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President's Statement

Mr. TIAN Huiyu
Executive Director of the Board and President of the Bank

In 2015, the Bank unswervingly implemented various requirements of the regulatory authorities and the Board of Directors, fully promoted the building of an asset-light bank and the implementation of the “One Body with Two Wings” strategy, further highlighted its features and enhanced brand image, thus reinforcing its position as a forerunner in business transformation.

As at the end of 2015, total assets of the Group amounted to RMB5,474.978 billion, up by 15.71% from the beginning of the year; total deposits from customers amounted to RMB3,571.698 billion, up by 8.09% from the beginning of the year; and total loans and advances to customers amounted to RMB2,824.286 billion, up by 12.35% from the beginning of the year. Net profit attributable to the shareholders of the Bank amounted to RMB57.696 billion, up by 3.19% year-on-year. The return on average net equity (after tax) attributable to the shareholders of the Bank was 17.09%, down by 2.19 percentage points year-on-year. Under the advanced approach, the capital adequacy ratio was 12.57%, up by 0.19% as compared with that at the beginning of the year. The non-performing loan ratio was 1.68%, the allowance coverage ratio of non-performing loans was 178.95% and the allowance ratio of loans was 3.00%.

In 2015, the Bank steadfastly pursued its strategic transformation, making its preliminary achievements in “Asset-light Banking”. Our assets have become more “light”. We made initial success in structural adjustments despite various challenges and difficulties. We significantly scaled down risk assets in areas including the overcapacity industries, while increasing our allocations in low-risk and quality retail assets such as credit-card and home mortgages. Balance of our retail loans accounted for nearly half of our total loans, and the proportion of our corporate loans to customers with high credit rating increased by 6.1 percentage points, thus further optimising our asset structure. Our liabilities have become more “light”. Persistently following the operating principle where “assets determine liabilities”, we vigorously optimised the mechanism for pricing of deposits and differentiated authorisation, and significantly reduced the proportion of high-cost structured deposits. As a result, we saw a rise in the proportion of demand deposits and an increase of 11 basis points in net interest margin, effectively offsetting the adverse impact of several interest rate cuts during the year. Our income has become more “light”. The proportion of our net non-interest income increased to 32.41%, and the cost-income ratio fell to a historical low of 27.55%.

In 2015, under the counter-cyclical pressure, the Bank adhered to differentiate itself in the tough operating environment by capitalising on the “One Body with Two Wings” strategy. We continued to boost our retail finance business, making the “one body” a firm cornerstone for the Bank to survive the tough operating environment. The proportion of profit before tax of retail banking reached 46.34%, up by 6.70 percentage points year-on-year. The bank maintained its lead in a number of areas including private banking, wealth management and credit cards businesses. We grasped opportunities to penetrate into emerging businesses, making the “two wings” the powerful “dual-engine” for the Bank to surf through high waves. Playing a leading role in transaction banking among its peers, the Bank saw a significant increase in the number of core customers in supply chains and the amount of settlement deposits. The market share of cross-border settlement and sales of foreign exchange was 4.48%, ranking first among small and medium-sized banks nationwide. Our investment banking and asset management businesses have become a dual-driver for further growth and grasped a number of market opportunities arising out of mergers and acquisitions and restructuring, capital market, government-guided funds and emerging financing business. The business of the privatisation of overseas-listed Chinese enterprises has become an industry benchmark, with bond underwriting business ranking first among the domestic small- and medium- sized banks. We ranked second among our peers in terms of the volume of asset management. The volume of asset custody amounted to RMB7.16 trillion. We outperformed our peers in several key indicators of bills business. Profits form financial markets business doubled for two consecutive years.

In 2015, the Bank established the Internet finance development strategy of “building service platforms, connecting to external traffic and conducting traffic operation (內建平台、外接流量、流量經營)”. Our open mobile finance platform has served a sizable number of users, the APPs of Mobile Banking and CMB Life (掌上生活) were both upgraded to the next generation, and the registered members and transaction volume of Small Business E Home continued to surge. “Zhao Ying Tong (招贏通)”, a financial transaction platform for financial institutions, became the first-mover in seizing market opportunities, and CMB-China Unicom Consumption Finance Co., Ltd. (招聯消費金融有限公司) officially opened for business. Our cooperation with third-party platforms was also initiated during the year. At present, we have established comprehensive strategic partnership with various Internet companies and telecommunication operators including Didi Taxi (滴滴出行), China Mobile and China Unicom. Riding on the trend of online payment, we have established “All-in-one Net”, an online light account cross-bank payment platform, and “All-in-one Mobile (一閃通)”, an offline payment platform. In addition, we proactively embraced various cutting-edge technologies to launch the new payment function of “cash withdrawal via face-scanning (刷臉取款)” and Apple Pay, vigorously improved Internet users’ experience of online payment, and timely launched the “Free Online Transfer” service to implement inclusive finance, which received warm applause from the public.

In 2015, in response to changes in customer and market demands, the Bank geared up the reform of operation systems and processes, and began the second-phase reform across the Bank based on the experience of the system reform of the first batch of 11 pilot branches, thus further optimised the organisational structure. In addition, we gradually promoted the streamlining of the “customer-centric” end-to-end operation processes, constantly developed and optimised the models and tools for risk management, thus putting risk monitoring and pre-warning management in place, optimised the unified risk exposure management mechanism, promoted post-disbursement management, and improved provision management, all contributing to protection and control of asset quality in a multi-dimensional way. We carried out inspections and audits throughout our business operation, thus effectively improved our compliance management. We vigorously promoted the reform of human resources, proactively implemented measures for management of assets and debts, and established the decision-making mechanism for investment banking and asset management.

In 2015, the performance of a number of our strategic emerging businesses known as light assets business ran in parrel with large-sized state-owned banks despite our smaller volume of assets, thereby differentiating us from our peers in terms of the “Asset-light Banking”. We so far have received positive market response and trust from investors. In 2015, the Bank was a frontrunner among listed banks in terms of cumulative increase in share price and the price/book ratio of its A shares, and ranked first in the “Top Ten of investors’ Most Respected 100 Listed Companies in China”. Our achievements in 2015 were attributable to the hard work of our staff and the unwavering support from our customers, investors and the community. On behalf of the Bank, I would like to extend my sincere gratitude to all who care about and support the development of the Bank.

2016 is the starting year of the “13th Five-year Plan”. Facing the complicated operating environment at home and abroad, we will continuously implement the transformation strategies of “Asset-light Banking” and “One Body with Two Wings”, respond flexibly to the changing environment and grasp market opportunities arising from economic restructuring, and persistently stick to organic growth which places equal emphasis on strategic transformation and development results. We will adhere to our operation strategies and strive to first work out a path of characterised business transformation of Chinese commercial banks in the next three to five years.

China Merchants Bank Co., Ltd. President: