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Banking Newsletter Review and Outlook of China Banking Industry in 2014
April 2015
www.pwccn.com
12 Major Listed Banks’ NIM edged up by 0.03 ppts
Most listed banks saw their profit growth drop to single-digits in 2014
From this issue, the sample size of the listed banks covered has been expanded from 10 to 12 major listed banks that have released their 2014 annual results on or before 20 April 2015. These 12 banks as defined by the China Banking Regulatory Commission are Large Commercial Banks and Joint Stock Commercial Banks. The total assets of these banks in 2014 accounted for 73.22% of the assets of China’s commercial banking sector.
NPL ratio of 12 Major Listed Banks rose by 0.24 ppts
2.60% 1.23%
Editorial Team
Editor-in-Chief：Yan Hu
Deputy Editor-in-Chief：Luna Liu, Jeff Deng
Macro Overview：Jeff Deng
Listed Banks Analysis：
Joanne Song, Sherry Song, Wendy Li, Grace Rong, Luna Liu, Jeff Ma, Evelyn Liu
Industry Hot Issues:
Yidel Wu, Kiki Chen, Weiwei Su, Ning Liang, Kevin Wang, Jeff Deng
Editorial Team：
Advisory Board：
Raymond Yung, Jimmy Leung, Margarita Ho, Richard Zhu
PwC
Introduction
We are pleased to present our Banking Newsletter (the Newsletter), PwC’s analysis of China’s Listed Banks and the wider industry, which is now in its 22 edition.
To provide a more comprehensive perspective to readers, from this issue we have strengthened the content by including more in-depth analysis from a wide range of perspectives across banking industry and financial markets, as well as an overview of listed banks’ financial results. The sample size of the listed banks covered has also been expanded from 10 to 12 major listed banks (we refer them as the Major Listed Banks in following context) that have released their 2014 annual results on or before 20 April 2015. These banks as defined by the China Banking Regulatory Commission (CBRC) are:
Large Commercial Banks (LCBs)
Industrial and Commercial Bank of China Limited (ICBC)
China Construction Bank Corporation (CCB)
Agricultural Bank of China Limited (ABC)
Bank of China Limited (BOC)
Bank of Communications Co. Ltd (BOCOM)
Joint-Stock Commercial Banks (JSCBs)
China Merchants Bank Co., Ltd (CMB)
Shanghai Pudong Development Bank Co., Limited (SPDB)
China CITIC Bank Corporation Limited (CITIC)
China Minsheng Banking Corporation Limited (CMBC)
China Everbright Bank Company Limited (CEB)
Ping An Bank Co., Ltd (PAB)
Hua Xia Bank Co., Limited (HXB)
The total assets of the Major Listed Banks for 2014 accounted for 73.22% of the assets of China’s commercial banking sector. These banks are presented in order of their total assets size as of 31 December 2014. Unless otherwise stated, all the information in the newsletter comes from publicly available sources, e.g. listed banks’ annual reports and statistics from regulatory bodies. All figures are prepared under China Accounting Standards (CAS) and expressed in RMB (except for ratios).
For more information, please ask your PwC contacts or any of those listed in the Appendix as Banking and Capital Markets Contacts.
Banking Newsletter
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April 2015
PwC
Table of Contents
Banking Newsletter
4
April 2015
1. Macro Overview 5
2. Analysis of Listed Banks’ Results for 2014 13
3. Highlights 39
4. Appendix 53
PwC
1. Macro Overview
• Confidence in emerging economies tested as global growth diverges
• China to be the largest economy under the “new normal”
• Slowdown most significant in property, retail & wholesale, and manufacturing sectors
• Liquidity management remains a challenge despite plenty of measures being implemented
• Banks’ profit growth slows as credit risk accelerates
• 2015：More opportunities than challenges on new growth path
• China banking industry 2014 at a glance
Banking Newsletter
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April 2015
PwC
Confidence in emerging economies tested as global growth diverges
Global economies continued along diverging paths in 2014. The US recorded a strong recovery, which prompted growing expectations of an interest rate hike as the Federal Reserve finally exited quantitative easing (QE). At the same time, the central banks of both Japan and Europe started another wave of QE stimulus, due to their economies’ sluggish growth.
Emerging economies’ growth was challenged too, with China seeing its slowest Gross Domestic Product (GDP) growth of 7.40% in 24 years. Other BRICS countries, i.e. Russia, India, Brazil and South Africa experienced slowdown of different pace.
An earlier PwC survey that targeted CEOs of multinational corporations (MNCs) suggests confidence in US growth has picked up rapidly and is even overtaking that of China, while confidence in Brazil and Russia has dropped (see graph 1).
Banking Newsletter
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April 2015
Graph 1 Top 10 growth markets as picked by Global CEOs, 2015 Vs. 2014
38%
US China
Germany UK
11% Brazil
10% India
9% Japan
8% Russia
6%
Indonesia
6% 34%
Australia
6%
China US
Germany Brazil
12%
UK
10%
India
7%
Russia
7%
Japan
7%
Indonesia
7%
Mexico
5% 30% 33%
19%
17%
2014
2015
Source: PwC 18th Global CEO Survey, respondents include 1,322 CEO from 77 economies across 22 industries.
Note: The survey asked each respondent to select up to 10 economies that they were most confident about. As a result percentages
add up to greater than 100%.
PwC
China to be the largest economy under the “new normal”
Despite the slowdown, China’s growth of 7.40% is still well higher than most other economies in the world, and within the target range (approximately 7.50%) set by the government.
2015 growth target: around 7.00%
China’s growth path has shifted from “high speed to medium-high speed” after three decades of rapid development according to the country’s leadership. President Xi Jinping referred to this new growth path as the “new normal” during the second half of 2014.
In the Government Work Report delivered by Premier Li Keqiang in March 2015, the GDP growth target for 2015 was lowered to approximately 7.00% for the first time, which indicates the Chinese government has adjusted its attitude towards growth.
In a global macro trend study by PwC titled “The World in 2050: Will the shift in global economic power continue?”, it is projected that China will grow at an annual rate of 6.30% in the years leading up to 2020 before slowing further. Despite this, the study still believes that such growth will make China the world’s largest economy (by market exchange rates) in 2028, overtaking the US.
Banking Newsletter
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April 2015
1990, 3.80%
1991, 9.20%
2014, 7.40%
0%
2%
4%
6%
8%
10%
12%
14%
16%
1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014
Source: National Bureau of Statistics & PwC
Graph 2 China GDP growth, year on year
PwC
Slowdown most significant in property, retail & wholesale and manufacturing sectors
Property recorded the most significant slowdown of all industries in 2014, with its value added growth lower than in 2013.
Residential property prices for newly-built units in 70 major cities were stable during 1H 2014, with only one city recording price falls over the period. Yet since the beginning of 2H, the number of cities recording price falls started to surge (see graph 3). The trend has become even more evident since September, with 68 out of 70 cities recording price falls in December.
Investment in property development slumped in 2014, with growth slowing to its lowest since 1998. Property sales saw their first drop since 2008, both in terms of total areas sold and transaction amounts. New property construction by areas also recorded its largest fall since 1998 .
In March 2015, the People’s Bank of China (“PBoC” or the “central bank”), Ministry of Housing and Urban-Rural Development and the CBRC jointly announced policy measures to ease restrictions on down payment requirement ratio for “second home” buyers (those individuals or households who own one residential property and are seeking to buy another).
Apart from property, the retail & wholesale and manufacturing sectors saw marked slowdown too. Both retail sales and industrial production growth slipped in December 2014 (see graph 4).
Mild inflation
Inflation remained mild as the economy slowed, with the Consumer Price Index (CPI) rising 2.00% and the Producer Price Index (PPI) falling 1.90% in 2014.
0
10
20
30
40
50
60
70
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Rise No change Fall
Number of cities
Source: National Bureau of Statistics & PwC
Banking Newsletter
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April 2015
Graph 3 Residential property price movement in 2014 Graph 4 Retail sales & industrial production growth
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
Industrial production
Source: National Bureau of Statistics & PwC
Retail sales
Note: January and February data are usually combined to avoid
the seasonal distortion of Chinese New Year.
PwC
Liquidity management remains a challenge despite plenty of measures being implemented
1.49
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
M2 growth / GDP growth Historical average
Source: National Bureau of Statistics, PBoC & PwC
Banking Newsletter
Broad money supply (M2) growth slowed in 2H 2014, with the ratio of M2 to GDP growth standing at 1.49, the lowest level in past three years and well below the 23 year historical average of 1.91 (see graph 5).
Liquidity is perceived to be a constant challenge. As the surplus in the balance of international payments reduce and exchange rates become increasingly volatile, liquidity management will be more challenging in short term. In mid-term, mismatch of assets and liabilities for commercial banks’ will cause a liquidity shortfall. While infrastructure projects and properties which require long term funding commitments become major targets for investment, banks’ deposit base become less stable. This will lead to a rise in liquidity risk over the longer term.
The PBoC has implemented plenty of monetary policies to support the real economy by providing
liquidity to banks, including open market operations, short term liquidity support facilities and Standing Lending Facilities (SLF). The central bank has also introduced innovative tools such as the Medium-term Lending Facility (MLF) and Pledged Supplementary Lending (PSL). Statistics indicated PBoC has injected a total of RMB 1.14 tn from September to December.
Market liquidity was stable over the year, with interest rates for both interbank lending and pledged repo moving within a relatively small range. The same applied to the yield on government bonds.
The PBoC cut benchmark interest rates for the first time in two years in November 2014 and again in February 2015 in an attempt to bring down real borrowing costs. The PBoC also lowered deposit reserve requirement ratio (RRR) in February and April 2015 respectively.
9
April 2015
Graph 5 M2 growth to GDP growth, 1991-2014
PwC
Banks’ profit growth slows as credit risk accelerates
2014 was an especially challenging year for China banking industry against the back drop of economy slowdown and rapidly developing internet-based financial products and services.
According to CBRC, commercial banks (including large commercial banks, joint-stock commercial banks, city commercial banks, rural commercial banks and foreign banks) recorded an aggregate net profit of RMB 1.55 bn in 2014, up 9.65% year-on-year. The growth rate was only 4.83 ppts lower in 2013 and indeed, the first time it has fallen to single-digits.
Credit risk increased rapidly in 2014 for commercial banks, with non-performing loan (NPL) balances surging by 42.31% or RMB 250.60 billion to RMB 842.60 billion as of year end. The NPL increase in 2014 was larger than that for the previous three years combined.
NPL ratio soared by 0.25 percentage point from 2013 year end to 1.25% as of 2014 year end.
Banking Newsletter
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April 2015
Graph 6 Net profit growth for commercial banks Graph 7 NPL growth for commercial banks
428 493
592
843
1.00%
0.95%
1.00%
1.25%
0.8%
0.9%
1.0%
1.1%
1.2%
1.3%
-
100
200
300
400
500
600
700
800
900
2011 2012 2013 2014
NPL balance NPL ratio
NPL ratio
Sources：CBRC & PwC
NPL balance, in billions
1,041
1,239
1,418
1,555
36.34%
18.96%
14.48%
9.65%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
200
400
600
800
1,000
1,200
1,400
1,600
2011 2012 2013 2014
Net profits Growth
Growth
Sources：CBRC & PwC
Net profit, in billions
PwC
2015：More opportunities than challenges on new growth path
Banking Newsletter
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April 2015
In 2015, the US economy is expected to continue its recovery. Yet it still remains to be seen how consumption and employment in Japan and Europe will respond to new QE measures. For emerging economies, continued capital outflow and currency depreciation remains the biggest risks as growth slows.
Apart from above risks, China is facing challenges in a wide range of areas, including slowing fixed-asset investments, over capacity in manufacturing sector, weakening property market, rising NPLs in banking sector and continued expose to local government debt risk.
Commercial banks in China have been under real pressure in 2015 due to the economic slowdown as well as the competition being unleashed by both market-based reforms and groups of new entrants with digital technologies . On top of these challenges are increasingly sophisticated liquidity management requirements and tougher regulations on capital adequacy ratios.
That said, there are opportunities ahead. A PwC survey targeted at global CEO reveals that three quarters of respondents believe there are more opportunities today than there were three years ago. Half of respondents plan to increase their headcount in the coming 12 months.
China’s top decision making authorities in December 2014 identified a number of new trends under “new normal”, which may boost banks’ business in many ways. Over the medium to long term, the country’s “One Belt and One Road” initiative, regional integration among Beijing, Tianjin and Hebei and the Yangtze River Economic Belt will boost trade, mergers and acquisitions (M&A) demand for financing. Banks will be given a chance to redraw their regional and international strategies in the light of these macro-economic developments. the Chinese
banking industry will face more opportunities than challenges under the ‘New Normal’.
On banks’ businesses:
• Assets – yields on interest-earning assets will drop as the government strives to reduce borrowing costs;
• Liabilities – Costs on deposits will rise due to continuing market-based reforms. The introduction of Deposit Insurance Act, robust internet-based wealth management products and stock markets will all affect banks’ deposit base.
