Analysis of China`s top 10 listed banks` results for the third

November 2014
Banking Newsletter
Analysis of China’s Top 10
Listed Banks’ Results for the
Third Quarter of 2014
www.pwccn.com
Banking Newsletter Editorial Team:
Editor-in-chief: Elaine Wang
Deputy-editor-in-chief: Ray Chen, Jeff Deng
Special focus: Ray Chen
Macro review: Jeff Deng
Operating performance: Elsie Gao, Ray Chen
Financial position and capital management: Jo Liu, Emma
Zhang, Daisy Wu, Elsie Gao
Advisory Board:
Raymond Yung, Jimmy Leung, Margarita Ho, and Richard Zhu
Introduction
We are pleased to present the 21st edition of our Banking Newsletter, a quarterly
publication showing PwC’s analysis of China’s Top 10 Listed Banks’ performance.
The Top 10 Listed Banks, as defined by the China Banking Regulatory Commission
(CBRC), are:
Large commercial banks
Industrial and Commercial Bank of China Limited (ICBC)
China Construction Bank Corporation (CCB)
Agricultural Bank of China Limited (ABC)
Bank of China Limited (BOC)
Bank of Communications Co., Ltd. (BOCOM)
Joint-stock commercial banks (JSCBs)
China Merchants Bank Co., Ltd. (CMB)
Shanghai Pudong Development Bank Co., Ltd (SPDB)
Industrial Bank Corporation Limited (CIB)
China CITIC Bank Corporation Limited (CITIC)
China Minsheng Banking Corporation Limited (CMBC)
The newsletter presents the financial position and operating performance of the Top 10
Listed Banks in the first three quarters of 2014. The total assets of the Top 10 Listed
Banks by the end of the third quarter of 2014 accounted for 74.32% of China’s commercial
banking sector. The Top 10 Listed Banks are presented according to the size of their total
assets as of 31 December 2013.
Unless otherwise noted, all of the information in the Newsletter was obtained from
publicly available sources (e.g. annual reports of listed banks and statistics from
regulators). All the figures are prepared according to PRC Accounting Standards and
stated in RMB (except for ratios).
For more information, please ask your PwC contacts or any of the Banking and Capital
Markets Contacts listed in the Appendix.
Banking Newsletter
普华永道
PwC
November 2014
3
Table of Contents
Special focus: Overview of the Top 10 Listed Banks’ cross-boarder
M&A activities
5
Macro overview
11
Analysis of operating performance
15
Analysis of financial position and capital management
19
Appendix
29
Banking Newsletter
普华永道
PwC
November 2014
4
Special focus ：
Overview of the Top 10 Listed Banks’ crossborder M&A activities
•
2014: momentum regained
•
Seeking controlling interests, eyes on emerging markets
•
Features and risk factors for M&A
•
Overview of Top 10 Listed Banks’ cross-boarder M&A
Banking Newsletter
普华永道
PwC
November 2014
5
2014: momentum regained
If history is a guide, a global presence and diversified business portfolio have helped
many international banks to thrive. That is why cross-border mergers & acquisitions
(M&A) have been a vital part of Chinese commercial banks’ global strategy.
Another robust year by
number of deals
Since 2006, Chinese banks
have accelerated the pace of
cross-border M&A, with
both amount and volume
increasing significantly. The
number of deals for Chinese
banks reached a record high
in 2008. In the last two
years, M&A activities have
been gathering pace again,
with the number of deals in
2014 hitting another record.
ICBC the most active
buyer
Among the Top 10 Listed
Banks, the largest tended to
be most active in M&A
markets. ICBC, the world’s
largest bank by market
capitalisation, is the most
active buyer. Compared to
setting up overseas
networks, M&A is a more
effective way of expanding
overseas. ICBC prefers to
grow its international
business through M&A.
Graph 1 Cross-border M&A Deals by Amount and Volume
Volume (No. of deals)
5
Amount (In millions)
40,000
35,000
4
30,000
25,000
3
20,000
2
15,000
10,000
1
5,000
-
0
2006 2007 2008 2009 2010 2011 2012 2013 2014
Amount
Volume
Source: Annual reports and other disclosures of the Top 10 Listed Banks
Graph 2 Cross-border M&A Amounts and Volume by Banks
Volume (No. of deals)
Amount (In millions)
60,000
12
50,000
10
40,000
8
30,000
6
20,000
4
10,000
2
-
0
ICBC
CCB
Amount
BOC
CMB
SPDB
CMBC
Volume
Source: Annual reports and other disclosures of the Top 10 Listed Banks
Banking Newsletter
普华永道
PwC
November 2014
6
Seeking controlling interests, eyes on emerging
markets
Seeking controlling
interests
A close examination of the Top
10 Listed Banks’ overseas
M&A activities reveals that
most banks prefer to acquire
controlling interests. As a
majority shareholder, banks
can better leverage deals to
strengthen their existing
operations and avoid the risk
of losing say. ICBC is a typical
example, as most of its 10
M&A deals closed with it
gaining controlling interest,
except for the acquisition of
Standard Bank of South Africa
and SinoPac Holdings (of
Taiwan) due to regulatory
restrictions.
