Citibank (China) Co., Ltd.
Transcription
Citibank (China) Co., Ltd.
Citibank (China) Co., Ltd. ANNUAL REPORT 2013 CONTENTS CHAIRMAN’S MESSAGE 01 INSTITUTIONAL CLIENTS GROUP 02 GLOBAL CONSUMER BANKING 08 UPHOLDING WORLD-CLASS CORPORATE GOVERNANCE 10 GIVING BACK TO THE LOCAL COMMUNITY 14 AWARDS AND RECOGNITION 20 CITI’S MISSION & KEY PRINCIPLES 21 BRANCH NETWORK 23 CHAIRMAN’S MESSAGE I’m pleased to present to you the Citibank (China) Co., Ltd. 2013 Annual Report. Citi China ended the year with notable achievements which reinforced our leadership in China’s financial industry. China is one of the most important markets for Citi globally, and we place great emphasis on long-term planning for our sustainable development in this market. Our continued investments aim to enable progress for our clients by leveraging our global network synergies and capitalizing on three long-term trends – globalization, urbanization, and digitization. As a result, we delivered solid financial performance and ended 2013 with strong numbers. We During the year, we expanded our target markets, achieved an operating income of RMB4.35 billion pursued new business opportunities, and grew our and a net profit of RMB964 million. Our prudent employee and client bases. We also strengthened approach in operations and continued focus on our product innovation and extended our network high quality customers allowed us to attain strong presence in line with the latest development of the healthy ratios, like our Capital Adequacy Ratio, local banking industry. which was at 14.22 percent and well above the regulatory requirement. Our Global Consumer Bank upheld its long-standing reputation in wealth management, substantiat- We are optimistic about the future of China. As we ed by our ability as the first foreign bank to launch move the business forward, we will continue to domestic mutual funds in China. We continued to actively participate in and contribute to China’s push ahead with our credit card business, for which financial reform for the development and prosperi- we were the first global bank to issue sole-branded ty of the local banking and financial sector. I credit cards, offering attractive products and believe that, with this right attitude, strategy and unique value propositions to our card holders. vision for success, Citi China will continue bringing more opportunities to our clients and China. We were also actively engaged in China’s financial reform, and were honored to be the pioneer global bank to obtain approval to prepare for a sub-branch in the China (Shanghai) Pilot Free Sincerely, Trade Zone. By amalgamating the latest policies in the Zone with our unparalleled global expertise, local insight and client relationships, we launched industry-first solutions that helped our clients Andrew Au maximize opportunities there. Chairman, Citibank (China) Co., Ltd. 01 CCCL has also been elected as the Co-Chair of the key cities around the globe continue to serve them. Shanghai Banking Association (SBA) FTZ committee. We hosted ‘China Day’ in multiple cities around the world, sharing with clients insights and updates on As part of the ongoing reform in the FTZ, Citi China their concerned industries and the related econo- launched RMB cross-border auto pooling and mies. We also organized China Desk Network Day payment netting solutions in line with newly in April and December, where we gathered staff released FTZ policies. We are the first bank to do from all our China Desks to meet with Chinese so, thanks to our unparalleled global network, customers and give them a platform to network strong product capabilities and in-market knowl- with each other. edge in customizing existing solutions according to client needs. INSTITUTIONAL CLIENTS GROUP Citi’s Institutional Clients Group builds enduring relationships with clients by providing a full suite of strategic advisory and financing products to multinational and local corporations, financial and public sector institutions, and privately held businesses. Sub-branch in the Shanghai Pilot Free Trade Zone As a leader in the local financial industry, Citi has also given more than 15 talks at internal and external events, webinars and seminars to relevant global customers, which educated the audience about new regulations, opportunities for them in the Zone and our corresponding services created for their benefit. Corporate and Investment Banking Global Subsidiaries Group Citi has traditionally been a leading financial service provider to multinational companies operating in China. In 2013, our Global Subsidiaries Group (GSG) continued to capitalize on Citi’s global network and broad service offerings to support our client’s growth in China. The department witnessed good business momentum in 2013 as clients continued to invest and build capacity for the future. We Citi’s Corporate and Investment Banking arm provides comprehensive relationship coverage service to ensure the best possible service and responsiveness to our clients. focused on holistic client advisory that is combined with strong execution, and helped our clients raise significant funds from the capital markets, including several innovative structures in cross border financing flows. In 2013, Citi China continued to help our clients A key milestone for Citi China in 2013 was the approval in September 2013 to open a sub-branch in the China develop and expand domestically and overseas. (Shanghai) Pilot Free Trade Zone (FTZ). The FTZ is a big step taken by the Chinese government in its reform Some of these clients have now expanded across journey. It is an honor to be the first global bank to receive this approval. five continents, and our nine China Desks based in 02 INSTITUTIONAL CLIENTS GROUP 03 Financial Institutions Group and Public Sector Group Citi China bagged five titles in Asia Pacific finance magazine Asian Money’s 2013 Foreign Ex-change (FX) survey: Driven by the special needs of institutional clients, Best Overall FX Services (Corporate category); the Financial Institutions Group (FIG) and Public Sector Group (PSG) provide comprehensive finan- Best FX Options (Corporate category); cial solutions to a wide range of financial institutions and the public sector, including banks, insur- Best FX Products and Services (Corporate cate- ance companies, securities firms, fund managers, gory); trust and leasing companies, and public sector firms. Best FX Research and Market Coverage (Corpo- FIG & PSG achieved robust business development Markets in 2013. We continued to lead the industry with the strongest presence of any international bank in the local market, offering a full spectrum of tailor-made solutions with a deep understanding of the financial institutions industry in China. We also have one of the largest professional financial institutions team among foreign banks in China. Top three Best FX Services (Financial Institu- With one of the largest Markets teams among international banks, Citi offers a broad range of market-leading and innovative financial products to corporate, institutional, government and public sector clients. tions category). We were also recognized as the industry’s best in client servicing by Euromoney magazine and research-based consulting firm Greenwich Associates (top three). The FIG also facilitated the implementation of new rules from two regulatory bodies: rate category); In order to better provide customers with solutions according to their unique needs, Citi China also The China Insurance Regulatory Commission partnered with other banks and financial institu- (CIRC) released its first rulebook for interim tions including mutual fund, insurance, pension and measures for overseas investment of insur- sovereign fund companies, to leverage on each ance funds. As Citi China works with several other’s strengths and innovation. insurance companies, FIG took responsibility in proactively assisting our partner insurance In 2013, Citi Markets sustained strong performance agencies in planning for future business and maintained its leadership position in foreign according to the rules. exchange, interest rates and commodities. The China Banking Regulatory Commission As many Chinese companies showed a large inter- (CBRC) put in place new capital management est in going global during the year, the Markets regulations for banks for the first time. To this team was focused on enabling them to do so. In end, Citi China FIG shared with other banks addition to traditional banking services, we helped about our company’s global experience to help them set up global risk management platforms, everyone get up to speed. manage foreign exchange exposures, conduct structured finances, and execute hedging transactions onshore and off-shore. 04 INSTITUTIONAL CLIENTS GROUP 05 Securities and Fund Services All of these products and services aim to improve treasury efficiency for our clients. For Chinese multinational corporations, TTS dedicated atten- Securities and Fund Services (SFS) offers a large tion to providing them even greater financial portfolio of products and services including custo- support for their global business expansion. dy, escrow and related services, depositary receipts, and agency and trust. We also support international securities trading and investment activities of leading institutions through efficient receipt, delivery and safekeeping of securities as well as the related cash and FX functions. Treasury and Trade Solutions Business highlights include: All these services are offered to a wide range of sophisticated investors, including mutual funds, pension funds, hedge funds, banks, and insurers. Global industry surveys consistently rank us as a premier choice for custody, clearing, agency and trust, and depositary receipts services in more markets than any other bank. Treasury and Trade Solutions (TTS) delivers cash Executing the first RMB cross-border lending management and trade solutions that help clients transaction in January 2013 and maintaining streamline and automate processes, mitigate risk leadership in the number of these transactions; and expand their reach. Launching a series of RMB cross-border trade In 2013, the TTS team continued to lead the way in refinancing delivering innovative and customized solutions to optimized trade financing for their cross border clients, including an array of digital and mobile-en- RMB trade flows; solutions that give clients abled platforms and tools. Of note were a couple of new product launches in cash delivery and trade and treasury management that are first in the industry. These new solutions are focused on promoting RMB internationalization, created in line with our approval as the first global bank to open a sub-branch in the China (Shanghai) Pilot Free Trade Zone (FTZ). Providing successfully foreign currency cross-border centralized fund management solutions for multinational corporations under State Administration of Foreign Exchange’s (SAFE) pilot program; Being the first international bank to launch a paperless processing solution for RMB cross-border settlements; Performing the first cross border RMB sweeping transaction in the market. 06 INSTITUTIONAL CLIENTS GROUP 07 GLOBAL CONSUMER BANKING Commercial Bank Citi is focused on being a trusted financial advisor of each and every of our small and medium private enterprises (SMEs) customer. In 2013, our commercial banking business attained Citi’s Global Consumer Bank (GCB) focuses on serving affluent and emerging affluent customer segments in top-tier cities, where the bank’s unique global network, premium brand, customer-centric products and services provide unique competitive advantages. GCB aims to deliver a remarkable experience through industry-leading products and services, next-generation retail formats and world-class digital channels. market average. Retail sales were three times strong growth among key indicators in revenue, above average; activation rate was twice that of customer deposits. average. As a testament to delivering remarkable customer experience, Citi launched a 60-minute card issuance service in 2013 where customers could get their applications approved and personalized cards issued within an hour. Citi became the first foreign bank to be allowed by the China Securities Regulatory Commission (CSRC) to sell domestic mutual funds in the country in June 2013. A new addition to the bank’s existing portfolio of wealth management services, Citi Wealth Management Products In 2013, GCB celebrated a number of milestones in the credit card and wealth management businesses, Citi China is deeply committed to bringing choices, including instant card issuance and the launch of local innovation and world-class wealth management mutual fund. Our retail network also expanded with a products and services to our customers. China’s domestic mutual fund products combines our experience in global mutual funds with our local market knowledge. By the end of 2013, Citi China was partnering with five fund houses to offer over 20 domestic mutual new outlet in Chengdu, bringing our total number of retail outlets in the country to 52. Domestic Mutual Funds Besides offering customers a comprehensive array funds. We tap our global expertise and resource network to bring new, innovative and value-added solutions that better cater to our expanding customer base and enhance our relationships with them. For example, our mobile banking application allows customers to access banking services, like payment authorization, efficiently, conveniently, and most importantly, safely. Citi offers a broad range of solutions to our SME customers, such as our American Depositary Receipts (ADR), syndicated loans, bonds, international funds and cross-border RMB settlement pooling services, grant SMEs the capability to expand their business abroad, thereby increasing their competitiveness. In 2013, Citi Commercial Bank partnered with our China of products, we are also devoted to creating more Export and Credit Insurance Corporation (SINOSURE) Credit Cards convenient and smarter service channels. to support a number of SMEs in export insurance and Citi China offers two credit cards: Premier Miles mutual funds transactions into CitiPhone Banking, and consumer through which customers can buy, sell, redeem, The Citibank China Emerging Affluent Tracker It is important that our SME customers are kept segments according to their spending preferences, and transfer QDII mutual funds remotely, thereby Report, conducted semi-annually by research com- apprised of market movements so that they can plan and are available in all 13 cities that Citi China oper- increasing efficiency notably. pany Anovation, evaluates a set of markets and better and more sustainable business strategies. We trends KPIs to calculate Citi China’s brand consid- do this through different activities and communica- eration scores as a measure of the level of public tions, like trainings, seminars, and networking events awareness of our brand. organized in collaboration with the Economic Informa- Rewards, targeting For example, in April 2013, we incorporated QDII different ates in. The PremierMiles Card boasts the widest range of Building Brand Awareness financing. tion Commission, various SME associations, law firms, redemption choices for over 50 airlines and access to over 600 airport lounges worldwide six times In 2013, Citi China continued and expanded our auditing companies, etc. These events also encourage per year, and gives cardholders the flexibility of ‘Blue Wave’ branding campaign to five major cities, a spirit of information sharing among SMEs and the transferring air miles to friends and family; namely, Beijing, Chongqing, Guangzhou, Shanghai aforementioned third parties in the country. Rewards Card holders enjoy preferential offers and Shenzhen. We paid extra attention on deliver- with Citi’s merchant partners, and can use points ing value-added communications like sending In 2013, we held over 50 of these sessions that accumulated to redeem air miles or vouchers. relevant and useful information to target audienc- spanned more than 200 hours across 15 cities in China, es. As a result, our brand consideration score more and received a ‘SMEs’ Favorite Service Provider’ than doubled from that of 2012. award from Guangdong Provincial SME Development 2013 September 19th marked the first year anniversary of our sole-branded credit cards. Results have Association. exceeded expectation and outperformed the 08 GLOBAL CONSUMER BANKING 09 UPHOLDING WORLD-CLASS CORPORATE GOVERNANCE Board members can timely be aware of the opera- independent directors have actively participated in tion and management situation of the Bank and the decisions of the Board and provided their inde- provide responses to management through such pendent opinions. communication mechanism. All the directors performed their duties with due diligence and At Citi, we aspire to the highest standards of corporate governance and ethical conduct. We act in the best interests of all of our stakeholders, maintain the highest ethical standards, and ensure full compliance with the laws and regulations that govern our company. protected the interests of both the Bank and the CCCL does not have a board of supervisors, but Independent Directors has a single supervisor designated by the share- As of the end of December 2013, we have two inde- Board of Directors pendent directors, i.e., Mr. Stephen Long (who replaced Mr. Danny Liu to be our new independent The structure of the Board of Directors has been optimized since the establishment of Citibank China Co., Ltd director since June 2013) and Mr. Zhe Sun. holder. Our supervisor Mr. Mark Hart performed his duties diligently and attended all of the Board meetings after his appointment, and issued confirmation letters to the meetings he attended accordingly. (CCCL). As of 31 December 2013, the CCCL Board of Directors consisted of 10 directors in total, 5 non-executive directors, 3 executive directors and 2 independent directors. Supervisor shareholder. Mr. Stephen Long is the voting member of Internal Audit Committee and Risk Management Committee under the CCCL Board, and also chairs the Internal Title Name CCCL Title Audit Committee. Chairman Andrew Au Legal Representative, President Mr. Zhe Sun is the voting member of Risk Manage- In addition, Mr. Hart supervised the Bank’s financials and the performance of directors and the senior management. The supervisor also provided opinions to the matters in relation to 2012 audited ment Committee and Related Party Transaction Independent Director Stephen Long Independent Director Zhe Sun Director Kai Zhang CFO and the relevant committee meetings (Mr. Stephen Director Simon Chow EVP Long attended all Board and relevant committee Director Stephen Bird Director Deepak Sharma Director Daisy Yao Director Agnes Liew In addition, during the intersession of the Board Director Anthony Nappi meetings, the independent directors kept abreast Control Committee, and he is also the chairman of Related Party Transaction Control Committee. financials, the performance of directors and the senior management. We also informed the supervisor about related party transactions under the 15th board written resolution. Both of them have attended all the Board meetings meetings after his appointment), and were involved in the consideration and approval of the related matters. themselves with our monthly financial information, business updates, and CBRC on-site inspections through our newsletters. In 2013, we held 4 Board meetings at an average of once every quarter. The Board resolved or heard the Professional Board Committees reports of a total of 57 matters (including 26 resolutions and 31 reports). In addition, CCCL Board has exer- Furthermore, Mr. Zhe Sun has issued his written As of December 31, 2013, there were three profes- cised 6 written resolutions to 6 key matters in the period between Board meetings. opinion on material related party transactions sional committees under the CCCL Board. These reviewed through the 15th written resolution of the were: a Related Party Transaction Control Com- During the intersession of the board meetings, we also provided 14 newsletters to the Board in terms of Board (for completion of information purpose, Mr. mittee established on June 13, 2007, an Internal CCCL’s monthly financial information, CBRC on-site inspection on CCCL’s consumer banking business and Danny Liu also issued a written opinion on the Audit Committee established on June 13, 2007 and commercial banking business, CCCL’s self-assessment on counter operation and financial/expense control, same material related party transactions). The a Risk Management Committee established on and Notice on Foreign Banks’ Risk Prevention and Stable Development for 2013 issued by CBRC Shanghai. 10 UPHOLDING WORLD-CLASS CORPORATE GOVERNANCE 11 September 12, 2007. Details are as below: review and discuss the matters correctly and mittee made 11 resolutions and heard 41 reports. The management (IBAM); reopen rate (RoR); and on time efficiently. risk portfolio seasonal report, classified portfolios, remediation rate (OTR). NPLs and loss provisions, and key risk limits against Internal Audit Committee Senior Management Team Chairman The senior management team of the Bank performed Committee Voting Member Committee Voting Member Committee Non-Voting Member Stephen Long Independent Director Daisy Yao Andrew Au Simon Nie Related Party Transaction Control Committee Chairman Committee Voting Member Committee Voting Member Committee Voting Member Committee Non-Voting Member Committee Non-Voting Member Zhe Sun Independent Director Andrew Au Deepak Sharma Agnes Liew Lili Qin Kai Zhang Risk Management Committee Chairman Committee Voting Member Committee Voting Member Committee Voting Member Committee Voting Member Committee Non-Voting Member Committee Non-Voting Member Committee Non-Voting Member Committee Non-Voting Member Daisy Yao Stephen Long Independent Director Zhe Sun Independent Director Anthony Nappi Andrew Au Lili Qin William To Wai-ling Wong Marine Mao an active role in adherence to optimizing the corporate governance standard, expanding the Bank’s scope and promoting the Bank’s reputation. The team provided timely reports to the Board and/or the Board committee through various channels, including Board and committee meetings, newsletters, etc. Management level committees also held several meetings and actively exercised its management functions. training was provided to employees. These topics included anti-fraud policies and fraud awareness, professional conduct, improper electronic communianti-money At meeting. expressed their opinions and provided constructive laundering and sanctions, anti-bribery and corruption, etc. The senior management team met regularly and worked diligently to ensure the Bank performed well in 2013. In addition to these achievements, we will continue to adhere to, and where appropriate, strengthen our governance practice to ensure stable, sustainable and fast development in 2014. country risk policies. They continued to focus on the frequent communications facilitate mutual under- key risk areas that CCCL faced due to regulatory standing between them and CCCL, and therefore, requirements and market changes, including reputa- help our internal audit team address their expecta- tion risk, information technology risk, fraud case tions and concerns more effectively. prevention and outsourcing risk, etc. Internal Audit adopted a risk-based methodology, managed within the organization’s risk tolerance. Audit plan is driven by audit needs assessment of auditable entities. The audit needs assessment is based on a composite risk which is derived from two distinctive ratings – Citigroup level risk rating and ensuring transparency and procedural fairness of transactions undertake with the Bank’s related parties. The Committee takes responsibility of identifying the related parties of CCCL and ensures that the latter’s information is accurate. They monitor transactions in Internal Audit received the latest business and General related party transactions are reviewed and management information through business monitoring and shared audit results, key findings and status of corrective actions through various committee such as the Business Risk and Compliance Control Committee etc. More importantly, it also draws management attention to significant risks and internal control abreast of supervising senior management’s control and 6 local offices in 2013, so as to keep abreast with decisions. The three special committees held 12 of various risks, including credit, market, liquidity, the changing regulatory requirements and facilitate meetings in total, reviewed 27 motions and heard compliance, operational , IT and, reputation risk. It communication with local regulators. 