• Credit asset quality – NPL ratio is expected to go up with pressures on write-offs and disposals on the rise. The risk of overdue loans to switch into the NPL category is higher than ever, affecting banks’ bottom line.
• Business strategies – banks will have to transform their business model from deposit taking and lending to intermediary business. Better customer services and more efficient asset and liabilities management is vital for banks to retain clients.
Banks’ credit risk will increasingly be exposed in 2015. Banks need to get to grips with credit asset quality pressures. A more prudent loan impairment loss recognition policy may help to control risks, while increased the disposal of NPLs through write-offs and transfers will reduce asset quality pressure.
Key data of Major Listed Banks’ business and financial performance have been summarised on the next page to help readers better understand the industry in 2014.
PwC
China banking industry 2014 at a glance
Banking Newsletter
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April 2015
Major Listed Banks’ profit growth dropped to single digits Most banks saw a drop in profitability indicators
ROA ROE
+7.29%
Operating income structure was differentiated
Large
Commercial
Banks
5.26% 18.54%
76.20%
Joint stock
Commercial
Banks
3.66% 22.99%
73.36%
Net interest income
Net fee and commission income
Other non-interest income
NIM and NIS expanded slightly for Major Listed Banks
2.60% 2.42%
Intermediary business income structure differentiated
16.02% Consultancy
& advisory
24.46%
29.13% Bank cards
18.84% Settlement
& clearing
13.77% Agency
23.42%
Wealth
management,
private bank &
custodian
98.70 tn
+10.63%
Assets continued to grow for Major Listed Banks
Top 3 intermediary businesses for LCBs
Top 3 intermediary businesses for JSCBs
NIM
+0.03 ppts
NIS
+0.02 ppts
1.18 tn
“Double increase” in both NPL balance and ratio
NPL ratio +0.24 ppts to 1.23%
NPL balance +38.23%
Bank cards
PwC
2. Analysis of Listed Banks’ Results for 2014 • Net profit slowed to single-digit growth, with profitability indicators
(ROA & ROE) falling
• Income mix: different patterns emerged
• NIM and NIS expanded slightly, with growth pattern diverging
• JSCBs saw relatively higher growth in fee and commission income
• Asset mix: rising investments, shrinking interbank activities, stable loans
• Credit risk in the corporate loan portfolio continues to rise
• NPL “double increase” as credit risk exposure accelerated
• Deposit growth slowed, with L/D ratio rising for LCBs
• WMPs issuance presented divergent trends
• Capital adequacy ratio (CAR) improved
Banking Newsletter
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April 2015
PwC
Net profit slowed to single-digit growth
Banks’ earnings slowed further in 2014 as provisions increased significantly due to concerns over credit risk in light of the economic downturn.
Most listed banks in our sample (see table 1) saw their net profit growth drop to single-digit territory in 2014. The Major Listed Banks recorded aggregate net profits of RMB 1.18 tn, 7.29% more than in 2013. The growth in 2014 was 5.26 ppts lower than in 2013.
Profit growth for the five Large Commercial Banks (5 LCBs) was largely driven by net interest income as a result of expansion in interest-earning assets. Meanwhile the seven Joint-stock Commercial Banks (7 JSCBs) recorded strong growth in both net interest income and fee & commission income.
The slowdown in growth can be attributed to:
1) Slower growth in banks’ assets as a result of the economic downturn;
2) Net interest margin (NIM) and net interest spread (NIS) rose slightly due to banks’ proactive asset pricing strategy and liquidity management. This helped to offset the effect of interest rate cut;
3) Loan impairment charges increased significantly as credit asset quality deteriorated.
The aggregate loan impairment charges for the Major Listed Banks totalled RMB 390 bn in 2014, representing a year-on-year increase of 62.09%. The loan impairment charges for the 7 JSCBs increased by 108.37%.
Banking Newsletter
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April 2015
Table 1 Net profit and growth for the Major Listed Banks in 2014
Listed banks Net profit (in billions) 2014 growth 2013 growth
ICBC 276.29 5.07% 10.17%
CCB 228.24 6.10% 11.12%
ABC 179.51 8.00% 14.52%
BOC 177.20 8.22% 12.35%
BCM 66.04 5.72% 6.81%
CMB 56.05 8.32% 14.29%
SPDB 47.36 14.95% 20.08%
CITIC 41.45 4.37% 26.55%
CMBC 45.57 5.28% 12.98%
CEB 28.93 8.13% 13.27%
PAB 19.80 30.01% 12.72%
HXB 18.02 16.19% 21.22%
Total 1,184.46 7.29% 12.55%
PwC
Profitability indicators (ROA & ROE) fall
Banking Newsletter
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April 2015
ICBC
CCB
ABC
BOC
BCM
CMB
SPDB
CITIC
CMBC
CEB
PAB
HXB
14%
15%
16%
17%
18%
19%
20%
21%
22%
23%
24%
Return on Equity (ROE)
2014 2013
Graph 8 Change in profitability indicators for the Major Listed Banks
ICBC
CCB
ABC
BOC
BCM
CMB
SPDB
CITIC
CMBC
CEB
PAB
HXB
0.8%
0.9%
1.0%
1.1%
1.2%
1.3%
1.4%
1.5%
1.6%Return on Asset (ROA)
2014 2013
The Key profitability indicators of the Major Listed Banks fell in 2014 (see Graph 8), as net profit growth slowed.
Although the PBoC lowered the benchmark interest rate in 2014, the Major Listed Banks’ NIM expanded slightly thanks to a proactive management of assets and liabilities as well as improvement in pricing capabilities. However, as most banks’ profits grew more slowly than their total assets, their Return on Assets (ROA) dropped in 2014 .
Return on Equity (ROE) for most banks was on a downward trend too. This was primarily due to growth in owners’ equity (sometimes referred as “net assets”) outpacing net profits’.
Owner’s equity grew faster because:
1) Bond yields dropped in 2014, leading to a substantial fair value gain on available-for-sale financial assets recorded in the comprehensive income and owners’ equity;
2) Some listed banks issued preference shares t0 strengthen their capital base.
Note: The ROE for Hua Xia in 2014 was 19.31%, 0.01 ppts
higher than in 2013.
PwC
Income mix: different patterns emerged
The Major Listed Banks recorded an aggregate operating income of RMB 3.14 tn in 2014, 14.24% higher than that in 2013.
The income mix for the 5 LCBs remained relatively unchanged (see Graph 9). The proportion of net interest income remained nearly the same. Yet the proportion of fee and commission income (sometimes referred as “intermediary business income”) dropped due to slower growth in 2014, which was affected by the low growth in consulting and investment banking businesses. Other non-interest income saw a slight proportional rise, as fair value gains, income from insurance and other non-banking business enjoyed a rapid growth.
The change in income mix for the 7 JSCBs was evident, with the proportion of net interest
income falling, and net fee and commission income as well as other non-interest income rising.
The regulatory bodies tightened the inspection of listed banks’ intermediary businesses in 2014. As a result the growth in fee and commission income for the 5 LCBs dropped dramatically. Yet the fee and commission income for the 7 JSCBs continue to grow rapidly in these intermediary businesses (se e Graph 11, Page 17). Its proportion of operating income was 4.45 ppts higher than that of the 5 LCBs’ and the gap was widening. This was due to higher growth in bank card, agency and e-banking business (eg. payment and clearance income from mobile banking) for the 7 JSCBs.
Banking Newsletter
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April 2015
Note: other non interest income includes income, investment income, foreign exchange
gains and other income from changes in fair value; the other is insurance, leasing
and business of precious metals 。
76.20% 76.11% 73.36% 78.48%
18.54% 19.59% 22.99% 19.74%
5.26% 4.30% 3.66% 1.78%
2014 2013 2014 2013
5 LCBs 7 LJSCBs
Net interest income Fee and commission income Other non-interest income
Graph 9 Change in income mix, LCB Vs. JSCBs
PwC
High interest income growth but lower intermediary business growth
In 2014, the growth in both interest income and fee and commission income for the 7 JSCBs was higher than that of the 5 LCBs. The trends were similar to 2013.
Growth in most listed banks’ interest income was higher in 2014 than in 2013 (see Graph 10). Apart from improvement in loan pricing capabilities, it can be attributed to the fact that banks reclassified consulting fees whose nature was actually interest back to interest income in 2014.
CMB, CITIC, PAB and HXB saw the most significant improvements in interest income growth. The higher interest income growth for CMB and CITIC was due to a surge in interest from investments, while PAB’s growth was driven by interest income from loans.
In terms of fee and commission income, most banks’ growth in 2014 was lower than in 2013. CMB was the exception (see Graph 11).
CMB’s enhanced growth in intermediary income was driven by custody and other trustee income, bank cards and agency business. According to the bank, it further promoted wealth management products based on customer demand. The bank also saw a rapid increase in income from credit card repayment by instalments and POS income.
Banking Newsletter
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April 2015
ICBC
CCB ABC
BOC
BOCOM
CMB
SPDB
CITIC
CMBC
PAB
CEB
AMC
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2014 2013
ICBC
CCB
ABC
BOC
BOCOM
CMB
SPDB
CITIC
CMBC
CEB
PAB
AMC
0%
5%
10%
15%
20%
25%
30%
2014 2013
Graph 10 Change in interest income growth Graph 11 Change in intermediary business growth
PwC
NIM and NIS expanded slightly
The banking industry was challenged by a number of forces in 2014, including interest rate liberalisation, continued “financial disintermediation” and a internet-based financial products and services providers.
Yet NIM for the Major Listed Banks as a whole expanded by 0.03 ppts to 2.60% in 2014 (as shown in Graph 12). NIS expanded by 0.02 ppts to 2.42% compared with 2013.
Since the restriction on lending rates was lifted, the Major Listed Banks’ yield on loans has been rising as they enhance the management of yields on assets by pricing in credit risk and funding costs.
On the other hand, their funding costs have been rising too, due to the continued broadening of the floating range for deposit rates. This is coupled with the increasing challenges from internet-based competitors.
It is estimated that the central bank will continue to cut benchmark interest rates as well as lower the deposit reserve requirement ratio in 2015. This will make banks struggle to maintain the current yields on interest-earning assets. Funding costs on the liabilities side will rise further and in turn bring pressure on NIM and NIS, Strong stock market performance is also causing fund inflows.
Banking Newsletter April 2015
ICBC
CCB
ABC
BOC
BOCOM
CMB
SPDB
CITIC
CMBC
CEB
PAB
AMC
2.0%
2.1%
2.2%
2.3%
2.4%
2.5%
2.6%
2.7%
2.8%
2.9%
3.0%
2014 2013
18
Graph 12 Change in NIM for Major Listed Banks
Note: The net interest margin (NIM) of BOC was 2.25%, which increased
by 0.01 points compared with year 2013.
PwC
Yields rise more than costs
Yields on interest-earning assets for the Major Listed banks rose by 0.17 ppts to 4.79% in 2014, while costs on interest-bearing liabilities rose by 0.15 ppts to 2.37% in the same period.
The rise in yields on interest-earning assets was slightly faster than the rise in costs on interest bearing liabilities, which led to the expansion of NIM and NIS.
While the yields on interest-earning assets for the 7 JSCBs were higher than those of the 5 LCBs, their costs on interest-bearing liabilities were higher too (see Graph 13).
As opposed to the 7 JSCBs , the borrowers in the 5 LCBs’ loan portfolios were mainly state-owned enterprises (SOEs) and large corporations. As a result the yields on such loans were relatively lower given low default risk.
That said, the 5 LCBs’ deposit base was broad, with an extensive network of retail customers. This enabled them to maintain funding costs at lower level.
Banking Newsletter April 2015
19
Graph 13 Comparison of yields and costs, LCB Vs. JSCBs
ICBC
CCB
ABC
BOC
BOCOM
1%
2%
3%
4%
5%
6%
5 LCBs
2014 average yield on interest-earning assets2013 average yield on interest-earning assets2014 average cost on interest-bearing liabilities2013 average cost on interest-bearing liabilities
CMB
SPDB
CITIC
CMBC
CEB
PAB HXB
1%
2%
3%
4%
5%
6%
7 LJSCBs
2014 average yield on interest-earning assets
2013 average yield on interest-earning assets
2014 average cost on interest-bearing liabilities
2013 average cost on interest-bearing liabilities
PwC
NIM growth pattern diverged
Banking Newsletter
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April 2015
71.05% 71.53% 61.09% 63.44%
17.14% 17.04%
21.20% 16.63%
5.37% 5.71% 3.59% 3.95%
6.43% 5.72% 14.12% 15.98%
2014 2013 2014 2013
5 LCBs 7LJSCBs
Deposit with central banks Interbank activities
Investments Loans
78.29% 80.43%
57.20% 58.53%
17.50% 15.61% 38.69% 37.72%
4.21% 3.96% 4.11% 3.75%
2014 2013 2014 2013
5 LCBs 7 LJSCBsOther borrowings
Interbank liabilities and due to Central Banks
Deposits
Graph 15 Interest income mix, LCB vs JSCBs Graph 16 Interest expense mix, LCB Vs JSCBs
12.60%
15.89% 14.06%
53.47%
6.56% 9.57%
27.42%
6.31%
0%
10%
20%
30%
40%
50%
60%
5 LCBs 7 LJSCBs
Loans Investments
Deposit with central banks Interbank activities
Graph 14 Interest income growth by business The growth pattern of NIM for the 5 LCBs and 7 JSCBs has diverged in 2014.
