Bank of China Limited ("the Bank": Hong Kong Stock Exchange stock code: 3988; Shanghai Stock Exchange stock code: 601988; Shanghai Stock Exchange convertible bond code: 113001) announced its 2014 interim results on 19 August. According to International Financial Reporting Standard ("IFRS"), the Bank recorded a profit after tax of RMB93.409 billion and profit attributable to equity holders of RMB89.724 billion, increased 10.97% and 11.15% year-on-year respectively.

In the first half of the year, guided by the strategic goal of 'Serving Society, Delivering Excellence', the Bank calmly responded to the complicated operational environment, enhanced business development, tightened risk management, deepened reform and innovation, strengthened team building, thus achieved steady progress in operating results.

Good performance in key financial indicators

As at the end of June 2014, the Bank's total assets, liabilities and capital and reserves attributable to equity holders amounted to RMB15.47 trillion, RMB14.46 trillion and RMB965.733 billion, increased 11.49%, 12.00% and 4.53% respectively from the prior year-end. The ROA and ROE reached 1.27% and 18.57% respectively. Net interest margin slightly improved and non-interest income grew rapidly. The Bank's asset quality remained stable in a reasonable range with sufficient provision. The non-performing loans ratio stood at 1.02% and non-performing loans coverage ratio recorded at 217.02%. Advanced capital management approach was approved to implement by the regulator. The capital adequacy ratio and common equity tier 1 capital adequacy ratio recorded at 12.41% and 10.11% respectively. Basic earnings per share achieved RMB0.32, growing RMB0.03 year-on-year.

The Bank has been listed in the Fortune Global 500 for 26 consecutive years and was ranked 7th among the Top 1000 World Banks by the Banker. The Bank continuously lifted its market recognition and was warmly welcomed by the capital market.

Supported real economy with optimised business structure

The Bank actively sought upstream and downstream customers along industrial supply chains, and strived to develop fundamental businesses such as payroll disbursements agency and agency of collection and payment. As a result, its customer base continued to expand. As at 30 June 2014, the Bank's customer deposits amounted to RMB11,190.569 billion, an increase of RMB1,092.783 billion or 10.82% compared with the prior year-end. The domestic RMB deposits reached 8,445.227 billion, an increase of RMB735.264 billion or 9.54% compared with the prior year-end. The Bank expanded sources to absorb stable funding by issuing bonds globally, actively developing global cash management platform, custody and bond underwriting businesses. The deposits absorbed by the Bank's global cash management platform increased 27% from the end of last year and assets under custody of the Bank's domestic institutions grew by 13%. The debt financing instrument underwritten by the Bank through domestic public offering ranked first among the peers.

The Bank strived to shoulder its social responsibilities and consciously incorporated its own development with the national strategies, continuously optimised its credit structure and maintained balanced growth in its loan portfolio. The amount of loans and advances to customers was RMB8,424.595 billion, growing by 10.74% compared with the prior year-end. The domestic RMB loans was RMB5,891.705 billion, an increase of RMB338.075 billion or 6.09% compared with the prior year-end. The domestic RMB personal loans recorded RMB2,000.874 billion, with the proportion to domestic RMB loans increasing 0.39 percentage point. Small enterprise loans by "BOC Credit Factory" and domestic medium sized enterprise loans grew by 12.60% and 8.08% respectively, exceeding the overall growth rate of domestic corporate loans. The loans to strategic emerging industries increased 21.8% and the balance of agriculture-related loans increased 6.1% from the last year-end.

In the first half of the year, the Bank faced heavier pressure on net interest margin given the up-trend of funding cost. Due to the proactive efforts to optimise its asset and liability structure and enhance profitability of overseas business, the Bank expanded net interest margin by 3 basis points from last year to 2.27%.

Adapting to customer demands, the Bank made greater efforts in product innovation and promotion to expand the resources of non-interest income. In the first half of 2014, non-interest income recorded RMB78.197 billion, and increased by 13.39% year-on-year, representing 33.29% of total operating income, which maintained a higher level in the industry. Net fee and commission income increased 14.62% year-on-year. The Bank strengthened its traditionally competitive businesses such as international settlement and FX business. The transaction volume of international trade settlement conducted by its domestic institutions reached USD782.382 billion, accounting for nearly one third of China's total import and export volume. The Bank also achieved rapid growth in fee income from its custodian and bank card businesses.

Expanded leading advantage by grasping on RMB internationalisation opportunities

Seizing the market opportunities arising from RMB internationalisation and Chinese enterprises'"Going Global", the Bank stepped up the collaborations of its domestic and overseas operations, improved its global service capabilities and enhanced its market competitiveness. As at the end of June 2014, the Bank's total overseas assets was USD765.290 billion, an increase of 21.31% compared to the prior year-end, and accounted for 27.73% of the Bank's total assets. Overseas profit before tax was USD4.412 billion, an increase of 35.76% year-on-year, accounted for 22.22% of the Bank's total profit before tax. Deposits and loans of overseas commercial banks increased 16.10% and 24.10% respectively compared with the prior year-end. The Bank owns 619 overseas institutions in Hong Kong, Macau, Taiwan and 37 countries.

