OUR PERFORMANCE financial companies, 11 securities companies
and 31 fund companies have become members of Golden Orange Club. Other membership platforms are still under construction. Ping An Bank introduced its “Daidai Ping An Commercial Card”, which provides one-stop solution for small enterprises to enjoy comprehensive integrated financial services including deposit, borrowing, settlement and wealth management. Leveraging on the opportunity in internet and big data era, Ping An Bank upgraded its trade finance services and realized “four streams come into one”, namely commercial stream, fund stream, information stream and logistic stream.
Meanwhile, Ping An Bank upgraded “Ping An Pocket Bank” which enhanced customer’s mobile payment experience and established a platform called Inter-bank E Express to provide products and services for large number of medium and small commercial banks.
By actively adjusting business structure with effective cost management, in 2013, the key performance indicators of Ping An Bank continued to be favorable, while quality and efficiency continued to rise. The banking business realized a net profit of RMB14,904 million, up by 12.6% as compared with last year, and profit contribution to the Group reached RMB7,807 million. Non-interest net income kept a stable growth rate, by reaching RMB11,500 million, growing 68.8% as compared with last year. The non-interest net income contributed to 21.9% of the net operating income, up by 4.9 percentage points compared with last year, which further improved the income structure.
In 2013, the cost/income ratio was 41.75%.
Strategies such as operational transition and expansion of outlets were implemented while maintaining reasonable growth in costs.
Ping An Bank ramped up its network expansion, with the number of business outlets growing rapidly. In 2013, five branches, namely the Xian branch, Suzhou branch, Linyi branch, Leshan branch and Xiangyang branch, and 73 sub-branches were officially opened. As at the end of 2013, the number of Ping An Bank’s outlets reached 528, up by 78 compared to the end of 2012. The strategic allocation of banking institutions became complete, and we are well-equipped to meet the requirement to serve the group’s integrated financial strategy and customer demand, promoting the development of banking business.
In 2013, the Group has successfully completed the capital injection of RMB14,782 million to Ping An Bank, which significantly improved the Bank’s capital adequacy. As at the end of 2013, the capital adequacy ratio of Ping An Bank was 9.90%, with both tier one capital adequacy ratio and core tier one capital adequacy ratio of 8.56%, under the “Capital Rules for Commercial Banks (Provisional)” enforced by the CBRC. Ping An Bank continued to tighten risk regulation, improve risk management system, and maintain a stable quality of assets.
As at the end of 2013, the non-performing loans ratio was 0.89%, 0.06 percentage points lower over the beginning of the year. The provision coverage ratio was 201.06% while the loan loss provision ratio was 1.79%, representing an increase of 18.74 percentage points and 0.05 percentage points respectively, over the start of the year.
Management Discussion and Analysis Banking Business
RESULTS OF OPERATION
Pursuant to the Accounting Standards for Business Enterprises, the identifiable assets and liabilities acquired upon the merger with Original SDB were to be recognised and measured at fair value on the date of merger.
As a result, the figures of Original SDB in the consolidated financial statements of the Group were the results of further calculation on the basis of the fair value of its assets and liabilities on the date of merger. Therefore, there were differences between the data and indicators of operating results of the Group’s banking business and those of the consolidated results of operations of Ping An Bank as disclosed in its annual report.
(in RMB million) 2013 2012
Interest income 93,293 74,852
net of reversals (6,675) (3,038) Foreign currency gains
or losses (163) 249
General, administrative
and other expenses(1) (26,186) (19,910) Total expenses (86,788) (65,036)
Income tax (4,739) (3,975)
Net profit 14,904 13,232
(1) General, administrative and other expenses include general and administrative expenses and other expenses.
In 2013, the banking business maintained stable growth in profitability, which realized a net profit of RMB14,904 million. Profit contribution to the Group reached RMB7,807 million, representing a growth of 13.6% from 2012.
