china merchants bank co., ltd. 2013 annual results announcement · 2014-04-01 · operational...

China Merchants Bank Co., Ltd.

2013 Annual Results Announcement

1

Forward-Looking Statement Disclaimer

This presentation and subsequent discussions may contain forward-looking

statements that involve risks and uncertainties. These statements are generally

indicated by the use of forward-looking terminology such as believe, expect,

anticipate, estimate, plan, project, target, may, will or may be expressed to be results

of actions that may or are expected to occur in the future. You should not place undue

reliance on these forward-looking statements, which reflect our belief only as of the

date of this presentation. These forward-looking statements are based on our own

information and on information from other sources we believe to be reliable. They

relate to future events or our future financial, business or other performance and are

subject to a number of uncertainties that may cause our actual results to

differ materially.

Agenda

1 Overview

2 Operational Information

3 Outlook and Strategies

2012 2013

3

Profitability, asset quality and scale maintained

balanced development

Note: In this presentation, unless otherwise indicated, all financials are on consolidated Group level and all business data are on standalone Bank level;

unless otherwise indicated, all data shown in this presentation are based on IFRS and denominated in RMB (hereinafter inclusive)

Total assets Total deposits Total loans

2012 2013

2,532,444 2,775,276

2012 2013

1,904,463 2,197,094

Net profit attributable to the Bank’s shareholders

Net profit

2012 2013

(RM

B m

illio

n)

(RM

B m

illio

n)

(RM

B m

illio

n)

2012 2013

2,214,822 2,583,045

Balance at the end of the year Balance at the end of the year Daily average balance

(RM

B m

illio

n)

45,268 51,743

(RM

B m

illio

n)

2012 2013

1.46% 1.39%

2012 2013

ROAA

Return on average assets attributable to

the Bank’s shareholders

Return on average equity attributable to

the Bank’s shareholders

ROAE NPL ratio

2012 2013

24.78%

22.22%

3,408,099

4,016,399

0.61%

0.83%

Note: All data on this page is based on consolidated Group level

Business structure further optimized

4

17.34%

21.92%

2012 2013

21.25%

24.35%

2012 2013

Proportion of the net non-interest income

continued to grow

Proportion of the net fee and commission income

rose rapidly

32.78%

35.84%

2012 2013

Proportion of profit before tax from retail banking

business to profit before tax continued to increase

Small and micro enterprise loans increase as a

percentage of domestic general loans

2012 2013

22.59%

32.45%

Note: All data on this page is based on standalone Bank level, except for the proportion of net fee and commission income

which is based on consolidated Group level

Operational efficiency continually improved

2012 2013

36.15% 34.69%

2012 2013

60.89 64.12 1.21 1.29

2012 2013

Profit before tax per person Profit before tax per outlet

(RM

B m

illio

n)

Cost-to-income ratio Risk adjusted return on capital before tax (RAROC)

2012 2013

29.84%

26.38%

Note: All data on this page is based on standalone Bank level 5

(RM

B m

illio

n)

Proactively coping with the interest rate liberalization

reform, with funding cost remaining low

6

2.07% 2.06%

2012 2013

2012 2013

Average cost of customer deposits

1.91% 1.88%

Down by 0.03ppt

Average cost ratio of retail customer deposits

2012 2013

1.70% 1.62%

Proportion of demand deposits to total retail deposits

2012 2013

58.26% 58.38%

Average cost ratio of corporate customer deposits

Down by 0.01ppt

Note: All data on this page is based on standalone Bank level, except for the average cost ratio of customer deposits which is

based on consolidated Group level

Risk compensation capability continued to be enhanced

amid the downward pressure of the economy

7

NPL allowance coverage ratio

2012 2013

351.79%

266.00%

Capital adequacy ratio

2012 2013

11.41% 11.14%

Tier 1 capital adequacy ratio

8.34% 9.27%

2012 2013

Loan allowance ratio

2.16% 2.22%

2012 2013

NPL formation rate

0.35%

0.66%

2012 2013

Ratio of NPLs to loans overdue

more than 90 days

1.12 1.15

2012 2013

Note: All data on this page is based on consolidated Group level except for the NPL formation rate which is based on

standalone Bank level

Accelerating transformation of the business model in line

with the development of internet finance

8

Accumulated value of mobile banking

transactions

Accelerated transformation of the operating model

towards the internet-based and digitalized platform

Establishing a business system integrating online and offline

operations: Accelerating the establishment of an internet-based

business and developing an integrated offline and online business

operating system

Bringing potential breakthrough to the business model

through platform-based services: Promoting "Small Business E

Home", launching a small business services e-platform,

developing investment and financing intermediary services, and

seeking potential breakthrough to the business model of financial

services to small enterprises

Innovation in client operations and risk management models

based on "big data": Integrating internal and external data

resources, leveraging on big data analysis techniques to bring

innovation to client operations and risk management

Pushing forward transformation of the operating model in

three major business lines through internet and platform

based services . Retail financial services: Through integrated

online and offline business operating systems together with a big

data platform, we aim to push forward transformation of the retail

business model and to accelerate internet-based consumer

finance and wealth management services. Corporate financial

services: We vigorously expand transaction banking by

promoting the Intelligent Supply Chain 2.0 platform, supply chain

development and supply chain financing. We also build up the

"Small Business E Home" and explore ways to use the internet to

provide financial services to small business in ways that bring

potential breakthrough the business model. Interbank financing:

