China Construction Bank Corporation (”CCB”) announced its 2009 third quarter results on 23 October 2009.  In this quarter, CCB was able to achieve steady growth in net profit and declines in both the amount and ratio of non-performing loans. This was achieved through a proactive yet prudent operating approach, by stepping up the pace of business structure adjustments and by advancing the total risk management.

Steady growth in asset and profit; overall stabilisation of performance indicators.  In the third quarter of this year, though affected by factors such as a narrowing of interest spreads, CCB realised a net profit of RMB30,321 million (unless otherwise specified, the Group’s data set forth herein is reported in RMB in accordance with International Financial Reporting Standards on a consolidated basis), an increase of 18.56% on the year, while earnings per share rose 18.18% on the year to RMB0.13.  As of 30 September, CCB achieved in the first three quarters a net profit of RMB86,162 million, a year-on-year growth of 2.25%.  It also achieved a net fee and commission income of RMB35,763 million, an increase of 20.94% over the same period last year.  During the same period, total assets grew 23.80% from the end of last year to RMB9,353,972 million, while total liabilities grew 24.39% to RMB8,816,947 million, providing a firm base for realising sustainable development.

As assets and operating profits were growing steadily, CCB’s key performance indicators maintained overall stability.  The net interest spread and net interest margin were 2.30% and 2.41% respectively in the first three quarters.  While these figures were lower than those in the corresponding period a year earlier, the decline has been further narrowed down.  In the same period, annualised return on average equity was 22.78%, an increase of 0.24 percentage points from the first half of the year.  Cost-to-income ratio was maintained at a relatively low level of 35.55%.

Reasonable control of credit supply tempo; tangible results obtained from structural adjustment.  So far this year, CCB has been implementing conscientiously the moderately easy monetary policy and keeping credit supply under reasonable control.  As of 30 September, its net loans and advances to customers was RMB4,563,208 million, up RMB879,633 million or 23.88% from the end of last year.

CCB is making “structural adjustment” a key focus in credit management.  CCB’s competitive traditional businesses that have undergone consolidation are being integrated into the rapid development of innovative new businesses.  The allocation of credit resources is being further optimised.  As of 30 September, loans extended to infrastructure industries increased by 27.47% from the end of last year to RMB1,514,915 million.  The growth rate is higher than the average growth rate of all corporate loans. The balance of personal loans of domestic branches amounted to RMB1,030,286 million, of which the balance of residential mortgage loans was RMB876,411 million, leading the industry in terms of balance and incremental amount.

In the first three quarters of this year, CCB's credit supply to new business areas such as small enterprises and the “Three Rurals" (agriculture, rural areas and farmers) has seen sustained growth.  An online banking loan risk pool for small enterprise was set up jointly with the People’s Government of Zhejiang Province and Alibaba. “Swift E Loan”, an online banking lending business, has been expanded in Beijing, Shanghai and Zhejiang regions.  The number of business centres for small enterprises operated under the “Credit Factory" mode has increased to 122, an increase of 44 centres from the beginning of the year.  As of 30 September, new loans extended to small and medium enterprises grew 16.5% or RMB169.3 billion.  During the same period, agriculture-related loans have increased 31.52% or RMB134,397 million.

CCB has been strictly restricting loans to “high pollution, high energy consumption, resource-dependent” and overcapacity industries, as a key measure to adjust its credit structure.  It has also improved its watch list management.  In the first three quarters of this year, it voluntarily withdrew RMB55.8 billion in loans to achieve optimisation of its asset structure.

Continued redoubling of risk monitoring efforts; comprehensive strengthening of post-lending management.  In the first three quarters of this year, in the face of new developments in the economic and financial situation, CCB upheld its credit approval standards by enhancing the post-lending inspection efforts and seriously monitoring the usage of its loans.  Consequently, the refinement and differentiation levels of its risk management have been enhanced significantly.

As of 30 September, the balance of CCB’s non-performing loans was RMB73,682 million, a decline of RMB10.2 billion from the end of last year.  Its non-performing loan ratio was 1.57%, down by 0.64 percentage points from the end of the previous year.  This enabled CCB to maintain its “double decline” trend, of which, the non-performing loan ratio for residential mortgage loans of domestic branches was 0.58%, revealing the soundness of such loans.  The ratio of allowance to non-performing loans was 161.08%, an increase of 29.50 percentage points from the end of the previous year, reflecting the continuous strengthening of CCB’s risk mitigation capabilities.

As of 30 September, CCB’s total equity was RMB537,025 million, a growth of RMB69,463 million or 14.86% from the end of last year.  Its core capital adequacy ratio was 9.57%, an increase of 0.27 percentage points from the end of the first half of the year; while its capital adequacy ratio was 12.11%, up 0.14 percentage points from the end of the first half of the year.

Services increasingly professional and refined; service quality and efficiency steadily improved.  CCB has set raising the refinement and professional levels of its customer service as its key objectives.  In September this year, by adopting the experience and technology of Bank of America, CCB set up the first ever product innovation laboratory in China’s banking industry.  This laboratory is used for the collection and screening of product ideas from customers and other sources, providing an important basis for business innovation.  In the area of meeting customer needs, CCB has extended and optimised various functions of mobile banking and continued to be the leader in the domestic banking industry, with customers exceeding 10 million.  CCB has also enhanced online banking security by launching an SMS verification service for personal online banking business and introduced “E-Guard online banking security components”.  It was the pioneer in introducing the function for making fund transfers from the channel of online banking to mobile banking.  CCB’s ratio of e-banking transactions to over-the-counter transactions has risen continuously. It has also issued more than 23 million credit cards with the transaction amount for consumption and the amount of new loans leading the domestic banking sector.

In the area of integrated services, it has been earnestly undertaking branch transformation Gen II project, with the main aim of optimising service processes targeting medium to high-end customers.  As of 30 September, more than 770 of its branches have undergone a Gen II transformation.  In August, China Construction Bank (Asia) Corporation Limited, a wholly-owned subsidiary of CCB, succeeded in acquiring AIG Finance (Hong Kong) Limited, a company mainly engaged in credit card and personal loan businesses, thus further improving CCB’s business deployment in the Hong Kong-Macau region.

The current global economic and financial situation is still very complicated and China’s economy is at the critical juncture of stabilising and recovering and regulatory authorities put forward higher requirements on the operation management of commercial banks.  CCB will carefully study the challenges encountered in the operation and management of banks, further advance the adjustment of its business structure, scientifically control the tempo of its credit extension, improve on its long-term risk management system, strive to achieve all development targets set for the current year and continue to contribute towards reinforcing the healthy momentum of steady and brisk economic development.