45 reports. Each of the three committees effective- also reviews risk portfolio reports, classified portfoli- ly operated with distinct division of responsibilities os, NPLs and loss provisions and key risk limits Topics discussed during these meetings include regu- and provided professional advice and suggestions against actual exposures. latory expectations, internal audit transformation, 12 defines the principles, procedures and rules aimed at credit extension, asset transfer and service provision. roles in assisting the Board to make correct ground for the Board so that the Board could The Related Party Transaction Control Committee country level risk rating. Head of Audit paid several visits to CBRC Shanghai They provided solid fully in making scientific and effective decisions.These The Risk Management Committee keeps itself party transaction control. members portfolio, derivative risk assessment, stress test and ing quality and effectiveness, performed important in terms of audit, risk management and related meeting, members played an active role to support the Board lapses. Board, based on the principle of equally emphasiz- committee The Committee paid attention to the credit card Robust Risk Management and Internal Control In 2013, the three special committees under the each and timely suggestions to the management team. All which provides assurance that risks are being Our management team also ensured that adequate cation, actual exposures were reviewed at each Committee approved by the Committee, while the material related party transactions are subject to approval by the Committee to ensure all of CCCL’s related party transactions are made in good faith, are according to the arms-length principle, and are compliant with the relevant laws and regulations. In addition, material related party transactions are, post The Citigroup Chief Auditor, Regional Chief Auditor, CCCL’s Chair of the Audit Committee and Country audit focus and the three key performance indices All voting members of the Committee attended every (KPIs) directly linked to the management’s perfor- of the four meetings held during the year. The Com- mance. The KPIs are: issues being addressed by the examination of the Committee, submitted to the Board of Directors for final approval. By having a formal approval and review process, it allows CCCL to achieve in-country governance and enhance effectiveness of controls. The Committee is legislated by the China Banking Regulatory Commission’s administrative measures for connected transactions between commercial banks and their insider or shareholders, the Related Party Transaction Internal Control Policy and the Working Rules for the Related Party Transaction Internal Control Committee of CCCL. UPHOLDING WORLD-CLASS CORPORATE GOVERNANCE 13 GIVING BACK TO THE COMMUNITY . As Citi grows in China, we are committed to good corporate citizenship at every opportunity. We take a holistic approach in giving back to our local communities around China in a manner that is results-oriented and that contributes to the sustainable development of the communities we support. Citi strives to put part of our money, talent, experience where we can help accelerate economic opportunity, and to find ways to include more Financial Capability and Asset Building Citi sees financial knowledge and skill sets as an important life skill. This, coupled with our expertise in this space, made us decide to support an extensive array of financial education programs that have to date benefitted 13,000 children and youth in 2013 alone. Enterprise Development and those where philanthropic capital can seed the development and testing of new ideas with the potential to attain scale. Our efforts are partially catalyzed by Citi Foundation’s investments in partners that promote financial inclusion and economic empowerment, and fueled by the engagement of our employees and partners. The Foundation provides support to programs that promote the scaling of proven ideas. We also encourage employees to participate actively in activities that complement our commu- We and our NGO partners are heartened by the changes we have witnessed in their financial behaviors, like developing personal non-profit partners to launch twelve community 14 The program illustrates basic financial concepts a platform for them to network and learn, the such as financial planning, smart spending and Awards are highly regarded as an industry yard- saving, in interesting and easy-to-absorb ways: stick for success. In fact, this year’s Awards com- cartoons, comic books, skits performed by the mittee received the highest number of applications students themselves and competitions, and in and to date, with 165 applications for Institutional out-of-school activities. Of note, the cartoon series Awards from 23 provinces, and an overwhelming was a new channel introduced in December 2013, 100 individuals competing for the Microentrepre- consisting of 32 episodes, nine of which were neur of the Year Award. dubbed in local dialects by Citi volunteers. Microfinance The Citi – CBA Micro-entrepreneurship Awards budget and maintaining monthly expenditure Citi celebrates microentrepreneurs and microfi- report. nance practitioners with the annual Citi Microentrepreneurship Awards (CMA). The Awards has a secondary mission to raise awareness of the role Case Study: Agent Penny Program development programs that address a diverse group of social, economic or environmental needs. become the largest and most influential event for monthly nity activities. In 2013, Citi China joined hands with more than ten ods. As a leading corporate supporter of microfinance in China, Citi has, over the decade, been advocating for the sector’s development by enlarging the capacity of non-profit microfinance institutions (NGO MFIs) and sector networks to support financial education initiatives for microfinance clients, many of whom are a less fortunate population. causes that fit our mission of financial inclusion ground and thought leadership and innovation Funded by Citi Foundation, the Awards have since Chinese microfinance practitioners. Besides being people in the financial system. We support specific nongovernmental organizations working on the primary school students through innovative meth- of microfinance in increasing access to finance and poverty alleviation. In October 2013, we held the ninth CMA in Beijing The Agent Penny program was launched in 2007 where we gathered 200 microfinance practition- and expanded in 2009 with NGO Shanghai Better ers, veterans and supporters from government, Education Development Center (Better Education) non-profit in a bid to promote financial literacy to upper research institutions and media. organizations, banks, industry GIVING BACK TO THE COMMUNITY 15 Financial Stability and Enterprise Development In 2011, Citi China partnered with the Communi- artisans also got a chance to showcase their ty-Based Conservation and Development Research talents and products. Citi focuses on initiatives that address key community needs – financial stability, enterprise development and neighborhood revitalization – while fostering innovation and providing thought leadership. to derive greater impact for the farmers. Center of Guizhou (CCDRC) to launch the Guizhou In August 2013, Citi and HPP announced the com- Indigenous Batik Development Program. The pletion of the project. The achievements are program has since expanded to more craftworks in impressive: the province, which explains the program’s more encompassing name today. 70 percent of program household enterprises The program sought to enhance the artisans’ have indicated an increase in their average production and marketing skills so that they can annual income by 30 percent. make a better living. We also established sales We also collaborate with external stakeholders to centers where the artisans are able to negotiate 1,853 household enterprises (7,096 individuals) address these economic issues through impactful, prices, expand their sales channels i.e. new from five villages in the district received the multiyear public-private partnerships that include markets. technical and field trainings. Overall success would call upon strong collabora- A total of 127 training sessions have been In China, we pay particular attention to disas- tion not only between Citi and CCDRC, but also conducted for 19,561 farmers cumulatively. ter-stricken and poor villages. We desire to create from other corporations, grass-root organizations effective and sustainable vehicles to help the com- and the local government. nonprofit partners and local governments. munities to reap triple benefits – economic, environmental and social. We do so by building their living quarters, increasing their income levels by way of establishing or expanding household and micro enterprises, coaching them on adopting better and greener farming practices and technology, and expanding their market access, while preserving their indigenous traditional cultural heritage like art and agriculture. The results to date speak for themselves: Over 2,000 household enterprises (7,000 individuals) have witnessed their income levels increase by 30-40 percent year-over-year. Case Study: Chongqing Rural Small Development Program Citi donated fruit and nut trees to 120 house- Enterprise estimated additional annual profit of at least RMB 920,000 for 20 years when trees are in Chongqing is Guizhou’s neighboring province, in southwest China. Most of its population are farmers as agriculture remains significant. The program has received wild acclaim, winning full production. Community development funds were established to support 62 income generating sub-projects, bringing additional 10 percent of several of the nation's top community develop- Since late 2010, Citi has been partnering with a ment awards. humanitarian organization Humana People to People (HPP) to economically empower impover- Citi also recognizes that solutions to many com- The sustainable success and impact of the plex community challenges require sustained ished and low income residents of rural Chongqing program has drawn attention not only from investment and collaboration over time. Here are in a sustainable way. within the Guizhou Province, but also from its some examples of how our long-term commit- neighbors, renowned experts, designers and the ments have made a real difference: The program was first incepted in Wanzhou district, industry’s influencers. teaching the farmers from small and growing Case Study: Guizhou Indigenous Craftwork Development Program hold enterprises to further generate an income increase to 847 participating families. With this resounding success, Citi and HPP will replicate the program in Haokou, Wulong district come January 2014. household enterprises technical and practical skills In November 2013, we celebrated the program’s like sustainable agricultural production, animal third anniversary with an event with our partners, husbandry, rudimentary finance and marketing. We during which we shared with attendees our also built an effective and sustainable training Guizhou, a rural province located in southwest program model, learnings, experiences and the model for local farmers to become skilled farming China, is tknown for its indigenous artisans, mostly sustainable impact generated. We also supported instructors, and established farmers’ clubs that from the Miao minority group. the launch of the Guizhou Absolute Cultural Week conduct systematic training and support activities and 2013 Absolute Guizhou exhibition, where the 16 GIVING BACK TO THE COMMUNITY 17 Youth Education and Livelihood Youth ages 13–25 represent a growing percentage mation, knowledge and experience about the of the Chinese population. finance industry, so that they will be better prepared for the real world upon graduation Our grants, funded by Citi Foundation, support programs that aim to increase the number of low-income, migrant, youth who, based on their skills, become employed, start their own income-generating business or obtain higher education or training. In 2013, Citi China renewed our commitment for the third year, to the BN Vocational School (BNVS) and Safe the Children to provide complimentary training to migrant students who hope to gain academic knowledge (English, Chinese, Math), vocational (electrical maintenance, western pastry later that year. Continued hosting Banking Courses in Beijing University and Fudan University over ten weeks each. The universities have expressed gratitude to Citi China for hosting the courses and shared positive feedback from the students. As of 2013, Beijing University has also made the Citi Banking Course as a compulsory subject for all Finance majors. In 2013, Citi China continued to sponsor five scholarships in various educational institutions and competitions. and hospitality services) and life skills (professional etiquette, Chinese traditional culture, communications, self-confidence or conflict management) to secure skilled-based employment and the opportunity to break their families’ poverty cycle. Citi Forum 2013 was the 10th year that Citi sponsored the Sun Yat-sen University Management School’s Citi Young Talent Development Forum which saw the largest number of partici- Citi believes in nurturing the next generation of and scholars from local top universities with its talent who will be the main contributors to our unique form and original content. economy. pants ever. Citi Forum attracts numerous students Industry Recognition Universum’s Student’s Ideal Employer Survey which ranked Citi 4th among business students, with our brand, training and development opportunities, and harmonious teamwork being We continue to cooperate with top universities to Citi China’s efforts in this area have been recog- sponsor, train, and recognize young talent through nized by third parties, including: various programs. In 2013, we: the top reasons. ChinaHR’s 11th Best Employers of China placed us at the top among foreign banks, second in Continued our Management Associate (MA) the investment banking and securities industry, Summer Internship program – the Citi Future and 14th in the overall ranking, a stark improve- Elite Summer Camp – with structured orienta- ment from the previous year’s rank at 40. tion, soft skill trainings, speaker series, and an offsite camp to equip students with more infor- 18 GIVING BACK TO THE COMMUNITY 19 AWARDS AND RECOGNITION ChinaHR The Asset Best Bank in China (for the 7th year) 11th Best Employers of China Awards’ 14 Best Employer in China th China Business Journal Citizenship Awards Most Competitive Foreign Bank JRJ.com and Tsinghua PBCSF, Tsinghua University China Business News (CBN) 2013 Lujiazui Warm-hearted Finance Best Foreign Bank China Philanthropy Times 2013 CSR Awards The Corporate Treasurer Outstanding Program Award Best Cash Management Bank Global Finance China Foundation for Poverty Alleviation World’s Best Consumer Internet Bank Best Foreign Consumer Credit Card Best Foreign Equity Underwriting 2013 Collection of China and Foreign Enterprises' Outstanding International CSR Cases 2013 Poverty Alleviation Ambassador China Charity Festival Greenwich Associates Asian Large Corporate Banking Quality Asian Large Corporate Cash Management Quality Shanghai Banking Association Best Banking Customer Service Center Best Innovation in Charity Award Best Charitable Program Award Shanghai Pudong Charity United Pudong Charity Award Shanghai Oasis Ecological Conservation and Communication Center Annual Financial Statistical Evaluation People’s Bank of China 2013 Best Green Angel Award Universum Student’s Ideal Employer Survey’s 4th Most Ideal Employer 20 CITI’S MISSION & KEY PRINCIPLES Common Purpose Responsible Finance Citi’s Mission: Enabling Progress Citi works tirelessly to serve individuals, communities, institutions and nations. With more than 200 years of experience meeting the world’s toughest challenges and seizing its greatest opportunities, we strive to create the best outcomes for our clients and customers with financial solutions that are simple, creative and responsible. An institution connecting over 1,000 cities, 160 countries and millions of people, we are your global bank; we are Citi. key principles that guide us as we perform our mission are: Ingenuity Leadership 21 One team, with one goal: serving our clients and stakeholders Conduct that is transparent, prudent and dependable Enhancing our clients’ lives through innovation that harnesses the breadth and depth of our information, global network and world-class products Talented people with the best training who thrive in a diverse meritocracy that demands excellence, initiative and courage CITI’S MISSION & KEY PRINCIPLES 22 BRANCH NETWORK -BRANCHES 01 BEIJING 02 CHANGSHA 2F, No.110, Furong Middle Road, 2nd Section, Changsha, P.R.China 410015 Tel: (86731)89860518 Fax: (86731)89860488 03 CHENGDU Unit A-E, 30/F, City Tower,No.86 Section 1 Renminnan Road Sichuan, P.R.China 610016 Tel: (8628) 86110066 Fax: (8622) 86202160 04 CHONGQING GroundUnit 1~3, 12, 18F, No 38, Qingnian Rd, International Trade Center, Yuzhong district, Chongqing, P.R.China 400010 Tel: (8623) 63106395 Fax: (8623) 63106312 05 DALIAN Unit 12, 01-03, 18F, Wanda Center, No 6, Gangxing Road, Zhongshan District, Dalian, P.R.China 116001 Tel: (86411) 39763976 Fax: (86411) 39027599 06 GUANGZHOU 07 GUIYANG 23 16-18F, Excel Center, No.6 Wu Ding Hou Street, Xi Cheng District, Beijing, P.R.China 100032 Tel: (8610) 59376000 Fax: (8610) 59376002 7201-7202, Office Tower, CITIC Plaza, No.233 Tian He North Road, Guangzhou, P.R.China 510613 Tel: (86755) 82371888 Fax: (86755) 25988829 Unit 1-01, No 215, Fushui South Road, Nanming District, Guiyang, P.R.China 550002 Tel:(86851)5285888 Fax:(86851)5258009 08 HANGZHOU 13 Floor Unit A, B, G, Jia De Plaza, No. 118 Qing Chun Road, Hangzhou, P.R. China 310003 Tel: (86571) 87229088 Fax: (86571) 87222827 09 NANJING 1F-2F, Nanjing World Trade Center, No. 2 Hanzhong Road, Nanjing, P.R.China 210005 Tel:(8625)88011088 Fax:(8625)89602700 10 SHANGHAI No.33 Hua Yuan Shi Qiao Road, Lu Jia Zui Finance and Trade Area, Shanghai, P.R.China 200120 Tel: (8621) 28966000 11 SHENZHEN 34F, Duty Free Building, No. 6 1st Fu Hua Road, Fu Tian CBD, Shenzhen, P.R.China 518048 Tel: (86755) 82371888 Fax: (86755) 25988829 12 TIANJIN Room 1801, 18/F, The Exchange Tower, No.189 Nanjing Road, Heping Destrict, Tianjin, P.R.China 300051 Tel: (8622) 58900988 Fax: (8622) 83191688 13 WUXI 1F, 2F, & unit 0701-0703, 0712, 0715-0722, 7F, No.218, Jin Jiang Hotel, Zhongshan Road,Wuxi, P.R.China 214002 Tel: (86592) 2133751, 2029832, 2023333 ext. 208 Fax: (86592) 2133752 14 XIAMEN Room 208, Holiday Inn Crown Plaza, No. 12-8 Zhenhai Road, Xiamen, P.R.China 361001 Tel: (8622) 58900988 Fax: (8622) 83191688 BRANCH NETWORK - BRANCHES 24 BRANCH NETWORK -CONSUMER OUTLETS 01 SHANGHAI Shanghai Branch 1/F Citigroup Tower, No.33 Hua Yuan Shi Qiao Road, Lu Jia Zui Finance and Trade Area, Shanghai, P.R.China 200120 Tel: 8621) 28963333 Fax: (8621) 28963590 Shanghai Yalong Plaza Sub-branch Unit S01, 1F and Unit S13, B2, No.500, East Jinling Road, Shanghai, P.R.China 200021 Tel: (8621) 38627333 Fax: (8621) 63732685 Shanghai Lujiazui Sub-branch 1/F, Marine Tower, No.1 PuDong Avenue, Shanghai, P.R.China 200120 Tel: (8621) 38627188 Fax: (8621) 68860028 Shanghai Xin Tian Di Sub-branch Unit F, Building 1-6, No 222, Madang Road, Luwan District, Shanghai, P.R.China 200021 Tel: (8621) 38627588 Fax: (8621) 53068396 Shanghai Puxi Sub-branch 1/F, North Building, Peace Hotel, No.19 Zhong Shan Dong Yi Road, Shanghai, P.R.China 200002 Tel: (8621) 38627000 Fax: (8621) 63297676 Shanghai People Square Metro Station Sub-branch Unit 1-116, Interchange Hall, People Square Station, Shanghai Metro Line 1 Shanghai, P.R.China 200021 Tel: (8621) 38627600 Fax: (8621) 22057282 Shanghai Gu Bei Sub-branch 1F Unit 102, Golden Garden, No.1078, Gubei Road, Shanghai, P.R.China 201103 Tel: (8621) 38627488 Fax: (8621) 62709509 Shanghai West Yan An Road Sub-branch Unit 01, 02, 7F, unit 01 02, 2F and unit 01, 1F, No 500, West Yan An Road, Shanghai, P.R.China 200050 Tel: (8621) 38627388 Fax: (8621) 32200960 Shanghai Xujiahui Sub-branch No 955-5, Zhao jia Bang Road, Shanghai, P.R. China 200030 Tel: (8621)38627511 Fax: (8621)54246182 Shanghai West Nanjing Road Sub-branch Unit A, 1F and 2F, No 762, West Nanjing Road, Shanghai, P.R.China 200040 Tel: (8621) 28963188 Fax: (8621) 68860028 Shanghai Zhongshan Park Sub-branch Unit 1055, Ground Floor, Cloud 9 Mall, No.1018 Chang Ning Road, Shanghai, P.R. China 200042 Tel: (8621) 38627222 Fax: (8621) 62121520 Beijing Branch Room 101, 1st Floor, Excel Centre, No.6 Wu Ding Hou Street, Xi Cheng District, Beijing, P.R.China 100032 Tel: (8610) 59376700 Fax: (8610) 59376729 Shanghai Hongkou Sub-branch Unit 605-608 6F and Unit 707-708 7F and Unit 803A, 806, 807 8F and Unit 103, 1F, No.1500, North Sichuan Road, P.R.China 200080 Tel: (8621) 26012288 Fax: (8621) 63071396 25 02 BEIJING Beijing Chang-an Sub-branch 1/F, Tower 1, Bright China Chang An Building, No.7 Jianguomennei Avenue, Beijing, P.R.China 100005 Tel: (8610) 59379366 Fax: (8610) 65102450 BRANCH NETWORK - CONSUMER OUTLETS 26 Beijing Zhong Guan Cun Sub-branch Room 04 & 05, 1st Floor, Ideal Plaza, No. 58 West Road, North Fourth Ring, Haidian District, Beijing, P.R.China 100080 Tel: (8610) 59379288 Fax: (8610) 82607211 27 03 GUANGZHOU Guangzhou Fortune Plaza Sub-branch Unit 101, Fortune Plaza, No.118 TiYu East Road, Tian He District, Guangzhou, P.R.China 510620 Tel: (8620) 38171888 Fax: (8620) 38931628 Kerry Centre Sub-branch Unit 201, 2F, North Office Building and Unit 02, 1F,Kerry Center, No.1 Guang Hua Road, Chao Yang District, Beijing, P.R.China 100020 Tel: (8610) 59379000 Fax: (8610) 85298755 Guangzhou Huan Shi Dong Sub-branch 1/F, Asian International Hotel, No.326 Huanshidong Road, Guangzhou, P.R. China 510133 Tel: (8620) 38171021 Fax: (8620) 83866918 Beijing Upper East Side Sub-branch A09-A15, Upper East Side Central Plaza, No.6 North Ave, East 4th Ring Road, Chaoyang District, Beijing, P.R.China 100016 Tel: (8610) 59379100 Fax: (8610) 51307131 Guangzhou Wanguo Plaza Sub-branch Unit 1002, 1st Floor, No.131,133,135,137, Jiangnan Middle Avenue,Haizhu District, Guangzhou, Guangdong, P.R. China 510220 Tel: (8620) 38171099 Fax: (8620) 84499860 Beijing Pacific Century Sub-Branch Unit 109, First Floor, Pacific Century Shopping Mall, Jia 2 Gongti North Road, Beijing, P.R.China, 100027 Tel: (8610) 59379200 Fax: (8610) 65392716 Guangzhou Nong Jiang Suo Sub-branch Unit 3, 1F, No 34-2, Zhongshan Fourth Road, Yuexiu District , Guangzhou, Guangdong, P.R. China,510030 Tel: (8620) 38171688 Fax: (8620) 83893730 Beijing Asian Games Village Sub-branch Unit 1012, 1013, Tower C, No 103, Huizhongli, Chaoyang District, Beijing, P.R.China, 100027 Tel: (8610) 59379050 Fax: (8610) 84871619 Shenzhen Shum Yip Sub-branch 1/F, Shum Yip Center (Beside the Book City), No. 5045 Shen Nan East Road, Shenzhen, P.R.China 518010 Tel: (86755) 22945188 Fax: (86755) 82083401 04 SHENZHEN Beijing Jin Bao Jie Sub-branch Room F1-1, F1-2, CITS Plaza shopping center, No.1 North Dong Dan Street, Dong Cheng District, Beijing, P.R.China 100005 Tel: (8610) 59379188 Fax: 65597386 Shenzhen Futian Sub-branch Room 105, Duty Free Building, Yitian Road, Futian District, Shenzhen, P.R.China 518048 Tel: (86755) 8276633 Fax: (86755) 88820518 Beijing Wangjing Sub-branch Unit 105, No. 429 Wangjing Xiyuan, Guangshun North Street, Chaoyang, Beijing, P.R.China,100102 Tel: (8610) 59379333 Fax:(8610) 64716804 Shenzhen Nanshan Sub-branch North 1F, Jinhai Building, No.2748, Nanhai Avenue, Nanshan District, Shenzhen, P.R.China 518054 Tel: (86755) 86122988 Fax: (86755) 86121161 BRANCH NETWORK - CONSUMER OUTLETS 28 05 CHENGDU 06 TIANJIN 29 Shenzhen Chegongmiao Sub-branch Podium 101-B103, NEO Lvgen Plaza, Che Gong Miao, Shennan Avenue, Futian District, Shenzhen, P.R.China 518010 Tel: (86755) 82718199 Fax: (86755) 82777282 Tianjin Youyi Road Sub-branch Unit 101 & 201, Zhongfu Tower, No.1 Youyi Road, Hexi District, Tianjin, P.R.China 300201 Tel: (8622) 28353003 Fax: (8622) 28350282 Shenzhen Luohu Sub-branch No. 2041-1, 1st Floor, Xi Long Building, Renmin South Road, Luohu, Shenzhen, P.R.China 518001 Tel: (86755) 82257866 Fax: (86755) 82235166 Tianjin Jin Tower Sub-branch Unit 3, No 160, Zhang Zi Zhong Road, Heping District, Tianjin, P.R. China 300041 Tel: (8622) 58356150 Fax: (8622) 58356162 Chengdu Sub-branch Unit 101, 1/F, City Tower, No.86 Section 1 Renminnan Road, Chengdu Sichuan, P.R.China 610016 Tel: (8628) 86110066 Fax: (8628) 86202328 Tianjin Qi Xiang Tai Road Sub-branch Unit. 6, No. 89 Qi Xiang Tai Road, Hexi District, Tianjin, P.R. China 300074 Tel: (8622) 83118000 Fax: (8622) 83118058 Chengdu Fund International Plaza Sub-branch 1F, Unit 4~5, No 6, Hangkong Road, Wuhou District, Chengdu, P.R.China 610041 Tel: (8628) 61517766 Fax: (8628) 61517878 Hangzhou Sub-branch Ground Floor, Jia De Plaza, No. 118 Qing Chun Road, Hangzhou, P.R. China 310003 Tel: (86571) 87229191 Fax: (86571) 87222872 07 HANGZHOU Chengdu Dong Da Jie Sub-branch Unit A, Room 103 and 105, 1F, Building 1, No 35, Zi Dong Lou Duan, Dongdajie Street, Chengdu, P.R.China 610061 Tel: (8628) 65280016 Fax: (8628) 65280019 Hangzhou Huanglong Sub-branch Room 109-110, Floor 1, Jiahua International Business Center, No.15 Hangda Road, Hangzhou, P.R. China 310007 Tel: (86571) 87687028 Fax: (86571) 87687027 Tianjin Sub-branch R102/1810, The Exchange Tower No.1, No.189 Nanjing Road, Heping Destrict, Tianjin, P.R.China 300051 Tel: (8622) 58900688 Fax: (8622) 83191800 Hangzhou Chengxi Sub-branch No 81, Wen Er West Road, Hangzhou, P.R.China 310012 Tel: (86571) 88250866 Fax: (86571) 88255603 Tianjin Binhai Sub-branch Level 1&2, 23 Fortune Plaza, No.21 Third Avenue, TEDA, Tianjin, P.R.China 300457 Tel: (8622) 66209229 Fax: (8622) 66219980 Hangzhou Xin Tang Road Sub-branch Unit 110 , 111, No. 99 Xintang Road, Hangzhou, P.R.China 310020 Tel: (86571) 88908018 Fax: (86571) 28972758 BRANCH NETWORK - CONSUMER OUTLETS 30 08 DALIAN Dalian Branch 1F, Podium Building and unit 12, 01-03, 18F , Wanda Center, No 6, Gangxing Road, Zhongshan District, Dalian, P.R.China 116001 Tel: (86411) 39075588 Fax: (86411) 39027518 Dalian Xinghai Bay Sub-branch No 451-13, Zhongshan Road, Shahekou district, Dalian, P.R.China 116021 Tel: (86411) 39570188 Fax: (86411) 39570166 Dalian Xigang Sub-branch No. 232 & 234 Zhongshan Road, Xigang District, Dalian, P.R.China 116011 Tel: (86411) 83729700 Fax: (86411) 83729726 09 CHONGQING 11 NANJING Nanjing Branch 1F-2F, Nanjing World Trade Center, No. 2 Hanzhong Road, Nanjing, P.R.China 210005 Tel:(8625)88011088 Fax:(8625)89602700 12 CHANGSHA Changsha Branch 2F, No.110, Furong Middle Road, 2nd Section, Changsha, P.R.China 410015 Tel: (86731)89860518 Fax:(86731)89860428 13 WUXI Wuxi Branch 1F, 2F, & unit 0701-0703, 0712, 0715-0722, 7F, No.218, Jin Jiang Hotel, Zhongshan Road,Wuxi, P.R.China 214002 Tel:(86510)82799668 Fax:(86510)82750389 Chongqing Branch 1F, No 185, and 2F, No 189, Zhonghua Rd, International Trade Center, Yuzhong district, Chongqing, P.R.China 400010 Tel: (8623) 63106395 Fax: (8623) 63106361 Chongqing Airport Sub-branch Terminal T2A (Departure Hall, beside Gate 4), Chongqing Jiangbei International Airport, P.R.China 401120 Tel: (8623) 67155079 Fax: (8623) 67155431 Chongqing Bei Cheng Tian Jie Sub-branch Unit 16, No. 12 Bei Cheng Tian Jie, Jiang bei District, P.R.China 400020 Tel: (8623) 67855956 Fax: (8623) 67857217 10 GUIYANG 31 Guiyang Branch Unit 1-01, No 215, Fushui South Road, Nanming District, Guiyang, P.R.China 550002 Tel:(86851)5285888 Fax:(86851)5258007 BRANCH NETWORK - CONSUMER OUTLETS 32 CITIBANK (CHINA) COMPANY LIMITED ENGLISH TRANSLATION OF FINANCIAL STATEMENTS FOR THE YEAR FROM 1 JANUARY 2013 TO 31 DECEMBER 2013 IF THERE IS ANY CONFLICT BETWEEN THE CHINESE VERSION AND ITS ENGLISH TRANSLATION, THE CHINESE VERSION WILL PREVAIL 33 Citibank (China) Company Limited Balance Sheet as at 31 December 2013 (Expressed in Renminbi Yuan) Citibank (China) Company Limited Balance Sheet as at 31 December 2013 (continued) (Expressed in Renminbi Yuan) Note 2013 Note 2012 Assets 2013 2012 Liabilities: Cash on hand and deposits Deposits from inter-banks and with central bank 5 26,885,794,247 30,637,522,420 non-bank financial institution 16 20,601,138,894 12,308,582,670 Deposits with inter-banks 6 7,650,815,916 12,786,085,145 Borrowings from inter-banks 17 10,492,510,490 6,751,057,744 Placements with inter-banks 7 30,707,510,787 23,311,688,269 Derivative financial liabilities 9 2,844,811,150 1,430,554,047 Trading financial assets 8 3,266,961,398 3,512,945,036 Financial assets sold under repurchase agreements 18 - 7,920,000,000 Derivative financial assets 9 2,828,654,593 1,690,055,766 Deposits from customers 19 96,624,103,633 103,566,097,380 520,846,457 457,176,967 Employee benefits payable 20 241,120,930 228,251,112 4(3) 214,014,543 180,510,101 451,104,989 252,270,780 9,891,133,757 9,153,222,437 141,359,938,386 141,790,546,271 Interest receivable Loans and advances to customers 10 61,387,928,396 62,950,509,681 Available-for-sale financial assets 11 17,228,779,130 16,135,172,130 Fixed assets 12 62,383,285 74,135,564 Intangible assets 13 69,355,354 80,561,003 Deferred tax assets 14 213,529,169 95,285,122 Other assets 15 1,925,037,788 602,916,077 152,747,596,520 152,334,053,180 Total assets Taxes payable Interest payable 21 Other liabilities Total liabilities Equity Paid-in capital 22 3,970,000,000 3,970,000,000 Capital reserve 23 (86,245,081) 33,724,090 Surplus reserve 24 702,043,313 605,631,273 General reserve 25 1,476,690,285 1,305,394,495 Retained earnings 5,325,169,617 4,628,757,051 Total equity 11,387,658,134 10,543,506,909 152,747,596,520 152,334,053,180 Total liabilities and equity These financial statements were approved by the Board of Directors. Andrew Au Kai Zhang Company stamp Chief Executive Officer Chief Financial Officer Date:14 Apr 2014 The notes on pages 8 to 82 of these financial statements. 34 The notes on pages 8 to 82 form part of these financial statements. 35 Citibank (China) Company Limited Income Statement for the year ended 31 December 2013 (Expressed in Renminbi Yuan) Note Operating income Net interest income Interest income Interest expenses 27 Net fee and commission income Fee and commission income Fee and commission expenses 28 Citibank (China) Company Limited Cash Flow Statement for the year ended 31 December 2013 (Expressed in Renminbi Yuan) 2013 2012 Note 4,352,882,044 4,628,461,238 Cash flows from operating activities 2,602,809,464 4,393,500,690 (1,790,691,226) 2,690,207,368 4,408,561,165 (1,718,353,797) Net decrease in deposits with central bank and inter-banks 617,919,568 713,879,351 (95,959,783) 497,422,633 590,755,963 (93,333,330) 29 30 Operating expenses 4(1) 31 32 Business taxes and surcharges General and administrative expenses Impairment losses (charge) / reversal 2012 95,488,384 - 3,078,658,961 - - 6,780,294,763 1,350,562,477 16,494,135,837 29,395,650 209,516,790 - 1,734,284,034 Interest, fee and commission receipts Refund of taxes 5,001,433,123 5,687,000 5,119,753,866 12,872,000 532,657,662 170,908,408 10,093,883,257 --------------------- 30,521,765,698 --------------------- Net decrease in loans and advances to customers Net increase in borrowings from inter-banks and non-bank financial institutions Net increase in deposits from customers and inter-banks Cash received from returns on trading financial assets Investment income (Losses) / gains from changes in fair value Foreign exchange gains Other operating income 2013 736,869,649 (266,550,720) 626,739,267 35,094,816 908,881,187 34,477,582 342,775,514 154,696,953 (3,125,942,378) (2,811,830,342) Cash received relating to other operating activities (242,237,669) (2,715,335,079) (168,369,630) (270,559,583) (2,547,727,861) 6,457,102 Sub-total of cash inflows from operating activities Cash received from disposals of trading financial assets Net increase in deposits with central bank Operating profit 1,226,939,666 Add: Non-operating income Less: Non-operating expenses 6,634,513 (2,649,273) Profit before income tax Less: Income tax expense 1,230,924,906 4(2)/33 1,816,630,896 15,001,545 (3,651,857) 1,827,980,584 (266,804,510) (454,767,618) 964,120,396 1,373,212,966 and inter-banks Net increase in loans and advances to customers - Net decrease in borrowings from inter-banks and non-bank financial institutions (10,255,221,634) (790,357,194) (1,687,816,800) (1,754,454,271) Cash paid to and for employees Cash paid for all types of taxes (1,381,371,282) (888,425,895) (1,188,576,641) (1,072,285,865) (52,057,594) (71,264,868) (15,055,250,399) (9,476,335,521) --------------------- --------------------- (4,961,367,142) --------------------- 21,045,430,177 --------------------- Sub-total of cash outflows from operating activities Net profit for the year Other comprehensive income for the year 34 964,120,396 (119,969,171) 1,373,212,966 23,366,677 Net cash (outflow) / inflow from 35(1) operating activities Total comprehensive income for the year 844,151,225 The notes on pages 8 to 82 form part of these financial statements. 36 - Cash paid for acquisition of trading financial assets Interest, fee and commission payments Cash paid relating to other operating activities Net profit for the year (349,478,616) (5,040,275,260) 1,396,579,643 The notes on pages 8 to 82 form part of these financial statements. 37 Citibank (China) Company Limited Cash Flow Statement for the year ended 31 December 2013 (continued) (Expressed in Renminbi Yuan) Note Citibank (China) Company Limited Statement of Changes in Equity for the year ended 31 December 2013 (Expressed in Renminbi Yuan) 2013 2012 Cash received from disposals of investments 11,283,281,490 4,796,060,687 Cash received from returns on investments Cash received from disposals of fixed assets 573,694,845 103,000 510,158,540 - paid-in capital Note Capital reserve Surplus reserve General reserve Retained earnings Total Cash flows from investing activities Balance at 1 January 2013 3,970,000,000 605,631,273 1,305,394,495 ------------------- ------------------- ------------------- ------------------- Cash paid for acquisition of investments Cash paid for acquisition of fixed assets, 11,857,079,335 5,306,219,227 --------------------- --------------------- (11,587,141,324) (9,492,476,412) - long-term assets (55,916,647) (121,278,910) ------------------- ------------------- - 964,120,396 - - 964,120,396 2. Other comprehensive income 34 Subtotal of 1 and 2 - (119,969,171) - - - - (119,969,171) - - 964,120,396 844,151,225 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- intangible assets and other 4,628,757,051 10,543,506,909 Changes in equity for the year 1. Net profit for the year Sub-total of cash inflows from investing activities 33,724,090 3. (119,969,171) Appropriation of profits - Appropriation for Sub-total of cash outflows from investing surplus reserve activities (11,643,057,971) (9,613,755,322) --------------------- --------------------- 24, 26 - - 96,412,040 - (96,412,040) - 25, 26 - - - 171,295,790 (171,295,790) - - Appropriation for general reserve Net cash inflow / (outflow) from investing activities 214,021,364 --------------------- (4,307,536,095) --------------------- Balance at 31 December 2013 3,970,000,000 (86,245,081) 702,043,313 Effect of foreign exchange rate changes on cash and cash equivalents (507,423,612) (9,570,523) --------------------- --------------------- (5,254,769,390) 16,728,323,559 40,544,135,948 23,815,812,389 35,289,366,558 40,544,135,948 Net (decrease) / increase in cash and cash equivalents 35(2) Add: Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 35(3) The notes on pages 8 to 82 form part of these financial statements. 38 The notes on pages 8 to 82 form part of these financial statements. 39 1,476,690,285 5,325,169,617 11,387,658,134 Citibank (China) Company Limited Statement of Changes in Equity for the year ended 31 December 2012 (continued) (Expressed in Renminbi Yuan) Note Balance at 1 January 2012 paid-in capital 3,970,000,000 Capital reserve Surplus reserve 10,357,413 468,309,977 -------------------------------------- ------------------- General reserve Retained earnings 818,441,173 3,879,818,703 ------------------- ------------------- Citibank (China) Company Limited Notes to the Financial Statements (Expressed in Renminbi Yuan) 01 General information Total 9,146,927,266 ------------------- Citibank (China) Company Limited (Citibank China or the English from the Bank’s statutory financial statements Bank) is a wholly foreign-owned bank incorporated in issued in the PRC in Chinese. Shanghai, the People’s Republic of China (PRC), estabThe financial statements have been prepared on the lished by Citibank, N.A. (Citibank or the Investor). basis of going concern. Changes in equity for the year With the approval of the China Banking Regulatory Com- 1. Net profit for the year - 2. Other comprehensive income 34 Subtotal of 1 and 2 3. - - - 23,366,677 - 23,366,677 - 1,373,212,966 - 1,373,212,966 23,366,677 - - 1,373,212,966 1,396,579,643 -------------------------------------- ------------------- ------------------- ------------------- ------------------- (1) Statement of compliance mission (the CBRC) issued on 22 December 2006, Citibank transformed its Shanghai Branch, Shenzhen Branch, Guangzhou Branch, Beijing Branch, Tianjin Branch and The financial statements have been prepared in accord- Chengdu Branch which were set up in China during 1988 ance with the requirements of “Accounting Standards to 2005 into Citibank China, a wholly foreign-owned for Business Enterprises – Basic Standard” and 38 bank invested solely by Citibank. Specific Standards issued by the Ministry of Finance (MOF) of PRC on 15 February 2006, and application Appropriation of profits - Appropriation for surplus reserve 24, 26 - - 137,321,296 - (137,321,296) - - Appropriation for general reserve 25, 26 - - - 486,953,322 (486,953,322) - Balance at 31 December 2012 The Bank obtained a financial license on 20 March 2007 guidance, bulletins and other relevant regulations and a business license (qi du hu zong zi No. 043865) issued [Municipal Bureau] issued by the Shanghai Administra- “Accounting Standards for Business Enterprises” or tion of Industry and Commerce on 29 March 2007, and “CAS”). These financial statements present truly and subsequently (No. completely the financial position of the Bank as at 31 310000400507900) [Municipal Bureau] from the December 2013, financial performance and the cash Shanghai Administration of Industry and Commerce flows of the Bank for the year then ended. obtained a revised license subsequently (collectively referred to as after commencement of operation. The Bank’s regis3,970,000,000 33,724,090 605,631,273 1,305,394,495 4,628,757,051 10,543,506,909 tered capital is Renminbi 3,970,000,000. In accordance (2) Accounting year with the Bank’s business license, the Bank has an undefined operating period from 29 March 2007. The Bank The Bank’s accounting year is from 1 January to 31 commenced operation on 2 April 2007 and its scope of December. operation includes partial or full scope foreign currency business and Renminbi business, approved by relevant regulators. (3) Measurement basis As at 31 December 2013, the Bank had 13 branches and The measurement basis used in the preparation of the 41 sub-branches in Shanghai, Shenzhen, Guangzhou, financial statements is historical cost basis except for Beijing, Tianjin, Chengdu, Hangzhou, Dalian, Chongqing, the assets and liabilities set out below: Guiyang, Nanjing, Changsha, and Wuxi. Financial assets and financial liabilities at fair value through profit or loss (including financial assets or 02 Basis of preparation financial liabilities held for trading) (see Note 3(2)). Available-for-sale financial assets (see Note 3(2)). The notes on pages 8 to 82 form part of these financial statements. 40 These financial statements have been translated into 41 (4) Functional currency and presentation currency lation of available-for-sale financial assets, which are profit or loss; for other categories of financial assets Available-for-sale financial assets include non-deriva- recognised as other comprehensive income in capital and financial liabilities, any related directly attributable tive financial assets that are designated upon initial reserve. transaction costs are included in their initial costs. recognition as available for sale and other financial Subsequent to initial recognition, financial assets and assets which do not fall into any of the above categories. The Bank’s functional currency is Renminbi. These financial statements are presented in Renminbi. Func- liabilities are measured as follows: (2) Financial instruments tional currency is determined by the Bank on the basis of the currency in which major income and costs are Available-for-sale investments in equity instruments Financial instruments of the Bank include cash on hand denominated and settled. and deposits with central bank, deposits with inter-banks, placements with inter-banks, trading financial assets, derivative financial assets, interest receiva- 03 Significant accounting polices and accounting estimates ble, loans and advances to customers, available-for-sale financial assets, deposits from inter-banks and non-bank financial institutions, borrowings from inter-banks, (1) Translation of foreign currencies derivative financial liabilities, financial assets sold under repurchase agreements, deposits from customers, When the Bank receives capital in foreign currencies employee benefits payable, interest payable and paid-in from investors, the capital is translated to Renminbi at capital. the spot exchange rate on the date of receipt. Other foreign currency transactions are, on initial recognition, (a) Recognition and measurement of financial assets translated to Renminbi at the spot exchange rates on and financial liabilities Financial assets and financial liabilities at fair value whose fair value cannot be measured reliably are meas- through profit or loss (including financial assets or ured at cost subsequent to initial recognition. Other financial liabilities held for trading) available-for-sale financial assets are measured at fair value subsequent to initial recognition and changes A financial asset or financial liability is classified as at therein, except for impairment losses and foreign fair value through profit or loss if it is acquired or exchange gains and losses from monetary financial incurred principally for the purpose of selling or repur- assets which are recognised directly in profit or loss, are chasing in the near term or if it is a derivative. Subse- recognised as other comprehensive income in capital quent to initial recognition, financial assets and financial reserve. When an investment is derecognised, the cumu- liabilities at fair value through profit or loss are meas- lative gain or loss is reclassified from equity to profit or ured at fair value, and changes therein are recognised in loss. Interest on available-for-sale financial assets calcu- profit or loss. lated using the effective interest method is recognised in profit or loss. Loans and receivables Other financial liabilities the dates of the transactions. A spot exchange rate is an exchange rate quoted by the People’s Bank of China (the A financial asset or financial liability is recognised in the PBOC), the State Administration of Foreign Exchanges balance sheet when the Bank becomes a party to the or a cross rate determined based on quoted exchange contractual provisions of a financial instrument. rates. The Bank classifies financial assets and liabilities into Monetary items denominated in foreign currencies are the different categories at initial recognition based on translated to Renminbi at the spot exchange rate at the the purpose of acquiring assets or assuming liabilities: balance sheet date. The resulting exchange differences financial assets and financial liabilities at fair value are recognised in profit or loss. Non-monetary items through denominated in foreign currencies that are measured at profit or loss, loans and receivables, held-to-maturity investments, available-for-sale finan- historical cost are translated to Renminbi using the cial assets and other financial liabilities. foreign exchange rate at the transaction date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated using the foreign Financial assets and financial liabilities are measured exchange rate at the date the fair value is determined; initially at fair value. For financial assets and financial the resulting exchange differences are recognised in liabilities at fair value through profit or loss, any related profit or loss, except differences arising from the trans- Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not Financial liabilities other than financial liabilities at fair quoted in an active market. Subsequent to initial recog- value through profit or loss are classified as other finan- nition, loans and receivables are measured at amortised cial liabilities. cost using the effective interest method. Other financial liabilities include the liabilities arising from financial guarantee contracts. Financial guaran- Held-to-maturity investments tees are contracts that require the Bank (i.e. the guaranHeld-to-maturity investments are non-derivative finan- tor) to make specified payments to reimburse the bene- cial assets with fixed or determinable payments and ficiary of the guarantee (the holder) for a loss the holder fixed maturity that the Bank has the positive intention incurs because a specified debtor fails to make payment and ability to hold to maturity. Subsequent to initial when due in accordance with the terms of a debt instru- recognition, held-to-maturity investments are measured ment. Where the Bank issues a financial guarantee, at amortised cost using the effective interest method. subsequent to initial recognition, the guarantee is measured at the higher of the amount initially recognised less accumulated amortisation and the amount of a provi- Available-for-sale financial assets sion determined in accordance with the principles of directly attributable transaction costs are charged to 42 43 03 Significant accounting polices and accounting estimates contingencies (see Note 3(11)). Except for the liabilities arising from financial guarantee (d) Derecognition of financial assets and financial fair value with changes in fair value recognised in profit The cost of a purchased fixed asset comprises the liabilities or loss. purchase price, related taxes, and any directly attributa- A financial asset is derecognised if the Bank’s contractu- contracts described above, subsequent to initial recog- al rights to the cash flows from the financial asset expire nition, other financial liabilities are measured at amor- or if the Bank transfers substantially all the risks and tised cost using the effective interest method. rewards