Eyes on neighbouring
area & emerging markets
Before 2006, Top 10 Listed
Banks’ cross-boarder M&A
were mainly in Greater China
region and neighbouring areas
like Southeast Asia, with small
scale and less frequent. Since
2006, their M&A scope have
expanded to America, Europe
and Africa. The development
pattern can be summarised as:
rapid growth in Hong Kong,
Macau and Taiwan, decent
presence in Europe, active
expansion in Southeast Asia,
increased focus on emerging
markets such as South
America Africa.
Banking Newsletter
普华永道
PwC
Graph 3 Cross-boarder M&A Deals by Holding Structure
30%
With controlling interest
With non-controlling
interest
70%
Source: Annual reports and other disclosures of the Top 10 Listed Banks
Graph 4 Cross-boarder M&A Deals by Geographical Regions
Volume (No. of deals)
Amount (In millions)
40,000
7
35,000
6
30,000
5
25,000
4
20,000
3
15,000
10,000
2
5,000
1
0
HK, Macau North
& Taiwan America
Amount
Europe
Southeast South
Asia
America
Africa
Volume
Source: Annual reports and other disclosures of the Top 10 Listed Banks
November 2014
7
Features and risk factors for M&A
Features
With their corporate clients’ needs for financial services increasing, the Top 10 Listed
Banks’ cross-border M&A activities are becoming more diversified, sophisticated and
comprehensive:
 CCB acquired a 72.00% stake in Banco Industrial e Comercial S.A. in 2014, which is
the largest M&A deal with controlling interest for a Chinese bank;
 SPDB acquired South Asia Investment Management Limited in Hong Kong in 2014;
 CMB managed to get a wide range of licenses for securities, insurance, futures and
trust business in Hong Kong by acquiring 53.1o% interest in Wing Lung Bank,
marking the beginning of the bank’s business diversification in 2008;
 ICBC acquired a 20.00% stake in Standard Bank of South Africa in 2006, which is
the largest M&A deal with non-controlling interest for a Chinese bank;
 BOC acquired Singapore Aircraft Leasing Enterprise Pte. Ltd at the end of 2006, and
Heritage Fund Management in 2008.
Risk factors
Not all M&As ended up as expected, due to the inherent risks and complexity of each deal.
A number of risk factors need to be considered:
 Inadequate information obtained due to insufficient preliminary investigation and
weak due diligence;
 Insufficient diversification due to incomprehensive assessment;
 Higher acquisition costs as a result of inappropriate timing;
 Acquisition of non-controlling interest leads to the risk of losing say;
 Synergy after M&A cannot be properly identified and realised;
 Challenges of employee integration due to cultural differences between entities;
 Failure of management integration after merger causes problems in operations;
 Fluctuation of regulatory indicators, eg. capital adequacy, due to M&A;
 Burden of compliance risks, as banking is a highly regulated industry.
Should you require any further information, or wish to further discuss cross-border M&A
related matters, please do not hesitate to contact Mr. Nelson Lou, Advisory (M&A)
Partner, at +86 (10) 6533 2003.
Banking Newsletter
普华永道
PwC
November 2014
8
Overview of Top 10 Listed Banks’ cross-boarder M&A
An overview of Top 10 Listed Banks’ cross-boarder M&A deals as follow:
Listed
Year
banks
Price
Economy
%
Controlling
interest?
Bank Halim Indonesia
Indonesia
90.00%
Yes
South Africa
20.00%
No
Macau
79.93%
Yes
ICBC
2006
ICBC
2007
USD5.46 billion Standard Bank of South Africa
ICBC
2007
MOP4.68 billion Seng Heng Bank of Macau
ICBC
2010
Industrial and Commercial Bank
CAD15.71 million of China Canada (the former
Bank of East Asia Canada)
Canada
70.00%
10.00%
Yes
ICBC
2011
USD140 million Bank of East Asia United States
United States
80.00%
Yes
ICBC
2011
THB3.55 billion
Thailand
97.24%
Yes
ICBC
2011
USD600 million Standard Bank of Argentina
Argentina
80.00%
Yes
ICBC
2013
TWD18.7 billion SinoPac Holdings(Bank SinoPac)
Taiwan
20.00%
No
ICBC
2014
USD770 million Standard Bank Plc
United Kingdom 60.00%
Yes
ICBC
2014
USD316 million Tekstil Bankası A.Ş.
Turkey
75.50%
Yes
CCB
2006
HKD9.71 billion Bank of America Asia
Hong Kong
100.00%
Yes
CCB
2009
USD70 million
Hong Kong
100.00%
Yes
CCB
2013
USD100 million VTB Capital
Russia
0.60%
No
CCB
2014
BRL1.621 billion
Banco Industrial e Comercial
S.A.
Brazil
72.00%
Yes
BOC
2006
USD965 million
Singapore Aircraft Leasing
Enterprise Pte. Ltd
Singapore
100.00%
Yes
BOC
2008
EUR236 million
La Compagnie Financiere
Edmond de Rothschild Banque
France
20.00%
No
BOC
2008
CHF9 million
Heritage Fund Management
Swiss
30.00%
No
USD126 million United Commercial Bank(UCBH) United States
9.90%
No
Hong Kong
53.12%
Yes
Hong Kong
100.00%
Yes
CMBC 2008
No data
Acquiree
ACL Bank of Thailand
AIG Finance (Hong Kong)
Limited
CMB
2008
HKD19.3 billion Wing Lung Bank Ltd.