Interest income from inter-bank activities recorded the highest growth of all businesses for the 5 LCBs (see Graph 14), with interest income and expense mixes stable (see Graph 15 and 16).
Interest income from investments became the highest growth (as high as 53.47%. ) segment for the 7 JSCBs, where the proportion of interest income rose by 4.57 ppts to 21.20% in 2014. The growth was due to income from trust beneficiaries rights and asset management schemes.
Analysis of interest expense mixes for the 7 JSCBs suggested that they have been increasingly reliant on inter-bank borrowings to make up for the weak growth in deposits.
PwC
JSCBs record higher growth in fee and commission income
Banking Newsletter
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April 2015
24.46% 29.13%
18.84% 6.86%
16.02%
9.49%
15.51%
23.42%
12.52% 13.77%
6.76% 9.36%
5.89% 7.97%
5 LCBs 7 JSCBs
Bank cards
Graph 17 Fee & commission income mix
Graph 18 Comparison of growth in intermediary businesses in 2014, LCB vs JSCBs
The Major Listed Banks recorded net fee and commission income of RMB 615.76 bn in 2014, reflecting a growth of 14.15%. The growth was lower than that of 2013 (21.30%). The 5 LCBs experienced relatively slower growth in 2014 due to regulatory policy changes, while the 7 JSCBs saw a relatively higher growth (see Graph 18). But when compared to 2013, 7 JSCBs’ growth slowed in 2014.
The largest income segment for the Major Listed Banks was bank cards, despite the proportion of other segments being different. (see Graph 17).
The top 3 businesses for the 5 LCBs were: 1) bank cards; 2) settlement, clearing and forex trading; 3) consulting and investment banking.
Top 3 businesses for the 7 LJSCBs were: 1) bank cards; 2) WMPs, private banking and custodian; 3) Agency service.
-12%
-6%
0%
6%
12%
18%
24%
(60)
(30)
-
30
60
90
120
Income 2014 growth 2013 growth
In billions
5 LCBs Growth
0%
20%
40%
60%
80%
-
10
20
30
40
50
60
Income 2014 growth 2013 growth
In billions 7 JSCBs Growth
PwC
Assets growth slowed
Banking Newsletter
22
April 2015
Graph 19 Total asset growth, LCBs vs JSCBs
Total assets of the Major Listed Bank expanded to RMB 98.70 tn at the end of 2014, up 10.63% compared to the end of 2013. Growth has continued to slow over the past five years.
Total assets of the 5 LCBs amounted to RMB 74.85 tn, up 8.98% compared to the end of 2013. Yet the growth continued to slow (see Graph 19).
Total assets of the 7 JSCBs climbed to RMB 23.86 tn, up 16.13% compared to the end of 2013. The growth rate was 2.64 ppts higher than that of 2013.
During last five years, total assets growth of the 7 JSCBs generally slowed with a relatively larger fluctuation, reflecting the evolution of their interbank activities and investments preferences.
74.85
15.74%
13.99%
12.23%
9.51% 8.98%
0%
5%
10%
15%
20%
0
10
20
30
40
50
60
70
80
2010 2011 2012 2013 2014
Total assets Growth
In trillions Growth 5 LCBs
23.86
16.85%
25.19%
23.05%
13.49%
16.13%
0%
5%
10%
15%
20%
25%
30%
0
5
10
15
20
25
2010 2011 2012 2013 2014
Total assets Growth
Growth In trillions 7 JSCBs
PwC
Asset mix: rising investment, shrinking interbank activity, stable loans
Banking Newsletter
23
April 2015
The asset mix for the 5 LCBs remained stable in 2014, with the proportion of interbank assets falling and loan book rising slightly.
As for the 7 JSCBs, the proportion of loans fell slightly, while the proportion of investment rose significantly. Interbank assets saw a drop in proportion accordingly as well, due to tightening regulations.
At the end of 2014, the Major Listed Banks’ loan balance reached RMB 52.32 tn, up 11.44% from 2013. The growth was slower than it was in 2013 (13.02%), with the 7 JSCBs’ growth higher than 5 LCBs.
Graph 20 Change in asset mix, LCB vs JSCBs
52.61% 51.80% 48.31% 49.11%
20.86% 21.01% 22.58% 18.53%
16.31% 16.58% 13.09%
13.28%
6.93% 7.35% 12.86% 16.15%
3.29% 3.26% 3.16% 2.92%
2014 2013 2014 2013
5 LCBs 7 JSCBsOthersInterbank assetsCash and deposits with central banksInvestmentsLoans
18.53%
14.52% 13.56%
13.02%
11.49%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
10
20
30
40
50
60
2010 2011 2012 2013 2014
Loan balances Growth
In trillions Growth
Graph 21 Loan growth for Major Listed Banks
PwC
Banking Newsletter
Loan mix remained stable
69.77% 67.51%
32.88% 34.74%
4.96% 6.36%
5.66% 6.64%
34.72% 36.04%
12.08% 11.33%
22.63% 19.29%
7.52% 8.16% 9.78% 9.94%
2014 2013 2014 2013
5 LCBs 7 JSCBs
Personal housing Personal businessPersonal consumption Credit cards
68.56% 70.43% 66.81% 67.68%
28.89% 27.99% 31.03% 30.05%
2.55% 1.58% 2.16% 2.27%
2014 2013 2014 2013
5 LCBs 7 JSCBs
Corporate Personal Discounted bills
Loan mix in 2014 saw similar changes for the Major Listed Banks, with the proportion of corporate loans dropping and personal loans rising. The proportion of discounted bills also rose for the 5 LCBs (see Graph 22).
The proportion of corporate loans for 5 the LCBs was higher than that of the 7 JSCBs, while the proportion of personal loans for the 7 JSCBs was higher.
Further analysis on the structure of personal loans suggested housing loans composed the largest share of the 5 LCBs’ portfolio (see Graph 23), with the proportion in 2014 rising by 2.26 ppts. Credit cards were the second largest personal loan segment, with their proportion rising by 0.75 ppt.
In the case of the 7 JSCBs, personal business loan were the largest segment in 2014, followed by personal housing loans and credit cards.
In March 2015, the PBoC, Ministry of Housing and Urban-Rural Development and CBRC jointly announced policy measures to ease restrictions on down payment requirement for “second home” buyers. Such easing is expected to be a boost to banks’personal housing loan businesses.
Credit card business growth should remain robust as well, as the government is determined to encourage private consumption. Large purchasing through Credit card installment are especially promising.
Graph 22 Change in loan mix, LCB vs JSCBs Graph 23 Change in personal loan mix
April 2015
24
PwC
Banking Newsletter
25
April 2015
Credit risk of corporate loan portfolios continues to rise
By geographical areas, the Yangtze River Delta region still accounted for the largest portion of loans in 2o14 (see Graph 24), followed by the Bohai Rim and Western China regions.
By industry, the top 5 corporate borrowers for 5 LCBs were: 1) manufacturing; 2) transportation, storage & postal services; 3) leasing & business services; 4)real estate; 5) electricity, gas and water production and supply. These industries accounted for 69.24% of their corporate loan portfolios. The top 5 industry for the 7 JSCBs were: 1)manufacturing; 2) wholesale and retail; 3) real estate; 4)leasing and business services; 5) transportation, storage and postal services. These industries accounted for 71.70%. of their corporate loan portfolio.
The top 3 industries for the 7 JSCBs were also those experiencing the most significant slowdown in economic growth.
Graph 25 Corporate loans by industry in 2014, LCB vs JSCBs
0%
5%
10%
15%
20%
25%
30%
35%
-
2
4
6
8
10
12
14
Loan balance Growth
Loan balance(In trillions) Growth
Graph 24 Loan balance by geographical areas
24.32%
15.97%
11.10%
9.10%
8.76%
7.95%
4.81%
4.41%
3.50%
1.78%
0.91%
0.68%
0.04%
6.67%
Manufacturing
Transportation, logistics and postalservices
Leasing and commercial services
Real estate
Production and supply of power, heat,gas and water
Retail and wholesale
Water, environment and public utilitiesmanagement
Mining
Construction
Finance
Science-education-culture-health
Accommodation and catering
Telecommunications, computer servicesand software
Others
5 LCBs 24.61%
7.45%
8.65%
13.93%
3.41%
17.06%
4.01%
4.24%
6.74%
0.43%
1.24%
0.29%
0.44%
7.51%
Manufacturing
Transportation, logistics and postalservices
Leasing and commercial services
Real estate
Production and supply of power, heat,gas and water
Retail and wholesale
Water, environment and public utilitiesmanagement
Mining
Construction
Finance
Science-education-culture-health
Accommodation and catering
Telecommunications, computerservices and software
Others
JSCBs
Note: Other include loans from Public management, social securities and social organisation sector, as well as agriculture, forestry, farming, fishing industry.
PwC
NPL on the rise as credit risk exposure accelerated
The major Listed Banks’ credit asset quality continued to deteriorate in 2014, with NPL balance increasing and NPL ratios also rising. The NPL balances of the Major Listed Banks reached RMB 641.51 bn by the end of 2014, representing an increase of 38.23% from the end of 2013.
NPL balances for the 5 LCBs stood at RMB 506.15 bn, up by 35.22%. For the 7 JSCBs the figure was RMB 135.36 bn, an increase of 50.78%.
NPL ratios for the Major Listed Bank rose by 0.24 ppts to 1.23%, which is a clear sign of further exposure to credit risk.
Banking Newsletter
26
April 2015
ICBC
CCB
ABC
BOC
BOCOM
CMB SPDB
CITIC
CMBC
CEB
PAB
HXB
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
2014 2013
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0
20
40
60
80
100
120
140
ICBC CCB ABC BOC BOCOM
5 LCBs
2014 2013 Growth
NPL balance (In billions) Growth
0%
10%
20%
30%
40%
50%
60%
70%
0
5
10
15
20
25
30
CMB SPDB CITIC CMSB CEB PAB HXB
7 JSCBs
2014 2013 Growth
NPL balance(In billions) Growth
Graph26 Change in NPL ratios
Graph 27 Change in NPL balance, LCB vs JSCBs
PwC
Credit risk spreading to the western regions
Banking Newsletter
27
April 2015
Nine out of 12 Major Listed Banks disclosed NPL breakdown by geographical regions in 2014, with the Yangtze River Delta and Bohai Rim being the most troublesome area (see Graph 28). It is alarming that credit risk has been spreading to the west as NPL balance increased significantly in that region.
Graph 29 shows that credit asset quality deteriorated most significantly in the West and Yangtze River Delta region.
The growth in NPL balances in these regions were the highest, with NPL growth in the West being 77.78%.
0%
20%
40%
60%
80%
-
20
40
60
80
100
120
140
160
180
NPL balance Y-o-Y growth
NPL balance(In billions) Growth
Graph28 NPL by region in 2014
Graph 29 Credit risk of Major Listed Banks (NPL％ as benchmark)
Note: BOCOM, SPDB and HXB do not disclose NPLs by region.
Risk is spreading
Hainan
Northeast
Central
Pearl River
Delta
Yangtze River Delta
West
Bohai Rim
2014
Below 1.00%
1.10%-1.20%
1.20%-1.40%
1.40%-1.50%
Above 1.50%
NPL ratio as presented in the map
2013
West
Northeast
Bohai Rim
Yangtze
River Delta Central
Pearl River Delta
Hainan
PwC
Banking Newsletter
28
April 2015
NPL risk concentrated in mining, leasing & business services, wholesale & retail sectors
By industry, Major Listed Banks’ NPLs were concentrated in manufacturing, wholesale and retail sectors (see Graph 30) in 2014, with an increase of 32.02% and 54.59% respectively.
The mining sector recorded most significant increase (410.06%) in NPL balances due to the slump of international commodity price in 2014, although the sector’s total NPL base was very low comparatively.
NPL balances in the leasing and business services sector increased dramatically (92.64%) too, as the deterioration in commercial property markets and business environment for tenants became severe.
NPL balances in the construction sector also increased significantly (69.31%). Yet its base was low as well.
On the other hand, NPL balances for transportation, storage and postal services, and electric power, gas and water production and supply sectors decreased in 2014.
Note: BOCOM and HXB did not disclose NPL breakdown by industries.
Graph 30 Corporate NPLs by industry in 2014
4.04%
2.70%
1.00% 0.78%
0.77% 0.58%
0.48% 0.35% 0.45%
2.58% 2.06%
0.61%
0.17% 0.51% 0.51%
0.66% 0.55%
2.79%
2014 2013
PwC
Overdue loans increased significantly
Banking Newsletter
29
April 2015
As credit risk rises significantly, overdue loan balance for Major Listed Banks increased by 65.12% in 2014, to RMB 1.05 tn (see Graph 31); overdue loan ratio rose to 2.00%.