We aim to develop an online platform for interbank transactions

and to establish a new internet-based asset management platform

2012 2013

92.50% 90.66%

2012 2013

54.65% 52.40%

2012 2013

88.47% 92.42%

Number of online banking transaction

continues its rapid growth

Replacement ratio of online corporate

banking settlements continues to increase

Replacement ratio of counter transactions

with electronic channels continues to

increase

Counter replacement ratio

of retail e-banking

channels

Counter replacement ratio

in respect of corporate e-

banking channels

A leader in the Chinese banking industry in

establishing an internet-based business

2012 2013

55.09 44.09

2012 2013

947.74 736.13

Accumulated number

of corporate online

banking transactions

Accumulated number of

retail online banking

transactions

（Mill

ion

）

2012 2013

1,077,434

405,934

（RM

B m

illio

ns

）

Note: All data on this page is based on standalone Bank level

9

Brand recognition remained strong

The Asian Banker

Awarded the Best Joint Stock Retail Bank in

China for the ninth time in 2013

Best Mobile Phone Banking Product in China,

2013

Commendation Award for SME Business in

China. 2013

The Asset

Best Cash Management for SME in China, 2013

Best Custody Specialist in China for the fourth

time in 2013

Euromoney

Best Private Banking Services Overall in China

2013

Best Relationship Management

Best Range of Investment Products

Best UHNWI Services

2nd China Trade Finance Annual

Conference

"Best Innovation Bank for Trade Finance

Products"

ACCE

“The World's Best Call Center"

and ranked among the top four in the world

Financial Times

Awarded Best Private Bank in China for the

fourth time in a row in 2013

Asiamoney

Awarded Best Cash Management Bank in China

for the eighth time in a row in 2013,

monopolising the awards for best cash

management services to large, medium and

small businesses in mainland China,

winning 10 awards in total

Hurun Best of the Best Awards

"Most Preferred RMB Wealth Management Bank”

“Most Preferred Credit Card Issuer”

Annual Finance Summit of Asia and 2013

Asian Banks Competitive Ranking Report

Release Ceremony

“Best Wealth Management Bank in Asia”

Agenda

1 Overview



911

1,065

2012 2013

19,518

25,496

2012 2013

Expanding valued customer base

Number of sunflower-level and

above customers

Number of private banking

customers

219,144

319,590

2012 2013

323,170

396,230

2012 2013

64,988

74,489

2012 2013

Number of high-value

wholesale customers

Number of cash

management customers

Number of small

enterprise customers

（

户

）

(1,0

00)

11

Number of corporate deposit

and loan customers

480,700

559,200

2012 2013

35,200

42,500

2012 2013

Number of corporate

deposit customers

Number of corporate

loan customers

Note: All data on this page is based on standalone Bank level . Micro enterprise customers include personal

operation, commercial housing, "Shou Fu Yi" and Business All-in-one Card customers

196,593

959,097

2012 2013

Number of micro enterprise

customers

2012 2013

Issued debts

Placement from other banks and financial institutions

Deposits from customers

2012 2013

12

Net interest income grew steadily

Net interest income Interest-bearing liabilities

Steady growth of interest-earning assets

11.93%

20.83%

(RM

B m

illio

n)

Proactively enhanced the risk pricing capability and controlled funding

cost to offset the decline of NIM

Interest-earning assets

Net interest margin

3.03% 2.82%

-21bps

88,374

98,913

61,727

74,582

2012 2013

Net interest income

Interest expense

2012 2013

Average cost of customer deposits

1.91% 1.88%

-3bps

2012 2013

Placement with other banks and financial institutions

Balances with central bank

Investments

Loans and advances

(RM

B m

illio

n)

2,921,423

3,507,220 2,721,536

3,236,014

60.59% 59.65%

14.53% 15.47% 14.22% 13.47% 10.67%

11.40%

81.38% 79.82%

18.00%

2.18%

16.53% 2.09%


(RM

B m

illio

n)

2012 2013

13

Net non-interest income achieved rapid growth

Net non-interest income

Net fee and commission income

25,444

34,205

2012 2013

(RM

B m

illio

n)

19,739

29,184

(RM

B m

illio

n)