SPDB
2014
HKD8.5 million
South Asia Investment
Management Limited
Source:: Annual Report of Top 10 Listed Banks and Related Announcements
Banking Newsletter
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PwC
November 2014
9
Banking
Newsletter
Banking
Newsletter
PwC
NovemberNovember
2014
2014
10
10
Macro overview
•
China’s economy feeling the pinch, while growth continued to
slow globally
•
Interest rates fluctuated despite ample liquidity
Banking Newsletter
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PwC
November 2014
11
China’s economy feeling the pinch, while growth
continued to slow globally
The global economy
continued to recover at
different paces in 3Q 2014:
the US economy recovered
sufficiently to end
quantitative easing (QE);
Japan’s output is weak;
Europe is on the brink of
recession.
China’s growth was still the
strongest among emerging
economies. Gross Domestic
Product (GDP) growth in the
first three quarter of 2014
remained 7.40%, the same
as for the first two quarters.
On a quarterly basis, growth
in 2014 Q3 slowed slightly to
7.30% from 7.50% in 2Q.
While China’s growth
remained stable, investment
and consumption slowed in
the first three quarters.
Real estate experienced the
most significant slowdown
in 3Q 2014, which led to the
policy easing by People’s
Bank of China (PBoC) and
China Banking Regulatory
Commission (CBRC) to lift
purchasing restrictions and
review the definition of
“second house”. Mortgagebacked securities (MBS)
were encouraged, too.
Graph 5 China Quarterly GDP Growth Trend
16%
14%
12%
10%
8%
6%
1998 Q2,
7.20%
2009 Q1,
6.60%
4%
2014 Q3,
7.30%
2%
0%
Source：National Bureau of Statistics
Graph 6 FAI, Real estate Investment and Retail Sales Growth
28%
26%
24%
22%
20%
18%
16%
14%
12%
10%
8%
Fixed assets investment
Growth continue to slow
Real estate investment
Retail sales
Source：National Bureau of Statistics
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PwC
November 2014
12
Liquidity ample; interest rates fluctuated slightly
Price levels were stable in
3Q 2014, with ample
liquidity in the market.
Open market operations of
PBoC show that the bank
had been pumping cash into
the market (the amount of
money injected was greater
than that taken out) in the
previous two quarters, with
the net amount injected in
3Q totalling 173 billion.
PBoC recently disclosed it
provided a Medium-term
Lending Facility (MLF) of
500 billion to large
commercial banks and the
largest joint-stock banks in
September, aiming at bring
down borrowing costs and
overall financing rates.
Market interest rates
fluctuated slightly in 3Q
2014. Weighted average
Shanghai interbank offering
rate (SHIBOR) and bondpledged repos went down
slightly in September but
still higher than it was in
June.
Graph 7 Net Effect of Open Market Operations by PBoC
In billions
900
814
700
533
503
500
369
355
300
173
127
100
(100)
-68
-6
Q1
Q2
Q3
Q4
Q1
(300)
Q2 Q3
2013
Q4
Q1
Q2
2014
Q3
(500)
-524
(700)
-706
(900)
Source： China Foreign Exchange Trade System
Note: The amount in the above graph is the net value of open market operations, i.e. the difference
between money injected (maturity of central bank bills and repo agreements, reverse repos) and
money taken out (repo agreements, issuing of central bank bills and maturity of reverse repos). A
positive amount implies net money injection and negative indicates net money take-out.
Graph 8 Weighted-average SHIBOR and Bond-pledged repo rate
7%
6%
5%
4%
3%
2%
SHIBOR
bond-pledged repo
Source： China Foreign Exchange Trade System
Banking Newsletter
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PwC
November 2014
13
Banking
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November
2014 2014
November
14
14
Analysis of operating performance
•
Profit growth slowed; cost control remained strong
•
ROE dropped by 0.58 ppts QoQ; NIM narrowed slightly
•
Negative growth for intermediary business
Banking Newsletter
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November 2014
15
Profit growth slowed; cost control remained strong
In 3Q 2014, the Top 10
Listed Banks realised
aggregate net profit of RMB
301.2 billion, 7.02% more
than in Q3 2013. The year
on year (YoY) growth rate
was lower than that of Q3
2013 (12.15%) and Q2 2014
(9.00%).
Profit growth for the Top 10
Listed Banks has dropped to
single digits since Q2 2014,
which indicates that the
turning point for profit
growth is approaching.
In 3Q 2014, the Top 10
Listed Banks continued to
improve their cost controls.
All of the eight banks that
disclosed their cost to
income ratio saw a
reduction, with the average
level falling to below 27%
and 1 percentage point lower
on a YoY basis.
Graph 9 Net profit growth trend of The Top 10 Listed Banks
Net profit (in 100 millions)
3,500
15.21%
Slowdown in profit growth
indicates the approaching
turning point
YoY growth
18%
3,000
16%
12.15%
2,500
14%
2,000
12%
1,500
10%
1,000
7.02% 8%
500
6%
-
4%
2012 2012 2013 2013 2013 2013 2014 2014 2014
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Net Profits
YoY Growth
Graph 10 Change in Cost-to-income ratio
35%
ABC
CMBC
30%
CMB
BOC
25%
ICBC
CCB
BOCOM
CIB
20%
2014 Q1-3Q
2013 Q1-3Q
Note: SPDB and CITIC did not disclose cost-to-income ratios for the
first three quarters of 2014 and 2013
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November 2014
16
ROE dropped by 0.58 ppts QoQ; NIM narrowed
slightly
In the first three quarters of
2014, the weighted-average
ROE declined by 0.58
percentage points to 20.71%
as compared with 21.29% in
the first half of 2014.