Loans that are overdue but not classified as NPLs for Major Listed Banks increased at a much faster pace than that of NPLs, at a rate of 112.65%, causing to a balance of RMB 447.2 bn.
As credit asset quality continues to deteriorate, the amount of loans that are overdue increases as well as the amount of overdue loans that eventually become NPLs.
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
-100
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
2010 2011 2012 2013 2014
Overdue NPL
Overdue but not NPL Overdue but not NPL growth
In billions Growth
Graph 31 Overdue loans and NPLs the of Major Listed Banks
PwC
Credit cost have risen along with provision level dropped
Major Listed Banks increased their provisions in 2014 in response to rising credit risk, with most banks’ credit costs also rising (see Graph 32). The trend was more evident for the 7 JSCBs.
Loan loss reserves (LLR) coverage ratio (or “provision coverage ratio”, see Graph 33) for Major Listed Banks was 220.54% by the end of 2014, down 51.29 ppts compared to 2013, although their actual provision amount has increased. LLR coverage ratio for 5 LCBs fell by 52 ppts, while that of 7 JSCBs’ dropped by 46 ppts.
LLR to total Loans, another ratio that measures banks preparedness to deal with NPLs (see Graph 34) remained broadly the same in 2014 for Major Listed Banks, with the 5 LCBs’ ratio dropping to 2.80% and 7 the JSCBs’ rising to 2.39%.
Banking Newsletter
30
April 2015
Graph 34 LLR/total loan ratio Graph 33 LLR coverage ratio
0.22%
0.66%
0.85%
0.58%
0.66%
1.33%
1.15%
1.07%
1.18%
0.81%
0.79%
0.59%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
2014 2013
Graph 32 Credit costs of Major Listed Banks
2.4%
2.7%
4.5%
2.2% 2.2%
2.2%
2.4%
2.1%
2.2% 2.1%
1.8%
2.7%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
2014 2013
206.90% 222.33%
286.53%
187.60%
178.88%
233.42%
249.09%
181.26%
182.20%
180.52%
200.90%
233.13%
0%
100%
200%
300%
400%
2014 2013
PwC
NPL write-offs increased
Banking Newsletter
31
April 2015
0%
100%
200%
300%
400%
2010 2011 2012 2013 2014
5 LCBs
LLR/Overdue LLR/NPL
0%
50%
100%
150%
200%
250%
300%
350%
2010 2011 2012 2013 2014
7 JSCBs
LLR/Overdue LLR/NPL
Graph 36 LLR to overdue loans & LLR to NPLs, LCBs vs JSCBs
Major Listed Banks’ NPL write-offs and transfers have continued to grow since 2012. In 2014， Major Listed Banks increased their NPL disposals, with write-offs and transfers amount totaling RMB 219.2 bn, which is 2.2 in the amount in 2013.
As the economy slowed, the disposals were not sufficient to cover the NPL increase (see Graph 35 and 36).
The Ministry of Finance (MoF) published “Bad debt write-offs measures for the management of financial enterprises” in 2014, encouraging financial institutions to increase bad debt write-offs by easing standards.
Graph 35 Write-offs, transfers & NPL net growth
-100
0
100
200
300
400
2010 2011 2012 2013 2014
Write-offs and transfers NPL net growth amount
In billions
PwC
Investment growth accelerated
At the end of 2014, the investment balances for
the Major Listed Banks amounted to RMB19.53
tn, an increase of 16.52% compared to 2013.
Analysis of the investment portfolio suggested
over 80% of the 5 LCBs’ book were bonds, with
other instruments accounting for only a small
portion. Although the 5 LCBs have increased the
proportion of non-bond holdings in 2014.
The 7 JSCBs have seen a wider range of
instruments in their investment books, with all of
them increased the trust beneficiary right
products and asset management schemes
investments in 2014, which added up to RMB
3.06 tn, up by 106.41%. The proportion of such
instruments in investments rose by 16.51 ppts in
2014 compared to 2013.
In2014, the 7 JSCBs’ non-bond investments
accounted for over 30% of their investment
portfolio.
The 7 JSCBs accrued provision of debt
instruments classified as receivables in 2014. The
impairment loss ratios are summarised in table 2.
Banking Newsletter
32
April 2015
Note：Investment includes available-for-sale assets, held-to-maturity assets and debt instruments classified as receivables.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
ICBC CCB ABC BOC BOCOM
20142013% of bond investment 2014% of bond investment 2013
In trillions
Graph 37 Comparison of the investment structures of Major Listed Banks
Table 2 Impairment loss ratio of receivables
Note: The calculation of impairment loss ratio includes beneficiary
rights of trust products, asset management schemes investment
and others.
0%
20%
40%
60%
80%
100%
120%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
CMB SPDB CITIC CMBC CEB PAB HXB
20142013% of bond investment 2014% of bond investment 2013
In trillions
Year CMB SPDB CITIC CMBC CEB PAB HXB
2014 0.02% 0.44% 0.02% 0.45% 0.06% 0.14% 0.53%
2013 0.03% 0.46% 0% 0% 0% 0% 0%
PwC
Growth in liabilities slowed
At the end of 2014, total liabilities of the Major Listed Banks amounted to RMB 91.72 tn, an increase of 10%. The liabilities of the 5 LCBs increased by 8.22%, while those of the 7 JSCBs grew by 15.90%.
From 2009 to 2014, the growth in liabilities for Major Listed Banks has shown a slowing trend (see Graph 39).
The liabilities mix for the Major Listed Banks remained broadly stable, with the proportion of deposits holding around 80% of the total for the 5 LCBs and 70% for the 7 JSCBs respectively, both showing a declining trend in growth (see Graph 38).
The Major Listed Banks adjusted their liabilities structures in 2014 according to liquidity needs, with their balances of inter-bank liabilities and borrowings from central banks increasing.
Banking Newsletter
33
April 2015
Graph 39 Liabilities growth, LCB vs JSCBs
25.36%
14.96% 13.83%
11.86%
9.31% 8.22%
0%
5%
10%
15%
20%
25%
30%
0
10
20
30
40
50
60
70
80
90
2009 2010 2011 2012 2013 2014
Total liabilities Growth
In trillions Growth 5 LCBs
30.83%
22.56% 24.60%
23.31%
12.94%
15.90%
0%
5%
10%
15%
20%
25%
30%
35%
0
5
10
15
20
25
2009 2010 2011 2012 2013 2014
Total liabilities Growth
Growth
7 JSCBs In trillions
80.19% 82.18% 71.26% 72.55%
12.15% 10.46% 22.62% 22.48%
6.09% 5.98% 3.66% 3.31%
2014 2013 2014 2013
5 LCBs 7 JSCBsOthersBonds payableInter-bank liabilities & borrowings from central bankDeposits
Graph 38 Change in liabilities mix
Note: Others include financial liabilities at fair value through profit
or loss, derivativefinancial liabilities.
PwC
Deposits growth slowed, loan to deposit ratio rise for LCBs
Banking Newsletter
34
April 2015
Deposit growth for most Major Listed Banks slowed in 2014 (see Graph 40), as the impact caused by wealth management products and internet-based financial products and services providers became evident. The “deposit deviation” indicator introduced by regulators in September 2014 has also restricted banks’ aggressive deposit taking activities at the end of each quarter.
As a result, the loan-to-deposit ratio (L/D ratio) of the 5 LCBs went up in 2014 (see Graph 41) , while the ratio for the 7 JSCBs fell.
ICBC
CCB
ABC BOC
BOCOM
CMB
SPDB
CITIC
CMBC
CEB
PAB
HXB
-5%
0%
5%
10%
15%
20%
25%
30%
2014 2013
ICBC
CCB
ABC
BOC
BOCOM
CMB
SPDB
CITIC
CMBC
CEB
PAB
HXB
60%
63%
66%
69%
72%
75%
78%
2014 2013
Graph 40 Change in deposit growth Graph 41 Change in loan-to-deposit ratios
PwC
WMPs issuance presented divergent trends
Banking Newsletter April 2015
Note: No disclosure of consolidated data from BOC in 2014 & 2013.
35
In 2014, the growth of wealth management products (WMPs) balances for Major Listed Banks presented divergent trends (see Graph 42), with most consolidated WMPs (with principal guaranteed) continuing to expand.
Yet principal-guaranteed WMPs of some banks’ experienced a slow or even negative growth. This was due to a proactive management of such issuance due to concerns on high funding costs.
At the end of 2014, the volume of unconsolidated WMPs (with principal not guaranteed) for Major Listed Banks increased by 50.
Major Listed Banks have been launching WMPs based on net asset values in 2014, with some banks developing structured WMPs with high-yield. This divergent trend suggested that banks have been differentiating their WMPs issuances
in accordance with their investment preferences and risk appetites.
With the rapid development of internet-based financial services, most WMPs issued by Major Listed Banks have been extended to online distribution channels in 2014. As a result, bank liquidity management has been increasingly challenged by wide-spread use of information technology, more flexible payment as well as changing customer demands for higher yields.
Graph 42 Change of wealth management products balance for Major Listed Banks
-50%
0%
50%
100%
150%
200%
250%
300%
(100)
-
100
200
300
400
500
600
2014 2013 Growth
Growth Consolidated (principal guaranteed )
In billions
0%
20%
40%
60%
80%
100%
120%
140%
160%
-
200
400
600
800
1,000
1,200
1,400
1,600
2014 2013 Growth
Growth Unconsolidated (principal not guaranteed )
In billions
PwC
ICBC
CCB
ABC*
BOC BOCOM
CMB*
SPDB
CITIC
CMSB
CEB PAB
HXB
9%
10%
11%
12%
13%
14%
15%
16%
2014 2013
In April 2014, the CBRC gave the green light for the implementation of the Advanced Approach of Capital Management (the “advanced approach”) to ICBC, CCB, ABC, BOC,BOCOM and CMB.
During the parallel period, those banks are supposed to comply with both the advanced approach as well as the regulatory requirements of other approaches (those adopted for the period ended 31 December 2013), and meet the minimum capital requirements.
In 2014, Capital Adequacy Ratios (CAR) for Major Listed Banks improved. The 5 LCBs and CMB’s CAR rose markedly.
Degree of risk represents the ratio of risk-weighted assets to on and off -balance sheet assets. High degree of risk suggests banks have been taking high risks.
Degree of risk can be affected by following factors:
• Coverage of internal rating based (IRB) approach: Under the circumstances where bank’s assets are high-quality, higher coverage can save more capital.
• Probability of Default (PD): PD is determined by the rating of the counterparty. The lower the PD, the better the counterparty’s quality and the less capital consumed.
• Loss on Given Default (LGD): LGD reflects the effects of qualified risk mitigation. The more qualified risk mitigation, the lower LGD and less capital consumed.
To sum up, banks can improve capital management by utilising the IRB approach, selecting counterparties with high quality, and adding qualified risk mitigations.
Note: ICBC, CCB, ABC, BOC and CMB’s were calculated under
the advanced approach.
ICBC
CCB
ABC
BOC
BOCOM
CMB
40%
45%
50%
55%
60%
Degree of risk = risk-weighted assets without capital floor and
adjustments / Total assets, with figures shown above
Graph 43 Capital adequacy ratios
Capital adequacy ratio (CAR) improved
Graph 44 Degree of risks for selected banks
April 2015 Banking Newsletter
36
PwC
ICBC
CCB
ABC
BOC
BOCOM
CMB
30%
40%
50%
60%
70%
31 December 2014 30 June 2014
As of 31 December 2014, ABC and BOCOM’s IRB approach coverage ratio for credit risk had increased considerably compared to 30 June 2014, while ICBC, CCB, BOC, and CMB’s remained almost the same.
The application of the advanced approach not only make banks’ CAR measurements more detailed and accurate, but also provides meaningful risk components that can be used in risk warnings, credit risk exposure identifications and pricing.
Conventional assets quality indicators such as NPL ratios and overdue loan ratios can only expose credit quality and losses from defaults in the current period. Yet PD is a leading indicator that might reflect the probability of counter-party default risk in the future.
In the process of credit management and risk monitoring, banks should look at NPL ratios, overdue loan ratios and PD from present and future perspective to manage existing risk and anticipate potential risks. Banks can also analyse these ratios from different angles, i.e. by region, industry and other categories to project potential default risk.
PD was disclosed in 2014 for the first time. The scope and format of the disclosure were pre-mature and inconsistent among banks. With more comparable data from the use of the advanced approach in future and the convergence of banks’ disclosure scopes and formats, PD is expected to be a significant indicator in analysis.