Fee and commission income structure in 2013

In RMB million

except for percentage 2013

Proportion to

fee income

Growth

year-on-

year

Bank cards fees 8,309 26.49% 42.64%

Settlement and

clearing fees 2,756 8.79% 24.65%

Agency services fees 5,143 16.40% 31.07%

Commissions from

credit commitment and

loan business

2,873 9.16% 28.89%

Commissions from

custody and other

trustee businesses

7,187 22.91% 56.44%

Others 5,097 16.25% 113.80%

Total fee and

commission income 31,365 100.00% 48.18%

Fee and commission

expense (2,181) (6.95%) 52.73%

Net fee and commission

income 29,184 93.05% 47.85%


Retail loan structure continued to be optimized

Balance of retail loans

Balance of micro enterprise loans Proportion of micro enterprise loans

to retail loans

14

2012 2013 2012 2013

177,139

315,453

26.36%

40.16%

Floating range of weighted average

interest rates for newly granted small

and micro enterprise loans

29.41% 32.08%

2012 2013

(RM

B m

illio

n)

2012 2013

Others Credit card loans

Small and micro enterprise loans Residential mortgage loans

48.84% 33.28%

26.36% 40.16%

15.80% 19.73% 9.00%

6.83% 671,900 785,525

(RM

B m

illio

n)

Floating range of weighted average interest rates of

newly granted retail loans in RMB

2012 2013

22.95%

29.49%


Retail customer relationship continued to be strengthened

15

1,672.0

2,052.5

2012 2013

747.1

857.2

2012 2013

434.2

571.4

2012 2013

AUM of sunflower-level and above customers AUM of private banking customers

Daily average balance of retail deposits

(RM

B b

illio

n)

2,380.2

2,825.2

2012 2013

AUM of retail customers

(RM

B b

illio

n)

(RM

B b

illio

n)

(RM

B b

illio

n)


1,141

1,664

2012 2013

5,534

7,157

2012 2013

963

1,378

2012 2013

16

Wealth management income from retail banking

achieved rapid growth

Fees and commission income from

wealth management services

(RM

B m

illio

n)

(RM

B m

illio

n)

Income from entrusted wealth management

Income from distribution

of mutual fund

Income from distribution of

third-party trust plan

Income from distribution of

third-party insurance policies

(RM

B m

illio

n)

1,421

1,810

2012 2013

1,797

2,140

2012 2013

(RM

B m

illio

n)

(RM

B m

illio

n)


Retail banking credit card business maintained

competitive advantage

Average transaction value per month of each

active credit card

Number of credit cards in circulation

17

Percentage of the revolving balances of credit

cards and growth in cumulative transaction value

Growth rates in interest income from credit cards

and in non-interest income from credit cards

21.80

25.65

2012 2013

2,690

3,301

2012 2013

41.54% 42.99%

Growth in interest income from creditcards

Growth in non-interest income fromcredit cards

30.52%

43.08%

Percentage of the revolvingbalances of credit cards

Growth in cumulative transactionvalue

2013

(RM

B)

(Mill

ion)

2013


2012 2013

Series1 Series2

Wholesale deposit and loan businesses maintained

stable growth Balance of corporate

loans

18

2012 2013

1,033,545

1,162,140

Balance of small enterprises loans as the

percentage of domestic corporate loans

Floating range of weighted average interest rates for

newly granted small enterprises loans

2012 2013

200,410

300,014

27.00%

20.06%

22.06%

22.78%

Small enterprises loans Small enterprises loans as the

percentage of domestic corporate loans

Daily average balance of

corporate deposits

Balance of corporate

deposits

2012 2013

1,562,704 1,755,888

(RM

B m

illio

n)

2012 2013

1,369,261

1,608,085

(RM

B m

illio

n)

2012 2013

11.80% 12.69%

(RM

B m

illio

n)

(RM

B m

illio

n)

Floating range of weighted

average interest rates for newly

granted corporate loans in RMB


Sound development of wholesale cross-border finance

businesses

19

Amount of cross-border RMB settlements

168,927

350,017

2012 2013

2,518

3,801

2012 2013

Amount of inter-bank cross-border RMB

clearing service

Offshore trade finance balance Balance of deposits from

offshore customers

146,456

363,508

2012 2013

6,288

9,173

2012 2013

International settlements

2012 2013

331,696

424,922

(RM

B m

illio

n)

(RM

B m

illio

n)

(US

D m

illio

n)

(US

D m

illio

n)

(US

D m

illio

n)


1,080,678

1,857,216

2012 2013

Rapid growth in emerging wholesale businesses

20

Balance of assets under

custody Debt financing instruments

underwritten

2012 2013(R

MB

mill

ion)

(RM

B m

illio

n)