Graph 11 Change in ROE for the Top 10 Listed Banks
26%
CIB
24%
22%
CMBC
CCB ABC
ICBC
CMB
20%
BOC
18%
CITIC
16%
BOCOM
14%
SPDB
2014 Q1-Q3
2014 1H
Note: To ensure the consistency, the data of SPDB and CIB was
annualised
Net interest margin (NIM)
was disclosed by seven of the
listed banks for the first
three quarters of 2014.
Based on stable yields of
inter-bank assets being
sustained, the weightedaverage NIM decreased by
just 0.01 percentage point
compared with that of the
first half of 2014. It is
increased by 0.04
percentage point compared
to the first three quarters of
2013.
Graph 12 Change in NIM for 7 Listed Banks
3.0%
ABC
CCB
2.8%
CMBC
CMB
2.6%
BOCOM
2.4%
CITIC
2.2%
2.0%
BOC
2014 Q1-Q3
2014 1H
Note: ICBC, SPDB and CIB did not disclose NIM for the three quarters of 2014. The
data were all annualised.
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PwC
November 2014
17
Negative growth for intermediary business
For 2014 3Q, the fees and
commissions income of the
Top 10 Listed Banks were
RMB 134,487 billion,
decreasing by 13.94% on a
quarter on quarter (QoQ)
basis, while it increased by
15.06% in Q3 2013 on a
QoQ basis.
In 3Q 2014, the fees and
commissions income for
most of the banks fell on a
QoQ basis, partially due to
the coming into force of
Interim Measures for the
Management of the Service
Prices of Commercial Banks,
jointly issued by PBoC and
National Development and
Reform Commission
(NDRC).
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Graph 13 Net Fees & Commissions Income Growth, QoQ
BOC
200%
150%
100%
BOCOM
50%
0%
CCB ABC
CMB
SPDB
CITIC
ICBC
CIB
CMBC
-50%
2014 Q3
2013 Q3
November 2014
18
Analysis of financial position and capital
management
•
QoQ decline in assets and liabilities
•
Increases in both the NPL balance and NPL ratio
•
PBOC provided liquidity support through MLF to the Large
Commercial Banks
•
QoQ increase of CARs driven by Tier-2 capital instruments
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November 2014
19
QoQ decline in assets and liabilities
Total assets of the Top 10
Listed Banks amounted to
RMB 94.98 trillion at the
end of 3Q 2014, increasing
by 9.17% from the end of
2013. Growth continued to
decline.
It was their first decline QoQ
since 2012, due to pressure
on deposits, CBRC’s
regulatory requirement
(No.127) on inter-bank
business and off-balancesheet business.
Graph 14 Change of Total Assets at Top 10 Listed Banks
100
10%
80
8%
60
6%
40
-0.29% 4%
20
However, total liabilities
decreased by 0.66% from
the end of June 2014, which
was also the first fall since
2012, mainly due to the
decrease in deposits.
1.27%
0.67%
0%
-20
-2%
Total assets
QoQ growth rate
Graph 15 Change of Total Liabilities of the Top 10 Listed Banks
Total assets (in trillion)
90
QoQ growth
9%
70
7%
50
5%
30
10
-0.66% 3%
1.01%
0.32%
1%
-10
-1%
Total liabilities
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2%
0
The decline for the five
largest joint-stock
commercial banks was
1.46% QoQ, while growth
for the five large commercial
banks was 0.03% QoQ.
As at the end of 3Q 2014,
total liabilities of the Top 10
Listed Banks amounted to
RMB 88.60 trillion, with an
increase of 9.07% from the
end of 2013.
QoQ growth rate
Total assets (in trillion)
QoQ growth rate
November 2014
20
Slowdown in QoQ growth of loans on weak demand
As at the end of 3Q 2014,
total loan balances for the
Top 10 Listed Banks were
RMB49.91 trillion,
increasing by 9.81% as
compared to the end of
2013. The growth declined
compared to 3Q 2013
(10.56%).
Due to the slowdown of
growth in deposits and weak
demand in the market, total
loan balances increased at a
lower rate of 12.05% yearon-year, as compared to
13.13% in 3Q 2013 and
12.78% in 2Q 2014.
In 2014 3Q, the loan growth
rate of the Top 10 Listed
Banks declined compared to
the first half of 2014 due to
the impact of high pressure
on maintaining customer
deposits, CBRC’s regulatory
requirement (No.127) on
inter-bank business,
development of off-balancesheet business and seasonal
fluctuation of credit supply.
Graph 16 YoY Growth of Loan Balances
Loan balances (in trillions)
50
45
40
35
30
25
20
15
10
5
-
YoY growth
20%
13.90%
10%
5%
0%
Total loans
Graph 17
YoY growth rate
QoQ Growth of Loan Balances
5%
CIB
ABC
4%
CCB
3%
12.05% 15%
13.13%
CMB
BOCOM
BOC
CITICCMBC
SPDB
ICBC
2%
1%
0%
2014 Q3
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2014 Q2
November 2014
21
Increases in both the NPL balance and NPL ratio
As at the end of 3Q 2014, the
Top 10 Listed Banks
experienced increases in
both the NPL ratio and
balances, as the quality of
credit assets deteriorated.
