24 October 2008 -- China Construction Bank Corporation (“CCB” or “the Bank”) today announced its 2008 third quarter business results amid the volatile global financial situation. According to the report, in the first three quarters of 2008, CCB achieved steady growth in its assets and liabilities; further entrenchment of its business structure fine-tuning; and continued increase of its overall profitability and risk management capability.  Additionally, CCB was able to maintain momentum in the development of all its business lines and all its core performance indicators remained among the best in the industry both domestically and internationally.  CCB's operating income for the first three quarters this year was 199.578 billion (The monetary figures mentioned below are calculated in accordance with the International Accounting Standards and are denominated in RMB unless otherwise specified.), an increase of 25.11% over the same period last year.  Meanwhile, its net profit reached 84.267 billion, an increase of 47.58% compared with the same period over the previous year, while earnings per share rose by 44.00% to RMB0.36 over the same period last year.  As at 30 September 2008, CCB’s weighted annualised return on average equity was 24.91% and net interest margin was 3.30%, respectively an increase of 2.81 and 0.15 percentage points over the same period last year.  CCB’s risk mitigating capability continued to strengthen: its ratio of allowances to non-performing loans was 119.41%, an increase of 22.4 percentage points over the same period last year, while its non-performing loan ratio was 2.17%, a decrease of 0.66 percentage points compared with the same period last year.

Steady growth in assets and liabilities; further optimisation in credit structure

As of 30 September 2008, CCB’s total assets reached 7.32 trillion, an increase of 725.5 billion or 10.99% over the end of last year.  At the same time, its total liabilities amounted to 6.84 trillion, an increase of 668.2 billion or 10.82% over the end of last year.  While duly implementing the macroeconomic control policies of the State and operating prudently in compliance of laws and regulations, CCB was able to reasonably allocate its credit resources, adjust its credit structure, increase its resource skewing efforts and commit itself to the healthy and speedy development of the national economy.  As at the end of September, its net loans and advances to customers totalled 3.53 trillion, an increase of 350.0 billion or 10.99% over the end of the previous year.  Deposits from customers, meanwhile, amounted to 6.11 trillion, an increase of 782.3 billion or 14.68% over the end of last year.

Improvement of internal management processes; expansion of strategic cooperation dimensions

CCB had been striving to instil its “customer-centric” corporate culture into all its systems and processes by carrying out evaluation of its banking operation activities from the viewpoint of its customers, by reforming its internal management structure and by improving its business processes.  In the first three quarters of 2008, CCB had initiated 305 process optimisation projects while continuing its efforts in reengineering projects to separate front and back office operations and to achieve a flatter organisation structure.  CCB’s professional operation level was on the rise.  As at the end of September, it had set up and started operating 85 new wealth management centres and 2 private banks, 50 small-business operating centres and 272 personal loan centres. It has also established a major-customer service team and a direct sales team.  Meanwhile, CCB had further increased the breadth and depth of its strategic cooperation with the Bank of America with the view to improve its customer service and risk management capabilities.  So far this year, it had implemented 13 strategic cooperation projects, 11 experience sharing projects and 7 consulting projects covering areas such as the transformation of retail business, financial leasing and credit card business, etc.  As at the end of September, it had already completed the transformation of 10,275 or 79% of its retail outlets.  CCB had effectively improved customer experience by setting up five customer experiencing centres and by revamping its sales and service processes for VIP customers.  With the implementation of scorecards for mortgage lending and credit cards, it had made a major step in unifying bank-wide standards in retail risk and in raising its risk management levels.

Steady development of established business; rapid growth of agriculture-related and small enterprise businesses

In the first three quarters of this year, while CCB’s infrastructure loan business and credit card business recorded sound development, its personal residential mortgage loans registered steady growth, the quarterly growth of its real estate development loans witnessed continued decline, and both the amount and the ratio of non-performing loans for industries affected by the state’s tightening macroeconomic controls dropped.  For CCB as a whole, the balance of loans to customers with credit ratings of AA and above accounted for 79.56% of all loans, which was an increase of 3.62 percentage points from the beginning of the year.  Meanwhile, to meet the diversified financial needs of China’s new rural construction, the Bank strengthened its efforts in developing innovative new products and services.  Subsequently, loans related to agriculture, rural areas and peasantry surged.  As of the end of August 2008, agriculture-related loans amounted to 411.4 billion, representing an increase of 76.0 billion or 22.64% since the beginning of this year.  In support of robust development of small enterprises, CCB had been advancing the construction of a financial service system to provide them with professional services.  As of 30 September 2008, the balance of loans to small enterprises amounted to 254.8 billion, an increase of 40.5 billion since the start of the year.

