Hankou Bank Co., Ltd. 2019Annual Report

Hankou Bank Co., Ltd.

2019 Annual Report

2019 Annual Report of Hankou Bank Co., Ltd.

I

Contents

Chapter I Important Notice................................................................................................................ 1

Chapter II Basic Information..............................................................................................................2

I. Terms and Definitions......................................................................................................................................... 2

II. Company Profile................................................................................................................................................ 2

III. Organizational Chart of the Company..............................................................................................................4

Chapter III Summary of Accounting & Business Data.................................................................... 5

I. Major Financial Data for the Reporting Period.................................................................................................. 5

II. Major Accounting Data and Financial Indicators for the Three Years before the End of the Reporting

Period...................................................................................................................................................................... 6

III. Return on Equity and Earnings per Share........................................................................................................ 7

IV. Supplementary Financial Data for the Three Years before the End of the Reporting Period.......................... 8

V. Supplementary Financial Indicators for the Three Years before the End of the Reporting Period...................9

VI. Changes in Shareholder’s Equity during the Reporting Period.....................................................................10

VII. Composition of Capital and Its Changes...................................................................................................... 11

VIII. Liquidity Coverage Ratio at the End of the Period..................................................................................... 12

Chapter IV Report of the Board of Directors..................................................................................14

I. Management Discussion and Analysis..............................................................................................................14

i. Business review during the reporting period............................................................................................ 14

ii. Analysis of financial position and operating results during the reporting period....................................23

iii. Assets and liabilities during the reporting period................................................................................... 29

iv. Analysis of investment status.................................................................................................................. 37

II. Business Overview...........................................................................................................................................37

i. Institution setup......................................................................................................................................... 37

ii. Loan quality analysis................................................................................................................................40

iii. Group customer credit business and its risk management......................................................................42

iv. NPA changes and management measures................................................................................................42


II

v. Impairment provisions for repossessed assets and other prime assets.....................................................43

vi. Categories, average balances and average interest rates of major deposits and loans at the end of the

reporting period............................................................................................................................................ 43

vii. Debt securities investment..................................................................................................................... 44

viii. Items designated at fair value................................................................................................................46

ix. Bad debt provisions for interest receivable and other receivables..........................................................46

x. Balances and risk management of major off-balance-sheet items...........................................................47

III. Risk Exposures and Countermeasures of the Bank........................................................................................47

i. Credit risk.................................................................................................................................................. 47

ii. Market risk................................................................................................................................................48

iii. Operational risk....................................................................................................................................... 49

iv. Compliance risk....................................................................................................................................... 50

v. Liquidity risk.............................................................................................................................................50

vi. Reputational risk......................................................................................................................................52

IV. Changes in the Business Environment and Macro Policies, Laws and Regulations and Influences thereof 52

i. Influence of macro control........................................................................................................................ 52

ii. Influence of reform in financial supervision............................................................................................53

V. Outlook............................................................................................................................................................. 53

i. Industry development pattern and trend....................................................................................................53

ii. Possible external risks in future operation............................................................................................... 54

iii. Challenges and opportunities in future operation................................................................................... 54

iv. Operating plan..........................................................................................................................................54

VI. Work of the Board of Directors during the Reporting Period........................................................................56

i. Meetings of the Board of Directors and resolutions during the reporting period.....................................56

ii. Implementation of the resolutions of Shareholders’ General Meeting by the Board of Directors..........57

iii. Performance of duties by the special committees of the Board of Directors......................................... 58

iv. Performance of strategic management functions by the Board of Directors.......................................... 59

v. Development of policies and procedures of the Board of Directors........................................................59


III

VII. Profit Distribution Plan during the Reporting Period...................................................................................60

Chapter V Report of the Board of Supervisors............................................................................... 61

I. Work of the Board of Supervisors during the Reporting Period.......................................................................61

i. Meetings of the Board of Supervisors and Resolutions............................................................................61

ii. Performance of duties by the special committees of the Board of Supervisors...................................... 62

iii. Supervisors’ attendance of the general meetings and the meetings of the Board of Directors as

non-voting delegates.....................................................................................................................................62

iv. Supervision of duty performance............................................................................................................ 62

iv. Special work done....................................................................................................................................63

v. Development of policies and procedures..................................................................................................63

vi. Application of supervision findings........................................................................................................ 64

vii. Studies.................................................................................................................................................... 64

II. Independent Opinions of the Board of Supervisors on Relevant Issues......................................................... 64

i. Compliant operation of the Company....................................................................................................... 64

ii. Authenticity of the financial statements of the Company........................................................................64

iii. Acquisitions and sales of assets.............................................................................................................. 64

iv. Related party transactions........................................................................................................................64

v. Implementation of resolutions made by the general meetings.................................................................64

vi. Risk management and internal control....................................................................................................64

Chapter VI Significant Events.......................................................................................................... 66

I. Material Legal Proceedings and Arbitrations................................................................................................... 66

II. Increase or Decrease of Registered Capital, Split-off and Merger..................................................................66

III. Material Asset Acquisition and Sale, Merger and Acquisition...................................................................... 66

IV. Related Party Transactions..............................................................................................................................66

i. Related parties........................................................................................................................................... 66

ii. Summary of related party transactions.....................................................................................................68

iii. General related party transactions...........................................................................................................69

iv. Major related party transactions.............................................................................................................. 70


IV

V. Material Contracts and Performance of Obligations thereunder..................................................................... 71

i. Material trusts, sub-contracts and leases...................................................................................................71

ii. Material guarantees.................................................................................................................................. 71

iii. Other material contracts and performance of obligations thereunder.................................................... 71

VI. Engagement and Dismissal of the Accounting Firm......................................................................................71

VII. Regulatory Penalties on Directors, Supervisors and Senior Executives of the Company........................... 72

VIII. Other Important Information Necessary to Inform the Public.................................................................... 72

i. Acquisition of business access qualifications........................................................................................... 72

ii. Establishment of institutions.................................................................................................................... 72

iii. Other important information................................................................................................................... 72

Chapter VII Share Capital Changes and Shareholders................................................................. 74

I. Share Changes................................................................................................................................................... 74

i. List of share changes................................................................................................................................. 74

ii. Share offerings in the three years before the end of the reporting period............................................... 74

II. Shareholders.....................................................................................................................................................74

i. Total number of shareholders.................................................................................................................... 74

ii. Major equity transfers.............................................................................................................................. 74

iii. Shareholdings of the top 10 shareholders and changes thereof as at the end of the reporting period... 74

iv. Substantial shareholders.......................................................................................................................... 76

Chapter VIII Directors, Supervisors, Senior Executives and Employees.....................................79

I. Directors, Supervisors and Senior Executives.................................................................................................. 79

i. Basic information on the members of the Fifth Board of Directors and Board of Supervisors and senior

executives during the reporting period1.......................................................................................................79

ii. Posts of directors and supervisors in shareholder entities and related enterprises.................................. 81

iii. Major work experience and posts of directors, supervisors and senior executives at the end of the

reporting period............................................................................................................................................ 81

iv. Changes in directors, supervisors and senior executives during the reporting period............................85

II. Remunerations of Directors, Supervisors, Senior Executives and Key Management Personnel................... 86


V

III. Employees of the Bank...................................................................................................................................87

Chapter IX Corporate Governance Practice...................................................................................90

I. Corporate Governance during the Reporting Period........................................................................................ 90

i. About shareholders and the Shareholders’ General Meeting....................................................................90

ii. About directors, the Board of Directors and special committees............................................................ 91

iii. About supervisors, the Board of Supervisors and special committees...................................................91

iv. About information disclosure and investor relations management.........................................................92

II. Duty Performance of Independent Directors and External Supervisors......................................................... 92

i. Attendance of independent directors at Board of Directors’ meetings..................................................... 92

ii. Attendance of external supervisors at Board of Supervisors’ meetings.................................................. 93

iii. Objections raised by independent directors and external supervisors to relevant matters of the

Company.......................................................................................................................................................93

III. Operation Decision-making System of the Company....................................................................................93

IV. Assessment, Incentive and Constraint Mechanism for Senior Executives.................................................... 93

Chapter X Internal Control.............................................................................................................. 95

I. Statement of the Board of Directors on Internal Control Responsibilities.......................................................95

II. Basis of Internal Control over Financial Reporting and Internal Control System Development................... 95

i. Basis of establishing internal control over financing reporting................................................................95

ii. General plan on the establishment of internal control............................................................................. 95

iii. Establishment and improvement of internal control system...................................................................96

iv. Operation of internal control supervision mechanism............................................................................ 96

v. Internal control self-assessment................................................................................................................97

vi. Development and improvement of internal control................................................................................ 97

Chapter XI Financial Report............................................................................................................ 98

Chapter XII List of Documents for Reference................................................................................ 98

Chapter XIII Annexes........................................................................................................................98

Written Confirmation of Directors and Senior Management of Hankou Bank Co., Ltd. on theCompany’s 2019 Annual Report.......................................................................................................99


VI

2019 Auditor’s Report of Hankou Bank Co., Ltd. ...................................................................... 100


1

Chapter I Important Notice

The Board of Directors, and the Board of Supervisors, as well as the directors, supervisors and senior executives

of the Company warrant that the information contained herein does not contain any false records, misleading

statements or material omissions, and shall bear the joint and several liabilities for the authenticity, accuracy and

integrity of its contents.

The 2019 Annual Report of the Company and its summary were reviewed and approved at the 12th Meeting of the

Sixth Board of Directors of the Company on 29 May 2019. Of the 10 directors supposed to attend the meeting, 10

directors were present. Eight supervisors of the Company attended the meeting as non-voting delegates.

The annual financial report of the Company has been audited by Union Power Certified Public Accountants LLP

in accordance with the PRC Auditing Standards with a standard unqualified auditor’s report issued.

The Board of Directors of Hankou Bank Co., Ltd.

Chen Xinmin, Chairman, Ruan Xuzhou, Vice President & Financial Controller, and Li Daquan, Principal of the

Planning and Finance Department, warrant the authenticity and integrity of the financial report herein.


2

Chapter II Basic Information

I. Terms and Definitions

i. The Company, the Bank or Hankou Bank: Hankou Bank Co., Ltd.

ii. Our Group or the Group: Hankou Bank Co., Ltd. and its subsidiaries

iii. Articles of Association: Articles of Association of the Company

iv. Shareholders’General Meeting: The Shareholders’ General Meeting of the Company

v. Board of Directors: The Board of Directors of the Company

vi. Board of Supervisors: The Board of Supervisors of the Company

II. Company Profile

i. The Company’s legal Chinese name: 汉口银行股份有限公司

Legal English name: Hankou Bank Co., Ltd. (“HKB” in short)

ii. Legal Representative of the Company: Chen Xinmin

iii. Board Secretary: Ding Rui

Address: 933 Jianshe Road, Jianghan District, Wuhan City, Hubei Province

Postal Code: 430015

Tel: 027-82656263

Fax: 027-82656099

iv. Registered/office address: 933 Jianshe Road, Jianghan District, Wuhan City, Hubei Province

Postal Code: 430015

Tel: 027-82656263

Fax: 027-82656099

Customer service hotline: 96558 (Wuhan), 4006096558 (Nationwide)

Website: http://www.hkbchina.com

Email: [email protected]

v. Newspaper designated for information disclosure: Financial Times

Website designated for publication of annual report: http://www.hkbchina.com


3

Place where the Annual Report can be obtained: Office of the Board of Directors of the Company

vi. Other relevant information:

Date of First Registration: 15 December 1997

Date of change of registration: 26 December 2012

Place of initial registration: 21 Jianghan Road, Jianghan District, Wuhan City

Place of registration changed to: 933 Jianshe Road, Jianghan District, Wuhan City

Unified Social Credit Code: 91420100300248067P

Name of domestic accounting firm engaged: Union Power Certified Public Accounts (Special General

Partnership)

Office address: F/2-9, Donghu Road, Wuchang District, Wuhan City

vii. This report is prepared in both Chinese and English. The Chinese version shall prevail in case of any

discrepancy between the two versions.


4

III. Organizational Chart of the Company


5

Chapter III Summary of Accounting & Business

Data

I. Major Financial Data for the Reporting Period

(Unit: RMB1,000)

Item Consolidated Parent Company

Total profits (before tax) 2,076,681 2,019,903

Net profit attributable to common shareholders of the Company 2,416,842 2,362,902

Net profit attributable to common shareholders of the Company

with deduction of non-recurring profit and loss 2,213,308 2,161,836

Profit from principal operation 2,062,961 2,004,965

Operating profit 2,080,038 2,023,222

Profit from other operations 17,077 18,257

Investment income 1,227,191 1,227,191

Net non-operating income/expenses -3,357 -3,319

Net cash flows from operating activities 35,160,127 35,816,711

Net increase in cash and cash equivalents 15,758,041 15,827,747

Notes: 1. The non-recurring profit and loss are recognized and calculated in accordance with the Announcements for the Explanation

on the Information Disclosure by Companies that Offer Securities to the Public No.1-Non-recurring Gain and Loss (Announcement

No. 43 of China Securities Regulatory Commission (CSRC) in 2008).

2. Non-recurring profit and loss during the reporting period are presented below:

(Unit: RMB1,000)

Non-recurring profit and loss Consolidated Parent Company


6

Non-recurring profit and loss Consolidated Parent Company

Gains/losses on disposal of non-current assets, including the offset

part of allowance for impairment losses on assets set aside 97 95

Government subsidy recognized in the current profit or loss,

excluding the government subsidy closely relating to the

Company's normal business operation, complying with national

policies and enjoyed by the Company at a fixed amount or

quantity according to certain standards

6,951 6,635

Amounts recovered in current year on the assets written off in

previous years 272,839 266,847

Other non-operating income and expenses -3,357 -3,319

Income tax effects of non-recurring gains or losses 70,767 69,192

Net non-recurring profit and loss 205,764 201,066

Less: net effect of non-recurring profit and loss attributable to

minority shareholders (after tax) 2,231 0

Non-recurring profit and loss attributable to common

shareholders of the Company 203,534 201,066

II. Major Accounting Data and Financial Indicators for the Three Years before

the End of the Reporting Period

(Unit: RMB1,000)

Item

Consolidated Parent Company

2019 2018 2017 2019 2018 2017

Operating income 6,472,600 6,076,107 5,802,988 6,334,879 6,030,548 5,763,219

Net profit attributable to

common shareholders of

the Company

2,416,842 1,891,963 1,691,224 2,362,902 1,902,528 1,688,504


common shareholders of

the Company with

2,213,308 1,841,902 1,633,975 2,161,836 1,852,707 1,632,037


7

Item


2019 2018 2017 2019 2018 2017

deduction of

non-recurring profit and

loss

Total assets 405,739,564 319,295,909 281,077,036 405,041,970 318,471,383 280,077,198

Total liabilities 383,891,723 299,253,630 263,070,054 383,307,789 298,501,765 262,163,626

Shareholders’ equity 21,847,841 20,042,279 18,006,982 21,734,181 19,969,618 17,913,571

Net cash flows from

operating activities35,160,127 12,718,627 26,286,307 35,816,711 13,037,621 26,121,571

Basic earnings per share 0.59 0.46 0.41 0.57 0.46 0.41

Net assets per share 5.29 4.86 4.36 5.27 4.84 4.34

Net cash flows from

operating activities per

share (RMB)

8.52 3.08 6.37 8.68 3.16 6.33

Note: Relevant indicators are calculated in accordance with Article 21 of the Standards for Content and Format of Information

Disclosure by Companies Offering Securities to the Public No.2: Content and Format of Annual Report (2017 Revision) and the

provisions under the Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No.9: Calculation

and Disclosure of Return on Equity and Earnings per Share (2010 Revision). Where, basic earnings per share = P0÷S, S=S0＋S1＋

Si×Mi÷M0– Sj×Mj÷M0-Sk

Where: In the equation, P0 denotes the net profit attributable to the common shareholders or the net profit excluding non-recurring

items attributable to the common shareholders; S denotes the weighted average number of common shares outstanding; S0 denotes the

total number of shares at the beginning of the period; S1 denotes the increased shares as a result of recapitalization of public reserve

fund or the allotment of stock dividends during the reporting period; Si denotes the increased shares as a result of issue of new shares

or debt-for-equity swap during the reporting period; Sj denotes the decreased shares due to repurchase during the reporting period; Sk

denotes the number of shares downsized during the reporting period; M0 denotes the number of months of the reporting period; Mi

denotes the accumulative number of months from the next month of increase of shares to the end of the reporting period; Mj denotes

the accumulative number of months from the next month of reduction of shares to the end of the reporting period.

III. Return on Equity and Earnings per Share

Consolidated

Item Profit for the Weighted average Basic earnings per Diluted earnings per


8

reporting period

(RMB1,000)

ROE (%) share (RMB yuan) share (RMB yuan)


common shareholders of the

Company2,416,842 11.55 0.59 0.59



Company with deduction of

non-recurring profit and loss

2,213,308 10.58 0.54 0.54

Parent Company

Item

Profit for the

reporting period

(RMB1,000)

Weighted average

ROE (%)

Basic earnings per

share (RMB yuan)

Diluted earnings per

share (RMB yuan)



Company

2,362,902 11.31 0.57 0.57



Company with deduction of

non-recurring profit and loss

2,161,836 10.35 0.52 0.52

Note: Relevant indicators are calculated in accordance with the provisions in the Compilation Rules for Information Disclosure by

Companies Offering Securities to the Public No. 9: Calculation and Disclosure of Return on Equity and Earnings per Share (2010

Revision).

IV. Supplementary Financial Data for the Three Years before the End of the

Reporting Period

(Unit: RMB1,000)

ItemConsolidated Parent Company

2019 2018 2017 2019 2018 2017


9

Total liabilities 383,891,723 299,253,630 263,070,054 383,307,789 298,501,765 262,163,626

Total deposits 250,341,491 202,019,724 175,765,692 249,303,848 201,051,872 174,880,342

Due to banks and

other financial

institutions

1,850,576 1,504,290 1,625,404

1,850,576

1,504,290 1,625,404

Total loans 172,611,177 137,188,020 114,916,650 171,943,350 136,563,754 114,381,736

Notes: 1. Total deposits include savings deposits, corporate deposits, margin deposits, remittances outstanding and temporary deposits,

principal-guaranteed wealth management liabilities (principal-guaranteed wealth management was cleared to zero upon maturity at the

end of 2019) and large-value certificates of deposit issued;

2. Total loans include personal loans, corporate loans, discounts, import & export bill advances, trade finance, advances and

overdue loans.