Graph 18
Changes of NPL Balance at the Top 10 Listed Banks
NPL balances (in 100 million)
1,200
QoQ growth
50%
1,000
40%
800
The total amount of NPLs
amounted to RMB564.05
billion at the end of 3Q 2014
which represented an
increase of RMB 44.04
billion or 8.47% from the
end of 2Q 2014.
NPL growth for the five
largest joint stock
commercial banks (12.13%)
was still higher than that of
the five large commercial
banks (7.63%).
As at the end of 2014 Q3,
the NPL ratio reached
1.13%, an increase of 0.07
percentage point compared
to the end of 2014 Q2.
The NPL increase was due
to slower economic growth,
which leads to a decline in
market demand and
increase in credit risks for
pro-cyclical industries and
small and medium
enterprises. These sectors
were vulnerable to economic
downturn. Credit risk of
industries with excess
capacity was also on the rise
as a result of restructuring
of sectors.
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30%
600
20%
400
10%
200
0
0%
2014-09-30
2014-06-30
QoQ growth
Graph 19 Changes of NPL Ratios
CITIC
1.40%
ABC
1.30%
1.20%
1.10% ICBC
BOCOM
CCB
BOC
CMB
CMBC
CIB
1.00%
SPDB
0.90%
2014-09-30
2014-06-30
November 2014
22
The initial impact of new regulation on interbank
business
ICBC
CCB
ABC
BOC
BOCOM
2014.09.30
2014.06.30
58%
58%
2014.09.30
2014.06.30
2014.09.30
2014.06.30
8%
64%
22%
9% 5%
25%
24%
11%
17%
10%
17%
30%
52%
4% 13%
27%
58%
21%
59%
4%
17%
7%
14%
7%
13%
21%
Held to maturity
Financial assets at fair value
Available for sale
Receivables
CMB
2014.09.30
SPDB
Five large Joint-stock Commercial Banks
2014.09.30
2014.09.30
2014.09.30
2014.09.30
36%
2014.06.30
36%
25%
2014.06.30
24%
13%
2014.06.30
15%
29%
26%
19%
4%
42%
4%
46%
3%
18%
65%
4%
63%
20%
34%
4%
42%
2014.06.30
19%
36%
3%
42%
19%
2014.06.30
17%
21%
20%
Held to maturity
Financial assets at fair value
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25%
8%5%
53%
2014.09.30
2014.06.30
8% 8%
9%
23%
49%
2014.09.30
2014.06.30
26%
64%
47%
CIB
CBRC’s regulations of No.27
which regulated inter-bank
businesses, such as trust
beneficiary right products
and asset management
schemes of financial
institutions, had some
impact on the banks’
investment structure. The
proportion of investment in
receivables of CMB and
CITIC decreased while that
of SPDB and CMBC
increased relative to 30 June
2014.
Five large commercial banks
CITIC
There was some change in
the investment mix for the
five largest joint-stock
commercial banks, as
investment classified as
receivables decreased
slightly from 50.24% as at
30 June 2014 to 49.36% as
at 30 September 2014.
Graph 20 Movement in composition investments
CMBC
The proportion of each
investment remained stable
for the five large commercial
bank at the end of 3Q 2014
relative to the end of 2Q
2014. Held-to-maturity
remained the most popular
investment and accounted
for more than 50% of
investment portfolios.
2%
58%
2%
61%
30%
33%
6%
7%
28%
24%
Available for sale
Receivables
November 2014
23
Negative QoQ growth in deposits
As at the end of 3Q 2014,
total deposits of the Top 10
Listed Banks amounted to
RMB69.56 trillion. This is
an increase of 6.89% from
the end of 2013, but a
decrease of 1.98% from the
end of June 2014, which is
the first negative QoQ
growth since 2012.
Graph 21 Growth trend of total deposits, QoQ
Total Deposits (in Trillions)
QoQ growth rate
70
10%
60
8%
50
6%
40
30
4%
20
In September 2014, the
CBRC, MoF and PBOC
jointly released [2014]No.
236 to monitor banks’
deposit stability and
deviation, aiming at to
constrain aggressive deposit
taking activities. Negative
growth in deposits was
partly due to this rule.
With the impact of the above
regulation, most of the Top
10 Listed Banks showed
negative growth in deposits
in 3Q 2014, compared to 2Q.
1.60%
10
2%
1.37%
0
-1.98%
-10
0%
-2%
Total customer deposit
QoQ growth
Graph 22 Changes of deposits’ quarterly growth
16%
CMB
12%
SPDB CIB
8%
BOCOM
ICBC
4%
ABC
CITIC
CMBC
BOC
CCB
0%
-4%
-8%
2014 Q3
Banking Newsletter
普华永道
PwC
2014 Q2
November 2014
24
Proportion of time deposits increased; QoQ loanto-deposit ratio grew slightly
Graph 23 Change of deposit portfolio
CIB SPDB CMB BOCOM ABC CCB ICBC
As at the end of 3Q 2014, six
banks that disclosed the
breakdown of deposits saw
an increase in the proportion
of time deposits compared to
the end 2Q 2014.
2014.09.30.
2014.06.30.
Time deposit
52%
50%
2014.09.30.
2014.06.30.
47%
46%
2014.09.30.
2014.06.30.
Demand deposit
46%
48%
50%
51%
43%
42%
2014.09.30.
2014.06.30.
53%
50%
2014.09.30.
2014.06.30.
53%
52%
2014.09.30.
2014.06.30.
54%
51%
3%
3%
51%
52%
54%
57%
2014.09.30.
