and deposits showing strong growth and absorption capability As of June 30, 2020, Key Scale Indicators | Indicator (Million CNY) | June 30, 2020 | December 31, 2019 | Growth (%) | | :--- | :--- | :--- | :--- | | Total Assets | 7,080,616 | 6,750,433 | 4.89 | | Total Loans and Advances | 4,214,523 | 3,997,987 | 5.42 | | Total Customer Deposits | 4,443,816 | 4,038,820 | 10.03 | | Total Liabilities | 6,534,250 | 6,217,909 | 5.09 | | Total Equity Attributable to Bank Shareholders | 530,877 | 517,311 | 2.62 | Asset Quality Ratios As of June 30, 2020, asset quality faced pressure with NPL ratio rising to 1.83%, but risk coverage remained robust, with provision coverage at 175.72% and loan loss provision ratio at 3.22% As of June 30, 2020, Key Asset Quality Ratios | Indicator | June 30, 2020 | December 31, 2019 | Change (percentage points) | | :--- | :--- | :--- | :--- | | Non-Performing Loan (NPL) Ratio | 1.83% | 1.65% | 0.18 | | Provision Coverage Ratio | 175.72% | 175.25% | 0.47 | | Loan Loss Provision Ratio | 3.22% | 2.90% | 0.32 | Other Key Regulatory Ratios As of June 30, 2020, all key regulatory ratios met requirements, with capital adequacy ratios improving and liquidity coverage ratio remaining well above 100% As of June 30, 2020, Capital Adequacy and Liquidity Ratios | Indicator | June 30, 2020 | December 31, 2019 | Regulatory Minimum | | :--- | :--- | :--- | :--- | | Core Tier 1 Capital Adequacy Ratio | 8.80% | 8.69% | ≥7.50% | | Tier 1 Capital Adequacy Ratio | 10.29% | 10.20% | ≥8.50% | | Capital Adequacy Ratio | 12.57% | 12.44% | ≥10.50% | | Leverage Ratio | 6.64% | 6.71% | ≥4% | | Liquidity Coverage Ratio | 125.95% | 149.27% | ≥100% | Management Discussion and Analysis Economic, Financial, and Regulatory Environment In H1 2020, COVID-19 impacted the global economy, but China's economy recovered from Q2, with financial regulators implementing prudent monetary policies and strict oversight - Macroeconomic: The COVID-19 pandemic significantly impacted economic and social development, but China's long-term positive economic fundamentals remain unchanged, with steady recovery since Q2[24] - Regulatory Policy: Financial regulators adhered to the principle of seeking progress while maintaining stability, diligently implementing "six stabilities" and "six guarantees" tasks, with the central bank continuing prudent monetary policy and the CBIRC maintaining strict supervision[24] Overview of Operating Performance Group operating income grew 9.51% but net profit declined 9.77% due to increased provisions; asset quality was generally controllable, with NPL ratio rising but provision coverage stable; business scale grew steadily H1 2020 Key Operating Performance Data | Indicator | H1 2020/Period-end | YoY/Change from prior year-end | | :--- | :--- | :--- | | Operating Income | CNY 102.01 billion | Growth 9.51% | | Net Profit Attributable to Parent | CNY 25.54 billion | Decline 9.77% | | Non-Performing Loan Ratio | 1.83% | Up 0.18 percentage points | | Provision Coverage Ratio | 175.72% | Up 0.47 percentage points | | Total Assets | CNY 7.08 trillion | Growth 4.89% | | Total Customer Deposits | CNY 4.44 trillion | Growth 10.03% | Financial Statement Analysis This section analyzes H1 2020 financials, detailing income statement growth offset by higher impairment losses, balance sheet expansion driven by loans and deposits, and a significant increase in operating cash flow Income Statement Analysis Operating income grew 9.51%, driven by non-interest net income; net interest margin narrowed; credit impairment losses surged 39.59% to CNY 47.73 billion, impacting net profit; business and management expenses decreased, improving cost-to-income ratio to 22.08% - In the operating income structure, non-interest net income's share increased from 34.0% to 36.4%, indicating a more diversified income structure[30][31] - Affected by intensified market competition, the Group's net interest margin was 1.99%, down 0.12 percentage points year-on-year; net interest spread was 1.91%, down 0.11 percentage points year-on-year[36] - Total credit and other asset impairment losses were CNY 47.73 billion, a 39.59% year-on-year increase, primarily due to increased provisions for loans and financial investments[59] - Cost control was highly effective, with