V. Supplementary Financial Indicators for the Three Years before the End of the

Reporting Period

(In %)

ItemRegulatorystandard


2019 2018 2017 2019 2018 2017

Capital adequacyratio

≥10.5% 13.31 13.60 12.80 13.26 13.57 12.69

Liquidity ratioRMB

≥25% 103.46 76.13 59.73 103.27 76.10 59.72

Foreign currency≥60% 208.30 174.22 127.57 208.30 174.22 127.57

Loan-to-depositratio RMB 68.48 66.69 64.81 68.50 66.70 64.83

Foreign currency 95.11 69.74 42.43 95.11 69.74 42.43

Percentage ofinter-bankplacementsBorrowing

≤4%0.74 0.74 0.92

0.740.75 0.93

Lendings to banksand other financialinstitutions

≤8%2.16 0.25 0.18

2.170.25 0.18

NPL ratio ≤5% 1.75 2.11 2.14 1.75 2.10 2.13


10

ItemRegulatorystandard


2019 2018 2017 2019 2018 2017

Percentage ofloans to singlelargest customer

≤10% 6.80 6.72 6.04 6.84 6.76 6.08

Provision coverageratio

≥150% 194.23 158.23 176.17 194.38 158.71 176.54

Cost-to-incomeratio 34.34 34.04 34.30 34.61 33.86 34.09

Return on assets 0.67 0.63 0.69 0.65 0.64 0.69

Return on capital 11.55 9.89 9.72 11.33 10.04 9.73

Leverage ratio ≥4% 5.03 5.90 5.59 5.01 5.88 5.56

Net tier-1 capital(RMB1,000) 21,826,695 20,013,663 17,886,362 21,639,804 19,882,576 17,734,536

Balance ofconsolidated assetson and off thebalance sheet(RMB1,000)

434,033,201 338,960,513 320,256,589 432,275,595 338,079,044 318,997,845

Notes: 1. The above indicators except return on assets and return on capital are calculated on the basis of year-end balances. Return on

assets = Net profit/[(total assets at the beginning of the period + total assets at the end of the period)/2], and return on capital = Net

profit/[(net assets at the beginning of the period + net assets at the end of the period)/2];

2. NPL ratio = (Substandard loans + doubtful loans + loss loans)/loan balance;

3. Calculated capital adequacy ratios in accordance with the Regulation Governing Capital of Commercial Banks (Provisional);

4. Percentage of loans to single largest customer = Balance of loans to single largest customer/net capital;

5. For the loan-to-deposit indicator, the denominator “deposits” is calculated under the statistical approach of the credit receipts

and payments table of the People’s Bank of China, including corporate and personal principal-guaranteed wealth management

liabilities; and the numerator is the original value of loans not deducting the allowance for impairment losses on loans.

6. Leverage ratio, net tier-1 capital and balance of consolidated assets on and off the balance sheet are disclosed under the

Measures for Management of Leverage Ratio of Commercial Banks (Revised) (CBRC [2015] No. 1 Decree).

VI. Changes in Shareholder’s Equity during the Reporting Period

(Unit: RMB1,000)

Consolidated


11

ItemShare

capital

Capital

reserve

Other

comprehensive

income

Surplus

reserves

General

reserve

Retained

profit

Minority

interests

Total

shareholders’

equity

Beginning

balance 4,127,846 3,259,204 364,218 1,569,803 4,203,355 6,461,342 56,511 20,042,279

Increase

during the

period0 1,167 0 236,290 781,045 945,444 0 1,963,946

Decrease

during the

period0 0 144,276 0 0 0 14,107 158,384

Ending

balance 4,127,846 3,260,371 219,941 1,806,093 4,984,400 7,406,786 42,404 21,847,841

(Unit: RMB1,000)

Parent Company

ItemShare

capital

Capital

reserve

Other

comprehensive

income

Surplus

reserves

General

reserveRetained profit

Total

shareholders’

equity

Beginning

balance 4,127,846 3,258,594 364,218 1,569,803 4,203,355 6,445,802 19,969,618

Increase

during the

period0 0 0 236,290 781,045 891,505 1,908,839

Decrease

during the

period0 0 144,276 0 0 0 144,276

Ending

balance 4,127,846 3,258,594 219,941 1,806,093 4,984,400 7,337,307 21,734,181

Note: Changes in the shareholders’ equity are mainly due to the increase of profit during the reporting period, the changes in the fair

value of the available-for-sale financial assets and the withdrawal of general reserve.

VII. Composition of Capital and Its Changes

(Unit: RMB1,000)


12

Item


2019 2018 2019 2018

Net capital

Net core tier-1 capital 21,825,403 20,012,176 21,639,804 19,882,576

Net tier-1 capital 21,826,695 20,013,663 21,639,804 19,882,576

Total net capital 29,405,445 26,702,732 29,209,203 26,561,713

Credit risk weighted assets

On-balance-sheet risk weighted assets 193,508,229 172,586,998 193,015,954 172,044,293

Off-balance-sheet risk weighted assets 15,406,870 12,928,415 15,406,870 12,928,415

Total credit risk weighted assets: 208,915,100 185,515,412 208,422,825 184,972,708

Market risk weighted assets 556,703 252,871 556,703 252,871

Operational risk weighted assets 11,421,716 10,625,549 11,283,476 10,553,443

Total risk weighted assets beforeapplication of capital bottom line: 220,893,518 196,393,832 220,263,003 195,779,022

Total risk weighted assets after applicationof capital bottom line: 220,893,518 196,393,832 220,263,003 195,779,022

Core tier-1 capital adequacy ratio (%) 9.88 10.19 9.82 10.16

Tier-1 capital adequacy ratio (%) 9.88 10.19 9.82 10.16

Capital adequacy ratio (%) 13.31 13.60 13.26 13.57

Note: The capital adequacy ratio, tier-1 capital adequacy ratio and core tier-1 capital adequacy ratio are calculated according to the

Regulation Governing Capital of Commercial Banks (Provisional).

VIII. Liquidity Coverage Ratio at the End of the Period



13

Liquidity coverage ratio (%) 182.58 180.24

Eligible high-quality liquid assets (RMB1,000) 58,238,033 58,232,262

Ending value of net cash outflows over the next

30 days (RMB1,000)31,898,025 32,307,465


14

Chapter IV Report of the Board of Directors

I. Management Discussion and Analysis

i. Business review during the reporting period

1. Scope of principal operations

Principal operations of the Company are deposits taking, extension of short, medium and long-term loans, domestic

settlement, bill discounting, issuance of financial bonds, commissioned issuance, honoring and underwriting of

government bonds, trading over government bonds, interbank lending, provision of security, agency

collection/payment and insurance, provision of safety deposit box services, entrusted deposits and loans on behalf

of local public finance, foreign exchange deposits, foreign exchange loans, foreign exchange remittance, foreign

currency conversion, foreign exchange guarantee, credit reference, inquiry and witness services, international

settlement, interbank foreign exchange lending, foreign exchange settlement, foreign exchange sales, foreign

exchange trading on its own behalf and as an agent, foreign exchange borrowings, trading or agency trading over

non-stock foreign currency securities, policy-related housing finance services, and other services approved by the

CBIRC Hubei Office and the State Administration of Foreign Exchange.

2. Performance review during the reporting period

In 2019 with economic and financial complexities and tough market environment, the Bank overcame difficulties

under self-inflicted pressure according to the work plan that “take leading peers as benchmark, fighting three tough

battles”, delivering good results based on the high comparison level in 2018.

2.1 Fulfillment of operating targets across the Bank

At the end of 2019, the Bank’s total assets reached RMB405,042 million, an increase of RMB86,571 million or

27.18% over the previous year. The balance of deposits amounted to RMB249,304 million1, an increase of

RMB48,252 million or 24.00% over the previous year. The balance of loans amounted to RMB171,943 million, an

increase of RMB35,380 million or 25.91% over the previous year. The balance of net assets totaled RMB21,734

million, an increase of RMB1,765 million or 8.84% over the previous year.

In 2019, the Bank reported a net profit of RMB2,363 million, an increase of RMB460 million or 24.20% over the

previous year.

Accumulated intermediary business income registered RMB963 million, accounting for 15.20% of net operating

income.

As at the end of the reporting period, the balance and ratio of non-performing loans were RMB3,003 million and

1.75% respectively. Provision coverage ratio was 194.38%, better than regulatory standard.

2.2 Progress was made in the transition from old to new growth drivers

1 According to the PBOC statistical criteria, the balance of deposits at the end of 2018 included RMB13.2 billion of principal-guaranteed wealthmanagement products. The accounting firm restated them in “financial liabilities designated at fair value through profit or loss”. At the end of 2019, thebalance of principal-guaranteed wealth management products was cleared to zero.


15

The corporate customer base was restructured vigorously. The number of trade finance customers grew by 178%

year-on-year. 77 supply chain projects were implemented in the year, with the first ever independent lead

underwriting deal accomplished and the first residential mortgage-backed security (RMBS) successfully issued.

Investment banking, trade finance, transaction banking, wealth management and credit card business were

developed with vigor, pushing intermediary business income up by 35% year-on-year. The Bank worked hard to

address regional imbalance in development and structural imbalance in business, with a focus on major business

areas and weaker fields of management, such as quality and compliance.

2.3 The way of serving the real economy was increasingly enriched.

The Bank served major government strategies, cumulatively granting RMB231.3 billion of credits, on or off

balance sheet, and held RMB21,547 million of local government bonds with a focus on high-quality development

areas in Hubei and the “Two Points” positioning of Chongqing. In serving emerging industries, the Bank became

the first banking lender to the PPP project of the Wuhan National Aerospace Industry Base, extended integrated

credit to Yangtze Memory Technologies Co., Ltd. and supported 35 major investment promotion projects. In

serving the private-sector economy, the Bank took actions to serve private enterprises with financial services and

introduced measures to improve the business environment. The balance of loans to private enterprises increased by

RMB10,231 million over the beginning of the year. The Bank’s case of serving the private-sector real economy

won the first prize for excellent cases awarded by the Asian Financial Cooperation Association. In serving poverty

alleviation, the Bank carried out financial service-based precision poverty alleviation with vigor and further

performed its duty. The Bank’s balance of precision poverty alleviation loans was RMB362 million, up 31.49%

from the beginning of the year.