Bank NPL
ratio
Overdue
loan ratio
Probability of
default (PD)
ICBC 1.13% 1.91% 2.59%
CCB 1.19% 1.41% 2.44%
ABC 1.54% 2.10% 2.24%
BOC 1.18% 1.48% 2.60%
BOC
OM 1.25% 2.37% 3.42%
Note: Data of Probability of Default (PD) was gathered from 2014
Capital Adequacy Ratios Report of each bank and has been
weighted by total exposure.
Risk components in advanced approach offer new risk identification perspectives
Graph 45 IRB approach coverage ratio for credit risk Table 3 Disclosure information illustration
April 2015 Banking Newsletter
37
PwC
Bank Capital instruments issuance plan(s) Proceeds（In RMB） Status
ICBC Proposed to issue 450m preference
shares in domestic market Up to 45bn
Approved by regulatory
bodies in March 2015
CCB Proposed to issue preference shares both
in domestic and overseas markets
Domestic: up to 60bn
Overseas: up to 20bn
Pending approval of
shareholders meeting and
regulatory bodies
ABC Proposed to issue 400m preference
shares in domestic market Up to 40bn Issued in March 2015
BOC Proposed to issue 280m preference
shares in domestic market Up to 28bn Issued in March 2015
BOCOM Proposed to issue 450m preference
shares in domestic market Up to 45bn
Pending approval of
shareholders meeting and
regulatory bodies
SPDB Proposed to issue 150m preference
shares in domestic market Up to 15bn Issued in March 2015
CITIC Proposed to issue 350m preference
shares in domestic market Up to 35bn
Pending approval of
shareholders meeting and
regulatory bodies
CMBC
Proposed to issue 200m preference
shares in domestic market
Proposed to issue RMB 20bn Tier 2
capital bonds
Preference shares: Up to
20bn
Tier 2 capital bonds:
Up to 20bn
Preference shares:
Pending approval of
shareholders meeting and
regulatory bodies;
Approved in April 2015 by
regulatory bodies to issue Tier
2 capital bonds
CEB Proposed to issue up to 300m preference
shares Up to 30bn
Approved by of shareholders
meeting in December 2014
PAB Proposed to issue 200m preference
shares and 1.07m of ordinary A shares
Preference shares: up to
20bn
Ordinary shares: up to
10bn
Pending approval of
shareholders meeting and
regulatory bodies, to issue
1.07m ordinary shares in
2015
HXB Proposed to issue up to 200m preference
shares Up to 20bn
Pending approval of
shareholders meeting and
regulatory bodies
Banks’ innovative capital instruments issuance arrangements in 2015
April 2015 Banking Newsletter
38
Table 4 Major Listed Banks’ innovative capital instruments issuance plan in 2015
Major Listed Banks have planned to issue innovative capital instruments in 2015 to strengthen their capital base, including issuing preference shares and sub-ordinary debts. Below is a summary of banks issuing arrangements:
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3. Highlights
• Banks’ responses to digital disruption: an overview
• Getting prepared for the new impairment model
• Potential revisions of the Standardised Approach is are challenging
banks’ operations
• Why does ongoing disclosure matter for ABS?
• How should banks deal with the replacement of business tax with value
added tax?
Banking Newsletter
39
April 2015
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Being disrupted in every way
The six most common forms of internet finance include: third-party payment, online P2P (peer-to-peer) lending, big data finance (internet based micro financing), crowdfunding, innovative online financial services and web-based direct sales (see Graph 46). These segments have been disrupting banks’ businesses in every way.
For instance, the third-party payment business has been eroding banks’ fee income in settlement, clearing and other areas. Online P2P lending service providers aimed at SMEs, together with crowdfunding and wealth management products sold online, have also been diverting banks’ deposit base. This is because they offer higher yields than bank deposits.
Globally speaking, information technologies have been disrupting businesses in many industries other than financial services in recent decades. These include retail, catering, tourism and transportation, among others. Most of those industries who embraced technological change have seen their prices and costs fall, while improving customer experience and their efficiency of response to customer demands
Information technologies have played an important role in China’s financial services industry by improving the efficiency of fund allocation and filling in the financing gap left by
traditional financial institutions. They have helped stimulate household consumption, encouraged financial innovation and promoted market based reforms. The industry is expected to see a deeper integration with these technologies.
Large banks: adapt and change proactively
It is encouraging that most banks in China have been responding to technological disruptions
Banks’ responses to digital disruptions: an overview
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April 2015
Internet
Finance
Crowdfunding
Innovative
online financial
services
Big data finance
Web-based direct banking
Online P2P lending Third party payment
@
Graph 46 Six common types of internet finance
The collaboration between Alibaba and Tianhong Asset Management disrupted China’s wealth management markets in 2013, as their “Yuebao” product (money market funds sold on third party payment channel) attracted billions of funds in just a few days. The disruptions were so significant that 2013 was referred as the genesis of internet based financial products and services (internet finance). In 2014 Chinese banks responded to these challenges by building their own internet financial services platforms. This article is trying to look into those responses from six business segments that are regarded as the most common forms of internet finance.
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Banking Newsletter April 2015
proactively, although they still largely enjoy a dominant role. Most banks have been adapting and changing while building their own internet financial services platforms.
ICBC, the largest and most profitable bank in the world, launched its e-ICBC strategy in March 2015 in Beijing, showcasing the bank’s ambitions in internet-based finance.
The products and services ICBC launched cover five major functions ranging from fundraising and finance to trade, commerce and information. They include ‘e-mall’ , social networking and direct banking platforms, along with payment and financing services.
According to Mr. Jiang Jianqin, the Chairman of the bank, the real challenges the in internet era do not arise from new market entrants, but from banks’ adaptability to the new environment and changing customer needs. Banks need to embrace technological change with innovation and passion.
Linking IT with niche
ABC is another bank that is responding to these changes. It has done so by integrating information technologies with its niche on rural business.
The bank set up an internet-based financial innovation laboratory as early as June 2013 to explore opportunities in this area. An internet-based financial service promotion office was set up in March 2014 to strengthen implementation of the bank’s internet strategies.
In terms of payment, ABC leveraged on its advantages on off-line customers and resources in 2014 to establish mobile terminal payment off-
line customer base and resources to establish a mobile terminal payment s system in 2014. This proved particularly important in rural areas.
ABC has also launched pilot operations of a “data internet loan” product. This innovative internet financing product provides self-service credit online based purely on transaction data.
In 2014, the bank launched “e-Commerce Steward”, which integrates e-commerce platforms with operation and management of enterprises.
Joint-stock banks: eager to embrace change
As well as the large commercial banks, most joint stock commercial banks have also been responding eagerly to changes.
Listed
Banks
Personal
e-banking
Corporate
e-banking
Mobile
banking
ICBC 180.00 Not disclosed 140.00
CCB 178.69 3.30 146.79
ABC 135.00 3.19 111.00
BOC 112.50 2.60 64.60
BOCOM Not
disclosed Not disclosed
Not
disclosed
CMB 18.63 0.54 23.68
SPDB 12.00 Not disclosed 6.64
CITIC 13.91 Not disclosed 6.45
CMBC 11.61 0.49 13.02
CEB 15.38 Not disclosed 12.58
PAB 7.34 Not disclosed 5.40
HXB 3.15 0.16 1.59
Table 5 E-banking & mobile banking user numbers
Unit: millions
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Banking Newsletter April 2015
CITIC has been embracing information technologies by promoting a balanced, two-way development: namely “internet-based financial services” with “finance-based internet business”.
Through internet-based financial services, the bank reinforced its efforts to integrate various e-channels and promote an e-channel “Express Way” for optimal customer experience and satisfaction. As part of its finance-based internet business, the bank launched its “Cyber Payment” mobile app. This is a fully online public platform providing cross-border foreign exchange payments.
Online financing has been supported by optimising internet lending to traders with POS terminals. “Huitongda” online business lending provides supply chain finance and based on agency payroll payment data, and personal credit
based on payment of contribution to the public housing reserve.
PAB strengthened its internet-based financial services by rolling out innovative products and service platforms such as “Orange-e-Net”, “Hang E-Tong version 2.0”, “Gold Banking” and “Pocket Banking” (a mobile financial services platform including debit and credit cards, wealth management, mobile payment and other mobile services.
As well as the names mentioned above, other banks have been building or preparing their own Business to Business (B2B) and Business to Consumer (B2C) e-commerce platforms and online lending platforms with the assistance of big data. Payment platform are targeted at individual and corporate’s diversified needs. A new competitive space is developing quickly.
E-commerce Online
payment
Innovative
platform
Internet based
micro financing
Mobile
banking
Web-based
direct banking
ICBC √ √ √ √ √ √
CCB √ √ √ √ √ √
ABC √ √ √ √ √
BOC √ √ √ √ √
BOCOM √ √ √ √ √
CMB √ √ √ √ √ √
SPDB √ √ √ √
CITIC √ √ √ √ √
CMBC √ √ √ √ √ √
CEB √ √ √ √ √
PAB √ √ √ √ √ √
HXB √ √ √ √ √
Table 6 Major Listed Banks’ presence in different types of internet-based financial services
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The key changes of IFRS 9
This new standard includes amended guidance for the classification and measurement of financial instruments. Classification for investments in debt instruments is driven by the entity’s business model for managing financial assets and their contractual cash flow characteristics. Investments in equity instruments are always measured at fair value. New guidance is also provided for financial liabilities at fair value through profit or loss.
This new standard also introduces a new impairment model —— the expected credit loss model. The new standard outlines a ‘three-stage’ model for impairment based on changes in credit quality since initial recognition. Assets move in the three stages based on changes of the credit quality, and there is a different way to measure impairment loss and use the effective interest rate (see next page).
• Stage 1 includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these
assets, 12-month expected credit losses (‘ECL’) are recognised and interest revenue is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance).
• Stage 2 includes financial instruments that have had a significant increase in credit risk since initial recognition (unless they have low credit risk at the reporting date) but that do not have objective evidence of impairment. For these assets, lifetime ECL are recognised, but interest revenue is still calculated on the gross carrying amount of the asset.
• Stage 3 includes financial assets that have objective evidence of impairment at the reporting date. For these assets, lifetime ECL are recognised and interest revenue is calculated on the net carrying amount (that is, net of credit allowance).
Getting prepared for the new impairment model
Banking Newsletter
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April 2015
In 2014 the International Accounting Standards Board (IASB) finally published the complete version of International Financial Reporting Standards No.9 (IFRS 9), representing the accomplishment of a prolonged and difficult programme to improve the standards of financial instruments since 2008. IFRS 9 will be effective for annual periods beginning on or after 1 January 2018, and the changes are likely to have a significant impact on entities that have significant financial assets and in particular financial institutions. Considering the continuing convergence of the China Accounting Standards (CAS) and the IFRS, this new standard will have an impact on the amendments and implementation of CAS. This section will focus on the impairment of the financial instruments and discuss the challenges of the implementation of the expected loss model, as well as the importance of getting prepared.
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April 2015 Banking Newsletter
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The standard requires management, when determining whether the credit risk on a financial instrument has increased significantly, to consider reasonable and supportable overview of the model information available, in order to compare the risk of a default occurring at the reporting date with the risk of a default occurring at initial recognition of the financial instrument.
IFRS 9 introduces significant additional disclosure requirements relating to credit risk and expected credit loss allowances. Understanding the required data and systems for all these needs will therefore be critical to ensuring the completeness of IFRS 9 project scopes and avoiding revisions later in the project that could be costly and jeopardise project timings.
This standard will be very challenging to apply, in particular for financial institutions.
Currently, most entities do not collect the amount of credit information required by the standard. Entities will need to significantly modify their current credit and information systems in order to gather the required information.
Management will need to build new models to determine both 12-month and lifetime ECL. This will require complex judgements (for example, definition of default, definition of low credit risk and behavioural life of revolving credit facilities). It is expected that the implementation process will require a significant amount of time before an entity will be in a position to comply with the requirements of the standard.
Recognition of expected credit losses
Interest revenue
Effective interest on gross
carrying amount
Lifetime expected credit losses 12-month expected credit losses
Change in the credit risk since initial recognition
Stage 1 Stage 2 Stage 3
Performing
（Initial recognition）
Underperforming
（Assets with significant increase in
credit risk since initial recognition）
Non-performing
（Credit-impaired assets）
Lifetime expected credit losses
Effective interest on gross
carrying amount
Effective interest on amortised cost
carrying amount（that is, net of
credit allowance)
Graph 47 Illustration of the 3 stages for expected credit loss impairment model
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April 2015 Banking Newsletter
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Basel Committee guidance on accounting for expected credit losses
On 2 February 2015 the Basel Committee issued for consultation ‘Guidance on accounting for expected credit losses’. The guidance will impact banks implementing IFRS 9 and is designed to drive consistent interpretations and practice. The consultation period ends on 30 April 2015.
While ECL accounting frameworks are new and different from current accounting frameworks and their implementation will require an investment in both resources and system developments/upgrades, standard setters have given or are expected to give firms a considerable time period to transition to the updated accounting requirements. On that basis, the Committee has significantly heightened supervisory expectations that internationally active banks - and those banks that are more sophisticated in the business of lending will have
the highest-quality implementation of an ECL accounting framework.