business and management expenses decreasing 4.69% year-on-year, and the cost-to-income ratio falling to 22.08%, a 3.29 percentage point decrease year-on-year[57][58] Balance Sheet Analysis As of period-end, Group total assets reached CNY 7.08 trillion, up 4.89%; loans and advances grew 5.42%; financial investments increased 6.58%; total liabilities grew 5.09%, primarily driven by customer deposits, which rose 10.03% Balance Sheet Structure Changes | Item (Million CNY) | June 30, 2020 | December 31, 2019 | Growth from prior year-end | | :--- | :--- | :--- | :--- | | Total Assets | 7,080,616 | 6,750,433 | 4.89% | | Total Loans and Advances | 4,214,523 | 3,997,987 | 5.42% | | Total Financial Investments | 1,985,987 | 1,863,351 | 6.58% | | Total Liabilities | 6,534,250 | 6,217,909 | 5.09% | | Total Customer Deposits | 4,443,816 | 4,038,820 | 10.03% | - Within financial investments, bond investments are the main component, accounting for 66.9% of total financial investments, with government bond investments growing rapidly[68][70] Loan Quality Analysis Asset quality remained stable but faced pressure, with NPL ratio rising to 1.83%; personal loan NPLs increased, and corporate NPLs concentrated in wholesale/retail and manufacturing, but provision coverage remained robust at 175.72% Key Loan Quality Ratios | Indicator | June 30, 2020 | December 31, 2019 | Change | | :--- | :--- | :--- | :--- | | Non-Performing Loan Ratio | 1.83% | 1.65% | Up 0.18 percentage points | | NPL Provision Coverage Ratio | 175.72% | 175.25% | Up 0.47 percentage points | | Loan Loss Provision Ratio | 3.22% | 2.90% | Up 0.32 percentage points | - Corporate non-performing loans are primarily concentrated in the wholesale and retail trade and manufacturing sectors, with their share of NPL balance reaching 57.76%[97] - Personal loan NPL ratio increased 0.30 percentage points to 1.18%, while corporate loan NPL ratio increased 0.11 percentage points to 2.71%[90][91] - Overdue loans increased by CNY 27.03 billion from year-end, and the proportion of loans overdue for more than 91 days increased by 0.35 percentage points from year-end[110] Cash Flow Statement Analysis Operating cash net inflow was CNY 66.85 billion, significantly increasing due to customer deposits; investing cash net outflow was CNY 116.77 billion, decreasing due to increased financial investment sales; financing activities shifted to a net outflow of CNY 24.49 billion from increased debt repayment - Net cash inflow from operating activities was CNY 66.85 billion, a 682.2% year-on-year increase, primarily benefiting from strong growth in customer deposits[117][119] - Net cash outflow from investing activities was CNY 116.77 billion, a 38.6% year-on-year decrease, mainly due to increased sales and redemptions of financial investments[118][119] - Net cash outflow from financing activities was CNY 24.49 billion, compared to a net inflow of CNY 42.52 billion in the prior year, mainly due to increased repayment of maturing debt instruments[118][120] Segment Reporting Corporate banking remained the largest revenue source at 45.9%, though its pre-tax profit contribution declined; retail banking's revenue share rose to 38.0%; financial markets business showed strong growth, contributing the highest pre-tax profit share at 37.5% H1 2020 Operating Performance by Business Segment (Million CNY) | Business Segment | Operating Income | Revenue Share (%) | Pre-tax Profit | Profit Share (%) | | :--- | :--- | :--- | :--- | :--- | | Corporate Banking | 46,859 | 45.9 | 12,528 | 40.8 | | Retail Banking | 38,770 | 38.0 | 7,516 | 24.4 | | Financial Markets Business | 14,509 | 14.2 | 11,531 | 37.5 | Key Issues of Capital Market Concern This section addresses four key market concerns: COVID-19 response, asset quality, wealth management subsidiary, and fintech, detailing the bank's actions in risk mitigation, business transformation, and technological advancements - COVID-19 Response: Provided differentiated financial services such as deferred principal and interest payments and fee reductions for affected enterprises and individuals, while increasing provisions to enhance risk resilience[129][130] - Asset Quality Analysis: NPL ratio rose to 1.83%, primarily influenced by macroeconomic factors, China-US trade friction, and