of ownership of the financial asset to another party. Where a transfer of a financial asset in its entirety (b) Presentation of financial assets and financial liabil- meets the criteria of derecognition, the difference ities between the two amounts below is recognised in profit or loss: Financial assets and financial liabilities are presented separately in the balance sheet and are not offset. How- the carrying amount of the financial asset transferred ever, a financial asset and a financial liability are offset and the net amount is presented in the balance sheet the sum of the consideration received from the trans- when both of the following conditions are satisfied: fer and any cumulative gain or loss that has been recognised directly in equity. the Bank has a legal right to set off the recognised amounts and the legal right is currently enforceable; The Bank derecognises a financial liability (or part of it) and ble expenditure for bringing the asset to working condiIf an embedded derivative is separated, the host tion for its intended use. The cost of self-constructed contract shall be accounted for in accordance with (a) assets includes the cost of materials, direct labour, and (b) in this notes. capitalised borrowing costs, and any other costs directly attributable to bringing the asset to working condition (3) Cash and cash equivalents for its intended use. Cash and cash equivalents comprise cash on hand, Where the parts of an item of fixed assets have different non-restricted balances with central banks, deposits useful lives or provide benefits to the Bank in a different with inter-banks, placements with inter-banks, and pattern, thus necessitating use of different depreciation short-term, highly liquid investments, which are readily rates or methods, each part is recognised as a separate convertible into known amounts of cash and are subject fixed asset. to an insignificant risk of change in value. The subsequent costs including the cost of replacing part of an item of fixed assets, are recognised in the (4) Financial assets sold under repurchase agreements carrying amount of the item if the criteria to recognised fixed assets are satisfied, and the carrying amount of only when the underlying present obligation (or part of it) is discharged, cancelled or expires. the Bank intends either to settle on a net basis, or to the replaced part is derecognised. The costs of the Financial assets sold under repurchase agreements are day-to-day servicing of fixed assets are recognised in recorded as the amount actually received when the realise the financial asset and settle the financial liability simultaneously. (e) Embeded derivatives An embedded derivative is a component of a hybrid (c) Determination of fair value (combined) instrument that also include both the derivaIf there is an active market for a financial asset or finan- tive and a host contract with the effect that some of the cial liability, the quoted price in the active market is used cash flows of the hybrid (combined) instrument vary in a to establish the fair value of the financial asset or finan- way similar to a stand-alone derivative. cial liability. If no active market exists for a financial instrument, a valuation technique is used to establish The embedded derivative are separated from the host the fair value. Valuation techniques include using recent contract and accounted for as a derivative when: (i) the arm’s-length market transactions between knowledgea- economic characteristics and risks of the embedded ble, willing parties, reference to the current fair value of derivative are not closely related to the economic char- another instrument that is substantially the same, acteristics and risks of the host contract; (ii) a separate discounted cash flow analysis, option pricing models, instrument with the same terms as the embedded deriv- and etc. The Bank calibrates its valuation technique and ative would meet the definition of a derivative; and (iii) tests it for validity periodically. the hybrid (combined) instrument is not measured at 44 profit or loss as incurred. Gains or losses arising from transactions occur, and are carried in the balance sheet. the retirement or disposal of an item of fixed asset are The underlying assets of the repurchase agreements determined as the difference between the net disposal continue to be recorded in the balance sheet and meas- proceeds and the carrying amount of the item, and are ured accordingly. recognised in profit or loss on the date of retirement or disposal. The difference between the sale and repurchase consideration is amortised over the period of the respective The cost of fixed assets, less its estimated residual value transaction using the effective interest method and and accumulated impairment losses, is depreciated included in interest expenses. using the straight-line method over its estimated useful life, unless the fixed assets are classified as held for sale. (5) Fixed assets The estimated useful lives, residual value rates and depreciation rates of each class of fixed assets are as Fixed assets represent the tangible assets held by the follows: Bank for administrative purposes with useful lives over one year. Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses (see Note 3(8)(b)). 45 03 Significant accounting polices and accounting estimates Asset type Estimated useful life Residual value rate (8) Impairment of assets Depreciation rate (a) Impairment of fiancial assets Office and other equipment Motor vehicles 3 -5 years 0% 20% - 33.33% 5 years 0% 20% The carrying amounts of financial assets (other than those at fair value through profit or loss) are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such Useful lives, residual value and depreciation methods evidence exists, an impairment loss is recognised. are reviewed at least at each year-end. Loans and receivables and held-to-maturity invest- (6) Operating lease charges ments Rental payments under operating leases are recognised Held-to-maturity investments are assessed for impair- as part of the cost of another related asset or as expens- ment on an individual basis. Loans and receivables are es on a straight-line basis over the lease term. Contin- assessed for impairment both on an individual basis and gent rental payments are recognised as expenses in the on a collective group basis. accounting period in which they are incurred. Where impairment is assessed on an individual basis, an impairment loss in respect of a loan and receivable or (7) Intangible assets held-to-maturity investment is calculated as the excess of its carrying amount over the present value of its Intangible assets are stated in the balance sheet at cost estimated future cash flows (exclusive of future credit less accumulated amortisation (where the estimated losses that have not been incurred) discounted at the useful life is finite) and impairment losses (see Note original effective interest rate. All impairment losses are 3(8)(b)). For an intangible asset with a finite useful life, recognised in profit or loss. its cost less estimated residual value and accumulated impairment losses is amortised on the straight-line An assessment is made collectively where loans and method over its estimated useful life, unless it is classi- receivables share similar credit risk characteristics fied as held for sale. At the balance sheet date, the (including those not individually assessed as impaired), Bank’s intangible assets consisted of software, which is based on their historical loss experiences, and adjusted amortised over three to ten years. by the observable factors reflecting present economic conditions. An intangible asset is regarded as having an indefinite useful life and is not amortised when there is no foresee- If, after an impairment loss has been recognised on able limit to the period over which the asset is expected loans and receivables or held-to-maturity investments, to generate economic benefits for the Bank. At the there is objective evidence of a recovery in value of the balance sheet date, the Bank did not have any intangible financial asset which can be related objectively to an assets with indefinite useful lives. event occurring after the impairment was recognised, 46 the previously recognised impairment loss is reversed An asset group is the smallest identifiable group of through profit or loss. A reversal of an impairment loss assets that generates cash inflows and that is largely will not result in the asset’s carrying amount exceeding independent of the cash inflows from other assets or what the amortised cost would have been had no impair- asset groups. An asset group is composed of assets ment loss been recognised in prior years. directly related to cash-generation. Identification of an asset group is based on whether major cash inflows generated by the asset group are largely independent of Available-for-sale financial assets the cash inflows from other assets or asset groups. In Available-for-sale financial assets are assessed for identifying an asset group, the Bank also considers how impairment on an individual basis. When an availa- management monitors the Bank’s operations and how ble-for-sale financial asset is impaired, the cumulative management makes decisions about continuing or loss arising from decline in fair value that has been disposing of the Bank’s assets. recognised directly in equity is reclassified to profit or loss even though the financial asset has not been derec- The recoverable amount of an asset, asset group or set ognised. If, after an impairment loss has been recog- of asset groups is the higher of its fair value less costs to nised on an available-for sale debt instrument, the fair sell and the present value of expected future cash flows. value of the debt instrument increases in a subsequent An asset’s fair value less costs to sell is the amount period and the increase can be objectively related to an determined by the price of a sale agreement in an event occurring after the impairment loss was recog- arm’s-length transaction less the costs that are directly nised, the impairment loss is reversed through profit or attributable to the disposal of the asset. The present loss. value of the expected future cash flows of an asset is determined by discounting the future cash flows, (b) Impairment of other assets estimated to be derived from continuing use of the asset and from its ultimate disposal to their present value The carrying amounts of the following assets are using an appropriate pre-tax discount rate. reviewed at each balance sheet date based on the internal and external sources of information to determine If the result of the recoverable amount calculation whether there is any indication of impairment: indicates the recoverable amount of an asset is less than its carrying amount, the carrying amount of the fixed assets asset is reduced to its recoverable amount. That reduc- intangible assets tion is recognised as an impairment loss and charged to profit or loss for the current period. A provision for If any indication exists that an asset may be impaired, impairment of the asset is recognised accordingly. For the recoverable amount of the asset is estimated. In impairment losses related to an asset group or a set of addition, the Bank estimates the recoverable amounts asset groups, reduce the carrying amount of the other of intangible assets with indefinite useful lives that have assets in the asset group or set of asset groups on a pro yet to reach a working condition at least once during rata basis. However, the carrying amount of an impaired each year irrespective of whether there is any indication asset will not be lower than the greatest amount of its of impairment. 47 03 Significant accounting polices and accounting estimates ty-settled share-based payments. individual fair value less costs to sell (if determinable), the differences between the carrying amounts of assets (d) Termination benefits and liabilities for financial reporting purposes and their the present value of expected future cash flows (if Where the Bank uses shares or other equity instruments When the Bank terminates the employment relationship tax bases, which include the deductible losses and tax as consideration for services received from employees, with employees before the employment contracts credits Once an impairment loss is recognised, it is not reversed the payment is measured at the fair value of the equity expire, or provides compensation as an offer to encour- Deferred tax assets are recognised to the extent that it in a subsequent period. instruments granted to the employees. If the equity age employees to accept voluntary redundancy, a provi- is probable that future taxable profits will be available instruments granted to employees vest immediately, sion for the termination benefits to be provided is against which deductible temporary differences can be the fair value of the equity instruments granted on its recognised in profit or loss when both of the following utilised. grant date is recognised as a relevant cost or expense conditions are satisfied: determinable) and zero. (9) Employee benefits carried forward to subsequent periods. Employee benefits are all forms of consideration given with a corresponding increase in capital reserve. If the and other related expenditures incurred in exchange for equity instruments granted to employees do not vest The Bank has a formal plan for the termination of es arising from the initial recognition of assets or liabili- services rendered by employees. Except for termination until the completion of services for a vesting period, or employment or has made an offer to employees for ties in a transaction that is not a business combination benefits, employee benefits are recognised as a liability until the achievement of a specified performance condi- voluntary redundancy, which will be implemented short- and that affects neither accounting profit nor taxable in the period in which the associated services are tion, the Bank, at each balance sheet date during the ly; profit (or tax loss). rendered by employees, with a corresponding increase vesting period, makes the best estimation according to in the cost of relevant assets or expenses in the current the latest information of the number of employees who period. are granted to vest and revises the number of equity Deferred tax is not recognised for temporary differenc- The Bank is not allowed to withdraw from termination At the balance sheet date, the amount of deferred tax plan or redundancy offer unilaterally. recognised is measured based on the expected manner of recovery or settlement of the carrying amount of the instruments expected to vest. Based on its best estima(a) Social insurance and housing fund tion, the Bank recognises the services received for the current period as related costs or expenses, with a (10) Income tax assets and liabilities, using tax rates that are expected or the liability is settled in accordance with tax laws. to be applied in the period when the asset is recovered Pursuant to the relevant laws and regulations of the corresponding increase in capital reserve, at an amount PRC, employees of the Bank participate in the social Current tax and deferred tax are recognised in profit or equal to the fair value of the equity instruments at the insurance system established and managed by govern- loss except to the extent that they relate to a business grant date. combination or items recognised directly in equity The carrying amount of a deferred tax asset is reviewed (including other comprehensive income). at each balance sheet date. The carrying amount of a ment organisations. The Bank makes social insurance contributions, including contributions to basic pension When the Bank receives services but has no obligation insurance, basic medical insurance, unemployment to settle the transaction, and the related equity instru- Current tax is the expected tax payable calculated at the longer probable that sufficient taxable profits will be insurance, work-related injury insurance, maternity ments are issued by the Bank’s ultimate parent, the applicable tax rate on taxable income for the year, plus available to allow the benefit of the deferred tax asset insurance and etc., as well as contributions to housing Bank recognises the transaction as an equity-settled any adjustment to tax payable in respect of previous to be utilised. Such reduction is reversed to the extent fund, at the applicable benchmarks and rates stipulated share-based payment transaction. years. that it becomes probable that sufficient taxable profits by the government for the benefit of its employees. The deferred tax asset is reduced to the extent that it is no will be available. social insurance and housing fund contributions are (c) Annuity plan recognised as part of the cost of assets or charged to profit or loss on an accrual basis. Except for the above contributions, the Bank has no other obligations in this respect. At the balance sheet date, current tax assets and liabilities are offset if the Bank has a legally enforceable right At the balance sheet date, deferred tax assets and liabil- The Bank provides an annuity plan to the eligible to set them off and also intends either to settle on a net ities are offset if all the following conditions are met: employees. The Bank makes annuity contribution in basis or to realise the asset and settle the liability simul- proportion to its employees’ gross salaries, which are taneously. the taxable entity has a legally enforceable right to offset current tax liabilities and assets, and expensed in profit or loss when the contributions are (b) Share-based payments made. Deferred tax assets and liabilities arise from deductible they relate to income taxes levied by the same tax and taxable temporary differences respectively, being Share-based payment transactions in the Bank are equi- authority on either: 48 49 03 Significant accounting polices and accounting estimates Entrusted lending is the business where the Bank enters the duration and the effective interest rate. Interest the effective interest rate. If the commitment expires into entrusted loan agreements with customers, where- income includes the amortisation of any discount or without the Bank making a loan, the fee is recognised as different taxable entities which either to intend to by the customers provide funding (entrusted funds) to premium or differences between the initial carrying revenue on expiry. settle the current tax liabilities and assets on a net the Bank, and the Bank grants loans to third parties amount of an interest-bearing instrument and its basis, or to realise the assets and settle the liabilities (entrusted loans) at the instruction of the customers. As amount at maturity calculated on an effective interest simultaneously, in each future period in which signifi- the Bank does not assume the risks and rewards of the rate basis. cant amounts of deferred tax liabilities or assets are entrusted loans and the corresponding entrusted funds, expected to be settled or recovered. entrusted loans and funds are recorded as off-balance The effective interest method is a method of calculating non-monetary assets from the government to the Bank sheet items at their principal amounts and no impair- the amortised cost of financial assets and liabilities and at no consideration except for any capital contribution (11) Provisions and contingent liabilities ment assessments are made for these entrusted loans. of allocating the interest income and interest expense from the government as a shareholder of the Bank. over the relevant period. The effective interest rate is Special funds such as investment grants allocated by A provision is recognised for an obligation related to a Wealth management business refers to agreements the rate that exactly discounts estimated future cash the government, if clearly defined in official documents contingency if the Bank has a present obligation that between the Bank and its customers to raise funds from payments or receipts through the expected life of the as part of “capital reserve” are dealt with as capital can be estimated reliably, and it is probable that an them for investment in the assets of the Bank or third financial instrument, or, when appropriate, a shorter contributions, and not regarded as government grants. outflow of economic benefits will be required to settle parties. In this business, the Bank performs its manage- period, to the net carrying amount of the financial the obligation. Where the effect of the time value of ment duties and collects corresponding fees in accord- instrument. When calculating the effective interest rate, A government grant is recognised when there is reason- money is material, provisions are determined by ance with the relevant agreements. As the Bank does the Bank estimates cash flows considering all the able assurance that the grant will be received and that discounting the expected future cash flows. not assume the risks and rewards of the funds and contractual terms of the financial instrument (for exam- the Bank will comply with the conditions associated with investments of the wealth management business, the ple, prepayment, call and similar options) but does not the grant. In terms of a possible obligation resulting from a past corrensponding funds and investments are recorded as consider future credit losses. The calculation includes all transaction or event, whose existence will only be off-balance sheet items. fees and points paid or received between parties to the If a government grant is in the form of a transfer of a confirmed by the occurrence or non-occurrence of contract that are an integral part of the effective inter- monetary asset, it is measured at the amount that is uncertain future events or a present obligation resulting est rate, transaction costs and all other premiums or received or receivable. If a government grant is in the discounts. form of a transfer of a non-monetary asset, it is meas- the same taxable entity; or (13) Revenue recognition from a past transaction or event, where it is not probable that the settlement of the above obligation will Revenue is the gross inflow of economic benefits in the cause an outflow of economic benefits, or the amount of periods arising in the course of the Bank’s ordinary the outflow can not be estimated reliably, the possible activities when the inflows result in increase in share- or present obligation is disclosed as a contingent liabili- holders’ equity, other than increases relating to contri- ty. butions from shareholders. Revenue is recognised in profit or loss when it is probable that the economic (12) Fiduciary activities benefits will flow to the Bank, the revenue and costs can be measured reliably and the following respective conditions are met: The Bank acts in a fiduciary capacity as a custodian, trustee or an agent for its customers. Assets held by the (a) Interest income Bank and the related undertakings to return such assets to customers are excluded from the financial statements as the risks and rewards of the assets reside with Interest income arising from the use by others of entity the customers. assets is recognised in the income statement based on 50 (14) Government grants Government grants are transfers of monetary assets or ured at its fair value. Interest on the impaired financial assets is calculated and recognised using the rate of interest used to A government grant related to an asset is recognised discount future cash flows for the purpose of measuring initially as deferred income and amortised to profit or the related impairment loss. loss on a straight-line basis over the useful life of the asset. A grant that compensates the Bank for expenses (b) Fee and commission income to be incurred in the subsequent periods is recognised initially as deferred income and recognised in