CITICS 2016 Financial Performance Presentation

Mar.24, 2017

1 Chinese Securities Industry Overview

2 CITICS Financial Performance

3 CITICS Business Highlights

3

Content

1 Chinese Securities Industry Overview

Overview of Chinese Capital Market in 2016

4

China’s Capital Market Indices Average Daily Turnover in the Equity Market 1 2

Stock Indices

Shanghai Composite Index -12.3%

Shanghai & Shenzhen 300 -11.3%

Hang Seng Index +0.4%

Bond Index

China Bond Wealth Index +1.3%

0

500

1,000

1,500

2,000

Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov

305.8bn

in 2014

1,076.5bn

in 2015

531.5bn

in 2016

Margin Finance Balance in the Market 3 Stock-Pledged Repo Balance in the Market 4

337.5

708.7

1,221.6

0

500

1,000

1,500

2014 End 2015 End 2016 End

1,026.0 1,174.3

939.2

0

500

1,000

1,500

2014 End 2015 End 2016 End

-20% y-o-y +72% y-o-y

RMB Bn

RMB Bn RMB Bn

Source: Internal.

Overview of Chinese Capital Market in 2016

5

AUM of Securities Industry AUM of Fund Industry 3 4

8.0 11.9

17.0

0

5

10

15

20

2014 End 2015 End 2016 End

+44% y-o-y

6.7 8.4 9.2

0

10

20

2014 End 2015 End 2016 End

+9% y-o-y

Capital Raised in the Equity Market 1 Capital Raised in the Bond Market 2

0.9

1.7 2.1

0

1

2

3

2014 2015 2016

+28% y-o-y

6.2

11.5 14.9

0

5

10

15

2014 2015 2016

+29% y-o-y RMB Tn RMB Tn

RMB Tn RMB Tn

Source: Internal.

Assets Overview: Client Assets Reflected Market Volatility

6

Total Assets Total Liabilities 1 2

1.1 1.6 2.9

4.9 4.4 4.3 0.6 0.5 1.2

3.4 2.1 1.4

0

2

4

6

8

10

2012 End 2013 End 2014 End Jun 2015 End

2015 End 2016 End

Own Assets Client Assets

0.6 1.0 2.0 3.6 2.9 2.7 0.6

0.5 1.2

3.4

2.1 1.4

0

2

4

6

8

10

2012 End 2013 End 2014 End Jun 2015 End

2015 End 2016 End

Own Assets Client Assets

4.1

8.3 7.0

1.2

6.4 5.0

2.1 1.7 3.2 1.5

Net Assets 3 Leverage Ratio 4

0.50 0.52 0.92

1.30 1.50 1.64

0

1

2

2012 End 2013 End 2014 End Jun 2015 End

2015 End 2016 End

1.6 2.1

3.2 3.7 3.0 2.7

2.5 2.8 4.4 6.4

4.4 3.5

0

5

10

2012 End 2013 End 2014 End Jun 2015 End

2015 End 2016 End

Adjusted Leverage Total Leverage

5.8 4.2

RMB Tn RMB Tn

RMB Tn Multiples

Source: Internal.

Industry Profitability：Back to Normal Level

7

Total Revenue

ROE

Net Profit 1

3

2

Net Profit Margin 4

283.6

129.5 159.2 260.1

575.2

328.0

0

200

400

600

2007 2012 2013 2014 2015 2016

132.7

32.9 44.0 96.5

244.8

123.4

0

100

200

300

2007 2012 2013 2014 2015 2016

60.0%

4.9% 6.1% 11.8%

19.9% 8.1%

0%

20%

40%

60%

80%

2007 2012 2013 2014 2015 2016

47%

25% 28% 37% 43% 38%

0%

20%

40%

60%

80%

100%

2007 2012 2013 2014 2015 2016

-43% y-o-y -50% y-o-y RMB Bn RMB Bn

Source: Internal.

8

Content

2 CITICS Financial Performance

1. CITICS Profitability

9

46.5%

4.9% 6.0% 12.2% 16.6%

7.4%

0%

20%

40%

60%

2007 2012 2013 2014 2015 2016

Total Revenue 1 Net Profit 2

30.9

11.7 16.1

29.2

56.0

38.0

0

20

40

60

2007 2012 2013 2014 2015 2016

ROE 3 Net Profit Margin 4

12.4

4.2 5.2 11.3

19.8

10.4

0

10

20

30

40

2007 2012 2013 2014 2015 2016

40% 36% 32% 39% 37% 31%

0%

20%

40%

60%

80%

100%

2007 2012 2013 2014 2015 2016

-32% y-o-y -48% y-o-y RMB Bn RMB Bn

Source：Company Annual Report Note：The calculation of net profit margin in both 2015 and 2016 excluded the impact from

commodity subsidiary.

