OREANDA-NEWS. March 28, 2011. Bank of China Limited ("BOC": Hong Kong Stock Exchange stock code: 3988; Shanghai Stock Exchange Stock code: 601988) announced its 2010 annual results. According to International Financial Reporting Standard ("IFRS"), BOC has achieved profit after tax of RMB 109.69 billion, a year-on-year growth of 28.52%, reported the press-centre of Bank of China.

In 2010, the Bank strictly adhered to the scientific outlook on development, fully implemented both the government’s macro-economic policies and its own strategic development plan. Through “streamlining structure, scaling up, managing risks and sharpening competitiveness”, the Bank achieved outstanding performance.

Significant improvement in profitability
In 2010, the Bank achieved profit after tax and profit attributable to equity holders of RMB109.69 billion and RMB104.42 billion respectively, increased by 28.52% and 29.20% from the previous year. At the end of 2010, the Bank’s total assets exceeded RMB10 trillion and amounted to RMB10,459.87 billion, an increase of 19.51% from the previous year-end. The growth of profit outpaced that of total assets. Basic earnings per share also recorded an increase of RMB0.08 to RMB0.39. The Group’s net interest margin was 2.07%, an increase of 0.03 percentage point compared with the prior year. Return on total average assets and return on average equity stood at 1.14% and 18.87%, respectively, an increase of 0.05 percentage point and 2.39 percentage points compared with the prior year.

The Bank maintained rapid profit growth in 2010, driven primarily by significant increases in net interest income and non-interest income, strict containment of credit cost, increased operating efficiency and a decline in the effective tax rate. During the year, the Bank’s net interest income grew by 22.08% compared with the previous year and net interest margin rose by 0.03 percentage point. Non-interest income increased by 12.03% from the previous year, of which net fee and commission income rose by 18.41%. Credit cost was 0.29%, down by 0.09 percentage point from the prior year, while the cost-to-income ratio decreased by 0.76 percentage point to 34.16%. The effective tax rate declined to 22.83% from 23.18%.

Business structure continuously optimized
In 2010, BOC strived to increase it deposit size through expanding client base. At the end of 2010, the Group’s deposits from customers amounted to RMB7,483.25 billion, an increase of RMB862.70 billion or 13.03% from the prior year-end. This included RMB-denominated deposits of RMB6,125.47 billion, an increase of RMB777.80 billion or 14.54% compared with the prior year-end. The bank reduced the funding cost through increasing the proportion of demand deposits by 0.49 percentage point.

The Bank fully implemented the government’s macro-policies and controlled credit extension in a rational and smooth manner. The Bank took actions to optimise the profile of its credit portfolio and improve pricing. At the end of 2010, the Group’s loans and advances to customers amounted to RMB5,660.62 billion, an increase of RMB750.26 billion or 15.28% compared with the prior year-end. This included RMB-denominated loans of RMB4,149.81 billion, which increased by RMB624.79 billion or 17.72% from the prior year-end. The proportion of domestic corporate loans granted to key industries, including transportation, water conservation and electric power, increased by 0.95 percentage point, whereas that to the manufacturing industry and industries with overcapacity continued to fall compared with the prior year-end. With respect to customer structure, the proportions of loans extended to customers with high rating of BB and above and SME customers continued to increase. The interest rates charged to new RMB and foreign currency loans surged by 12bps and 101 bps respectively during the year.

Strong growth of domestic business
In 2010, the Bank’s domestic business developed rapidly with good quality and high profitability. At the end of 2010, total assets of the domestic operations amounted to RMB8.52 trillion, an increase of RMB1.16 trillion or 15.71% from the prior year-end, representing 78.54% of the Group’s total assets. Total liabilities of the domestic operations amounted to RMB8 trillion, an increase of 15% from the prior year-end. In 2010, domestic operations reported an after-tax profit of RMB85.82 billion, an increase of RMB21.44 billion or 33.30% compared with the prior year, representing 78.24% of the Group’s profit for the year. Net interest margin of domestic RMB businesses increased by 6bps compared with the prior year. NIM of both RMB and FX business achieved steady quarterly improvement, with an increase of 14bps and 15bps quarter-on-quarter, respectively, in the fourth quarter. The credit cost of domestic operations was 0.33%, a decrease of 0.11 percentage point compared with the prior year.

Competitive advantages in overseas operations
BOC is the most internationalized and diversified bank in China. At the end of 2010, the assets and after-tax profit of the overseas operations contributed 21.46% and 21.76% to the Group, respectively. In 2010, the Bank set up 13 new overseas institutions and has covered Hong Kong, Macau, Taiwan and 31 countries and regions. The proportion of assets and after-tax profit, the number of overseas branches and the domicile countries all lead other Chinese peers.