profit or Fee and commission income is recognised in the income loss in the same periods in which the expenses are statement when the corresponding service is provided. recognised. A grant that compensates the Bank for expenses incurred is recognised in profit or loss immedi- Origination or commitment fees received by the Bank ately. which result in the creation or acquisition of a financial asset are deferred and recognised as an adjustment to 51 03 Significant accounting polices and accounting estimates (15) Profit distributions to owners (j) key management personnel of the Bank’s parent and actual transaction price for such transactions for historical loss experience for assets with credit risk close family members of such individuals segment reporting, and segment accounting policies are characteristics similar to the loans and advances. Distributions of profit proposed in the profit appropria- (k) other enterprises that are controlled or jointly consistent with those for the Bank’s financial statement. Historical loss experience is adjusted on the basis of the tion plan to be authorised by the Board of Directors and controlled by principal individual investors or key man- declared after the balance sheet date are not recog- agement personnel of the Bank, or close family mem- nised as a liability at the balance sheet date but bers of such individuals, and disclosed in the notes separately. (l) annuity plan of the Bank for the benefit of employ- relevant observable data that reflect current economic conditions. Management reviews the methodology and (18) Significant accounting estimates and judgments assumptions used in estimating future cash flows periodically to reduce any difference between estimated and actual losses. ees. The preparation of financial statements requires man- (16) Related parties (17) Segment reporting If a party has the power to control, jointly control or exercise significant influence over another party, or vice Reportable segments are identified based on operating versa, or where two or more parties are subject to segments which are determined based on the structure common control or joint control from another party, of the Bank’s internal organisation, management they are considered to be related parties. Related requirements and internal reporting system. An operat- parties may be individuals or enterprises. Enterprises ing segment is a component of the Bank that engages in with which the Bank is under common control only from business activities from which it may earn revenues and the State and that have no other related-party relation- incur expenses, whose financial performance are regu- ships are not regarded as related parties of the Bank. larly reviewed by the Bank’s management to make Related parties of the Bank include, but are not limited decisions about recources to be allocated to the to: segment and assess its performance, and for which financial information regarding financial position, finan- (a) the Bank’s parent cial performance and cash flows is available. (b) the Bank’s subsidiaries (c) enterprises that are controlled by the Bank’s parent (d) investors that have joint control or exercise significant influence over the Bank (e) enterprises or individuals if a party has control or agement to make estimates and assumptions that affect amounts of assets, liabilities, income and expenses. The fair values for financial instruments that lack an Actual results may differ from these estimates. active market to provide quoted prices are established Estimates and underlying assumptions are reviewed on using valuation techniques. These techniques include an ongoing basis. Revisions to accounting estimates are using recent arm’s-length market transactions between recognised in the period in which the estimate is revised knowledgeable, willing parties; reference to the current and in any future periods affected. Note 9(b) and Note fair value of another instrument that is substantially the 9(d) contain information about the assumpations and same; discounted cash flow analysis; and option pricing their risk factors relating to share-based payments and models. The Bank has established a process to ensure termination benefits. Other key sources of estimation that valuation techniques are constructed by qualified uncertainty are as follows: personnel and are validated and reviewed by independent personnel. Valuation techniques are certified before outputs reflect actual market conditions. Valuation models established by the Bank make the maximum use Two or more operating segments may be aggregated periodically to assess whether impairment losses exist of market inputs and rely as little as possible on into a single operating segment if the segments have and if they exist, an impairment loss is recognised. Bank-specific information. However, it should be noted same or similar economic characteristics and are similar Objective evidence for impairment includes observable that some inputs, such as credit and counterparty risk, in respect of: data indicating that there is a measurable decrease in and risk correlations, require management estimates. the estimated future cash flows identified with an Management estimates and assumptions are reviewed periodically and are adjusted if necessary. the Bank the nature of each products and services (f) joint ventures of the Bank, including subsidiaries of individual loan. It also includes observable data indicat- the nature of production processes joint ventures ing adverse changes in the repayment status of borrow- the type or class of customers for the products and ers or issuers in the assets portfolio or national or local services associates the methods used to distribute the products or (h) principal individual investors and close family mem- provide the services bers of such individuals the nature of the regulatory environment. (i) key management personnel of the Bank and close family members of such individuals Inter-segment revenues are measured on the basis of 52 implementation and are calibrated to ensure that (a) Impairment losses of loans and advances The Bank reviews the portfolios of loans and advances joint control over both the enterprises or individuals and (g) associates of the Bank, including subsidiaries of (b) Fair value of financial instruments the application of accounting policies and the reported (c) Income tax economic conditions that correlate with defaults on the assets in the portfolio. The impairment loss for a loan Determining income tax provisions involves judgement that is individually assessed for impairment is the on the future tax treatment of certain transactions. The decrease in the estimated discounted future cash flow Bank carefully evaluates the tax implications of transac- of that asset. When loans and advances are collectively tions and sets up tax provisions accordingly. The tax assessed for impairment, the estimate is based on treatment of such transactions is reconsidered periodi- 53 03 Significant accounting polices and accounting estimates 05 Cash on hand and deposits with central bank 04 Taxation cally to take into account all changes in tax legislation. (e) Depreciation and amortization of assets The major types of taxes applicable to the Bank and the Deferred tax assets are recognised for tax losses not yet such as fixed assets, intangible assets tax rates are as follows: tax assets can only be recognised to the extent that it is As described in Note 3(5) and 3(7), fixed assets and (1) Business tax probable that future taxable profits will be available intangible assets are depreciated and amortised over against which the deductible temporary differences can their useful lives after taking into account residual be utilised, management’s judgement is required to value. The useful lives of the assets are regularly assess the probability of future taxable profits. Manage- reviewed to determine the depreciation and amortisa- ment’s assessment is constantly reviewed and addition- tion costs charged in each reporting period. The useful al deferred tax assets are recognised if it becomes prob- lives of the assets are determined based on historical able that future taxable profits will allow the deferred experiences of similar assets and estimated technical tax assets to be utilized. changes. If there have been significant changes in the Note used and deductible temporary differences. As deferred 2013 2012 217,035,028 275,527,540 (1 ) 15,542,835,103 15,638,323,487 (2) 11,125,924,116 14,723,671,393 26,885,794,247 30,637,522,420 Cash on hand factors used to determine the depreciation or amortisation, the rate of depreciation or amortisation is revised (d) Impairment of fixed assets and intangible assets prospectively. Statutory deposit reserves with central bank Business tax is charged at 5% on taxable income (2012: Surplus deposit reserves 5%). with central bank (2) Income tax Total The statutory income tax rate applicable to the Bank is 25%. The applicable income tax rate for the year is the (1) The Bank places statutory deposit reserves with the statutory rate (2012: 25%). PBOC in accordance with the Regulation of the PRC on the Administration of Foreign-funded Banks (Adminis- (3) Taxes payable As described in Note 3(8)(b), fixed assets and intangible trative Regulation) and relevant regulations. The statu2013 2012 112,346,356 59,239,334 42,428,853 85,827,782 53,675,185 41,007,134 tory deposit reserves are not available for use in the Bank’s daily business. As at the balance sheet date, the assets are reviewed at each balance sheet date to determine whether the carrying amount exceeds the recover- Income tax able amount of the assets. If any such indication exists, Business taxes and surcharges Withholding taxes related assets are regarded as impaired and impairment statutory deposit reserve rates applicable to the Bank were as follows: 2013 losses recognised accordingly. To tal 214,014,543 2012 180,510,101 Renminbi deposits The recoverable amount of an asset (asset group) is the Foreign currency deposits greater of its fair value less costs to sell and its present 18 % 18 % 5% 5% value of the expected future cash flows. Since a market price for the asset (or the asset group) cannot be (2) The surplus deposit reserves are maintained with obtained reliably, the fair value of the asset cannot be the PBOC mainly for settlement purposes. estimated reliably. In assessing value in use, significant judgements are exercised over the asset’s production, selling price, related operating expenses and discount rate to calculate the present value. All relevant materials which can be obtained are used to estimate the recoverable amount, including an estimation of the production, selling price and related operating expenses based on reasonable and supportable assumptions. 54 55 06 Deposits with inter-banks 2013 09 Derivatives financial instruments 08 Trading financial assets 2012 2013 Bond investments held for trading Deposits with inter-banks - in Mainland China 1,140,335,808 1,728,623,830 - outside Mainland China 6,442,308,143 11,006,328,825 3,266,961,398 2012 2013 3,512,945,036 Notional amounts The bonds investments held for trading are issued by the following institutions and stated at fair value Subtotal 7,582,643,951 Fair Value 2012 Notional amounts Fair Value Total Assets Liabilities Total Assets Liabilities 135,049,948,534 956,074,626 931,897,543 139,697,972,546 456,618,654 421,765,687 4,015,236,292 148,593 1,450,812 2,527,647,336 506,401 214,982 139,065,184,826 956,223,219 933,348,355 142,225,619,882 457,125,055 421,980,669 4,832,778,514 15,828,793 7,933,033 11,558,446,498 26,068,871 24,426,965 247,342,477,351 1,834,152,533 1,881,079,714 201,399,941,349 1,194,899,631 972,184,204 252,175,255,865 1,849,981,326 1,889,012,747 212, 958,387,847 1,220,968,502 996,611,169 1,307,427,374 17,553,683 17,553,683 907,133,166 9,608,513 9,608,513 743,907,668 4,896,365 4,896,365 235,458,754 2,353,696 2,353,696 2,051,335,042 22,450,048 22,450,048 1,142,591,920 11,962,209 11,962,209 393, 291,775,733 2,828,654,593 2,844,811,150 356,326,599,649 1,690,055,766 1,430,554,047 12,734,952,655 Interest rate derivatives: Deposits with non-bank financial institutions - in Mainland China 2013 68,171,965 51,115,871 - 16,619 68,171,965 51,132,490 - outside Mainland China Subtotal 2012 Interest rate option Policy banks 2,494,194,090 1,098,233,820 459,936,228 40,977,976 outside mainland China 252,920,110 290,533,340 Enterprises in mainland China 59,910,970 79,821,200 - 2,003,378,700 The MOF Inter-banks and non-bank institutions Total 7,650,815,916 Interest rate swap 12,786,085,145 As at 31 December 2013, management considered that The PBOC no impairment provision of deposits with inter-banks was necessary (2012: nil). Total Currency derivatives: 3,266,961,398 Currency option Forward 3,512,945,036 Other derivatives: Commodity swap Equity swap 07 Placements with inter-banks 2013 2012 Total Placements with inter-banks - in Mainland China 19,858,944,162 12,063,459,320 - outside Mainland China 3,663,076,625 6,986,228,949 23,522,020,787 19,049,688,269 Subtotal The notional amounts of the derivatives indicate the volume of transactions outstanding at the balance sheet date; they do not represent the amounts at risk. Placements with non-bank financial institutions - in Mainland China Total 7,185,490,000 4,262,000,000 30,707,510,787 23,311,688,269 56 57 10 Loans and advances to customers (1) Analysed by nature (2) Analysed by industry sector Note 2013 2013 2012 Note Corporate loans and advances - loans - discounted bills 36,474,959,601 32,078,445,864 7,233,387,443 19,254,643,950 Personal loans and advances - residential mortgages 15,435,894,174 10,543,940,346 - personal consumer loans 1,330,960,452 1,074,259,688 - credit cards loans 1,580,481,382 500,395,636 62,055,683,052 63,451,685,484 Gross loans and advances Less: Allowances for impairment losses 10(6) (667,754,656) (501,175,803) Manufacturing Amount 61,387,928,396 28% 18,218,312,858 29% Wholesale and retail trade 7,956,768,198 13% 6,248,740,458 10% Leasing and commercial services 3,959,409,971 6% 3,512,607,045 5% Transportation, storage and postal services 3,065,219,941 5% 1,364,332,257 2% Telecommunications, IT services and software Mining 1,479,145,952 995,234,050 2% 2% 320,930,018 952,825,000 1% 2% Hotel and restaurant 795,078,689 1% 701,306,506 1% Real estate 135,875,278 *0% 137,254,723 *0% Fisheries and agriculture Construction 96,704,645 15,871,566 *0% *0% 94,289,114 404,712,940 *0% 1% - - 16,631,433 *0% 483,163,128 1% 106,503,512 *0% Subtotal 36,474,959,601 58% 32,078,445,864 51% Discounted bills Personal loans and advances 7,233,387,443 18,347,336,008 12% 30% 19,254,643,950 12,118,595,670 30% 19% Gross loans and advances 62,055,683,052 100% 63,451,685,484 100% Production and supply of electricity, gas and water 62,950,509,681 Less: Allowances for impairment losses 10(6) Net loans and advances to customer (667,754,656) s61,387,928,396 * The percentages of th ese items are less than 1%. 58 Amount 17,492,488,183 Others Net loans and advances to customers 2012 59 (501,175,803) 62,950,509,681 10 Loans and advances to customers (3) Analysed by geographical sector (5) Overdue loans analysed by overdue period 2013 Note Yangtze River Delta Amount 2013 2012 Amount Within three months (inclusive) Between three months and one year (inclusive) Between one year and three months (inclusive) Over three years Total 34,508,693,193 56% 34,827,058,106 55% 13,876,184,228 22% 12,355,518,733 19% 11,164,614,499 18% 13,655,069,590 21% Unsecured loans 210,085,416 33,707,258 4,066,540 661,218 248,520,432 2,071,002,611 435,188,521 3% 1% 2,271,763,844 342,275,211 4% 1% Guaranteed loans Secured loans 3,925,000 92,689,699 41,997,095 1,910,344 38,009,531 67,221,614 24,716,259 106,285,878 108,647,885 268,107,535 90,888,153 1,910,344 67,221,614 106,285,878 266,305,989 1,801,546 - - - 1,801,546 306,700,115 77,614,697 109,297,685 131,663,355 625,275,852 Bohai Rim Pearl River Delta Middle and western region Northeastern region - by tangible asssets other Gross loans and advances 62,055,683,052 100% 63,451,685,484 100% than monetary assets -by monetary assets Less: Allowances for impairment losses 10(6) (667,754,656) (501,175,803) Total Net loans and advances to customers 61,387,928,396 62,950,509,681 2012 (4) Analysed by security type Note 2013 2012 Unsecured loans 22,929,128,346 30,802,918,123 Guaranteed loans Secured loans - by tangible assets other than monetary assets - by monetary assets 13,418,533,793 25,708,020,913 16,950,022,186 8,757,998,727 14,207,343,972 18,441,423,389 11,966,617,126 6,474,806,263 62,055,683,052 63,451,685,484 (667,754,656) (501,175,803) 61,387,928,396 62,950,509,681 Unsecured loans Guaranteed loans Secured loans Less: Allowances for impairment losses 10(6) Net loans and advances to customers Between three months and one year (inclusive) Between one year and three months (inclusive) 25,866,444 2,422,809 1,756,529 Over three years 320,995 Total 30,366,777 10,141,582 25,814,411 1,644,856 28,780,910 66,381,759 39,941,609 46,291,731 34,181,193 117,000,000 237,414,533 39,941,609 46,291,731 34,181,193 117,000,000 237,414,533 75,949,635 74,528,951 37,582,578 146,101,905 334,163,069 - by tangible asssets other than monetary assets Gross loans and advances Within three months (inclusive) Total Overdue loans represent loans and advances to customers, of which the whole or part of the principal or interest was overdue for more than one day. 60 61 10 Loans and advances to customers 11 Available-for-sale financial assets (6) Movements of allowances for impairment losses 2013 2012 17,228,779,130 16,135,172,130 2013 As at 1 January Charge for the year Individual assessment Total 258,165,446 243,010,357 501,175,803 147,710,273 20,659,357 168,369,630 - (16,476) (16,476) (167,853) (1,774,301) 263,485,385 667,754,656 Effect of discounting Exchange differences As at 31 December Bond investments Collective assessment (1,606,448) 404,269,271 The available-for-sale bond investments are issued by the following institutions and stated at fair value: 2013 2012 The MOF 9,059,992,400 727,219,430 The PBOC 8,168,786,730 15,407,952,700 Total 17,228,779,130 16,135,172,130 2012 As at 1 January Individual assessment Total 339,595,219 173,284,147 512,879,366 (Reversal) / charge for the year (82,118,707) 75,661,605 (6,457,102) - (5,392,347) (215,143) (5,392,347) (215,143) 688,934 (327,905) Amounts written-off Effect of discounting Exchange differences As at 31 December As at 31 December 2013, management considered that no impairment provision of available-for-sale financial assets Collective assessment 258,165,446 243,010,357 was necessary (2012: nil). 361,029 501,175,803 As at 31 December 2013, the Bank’s loan provision ratio was 1.08% (2012: 0.79%), the provision coverage ratio was 230.86% (2012: 184.69%). Loan provision ratio represents ratio of loan loss provision over gross loans and advances to customers at the balance sheet date. Provision coverage ratio represents ratio of loan loss provision over non-performing loans. According to the five-tier risk classification in CBRC’s Notice on Distributing Guidelines on Loan Risk classification (Yin Jian Fa [2007] No. 54), non-performing loans represent loans and advances classified as substandard, doubtful and loss. (7 ) Restructured loans and advances to customers Restructured loans and advances to customers 62 2013 2012 117,076,000 131,854,773 63 12 Fixed Assets 13 Intangible assets Office & other equipment Motor vehicles Cost Cost As at 1 January 2013 Software Total As at 1 January 2013 168,767,408 360,188,484 3,995,159 364,183,643 Additions 17,954,927 1,354,324 19,309,251 Additions 7,817,033 Disposals (14,302,749) (15,154,077) Disposals (1,885,015) As at 31 December 2013 363,840,662 (851,328) 4,498,155 368,338,817 (286,454,868) (3,593,211) (290,048,079) Charge for the year Written back on disposal (30,629,732) 14,295,441 (424,490) 851,328 (31,054,222) 15,146,769 As at 31 December 2013 (302,789,159) (3,166,373) (305,955,532) As at 31 December 2012 As at 1 January 2013 (88,206,405) Charge for the year (17,499,721) Written back on disposal 362,054 As at 31 December 2013 (105,344,072) --------------------- Carrying amounts Carrying amount As at 31 December 2013 174,699,426 --------------------- Less: Accumulated amortisation Less: Accumulated depreciation As at 1 January 2013 As at 31 December 2013 61,051,503 73,733,616 1,331,782 401,948 62,383,285 As at 31 December 2013 69,355,354 As at 31 December 2012 80,561,003 74,135,564 As at 31 December 2013, management considered that no impairment provision of intangible assets was necessary As at 31 December 2013, management considered that no impairment provision of fixed assets was necessary (2012: nil). (2012: nil). 64 65 14 Deferred tax assets Deferred tax assets / (liabilities) As at 1 January 2013 Fair value adjustments for derivatives Fair value adjustments for available-for-sale financial assets Current year increase / decrease charged to profit or loss (64,875,431) Current year increase / decrease recognised in equity 68,916,476 - Note 2013 2012 1,500,940,390 231,756,983 Deposits from inter-banks Deferred expenses 210,603,390 146,490,760 - in Mainland China Leasehold improvements 146,149,304 158,282,164 Refundable deposits 94,497,451 91,804,819 189,103 2,555,633 - 213,354 1,952,379,638 631,103,713 (27,341,850) (28,187,636) Suspensed settlement As at 31 December 2013 4,041,045 Receivables Others (2,927,082) - 40,757,307 37,830,225 Fair value adjustments for trading financial assets Adjustments for accrued expenses 16 Deposits from inter-banks and non-bank financial institutions 15 Other assets 16,342 148,700,217 845,103 6,459,009 - 861,445 155,159,226 Others 14,371,076 1,155,496 110,656 15,637,228 Total 95,285,122 77,376,084 40,867,963 213,529,169 Subtotal Less : Provisions for impairment losses (1) - outside Mainland China Subtotal 1,925, 037,788 2012 113,948,602 160,902,318 12,297,468,094 6,109,029,283 12,411,416,696 6,269,931,601 894,667,156 3,165,698,244 7,295,055,042 2,872,952,825 8,189,722,198 6,038,651,069 20,601,138,894 12,308,582,670 Deposits from non - bank financial institutions - in Mainland China - outside Mainland China Subtotal Total 2013 602,916,077 Total (1) Movements of allowances for other assets At the balance sheet dates, the deferred tax assets and liabilities on the balance sheet, after offsetting each other, As at 1 January were as follows: Exchange differences As at 31 December Deferred tax assets Deferred tax liabilities 2013 2012 213,529,169 163,087,638 - Total 213,529,169 2013 2012 28,187,636 28,256,698 (845,786) 27,341,850 (69,062) 28,187,636 17 Borrowings from inter-banks (67,802,516) 2012 10,492,510,490 6,751,057,744 Borrowings from inter-banks 95,285,122 - outside Mainland China 66 2013 67 18 Financial assets sold under repurchase agreements 20 Employee benefits payable 2013 2012 The PBOC notes - 7,430,000,000 Government bonds - 490,000,000 Total - 7,920,000,000 As at 31 December 2012, the counterparties of the above financial assets sold under repurchase agreements were the PBOC and domestic banks in Mainland China. Note Salaries, bonuses and allowances Social insurances Medical insurance premium Pension insurance premium Annuity premium Unemployment insurance premium Work-related injury insurance premium Maternity insurance premium Housing fund Others Total 19 Deposits from customers (1) Balance at the begining of the year Accrued during the year Paid during the year Balance at the end of the year 207,695,315 1,109,167,665 (1,098,889,693) 217,973,287 15,403,381 158,695,002 (154,407,866) 19,690,517 3,418,432 42,281,096 (40,121,190) 5,578,338 8,054,260 81,856,655 (79,526,677) 10,384,238 3,041,657 23,369,149 (24,077,499) 2,333,307 551,384 5,971,974 (5,832,443) 690,915 124,991 2,018,213 (1,813,898) 329,306 212,657 3,197,915 (3,036,159) 374,413 4,542,256 33,832,722 (35,562,049) 2,812,929 610,160 78,374,936 (78,340,899) 644,197 228,251,112 1,380,070,325 (1,367,200,507) 241,120,930 (1) Pursuant to the relevant laws and regulations of the PRC, employees of the Bank participate in the social insurance system established and managed by government organisations. The Bank makes social insurance contributions to the 2013 2012 local social insurance entities at the applicable base salary and rates stipulated by the government for the benefit of its employees. Current deposits - corporate customers - personal customers 49,236,320,228 4,999,357,184 56,480,143,472 4,295,546,488 Subtotal of current deposits 54,235,677,412 60,775,689,960 Time deposits (including call deposits) - corporate customers - personal customers 33,243,212,636 8,840,279,854 33,648,763,402 9,085,025,373 42,083,492,490 42,733,788,775 304,933,731 56,618,645 96,624,103,633 103,566,097,380 Subtotal of time deposits Other Deposits - inward and outward remittances Total 68 Besides, the Bank provides an annuity plan to the eligible employees. The Bank makes annuity contributions in proportion to its employees’ gross salaries. 