The Bank strengthened the support for Chinese enterprises' "Going Global" and assisted their overseas expansion. In the first half of 2014, the Bank had supported 1,187 "going global" projects, with its loan commitment growing 26% year-on-year. The Bank fully leveraged on the competitive advantages arising from its diversified business platform including investment banking, insurance, investment and leasing businesses, and enhanced the synergies across the group. The Bank's comprehensive business income stood at RMB33.7 billion, a year-on-year increase of 20%, and the proportion to the total operating income increased 0.71 percentage point.

The Bank continued to focus on its contribution to RMB internationalisation progress and expanded its competitive advantages. In the first half of 2014, the Bank conducted cross-border RMB settlement and clearing volumes amounted to RMB2.79 trillion and RMB112.5 trillion respectively, an increase of 63.0% and 98.7% compared with the same period of the prior year, ranking first among its international peers, and became the largest RMB service provider in offshore markets. BOCHK, and the Bank's Macau branch, Taipei branch and Frankfurt branch became the local RMB clearing banks designated by PBOC. The Bank's 7×24 global RMB clearing service network was continuously improved. The Bank's overseas RMB assets and liabilities expanded rapidly and offshore RMB bonds issuance business led the Chinese peers. The Bank has successfully issued the first "Oceania Bond" in Sydney, "Schengen Bond" in Luxembourg and "Arc de Triomphe Bond" in Paris.

Enhanced customer experience by seizing opportunities arising from internet finance

The Bank continued to diversify and improve its e-banking service channels, including online banking, mobile banking, WeChat banking, telephone banking and home banking. It accelerated the integration of physical outlets and electronic channels and optimised product functions and operating processes with the aim of continuously enhancing customer experience. In the first half of 2014, the Bank's e-banking transaction volume reached RMB66 trillion, an increase of 29.71% year-on-year. The substitution ratio of e-banking channels for traditional outlets continued to increase and e-banking customer base expanded rapidly. The Bank actively promoted e-finance bank construction, continuously improved its Open platform, and launched innovative services including online wealth management, "Financial e-Manager", "e-Home", online cross-border financial products. Its "Future Bank" flagship branches achieved preliminary development.

Stablised asset quality by strengthening comprehensive risk control

In the first half of 2014, the banking industry faced increasing pressure on asset quality in the process of economy structure adjustment and growth rate slowing down. The Bank continuously improved its comprehensive risk management, strengthened risk prevention, early warning and resolution, and maintained asset quality in the reasonable range. As at the end of June 2014, the non-performing loans ratio and overdue loan ratio recorded 1.02% and 1.35% respectively, and special-mention loan ratio stood at 2.28%, down 0.21 percentage point from the prior year-end. The provision was sufficient and the ratio of provision to total loans of domestic institutions increased 9 basis points to 2.71%. The Bank strictly controlled the overall credit exposure to local government financing vehicles, and strengthened the risk management of overcapacity industries, real estate, wealth management businesses, innovative interbank businesses and etc.

Looking into the second half of 2014, the Bank will stick to its strategic goal of "Serving Society, Delivering Excellence", and earnestly carry out China's macro-economic policies. It will deepen reform to promote transformation, improve service to win market, strengthen collaboration to consolidate competitiveness, enhance efficiency to control risk, and strengthen fundamental construction and team building. The Bank will make great efforts to realise sustainable growth and deliver the sound results.

Financial Highlights

(IFRS)

Key Performance Figures

Unit: RMB million Change Six-month ended 30 Jun 2014 Six-month ended 30 Jun 2013
Net interest income 14.12% 156,675 137,288
Non-interest income 13.39% 78,197 68,963
Including: Net fee & commission income 14.62% 52,131 45,481
Operating expenses 4.49% (85,897) (82,209)
Impairment losses on assets 96.45% (27,782) (14,142)
Profit for the period 10.97% 93,409 84,172
Profit attributable to the equity holders of the Bank 11.15% 89,724 80,721

Key Assets and Liabilities Figures

Unit: RMB million Change As at 30 Jun 2014 As at 31 Dec 2013
Total assets 11.49% 15,469,096 13,874,299
Loans, gross 10.74% 8,424,595 7,607,791
Total liabilities 12.00% 14,462,640 12,912,822
Due to customers 10.82% 11,190,569 10,097,786
Capital and reserves attributable to equity holders of the Bank 4.53% 965,733 923,916

Key Ratios

Change (PPT) Six-month ended 30 Jun 2014 Six-month ended 30 Jun 2013
Return on average total assets -0.03 1.27% 1.30%
Return on average equity -0.36 18.57% 18.93%
Net interest margin 0.04 2.27% 2.23%
Cost to income ratio （calculated under domestic regulations） -2.13 25.54% 27.67%
Credit Cost 0.30 0.69% 0.39%
Change (PPT) As at 30 Jun 2014 As at 31 Dec 2013
Non-performing loan ratio 0.06 1.02% 0.96%
Non-performing loan coverage ratio -12.33 217.02% 229.35%
Common equity tier 1 capital adequacy ratio -0.33 9.36% 9.69%
Tier 1 capital adequacy ratio -0.33 9.37% 9.70%
Capital adequacy ratio -0.68 11.78% 12.46%
Capital adequacy ratio (Advanced approach) - 12.41% -

Per Share Information

Unit: RMB Change (RMB) Six-month ended 30 Jun 2014 Six-month ended 30 Jun 2013
Basic earnings per share 0.03 0.32 0.29
Change (RMB) As at 30 Jun 2014 As at 31 Dec 2013
Net assets per share 0.15 3.46 3.31


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