the pandemic, with higher risk exposure in wholesale and retail trade and manufacturing; accumulated disposal of non-performing assets reached CNY 31.61 billion during the reporting period[131][132] - Wealth Management Subsidiary: Wholly-owned subsidiary CITIC Wealth Management officially commenced operations in July 2020 with a registered capital of CNY 5 billion, marking a new stage in asset management transformation; as of the end of the reporting period, the proportion of net-value products in non-guaranteed wealth management increased to 67.70%[133][134] - Fintech: Successfully launched China's first core business system based on a fully independent distributed database, rapidly deployed nearly 200 AI application models relying on "CITIC Brain," and applied blockchain technology in multiple scenarios[135][136] Business Overview This section details the operating performance of corporate, retail, and financial markets segments, and subsidiaries; corporate banking transformed steadily, retail banking grew rapidly, and financial markets business achieved strong revenue growth, with subsidiaries developing steadily Corporate Banking Corporate banking achieved net operating income of CNY 44.19 billion, accounting for 45.2% of the bank's total; corporate client numbers increased, and corporate deposit balance reached CNY 3.38 trillion, leading joint-stock banks; key businesses maintained good development, with investment banking's debt financing underwriting ranking second Corporate Banking Key Data | Indicator | H1 2020/Period-end | Change | | :--- | :--- | :--- | | Net Operating Income (Million CNY) | 44,193 | YoY decline 0.62% | | Corporate Client Numbers | 783,700 accounts | Up 40,900 accounts from prior year-end | | Corporate Deposit Balance (Million CNY) | 3,380,779 | Up 339,449 Million CNY from prior year-end | | Custody Scale (Million CNY) | 9,730,000 | Up 586,729 Million CNY from prior year-end | - Investment Banking: Underwrote 548 debt financing instruments with an underwriting volume of CNY 339.96 billion, both ranking second in the market[150] - Inclusive Finance: Inclusive finance loan balance reached CNY 226.11 billion, a 10.70% increase from year-end, higher than the overall loan growth rate[154][155] Retail Banking Retail banking achieved net operating income of CNY 37.65 billion, up 15.94%, increasing its share to 38.51%; individual client numbers surpassed 100 million; wealth management and private banking AUM grew strongly; credit card business income grew 9.49% despite slower growth Retail Banking Key Data | Indicator | H1 2020/Period-end | YoY/Change from prior year-end | | :--- | :--- | :--- | | Net Operating Income (Million CNY) | 37,649 | Growth 15.94% | | Total Individual Clients | 106 million accounts | Growth 3.77% | | Individual Client Assets Under Management (AUM) (Million CNY) | 2,264,053 | Growth 7.54% | | Private Banking Assets Under Management (AUM) (Million CNY) | 648,761 | Growth 13.04% | | Cumulative Credit Card Issuance | 87.99 million cards | Growth 5.60% | | Credit Card Business Income (Million CNY) | 30,431 | Growth 9.49% | Financial Markets Business Financial markets achieved operating income of CNY 13.94 billion, up 44.77%, with non-interest net income up 68.75%; interbank business grew steadily, direct bill discounting up 29.38%; FX market-making volume reached CNY 4.61 trillion, ranking third; asset management transformed steadily, with non-guaranteed wealth management products at CNY 1.15 trillion and net-value products at 67.70% Financial Markets Business Key Data | Indicator | H1 2020/Period-end | YoY/Change from prior year-end | | :--- | :--- | :--- | | Operating Income (Million CNY) | 13,943 | Growth 44.77% | | Non-Interest Net Income (Million CNY) | 9,897 | Growth 68.75% | | Direct Bill Discounting Volume (Million CNY) | 658,896 | Growth 29.38% | | Non-Guaranteed Wealth Management Scale (Million CNY) | 1,152,777 | Growth 4.49% | Subsidiaries and Joint Ventures Subsidiaries and joint ventures developed steadily; CITIC International Financial Holdings had HKD 366.33 billion in total assets; CITIC Financial Leasing's net profit declined due to increased provisions; CITIC aiBank's total assets were CNY 54.35 billion and was approved for capital increase; Altyn Bank's net profit