Timetable
The implementation of IFRS 9 will be accomplished systematically, especially for the implementation of the new ECL model. Coordination among various functions is necessary for accounting, risk management, IT system and data management departments. It will remain necessary throughout the whole process: from the study of the new standard and sorting out the data request needed, to identifying gaps in the current information and system, and pilot running of the new system to the final implementation.
Therefore, as illustrated in the chart on the next page, the effective deadline of 2018 is very tight. Financial institutions should start to prepare for this as soon as possible.
2014.7
IASB published the
complete version of
IFRS 9
2018 .Q1
Consider the reports
to be published and
restatement
2015
Set the objectives,
project mobilisation,
model development
and quality check of
data
2015-2016
Model verfication
2018.1.1
effective for annual
periods beginning
on or after 1
January 2018
2017.1.1
Parallel
implementation
2014 2015 2016 2017 2018
2016
PRC publish the
related accounting
standard (expected)
Graph 48 Timetable for IFRS 9 implementation
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Potential revisions of the Standardised Approach are challenging banks’ operations
Banking Newsletter
Final standards expected to be unveiled by 2015 year-end
In its report to the G20 in November 2014, the Basel Committee pointed out that there are material variances in banks’ regulatory capital ratios that arise from factors other than differences in the riskiness of banks’ portfolios. The Committee pledged to reduce the level of observed variation in capital ratios across banks, by reviewing and revising policies and approaches, strengthening disclosure requirements, and monitoring outcomes of risk-weighted asset variability.
Recently, the Committee has been collecting comments for standardised approach for credit risk, market risk and operational risk, as well as the design of the new capital floor. The finalised
standards are expected to be issued by the end of 2015.
Among these revised standards, the new Standardised Approach for Credit Risk may have the most significant impact on banks. Besides its evident impact on the practices and capital requirements of banks under standardised approach, the new SA approach will also influence the regulatory capital requirements of the banks under the IRB approach through capital floor, though the extent of the influence will largely depends on the final design and calibration of the capital floor.
The table below summarises the weaknesses of the current standardised approach for credit risk and the principles and rationale for the revision.
46
April 2015
Weaknesses of the current approach
Over-reliance on external credit ratings
Lack of granularity and risk sensitivity
Out-of-date calibrations
Excessive complexity and lack of clarity
w ithin the standards
Lack of comparability and misalignment of
treatment w ith exposures risk w eighted
under the IRB approach
Excessive complexity and lack of clarity
w ithin the standards
Principles and rationale for the review
Keep the fundamental concept of the current
framework
Reflect to a reasonable extent the risk of the
exposures and provide the correct incentives for
banks
Be simple and suitable for a wider range of
jurisdictions and banks
Reduce reliance on internal modelled approaches to
set capital charges
Reduce or remove, where possible, the reliance on
external ratings when setting capital charges
Definitions used in the standardised approach
should, to the extent possible, be harmonised with
those used in the IRB framework
Be justified by illustrating either the weaknesses or
the potential correction of a misalignment
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2015年4月
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April 2015 Banking Newsletter
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Implications: increase the sensitivity of credit risk
According to the revised standardised approach, the risk exposure to financial institutions will be greatly increased in China, considering the current average capital adequacy ratio and non-performing loan rate of Chinese listed banks. The higher capital requirements under the revised standardised approach could bring large capital advantages to banks under IRB.
From an business perspective, the revised standardised approach will greatly increase the
risk sensitivity of exposures to corporates. Banks need to monitor the RAROC of existing portfolio, adjust current portfolio structures and guide future business by utilizing tools such as capital management and risk-based pricing. The recalibrations of risk weights between different asset classes will also affect the overall asset portfolio allocation.
From an operational perspective, the implementation of revised standardised approach will bring challenges to banks’ current operational models and information systems .
Key Revisions
Exposures to
banks
Credit risk
mitigation
Exposures
secured by
commercial
real estate
Exposures to
corporates
Exposure to
Retail
portfolio
Exposures
secured by
residential real
estate
In determining the risk weight, the
Committee aims to remove both references
to external credit ratings and the link to a
sovereign’s credit rating, and seeks to
develop a single approach based on two
risk drivers that are relevant to banks:
capital adequacy and asset quality. The
risk weights will range from 30% to 300%.
Corporate exposures will no longer
be risk-weighted by referring to the
external credit rating, but will
instead by referring to a look-up
table where risk weights range from
60% to 300% on the basis of two
risk drivers: revenue and leverage.
Further, risk sensitivity would be
increased by introducing specific
treatments for specialised lending.
The retail category would be
enhanced by tightening the criteria to
qualify for the 75% preferential risk
weight, and by introducing a fall back
subcategory for exposures that do
not meet the criteria.
Exposures secured by residential real
estate would no longer receive a single
35% risk weight. Instead, risk weights
would be determined according to a
look-up table where risk weights range
from 25% to 100% on the basis of two
risk drivers: loan-to-value and debt-
service coverage ratios.
Exposures secured by commercial
real estate are subject to further
consideration where two options
currently envisaged are: (a) treating
them as unsecured exposures, with a
national discretion for a preferential
risk weight under certain conditions;
or (b) determining the risk weight
according to a look-up table where
risk weights range from 75% to 120%
on the basis of the loan-to-value ratio.
The credit risk mitigation framework
would be amended by reducing the
number of approaches, recalibrating
supervisory haircuts, and updating
corporate guarantor eligibility criteria.
Graph 49 Key Contents of “Revisions to the Standardised Approach for credit risk (Consultative Document)”
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Why does ongoing disclosure matter for ABS? －Implications on the revisions of regulation AB in the US
Background
The US Securities and Exchange Commission (SEC) specially enacted a set of regulations named Regulation AB (Reg AB), in order to govern the disclosure and reporting for asset-backed securities (ABS) in the US. The rules were initially issued on 1 January 2006.
After the global financial crisis, with the amendment of the Dodd-Frank Act, the SEC took five years to amend Reg AB. The revisions went into effect formally on 24 November 2014.
Objective and content
The final rules are intended to provide investors with transparent, timely and sufficient information. They should enhance the investors’ confidence in ABS, reduce undue reliance on credit ratings, and help issuers pare funding costs.
The rules cover the following areas:
1. Each specific underlying asset required to be disclosed in standardised data points;
2. Disclosure requirement of ABS offering process, standard and prospectus;
3. Disclosure requirement of Asset-Backed Issuer on an ongoing basis including ABS issuer. Distribution Report on Form 10-D, the annual report on Form 10-K, and Current Report on Form 8-K.
1. Each specific underlying asset required to be disclosed in standardised data points
The maximum revision the SEC made from the 2006 version of Reg AB requires disclosure for six kinds of underlying asset: residential mortgages, commercial mortgages, auto loans, auto leases, debt securities or securitisations of asset-backed securities. For each kind of underlying assets, Reg AB set up standardised data points in a range from 67 to 270 by which the servicers are required to disclose. Such
Banking Newsletter
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April 2015
China’s credit asset securitisation developed rapidly in 2014, with product issuance totalling RMB 280 bn: 2.80 times the aggregate issuance from 2005 - 2013. It is expected the issuance will continue its momentum in 2015 following the registration based reform. This article aims to provide new market insights through an overview of relevant regulation revisions in the US.
Table 7 Disclosure required by Regulation
Frequency Content
Periodic
Form 10D – periodic distribution and pool performance information (item 1121 of REG AB)
Form 8K – the occurrence of certain defined reportable events such as changing servicers,
etc.
(New) Form ABS-EE- asset data files and asset related documents
Annual
Form 10K - assessment of compliance (item 1122 & 1123 of REG AB)
Form 10K - attestation reports by registered public accounting firms, etc. (item 1122 &
1123 of REG AB)
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April 2015 Banking Newsletter
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disclosure is not only made in the prospectus during the offering process but also in distribution report on Form 10-D during the ongoing period.
The new disclosure requirements are designed to provide investors and other participants in the securitisation market with data necessary to analyse for each securitisation transaction, at the time of inception and over the life of a security, the characteristics of each asset, including the collateral supporting each asset and the cash flows derived from each asset in the transaction.
Schedule AL (§229.1125) simply specifies the disclosure requirements of residential mortgages as an example. The key data points of other assets is less than residential mortgages, however the latitude and breadth of disclosure would launch a major challenge for issuers’ systems. The regulators also acknowledge that issuers need to invest human and financial resources to meet these disclosure requirements.
The SEC also considered carefully the privacy issues of disclosing asset-level information and indicated that it won’t lead to risk of re-
identification of the obligors and lessees especially in MBS and auto ABS. In addition, the finalised disclosure requirement of data points has weighted the benefits and costs of information for investor due diligence and considered risk mitigation of disclosing sensitive obligor data.
2. Securities Act Registration
The Regulation AB Final Rules adopt new registration procedures, registration forms and shelf eligibility requirements for asset-backed security issuers. The new rules maintain the fundamental framework of shelf registration for delayed ABS offerings, but provide new and important protections for investors who choose to commit capital to the ABS transaction.
3. Continuous disclosure during ongoing period
The SEC suggests that loan servicer’s disclosure and independent public accountant’s attestation during ABS ongoing period are the main aspects of regulation. The requirements of ongoing disclosure are shown in the following schedule.
ABS Type Key Data Points Key Disclosures
RMBS 270
• General information about the residential mortgage;
• Information related to property;
• Information related to the obligor;
• Information related to mortgage insurance;
• Information related to activity on the loan;
• Information related to servicers;
• Others: assets subject to demand, loans that have been charged
off, loan modifications, repayment plans, delinquent loans, etc.
Note: Above table is a summary of the regulation, please refer to 1125 Schedule AL of Regulation AB for details.
Table 8 Product disclosure requirement, RMBS as an example
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April 2015 Banking Newsletter
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1) Distribution Reports on Form 10-D
Form 10-D contains periodic distribution and pool performance information, and it is filed within 15 days of each required distribution date on the asset-backed securities. Disclosure of each asset in the pool needs to meet the requirements of part 1, which is a huge challenge to the servicers for the disclosed reports’ time and quality.
2) Annual Report of servicers on Form 10-K
The Form 10-K report of an asset-backed issuer mainly requires each servicer to provide an Independent Compliance Statement which
declares its services in line with servicing criteria including general service matters, cash recycling and management, distribution, information reporting and asset pool management.
The compliance assessment should be based on service platform-level rather than transaction-level. The assessment should include all the transactions that ABS servicers are responsible for reporting. In addition to the assessment of compliance with servicing criteria, the filing of attestation reports by registered public accounting firms on such assessment is required to provide a certain level of assurance and transparency regarding the servicer’s performance.
Independent Compliance
Statement of each servicer for their
due diligence (Section 1123)
An assessment of compliance with
servicing criteria by each party
participating in the servicing function
(Section 1123)
Sarbanes -Oxley Act 302
Authenticate provided by signatory of
annual report 10K
Independent Compliance Statement
declared by each servicer for servicing
criteria
Attestation reports of servicers’
statements by auditors
Disclosure requirements of Annual Report on
Form 10-K
Conclusion
As the start of the filing and registration system for China's asset securitisation, sufficient and effective issuing and ongoing disclosure of ABS is a crucial cycle to improve the sustainable and orderly development of the market. The ongoing disclosure and servicer’s due diligence attestation reports by registered public accounting firms proves valuable and beneficial to the development of ABS market transparency and to efficiency in the long run.
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Background
The Chinese government piloted VAT in Shanghai from 1 January, 2012. In 2013, the scope of the pilot was extended to the whole country and the pilot industries were broadened. In 2014, railways, postal services and telecommunications were included. Another seven service industries have been included in the scope of VAT.
According to statistics from the Ministry of Finance, by the end of 2014 there were 4.1 million pilot VAT payers nationwide, and more than 95% benefited from lower taxes. The total tax saving was 89.8 billion yuan.
The MoF, the State Administration of Taxation and the State Council clarified that the tax departments would continue to expand the scope of replacing business tax with VAT. In 2015, VAT will be extended to construction, real estate, financial services and life services.
Challenges in the banking industry
Complexity, a short timeline and significant workload
• It is expected that business tax will be replaced by VAT in the financial services industry in June, 2015. The implementation is expected from October 2015 at the earliest and January 2016 at the latest.
• Different businesses are taxed in different ways, which makes streamlining business more difficult. Due to diversification of products in loan businesses, intermediary businesses, financial products, and especially cross-border businesses, tax preferences will need to be identified and negotiated one by one.
Compliance is the basis, while tax efficiency is the target
• In order to meet VAT requirements, proper training should be delivered and sufficient human resources allocated, so that front line employees can issue invoices properly and purchasing departments can collect, file and certify VAT invoices on a timely basis:
• Need to adjust account codes to meet the recording of VAT;
• Analyse the bank’s performance in VAT payment and deduction. Consider increasing tax efficiency by using outsourcing services.
(continues in next page)
Banking Newsletter
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April 2015
How should banks deal with the replacement of business tax with value added tax?