NET INTEREST INCOME
(in RMB million) 2013 2012
Interest income
Due from the PBOC 3,315 2,691 Due from financial
institutions 19,188 9,703
Loans and advances
to customers 53,528 44,880
Interest income on investment
securities 17,033 10,226
Others 229 7,352
Total interest income 93,293 74,852 Interest expenses
Due to the PBOC (32) (27)
Due to financial
institutions (24,457) (15,135) Customer deposits (27,254) (23,120)
Bonds payable (656) (1,032)
Others – (2,295)
Total interest expenses (52,399) (41,609) Net interest income 40,894 33,243 Net interest
(1) Net interest spread (NIS) refers to the difference between the average interest-earning assets yield and the average cost rate of interest-bearing liabilities.
(2) Net interest margin (NIM) refers to net interest income/
average balance of interest-earning assets.
OUR PERFORMANCE Net interest income increased 23.0% to
RMB40,894 million in 2013 from RMB33,243 million in 2012, mainly due to the effect of an expanded scale of interest-earning assets and improved asset-liability structure.
NET FEES AND COMMISSION INCOME
(in RMB million) 2013 2012
Fees and commission income
Settlement fees
income 1,220 894
Agency commissions 728 771
Bank card fees
income 4,996 2,484
Wealth management
fees income 1,467 654
Consultancy fees
income 1,895 452
Account management
fees income 282 410
Others 1,233 785
Total fees and
commission income 11,821 6,450 Fees and commission
expenses
Agency expense (223) (111)
Bank card fees
expenses (1,044) (511)
Others (98) (106)
Total fees and
commission expenses (1,365) (728) Net fees and
commission income 10,456 5,722
Net fees and commission income increased to RMB10,456 million in 2013 from RMB5,722 million in 2012, up by 82.7%, which was benefited from the increased intermediary income arising
from the rapid growth of investment banking, depository business and credit card business, as well as the excellent performance of the wealth management and settlement business in scale and gain.
GENERAL, ADMINISTRATIVE AND OTHER EXPENSES
(in RMB million) 2013 2012
General and
and other expenses 26,186 19,910 Cost/income ratio 41.75% 40.61%
(1) Cost/income ratio is calculated as dividing the sum of general and administrative expenses and other expenses, deducting the business tax and surcharges, by operating income. Interest expenses, fees and commission expenses and non-operating income are excluded from operating income.
General, administrative and other expenses increased by 31.5% to RMB26,186 million in 2013 from RMB19,910 million in 2012, mainly due to the expansion in staff, branches and business scale, as well as continuous investment in the optimization of management workflow and the IT system. Cost/income ratio increased 1.14 percentage points to 41.75% in 2013 from 40.61%
in 2012.
LOAN LOSS PROVISIONS, NET OF REVERSALS Loan loss provisions, net of reversals, increased greatly from RMB3,038 million in 2012 to
RMB6,675 million in 2013, mainly due to the increase in provision coverage.
Management Discussion and Analysis Banking Business
INCOME TAX
2013 2012
Effective tax rate (%) 24.13 23.10
(1) Effective tax rate refers to income tax/profit before tax.
The effective tax rate increased from 23.10% in 2012 to 24.13% in 2013.
Deposit Mix
(in RMB million) December 31,
2013 December 31,
December 31, 2013 (December 31, 2012)
Corporate deposits 82.6 (82.3) Retail deposits 17.4 (17.7)
The total deposits increased by 19.2% to RMB1,217,002 million as at December 31, 2013 from RMB1,021,108 million as at December 31, 2012. Both types of deposits maintained stable growth.
Loan Mix
(in RMB million) December 31,
2013 December 31, 2012
Corporate loans 521,639 494,945
Retail loans 238,816 176,110
Accounts receivable
on credit cards 86,834 49,725
Total loans 847,289 720,780
Loan mix (%)
December 31, 2013 (December 31, 2012)
Corporate loans 61.6 (68.7) Retail loans 28.2 (24.4) Accounts receivable on credit cards 10.2 (6.9)
Ping An Bank continuously put effort in developing personal financial businesses, including the areas of retail, microfinance, credit card, automobile finance and so on.
