PIB Producto Interno Bruto

In 2010, the Company started implementing the “Second Transformation” strategy in a bid to accelerate the transformation into an organic and intensive development model, and identified five major objectives, i.e. higher capital utilisation efficiency, stronger loan risk pricing capability, higher operating efficiency, larger proportion of high-net-worth customers and better risk control. Despite the volatile and complicated external environment in 2013, the Company continued to press forward with the “Second Transformation” and achieved remarkable results.

Capital utilisation efficiency remained stable. As at 30 June 2013, the capital adequacy ratio and tier 1 capital adequacy ratio of the Company were 10.43% and 7.73% respectively, which increased by 0.14 percentage point and 0.31 percentage point as compared with the beginning of the year respectively, excluding the effect caused by such factors as the distribution of dividend and the amortisation of subordinated bonds. The annualised return on average equity (ROAE) was 23.60%, representing an increase of 0.71 percentage point as compared with the previous year. The risk adjusted return on capital after tax (RAROC) was 21.25%, representing an increase of 0.04 percentage point (calculated on the same statistical calibres) as compared with the previous year.

Risk pricing of loans kept improving. As at 30 June 2013, the floating range of weighted average interest rates of newly granted corporate loans in RMB (weighted at actual amounts, same as below) increased by 0.66 percentage point to 12.46% as compared with the previous year. The floating range of weighted average interest rates of newly granted retail loans in RMB increased by 7.16 percentage points to 30.11% as compared with the previous year.

Operational efficiency continued to improve. As at 30 June 2013, the cost-to-income ratio of the Company was 31.64%, representing a decrease of 4.51 percentage points as compared with the previous year; the annualised profit before tax per person was RMB1.36 million (calculated on the same statistical calibres), representing an increase of 12.40% as compared with the previous year; the annualised profit before tax per outlet was RMB67.68 million, representing an increase of 11.15% as compared with the previous year.

Proportion of high-net-worth customers increased continuously. As at 30 June 2013, the number of sunflower-level and above customers (retail customers of the Company with minimum total daily average assets of RMB500,000 per month) increased by 9.76% as compared with the beginning of the year, representing an increase of 0.08 percentage point in customer proportion as compared with the beginning of the year; the number of private banking customers (retail customers of the Company with minimum total daily average assets of RMB10 million per month) increased by 15.82% as compared with the beginning of the year.

Overall risk is under control in terms of asset quality. As at 30 June 2013, the allowance coverage ratio of our non-performing loans was 299.72%, representing a decrease of 52.75 percentage points as compared with the end of the previous year, and the non-performing loan ratio of the Company was 0.77%, representing an increase of 0.12 percentage point as compared with the end of the previous year, while the percentage of special mention loans to the total was 1.07%, which was 0.03 percentage point up as compared with that at the end of the previous year. The percentage of credit cost was 0.51%, an increase of 0.20 percentage point as compared with the end of the previous year. Non-performance loan formation rate was 0.58%. Affected by the macro-economic downturn, enterprises are facing mounting risks in their operation, which accelerated the occurrence of non-performing and special mention loans. In response, the Company took timely and effective risk management and control measures so as to ensure that the overall risk was under control.

3.8.2 Small and micro enterprises strategy

During the reporting period, the Company adopted certain measures to implement the small and micro enterprises strategy and achieved satisfactory results, including continuously pushing forward the system reform and process optimisation, actively establishing a professional management system in line with the development of small and micro enterprise businesses, and focusing on enhancing the capabilities of small and micro enterprise businesses in respect of market planning, marketing development, customer service, product innovation, risk management and operation management.

In order to objectively reflect corporate customers’ operation scale and risk-withstanding ability, the Company redefined its corporate customer classification standards from “annual sales + loan balance” to “annual sales + credit exposure amount”. Based on the bank’s adjusted caliber, as at 30 June 2013, balance of the Company’s loans to small and micro enterprises totalled RMB525.314 billion, representing an increase of RMB147.764 billion or 39.14% over the beginning of the year (calculated on the same statistical calibres), and accounted for 28.95% of domestic general loans (excluding discounted bills), representing an increase of 6.36 percentage points over the beginning of the year, of which: balance of the small enterprises loans amounted to RMB270.202 billion, up by 34.82% as compared with the beginning of the year (calculated on the same statistical calibres), and the proportion of small enterprises loans to domestic corporate loans reached 25.09%, representing an increase of 5.04 percentage points as compared with the beginning of the year; balance of micro enterprises loans amounted to RMB255.112 billion, up by 44.02% as compared with the beginning of the year, and the proportion of micro enterprises loans to total retail loans reached 34.58%, representing an increase of 8.22 percentage points as compared with the beginning of the year. The non-performing loan ratios of loans granted to small enterprises and micro enterprises remained at a low level of 1.48% and 0.60% respectively; and the floating ranges of weighted average interest rate of newly granted small enterprises and micro enterprises loans were 22.86% and 32.61% respectively, up by 0.80 percentage point and 3.20 percentage points as compared with the previous year respectively, demonstrating