The replacement of business tax with value-added tax is a crucial part of a deepening tax reform in China. In early 2015, the MoF and the State Administration of Taxation both proposed to expand the reform to construction, properties, financial services and other services. The Government Work Report delivered by Premier Li Keqiang emphasised the reform should be completed by the end of the year. Due to the complexity of business scope, tax structure and tax collection，financial industry reform is needed urgently and will require much effort.
PwC
Reassess the terms of business and business strategy, put into use in daily operation and make reference during business negotiation
• Adjust the businesses and products based on pricing strategy;
• Choose the proper supplier, change the contract terms and acquire the VAT invoice.
Preparation works of banks
Coordinate and cooperate within the organisation:
• Deploy relevant staff, organise working groups to coordinate the transition of business tax to value-added tax , mobilise the branches;
• Clear work plans including objectives and timetables, follow up the implementation of working plans, and evaluate the outcomes.
Implementation step by step:
• Figure out the current situations, gap analyses, plan in advance: In terms of the processes of IT system, recognise the key areas in internal process and products that need to improve; analyse the circumstances of clients and suppliers, evaluate the possibilities of transfer pricing on output value-added tax and the reduction of costs; assess the current structure and data of IT system, recognise the areas that need to transform;
• Strategy analysis, long-term projection and streamline of pricing: Evaluate the ways and areas that the profitability of the bank will be affected by
transfer from business tax to value-added tax from a strategic point of view; adjust the pricing with consideration of the preferences of banks; manage the bank’s portfolio by increasing exposure to certain customers while decreasing others.
• Smooth transition, understand policies in depth, and prompt compliance: According to the requirements of VAT, increase and revise the accounting policies and procedures of the bank; amend contracts and provide letters to suppliers and customers to introduce the shift between business tax to value-added tax; set up principles and policies, including revision of the policies and procedures over the management of value-added tax and the user manual of value-added tax invoices; revisit processes and systems;
• Figure out and solve issues, as well as control risks: Implement formal follow-up processes on tax declarations; establish sound communication mechanisms with tax authorities; track the issuance, acquisition and certification of value-added tax invoices; and evaluate the functions of systems.
April 2015 Banking Newsletter
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4. Appendix
• Financial highlights of Major Listed Banks
• Definitions
• Graph index
• Banking and Capital Markets Contacts
• PwC Offices in China
Banking Newsletter
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April 2015
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Financial highlights of Major Listed Banks (I)
Banking Newsletter
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April 2015
Operating Results in 2014 ICBC CCB ABC BOC BOCOM 5 LCBs Total
Operating income 658,892 570,470 520,858 456,331 177,401 2,383,952
Net interest income 493,522 437,398 429,891 321,102 134,776 1,816,689
Non-interest income 165,370 133,072 90,967 135,229 42,625 567,263
Net fee & commission income 132,497 108,517 80,123 91,240 29,604 441,981
Other non-interest income 32,873 24,555 10,844 43,989 13,021 125,282
Operating expenses (299,280) (273,223) (289,914) (225,412) (93,559) (1,181,388)
Business tax and surcharges (41,351) (34,983) (28,880) (26,224) (12,822) (144,260)
Business & administration expenses (176,261) (159,825) (179,992) (130,387) (53,045) (699,510)
Allowance for impairment losses (56,729) (61,911) (67,971) (48,381) (22,866) (257,858)
Other business expenses (24,939) (16,504) (13,071) (20,420) (4,826) (79,760)
Operating profit 359,612 297,247 230,944 230,919 83,842 1,202,564
Profit before tax 361,612 299,086 232,257 231,478 84,927 1,209,360
Income tax expense (85,326) (70,839) (52,747) (54,280) (18,892) (282,084)
Net profit 276,286 228,247 179,510 177,198 66,035 927,276
Non-controlling interests 475 417 49 7,603 185 8,729
Profit attributable to shareholders 275,811 227,830 179,461 169,595 65,850 918,547
Financial Position,
as of 31 December 2014 ICBC CCB ABC BOC BOCOM 5 LCBs Total
Total assets 20,609,953 16,744,130 15,974,152 15,251,382 6,268,299 74,847,916
Loans and advances, net 10,768,750 9,222,910 7,739,996 8,294,744 3,354,787 39,381,187
Loans and advances 11,026,331 9,474,523 8,098,067 8,483,275 3,431,735 40,513,931
Less: Allowance for impairment losses 257,581 251,613 358,071 188,531 76,948 1,132,744
Investments 4,433,237 3,727,869 3,575,630 2,710,375 1,162,876 15,609,987
Interbank assets 1,251,238 788,737 1,489,285 1,130,211 525,033 5,184,504
Cash & deposits with central bank 3,523,622 2,610,781 2,743,065 2,391,211 938,055 12,206,734
Others assets 633,106 393,833 426,176 724,841 287,548 2,465,504
Total liabilities 19,072,649 15,491,767 14,941,533 14,067,954 5,794,694 69,368,597
Deposits from customers 15,556,601 12,898,675 12,533,397 10,606,647 4,029,668 55,624,988
Interbank liabilities 1,920,196 1,388,048 1,187,085 2,005,577 1,324,606 7,825,512
Debt securities issued 279,590 191,349 211,779 278,045 129,547 1,070,525
Due to central bank 631 91,216 80,121 348,271 83,669 603,908
Other liabilities 1,315,631 922,479 929,151 829,414 227,204 4,223,879
Total owners’ equity 1,537,304 1,252,363 1,032,619 1,183,428 473,605 5,479,319
Non-controlling interests 6,445 10,184 1,553 42,569 2,550 63,301
Total equity attributable to equity
shareholders 1,530,859 1,242,179 1,031,066 1,140,859 471,055 5,416,018
Large Commercial Banks (In RMB millions)
PwC
Financial highlights of Major Listed Banks (II)
Banking Newsletter
55
April 2015
Joint-stock Commercial Banks (In RMB millions)
Operating Results in 2014 CMB SPDB CITIC CMBC CEB PAB HXB 7 JSCBs
Total
Operating income 165,863 123,181 124,716 135,469 78,531 73,407 54,885 756,052
Net interest income 112,000 98,183 94,741 92,136 58,259 53,046 46,241 554,606
Non-interest income 53,863 24,998 29,975 43,333 20,272 20,361 8,644 201,446
Net fee & commission income 44,696 21,346 25,313 38,239 19,157 17,378 7,652 173,781
Other non-interest income 9,167 3,652 4,662 5,094 1,115 2,983 992 27,665
Operating expenses (93,094) (61,430) (70,312) (75,990) (40,115) (47,161) (30,994) (419,096)
Business tax and surcharges (10,425) (8,147) (8,827) (9,005) (6,361) (5,482) (3,885) (52,132)
Business & administration expenses (50,656) (28,475) (37,812) (45,077) (23,416) (26,668) (20,622) (232,726)
Allowance for impairment losses (31,681) (24,193) (23,673) (21,132) (10,209) (15,011) (6,276) (132,175)
Other business expenses (332) (615) - (776) (129) - (211) (2,063)
Operating profit 72,769 61,751 54,404 59,479 38,416 26,246 23,891 336,956
Profit before tax 73,431 62,030 54,574 59,793 38,554 26,194 24,003 338,579
Income tax expense (17,382) (14,670) (13,120) (14,226) (9,626) (6,392) (5,980) (81,396)
Net profit 56,049 47,360 41,454 45,567 28,928 19,802 18,023 257,183
Non-controlling interests 138 334 762 1,021 45 - 42 2,342
Profit attributable to shareholders 55,911 47,026 40,692 44,546 28,883 19,802 17,981 254,841
Financial Position,
as of 31 December 2014 CMB SPDB CITIC CMBC CEB PAB HXB
7 JSCBs
Total
Total assets 4,731,829 4,195,924 4,138,815 4,015,136 2,737,010 2,186,459 1,851,628 23,856,801
Loans and advances, net 2,448,754 1,974,614 2,136,332 1,774,159 1,271,430 1,003,637 916,105 11,525,031
Loans and advances 2,513,919 2,028,380 2,187,908 1,812,666 1,299,455 1,024,734 939,989 11,807,051
Less: Allowance for impairment
losses 65,165 53,766 51,576 38,507 28,025 21,097 23,884 282,020
Investments 986,902 1,253,918 1,068,126 598,164 588,544 481,436 409,925 5,387,015
Interbank assets 525,051 360,444 297,936 927,756 459,731 291,446 204,910 3,067,274
Cash & deposits with central bank 654,785 506,067 538,486 471,632 354,185 306,298 292,248 3,123,701
Others assets 116,337 100,881 97,935 243,425 63,120 103,642 28,440 753,780
Total liabilities 4,416,769 3,932,639 3,871,469 3,767,380 2,557,527 2,055,510 1,749,529 22,350,823
Deposits from customers 3,304,438 2,724,004 2,849,574 2,428,112 1,785,337 1,533,183 1,303,216 15,927,864
Interbank liabilities 859,039 892,869 749,549 975,010 595,703 421,570 367,180 4,860,920
Debt securities issued 84,864 61,395 122,321 129,279 85,491 41,750 23,839 548,939
Due to central bank 20,000 21,006 50,050 50,745 30,040 2,754 20,058 194,653
Other liabilities 148,428 233,365 99,975 184,234 60,956 56,253 35,236 818,447
Total owners’ equity 315,060 263,285 267,346 247,756 179,483 130,949 102,099 1,505,978
Non-controlling interests 656 3,116 7,669 7,614 508 - 641 20,204
Total equity attributable to equity
shareholders 314,404 260,169 259,677 240,142 178,975 130,949 101,458 1,485,774
PwC
Financial highlights of Major Listed Banks (III)
Banking Newsletter
56
April 2015
Financial Ratios for 2014 ICBC CCB ABC BOC BOCOM
Profitability Return on average total assets (ROA) 1.40% 1.42% 1.18% 1.22% 1.08%
Return on weighted average equity (ROE) 19.96% 19.74% 19.57% 17.28% 14.87%
Net Interest Spread (NIS) 2.46% 2.61% 2.76% 2.12% 2.17%
Net Interest Margin (NIM) 2.66% 2.80% 2.92% 2.25% 2.36%
Cost to income ratio 26.75% 28.85% 34.56% 28.57% 29.90%
Income Mix
Net interest income 74.90% 76.67% 82.54% 70.37% 75.97%
Non-interest income 25.10% 23.33% 17.46% 29.63% 24.03%
Fee and commission income 20.11% 19.02% 15.38% 19.99% 16.69%
Asset Quality
Non performing loan (NPL) balance, in millions 124,497 113,171 124,970 100,494 43,017
NPL ratio 1.13% 1.19% 1.54% 1.18% 1.25%
Overdue loan balance, in millions 210,578 133,216 166,620 125,936 81,247
Overdue loan ratio 1.91% 1.41% 2.06% 1.48% 2.37%
Impairment losses on loans, in millions 22,941 59,264 65,063 46,606 22,210
Credit cost 0.22% 0.66% 0.85% 0.58% 0.66%
Allowance to total loans ratio 2.34% 2.66% 4.42% 2.22% 2.24%
Provision coverage ratio 206.90% 222.33% 286.53% 187.60% 178.88%
Capital Adequacy
Common Equity Tier 1 capital adequacy ratio 11.92% 12.12% 9.09% 10.61% 11.30%
Tier 1 capital adequacy ratio 12.19% 12.12% 9.46% 11.35% 11.30%
Capital adequacy ratio 14.53% 14.87% 12.82% 13.87% 14.04%
Total equity to total assets ratio 7.46% 7.48% 6.46% 7.76% 7.56%
Risk-weighted assets to total assets ratio 60.53% 60.94% 67.94% 65.14% 66.44%
Financial Ratios for 2014 CMB SPDB CITIC CMBC CEB PAB HXB
Profitability Return on average total assets (ROA) 1.28% 1.20% 1.07% 1.26% 1.12% 0.97% 1.02%
Return on weighted average equity (ROE) 19.28% 21.02% 16.84% 20.41% 17.36% 16.35% 19.31%
Net Interest Spread (NIS) 2.33% 2.27% 2.19% 2.41% 2.06% 2.40% 2.52%
Net Interest Margin (NIM) 2.52% 2.50% 2.40% 2.59% 2.30% 2.57% 2.69%
Cost to income ratio 30.54% 23.12% 30.32% 33.27% 29.82% 36.33% 37.57%
Income Mix
Net interest income 67.53% 79.71% 75.97% 68.01% 74.19% 72.26% 84.25%
Non-interest income 32.47% 20.29% 24.03% 31.99% 25.81% 27.74% 15.75%
Fee and commission income 26.95% 17.33% 20.30% 28.23% 24.39% 23.67% 13.94%
Asset Quality
Non performing loan (NPL) balance, in millions 27,917 21,585 28,454 21,134 15,525 10,501 10,245
NPL ratio 1.11% 1.06% 1.30% 1.17% 1.19% 1.02% 1.09%
Overdue loan balance, in millions 52,704 38,725 75,944 49,686 45,145 45,995 22,826
Overdue loan ratio 2.10% 1.91% 3.47% 2.74% 3.47% 4.49% 2.43%
Impairment losses on loans, in millions 31,254 21,919 22,074 19,928 9,981 14,614 5,225
Credit cost 1.33% 1.15% 1.07% 1.18% 0.81% 1.55% 0.59%
Allowance to total loans ratio 2.59% 2.65% 2.36% 2.12% 2.16% 2.06% 2.54%
Provision coverage ratio 233.42% 249.09% 181.26% 182.20% 180.52% 200.90% 233.13%
Capital Adequacy
Common Equity Tier 1 capital adequacy ratio 10.44% 8.61% 8.93% 8.58% 9.34% 8.64% 8.49%
Tier 1 capital adequacy ratio 10.44% 9.13% 8.99% 8.59% 9.34% 8.64% 8.49%
Capital adequacy ratio 12.38% 11.33% 12.33% 10.69% 11.21% 10.86% 11.03%
Total equity to total assets ratio 6.66% 6.27% 6.46% 6.17% 6.56% 5.92% 5.51%
Risk-weighted assets to total assets ratio 61.15% 68.37% 71.07% 71.30% 69.35% 61.87% 64.87%
PwC
Definitions
57
April 2015 Banking Newsletter
Terms Definition or formula
NPL balance Refers to the sum of Substandard, doubtful and loss loans in accordance with 5-tier classification
NPL ratio NPL balance / Total loans and advances to customers × 100%
Overdue loan balance In case of one day overdue for any principal or interest, the whole loan is classified as overdue
Overdue loan ratio Overdue loan balance / Total loans and advances to customers ×100%
Provision coverage) ratio Allowance for impairment losses on loans / NPL balance ×100%
Return on average assets
(ROA) Net profit / average balance of total assets × 100% × annualised coefficient
Return on weighted average
equity (ROE)
Net profit / average balance of the sum of owner's equity and minority's interest × 100% ×
annualised coefficient
Net interest margin (NIM) Net interest income / average balance of interest-earning assets × 100% × annualised coefficient
Net interest spread (NIS) Average yield of interest-earning assets - average cost of interest-bearing liabilities x annualised
coefficient
Other non-interest income Non-interest income other than net fee and commission income, including net income from treasury
business, fair value gains and losses of financial assets, income from other businesses, etc.