2014.06.30.
Others
2%
2%
6%
6%
46%
43%
47%
50%
31%
33%
16%
15%
34%
37%
12%
12%
Note: The time deposits of CMB represent its bank level balance, while those of other
banks represented group level balances. In addition, BOC, CITIC and CMBC offered
no information on deposit structure in 2014 Q3 disclosures.
As at the end of 3Q 2014,
five banks saw an increase
in loan-to-deposit ratio as
compared to the end of June
2014. This is probably due
to the fall in deposits in 3Q
2014.
Graph 24 QoQ Change of Loan-to-deposit Ratio
75%
BOCOM
BOC
CCB
SPDB
CMBC
70%
CITIC
ICBC
CMB
65%
CIB
60%
ABC
2014-09-30
2014-06-30
Note: CMB,CIB,CITIC and CMBC did not disclose their loan-to-deposit ratios as at the
end of third quarter of 2014. ICBC,BOC,BOCOM,SPDB disclosed their loan-to-deposit
ratios according to CBRC [2014] 34.
Banking Newsletter
普华永道
PwC
November 2014
25
PBoC provided liquidity support through MLF to
the large commercial banks
The above change reflected
the impact of liquidity
provided by PBOC to the
large commercial banks
during September.
According to the China
Monetary Policy Report
ssued by the PBoC, the
central bank introduced a
new tool of what was called
MLF in September. Through
this new tool an aggregate of
RMB 500 billion was
provided to the large
commercial banks and joinstock commercial banks in
an attempt to bring down
the overall borrowing costs
(including banks lending
rates) and in turn support
the real economy.
Banking Newsletter
普华永道
PwC
Five large
commercial
banks
Graph 25 Change of composition of inter-bank liabilities
Five large
JSCBs
As at the end of 3Q 2014, the
five large commercial banks
had relatively higher
percentages of borrowings
from the central bank. The
borrowings were doubled as
compared to the end 2Q
2014 with an increase of
RMB368.64 billion.
2014.09.30
55%
2014.06.30
2014.09.30
2014.06.30
69%
52%
45%
21%
24%
19%
12%
48%
55%
Placements from banks and other financial institutions
Financial assets sold under repurchase agreements
Borrowings from the central bank
November 2014
26
QoQ increase of CARs driven by Tier-2 capital
instrument
At the end of 3Q 2014, the
Core Tier-1 Capital
Adequacy Ratios (CARs) of
the Top 10 Listed Banks as
calculated on the basis of the
Administrative Rules for
Capital Management of
Commercial Banks
(Provisional) generally
increased from 2Q 2014.
The increase was primarily
due to the higher growth
rate in accumulation of
retained earnings than that
of risk-weighted assets.
Graph 26 Comparison of Core Tier-1 CAR, QoQ
13%
ICBC
CCB
12%
BOCOM
BOC
11%
10%
ICBC, CCB, ABC, BOC,
BOCOM and CITIC issued
Tier-2 capital bonds during
3Q which led to the increase
in their CARs. In October
2014, BOC became the first
Chinese bank to issue
offshore USD preference
shares (for a total amount
equivalent to RMB39.94
billion). With more and
more banks starting to issue
preference shares, banks will
further improve their CARs.
Banking Newsletter
普华永道
PwC
CIB CITIC
CMBC
ABC
SPDB
9%
8%
At the end of 3Q, the
weighted-average CAR of the
Top 10 Listed Banks was
13.20%, up by 0.61
percentage point from 2Q.
CMB
2014-09-30
2014-06-30
Graph 27 Comparison of CAR, QoQ
15%
CCB
ICBC
BOCOM
BOC
14%
CITIC
13%
ABC
CMB
CIB
12%
10%
CMBC
SPDB
11%
2014-09-30
2014-06-30
November 2014
27
Newsletter
BankingBanking
Newsletter
普华永道
PwC
November
2014 2014
November
28
28
Appendix
•
Financial highlights of the Top 10 Listed Banks
•
Banking and Capital Markets Contacts
•
PwC Offices in China
Banking Newsletter
普华永道
PwC
November 2014
29
Financial highlights of the Top 10 Listed Banks
Table 1 Income Statements
ICBC
CCB
ABC
BOC
1. Net Interest Income
362,934
323,237
317,793
238,775
102,380
82,267
71,508
69,954
70,048
67,405
2. Non-interest income
125,655
105,806
76,173
107,559
32,789
42,760
18,265
20,896
22,520
32,511
2.1. Net fee and commission
income
100,885
83,801
65,920
72,078
22,984
34,246
15,647
19,665
18,835
27,810
24,770
22,005
10,253
35,481
9,805
8,514
2,618
1,231
3,685
4,701
3. Operating income
488,589
429,043
393,966
346,334
135,169
125,027
89,773
90,850
92,568
99,916
4. Operating expenses
201,084
185,235