69 21 Other liabilities 23 Capital reserve 2013 Cash collaterals Suspensed settlement Accrued expenses Deferred income Others 2013 2012 7,374,698,368 2,047,180,081 251 ,593,516 54,941 ,612 162,720,180 5,692,041,839 2,942,486,128 208,305,475 25,900,425 284,488,570 Balance at the beginning of the year 9,891,133,757 9,153,222,437 Fair value adjustments Transfer to profit or loss Balance at the end of the year (169,198,731) 6,169,500 (151,320,901) Other capital reserve - Available-for-sale financial assets Total Changes during the year 11,708,330 - 33,400,541 2,192,097 - - 35,592,638 - Available-for-sale financial assets (2,927,082) 40,757,307 - - 37,830,225 - Equity-settled share-based payments (8,457,699) 110,656 - - (8,347,043) Total 33,724,090 6,169,500 (86,245,081) - Equity-settled share-based payments - Deferred tax 43,060,060 (169,198,731) 22 Paid-in capital As at 31 December, the Bank’s registered capital and paid-in capital are as follows: 2013 and 2012 Registered capital and paid-in capital Citibank Amount % 3,970,000,000 100% Capital contributions in foreign currency were translated into Renminbi at the exchange rate at the date of the contributions received as quoted by the PBOC. Certified Public Accountants have verified the above paid-in capital and issued related capital verification reports. 70 24 Surplus reserve The statutory surplus reserve is as follows: 2013 Balance at the beginning of the year Profit appropriation ( N ote 26(1 )) 605,631,273 96,412,040 Balance at the end of the year 702,043,313 71 27 Net interest income 25 General reserve Appropriation to general reserve in accordance with 2013 201 2 the regulations issued by the MOF 2013 Balance at the beginning of the year 1,305,394,495 Profit appropriation (Note 26) 171,295,790 Balance at the end of the year 1,476,690,285 According to the Notice on Administrative Measures on Accrual of Provisions by Financial Enterprises (Cai Jin [2012] No.20) issued by the MOF on 30 March 2012, a financial enterprise shall appropriate from net profits an amount of not less than 1.5% of its risk-bearing assets at the year end as general reserve. Where the general provision ratio cannot reach 1.5% immediately, it is acceptable to reach the ratio gradually over a period of not more than five years in principle. The Notice came into force on 1 July 2012. The Bank appropriates the general reserve in according with the requirements of Cai Jin [2012] No.20. As at 31 December 2013, the Bank appropriated an amount of Renminbi 1,476,690,285 as general reserve according to the above requirements (2012: Renminbi 1,305,394,495). Interest income : Loans and advances to customers corporate loans and advances discounted bills personal loans and advances Placements with inter -banks Deposits with central bank Deposits with inter -banks Others Total interest income Include : interest income from impaired financial assets 2013 Interest expenses : Deposits from customers Deposits from inter -banks and non -bank financial institutions Borrowings from inter -banks Financial assets sold under repurchase agreements (1) 96,412,040 137,321,296 Appropriations to general reserve 25 171,295,790 486,953,322 267,707,830 624,274,618 4,408,561,165 215,143 (1,331,619,085) (241,946,324) (103,649,690) (44,355,079 ) (221,540,695) (46,923,105) (118,270,912) Total interest expenses (1,790,691,226) (1,718,353,797) Net interest income 2,602,809,464 2,690,207,368 (1) Appropriations to surplus reserve The Bank appropriated an amount of Renminbi 96,412,040, representing 10% of profit after tax for the year as surplus reserve in accordance with relevant regulations and its articles (2012: Renminbi 137,321,296). 72 4,393,500,690 (1,400, 740,133 ) 2012 Appropriations to surplus reserve 3,356,128,938 1,788,421,5 07 1,019,309,699 548,397,732 702,846,294 292,640,768 46,726,232 10,218,933 16,476 26 Profit appropriation Note 3,048,313,5 79 1,507,553,348 697,351,582 843,408,651 1,034,107,517 283,897,507 21, 252,029 5,930,058 73 28 Net fee and commission income 29 Investment income 2013 201 2 Fee and commission income: Commission on trust and custodian activities 359,549,539 268,419,757 Fees for agency services 101,610,718 78,703,867 Credit commitment fees 71,723,520 95,819,314 Settlement and clearance fees 53,340,966 53,086,934 Trade finance and guarantee services fees Bank card fees 52,557,332 38,878,308 53,567,629 10,296,860 Others 36,218,968 30,861,602 Total fee and commission income 713,879,351 590,755,963 (47,209,234) (43,934,213) (31,280,223) (42,170,015) (4,952,417) (156,580) (661,733) (370,188) (11,856,176) (6,702,334) Total fee and commission expenses (95,959,783) (93,333,330) Net fee and commission income 617,919,568 2013 201 2 Available -for-sale financial assets Derivatives Trading financial assets 530,627,361 159,900,969 46,341,319 574,826,505 119,554,060 214,500,622 Total 736,869,649 908,881,187 2013 201 2 (263,170,308) 34,464,171 (3,380,412) 13,411 (266,550,720) 34,477,582 Fee and commission expenses: Inter-bank transaction fees Brokerage fees Bank card Trust and custodian fees Others 497,422,633 30 (Losses) / gains from changes in fair value Derivatives Trading financial assets Total 74 75 31 General and administrative expenses 33 Income tax expense Staff costs - Salaries, bonuses and allowances , etc. - Staff welfare Service fees Rental and property maintenance fees Business promotion expenses IT equipment maintenance fees Depreciation and amortisation Meetings and office expenses Travelling expenses Union fees Utilities Business entertainment expenses Stamp duties Others Total 2013 201 2 1,063, 816 ,546 270,902,661 1,027,220,288 230,384,915 1,334,719,207 1,257,605,203 372,765,434 297,574,342 147,005,837 121,776,443 82,661,395 50,765,471 23,929,158 20,606,494 15,930,783 9,771,537 7,339,166 230,489,812 396,783,683 277,734,483 147,190,441 59,277,436 83,867,266 49,029,469 30,617,447 18,152,699 14,497,912 10,285,845 6,418,899 196,267,078 2,715,335,079 2,547,727,861 (a) Income tax expense for the year represents 2013 201 2 Current tax expense for the year Tax filling differences Changes in deferred tax assets / liabilities 343,296,758 883,836 (77,376,084) 487,743,642 (4,699,211) (28,276,813) Total 266,804,510 454,767,618 (b) Reconciliation between income tax expense and accounting profit is as follows: 2013 201 2 1,230,924,906 1,827,980,584 Expected income tax expense at a tax rate of 25% Tax effect of non -deductible expenses Tax effect of non -taxable income Tax filling differences 307,731,227 5,261,669 (47,072,222) 883,836 456,995,146 13,266,252 (10,794,569) (4,699,211) Income tax expense 266,804,510 454,767,618 Profit before taxation 32 Impairment losses charge / (reversal) Impairment losses charge / (reversal) for loans and advances to customers 76 2013 201 2 168,369,630 (6,457,102) 77 35 Supplement to cash flow statement 34 Other comprehensive income 2013 (Losses) / gains arising from available -for-sale financial assets Add / (less): Tax expense Reclassification adjustments for amounts transferred to profit or loss Sub total 201 2 (169,198,731) 40,757,307 26,749,300 (6,946,788) 6,169,500 1,037,850 (122,271,924) 20,840,362 Changes in fair value of equity -settled share-based payments Add / ( less): T ax expense 2,192,09 7 110,65 6 3,387,924 (861,609) Subtotal 2,302,753 2,526,315 Total (119,969,171) 23,366,677 (1) Reconciliation of net profit to cash flows from operating activities: Net profit Add : Impairment losses charge / (reversal) for loans and advances to customers Depreciation of fixed assets Amortisation of intangible assets Amortisation of leasehold improvements 201 2 964,120,396 1,373,212,966 168,369,630 31,054,222 17,499,721 (6,457,102) 35,151,845 17,492,435 34,107,452 31,222,986 8,243,040 (549,336,732) 266,550,720 (77,376,084) (16,476) 516,254,958 (4,499,201,633) 3,172,191 (571,723,577) (34,477,582) (28,276,813) (215,143) 12,524,209 (3,976,724,878) (1,841,636,356) 24,190,528,640 (4,961,367,142) 21,045,430,177 Losses on disposal of fixed assets, intangible assets and other long -term assets Investment income Losses / ( gains) on changes in fair value Increase in deferred tax assets Interest income from impaired financial assets Unrealised foreign exchange losses Increase in operating receivables (D ecrease) / increase in operating payables Net cash (outflow ) / inflow from operating activities 78 2013 79 35 Supplement to cash flow statement 36 Related party relationships and transactions (2) Change in cash and cash equivalents: (1) Information on the parent of the Bank is listed as follows: 2013 201 2 Company name Cash and cash equivalents at the end of the year Less : C ash and cash equivalents at the beginning of the year Net (decrease) / inc rease in cash and cash equivalents Principal activities Stockholder’s equity Banking and financial services US dollar 147,557million Registered place 35,289,366,558 40,544,135,948 Citibank (40,544,135,948) (23,815,812,389) The Bank’s ultimate controlling party is Citigroup Inc.. (5,254,769,390) 16,728,323,559 (3) Cash and cash equivalents held by the Bank are as follows: 2013 201 2 Cash on hand Central bank deposits available on demand Deposits with inter -banks Placements with inter -banks Trading financial assets Available -for-sale financial assets 217,035,028 11,125,924,116 7,650,815,916 14,078,000,008 1,218,800,490 998,791,000 275,527,540 14,723,671,393 12,786,085,145 12,758,851,870 - Total 35,289,366,558 40,544,135,948 United States Shareholding percentage 100% Proportion of voting rights 100% (a) Transactions with the parent: Interest income Interest expense s Fee and commission income Fee and commission expenses Investment losses (Losses ) / gains from changes in fair value Other operating income General and administrative expenses 2013 201 2 37,757,204 (241,363,097) 16,027,519 (1,067) (28,910,779) (117,418,227) 48,669,226 (178,375,210) 13,392,800 (43,338,668) 298,375,694 20,549,173 153,643,483 (174,706,757) (172,294,922) (b) The balances of transactions with the parent at 31 December are set out as follows: Deposits with inter -banks Placements with inter-banks Derivative financial assets Interest receivable Other assets Deposits from inter -banks and non-bank financial institutions Borrowings from inter -banks Derivative financial liabilities Interest payable Other liabilities 80 81 2013 201 2 6,569,526,780 3,663,076,625 279,495,024 1,747,181 18,942,208 11,005,798,382 6,985,852,448 318,270,529 1,234,063 11,670,486 (12,205,915,844) (8,054,585,181) (340,381,722) (52,105,399) (181,847,596) (4,930,645,103) (5,793,590,239) (266,257,406) (28,386,037) (150,611,940) 36 Related party relationships and transactions (c) The notional amounts of derivative contracts with the parent at 31 December are set out as follows: Forwards (2) Transactions between the Bank and its key management personnel and their close family members 2013 201 2 20,506,936,203 15,441,768,950 3,352,575,453 237,809,030 4,015,236,292 622,828,508 371,953,833 10,031,131,761 1,164,168,936 2,527,647,336 453,566,583 117,729,377 Interest rate swaps Currency options Interest rate options Commodity swaps Equity swaps Operating lease commitments 11,000,612 Remuneration of key management personnel 2013 201 2 90,636,875 85,786,752 2,614,538 1,740,757 Maximum loans and advances issued to key management personnel and their close family members (b) The balances of transactions with the Bank’s key management personnel and their close family members at 31 December are set out (d) The balances of commitments with the parent at 31 December are set out as follows: 2013 (a) Transactions with the key management personnel and their close family members: 2012 as follows: 2013 201 2 1, 299,985 559,601 15,389,283 28,289,560 1,380,209 226,353 11,149,225 28,112,995 16,575,165 Loans and advances to customers Credit cards loans Deposits from customers Employee benefits payable (e) In addition, significant related party transactions with the Bank’s parent approved by Related Party Transaction Control Committee and the Board of Directors during the year are set out as follows: Related parties of the Bank include close family members of its key management personnel, key management personnel of the Bank’s parent, close family members of key management personnel of the Bank’s parent, other The Bank outsourced the non-Renminbi cash operation, funds and securities operation and technology related service enterprises that are controlled or jointly controlled by its key management personnel and close family members of to Citibank N.A. Singapore Branch. Such outsourcing services cost the Bank Renminbi 162,536,098 in general and such individuals. The Bank’s transactions with these related parties are insignificant, thus not disclosed separately. administrative expenses in the year 2013 (2012: Renminbi 154,457,440). A significant related party transaction represents a single transaction conducted between the Bank and a related party where the transaction amount is 1% or more of the total equity of the Bank, or after this transaction, the total balance with the connected party is 5% or more of the total equity of the Bank. (c) The balance of credit commitments with the Bank’s key management personnel and their close family members at 31 December are set out as follows: Credit commitments 82 83 2013 201 2 5,890,399 5,523,647 36 Related party relationships and transactions (d) The credit commitments with the Bank’s other related personnel is set out as follows: (3) Credit transactions between the Bank and its other related personnel 2013 201 2 4,335,439 5,793,744 2013 201 2 10,634,895 (645,291) 4,789,606 (3,307,269) (38,096,359) 3,004,354 (376, 618,749) 8,407,292 (584,178) 4,999,198 (3,166,454) (350,245) (919) 2,456,708 (339,710,503) Besides the key management personnel information listed in Note 36(2), the Bank discloses the credit transactions between the Bank and its related personnel according to the requirement of paragraph 38 of Administrative Measures for the Related Party Transactions between Commercial Banks and their Insiders or Shareholders (Order of the Credit commitments CBRC (2004) No.3). The Bank has credit commitments with 95 other related personnels. The Bank’s related personnel include the Bank’s insiders, controlling shareholders, directors or key management personnel of the Bank’s related legal entities or other organisations. Insiders include the Bank’s directors, senior management personnel of the head office and branches and other personnel who have the power to decide or participate in the extension of credit or transfer of assets by the Bank. (4) Transactions between the Bank and other related parties (a) Basic information of the related personnel that have mortgage transactions with the Bank (a) Transactions with other related parties: Name Title Jin Yu Executive vice president Cline Zhang Vice president of Shanghai Branch Julia Ye Branch manager of Shanghai West Nanjing Road Sub -branch The credit transaction information relating to the Bank’s executive vice president, Jin Yu, is disclosed in Note 36(2) and thus not included in Note 36(3). Interest income Interest expenses Fee and commission income Fee and commission expenses Investment losses Losses from changes in fair value Other operating income General and administrative expenses (b) 65 other related personnels are involved in credit card transactions with the Bank. The transactions and percentage between the Bank and its non-bank related parties are set out as follows: (c) The credit balance with the Bank’s other related personnel is set out as follows: 2013 2013 201 2 902,141 1,130,561 84 2012 % 259,940,034 79,770,469 10.20% 3.13% General and administrative expenses - Service received - Property rented Loans and advances to customers Mortgage loans Credit card loans % 293,412,645 83,206,103 637,652 406,256 85 10.81% 3.06% 36 Related party relationships and transactions (b) The balances of transactions with other related parties at 31 December are set out as follows: Deposits with inter-banks Placements with inter-banks Derivative financial assets Loans and advances to customers Interest receivable Other assets Deposits from inter-banks and non-bank financial institutions Derivative financial liabilities Deposits from customers Interest payable Other liabilities (d) The balances of commitments with other related parties at 31 December are set out as follows: 2013 201 2 13,033 - 249,458,809 117,000,000 1,146,384 2,049,042 23,658,809 47,317,618 1,682,338 659,503 8,223,809 13,529,366 (35,826,539) (14,503,483) (779,758) (532,688) (167,403,681) (108,536,199) (25,162) (16,162) (34,477,571) (96,824,457) Operating lease commitments Placement with non-bank financial institutions Loans and advances to customers Other liabilities - Service fee payables 249,458,809 23,658,809 34,477,571 % 2012 % 0.81% 117,000,000 47,317,618 22,453,856 0.50% 0.07% 0.25% 0.04% 0.34% Forwards Interest rate swaps Currency options 86 2012 1,641,082,638 2,063,394,482 10,155,941 1,117,604,985 3,797,222,632 60,377,381 119,802,127 Party Transaction Control Committee and the Board of Directors are set out as follows: Outsourcing of China Data Centre processing and management services, software application and enhancement and technical support to Citicorp Software and Technology Services (China) Ltd.(including Citicorp Data Processing (Shanghai) Co., Ltd. and Citicorp Management Consulting (Shanghai) Co., Ltd.), was approved in prior years. Such outsourcing services cost the Bank Renminbi 266,964,917 in general and administrative expenses in the year 2013 (2012: Renminbi 267,872,087). (c) The notional amounts of derivative contracts with other related parties at 31 December are set out as follows: 2013 201 2 (e) In addition, the significant related party transactions with other related parties approved by the Bank’s Related The balance of transactions with non-bank related parties at 31 December are set out as follows: 2013 2013 87 36 Related party relationships and transactions (e) Relationships between the Bank and other related parties under the transactions stated in 36(4)(a) to (d) above Company name Relationships with the Bank Company type Principle activities Software development, back office operation and outsourcing service, consulting and training Citicorp Software and Technology Services (China) Ltd. Group subsidiary Limited liabilities company (WOFE) Hubei Jingzhou Gong ’an Citi Lending Co., Ltd. Group subsidiary Limited liabilities company (WOFE) Dalian Wafangdian Citi Lending Co., Ltd. Hubei Xian’ ning Chibi Citi Lending Co., Ltd. Group subsidiary Chongqing Beibei Citi Lending Co., Ltd. CitiRealty China (BVI) Ltd. Group subsidiary Legal representative Registered place Registered capital Changes in registered capital for the year Gary Li PRC USD 17,350 thousand No changes Credit business Jie Liu PRC RMB 34,000 thousand No changes Limited liabilities company (WOFE) Limited liabilities company (WOFE) Credit business Shilu Liu PRC RMB 34,000 thousand No changes Credit business Sizhen Li PRC RMB 34,000 thousand No changes Credit business Zhengquan Li PRC RMB 38,800 thousand No changes Group subsidiary Limited liabilities company (WOFE) Private company Property holding * British Virgin Island USD 50 thousand No changes Citigroup Trade Services (Malaysia) Sendirian Berhad Group subsidiary Private company Outsourcing service * Malaysia MYR 5,000 thousand No changes Citicorp International Limited Group subsidiary Private company Banking * Hong Kong USD 24,000 thousand and HKD 200,000 thousand No changes Citicorp Service India Limited Diners Club International (Hong Kong) Ltd. Group subsidiary Group subsidiary Public company Private company Decision Support, Vendor Oversight Charge card business * * India Hong Kong Citishare Corporation Citibank Singapore Ltd. Group subsidiary Group subsidiary Private company Private company ATM processing Commercial banking * * United States Singarpore Citigroup Global Market Asia Ltd. Citi Ventures Shanghai Group subsidiary Private company * Hong Kong Group subsidiary’s Representative office Security and invesment banking business Marketing and Wei Hopeman United States Representative office Citibank Taiwan Limited representative office Group subsidiary of foreign enterprise Public company coordinating efforts Commerical banking Guolin Guan Taiwan NT$ 66,033 million No changes Citibank Nigeria Limited Group subsidiary Limited liabilities Commerical banking * Nigeria Naira 50,100 million Increased by Naira 1,000 million Citibank Uganda Limited Group subsidiary Private company Commerical banking * Uganda Citibank Japan Ltd. Group subsidiary Private company Commerical banking * Japan JPY 123,100 million No changes Citibank Pty Ltd. Group subsidiary Private company Commerical banking * Australia AUD 459.80 million No changes Citibank Europe PLC Group subsidiary Public company Commerical banking * Ireland USD 10,071 thousand No changes Group subsidiary INR 2,500 million HKD 2 million USD 1 thousand SGD 1,527,730 thousand HKD 320,134 thousand N/A UGX 43,923,900 thousand * These related parties were registered outside Mainland China where legal representatives are not required . 