64% 63%

74%

22% 21%

21%

14% 16%

5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015 2016

Capital-efficient

Flow-based

Fee-based

2. Balanced Revenue Mix

10

CITICS Revenue Composition

Source: Internal.

18.7 33.2

25.1

0

20

40

60

2014 2015 2016

6.4 11.2 7.2

0

20

40

60

2014 2015 2016

-24%

-36%

4.0 8.6 1.6 0

20

40

60

2014 2015 2016

-81% RMB Bn

RMB Bn

RMB Bn

11

3. Cost Analysis

Cost to Revenue Ratio 1

Compensation to Revenue Ratio 2

According to A-share

reporting, our cost to

revenue was 45% as of the

end of 2016, a 9% jump but

modestly lower than the level

of 2014.(47%)

According to A-share

reporting, our compensation

ratio was 30% as of the end

of 2016, a 4% jump but

modestly lower than the level

of 2014（32%）

67% 63% 64% 72%

50% 47% 36%

45%

0%

50%

100%

2013 2014 2015 2016

H-share Reporting A-share Reporting

25% 24% 20% 23% 32% 32% 26% 30%

0%

50%

100%

2013 2014 2015 2016

H-share Reporting A-share Reporting

Source：Company Annual Report

12

4. Capital Strength

34.8 44.3

94.5 93.5

0

20

40

60

80

100

2013 End 2014 End 2015 End 2016 End

87.7 99.1

139.1 142.7

0

50

100

150

2013 End 2014 End 2015 End 2016 End

Net Assets of Parent Company

Net Capital of Parent Company

Our net assets was 142.7bn as

of the end of 2016, a 3% jump y-

o-y, mainly due to net profit.

The net capital of our parent

company was 93.5bn.

+3%

1

2

RMB Bn

RMB Bn

Source：Company Annual Report Note：The figure as of 2015 end has been restated according to <The methodology of risk control ratios for securities firms> (2016 revision)

5. Leverage

13

Total Leverage 1

3.7 3.9

3.3

3.2

2

3

4

5

2014 2015 Jun End 2015 End 2016 End

CITICS Chinese Securities Industry Average Top 8 peers

Multiples

Source：Company Annual Report

6. Domestic and Overseas Benchmarking

14 Source：Company Disclosure

Our Revenue as % of Top 10 peers 1

Domestic Benchmarking

Our Profit as % of Top 10 peers 2 Our Assets as % of Top 10 peers 3

Revenue（Goldman Sachs/CITICS） 4

Overseas Benchmarking

Profit（Goldman Sachs/CITICS） 5 AUM as of 2016 End 6

17.4% 19.5%

0%

10%

20%

30%

40%

50%

2015 2016

15.1% 15.1%

0%

10%

20%

30%

40%

50%

2015 2016

10.0

5.6

0

5

10

15

2011-2015 average 2016

5.5 4.7

0

5

10

15

2011-2015 average 2016

1,380

417 404 403

0

500

1,000

1,500

2,000

Goldman Sachs

Morgan Stanley

Nomura CITICS

USD Bn

15.8% 16.9%

0%

10%

20%

30%

40%

50%

2015 End 2016 End

Multiples Multiples

15

Content

3 CITICS Business Highlights

China-related M&A

1. Investment Banking：Maintained the Leading Position in Market Share

Ranked No.1 in Equity Underwriting Ranked 2nd in Bond Underwriting

Rank Underwriter Market share

1 CITICS 11.5%

2 Huatai 7.0%

3 Guosen 6.8%

4 Guotai Junan 6.2%

5 China Sec. 5.9%

Market Equity Underwriting

Amount

Market Bond Underwriting

Amount

Market Overview 1 2 3

5

16

Rank Underwriter Market share

1 China Sec. 3.3%

2 CITICS 2.6%

3 Guotai Junan 2.4%

4 CMS 1.9%

5 Haitong 1.5%

+28%

+29%

Ranked No.1 in IPO Numbers 4

6.2

11.5

14.9

0

5

10

15

2014 2015 2016

0.9

1.7

2.1

0

1

2

3

2014 2015 2016

RMB Tn

Source: Bloomberg. CITICS ECM and DCM monthly report.