197,728
168,369
68,650
65,153
44,039
41,384
49,552
50,754
5. Operating and
administrative
expenses
118,873
104,254
121,332
93,462
36,549
35,127
20,665
19,475
25,282
30,486
6. Business tax and
surcharges
30,750
25,983
21,718
19,699
9,731
7,783
6,060
6,592
6,496
6,647
7. Other operating cost
19,005
15,574
9,657
16,130
4,061
245
266
197
No data
442
8. Asset impairment losses
32,456
39,424
45,021
39,078
18,309
21,998
17,048
15,120
17,774
13,179
9. Operating profit
287,505
243,808
196,238
177,965
66,519
59,874
45,734
49,466
43,016
49,162
10. Profit before tax
288,231
245,233
197,271
178,335
67,015
60,372
45,859
49,780
43,093
49,349
67,376
54,548
44,766
41,537
15,321
14,453
10,692
11,212
10,240
11,919
220,855
190,685
152,505
136,798
51,694
45,919
35,167
38,568
32,853
37,430
In RMB millions
2.2. Other non-interest
income
11. Income tax expenses
12. Net profit
BOCOM
CMB
SPDB
CIB
CITIC
CMBC
Table 2 Balance Sheet
In RMB millions
ICBC
CCB
ABC
BOC
BOCOM
CMB
SPDB
CIB
CITIC
CMBC
Total Assets
20,150,956 16,735,863 15,959,249 15,427,957 6,212,718 4,722,648 3,956,642 3,995,577 4,045,887 3,769,341
Total loans and
advances to
customers
10,603,544
Net investment
4,441,560
3,567,684 3,557,179 2,533,324 1,102,653
994,893 1,063,259
875,259
885,337
461,698
Cash and deposits with
central bank
3,472,425
2,737,700 2,810,852 2,560,566
932,196
590,593
489,574
433,425
536,648
438,533
9,102,547 7,650,922 8,256,032 3,396,875 2,384,121 1,920,895 1,450,544 2,070,721 1,714,728
Deposits and
placements with
banks and other
financial institutions
582,741
600,335
950,130 1,050,306
340,462
275,626
173,492
190,676
180,145
271,437
Financial assets held
under resale
agreements
432,604
317,706
566,629
330,027
155,447
371,451
223,287
909,811
282,134
657,257
N/A
93,503
97,807
78,882
34,459
23,892
14,963
25,318
24,155
15,490
Others
21,825,170
316,388
325,730
618,820
250,626
82,072
71,172
110,544
66,747
210,198
Total Liabilities
18,718,581 15,527,684 15,000,556 14,381,700 5,754,838 4,420,250 3,722,143 3,758,661 3,788,202 3,528,538
Deposits from
customers
15,339,964 12,982,406 12,638,575 11,047,285 4,116,546 3,265,520 2,688,621 2,205,228 2,875,725 2,397,690
Interest receivable
Deposits and
placements from
banks and other
financial institutions
1,429,869
1,260,899 1,118,068 2,081,343 1,118,686
866,642
727,765 1,215,196
649,442
782,112
Financial assets sold
under repurchase
agreements
310,136
1,129
35,644
32,714
176,736
48,179
39,556
136,283
52,725
50,037
Debt securities issued
268,726
434,863
331,208
282,002
116,757
101,047
105,410
123,378
126,959
129,829
1,369,886
848,387
877,061
938,356
226,113
138,862
160,791
78,576
83,351
168,870
Others
Banking Newsletter
普华永道
PwC
November 2014
30
Financial highlights of the Top 10 Listed Banks
(cont’d)
Table 3 Key Financial Ratios of the Top 10 Listed Banks
ICBC
CCB
ABC
BOC
BOCOM
CMB
SPDB
CIB
CITIC
CMBC
Profitability
Return on assets (ROA)
1.51%
1.58%
1.33%
1.24%
1.13%
No data
0.92% No data
1.14%
No data
Return on equity (ROE)
21.52%
22.14%
22.34%
18.03%
15.58%
21.33%
15.92% 17.54%
18.10%
22.71%
Net interest spread
No data
No data
2.75%
No data
2.21%
2.30%
No data No data
No data
No data
Net interest margin
No data
2.80%
2.91%
2.26%
2.40%
2.50%
No data No data
2.37%
2.61%
Cost-to-income ratio
24.33%
25.21%
30.80%
26.99%
27.39%
28.10%
No data 21.65%
No data
30.51%
1.06%
1.13%
1.29%
1.07%
1.17%
1.10%
0.96%
0.99%
1.39%
1.04%
105,320 103,466
90,695
40,872
26,923
18,977
14,774
29,428
18,124
234.47% 335.07% 207.70%
201.29%
227.99%
267.90% No data
181.49%
199.96%
9.40%
9.29%
8.73%
Asset quality
NPL Ratio
NPL balances (in millions)
115,471
Provision Coverage ratio
216.60%
Capital adequacy
Core Tier 1 capital
adequacy ratio
11.79%
11.65%
8.90%
10.51%
11.10%
10.35%
Capital adequacy ratio
14.20%
14.53%
12.38%
13.07%
13.80%
12.28%
10.91% 12.18%
12.99%
10.95%
Loan-to-deposit ratio
68.10%
72.02%
63.28%
71.65%
73.92%
No data
70.85% No data
No data
No data
Banking Newsletter
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8.63%
November 2014
31
Banking and Capital Markets Contacts
Assurance
Advisory
Tax
Raymond Yung – Beijing