88 89 No changes No changes No changes No changes No changes No changes No changes 36 Related party relationships and transactions 38 Segment reporting (5) Transactions with the annuity plan The Bank has two reportable segments, which are corpo- Unallocated items rate banking and personal banking segment, determined Apart from the obligations for defined contributions to the annuity plan, no other transactions were conducted based on the structure of its internal organisation, man- This segment mainly includes assets, liabilities, income between the Bank and the annuity plan during the year. agement requirements and internal reporting system. and expenses which cannot be attributed to directly or Each reportable segment is a separate business unit divided reasonably to segments. which offers different products and services, and is managed separately because they require different technol- (1) Segment results, assets and liabilities ogy and marketing strategies. The financial information 37 Share-based payments of the different segments is regularly reviewed by the For the purposes of assessing segment performance and Bank’s management to make decisions about resources allocating resources between segments, the Bank’s to be allocated to each segment and assess its perfor- management regularly reviews the assets, liabilities, mance. revenue, expenses and financial performance, attributable to each reportable segment on the following bases: Expenses recognised for the year arising from share-based payments are as follows: Corporate banking 2013 Equity -settled share-based payments 29,703,934 201 2 25,573,119 The Bank’s share-based payment scheme is devised to reward staff for their services. As at 31 December 2013, the outstanding number of shares in connection with share-based payments which the Bank granted to its staff but not exercised is 323,324 (2012: 415,741). The above shares are the shares of Citigroup Inc. Segment assets include all tangible, intangible, other This segment provides a range of financial products and non-current and current assets, with the exception of services to corporations and financial institutions, deferred tax assets and other unallocated corporate including: corporate deposit taking activities, corporate assets. short-term, medium-term and long-term loans, bank customers, deposits from inter-banks and non-bank acceptances and bills discounted, government bonds financial institutions, borrowings from inter-banks and and financial bonds transactions, foreign currency secu- other liabilities attributable to the individual segments. Segment liabilities include deposits from rities transactions other than stocks, letters of credit and guarantees, corporate domestic and foreign settle- Financial performance is operating income (including ments, foreign exchange trade and agent services, operating inter-bank placements and borrowings, safe deposit box inter-segment services, credit investigation and advisory services. expenses, depreciation, amortisation and impairment income from external customers operating income) after and deducting losses attributable to the individual segments. Inter-seg- Personal banking ment sales are determined with reference to prices charged to external parties for similar orders. Non-oper- 90 This segment provides a range of financial products and ating income and expenses and tax expenses are not services to individual customers, including: personal allocated to individual segments. Information regarding deposit taking activities, personal short-term, medi- the Bank’s reportable segments set out below includes um-term and long-term loans, personal domestic and the information used for assessing segment perfor- foreign settlement, foreign exchange trade and agent mance and allocating segment assets and liabilities by services, insurance agent services, bank card services the Bank’s management or not used but regularly and safe deposit box services. reviewd by the Bank’s management: 91 38 Segment reporting (1) Segment results, assets and liabilities (continued) Corporate banking 1. Operating income Net interest income Net fee and commission income Other income (a) 2. Operating expenses Include: Depreciation and amortisation Impairment losses (charge) / reversal 2012 2013 2012 2013 2012 2013 2012 3,249,936,744 1,939,987,885 201,694,997 1,108,253,862 3,914,175,176 2,325,685,876 189,133,241 1,399,356,059 1,102,945,300 662,821,579 416,224,571 23,899,150 714,286,062 364,521,492 308,289,392 41,475,178 - - 4,352,882,044 2,602,809,464 617,919,568 1,132,153,012 4,628,461,238 2,690,207,368 497,422,633 1,440,831,237 (1,630,348,676) (37,050,698) (1,612,993,634) (39,791,087) (1,495,593,702) (45,610,697) (1,198,836,708) (44,076,179) - - (3,125,942,378) (82,661,395) (2,811,830,342) (83,867,266) 26,363,477 (67,853,555) (19,906,375) - - (168,369,630) 2,301,181,542 (392,648,402) (484,550,646) - - 1,619,588,068 Add: Non-operating income Less: Non-operating expenses - 4. Profit / (loss) before tax 5. Total assets 6. Total liabilities - (392,648,402) (484,550,646) 6,634,513 (2,649,273) 15,001,545 (3,651,857) 3,985,240 11,349,688 95,285,122 1,619,588,068 2,301,181,542 133,516,400,273 139,393,849,482 19,017,667,078 12,844,918,576 213,529,169 119,777,171,197 126,825,113,235 21,582,767,189 14,965,433,036 - (a) Other income includes investment income, gains or losses from changes in fair value, foreign exchange gains or losses and other income. 92 Total Unallocated items 2013 (100,516,075) 3. Operating profit / (loss) Personal banking 93 1,226,939,666 6,634,513 (2,649,273) 1,230,924,906 6,457,102 1,816,630,896 15,001,545 (3,651,857) 1,827,980,584 152,747,596,520 152,334,053,180 - 141,359,938,386 141,790,546,271 38 Segment reporting 39 Fiduciary activities 40 Pledged assets agement and supervision responsibilities related to risk Assets pledged as security (1) Entrusted lending business (2) Geographic information control of the Bank, including periodically assess the 2013 The following table sets out information about the At the balance sheet dates, the entrusted loans and geographical location of the Bank’s operating income funds were as follows: from external customers and the Bank’s non-current 2013 assets (excluding financial instruments, deferred tax 2012 Secured liabilities - 2012 Bank’s overall risk exposures, provide guidance for developing a sound risk management and internal 7,920,000,000 control strategies and policies, and monitor their implementation. The Risk Management Committee reports to Carrying value of pledged assets analysed by balance sheet classification the Board of Directors. The Bank’s senior management is responsible for establishing risk management policies assets, same as below). The geographical information is Entrusted loans based on the location of customers receiving services. 16,294,361,580 18,766,531,856 Available - for - sale financial assets The geographical location of the specified non-current Entrusted funds 16,294,361,580 - and procedures, including specific risk management 8,042,092,500 policies for credit risk, interest rate risk and exchange 18,766,531,856 rate risk based on the risk management strategy assets is based on the physical location of the asset, in approved by Risk Management Committee and Board of the case of fixed assets; and the location of the operation to which they are allocated, in the case of intangible assets. (2) Custodian business Operating income from external customers 2013 2012 Outside Mainland China 5,833,614,039 6,019,384,895 405,919,014 420,763,470 6,239,533,053 Directors. under repurchase agreements. These transactions are performed by different head office departments upon conducted under usual and customary terms of borrow- approval from the Board of Directors. The internal audit ing. department of the Bank is responsible for independently At the balance sheet dates, the Bank’s Qualified Foreign Institutional Investors (QFII) and Qualified Domestic In Mainland China Secured liabilities are recorded as financial assets sold Institutional Investors (QDII) balances were as follows: 2013 2012 6,440,148,365 Specified non-current assets 2013 QDII 2012 81,385,783,540 75,682,252,678 37,041,939,069 8,655,813,030 ment will cause a financial loss for the other party by levels. The Bank’s main operating risks include credit failing to discharge an obligation. Credit risk mainly risk, market risk and liquidity risk. Market risks include objective is to reach an appropriate balance between - - risks and rewards, while minimising the negative impact 277,877,943 312,978,730 (3) Major customers arises from credit business. In treasury transactions, credit risk refers to the possibility that the value of the assets held by the Bank may decrease due to a fall in the rating of the issuer of the debt security. on its financial statements. At the balance sheet dates, the Bank’s off-shore wealth The Bank’s risk management policies aim to identify and management services balances were as follows: analyse risks to establish appropriate risk limits and Credit business Considering control measures, and to monitor risks and risk limits via 2013 The Bank’s interest income generated from top ten loans and advances customers was Renminbi 171,817,201 Off - shore wealth management services (2012: Renminbi 132,606,016), which contributed 6% (2012: 4%) of the Bank’s total interest income of loans 11,237,25 1,655 2012 10,684,304,750 94 the market economic environment, business development strategy and the requirements of an information system. clients, the Bank provides various direct credit and direct credit substitute businesses in the scope of risk The Bank’s Board of Directors is responsible for estab- control to foreign-invested companies set up in the PRC lishing the Bank’s risk management strategy. The Bank’s by multinationals, domestic companies with good credit Risk Management Committee is in charge of the man- and advances. are Credit risk is the risk that one party to a financial instru accepts and manages risks, or risk portfolios at different 312,978,730 (3) Off-shore wealth management services policies (1) Credit risk The Bank is exposed to many financial risks due to its 277,877,943 Outside Mainland China management 41 Risk management interest rate risk and exchange rate risk. The Bank’s In Mainland China risk inspecting risk management and internal control. operating activities. The Bank analyses, evaluates, QFII These 95 41 Risk management standing, as well as individual customers of good credit. A comparison of the Bank’s loan risk classification criteria and Yin Jian Fa [2007] No. 54 has been filed with the CBRC as follows: The Bank has established a strict credit management system, including credit approval, daily credit monitoring, reme- Internal grading Definition Five -tier grading Definition dial management, policies for loan loss provisioning and loan write-off and restructuring. Pass / PWL No evident weakness Normal Normal loans The Bank adopts the loan risk classification approach introduced by Citigroup to monitor the risk condition of its loan Speical Mention / substandard (accruing) Has potential weakness that deserves close attention Special mention The repayment might be adversely affected by some factors Substandard (non - accruing) Has a well -defined weakness that jeopardise the paying capacity of the borrower Substandard The borrower ’s capacity to repay is apparently in question and certain losses might occur even when guarantees are executed Doubtful Collection or liquidation in full high ly questionable and improbable Doubtful Cannot repay principal and interest in full and significant losses will occur even when guarantees are executed Loss Uncollectible Loss Principal and interest cannot be recovered after taking all possible measures portfolios. Loans are classified by a five-tier grading system: pass / Pass Watch List (PWL), special mention/substandard (accruing), substandard (non-accruing), doubtful and loss, according to risk levels. The five-tier grading for loans and advances is defined as follows: Internal credit Definition of corporate Defintion of cunsumer banking* */corporate grading banking * banking*** Pass / PWL Special Mention / substandard (accruing) No evident weakness Has potential weakness that deserve No overdue records management’s close attention. If left uncorrected, the potential weakness may result in deterioration of the days Substandard (non - accruing) paying capacity or credit posi tion of the borrower at some future date Inadequately protected by the current net assets and paying capacity of the Overdue 1 - 89 Overdue 90 - 179 days borrower . Assets so classified must have a well - defined weakness, or weaknesses , that jeopardise the Doubtful Loss timely repayment of its obligations, certain losses might incur even if collaterals are realised. With the added characteristic that The last three gradings of the CBRC’s five-tier classification are regarded as impaired loans and advances. If there is any indication of objective evidence that impairment and impairment loss has occurred, the loan is classified as an impaired loans and advances. The provision for impairment of impaired loans and advances shall be assessed collectively or individually based on the actual condition. The Bank manages, restricts and controls identified centralised credit risks, especially credit risks centralised in a single borrower, group or industry. The Bank sets limits on the same borrower, group or industry to optimise its credit risk structure. The Bank monitors these risks regularly, and reviews them annually or more frequently if necessary. The Bank manages credit risk via timely analysis Overdue 180 - 359 of the borrower’s ability to repay the principal and interest, and adjusts its credit lines accordingly. Other specific risk management the weaknesses make collection or liquidation in full, on the basis of current conditions, highly questionable and improbable days and mitigation measures include the following: Uncollectible and of such little value that their continuance as bankable assets is not warranted Overdue over 360 days The objective of credit commitment is to ensure the client obtains the funds needed. When the amount of credit commitment applied by a client exceeds the credit line originally authorised, the Bank asks for a deposit from the client to reduce the related credit risk. The Bank mitigates credit risk by obtaining collateral, guarantees and security from companies or individuals. The Bank has specified categories of acceptable collateral, including properties, commercial assets (commercial properties and accounts receivables), and * The definition does not include corporate banking’s branch Small and Medium Enterprise (SME) loan product. financial instruments (bonds and stocks). To reduce credit risk, the Bank has stipulated discount rates for different collaterals (the ratio between the fast cash realisable value to the market fair value of the collateral) to reflect the cash realisable value. For a loan ** The definition is taking personal mortgage loan for example. The consumer bank sets out different internal credit gradings guaranteed by a third party, the Bank assesses the guarantor’s financial condition, historical credit record and ability to settle the according to the overdue days for different products. debts on behalf of the borrower. *** Except for loans, collaterals or guarantees needed for other financial assets shall be determined by the nature of the instruments. Corporate banking’s branch SME loan product applies the over-due method used by consumer banking. 96 97 41 Risk management Generally, no collaterals are designated for investments in debt securities, treasury bonds and other notes, and financial instrument (ii) The balances represent collectively assessed allowances of portfolios are generally used as collateral for asset-backed securities. impairment losses. (2) Market risk Treasury business The Bank sets credit limits based on the credit risk inherent in the products, counterparties and geographical area. The system closely (c) Distribution of amounts due from inter-banks in monitors the credit exposure on a real-time basis. The Bank regularly reviews its credit limit policies and routinely updates the credit terms of credit ratings of counterparties limits. Market risk management involves an overall process of market risks identification, measurement, monitoring and control. Market risk refers to the risk of financial instruments’ fair value Amounts due from inter-banks include deposits and placements or future cash flow fluctuations due to changes in market with inter-banks. Distribution of amounts due from inter-banks (a) Maximum credit risk exposure The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet. The maximum exposure to credit risk in respect of these financial guarantees at the balance sheet prices, including foreign exchange risk, interest rate risk and in terms of credit quality mainly with reference to the external other price risk. Foreign exchange risk refers to the risk of rating agency Standard & Poors’ was as follows (counterparties financial instruments’ fair value or future cash flow fluctuations without external ratings are presented using their parent date is disclosed in Note 43(1). due to changes in foreign exchange rates; interest rate risk companies’ ratings): refers to the risk of financial instruments’ fair value or future (b) Distribution of loans and advances to customers in terms of credit quality Note Impaired Individually assessed and impaired gross amount Impairment losses Carrying amount Overdue but not impaired - less than 90 days - 90 days to 180 days Impairment losses 201 2 289,243,568 (263,485,385) 271,365,674 (243,010,357) 25,758,183 --------------------- 28,355,317 --------------------- Total carrying amount cash flow fluctuations due to changes in interest rates; other price risk refers to the market risks other than foreign Neither overdue nor impaired - A to AAA - B to BBB + - unrated Total carrying amount exchange risk and interest rate risk. 25,113,108,914 11,434,475,857 1,810,741,932 27,652,675,281 6,601,304,969 1,843,793,164 The Bank’s interest rate risk includes the risks arising from 38,358,326,703 36,097,773,414 related to banking business and from positions held for trading mismatches of the term structures of assets and liabilities purpose in treasury transactions. The Bank calculates its interest rate risk exposure according to the maturity dates of (ii ) 305,702,824 30,335,116 (31, 846,719) 304,191,221 --------------------- (ii ) 61, 430,401,544 (372, 422,552) 62,797,39 5 (256,601) 62,540,794 --------------------63,117,522,415 (257,908,845) (d) Distribution of debt securities in terms of credit all its interest-bearing assets and liabilities, and performs daily quality interest rate sensitivity analysis and periodical stress test. Meanwhile, by closely observing interest rate trends (both in The carrying amounts of debt securities analysed by the exter- Renminbi and foreign currency) and market interest rate nal rating agency Standard & Poors’ designations at the changes, the Bank conducts proper scenario analysis and balance sheet dates were as follows: makes timely adjustments to the loan and deposit interest rates (both in Renminbi and foreign currency) in line with the bench- 2013 Carrying amount 2012 (i ) Carrying amount Neither overdue nor impaired Gross amount Impairment losses 2013 2013 61, 057,978,992 --------------------61,387,928,396 mark interest rates to reduce its interest rate risk. 2012 62,859,613,570 --------------------- The Bank’s foreign currency risk exposures mainly arise from 62,950,509,681 (i) As at 31 December 2013, the overdue but not impaired loans and advances amounted to Renminbi 336,037,940. The covered portion and uncovered portion of these loans and advances were Renminbi 92,689,699 and Renminbi 243,348,241, respectively. The fair value of collaterals held against these loans and advances amounted to Renminbi 270,277,236. on balance sheet assets and liabilities designated in foreign - AAA - AA- to AA + Total 252,920,110 20,242,820,418 290,533,340 19,357,583,826 20,495,740,528 19,648,117,166 currencies and off balance sheet derivatives designated in foreign currencies. The Bank’s main principle of currency risk control is to match the assets and liabilities of the respective individual currency to minimize the foreign exchange risk, and to control the currency risk within limits set by the Bank. The The fair value of these collaterals was estimated by the Bank based on the external valuations adjusted after taking into account the Debt securities include trading financial assets and availa- current realisation experience in view of the collaterals and pledges as well as the latest market situation. ble-for-sale financial assets. 98 Bank, based on the guiding principles of Risk Management 99 41 Risk management Committee, relevant laws and regulations and the manage- — ment’s evaluation of the current environment, has set risk or dispose of positions within that period. This is considered to tolerance limits, and minimises the mismatch of assets and be a realistic assumption in almost all cases but may not be the liabilities in different currencies via reasonable arrangements case in situations in which there is severe market illiquidity for on the source and usage of foreign currency capital. Foreign a prolonged period; Interest rate risk Foreign currency risk Total VaR — A 99% confidence level does not reflect losses that may To address the above limitations in VaR analysis, the Bank presented according to the due dates of interest stipulated in occur beyond this level. Even with the model used there is 1% performs retrospective tests periodically to ensure the effec- the contracts; current financial assets and liabilities (including probability that losses could exceed the VaR; tiveness of the relevant models. Furthermore, the Bank interest receivable and payable as at the balance sheet dates) performs market risk stress testing periodically to assess the are presented under the item “repayable on demand”. Since maximum losses under extreme price fluctuation scenarios. derivatives are generally held for short-term purposes, their A 1-day holding period assumes that it is possible to hedge the liquidity status of the Bank. 2012 As at 31 December 25.70 12.52 28.95 Average Maximum Minimum 25.87 11.70 30.01 41.45 21.09 43.93 The following tables provide an analysis of the contractual 16.33 3.66 21.17 undiscounted cashflows of the Bank’s financial assets and liabilities at the balance sheet dates. Interest receivable and currency exposures are managed based on business category, payable of financial assets and liabilities with fixed terms are delegated trader authorisation limits, currencies and risk factors. The Bank conducts hedge transactions with overseas branches of Citibank to offset exchange rate risks for derivatives designated in foreign currencies. — VaR is calculated on an end-of-day basis and does not The Bank classifies financial instruments into investment reflect exposures that may arise on positions during the trading portfolios held for trading and non-trading investment portfoli- day; and cashflows are not included in the following analysis. (3) Liquidity risk os to effectively monitor market risk. The Bank mainly manages market risk via its market risk limit policy. According to the — CBRC’s Market Risk Management Guidelines for Commercial possible range of future outcomes may not always cover all Banks and Citigroup’s global risk management policy, the Bank possible scenarios, especially those of an exceptional nature. The use of historical data as a basis for determining the has established market risk limits and measurement policies to set related limits and approval mechanism on all market risk A summary of the VaR of the Bank’s trading portfolios at the exposures. The policies illustrate the structure and approval balance sheet date and during the respective year is as follows: system of market risk limits. Market risk limits mainly include (Renminbi million) Liquidity risk is the risk that a financial institution fails to meet its obligations related to financial liabilities due to lack of funds caused by mismatches between the amounts and maturity dates of assets and liabilities. The primary liquidity risk management measure adopted by the Bank is to match the maturity date structures between assets risk factor limits, position limits, value-at-risk (VaR) limits and and liabilities. Due to differences between various businesses stop-loss trigger. 