In 2010, the Bank continued to push forward the integrated development of its domestic and overseas operations. The Bank supported 1300 “Going Global” projects with aggregate contract value of USD190 billion, covering over 100 countries and regions. In 2010, the Bank reached a record high of total international settlement business volume, exceeding USD1.97 trillion and remained the world leader. Based on the advantages of its global presence and international business, the Bank became the first mover and leader in cross-border and overseas RMB businesses, benefiting greatly from RMB internationalization. In 2010, domestic operations conducted more than RMB160 billion of cross-border RMB settlement business, and BOCHK conducted more than RMB350 billion of cross-border RMB clearance and settlement business.

Asset quality continued to improve
In 2010,BOC further enhanced its comprehensive risk management system through strict control of the key monitored industries, improving market risk management ability, and accelerating the implementation of Basel II. The Bank’s asset quality continued to improve in 2010 with both non-performing loans and NPL ratio decreased. As at the end of 2010, the Group’s non-performing loans totalled RMB62.47 billion, representing a decrease of RMB12.25 billion from the prior year-end. The ratio of non-performing loans to total loans dropped by 0.42 percentage point to 1.10% compared with the prior year-end. The ratio of allowance for loan impairment losses to non-performing loans was 196.67%, up by 45.50 percentage points from the prior year-end. The credit cost was maintained at a relatively low level of 0.29%, a decrease of 0.09 percentage point compared with the prior year. As a result of rebound in securities prices and the repayment of principal and interests of foreign currency bonds, the Group realized a write-back of impairment losses on debt securities of RMB2.95 billion.

In 2010, the Bank achieved staged goal of the implementation of New Capital Accord. The Bank has essentially completed the implementation of Pillar I of Basel II. In respect of credit risk, the Bank established and upgraded its internal rating system covering corporations and financial institutions, as well as sovereign risk exposure and risk separation system covering retail risk exposure. In respect of market risk, the Bank launched internal models on the group-wide and legal entity-wide basis. In respect of operational risk, the Bank measured its risk and relevant capital charges for the eight business lines identified under the Basel II standardized approach and took the initiative in China to launch the risk-weighted assets engine earlier than Chinese peers. The Bank made remarkable progress in areas related to Pillar II and Pillar III. The Bank pushed forward the launching or upgrading of ten Basel II related systems including facility rating, risk mitigation and internal model approach implementation, and further enhanced the automatic integration of risk data.

New progress in infrastructure construction
In 2010, BOC made steady progress in channel development. With coordinated development of traditional outlets and electronic channels, the Bank’s service efficiency and quality were greatly improved. Domestic business outlets standardization was almost finished as overall efficiency improved. As a result, the average deposits and income per domestic outlet increased by 10.6% and 20.4% respectively from the previous year. The Bank has further optimized its e-banking channels, such as online banking, telephone banking, mobile banking, self-service banking, and home banking, so as to provide customers with safe, convenient and integrated online financial services.

The Bank achieved a breakthrough in implementing its IT Blueprint project. The new Core Banking System has been implemented across 23 branches. It has been operating smoothly, supporting more effective business development and receiving positive customer feedbacks. Now the Bank is promoting the IT Blueprint project to the rest of branches and expected to complete domestic implementation by the end of 2011. This new system fully represents the service concept of "customer centric" and provides customers with more convenient and efficient financial services.

Effective capital replenishment
In 2010,BOC successfully completed the issuance of A-share convertible bonds amounting to RMB40 billion and A&H rights issues amounting to RMB60 billion. The successful capital replenishment not only met with the regulator’s requirements, but also laid a solid foundation for the Bank’s future business development. At the end of 2010, the Group’s capital adequacy ratio was 12.58% and its core capital adequacy ratio was 10.09%, an increase of 1.44 percentage points and 1.02 percentage points respectively from the prior year-end. The Bank will take a number of measures to strengthen capital management. First, the Bank will strengthen capital constraint by enhancing capital budgeting and performance evaluation mechanism. Secondly, the Bank will improve the efficiency of capital utilization by optimising the structure of both on and off the balance sheet assets.

In 2011, the global economy may continue a slow and weak recovery while China is going to implement the 12th Five-Year Plan. The banking industry will still face significant strategic opportunities. BOC will continue to focus on scientific development, and accelerate the transformation of its development model. We will continue to fully implement strategic development plan, seize opportunities to explore new areas of business and promote innovation, transformation and cross-border development. With the aim of becoming a leading international banking group, we will celebrate the Bank’s 100th year anniversary with outstanding performance.