2.4 The pursuit of innovation-driven development yielded new results

In terms of technology finance, the Bank developed the “STAR IPO Loan” for seeded enterprises for the Star

Market of Shanghai Stock Exchange. A total of 40 STAR seeded enterprises in Hubei were served, including the

enterprise supported by the first “venture loan” in China’s banking industry that successfully went public on the

STAR Market. In terms of MSE finance, an innovative integrated inclusive finance business system was launched,

with nearly 4,000 new customers added and over RMB1 billion of new loans granted, achieving the “Two Increases,

Two Curbs” regulatory targets. In terms of Internet finance, 30 Internet finance innovations were introduced,

bringing personal financial assets in direct banking to a level beyond RMB10 billion. In terms of everyday financial

services, the Bank strengthened “Financial Plus” everyday, government and consumer services by rolling out over

30 everyday financial products. In terms of services for the 7th CISM Military World Games, the Bank enhanced

support during key time intervals and at major outlets during the event, including online customer service

representatives and offline “bilingual” guides at outlets, extending service recipients to players, staff, volunteers

and foreign guests to the Games.

2.5 Comprehensive risk management took on a new look

In the battle for asset quality enhancement, a multi-level supervision mechanism was implemented to monitor

organizations, people and projects according to plan and schedule. In the battle for compliance, a register focused

on “three fields, one priority” was established, “account closure” management was carried and the “troubleshooting

project” as advanced to crack down on non-compliances. In terms of building the comprehensive risk management


16

system, the new-generation credit risk management system development was accelerated.

2.6 IT development made new progress

The three-year plan for FinTech of the Bank was further implemented. The leading group on major information

system projects was established to ensure major projects are completed to schedule and quality criteria. FinTech

penetration into business was carried out continuously to boost business innovation. The online supply chain

platform, the MSE inclusive finance system and the integrated investment banking platform were built successively

in 2019. The existing big data platform was further exploited to provide decision-making support for customer

acquisition and marketing. The Bank’s data governance system began to reap the harvest. The Data Governance

Committee and the working group on data governance were established to promote fine-grained implementation of

all data governance work. The Internet security was enhanced through increasingly strengthened top-level design of

information security, and certified for ISO 27001. The information security system was comprehensively enhanced.

The dynamic security protection platform and the threat intelligence analysis platform were imported. As at the end

of 2019, the Bank had 127 IT staff, representing 3.1% of total headcount. The Bank spend RMB159 million in

information technology this year.

2.7 The foundation of operation and management was further reinforced.

Corporate governance was improved, with the Board of Directors, the Board of Supervisors and the senior

management re-elected. Another round of share capital increase was advanced. The quality and efficiency of

swindle prevention work were enhanced, with the responsibility for swindle prevention well assigned to

management personnel at each level and coordinated efforts made on annual key work on swindle prevention.

Bank-wide safety and stability were assured by formulating contingency plans against some bank risk incidents,

nipping problems in the bud and strengthening market monitoring. The “wartime” mechanism requirement was

implemented for the 7th CISM Military World Games. The Bank strengthened team building and sent young

officers to branches and sub-branches on secondment to strengthened their leadership staffing.

2.8 Development led by Party building went deeper

The Bank carried out the “Staying True to Our Founding Mission” themed education program and a range of

required activities, including studies, surveys, topical Party classes and topical democratic meetings under the

guiding principle of studying and implementing the Xi Jinping Thought on Socialism with Chinese Characteristics

for a New Era. The Bank cemented the outputs of the “Year of Development Led by Party Building” program,

increased the depth of “Party Building Plus”, improved the primary-level Party building assessment measures and

built the “Red Smelter” of amateur Party schools. To further improve Party conduct and uphold integrity, a conduct

supervision group was established to cement the outcomes of strict bank governance. The total-process

accountability mechanism for credit business was improved to further enforce accountability for credit

non-compliances.

3. Operation of main businesses

3.1 Corporate banking

3.1.1 Corporate business


17

During the reporting period, the Bank deepened the philosophy of “serving you with idea” in line with the

regulatory orientation and stayed true to its principal responsibility and business. By serving the real economy,

broadening the mind, enhancing professional capabilities, boosting development vitality and promoting business

transformation, the Bank managed to make solid progress in high-quality development. SME financial services

achieved the “Two Increases, Two Curbs” regulatory targets. The Bank strictly abided by the rules for “Two Bans,

To Restrictions”, “Seven Nos” and “Four Opens”, provided strong support for the development of private MSEs

and established Hankou Bank’s financial service system supporting SME development.

(1) Corporate deposits: As at the end of the reporting period, the balance of the Bank’s corporate deposits reported

RMB160,639 million, an increase of RMB27,821 million or 20.95% over the beginning of the year.

(2) Corporate loans: As at the end of the reporting period, the balance of the Bank’s corporate loans reported

RMB127,857 million, an increase of RMB26,263 million or 25.85% over the beginning of the year. Among those,

the balance of loans to small and micro enterprises reached RMB38,708 million, an increase of RMB5,291 million

or 15.83% over the beginning of the year.

(3) International banking: As at the end of the reporting period, the Bank reported an international settlement

volume of USD2,423 million, an increase of USD229 million or 10.41% over the beginning of the year.

(4) Intermediary business income: As at the end of the reporting period, the Bank generated an intermediary

corporate business income of RMB462 million, an increase of RMB125 million or 37.14% year-on-year.

3.1.2 Investment banking

During 2019, the Bank adhered to the economic and financial policies. The investment banking business returned

to the original mission of serving the real economy, working as an engine for transformation of corporate business.

They adhered to the development path of “light capital, pursuit of reform, and strict risk management”. It continued

to innovate services and products, enriched service methods, enhanced the capability of post-investment risk

prevention, and effectively and efficiently promoted collaboration with multiple lines in the Bank.

As at the end of the reporting period, balance of investment banking assets stood at RMB33.7 billion. RMB11.6

billion of financing was granted in the year and balance of investment banking assets rose by RMB3.3 billion.

Financing under debt financing plans stood at RMB5.13 billion, ranking first across Hubei Province. The Bank

underwrote 21 debt financing instruments as lead underwriter in the year, ranking third province-wide, and

underwriting shares amounted to RMB6.51 billion, ranking eighth province-wide and up RMB1.46 billion from the

previous year. 395 bonds were distributed with an aggregate value of RMB35 billion, the highest across Hubei

Province.

(1) Adhering to product innovation

During the reporting period, the Bank issued RMB3,511 million of residential mortgage-backed security (RMBS).

Its successful issuance helped expand the Bank’s sources of funding, accelerate turnover of credit funds and

optimize allocation of resources across the Bank.

(2) A number of “first-of-its-kind” lead underwriting deals were accomplished

During the reporting period, the Bank issued the 2019 commercial paper of Wuhan Municipal Construction Group


18

Co., Ltd. as independent lead underwriter for the first time. Subsequently the commercial paper of Hongshan City

Construction Investment, the super-short-term commercial paper of Tus Environmental, the super-short-term

commercial paper of Humanwell Healthcare and the super-short-term commercial paper of Jointown

Pharmaceutical, for which the Bank served as independent lead underwriter, were registered and issued. These

independent lead underwriting deals marked a new milestone in the Bank’s capability of “solicitation, undertaking

and underwriting” in the lead underwriting business.

(3) New channels were developed for non-standard business

In 2019, the Bank successfully had a number of peer institutions participate in a RMB1,615 million debt financing

plan registered and issued by it. The project served customers of the Bank, generated light-capital income and

pointed to a new direction of investment banking development.

3.2 Retail banking

3.2.1 Overview

During the reporting period, the Bank continued to foster the “neighborhood finance” brand, carried forward the

local “neighborhood culture” under the traditional Chinese philosophy that “a far-off relative is not as helpful as a

near neighbor” and built an online-offline integrated service system featuring “hearty finance” and “neighbor

service”. The Bank furthered the social security card-based inclusive finance services, tapped deep into distinctive

community banking services and launched a wide variety of innovative “Jointown” series products. Retail banking

maintained good momentum of growth, showing continuous improvements in professional value and regional

competitiveness. “Neighborhood finance” and “Jointown” brands became increasingly influential in market.

3.2.2 Personal financial assets

The Bank adapted itself to customers’ demand for diversity of financial assets and met their wealth management

needs in terms of earning, liquidity and safety. By improving business structure and attracting target customers, the

Bank steadily expanded the size of personal financial assets. At the end of 2019, personal financial assets grew by

24.78%, with a three-year compound annual growth rate of over 18%. The Bank continued to enhance its deposit

taking capacity by providing distinctive products and services, maintaining stable growth in savings deposits. The

balance of savings deposits grew by 29.85%. The balance of principal-guaranteed wealth management products

were reduced to zero.

3.2.3 Personal consumption loans

The Bank integrated online and offline development of personal consumer loans to serve the diverse consumer

needs. The Bank implemented the real estate regulation policy of the State, strictly implemented the differentiated

housing credit policy and gave priority to the needs of first-time homebuyers while supporting the loan demand of

home upgraders and curbing speculative trading in housing market. LPR was steadily applied to residential

mortgages. The Bank developed online high-quality channels for cooperation, enriched online business varieties,

enhanced fine-grained operation and management and enhanced online service capacity. The Bank issued the

RMB3,511 million Jointown 2019 Residential Mortgage-Backed Security Tranche I, in a bid to increase the return

on asset operation, liquidize remnant assets and improve the credit structure. At the end of 2019, personal

consumption loans grew by 35.57%.


19

3.2.4 Credit cards

The Bank continued to improve the credit card business structure, carried out business innovation, diversified

customer acquisition channels and kept enhancing the service capacity. Under the “micro and decentralized”

principle of credit card business, the Bank made solid moves in marketing toward “demand depositors” and

developed distinctive credit card installment facilities. As at the end of 2019, credit card overdrafts grew by

35.27%.