No. of customers under the "Qian

Ying Zhan Yi" program

Balance of loans to enterprises

under "Qian Ying Zhan Yi"

program

7,581

17,344

2012 2013

65,400

130,528

2012 2013

Num

ber

of custo

mers

(RM

B m

illio

n)

132,665

147,540

4,369.9 4,916.5

2012 2013

Sales of wealth

management products

(RM

B b

illio

n)

Amount of transactions through the

electronic supply chain

2012 2013

788,778

1,168,867

(RM

B b

illio

n)


2,691

3,878

2012 2013

1,336

2,108

2012 2013

856

1,601

2012 2013

654

1,062

2012 2013

21

Non-interest income from wholesale banking business

achieved strong growth

Non-interest income from

international business

Income from investment banking

business

Income from asset custody

business

Intermediary business income

from cash management

Net non-interest income from

wholesale banking business

Note: All data on this page is based on standalone Bank level. Non-interest income from international business includes:

onshore corporate business, offshore coordination, and coordination with Hong Kong and New York

971

2,134

2012 2013

Income from wholesale asset

management business

10,450

14,616

2012 2013

(RM

B m

illio

n)

(RM

B m

illio

n)

(RM

B m

illio

n)

(RM

B m

illio

n)

(RM

B m

illio

n)

(RM

B m

illio

n)

22

Optimizing operational processes and upgrading

operational efficiency

Centralized remote

authorization to reduce the need

for tellers

1,008 branches in the whole bank have

already fully implemented remote

authorization

Remote authorization saves 27 seconds of

the transaction processing time compared

with on-site authorization, raising the

processing efficiency by 33%

A cumulative reduction of over 200 teller

positions

Upgrading core systems to

optimize counter process

In 2013, the counter transaction processing

efficiency overall was up 10% compared to

the last year

Centralized approvals for retail

loans to improve staff efficiency

After approvals of retail loans were

centralized, the number of loan officers

required at head office were only 50% of that

required in the branches, and the approval

cycle for retail loans was reduced by 50%

Degree of operational

centralization

Percentage of back office

functions outsourced

Average transaction processing

time

10%

28%

2012 2013

11%

33%

2012 2013

3.22

2.64

2012 2013

（Min

ute

s

）


23

Focus on strengthening credit and liquidity risk

management

Retail NPL ratio

1.93%

0.60%

Small enterprise non-performing loanrate

Micro enterprise non-performing loanrate

0.48%

0.64%

2012 2013

Small and micro enterprise NPL ratio

2013

0.77%

0.48%

2012 2013

Loans extended to

overcapacity industries as a

percentage of the total

LGFV NPL ratio Real estate NPL ratio

2.81%

2.43%

2012 2013

0.17%

0.02%

2012 2013

Liquidity risk

management

We responded to several liquidity crises in

currency markets to ensure stable overall

liquidity for the bank as a whole, especially

when the risk was notable in 2013:

Optimised FTP management systems

Appropriately developed proactive

liability management through the use

of an extensive range of financing tools

Actively encouraged the healthy

development of the interbank financing

and wealth management businesses

Further improved liquidity management

systems and risk management support

systems


Agenda

1 Overview



25

Challenges and opportunities

Accelerating economic and social transformation and urbanization bring broad prospects for the demand in financial

services

Rapid accumulation of wealth increases the demand for wealth management

The development of the multi-level financial market system increases the emerging bank business opportunities

The loosening of exchange rate control and steady advancement in RMB internationalisation increases the

opportunities for cross-border finance business

Significant progress in IT development provides great potential for internet finance , casting light on the innovation of

banks

Ch

allen

ges

Op

po

rtu

nit

ies

Internationally Domestically

Economic reform and structural adjustment has far

reaching impetus with slowdown in economic growth

Chinese banks are faced with operational challenges as

interest rate liberalization gets accelerated

Rapid emergence of internet banking has caused certain

impact on traditional banking

Financial markets become even more complicated and

volatile, bringing difficulty to bank's liquidity management

Global economic growth is relatively weakened

Notable impact of the Global Financial Crisis still persists

Global geopolitical situation becomes more complicated

Uncertainty in the financial markets increases

The profound impact that the tapering of Quantitative Easing

by the US will have on the global economy has still not hit

26

Operating strategies

Striving for an asset-light banking model to drive smart growth:

Thorough upgrade of services to constantly expand core and valued client base

Accelerated innovation to strengthen competitive advantages of strategic businesses and new

businesses

Adjustments of organisational structure and business processes to unleash the potential of

new business systems

Proactive responses to changes in the external economic situation to comprehensively

upgrade risk management levels

Enhanced cost control to effectively respond to the impact of interest rate liberalization

Exploration of new operating models and profitability drivers in view of the current internet

development

china merchants bank co., ltd. 2013 annual results announcement · 2014-04-01 · operational...

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