CITICS Highlights

Domestic The size of A-share major assets restructuring

transactions completed ranked 1st

Cross-border

Announced global merger and acquisition

transactions involving PRC enterprises ranked 2nd

among Chinese peers

Regulatory

Recognition

Awarded an A rating for the financial advisory

business 4 years in a row

Rank Advisor Market Share

1 Goldman Sachs 9.9%

2 Morgan Stanley 8.9%

3 CICC 8.4%

4 CITICS 7.4%

5 JP Morgan 6.3%

RMB Tn

Rank Underwriter IPO Numbers

1 CITICS 19

2 Guangfa 16

3 China Sec. 15

4 CMS 12

5 Essence Sec. 12

2. Brokerage：Transforming to Wealth Management

Average Commission Rate in

the Market

Market Overview 1

17

309.8

1,076.5

531.5

0

500

1,000

1,500

2014 2015 2016

-51%

Market Average Daily Turnover

RMB Bn

bps

5.27 4.07 3.75

0

5

10

2014 2015 2016

Stabilizing Market Share Assets under Custody 3 2

2.8

3.9 4.3

0

1

2

3

4

5

2014 End 2015 End 2016 End

+10%

CITICS Average Commission Rate Cross-Border Institutional Clients 4 5

28 48 49

0 50

100 150

2014 End 2015 End 2016 End

No. of Clients

-8% 135 139 140

0 50

100 150

2014 End 2015 End 2016 End

QFII

RQFII

RMB Tn

bps

6.91

5.12 4.04

0

5

10

2014 2015 2016

-21%

6.46% 6.43% 5.72%

0%

5%

10%

2014 2015 2016

4.93% 5.12% 5.44%

0%

5%

10%

2014 2015 2016

2 2 2

5 5 2

Turnover

Ranking

Brokerage

Commission

Ranking

Source：internal

755.0 1,071.3

1,815.2

0

1,000

2,000

2014 End 2015 End 2016 End

3. Asset Management：AUM Increased

Market Overview

Total AUM of Securities Firms

1

18

Total AUM of Fund Industry

+44%

8.0

11.9

17.0

0

5

10

15

20

2014 End 2015 End 2016 End

6.7 8.4 9.2

0

10

20

2014 End 2015 End 2016 End

RMB Bn

RMB Bn

178.0

412.0

610.0

0

500

1,000

2014 End 2015 End 2016 End

458.4 864.4 1,005.8

0

500

1,000

1,500

2014 End 2015 End 2016 End

Asset Management Fee

China AMC AUM

Total AUM & Active AUM 2 3

5

+69%

+48%

+16%

China AMC Management Fee 4

0.81

1.75 2.10

0

1

2

3

2014 2015 2016

3.24 3.99 3.90

0

1

2

3

4

5

2014 2015 2016

RMB Bn RMB Bn

RMB Bn RMB Bn

Market share 2016 2015 "+/-"

Equity 11.1% 10.1% 1.0%

Hybrid 5.6% 5.3% 0.3%

Source：internal

+20%

+9%

19.0

10.0

0

10

20

2015 2016

(0.27)

(3.39) (4)

(3)

(2)

(1)

0

2015 2016

1.1 5.1

0

10

20

2015 2016

4. Equity Derivatives

19

Fin

an

cia

l Mark

et M

an

ag

em

en

t Co

mm

ittee

OTC Derivatives Equity Financing

Customer

Needs

Instruments

& Products

• Serve financial institutions, hedge

fund, enterprise, HNWI and retail

clients.

• Offer client risk management

solutions, wealth management,

global asset allocation and enterprise

capital operation.

Structured Products

OTC Option Flow Trading

Corporate Risk Management

Solution

• Serve shareholders, senior

executives and ESOP(Employee

Stock Ownership Program).

• Offer clients existing equity

solutions and financing

instruments

Equity Collateralized Financing

Equity Incentive Financing

Mezzanine/Cross-border

Financing

• Offer market-making services for

exchange fund products and

options.

• Offer liquidity market-making and

arbitrage strategies for cross-

market, cross-assets and cross-

products activities.