grew 10.17%; CITIC Wealth Management officially commenced operations post-period - CITIC International Financial Holdings: As of the end of the reporting period, total assets were HKD 366.33 billion, with net profit of HKD 1.13 billion[176] - CITIC Financial Leasing: As of the end of the reporting period, total assets were CNY 46.28 billion, with net profit of CNY 0.27 billion, a 37.47% year-on-year decrease, mainly due to increased provisions[179] - CITIC aiBank: As of the end of the reporting period, total assets were CNY 54.35 billion, with net profit of CNY 7 million, and was approved for a new round of capital increase and share expansion[180][181] Risk Management The bank comprehensively strengthened risk management, optimizing credit risk asset allocation and enhancing full-process risk control for personal loans and credit cards; market risk was managed through limits and stress tests; liquidity risk was managed via integrated asset-liability management, with all liquidity ratios above regulatory requirements - Credit Risk Management: For corporate business, implemented differentiated regional strategies, prioritizing credit resources for Beijing-Tianjin-Hebei, Yangtze River Delta, and Greater Bay Area; for personal loans, managed credit risk through "full-process risk penetration"[187][188] - Market Risk Management: Primarily faces interest rate risk and exchange rate risk, monitored using tools such as foreign exchange exposure analysis, interest rate repricing gap analysis, and sensitivity analysis[193][198] Liquidity Regulatory Ratios | Indicator | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Liquidity Coverage Ratio | 125.95% | 149.27% | | Net Stable Funding Ratio | 105.75% | 105.85% | Capital Management The Group adheres to a "light asset, light capital, light cost" strategy, establishing a comprehensive capital management system; as of period-end, capital adequacy, Tier 1, and core Tier 1 capital ratios were 12.57%, 10.29%, and 8.80% respectively, all increasing from year-end and meeting regulatory requirements Capital Adequacy Ratios | Indicator | June 30, 2020 | December 31, 2019 | Change | | :--- | :--- | :--- | :--- | | Core Tier 1 Capital Adequacy Ratio | 8.80% | 8.69% | Up 0.11 percentage points | | Tier 1 Capital Adequacy Ratio | 10.29% | 10.20% | Up 0.09 percentage points | | Capital Adequacy Ratio | 12.57% | 12.44% | Up 0.13 percentage points | Outlook For H2 2020, international economic growth remains uncertain, but domestic proactive fiscal and monetary policies will bring new market opportunities for commercial banks; concurrently, the banking sector will still face significant credit risk exposure pressure; the bank will implement regulatory requirements, improve risk management, and adequately provision to address future risks - Opportunities: Proactive fiscal policy, flexible and appropriate monetary policy, and the recovery of "new infrastructure and major projects" investment will bring new market opportunities for the banking sector[219][220] - Challenges: The global pandemic persists, domestic containment pressure remains, and declining overseas demand means the banking sector will continue to face significant credit risk exposure pressure for some time[220] Significant Matters Ordinary Share Profit Distribution The bank's 2019 profit distribution of CNY 2.39 cash dividend per 10 shares (pre-tax), totaling approximately CNY 11.70 billion, has been completed; the Board decided not to distribute profits or convert capital reserves into share capital for H1 2020 - 2019 Annual Dividend: CNY 2.39 cash dividend per 10 shares (pre-tax), totaling approximately CNY 11.70 billion[223] - H1 2020 Distribution: No profit distribution or conversion of capital reserves into share capital[224] Significant Related Party Transactions The bank's daily transactions with related parties adhere to general commercial principles; credit-related related party transaction balances were within pre-approved annual limits, totaling CNY 42.51 billion (SSE) and CNY 79.75 billion (CBIRC) with excellent quality; non-credit related party transactions also remained within annual limits Related Party Credit Exposure (As of June 30, 2020) | Related Party | SSE Standard (Billion CNY) | CBIRC Standard (Billion