3.2.4 Debit cards

The Bank attached importance to reinforcing the foundation of debit card business, upgrading payment channels

and fostering a secure and convenient environment for debit card users. Such special customer groups as social

security card holders, Jointown co-branded card holders and Jointown themed card holders were expanded

vigorously to win broad market recognition. At the end of 2019, the total number of debit cards issued grew by

8.68%.

3.2.5Entrusted loans under housing provident funds

The Bank implements the local and national policies on entrusted loans under housing provident funds, persistently

regards entrusted loans under housing provident funds as a service for people’s wellbeing, introduces innovative

service models, improves business processes, enhances improves the quality and efficiency of service to boost its

market position. As at the end of 2019, the balance of entrusted loans under housing provident fund grew by 84.3%.

3.3 Financial market business

3.3.1 Main operating results

During the reporting period, the Bank’s financial market business was sound and developed in compliance with

regulations. While continuing to develop bond investment, interbank investment, wealth management agency,

foreign exchange, bills, etc., the Bank also integrated market channel resources, optimized the structure of assets

and liabilities, and strengthened internal control & compliance efforts. In the complex and ever-changing financial

market environment, the Bank ensured continuous improvement in operating capacity and market influence.

(1) Treasury operation

During the reporting period, the Bank recorded RMB4.53 trillion in pledge-type repurchases and RMB3.52 trillion

in spot bond transactions. It won such awards and honors as Top 300 Interbank RMB Market Dealers 2019, Active

Dealers in the Interbank RMB Market, ChinaBond Excellent Proprietary Trader, ChinaBond Excellent Market

Making Settlement Agency for Treasury Bonds, ChinaBond Excellent Market Making and Settlement Agency for

Local Government Bonds and ChinaBond Outstanding Contributor to Collateral Business.

(2) Asset management business

At the end of the reporting period, the Bank registered RMB55,796 million in balance of proprietary wealth

management products, down RMB136 million or 0.24% year-on-year.

(3) Bills business


20

During the reporting period, the Bank registered nearly RMB1 trillion in bills financing, making itself a vibrant city

commercial bank in the bills market. Through imposing control at both front and middle offices, reasonably

arranging the business operation strategy and harnessing the role of Bills Appraisal Committee, the Bank ensured

scientific and complying major decisions under the guiding principle of “Shared Wisdom and Joint Risk

Identification” and in pursuit of sustained, steady business development and transformation. The Bank maintained

the record of six zeros (zero case, zero incident, zero fake bill, zero non-performing asset, zero advance and zero

penalty). In 2019, nearly ten major product series were launched, including “Discounting-Counter-discounting

Link”, “Discounting-Rediscounting Link”, “Bills ABS” and “Treasury Link”, running across the primary,

secondary and tertiary bills markets. Corporate customers and financial institutions were provided with a wide

variety of multi-tiered bills services.

3.4 Characteristic businesses -- technology finance

3.4.1 Operating results

As of the end of the reporting period, the Bank had served 2,713 high-tech firms, including 518 credit customers.

The balance of on- and off- balance sheet credits to high-tech enterprises stood at RMB27,974 million. Specifically,

the balance of on-balance-sheet loans (including discounted bills) to high-tech enterprises reached RMB17,398

million, an increase of RMB6,632 million or 61.6% over the beginning of the year. Technology finance made

breakthroughs, giving stronger impetus and support for the Bank’s business transformation.

3.4.2 Business development initiatives

(1) The action plan for the “Hundred, Thousand and Ten Thousand” Hi-tech Program was further implemented. The

three project pipelines (basic, select and core) were established, putting focus on enterprises in the strategic

emerging industries, participants in the “venture loan” program and capital market players. 443 enterprises were

added to the high-tech customer base in the year. As of the end of the reporting period, 71 of Hubei-based listed

companies were customers of the Bank. All the five Hubei applicants for listing on the STAR Market were

customers of the Bank.

(2) The technology finance business system was strengthened. Asset allocations to strategic emerging industries

were strengthened in the exploration for transforming to an asset trading bank. The Bank advanced the reform and

innovation in the technology finance system to improve the performance assessment and staff development policies

for technology finance. The banker-investor-business starter matchmaking business was strengthened under the

“venture loan” program to further improve the cooperation mechanism for technology finance channels.

(3) The research and development of new products were strengthened. The Bank approached government agencies

and capital markets, launched such innovative products as “STAR Listing Loan” and “Proportional Re-guarantee”

to meet the particular financing needs of high-tech businesses in different life stages and enterprises applying for

listing. These products enriched the Bank’s methods to foster high-tech enterprises and serve seeded enterprises for

listing.

3.5 Distribution channels

The Bank rendered products and services through a variety of channels which mainly consist of physical outlets

and e-banking means.


21

3.5.1 Physical outlet channels

(1) Establishment of institutions

As at the end of the reporting period, the Bank had established 181 institutions, including the Banking Department

of the Head Office, 15 branches, one sub-branch directly under the Head Office, 16 tier-1 sub-branches, two

specialized institutions and 146 tier-2 sub-branches (27 of which were community sub-branches). So far, the Bank

had its outlet layout almost cover the entire Hubei Province and set up a branch in Chongqing.

(2) New institutions and changes in existing ones

During the reporting period, the Bank established eight institutions in total, among which one branch and two

sub-branches were sub-branches beyond Wuhan and five sub-branches in Wuhan. During the reporting period, the

Bank established Suizhou Branch, Shiyan Shanghai Road Sub-branch and Xianing Xian’an Sub-branch outside

Wuhan, and established Shuguang Xingcheng Sub-branch, Yuanlin Road Sub-branch, Yongqing Sub-branch, Youyi

Road Sub-branch and Taizihu Sub-branch in Wuhan.

3.5.2 E-banking channels

(1) Operating results

As at the end of the reporting period, personal Internet banking customers reached 2,126,100, an increase of

17.92%; mobile banking customers reached 2,028,500, an increase of 19.78%; corporate Internet banking

customers reached 57,300, an increase of 5.72%; and new direct banking customers increased by 262,700. The

transaction volume of e-banking reached RMB2.18 trillion, an increase of 12.37%. In the year, the replacement rate

of counter-based transactions by e-banking arrived at 92.51%. There were 1,179 self-service equipment across the

Bank, 119 units more than the beginning of the year. The Bank established a total of 191 self-service banks, an

increase of three over the beginning of the year. Intelligent equipment at outlets recorded 126.09 transactions a day

on average, up 64.93% year-on-year. 833,000 passbook-based cash withdrawals were made on self-service

equipment, accounting for 52.57% of total passbook-based cash withdrawals, up 24.69% year-on-year.

(2) Channel innovation

First, online financial services were deepened to accelerate Internet banking transformation. 20 innovations were

completed in E-channel and Internet finance, with the versions of personal Internet banking, mobile banking and

direct banking updated 28 times. Both quantity and quality of mobile banking customers were improved. As of the

end of the reporting period, the customers with effective changes in balance of mobile banking accounts saw

year-on-year growth of 19.95% in number of transactions, or 39.62% in value of transactions. Direct banking

recorded over RMB10 billion in personal financial assets, maintaining high-quality growth.

Second, business innovation and upgrading gained pace and core competitiveness of channels was enhanced.

Mobile banking and direct banking were remodeled to optimize business processes. Mobile banking and direct

banking were integrated. The new version of mobile banking allows trusted login to the direct banking APP. The

mobile number-based payment project was completed. Application scenarios were actively developed to attract user

traffic. The mobile traffic fine payment service was launched.

Third, business scenarios were enriched to expand the everyday finance market. Based on the electronic social


22

security cards, the Bank entered local social security markets to increase deposits from social security agencies and

also expand the individual customers and corporate customers through pharmacies. The Bank partnered with China

UnionPay in the QuickPass-based marketing. 27,000 effective users of UnionPay APP were added to the customer

base, expanding the sources of intermediary service income. The online housing provident fund withdrawal service

was promoted. Direct banking rolled out nine new services, including transfer and withdrawal by home-buying

railway workers, withdrawal for commercial loan repayment and withdrawal under hybrid loan, pushing the

housing provident fund withdrawals up by 240% year-on-year. The unconscious pay parking scenarios were

developed, covering 64 Park & Ride parking areas. The Bank competed for the education and training tuition

collection market, achieving nearly RMB100 million in tuition collection service.

Fourth, smart outlet development was advanced. 16 outlets completed the upgrading of their intelligent

equipment-based service areas. The intelligent equipment systems were improved. 49 new features went online and

63 programs were optimized in the year The Bank accelerated the upgrading of self-service passbook-based

withdrawal features at outlets and enhanced the elderly customer service capability. Passbook-based withdrawals

increased by 24.69% year-on-year in Wuhan. The social security self-service process was optimized. 366,700

third-generation social security cards were issued through intelligent equipment and self-service card replacement

machines, representing a substitution ratio of 71.81%.

Fifth, the Bank strictly prohibited crossing the line for compliance and strengthened channel risk control. The

E-banking policies and procedures were improved to enhance compliance of business and standardize the risk

prevention and control for incremental business. Business continuity drills were conducted for all E-banking

channels. Business risk training was intensified.