Total loans increased by 17.6% to RMB847,289 million as at December 31, 2013 from RMB720,780 million as at December 31, 2012. Corporate loans increased by 5.4% to RMB521,639 million, contributing 61.6% to total loans as at December 31, 2013 (as at December 31, 2012: 68.7%). Retail loans increased by 35.6%
to RMB238,816 million, contributing 28.2% to total loans as at December 31, 2013 (as at December 31, 2012: 24.4%). Accounts receivable on credit cards increased by 74.6% to RMB86,834 million, contributing 10.2% to total loans as at December 31, 2013 (as at December 31, 2012:
6.9%).
LOAN QUALITY
(in RMB million) December 31,
2013 December 31,
OUR PERFORMANCE As at the end of 2013, the carrying amount of
non-performing loans was RMB7,541 million, up by RMB675 million compared with the amount at the end of 2012; the non-performing loan ratio was 0.89%, decrease by 0.06 percentage points over the end of 2012; the provision coverage ratio was 201.06%, up by 18.74 percentage points from the end of 2012.
Loan quality by region
December 31, 2013 December 31, 2012 (in RMB million) Amount
performing
Non-loan ratio Amount
performing Non-loan ratio
East 266,690 1.05% 248,688 1.06%
South 219,911 0.49% 216,672 0.47%
West 85,720 0.31% 60,122 0.35%
North 158,228 0.36% 137,167 0.53%
Headquarter 116,740 2.40% 58,131 3.89%
Total 847,289 0.89% 720,780 0.95%
In 2013, in compliance with the China’s macro-control policies and regulatory requirements, Ping An Bank strengthened the foundation of its credit risk management, raised the standard of credit risk management, maintained stable asset quality and further enhanced the risk prevention capability. It did these by rebuilding organization structure, improving risk management policies, optimizing workflow and stepping up efforts on loan recovery. Going forward, Ping An Bank will further optimize its credit structure, prevent and mitigate potential risks associated with existing loans, tightly control the growth of non-performing loans, maintain stable asset quality, as well as steadily raise the provision coverage ratio and loan loss provision ratio.
CAPITAL ADEQUACY RATIO
Calculated under the “Capital Rules for Commercial Banks (Provisional)” enforced by the CBRC:
(in RMB million) December 31,
2013
Net core tier 1 capital 100,161
Net tier 1 capital 100,161
Net capital 115,884
Total risk weighted assets 1,170,412 Core tier 1 capital adequacy ratio
(regulatory requirement>=5.5%) 8.56%
Tier 1 capital adequacy ratio
(regulatory requirement>=6.5%) 8.56%
Capital adequacy ratio
(regulatory requirement>=8.5%) 9.90%
Note: Capital requirement in regard to credit risk, market risk and operation risk was measured in weighted method, standard method and basic index method, respectively.
Calculated under the “Rules for Regulating the Capital Adequacy Requirement of Commercial Banks” and relevant regulations enforced by the CBRC:
requirement >=8%) 11.04% 11.37%
Core capital adequacy ratio (regulatory
requirement >=4%) 9.41% 8.59%
On June 7, 2012, the CBRC announced the “Capital Rules for Commercial Banks (Provisional)” (the “Rules”), which took effect from January 1, 2013. The Rules require commercial banks to meet the required capital adequacy ratio by the end of 2018. The Rules expand risk coverage, raise the risk sensitivity of regulatory capital and impose more prudent requirements on capital measurement.
As at December 31, 2013, calculated under the Rules enforced by the CBRC, capital adequacy ratio was 9.90%, with both tier 1 capital adequacy ratio and core tier 1 capital adequacy ratio of 8.56%, while calculated under the “Rules for Regulating the Capital Adequacy Requirement of Commercial Banks”
and relevant regulations enforced by the CBRC, capital adequacy ratio was 11.04%, with core capital adequacy ratio of 9.41%, all of which met the regulatory requirements.