Continued improvement in income structure and profit model; sustained strengthening of overall profitability

While rigorously implementing national policies, CCB had been actively driving its strategic transformation.  CCB also made considerable efforts to focus on various lines of business simultaneously that cater to both the domestic and overseas markets, diversify income sources and sustain its profitability.  As of 30 September 2008, it realised a net profit of 84.267 billion, of which 84.233 billion was attributable to shareholders.  These amounts were respectively 47.58% and 47.71% higher than those in the same period a year earlier.  On the other hand, net interest spread was 3.17% and net interest margin was 3.30%, respectively a rise of 0.13 percentage points and 0.15 percentage points over the same period a year before.  Net interest income was 168.170 billion, a growth of 20.73% over the same period in the previous year.  With the continued rapid development of its intermediary business, CCB registered net fee and commission income of 29.572 billion, an increase of 28.99% over the same period last year.

Strengthening of basic management, risk management and internal controls; continued enhancements in asset quality

In accordance with the requirements of the scientific outlook on development, CCB has implemented the risk management concepts in detail, through innovations in its internal risk control mechanisms and focused efforts to raise the professionalism and quantification level of its risk management.  As at the end of September 2008, the balance of its non-performing loans was 6.633 billion less than that at the end of last year and the non-performing loan ratio of 2.17% was a decrease of 0.43 percentage points compared with the year end of 2007.  CCB’s ratio of allowances to non-performing loans was 119.41%, which was an increase of 15.00 percentage points over the end of last year.  Its core capital adequacy ratio of 10.20% and capital adequacy ratio of 12.10% were maintained at decent levels.

Actively responding to the international financial market turmoil; reinforcing its prudent operating capabilities

Since this year, as CCB was monitoring the development of the ongoing global financial market crisis, it had voluntarily minimised the amount of its foreign currency debt securities investments and took opportunities to reduce some of its holdings in institutional debts, corporate debts and mortgage backed debt securities with relatively higher risks.  This way, it had effectively reduced its risk exposures.  As at the end of September, the book value of the foreign currency debt securities held by CCB was reduced by about US$18.6 billion from the beginning of this year.  The total amount of foreign currency debt securities held was just 1.8% of its total assets.  The amounts of US Treasury Bonds and other normal foreign currency debt securities accounted for 88.5% of the total amount of foreign currency debt securities, whereas the amounts of securities backed by US sub-prime mortgage loans and Lehman Brothers Holdings Inc. related bonds were respectively 1.25% and 0.98% of the total amount of foreign currency debt securities.  Thus the volatility of market values in the debt securities market had only minimal effects on CCB profits.  Recently, in accordance with prudence principles, CCB had sufficiently charged against allowances for impairment losses on its foreign currency debt securities holdings. 

Commitment to disaster relief and Olympic financial services and to undertake corporate social responsibility

While achieving steady development, CCB had been proactive in implementing its mission of “assuming full responsibility as a corporate citizen”.  Since the Sichuan earthquake, CCB had already donated a cumulative total of 176 million to the affected areas.  Confronted with natural disasters like the earthquake and the severe snowstorm that affected southern China early in this year, CCB developed numerous innovative measures to support these communities.  By employing special handling procedures to deal with various special circumstances, it was able to offer quality and efficient financial services to support disaster relief and reconstruction efforts.  As a result, the full amount of post-disaster reconstruction funds was dispensed in a timely manner.  As of the end of September, CCB extended post-disaster reconstruction loans totalling 45.735 billion, of which 21.712 billion went towards the Sichuan earthquake and 24.023 billion were directed towards the snowstorm disaster in southern China.  CCB also committed to providing financial services for the Beijing Olympics this summer.  In addition to launching the 95533 multi-lingual phone-banking services, it also collaborated with the Bank of America in developing a service allowing athletes and tourists holding Bank of America debit cards or credit cards to make free-of-charge cash withdrawals at CCB ATMs.  Meanwhile, CCB continued to advance various charity projects such as the “Sponsorship Programme for Impoverished High School Students" and the “Financing Programme for Impoverished Mothers of Heroes & Exemplary Workers in China”, etc.

In view of the turbulence in international financial markets and the various situations and issues that arise when operating in the domestic economy, CCB will rely on the scientific viewpoint on development as guidance. CCB will also abide by the requirements of related national policies in gleaning lessons from its experience.  It will continue to respond calmly and adopt corresponding measures actively with the aim to continually raise its customer service standards and risk management capabilities.  CCB will speed up its pace of strategic transformation and will conscientiously fulfil its annual goals to ensure that all lines of CCB business develop soundly and quickly.

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