CNY) | | :--- | :--- | :--- | | CITIC Group and Related Parties | 33.74 | 32.01 | | Xinhua Holdings and Related Parties | 6.79 | 20.74 | | China Tobacco and Related Parties | 0 | 0.08 | | Poly Group and Related Parties | 0 | 23.80 | Changes in Ordinary Shares and Shareholder Information Ordinary Shareholder Information As of period-end, the bank had 176,426 ordinary shareholders; controlling shareholder CITIC Corporation Limited held 65.37%; top ten shareholders included HKSCC Nominees Limited, China Tobacco Corporation, and China Securities Finance Corporation Limited Top Three Ordinary Shareholders' Holdings | Shareholder Name | Total Shares Held (shares) | Shareholding (%) | | :--- | :--- | :--- | | CITIC Corporation Limited | 31,988,728,773 | 65.37 | | HKSCC Nominees Limited | 11,555,352,346 | 24.61 | | China Tobacco Corporation | 2,147,469,539 | 4.39 | Preferred Shares Information Preferred Share Issuance and Listing In October 2016, the bank privately issued 350 million domestic preferred shares ("CITIC Preferred 1"), raising CNY 35 billion, with an initial coupon rate of 3.80%; additionally, the bank plans to privately issue up to CNY 40 billion in preferred shares, with authorization extended to January 29, 2021 - Issued preferred shares "CITIC Preferred 1" (code 360025), with an issuance size of 350 million shares, raising CNY 35 billion, and an initial coupon rate of 3.80%[290] - Plans to privately issue up to CNY 40 billion in additional preferred shares, with the shareholders' meeting extending the relevant authorization period to January 29, 2021[290][291] Convertible Corporate Bonds Information Convertible Corporate Bonds Overview In March 2019, the bank completed the issuance of CNY 40 billion A-share convertible corporate bonds ("CITIC Convertible Bonds"); the conversion period is from September 11, 2019, to March 3, 2025; due to the 2019 profit distribution, the conversion price was adjusted from CNY 7.22/share to CNY 6.98/share on July 15, 2020 - Issued CNY 40 billion A-share convertible bonds ("CITIC Convertible Bonds," 113021) in March 2019, used to supplement core Tier 1 capital[300] - Due to the 2019 annual dividend distribution, the conversion price was adjusted from CNY 7.22/share to CNY 6.98/share effective July 15, 2020[302][303] Directors, Supervisors, Senior Management, Employees, and Branches Employees and Branches As of period-end, the Group had 56,881 employees, with 1,397 domestic branches across 151 major cities in China, plus overseas branches and representative offices, focusing network expansion on developed cities and key national strategic regions Employee and Branch Numbers | Item | Number | | :--- | :--- | | Total Group Employees | 56,881 people | | Domestic Branches | 1,397 branches | Corporate Governance Corporate Governance Overview During the period, the bank continuously improved its corporate governance system, integrating Party leadership into governance; the Shareholders' Meeting, Board of Directors, Supervisory Board, and their special committees effectively performed their duties, adhering to CBIRC and Shanghai/Hong Kong listing rules - The corporate governance structure and its operations comply with relevant regulations and requirements of the CBIRC and listing venue securities regulators, with the Board of Directors, Supervisory Board, and their respective special committees actively playing their roles[320] Financial Report Financial Statements This section includes unaudited H1 2020 consolidated and bank financial statements (balance sheet, income statement, cash flow statement, and statement of changes in shareholders' equity); PwC Zhong Tian CPAs' review found no material non-compliance with Accounting Standard for Business Enterprises No. 32—Interim Financial Reporting Consolidated Balance Sheet Summary (Million CNY) | Item | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Assets | 7,080,616 | 6,750,433 | | Total Liabilities | 6,534,250 | 6,217,909 | | Total Shareholders' Equity | 546,366 | 532,524 | Consolidated Income Statement Summary (Million CNY) | Item | For the six months ended June 30, 2020 | For the six months ended June 30, 2019 | | :--- | :--- | :--- | | Operating Income | 102,013 | 93,150 | | Total Profit | 30,746 | 34,442 | | Net Profit | 25,964 | 28,837 |