4. Categories of principal operation income

(Unit: RMB1,000)

Income category

Amount during the reporting period


Loan interest income6,428,926 6,380,126

Interest income from due from central banks381,665 380,410

Interest income from interbank business (including due

from banks and other financial institutions, assets

purchased under resale agreements and placements)850,966 849,457

Bond investment income (including interest income,

spread income and dividends during the holding period) 6,333,403 6,237,023

Interest income from principal-guaranteed wealth

management products 298,827 298,827


23

Income category

Amount during the reporting period


Fee and commission income963,520 963,497

Total15,257,307 15,109,341

5. Market shares of main products or services

According to the statistics in RMB terms from the Operation Management Department of Wuhan Branch of the

People’s Bank of China, at the end of 2019, the Bank accounted for 9.49% of the total RMB deposits in Wuhan,

ranking third in the banking industry. Specifically, the Bank’s market share in the corporate deposit segment was

7.74%, ranking fourth; the market share in the savings deposit segment was 8.78%, ranking fifth. The Bank

accounted for 5.02% of the total RMB loans in Wuhan, ranking the seventh. The market share in the corporate loan

segment was 3.72%, ranking ninth; the market share in discounting segment was 32.99%, ranking first; and the

market share in personal loan market segment was 4.24%, ranking eighth.

ii. Analysis of financial position and operating results during the reporting period

1. Changes in major financial indicators and reasons

(Unit: RMB1,000)

Item


Main reason31 December

2019

31December2018

Change31 December

2019

31December2018

Change

Total assets 405,739,564 319,295,909 27.07% 405,041,970318,471,383

27.18%

Increase in loans

and investments

Total liabilities 383,891,723 299,253,630 28.28% 383,307,789 298,501,765 28.41% Increase in deposits

Shareholders’

equity 21,847,841 20,042,279 9.01% 21,734,18119,969,618

8.84%

Increase in net

profit

Total profit 2,076,681 1,715,761 21.04% 2,019,9031,737,377

16.26%

Increase in

operating income

Net profit 2,418,902 1,882,378 28.50% 2,362,9021,902,528

24.20%

Increase in

operating income

2. Items with 30% or more changes in the financial report and reasons


24

(Unit: RMB1,000)

Item


Main reason31

December2019

31December2018

Change31

December2019

31December2018

Change

Assets:

Depositswith banks andother financialinstitutions

2,279,318 1,072,991 112.43% 2,264,500 929,158 143.72%

Increase in

general deposits

with banks and

other financial

institutions

Lendingso banks andther financialnstitutions

5,400,000 500,000 980.00% 5,400,000 500,000 980.00%

Increase in

placements with

banks

Financialassetsdesignated atfair valuethrough profitor loss

1,822,570 13,042,298 -86.03% 1,822,570 13,042,298 -86.03%

Balance of

principal-guaran

teed wealth

management

products was

cleared to zero

upon maturity

Financialassets underreverserepurchaseagreements

10,627,229 4,010,200 165.00% 10,627,229 4,010,200 165.00%

Increase in

policy bank

bonds, notes

and government

bonds under

reverse

repurchase

agreements

Held-to-maturityinvestments

79,155,034 41,149,070 92.36% 79,155,034 41,149,070 92.36%

Increase in

held-to-maturity

investment

assets


25

Item


Main reason31

December2019

31December2018

Change31

December2019

31December2018

Change

Constructionin progress

11,790 36,370 -67.58% 11,790 29,860 -60.52%

Archive

storeroom

construction-in-

progress

transferred to

fixed asset

Otherassets 8,137,603 4,074,952 99.70% 8,125,212 4,064,941 99.89%

Increase in

non-recourse

factoring;

increase in

assets from

continuous

involvement

Liabilities:

Borrowingsfrom centralbanks

63,000 1,700,000 -96.29% 0 1,650,000 -100.00%

Maturity of

on-lending

supporting

small

enterprises

Depositsfrom banksand otherfinancialinstitutions

9,210,489 4,799,804 91.89% 9,712,287 5,088,388 90.87%

Increase in

general due

from banks and

other financial

institutions

Financialliabilitiesdesignated atfair valuethrough profitor loss

0 13,190,558 -100.00% 0 13,190,558 -100.00%

Balance of

principal-guaran

teed wealth

management

products was

cleared to zero

upon maturity


26

Item


Main reason31

December2019

31December2018

Change31

December2019

31December2018

Change

Financialassets underrepurchaseagreements

34,414,642 17,496,238 96.70% 34,414,642 17,496,238 96.70%

Increase in

government

bonds and bills

under

repurchase

agreements

Customerdeposits 250,341,491 188,829,166 32.58% 249,303,848 187,861,314 32.71%

Increase in

customer

deposits

Deferredincome taxliabilities

73,822 122,432 -39.70% 73,822 122,432 -39.70%

Decrease in

changes in fair

value of

available-for-sal

e financial

assets

Otherliabilities 6,648,892 3,646,474 82.34% 6,667,618 3,625,206 83.92%

Increase in

customer

deposits and

interest payable;

increase in

on-lending

funds; increase

in liabilities

from continuous

involvement

Shareholders’equity:

Othercomprehensiveincome

219,941 364,218 -39.61% 219,941 364,218 -39.61%

Decrease in fair

value of

available-for-sal

e financial

assets


27

Item


Main reason31

December2019

31December2018

Change31

December2019

31December2018

Change

Items onincomestatement:

Net fee and

commission

income

888,083 613,744 44.70% 888,164 613,786 44.70%

Increase in fee

and commission

income

Fee and

commission

income

963,520 688,905 39.86% 963,497 688,890 39.86%

Increase in fee

income from

agency service

and trade

finance

Incl.:

Investment

income on

associates and

joint ventures

35,169 24,434 43.94% 35,169 24,434 43.94%

Increase in

investment

income from

Aerospace

Science &

Industry

Financial

Leasing Co.,

Ltd.

Net gain on

changes in fair

value (Loss is

presented with

“-”)

35,887 60,020 -40.21% 35,887 60,020 -40.21%

Decrease in fair

value of

held-for-trading

financial assets

Exchange

gain (Loss is

presented with

“-”)

11,477 19,490 -41.11% 11,477 19,490 -41.11%Exchange rate

changes

Other

operating10,099 7,703 31.11% 11,597 9,201 26.04%

Increase in

rental income


28

Item


Main reason31

December2019

31December2018

Change31

December2019

31December2018

Change

income

Gain on

disposal of

assets (Loss is

presented with

“-”)

97 -3,206 103.04% 95 -3,206 102.96%

Decrease in loss

on disposal of

repossessed

housing

properties

Other

operating costs70 102 -31.12% 70 102 -31.12%

Less spending

on invoicing fee

Add:

non-operating

income

4,401 7,619 -42.24% 4,381 7,577 -42.18%

Decrease in

cleanup of

income from

unclaimed funds

Less: Income

tax expense-342,220 -166,617 -105.39% -342,999 -165,150 -107.69%

Increase of

tax-free income

Minority

profit or loss2,060 -9,585 121.49% 0 0 0

Increase in net

profit of

subsidiaries

Other

comprehensive

income after

tax, net

-144,276 566,304 -125.48% -144,276 566,304 -125.48%

Decrease in fair

value of

available-for-sal

e financial

assets

Other

comprehensive

income that

will be

reclassified

into profit or

loss

-144,276 566,304 -125.48% -144,276 566,304 -125.48%

Decrease in fair

value of

available-for-sal

e financial

assets


29

Item


Main reason31

December2019

31December2018

Change31

December2019

31December2018

Change

Gains or

losses on

changes in fair

value of

available-for-s

ale financial

assets

-144,276 566,304 -125.48% -144,276 566,304 -125.48%

Decrease in fair

value of

available-for-sal

e financial

assets

Total

comprehensive

income

attributable to

minority

shareholders

2,060 -9,585 121.49% 0 0 0

Increase in net

profit of

subsidiaries

iii. Assets and liabilities during the reporting period

1. Assets

1.1 Loans

（1）Loan structures in the three years before the end of the reporting period

(Unit: RMB1,000)

Item


31 December2019

31 December2018

31 December2017

31 December2019

31 December2018

31 December2017

Corporateloans andadvances

128,101,998 101,851,286 91,398,912 127,857,137 101,594,053 91,093,493

Incl.:Loans 82,844,309 73,266,363 71,872,923 82,599,448 73,016,020 71,572,881

Discounting 38,488,847 24,375,970 16,407,588 38,488,847 24,369,080 16,402,211

Advances 287,689 379,084 1,106,319 287,689 379,084 1,106,319

Personalloans 44,509,179 35,336,734 23,517,738 44,086,213 34,969,701 23,288,243


30

Item


31 December2019

31 December2018

31 December2017

31 December2019

31 December2018

31 December2017

Total 172,611,177 137,188,020 114,916,650 171,943,350 136,563,754 114,381,736

(2) Distribution of loans and advances

(i) Top 10 borrower industries and their percentages at the end of the reporting period

(Unit: RMB1,000)

Industry


Balance of loans Percentage (%) Balance of loans Percentage (%)

Financial industry 26,351,963 15.27 26,351,963 15.33

Wholesale and retail 19,410,738 11.25 19,388,815 11.28

Real estate 19,353,038 11.21 19,353,038 11.26

Manufacturing 17,803,214 10.31 17,675,544 10.28

Leasing and commercial services 16,788,354 9.73 16,770,354 9.75

Construction 9,080,755 5.26 9,066,855 5.27

Others 5,523,391 3.20 5,523,390 3.21

Water, environment and public utility

management3,695,589 2.14 3,689,589 2.15

Transport, storage and post 3,605,518 2.09 3,583,918 2.08

Personal loans and advances: 44,509,179 25.79 44,086,212 25.64

(ii) Loan distribution by geographical area at the end of the reporting period

(Unit: RMB1,000)

Consolidated

Area Balance of loans Percentage (%)


31

Consolidated

Area Balance of loans Percentage (%)

Wuhan 139,753,193 80.96

Ezhou 1,937,522 1.12

Yichang 5,027,768 2.91

Huangshi 4,415,290 2.56

Jingmen 2,256,009 1.31

Xiangyang 2,825,460 1.64

Jingzhou 2,264,055 1.31

Enshi 1,686,980 0.98

Shiyan 870,100 0.50

Xiaogan 1,941,566 1.12

Xianning 800,727 0.46

Huanggang 390,189 0.23

Xiantao 585,922 0.34

Suizhou 229,540 0.13

Chongqing 7,626,856 4.42

(iii) Loan distribution by guarantee mode at the end of the reporting period

(Unit: RMB1,000)

