China Construction Bank reports operating results for the third quarter of 2020
Intensifying efforts to serve the real economy and enhancing digital operation capabilities
China Construction Bank Corporation (“CCB”) (A-share stock code SH:601939; H-share stock code HK:939) released its operating results for the third quarter of 2020 on October 29, 2020. (The following data for the Group are prepared in line with International Financial Reporting Standards and denominated in RMB). According to the report, CCB has continued to develop its three key strategies of housing rental, inclusive finance, and FinTech since the beginning of the year, actively exploring digital business models, and contributing financial strength to post-pandemic production recovery and economic and social development. It maintained steady development in the first three quarters, with its core performance indicators such as asset size, profitability, and asset quality in line with expectations.
As of September 30, 2020, CCB's assets and liabilities have grown steadily, and rapid deposit and loan growth has been observed. Its assets totaled 28,298.121 billion, up by 2,861.860 billion or 11.25% from the end of 2019. Its liabilities totaled 25,952.251 billion, up by 2,751.117 billion or 11.86% from the end of 2019. Loans and advances totaled 16,711.368 billion, up by 1,688.543 billion or 11.24% from the end of 2019. Deposits totaled 20,941.183 billion, up by 2,574.890 billion or 14.02% from the end of 2019. CCB's capital adequacy ratio was 16.88%. Specifically, the Tier 1 ratio was 13.86% and the Core Tier 1 ratio was 13.15%, both conforming to regulatory requirements.
According to the report, In the first three quarters of 2020, CCB offered more benefits to the real economy through various ways such as fee reduction and debt service deferral, and at the same time proactively digested risks and saw an increase in impairment losses. It recorded a net profit of 207.609 billion, of which the net profit attributable to shareholders was 205.832 billion, down by 8.70% and 8.66% year-on-year, respectively. Annualized return on average assets was 1.03% and annualized return on average equity was 12.53%. Net interest income totaled 404.787 billion, up by 6.41%. Net fee and commission income increased by 6.66% year-on-year. Net interest spread was 1.99%, and net interest margin was 2.13%, down by 0.13 and 0.14 percentage points year-on-year, respectively, due to the impact of by factors such as the steady advancement of interest rate marketization and lower market interest rates over the same period last year. CCB's intermediary services posted steady income growth. Net fee and commission income came in at 113.507 billion, with the year-on-year growth rate slowing down to 4.17% as CCB reduced its fees to benefit the real economy. On the other hand, CCB’s credit card, electronic banking, trust and fiduciary activities achieved strong product development. Its cost-to-income ratio was 22.33％, down 0.91 percentage points year-on-year. According to the five-category classification of loans, CCB’s non-performing loans (NPLs) amounted to 255.528 billion, an increase of 43.055 billion from the end of 2019. Its NPL ratio was 1.53%, up 0.11 percentage points from the end of 2019. Its allowances to NPLs was 217.51%, down 10.18 percentage points from the end of 2019.
In the third quarter, the global pandemic failed to be fully contained, exerting a serious impact on the world economy. The global economic situation is complex and volatile, and uncertainties and instability factors are gradually increasing. Changes in the pandemic situation remain an important factor affecting economic recovery. CCB is actively fulfilling its responsibilities as a major bank, fully supporting the prevention and control of the pandemic and the resumption of work and production, intensifying its efforts to serve the real economy, vigorously promoting digital operations and services, and striving to achieve high-quality development.
Ensuring proper normalization of pandemic prevention and control, and intensifying efforts to serve the real economy. Since the beginning of the year, CCB has been improving the quality and efficiency of its efforts to serve the real economy, unleashing credit resources through multiple channels, increasing the support it provides, and conducting "precise drip-irrigation" in key areas to enhance its support efficiency and promote high-quality economic development. It optimized its emergency response mechanism, improved its emergency response plan and strengthened its business continuity management to ensure the health of its employees and the security of its business operations to the greatest extent. It adjusted its risk limits and credit policies, and optimized its customer ratings and credit approval procedures. It also increased its extension of credit, focusing on meeting the credit needs of pandemic prevention and control and the resumption of production and related industries, inclusive finance, and manufacturing, so as to fully protect market players. It adopted measures such as deferred repayment of principal and interest, deadline extension, and loan renewal to help ease the burden of customers affected by the pandemic. It stepped up support in terms of inclusive credit and service fee reduction and waivers, continued to enhance its service coverage, and promoted "quantitative increase, price reduction, quality improvement, and coverage expansion" in terms of small and micro enterprise financing. It deeply cultivated the housing rental market, actively revitalized vacant and idle housing to increase the supply of rental housing, vigorously promoted the implementation of policy-based rental housing projects, continued to promote financial product innovation, employed the REIT model to successfully complete the first transaction under the pilot project of equity transaction service for housing leasing companies in China, and guided more social funds to participate in the construction of the housing rental market, providing support for large-scale operations of housing leasing enterprises and effectively playing a leading and exemplary role as a state-owned enterprise.
Business empowerment through FinTech; enhanced digital operation capabilities. CCB provided high-quality and efficient online financial services to personal and corporate customers by tapping the “Cloud Workshop”. It launched the "Quick Loan" series and other consumer credit services that are handled online throughout the process to offer personal customers with more convenient consumer financing services. It gave full play to the advantages of its online platform “CCB Match-Plus” to achieve full-process digital online exhibition operation and cross-border matching. CCB used scientific and technological means to empower its inclusive finance customer base. In terms of innovative upgrade, it launched "Huidongni" 2.0, achieving "one-stop" services, "one-minute" financing and "one-price" financing with credit financing as the core as it continued to reduce the financing costs of SMEs in the real economy. It built online e-commerce and matching platforms, and a new model of poverty alleviation through consumption that combines offline dedicated areas, outlets and counters to comprehensively help ease poverty and promote rural revitalization. It facilitated the dissemination, collection and reporting of pandemic prevention and control information and medical resource allocation with its smart government affairs platform, helping to build a national pandemic information release network. It also launched the “CCB Smart Community Management Platform”, helping urban and rural communities build an integrated “online + offline” pandemic prevention and control system.
Adopting forward-looking measures to proactively address risks and consolidating the foundation of asset quality. CCB adhered to the guiding principle that business development should be bounded by its risk management and control capabilities, and solidly developed a comprehensive, proactive, and intelligent risk prevention, monitoring and management system. The Group accelerated the construction of a unified risk picture and enhanced its collaborative risk control capabilities. It actively carried out multiple rounds of special stress tests to assess the impact of the spread of the pandemic on asset quality and the achievement of business objectives. It fully considered the uncertainties that the macro economy might face, made prudent provisions, intensified the disposal of risky assets, and enhanced its ability to offset risks.
CCB stated that its next step would be to uphold its philosophy of stable operation and value creation, calmly deal with the complex economic and financial situation, lend its hand in the prevention and control of the pandemic, support economic and social development, strive to nurture new opportunities amid the crisis, develop new opportunities amid changes, continuously increase its exploration and development of new finance, promote its "Three Major Strategies" in depth and breadth, innovate its digital business model, maintain stable, balanced and sustainable business performance, strive to achieve high-quality development, and contribute financial power in accelerating China’s establishment of a new development pattern featuring dual circulation, which takes the domestic market as the mainstay and allows domestic and foreign markets to boost each other.