Exchange option contract

market-making

ETF/Money Market Market-

Making

Other Market-Making

Strategies

OTC derivative trading amount

of 109.8bn

Core market-maker of 50ETF

ranking 1st.

The market share of Stock-

pledged financing was 6.39%

among the 1st tier.

Market-Making

Stock-Pledged Option Delta TRS Market-Making

29.6 39.4

0 10 20 30 40 50

2015 2016

+33% -47% +349%

RMB Bn RMB Bn RMB Bn RMB Bn

Source：internal

1 2 3

4 5 6 7

5. Fixed Income

Business Highlights

20

ABS

4.70% 4.72%

5.62%

4%

5%

5%

6%

6%

2014 2015 2016

Interest Rate Bond

Market Share

Sales

475.1 522.1 441.4

0

200

400

600

2014 2015 2016

Trading

-1.53% 0.00%

4.90%

-5%

0%

5%

10%

China Bond Composite Index

Fixed Income Fund Average

Yield

Our Bond Trading Yield

New Business Initiatives

Integrate research and investment；

Full coverage of industrial chain；

Properly manage business and risk.

Cross-Border TRS

Convertible Bond

Business Scale

Term：6 months

Our annualized return：3%

FX Application

Regulatory communication;

Platform build-up;

Streamline FX business needs

Model design.

Overseas

Set up convertible trading team

Market-Making

Leading position in USD and

RMB bond trading turnover

Structured Products

USD 5.3bn trading turnover

Offer leveraged financing of

USD 1.5bn for clients

Trading

Apply CDS, FX, commodity

and equity index futures to

hedge risk

Credit Bond Amount

Ranking 2nd

among peers

Risk Management

BV01

At 4mn

Liquidity Support

Daily financing amount of

49bn

Credit Research team

build-up

Recruit talents

Smooth the dialog among

research, trading and risk

management

Strengthen enterprise

credit field research

Fin

an

cia

l Mark

et M

an

ag

em

en

t Co

mm

ittee

Source：internal

RMB Bn

6. Margin Finance

Peers Analysis 3

21

33.4

72.1 74.0 62.6

0

50

100

150

2013 End 2014 End 2015 End 2016 End

346.5

1,025.7 1,177.5

938.8

0

500

1,000

1,500

2013 End 2014 End 2015 End 2016 End

Industry Balance

CITICS Balance

1

2

-20%

-15%

+196%

+116% +3%

+15%

RMB Bn

Rank Brokers

2016

Balance

(RMB Bn)

2015

Balance

(RMB Bn)

+/-

1 CITICS 62.6 74.0 -15%

2 Guotai

Junan 57.7 72.5 -20%

3 Huatai 55.1 66.1 -17%

4 Shenwan

Hongyuan 54.5 72.3 -25%

5 Guangfa 54.1 66.9 -19%

Source：internal

RMB Bn

7. Goldstone as a Major Revenue Contributor

22

2.57 1.29

3.24

0 1 2 3 4 5

2014 2015 2016

Goldstone Financial Performance from 2014-2016

Total Revenue

1.64 0.41

1.67

0 1 2 3 4 5

2014 2015 2016

Net Profit

100%

Goldstone

100% 100% 100% 100%

Capital

Source

and

investment

Own Capital

Equity

Investment

Private Equity

Pre-IPO minority

interest

Private Fund

Acquisition to

control

Private Fund

REITs

Private Fund

FOF

60%

Private Fund

10 AUM as of

2016 End

(RMB Bn)

16.8 5.0 18 2.3 1.8

RMB Bn RMB Bn

Haorui Runhui Goldstone Fund

Management

CITIC Buyout

Fund

Jinshang

（Tianjin） Sanxia

Source：internal

23

8. International Expansion

On Dec.25th,2016 S&P maintained BBB rating and changed the outlook

from negative to stable. Overseas Credit

Rating Improved On Feb.24th,2017 Moody’s maintained Baa1 rating and changed the

outlook from negative to stable.

Best Sales Team in Asia-Pac

(ex.Japan & Australia)

Investment Banking

3

1

ECM:11 IPOs and 13 follow-ons

DCM: 16 bond underwritings

M&A: 13 projects

One Belt One Road: over 40

projects excluding Hong

Kong & Australia from 2015

to 2016.