Item




32

Item



Unsecured loans 30,704.583 17.79 30,678,709 17.84

Guaranteed loans 27,373,589 15.86 27,030,116 15.72

Loans secured by mortgages 64,069,292 37.12 63,786,713 37.10

Pledged loans 50,463,713 29.24 50,447,811 29.34

Total 172,611,177 100.00 171,943,349 100.00

(3) Balance and percentage of 10 largest borrowers at the end of the reporting period

(Unit: RMB1,000)

Consolidated & Parent Company

Borrower Balance of loans Percentage (%)

Customer A 1,999,000.00 1.16

Customer B 1,650,000.00 0.96

Customer C 1,385,132.00 0.81

Customer D 1,200,000.00 0.70

Customer E 1,088,000.00 0.63

Customer F 1,028,000.00 0.60

Customer G 1,000,000.00 0.58

Customer H 994,800.00 0.58

Customer I 977,052.30 0.57

Customer J 966,761.70 0.56

1.2 Financial assets purchased under resale agreements


33

(Unit: RMB1,000)


Item Ending balance Percentage (%) Beginning balance Percentage (%)

Bonds 10,427,229 98.12 3,510,200 87.53

Bills 200,000 1.88 0 0.00

Interbank CDs 0 0.00 500,000 12.47

Total 10,627,229 100.00 4,010,200 100.00

1.3 Investments

(i) Investment by accounting item

(Unit: RMB1,000)

Consolidated


Financial assets designatedat fair value through profit orloss

1,822,570 1.02 13,042,298 8.81

Available-for-sale financialassets 69,517,090 38.84 57,161,098 38.61

Held-to-maturityinvestments 79,155,034 44.23 41,149,070 27.79

Receivables investment 27,663,576 15.46 35,920,612 24.26

Long-term equity investment 822,813 0.46 787,643 0.53

Total 178,981,083 100.00 148,060,721 100.00

(Unit: RMB1,000)

Parent Company


Financial assets designatedat fair value through profit orloss

1,822,570 1.02 13,042,298 8.81


34

Available-for-sale financialassets 69,517,090 38.83 57,161,098 38.60

Held-to-maturityinvestments 79,155,034 44.22 41,149,070 27.79

Receivables investment 27,617,404 15.43 35,890,612 24.24

Long-term equity investment 894,753 0.50 844,583 0.57

Total 179,006,851 100.00 148,087,661 100.00

(ii) Investment by investor

(Unit: RMB1,000)

Consolidated


Government bonds 87,036,973 48.63 47,132,295 31.83

Financial institution bonds 9,539,046 5.33 19,171,941 12.95

Corporate bonds 5,771,416 3.22 10,839,209 7.32

Securities investment funds 42,106,766 23.53 30,047,802 20.29

Others 34,526,882 19.29 40,869,474 27.60

Total 178,981,083 100.00 148,060,721 100.00

(Unit: RMB1,000)

Parent Company


Government bonds 87,036,973 48.62 47,132,295 31.83

Financial institution bonds 9,539,046 5.33 19,171,941 12.95

Corporate bonds 5,771,416 3.22 10,839,209 7.32


35

Securities investment funds 42,106,766 23.52 30,047,802 20.29

Others 34,552,650 19.30 40,896,414 27.62

Total 179,006,851 100.00 148,087,661 100.00

Note: Others include wealth management products purchased from financial institutions and equity investments.

2. Liabilities

2.1 Loan structures in the three years before the end of the reporting period

(Unit: RMB1,000)

Item


31 December2019

31 December2018

31 December2017

31 December2019

31 December2018

31 December2017

Demanddeposits:

109,526,753 107,711,523 99,793,721 109,293,843 107,453,187 99,530,303

Corporatecustomers

86,188,086 87,732,106 81,482,714 86,011,416 87,530,173 81,260,222

Personalcustomers

23,338,667 19,979,417 18,311,007 23,282,427 19,923,014 18,270,081

Time deposits: 101,465,491 66,964,221 55,280,001 100,705,929 66,297,758 54,696,051

Corporatecustomers

56.267,196 29,219,566 22,913,847 56,131,654 29,087,107 22,786,585

Personalcustomers

45,198,295 37,744,654 32,366,154 44,574,275 37,210,650 31,909,466

Margin deposits 9,265,067 7,854,304 7,691,565 9,219,896 7,811,302 7,653,583

Other deposits 30,085,180 19,489,676 13,000,405 30,084,180 19,489,625 13,000,405

Total 250,341,491 202,019,724 175,765,692 249,303,848 201,051,872 174,880,342

Notes: 1. Time deposits at the ends of 2017 and 2018 included principal-guaranteed wealth management liabilities, while the balance

of principal-guaranteed wealth management products was cleared to zero at the end of 2019.

2. Other deposits mainly include large-value CDs issued and treasury term deposits.

2.2 Deposits from banks and other financial institutions

(Unit: RMB1,000)



36

31 December2019

31 December2018

31 December2017

31 December2019

31 December2018

31 December2017

Demanddeposits fromdomesticbanks

240,890 110,749 118,399 742,689 349,333 175,241

Time depositsfrom domesticbanks

8,102,936 1,100,013 3,000,013 8,102,935 1,150,013 3,000,013

Demanddeposits fromdomesticnon-bankingfinancialinstitutions

863,614 991,893 351,799 863,614 991,893 351,799

Time depositsfrom domesticnon-bankingfinancialinstitutions

3,049 2,597,149 1,142,711 3,049 2,597,149 1,142,711

Total 9,210,489 4,799,804 4,612,922 9,712,287 5,088,388 4,669,764

2.3 Financial assets under repurchase agreements

(Unit: RMB1,000)


Item 31 December 2019 31 December 2018 31 December 2017

Securities under repurchaseagreements:

Financial bonds 1,416,000 1,608,000 2,365,980

Government bonds 15,260,250 4,007,100 6,646,760

Subtotal 16,676,250 5,615,100 9,012,740

Bills under repurchaseagreements:

Bank acceptance bills 17,738,392 11,881,138 6,110,655

Subtotal 17,738,392 11,881,138 6,110,655

Interbank CDs underrepurchase agreements 0 0 98,000

Total 34,414,642 17,496,238 15,221,395


37

iv. Analysis of investment status

1. Use of proceeds

The Bank did not raise any funds during the reporting period.

2. External equity investments

During the reporting period, the balance of the Bank’s external equity investments was RMB910,335,000, up

RMB50,170,000 over the beginning of the year, as detailed below.

(Unit: RMB1,000)

NameAccounting

method

Book valueat periodbeginning

ChangeBook valueat periodend

Shareholding ratio

Accountingitem

HB Zhijiang Rural Bank , Ltd.Costmethod

25,500 - 25,500 51.00%Long-term

equityinvestment

HB Yangxin Rural Bank , Ltd.Costmethod

31,440 15,000 46,440 80.00%Long-term

equityinvestment

Aerospace Science & IndustryFinancial Leasing , Ltd.

Equitymethod

787,643 35,170 822,813 25.00%Long-term

equityinvestment

Urban Commercial Bank ClearingCenter

Costmethod

400 - 400 1.33%Available-for-sa

le financialassets

Wuhan Steel Electricity Co., Ltd.Costmethod

8,030 - 8,030 0.88%Available-for-sa

le financialassets

China UnionPay Co., Ltd.Costmethod

7,152 - 7,152 0.27%Available-for-sa

le financialassets

Total 860,165 50,170 910,335

II. Business Overview

i. Institution setup

S/N Institution Address Number of institutions

1 Head Office 933 Jianshe Road, Jianghan District, Wuhan City 1

2Banking Department

of the Head Office933 Jianshe Road, Jianghan District, Wuhan City

1

3 Chongqing Branch Building 1, 11 East Honghu Road, Yubei District, Chongqing 9


38


City

4 Xiangyang Branch8 Chunyuan Road, Xiangyang City High and New Technology

Development Zone, Hubei Province

2

5 Yichang Branch Tourism Square, 25 Yunji Road, Yichang City, Hubei Province 6

6 Huangshi Branch861 Huangshi Avenue, Huangshigang District, Huangshi City,

Hubei Province

3

7 Shiyan BranchWanlong Plaza, 9 Chaoyang Middle Road, Maojian District,

Shiyan City, Hubei Province

4

8 Jingzhou Branch280 Jiangjin West Road, Jingzhou City, Hubei Province

(Hengyuan Hotel)