James Chang – Beijing
Danny Yiu – Beijing
Tel: +86 (10) 6533 2121
Tel: +86 (10) 6533 2755
Tel: +86 (10) 6533 2787
[email protected]
[email protected]
[email protected]
Margarita Ho – Beijing
Addison Everett – Beijing
Oliver Kang – Beijing
Tel: +86 (10) 6533 2368
Tel: +86 (10) 6533 2345
Tel: +86 (10) 6533 3012
[email protected]
[email protected]
[email protected]
Richard Zhu – Beijing
William Gee – Beijing
Matthew Wong – Shanghai
Tel: +86 (10) 6533 2236
Tel: +86 (10) 6533 2269
Tel: +86 (21) 2323 3052
[email protected]
[email protected]
[email protected]
Jimmy Leung – Shanghai
William Yung – Shanghai
Florence Yip – Hong Kong
Tel: +86 (21) 2323 3355
Tel: +86 (21) 2323 1984
Tel: +852 2289 1833
[email protected]
[email protected]
[email protected]
Michael Hu －Shanghai
Matthew Phillips – Hong Kong
Assurance – Risk & Quality
Tel: +86 (21) 2323 2718
Tel: +852 2289 2303
[email protected]
[email protected]
Tracy Chen – Shanghai
Tel: +86 (21) 2323 3070
Shirley Yeung – Guangzhou
Chris Chan – Hong Kong
Tel: +86 (20) 3819 2218
Tel: +852 2289 2824
[email protected]
[email protected]
[email protected]
Nigel Dealy – Hong Kong
Tel: +852 2289 1221
Charles Chow – Shenzhen
Nelson Lou - Beijing
Tel: +86 (755) 8261 8988
Tel：+86 (10) 6533 2003
[email protected]
[email protected]
Banking Newsletter
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PwC
[email protected]
November 2014
32
PwC Offices in China
Beijing
Shanghai
Hong Kong
26/F, Office Tower A, Beijing Fortune Plaza
11/F, PricewaterhouseCoopers Center, 2 Corporate Avenue
22/F, Prince's Building
7 Dongsanhuan Zhong Road, Chaoyang District
202 Hu Bin Road, Huangpu District
Central, Hong Kong
Beijing, P.R.C.
Shanghai
Tel: +852 2289 8888
Zip: 100020
Zip: 200021
Fax: +852 2810 9888
Tel: +86 (10) 6533 8888
Tel: +86 (21) 2323 8888
Fax: +86 (10) 6533 8800
Fax: +86 (21) 2323 8800
Shenzhen
Guangzhou
Tianjin
34/F, Tower A, Kingkey100
18/F, PricewaterhouseCoopers Center
36/F, The Exchange Tower Two,
5016 Shennan East Road, Luohu District
10 Zhujiang Xi Road, Pearl River New City, Tianhe District
189 Nanjing Road, Heping District
Shenzhen, P.R.C
Guangzhou, P.R.C.
Tianjin, P.R.C.
Zip: 518001
Zip: 510623
Zip: 300051
Tel: +86 (755) 8261 8888
Tel: +86 (20) 3819 2000
Tel: +86 (22) 2318 3333
Fax: +86 (755) 8261 8800
Fax: +86 (20) 3819 2100
Fax: +86 (22) 2318 3300
Dalian
Qingdao
Hangzhou
8F Senmao Building
37/F, Tower One, HNA IMC Center
Unit 3205, Canhigh Center
147 Zhongshan Road, Xigang District
234 Yanan Third Road, Shinan District
208 North Huancheng Rd
Dalian, P.R.C.
Qingdao, P.R.C.
Hangzhou, P.R.C.
Zip: 116011
Zip: 266071
Zip: 310006
Tel: +86 (411) 8379 1888
Tel: +86 (532) 8089 1888
Tel: +86 (571) 2807 6388
Fax: +86 (411) 8379 1800
Fax: +86 (532) 8089 1800
Fax: +86 (571) 2807 6300
Chongqing
Ningbo
Xiamen
Room 1905, 19/F Metropolitan Tower
Room 1203, Tower E, Ningbo International Financial Center
Unit B, 11/F, International Plaza
68 Zou Rong Road
268 Min An Road East, Jiangdong District
8 Lujiang Road, Siming District
Chongqing, P.R.C.
Ningbo, P.R.C.
Xiamen, P.R.C.
Zip: 400010
Zip: 315040
Zip: 361001
Tel: +86 (23) 6393 7888
Tel: +86 (574) 8187 1788
Tel: +86 (592) 210 7888
Fax: +86 (23) 6393 7200
Fax: +86 (574) 8187 1700
Fax: +86 (592) 210 8800
Suzhou
Nanjing
Xi'an
Room 1501, Genway Tower
Unit 12A01, Nanjing International Center
7/F, D Block, Chang'an Metropolis
Center
188 Wang Dun Road, Suzhou Industrial Park
201 Zhongyang Road, Gulou District
88 Nanguan Street
Suzhou, P.R.C.
Nanjing, P.R.C.
Xi'an, P.R.C.
Zip: 215028
Zip: 210009
Zip: 710068
Tel: +86 (512) 6273 1888
Tel: +86 (25) 6608 6288
Tel: +86 (29) 8469 2688
Fax: +86 (512) 6273 1800
Fax: +86 (25) 6608 6210
Fax: +86 (29) 8469 2600
Macau
Wuhan
29/F, Bank of China Building
Unit 04, 41/F Wuhan Wanda Center
323 Avenida Doutor Mario Soares, Macau
96 Linjiang Avenue, Jiyuqiao, Wuchang District,
Tel: +853 8799 5111
Wuhan, PRC
Fax: +853 8799 5222
Zip: 430060
Tel: +86 (27) 5974 5818
Fax: +86 (27) 5974 5800
Banking Newsletter
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November 2014
33
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