Cost-to-income ratio Business and administration expenses / operating income x 100%
Current ratio Current assets / current liabilities × 100%
Loan to deposit ratio Balance of loans / Balance of Deposits × 100%
Net capital base Net capital base calculated as stipulated by the Capital Rules for Commercial Banks (Provisional)
and other regulations
Tier-1 capital after deductions Tier-1 capital after deductions calculated as stipulated by the Capital Rules for Commercial Banks
(Provisional) and other regulations
Net core tier-1 capital Net core tier-1 capital calculated as stipulated by the Capital Rules for Commercial Banks
(Provisional) and other regulations
Capital adequacy ratio (CAR)
Net capital base / (credit risk-weighted assets + market risk-weighted assets + Operational risk-
weighted assets + capital floor adjustment <only applicable to those who use Internal Ratings-Based
Approach for credit risk weighted average assets calculation> × 100%
Tier-1 CAR
Tier-1 capital after deductions / (credit risk-weighted assets + market risk-weighted assets +
Operational risk-weighted assets + capital floor adjustment <only applicable to those who use
Internal Ratings-Based Approach for credit risk weighted average assets calculation> × 100%
Core tier-1 CAR
Net core tier-1 capital / (credit risk-weighted assets + market risk-weighted assets + Operational risk-
weighted assets + capital floor adjustment <only applicable to those who use Internal Ratings-Based
Approach for credit risk weighted average assets calculation> × 100%
PwC
Graph index (I)
Banking Newsletter
58
April 2015
Graph No. Graph title Page
Graph 1 Top 10 growth markets as picked by Global CEOs, 2015 Vs. 2014 6
Graph 2 China GDP growth, year on year 7
Graph 3 Residential property price movement in 2014 8
Graph 4 Retail sales & industrial production growth 8
Graph 5 M2 growth to GDP growth, 1991-2014 9
Graph 6 Net profit growth for commercial banks 10
Graph 7 NPL growth for commercial banks 10
Graph 8 Change in profitability indicators for the Major Listed Banks 15
Graph 9 Change in income mix, LCB Vs. JSCBs 16
Graph 10 Change in interest income growth 17
Graph 11 Change in intermediary business growth 17
Graph 12 Change in NIM for Major Listed Banks 18
Graph 13 Comparison of yields and costs, LCB Vs. JSCBs 19
Graph 14 Interest income growth by business 20
Graph 15 Interest income mix, LCB vs JSCB 20
Graph 16 Interest expense mix, LCB Vs JSCBs 20
Graph 17 Fee & commission income mix 21
Graph 18 Comparison of growth in intermediary businesses in 2014, LCB vs JSCBs 21
Graph 19 Total asset growth, LCBs vs JSCBs 22
Graph 20 Change in asset mix, LCB vs JSCBs 23
Graph 21 Loan growth for Major Listed Banks 23
Graph 22 Change in loan mix, LCB vs JSCBs 24
Graph 23 Change in personal loan mix 24
Graph 24 Loan balance by geographical areas 25
Graph 25 Corporate loans by industry in 2014, LCB vs JSCBs 25
Graph 26 Change in NPL ratios 26
Graph 27 Change in NPL balance, LCB vs JSCBs 26
Graph 28 NPL by region in 2014 27
Graph 29 Credit risk of Major Listed Banks (NPL％ as benchmark） 27
Graph 30 Corporate NPLs by industry in 2014 28
Graph 31 Overdue loans and NPLs the of Major Listed Banks 29
Graph 32 Credit costs of Major Listed Banks 30
Graph 33 LLR coverage ratio 30
Graph 34 LLR/total loan ratio 30
Graph 35 Write-offs, transfers & NPL net growth 31
Graph 36 LLR to overdue loans & LLR to NPLs, LCBs vs JSCBs 31
Graph 37 Comparison of the investment structures of Major Listed Banks 32
Graph 38 Change in liabilities mix 33
Graph 39 Liabilities growth, LCB vs JSCBs 33
Graph 40 Change in deposit growth 34
PwC
Graph index (II)
Banking Newsletter
59
April 2015
Graph No. Graph title Page
Graph 41 Change in loan-to-deposit ratios 34
Graph 42 Change of wealth management products balance for Major Listed Banks 35
Graph 43 Capital adequacy ratios 36
Graph 44 Degree of risks for selected banks 36
Graph 45 IRB approach coverage ratio for credit risk 37
Graph 46 Six common types of internet finance 40
Graph 47 Illustration of the 3 stages for expected credit loss impairment model 44
Graph 48 Timetable for IFRS 9 implementation 45
Graph 49 Key Contents of “Revisions to the Standardised Approach for credit risk (Consultative Document)” 47
Table 1 Net profit and growth for the Major Listed Banks in 2014 14
Table 2 Impairment loss ratio of receivables 32
Table 3 Disclosure information illustration 37
Table 4 Major Listed Banks’ innovative capital instruments issuance plan in 2015 38
Table 5 E-banking & mobile banking user numbers 41
Table 6 Major Listed Banks’ presence in different types of internet-based financial services 42
Table 7 Disclosure required by Regulation 48
Table 8 Product disclosure requirement, RMBS as an example 49
PwC
Banking and Capital Markets Contacts
60
April 2015 Banking Newsletter
Assurance Advisory Tax
Raymond Yung – Beijing Matthew Phillips – Hong Kong Florence Yip – Hong Kong
Tel: +86 (10) 6533 2121 Tel: +852 2289 2303 Tel：+852 2289 1833
[email protected] [email protected] [email protected]
Margarita Ho – Beijing James Chang – Beijing Matthew Wong – Shanghai
Tel: +86 (10) 6533 2368 Tel: +86 (10) 6533 2755 Tel: +86 (21) 2323 3052
[email protected] [email protected] [email protected]
Jimmy Leung – Shanghai Chris Chan – Hong Kong Danny Yiu – Beijing
Tel: +86 (21) 2323 3355 Tel：+852 2289 2824 Tel：+86 (10) 6533 2787
[email protected] [email protected] [email protected]
Richard Zhu – Beijing Addison Everett – Beijing Oliver Kang – Beijing
Tel: +86 (10) 6533 2236 Tel: +86 (10) 6533 2345 Tel：+86 (10) 6533 3012
[email protected] [email protected] [email protected]
Michael Hu －Shanghai William Yung – Shanghai Assurance – Risk & Quality
Tel: +86 (21) 2323 2718 Tel：+86 (21) 2323 1984
[email protected] [email protected] Tracy Chen – Shanghai
Tel: +86 (21) 2323 3070
Charles Chow – Shenzhen William Gee – Beijing [email protected]
Tel: +86 (755) 8261 8988 Tel：+86 (10) 6533 2269
[email protected] [email protected] Nigel Dealy – Hong Kong
Tel: +852 2289 1221
Shirley Yeung – Guangzhou [email protected]
Tel：+86 (20) 3819 2218
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PwC Offices in China
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April 2015 Banking Newsletter
Beijing Shanghai Hong Kong 26/F, Office Tower A, Beijing Fortune Plaza 11/F, PricewaterhouseCoopers Center, 2 Corporate Avenue 22/F, Prince's Building
7 Dongsanhuan Zhong Road, Chaoyang District 202 Hu Bin Road, Huangpu District Central, Hong Kong
Beijing, P.R.C Shanghai, P.R.C Tel: +852 2289 8888
Zip: 100020 Zip: 200021 Fax: +852 2810 9888
Tel: +86 (10) 6533 8888 Tel: +86 (21) 2323 8888
Fax: +86 (10) 6533 8800 Fax: +86 (21) 2323 8800
Shenzhen Guangzhou Tianjin 34/F, Tower A, Kingkey100 18/F, PricewaterhouseCoopers Centre 36/F, The Exchange Tower Two,
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Shenzhen, P.R.C Guangzhou, P.R.C Tianjin, P.R.C.
Zip: 518001 Zip: 510623 Zip: 300051
Tel: +86 (755) 8261 8888 Tel: +86 (20) 3819 2000 Tel: +86 (22) 2318 3333
Fax: +86 (755) 8261 8800 Fax: +86 (20) 3819 2100 Fax: +86 (22) 2318 3300
Dalian Qingdao Hangzhou 8F Senmao Building 37/F, Tower One, HNA IMC Centre Unit 3205, Canhigh Center
147 Zhongshan Road, Xigang District 234 Yanan Third Road, Shinan District 208 North Huancheng Rd
Dalian, P.R.C Qingdao, P.R.C Hangzhou, P.R.C
Zip: 116011 Zip: 266071 Zip: 310006
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Fax: +86 (411) 8379 1800 Fax: +86 (532) 8089 1800 Fax: +86 (571) 2807 6300
Chongqing Ningbo Xiamen Room 1905, 19/F Metropolitan Tower Room 1203, Tower E, Ningbo International Financial Center Unit B, 11/F, International Plaza
68 Zou Rong Road 268 Min An Road East, Jiangdong District 8 Lujiang Road, Siming District
Chongqing, P.R.C. Ningbo, P.R.C Xiamen, P.R.C.
Zip: 400010 Zip: 315040 Zip: 361001
Tel: +86 (23) 6393 7888 Tel: +86 (574) 8187 1788 Tel: +86 (592) 210 7888
Fax: +86 (23) 6393 7200 Fax: +86 (574) 8187 1700 Fax: +86 (592) 210 8800
Suzhou Nanjing Xi'an
Room 1501, Genway Tower Unit 12A01, Nanjing International Centre 7/F, Block D, Chang'an Metropolis Center
188 Wang Dun Road, Suzhou Industrial Park 201 Zhongyang Road, Gulou District 88 Nanguan Street
Suzhou, P.R.C Nanjing, P.R.C Xi'an, P.R.C
Zip: 215028 Zip: 210009 Zip: 710068
Tel: +86 (512) 6273 1888 Tel: +86 (25) 6608 6288 Tel: +86 (29) 8469 2688
Fax: +86 (512) 6273 1800 Fax: +86 (25) 6608 6210 Fax: +86 (29) 8469 2600
Macau Wuhan Shenyang 29/F, Bank of China Building Unit 04, 41/F Wuhan Wanda Centre Room 705, EnterpriseSquare Tower A
323 Avenida Doutor Mario Soares, Macau 96 Linjiang Avenue, Jiyuqiao, Wuchang District 121 Qingnian Avenue, Shenhe District
Tel: +853 8799 5111 Wuhan, P.R.C Shenyang, P.R.C
Fax: +853 8799 5222 Zip: 430060 Zip: 110013
Tel: +86 (27) 5974 5818 Tel: +86 (24) 2332 1888
Fax: +86 (27) 5974 5800 Fax: +86 (24) 2326 3888
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