2013 As at 31 December Interest rate risk 8.90 Foreign currency risk 8 .83 Total VaR 11.02 VaR analysis For investment portfolios held for trading, the Bank adopts VaR analysis to evaluate market risk. VaR estimates potential losses and maturity tenors, it is impractical to maintain a perfect Average Maximum Minimum 19.47 34.87 7.67 match between assets and liabilities. To meet relevant liquidity requirements, the Bank has established a set of thresholds for 12.80 26.87 3.58 managing, measuring, monitoring and reporting liquidity risk, 20.77 36.56 8.29 including liquidity limits for normal operations, liquidity ratios, market triggers and regular stress testing. In addition, the Bank arising from changes in market interest rates and prices within established Liquidity Funding Plan and Contingency Funding a defined period and confidence interval. The Bank’s market Plan to maintain an appropriate balance of cash flows and to risk management department calculates the VaR of investment ensure all the required funds can be provided at maturity. portfolios held for trading according to the historical changes of the market interest rates and prices (confidence interval: The Finance department provides a daily calculation of regula- 99%, observation time: 1 trading day). tory liquidity ratios to relevant departments of the Bank. Global Markets department is responsible for managing the liquidity Although VaR is an important tool for measuring market risk, risk on daily basis and executes the liquid funds instructions. the assumptions on which the model is based do give rise to Market Risk Management monitors the liquidity risk independe- some limitations, including the following: ntly. The Asset Liability Committee will also regularly review 100 101 41 Risk management 2012 2013 Carrying amount Contractual undiscounted cashflows Repayable on demand / terms undated Within one month 26,885,794,247 26,885,794,247 26,885,794,247 - 38,358,326,703 3,266,961,398 2,828,654,593 39,267,095,616 3,357,516,120 2,828,654,593 7,406,939,918 2,828,654,593 8,139,828,895 919,786,684 - Assets Cash on hand and deposits with central bank Deposits and placements with inter-banks Trading financial assets Derivative financial assets Available-for-sale financial assets Loans and advances to customers Other assets 17,228,779,130 17,776,458,652 - 998,791,000 62,055,683,052 2,116,473,400 62,835,072,529 2,116,473,400 2,108,620,087 1,668,074,187 16,408,864,106 76,444,600 Total assets 152,740,672,523 155,067,065,157 40,898,083,032 26,543,715,285 --------------- --------------- --------------- --------------- Assets Cash on hand and deposits with central bank Deposits and placements with inter-banks Trading financial assets Derivative financial assets Available-for-sale financial assets Loans and advances to customers Other assets Total assets Liabilities Deposits and borrowings from inter-banks Derivative financial liabilities Deposits from customers Other liabilities Total liabilities Net position (31,093,649,384) (31,208,775,590) (8,871,124,754) (5,161,804,036) (2,844,811,150) (96,624,103,633) (10,528,418,064) (2,844,811,150) (96,829,178,027) (10,705,280,438) (2,844,811,150) (57,028,076,206) (3,049,049,378) (21,096,401,268) (328,368,663) (141,090,982,231) (141,588,045,205) (71,793,061,488) (26,586,573,967) --------------- --------------- 11,649,690,292 13,479,019,952 --------------(30,894,978,456) --------------- Liabilities Deposits and borrowings from inter-banks Derivative financial liabilities Financial assets sold under repurchase agreements Deposits from customers Other liabilities Total liabilities (42,858,682) Net position Carrying amount Contractual undiscounted cashflows Repayable on demand / terms undated Within one month 30,637,522,420 30,637,522,420 30,637,522,420 - 36,097,773,414 3,512,945,036 1,690,055,766 36,403,894,356 3,770,131,347 1,690,055,766 12,408,955,148 1,690,055,766 9,099,832,442 - 16,135,172,130 16,756,457,199 - - 63,451,685,484 783,294,402 75,869,163,243 783,294,402 1,625,299,986 382,260,895 13,412,044,752 29,606,412 152,308,448,652 --------------- Assets Cash on hand and deposits with central bank Deposits and placements with inter-banks Trading financial assets Derivative financial assets Available-for-sale financial assets Loans and advances to customers Other assets Total assets (19,132,376,867) (6,204,214,713) (1,430,554,047) (1,430,554,047) (1,430,554,047) (7,920,000,000) (103,566,097,380) (9,478,826,877) (7,927,453,889) (108,825,303,786) (9,478,826,877) (68,651,652,353) (9,243,072,235) (141,455,118,718) Total liabilities Between three months and one year Between one year and five years More than five years - - - - 7,755,659,646 300,655,584 - 12,598,408,255 1,508,782,051 - 3,366,258,902 547,939,618 - 80,352,183 - 49,567,550 12,091,942,652 4,636,157,450 - 12,043,627,332 46,070,466 11,594,015,919 209,384,459 7,309,496,856 116,306,373 13,370,448,229 193,315 20,195,580,578 38,002,533,336 15,976,159,199 13,450,993,727 --------------- --------------- --------------- --------------- Net position (4,925,593,245) (8,613,011,423) (3,637,242,132) (11,026,635,586) (1,327,101,438) (5,292,226,575) (4,178,347,135) (15,514,273) (1,822,413,824) (17,279,330,269) (18,083,585,133) (5,475,170,229) (2,370,324,119) - --------------- 10,853,329,934 19,116,003,267 (85,529,493,348) --------------(38,785,399,133) (6,355,350,214) (7,927,453,889) (19,732,060,205) (36,919,974) (34,051,784,282) --------------(11,510,300,676) Assets Cash on hand and deposits with central bank Deposits and placements with inter-banks Trading financial assets Derivative financial assets Available-for-sale financial assets Loans and advances to customers Other assets Liabilities Deposits and borrowings from inter-banks Derivative financial liabilities Financial assets sold under repurchase agreements Deposits from customers Other liabilities Between one month and three months Between three months and one year Between one year and five years More than five years - - - - 5,215,999,658 - 8,681,254,972 623,497,155 - 997,852,136 3,045,934,147 - 100,700,045 - - 8,145,071,577 8,611,385,622 - 19,725,625,236 48,813,847 12,717,046,422 151,812,366 10,535,569,201 170,485,881 17,853,577,646 315,001 24,990,438,741 --------------- (1,178,378,110) 30,318,682,492 17,954,592,692 --------------- --------------- (1,844,041,561) (3,550,392,269) - - - - (9,653,847,516) (96,064,431) (66,199,015) (40,501,574) - (10,721,544,697) (62,268,663) 23,361,226,987 --------------- (2,370,324,119) --------------- --------------- --------------- --------------- 2,916,250,309 19,918,948,203 10,500,988,970 11,080,669,608 Total liabilities Net position 102 (146,794,515,466) --------------- 22,541,483,606 --------------- 2012 Total assets Liabilities Deposits and borrowings from inter-banks Derivative financial liabilities Deposits from customers Other liabilities 46,744,094,215 --------------- (19,059,640,414) 2013 Between one month and three months 165,910,518,733 --------------- (11,593,953,508) (3,657,092,858) - --------------- (11,962,191,470) --------------- --------------- --------------- 13,028,247,271 18,724,728,984 19,704,134,129 17,954,592,692 103 41 Risk management requirements relating to capital adequacy ratio required (4) Capital management regulatory capital requirements. 31 December 2013 by CBRC. For systematicaly-impartant banks, the adequacy ratio of core tier one capital shall not be less The risk weighted assets of on-balance sheet assets are that 8.5%; the adequacy ratio of tier one capital shall calculated based on various risk weights. The risk The capital management of the Bank covers the calcula- not be less than 9.5%; and the capital adequacy ratio weights are determined in consideration of the risk tion and reporting of capital adequacy ratio (CAR), shall not be less than 11.5%, as at 31 December 2018. For factors of various assets, counterparties, markets and capital assessment and capital planning. The CAR of the non-systematically-important banks, the adequacy ratio other relevant aspects, as well as qualified collateral Bank represent its ability to operating healthily and of core tier one capital shall not be less than 7.5%; the and guarantee. The off-balance sheet exposures are dealing with risks. The CAR management of the Bank adequacy ratio of tier one capital shall not be less than calculated by the similar methodology with adjustments aims to ensure the Bank held adequate capital, which is 8.5%; and the capital adequacy ratio shall not be less of contingent losses. The credit risk weighted assets for appropriate to risk exposure and consistent with risk than 10.5%, as at 31 December 2018. The CBRC also counter parties in terms of over-the-counter derivative assessment result of the Bank, to meet the demand of required conmmercial banks to introduce reverse transactions are the summation of defaulted risk business operation and the requirement of relavant capital during transition period. As at 31 December 2013, weighted assets and credit valuation adjustment risk regulatory. The capital planning aims to set a target for non-systematically-important banks, the adequacy weighted assets. The market risk weighted assets are CAR which satisfies the Bank with the demand of future ratio of core tier one capital shall not be less that 5.5%; measured by standard method. The operational risk business development strategy, risk appetite, risk man- the adequacy ratio of tier one capital shall not be less weighted assets are measured by basic indicator agement, external business environment and long-term than 6.5%; and the capital adequacy ratio shall not be method. sustainability of various capital sources. less than 8.5%. adequacy ratio not to be less than 8%, and the adequa- ments prepared in accordance with the CAS. The Bank is level to support business development under all condi- cy ratio of core capital not to be less than 4%. As at 31 in compliance with the regulatory capital requirements tions and to adjust CAR to a reasonable level timely and December 2012, the capital adequacy ratio of the Bank during the year. effectively, if necessary. was calculated in accordance with the Administration of Capital Adequacy Ratios of Commercial Banks Proce- The adequacy ratio of core tier one capital, the adequa- The management monitor the utilisation of CAR and dures issued by the CBRC and other related laws and cy ratio of tier one capital and the capital adequacy ratio regulatory capital according to the requirement of regulations. as at 31 December 2013 calculated in accordance with one capital, other tier one capital and tier two capital. Since 1 January 2013, the capital adequacy ratio of the Bank (For Trial Implementation) and other related laws The Bank reported relevant information to CBRC on a Bank has been calculated in accordance with Adminis- and regulations are as follows: quarterly basis. trative Measures on Capitals of Commercial Bank (For lated in accordance with Administrative Measures on sea branches. Capitals of Commercial Bank (For Trial Implementation) 13. 7 6 % Adequacy ratio of tier one capital 13. 7 6 % Capital adequacy ratio 14. 2 2 % ratio as at 31 December 2012 calculated in accordance with Administration of Capital Adequacy Ratios of Commercial Banks Procedures and other related laws and regulations were as follows: 31 December 2012 tions, and the calculation result is in compliance with the 104 Adequacy ratio of core tier one capital The core capital adequacy ratio and capital adequacy issued by the CBRC and other related laws and regulaCommercial banks shall conform to the regulatory 82,770,443,222 (a) The total risk assets are composed of weighted Trial Implementation) issued by the CBRC and other land China. Currently, the Bank does not have any over- 11,766,169,034 Total risk assets (a ) Administrative Measures on Capitals of Commercial the capital adequacy ratio of the Bank has been calcu- Net capital risk assets include 12.5x market risk assets. ensures the Bank to retain its capital at an adequate covers all branches and sub-branches located in main- 11,387,658,134 weighted operational risk assets. Weighted market Bank are calculated on the basis of the financial state- related laws and regulations. As at 31 December 2013, Net tier one capital The capital adequacy ratio and relevant data of the Before 1 January 2013, the CBRC required the capital The scope of the Bank’s CAR calculation of the Bank 11,387,658,134 credit risk assets, weighted market risk assets and The prudent and solid concept of capital management CBRC. The capital of the Bank is composed of core tier Net core tier one capital 105 Core capital adequacy ratio 16.63% Capital adequacy ratio 16.99% 42 Fair value of financial instruments (1) Financial instruments measured at fair value traded in active markets are based on quoted market prices or tion in the determination of fair value. Management judgement and estimation are usually required for selection of the appropriate dealer price quotations. For all other financial instruments the valuation model to be used, determination of expected future cash flows on the financial instrument being valued, determination of Bank determines fair values using valuation techniques. probability of counterpart default and prepayments and selection of appropriate discount rates. For those more complex financial instruments, the Bank performs calibration and back testing of models against observed market transactions and conduct regular The following table presents the carrying value of financial Valuation techniques include net present value and discounted instruments measured at fair value as at 31 December across cash flow models, comparison to similar instruments for which the three levels of the fair value hierarchy. The level in the fair market observable prices exist, polynomial option pricing The Bank has an established control framework with respect to the measurement of fair values. The Bank’s processes include a value hierarchy within which the fair value measurement is models and other valuation models. Assumptions and inputs number of key controls that are designed to ensure that fair value is measured appropriately, particularly where a fair value model is categorised in its entirety is determined on the basis of the used in valuation techniques include risk-free and benchmark internally developed and used to price a significant product. Such controls include a model validation policy requiring that valuation lowest level input that is significant to the fair value measure- interest rates, credit spreads and other premia used in estimat- models be validated by qualified personnel, independent from those who created the models and escalation procedures, to ensure that ment in its entirety. The levels are defined as follows: ing discount rates, bond and equity prices, foreign currency valuations using unverifiable inputs are identified and monitored on a regular basis by senior management. Approvals from both exchange rates, equity and equity index prices and expected market risk department and product control department must be obtained prior to the use of valuation methodologies. The Bank’s Level 1 – fair value measurements using quoted prices in active price volatilities and correlations. The objective of valuation valuation models are reviewed and approved by market risk department which is independent from the front office. markets for identical assets or liabilities techniques is to arrive at a fair value determination that stress testing. 2013 reflects the price of the financial instrument at the reporting Level 2 – fair value measurements using inputs other than date, that would have been determined by market participants quoted prices included within Level 1 that are observable for the acting at arm’s length. asset or liability, either directly or indirectly The Bank uses widely recognised valuation models for deterThis category includes instruments using valuation technique: mining the fair value of common and more simple financial quoted market prices in active markets for similar instruments; instruments, like interest rate and currency swaps that use only quoted prices for identical or similar instruments in markets observable market data and require little management judge- that are considered less than active; or other valuation ment and estimation. Observable prices and model inputs are techniques where all significant inputs are directly or indirectly usually available in the market for listed debt and equity securi- observable from market data. ties, exchange traded derivatives and simple over the counter Level 1 RMB Level 2 RMB Level 3 RMB Total RMB 8 9 3,207,050,428 - 59,910,970 2,828,397,726 256,867 3,266,961,398 2,828,654,593 11 17,228,779,130 - - 17,228,779,130 20,435,829,558 2,888,308,696 256,867 23,324,395,121 - 2,844,554,283 256,867 2,844,811,150 Note Assets Trading financial assets Derivative financial assets Available-for-sale financial assets Total Liabilities Derivative financial liabilities 9 derivatives like interest rate swaps. Level 3 – fair value measurements using inputs for the asset or liability that are not based on observable market data For more complex financial instruments, the Bank uses proprie- 2012 tary valuation models, which usually are developed from recog- Note This category includes all instruments where the valuation nised valuation models. Some or all of the significant inputs into technique includes inputs not based on observable data and the these models may not be observable in the market, and are unobservable inputs have a significant effect on the instru- derived from market prices or rates or are estimated based on ment’s valuation. This category includes instruments that are assumptions. valued based on quoted prices for similar instruments where unobservable inputs include certain over the counter struc- Assets Trading financial assets Derivative financial assets Available-for-sale financial assets significant unobservable adjustments or assumptions are tured derivatives, certain loans and securities for which there is Total required to reflect differences between the instruments. no active market and retained interests in securitisations. Example of instruments involving significant Valuation models that employ significant unobservable inputs Fair values of financial assets and financial liabilities that are require a higher degree of management judgement and estima- 106 Liabilities Derivative financial liabilities Level 1 RMB Level 2 RMB Level 3 RMB Total RMB 8 9 3,433,123,836 - 79,821,200 1,687,789,911 2,265,855 3,512,945,036 1,690,055,766 11 16,135,172,130 - - 16,135,172,130 19,568,295,966 1,767,611,111 2,265,855 21,338,172,932 - 1,428,288,192 2,265,855 1,430,554,047 9 107 42 Fair value of financial instruments 43 Commitments and contingent liabilities During the year ended 31 December 2013, there was no signifi- 2013 (2) Fair value of other financial instruments (not measured at fair value) cant transfer between instruments in Level 1 and Level 2. (1) Credit commitments Contractual amount During the year ended 31 December 2013, there was no change At any given time the Bank has outstanding commitments to in valuation techniques for fair value measurements. extend credit. The Bank provides loan commitments, unused The Bank’s other financial assets mainly include deposits with central bank, deposits with inter-banks, placements with The movement of fair value measurements in Level 3 of the inter-banks and loans and advances to customers. fair value hierarchy for the year is as follows: Except for loans and advances to customers, most financial 201 3 Derivative F inancial assets RMB Balances at the beginning of the year Total gains / (losses) - in profit or loss Settlements Derivative financial liabilities RMB 2,265,855 (2,265,855) 8,302,169 (8,302,169) (10,311,157) 10,311,157 assets are due within one year or are measured at fair value; Total RMB - therefore their carrying amounts are close to their fair values. Loans and advances to customers are recorded at amortised cost less impairment losses (see Note 10). Since the interest rates for loans and advances are adjusted on a real-time basis based on the PBOC’s stipulated interest rates, and impaired Balances at the end of the year 256,867 Total gains / (losses) for the year recognised in profit or loss for assets held at the end of the year 256,867 (256,867) - loans have been reduced at the amount of impairment losses to reflect the recoverable amount, the carrying amounts of (256,867) - loans and advances are close to their fair values. The Bank’s financial liabilities that are recorded at amortised Sensitivity analysis on fair value mearsurements in Level 3 of cost mainly include deposits from inter-banks and non-bank the fair value hierarchy financial institutions, borrowings from inter-banks, financial Unused credit card facilities Loan commitments - with an original maturity within one year - with an original maturity of one year or over credit card facilities, financial guarantees and letters of credit to guarantee the performance of customers to third parties. The Bank assesses the potential loss of credit commitment on a periodic basis and recognises liabilities if necessary. Standby letters of credit issued and guarantees Acceptances Letters of credit accepted Letters of credit issued Letters of credit confirmed The contractual amounts for loan commitments and credit card unused facilities represent the total amounts if the Bank makes the fully payments. The amounts in the table for guarantees and letters of credit represent the maximum potential loss that would be recognised at the balance sheet date if counterparties failed to completely perform as contracted. Acceptances Total comprise undertakings by the Bank to pay bills of exchange 4,786,616,569 892,182,262 391,984,000 340,296,000 1,194,156,563 1,835,802,955 6,372,757,132 --------------------- 3,068,281,217 --------------------- 3,893,181,680 645,835,153 325,388,974 186,691,939 59,432,664 3,460,711,261 930,318,098 458,689,473 526,958,366 67,562,984 5,110,530,410 --------------------- 5,444,240,182 --------------------- 11,483,287,542 8,512,521,399 drawn by customers. The Bank expects most acceptances to be settled simultaneously with reimbursement from customers. As the credit facilities may not be fully used upon maturity, the contractual amount sets out below does not represent the (2) Credit risk weighted amount expected cash flow out in the future. assets sold under repurchase agreements and deposits from The Bank’s Level 3 financial instruments are mainly structured customers. As at the balance sheet date, the carrying amounts derivatives. Any deals between the Bank and its customers are of the Bank’s financial liabilities are close to their fair values. 2012 2013 Credit risk weighted amount of contingent liabilities and commitments fully squared with other financial institutions and there is no 3,662,655,242 open position. Thus, although fair value measurements of Level The above assumptions and methodologies provide the 3 use inputs that are not based on observable market data and consistant basis for calculating the fair value of the Bank’s The capital adequacy ratio of the Bank as at 31 December 2012 the measurement is uncertain, there is no impact on the Bank’s assets and liabilities. However, because other financial institu- was Renminbi 5,349,695,464, which was calculated in accord- current year profit or equity if such judgement and estimation tions may use different assumptions and methodologies, the ance with the Administration of Capital Adequacy Ratios of on unobservable inputs changes. fair value disclosed by each financial institution may not be Commercial Banks Procedures (the Administration) issued by comparable. the CBRC and other related laws and regulations. The Administration was expired on 1 January 2013. The credit risk weighted amount refers to the amount as computed in accordance with the rules set out by the CBRC and depends on the credit status of the counterparty and the matu- 108 109 rity characteristics. The risk weights used range from 0% to 150% of contingent liabilities and commitments. The credit risk weighted amounts stated above have taken into account the effects of bilateral netting arrangements. (3) Operating lease commitments As at 31 December, the total future minimum lease payments under non-cancellable operating leases of properties were payable as follows: 2013 Within 1 year (inclusive) After 1 year but within 2 years (inclusive) After 2 years but within 3 years (inclusive) After 3 years Total 201 2 290,439,790 256,611,906 166,231,090 214,188,843 74,718,038 40,106,719 104,987,530 47,325,141 571,495,637 623,113,420 (4) Capital commitments As at 31 December, the capital commitments of the Bank were as follows: 2013 2012 Leasehold improvement contracts entered into but not performed or performed partially Purchase contracts entered into but not performed 11,640,981 7,638,650 - 762,496 Total 11,640,981 8,401,146 110