Ran

k Teams Market Share

1 CLSA 16.4%

2 HSBC 16.0%

3 UBS 9.8%

Best Sales Team in Japan 4

Ran

k Teams Market Share

1 Nomura 17.7%

2 Daiwa 15.0%

3 CLSA 9.3%

Equity Underwriting in Asia-Pac

(ex.Japan) 2

Rank Teams Market Share

1 Morgan Stanley 7.6%

2 JP Morgan 5.0%

3 UBS 4.9%

4 CITI 4.6%

5 Goldman Sachs 3.5%

9 CLSA 2.9%

IB Projects in 2016 1

Research & Sales 2

CITIC CLSA

Strengthen overseas competitiveness

Optimize management overhead

Improve business coordination

Source：《Asiamoney》, Moody’s and Standard & Poor’s website, internal

24

9. Comprehensive Risk Management Framework

Source：internal

VaR 1

Market Risk

Interest Rate Sensitivity（-25BP）

Bond Holdings by Ratings (Onshore) 1

Credit Risk

Risk Management and Measures

Credit Risk Management system

includes: Due Diligence, Internal Credit

Rating, Limit Setting & Monitoring

2

2 Control Procedures 3

Operational Risk

To Prevent Risk via New Product

Approval Procedure, review of workflow &

design of control steps;

To Mitigate Risk via Incident Reporting,

Mitigation Action Recommendation and

Tracking

To Flag Potential Risk via day-to-day KRI

Monitoring

To Promote Risk Awareness via trainings

and case study

0.16 0.16 0.16 0.16 0.14 0.17

0.02 0.02 0.05 0.06

0.08 0.06

-

0.05

0.10

0.15

0.20

0.25

2014 Jun End

2014 End 2015 Jun End

2015 End 2016 Jun End

2016 End

Revenue Equity

-

50.0

100.0

2014 Jun End

2014 End 2015 Jun End

2015 End 2016 Jun End

2016 End

Sovereign AAA AA A A-1 Others

74.3

50.6

73.6 70.8 82.4 76.5

Sovereign and AAA accounted for 55% of the total

Assets over Liability 2016 2015

Margin Finance 276% 284%

Outright Repo 228% 263%

Stock Based Loans 273% 432%

Total Return Swaps 228% 211%

RMB Bn

RMB Bn RMB Bn

0.12

0.37

0.69

0.39

0.24

0.18

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2014 Jun End 2014 End 2015 Jun End 2015 End 2016 Jun End 2016 End

VaR-Equity

VaR-IR

VaR-FX

VaR

25

10. Abundant Financing Tools and Healthy Regulatory Ratios

Financing Activities in 2016 Terms Dispersion of Liabilities (excluding inter-bank lending and repo)

As of the end of 2016, our allocable capital was 81.2bn and net capital reached 93.5bn.

Liquidity reserve amounted to 36.5bn and regulatory ratio was well above regulatory limit.

The higher proportion of mid-long term liabilities indicated lower solvent pressure from short-term

liabilities.

The short-term liabilities like beneficiaries certificates can be issued on a rolling basis and there was

still room for the existing amount to reach that limit.

1 2

Liquidity Coverage Ratio Net Stable Funding Ratio 4

148% 167%

0%

100%

200%

2015 End 2016 End

Regulatory Limit 100%

141% 143%

0%

100%

200%

2015 End 2016 End

3

Credit Line by Commercial Banks 5

RMB Bn

4.6 22.0 13.0 15.6

60.7

0 20 40 60 80

100

Less than 1 month

1 month to 3 months

3 months to 6 months

6 months to 1 year

more than 1 year

Regulatory Limit 100%

As of the end of 2016, we have been

granted the amount of 363bn from 102

banks.

Source：internal

RMB Bn InstrumentsIncremental

s in 2016

Balance as of

2016 End

Equity

FinancingFollow-on/Convertibles /

Shareholders'

Equity over

140bn

1、Corporate Bond

（Public/Private

Placement）

2、Surbonidated Bond

17.0 61.5

Short-Term

Debt

Financing

1.Beneficiary

certificates

2.Commercial Paper

3.Gold leasing

.etc

103.3 55.3

Overseas

Debt

Financing

（USD Bn）

USD Bond / 1.45

Note：The amount of beneficiary certificates and commercial paper are

caluculated on accumulated basis, thus the results will be greater than the year

end balance

Mid-long

Term Debt

Financing

26

Thank You！