5

9 Jingmen Branch 21 Changning Avenue, Jingmen City, Hubei Province 4

10 Ezhou Branch59 Wenxing Avenue, Echeng District, Ezhou City, Hubei

Province

2

11 Xiaogan Branch51, Beijing Road, Xiaonan District, Xiaogan City, Hubei

Province

3

12 Huanggang Branch 55 Building, Feicui Yipin, No. 76 Chibi Avenue, Huangzhou

District, Huanggang City, Hubei Province

1

13 Xianning Branch Yangguang Weina International Celebrity Plaza, 25 Ganhe

Avenue, Xianning City, Hubei Province

2

14 Suizhou BranchNorthwest Corner of the Intersection of Jiaotong Road and

Yingbin Road, Zengdu District, Suizhou City, Hubei Province

1

15 Enshi Branch67 Shizhou Avenue (Jinlin Mansion), Enshi City, Hubei

Province

4

16 Xiantao Sub-branch 11-6, Xiantao Avenue, Xiantao City, Hubei Province 1

17 Optical Valley BranchMinzu Avenue, East Lake High-tech Development Zone,

Wuhan City

4

18

Hubei Pilot Free

Trade Zone Wuhan

Area Branch

Building A5, Optical Valley Software Park, Te 1 Guanshan

Avenue, Donghu New Technology Development Zone, Wuhan

City

1


39


19Technology Finance

Service Center

Building A5, Optical Valley Software Park, Donghu New

Technology Development Zone, Wuhan City

1

20

Wuhan Economic &

Technological

Development Zone

Sub-branch

10 Chuangye Road, Plot 1C1, Wuhan Economic &

Technological Development Zone, Wuhan City4

21 Jiang’an Sub-branchBuilding 1, Tower B, Sanyang Jincheng, 1541 Zhongshan

Avenue, Jiang’an District, Wuhan City

16

22 Jianghan Sub-branchFloors 1-2, Te 8, Xinhuaxia Road, Jianghan District, Wuhan

City

14

23 Qiaokou Sub-branch 160 Qiaokou Road, Qiaokou District, Wuhan City 10

24Hanzheng Street

Sub-branch107-109 Liji South Road, Hankou, Wuhan City

7

25 Hanyang Sub-branch Te 1 Cuiwei Road, Hanyang District, Wuhan City 8

26 Wuchang Sub-branch 440 Zhongshan Road, Wuchang District, Wuhan City 15

27Shuiguohu

Sub-branch33 Hongshan Road, Wuchang District, Wuhan City

11

28 Qingshan Sub-branch Yangang Road, Qingshan District, Wuhan City 7

29 Hongshan Sub-branch 586 Wuluo Road, Wuchang, Wuhan City 13

30 Caidian Sub-branch 208 Caidian Avenue, Caidian District, Wuhan City 2

31 Jiangxia Sub-branchZhongbei Jiangxia Shopping Center, Wenhua Road, Jiangxia

District, Wuhan City

3

32 Huangpi Sub-branch 387 Huangpi Avenue, Huangpi District, Wuhan City 4

33 Dongxihu Sub-branch288 Wuzhong Road, Wujiashan, Dongxihu District, Wuhan

City

5

34

Yangluo Economic

Development Zone

Sub-branch

Te 1 Hanshi Road, Yangluo Economic Development Zone,

Wuhan City

4

35 Jiutong (Hong Kong Floor 1 (Floors 1-12), 160 Qiansanyanqiao, Jiang’an District, 2


40


Road) Sub-branch Wuhan City

36Small and Micro

e Service Center

Floor 3, Zone B, Hankou Bank, No. 933 Jianshe Avenue,

Jianghan District, Wuhan City

1

37 Xinlu Sub-branchFloor 1, Building A, Yongsheng Tower, Shengli Street, Yiyuan

Street, Jiang’an District, Wuhan City

1

Total: 181 branches and sub-branches (including specialized institutions, tier-2 sub-branches in Wuhan, sub-branches beyondWuhan directly under the Head Office and sub-branches under non-Wuhan branches). In addition, Xinlu Sub-branch is the Bank’sAssets Preservation Department. The Small and Micro Enterprise Financial Service Center is the Bank’s specialized institutionengaged in providing financial services for small and micro enterprises. The Technology Finance Service Center is the Bank’sspecialized institution engaged in providing financial services for technological enterprises.

ii. Loan quality analysis

1. Five-category loan classification at the end of the reporting period

(1) Five-category loan classification method:

The Bank formulated the Administrative Measures for Risk Classification of the Credit Assets of Hankou Bank and

classified loans into five categories and 12 grades. It established the management mechanism of real-time and

dynamic classification, and the classification results reflected the risks that the Bank’s credit assets were exposed to

on a true, comprehensive and accurate basis.

(2) Five-category loan classification

(Unit: RMB1,000)

Parent Company

Five-categoryclassification

Loan balance atthe end of theperiod

Percentage (%)Loan balance atthe beginning ofthe period

Percentage (%) Change

Pass 156,622,329 91.09 123,092,056 90.14% 33,530,273

Specialmention 12,318,529 7.16 10,604,669 7.77% 1,713,860

Sub-standard 703,814 0.41 1,996,452 1.46% -1,292,638

Doubtful 2,238,780 1.30 802,858 0.59% 1,435,922

Loss 59,897 0.03 67,719 0.05% -7,822

Total 171,943,350 100.00% 136,563,754 100.00% 35,379,596


41

2. Provisioning and write-off of allowance for impairment losses on loans

(Unit: RMB1,000)

Item


2019 2018 2019 2018

Beginning balance 4,591,017 4,341,694 4,550,169 4,313,314

Accrued during the

reporting period 2,011,485 2,208,581 2,005,786 2,168,429

Transfer-out during the

reporting period 0 0 0 0

Written off during the

reporting period 997,309 2,024,479 985,997 1,996,770

Reversed during the period 273,414 65,221 267,423 65,196

Ending balance 5,878,607 4,591,017 5,837,381 4,550,169

Note: The foregoing balance of provisions excludes general risk reserves allocated on an after-tax basis. No special reserves are set

aside at present.

3. Overdue loans

(Unit: RMB1,000)

Consolidated

Item Ending balanceBeginningbalance

Change duringthe period (+,

-)Change (%) Reasons for the change

Overdue

loans2,771,817 3,111,457 -339,640 -10.92%

Multi-pronged approaches

taken to reduce overdue loans

vigorously and effectively.

Note: Overdue loan means the principal amount of the loans of which principal or interest has become overdue. As for loans repaid by

installments, as long as the principal or interest on any installment has become overdue, the principal amount of other non-defaulted

installments shall also be included in overdue loans.

4. Interest-subsidized loans

The balance of outstanding interest-subsidized loans stood at RMB136 million at the end of the reporting period.


42

iii. Group customer credit business and its risk management

In 2019, the Bank formulated the Management Measures for Group Credit Business of Hankou Bank, effectively

prevented and controlled the risks arising from the credits extended to group customers, and promoted the healthy

growth of the group customer credit business in accordance with the Guideline for Risk Management of Group

Customer Credits Granted by Commercial Banks and the Notice of the CBIRC General Office on Credit Risk Alerts

against Group Customers and its actual conditions in group customers.

1. The Bank defined the group customer identification criteria and procedures as well as the responsibilities and

requirements for managing such customers, and further strengthened the identification and risk management of

group customers across the Bank.

2. The principle that “substance overweighs form”, was upheld. The Bank intensified the investigation into

customers’ shareholder background, equity ties and relations of key persons as well as included the enterprises with

which the Bank shares jointly controlled parties and material influences into the group customer credit management,

in a bid to prevent the occurrence of excess credit.

3. The “unified credit” principle was followed. The on and off-balance-sheet credit business, various investment

businesses like bonds, and derivative trading business where risk incurred shall be taken by the Bank as well as the

full margin, CD pledge and other low-risk businesses shall be brought under uniform credit management.

4. The “appropriate credit” principle was followed. Under the “look-through” principle, priority was given to

assessing the risk of ultimate debtors. The group customers’ credit limit was reasonably determined according to

the risk level of borrowers and the Bank’s risk tolerance, and the regulatory policies on credit concentration in

group customers were strictly followed to prevent concentration risk.

5. The “early warning” principle was followed. The early risk warning mechanism was established to strengthen

monitoring various risks in members of group customers. Timely actions were taken to forestall and defuse credit

risk of group customers.

6. A classified management mechanism was established. Group customers were managed by category. The group

customer management mechanism and relevant business processes were streamlined to enhance the efficiency of

group customer marketing management and service.

iv. NPA changes and management measures

During the reporting period, the Bank worked harder to strictly control new loans and strengthen the disposal of

outstanding risky loans. Five-category classification of loans was carried out in accordance with regulatory

requirements. The Bank made solid progress in the asset quality enhancement campaign, with the quality of credit

assets improved in general, NPL balance increased mildly and NPL ratio reduced slightly. As at the end of the

reporting period, the balance and ratio of non-performing loans were RMB3,003 million and 1.75%. In 2019, the

Bank acted upon economic and financial policies and requirements on the “three critical battles”, aligned its

activities with local economic development to serve the real economy and kept improving the structure of credit

customers. It controlled risks in new credits through strict authorization and prudent underwriting. It strengthened

risk monitoring, early warning and activity supervision and gave timely warning against and addressed risks in

outstanding loans. A range of measures were taken to strengthen the disposal and recovery of risky loans. The


43

credit risk system and team building were strengthened to further fortify the foundation of credit business

management and effectively boost the quality of credit assets and improve the ability to control and forestall credit

risks.

v. Impairment provisions for repossessed assets and other prime assets

(Unit: RMB1,000)

Item


31 December2019

31 December2018

Increase/(decrease)

31 December2019

31 December2018

Increase/(decrease)

Repossessed assets: 394,777 224,294 170,483 394,041 223,557 170,483

Allowance forimpairment losses

13,010 0 13,010 13,010 0 13,010

Receivablesinvestment

27,663,576 35,920,612 -8,257,035 27,617,404 35,890,612 -8,273,207


1,038,457 1,047,153 -8,696 996,035 1,047,153 -51,118

Due from banks: 2,279,318 1,072,991 1,206,326 2,264,500 929,158 1,335,341


0 0 0 0 0 0

Placements withbanks:

5,400,000 500,000 4,900,000 5,400,000 500,000 4,900,000


0 0 0 0 0 0

vi. Categories, average balances and average interest rates of major deposits and loans at theend of the reporting period

(Unit: RMB1,000)

Parent Company

Category Average balance Average interest rate (%)

Corporate loans 112,944,636 4.03

Personal loans 38,152,724 4.80

Corporate deposits 141,680,288 2.34

Personal deposits 81,252,030 2.63

Note: Corporate loans include trade financing, discounts, rediscounts and advances, and personal loans include credit card business.


44

1. Structures, average balances and average interest rates of major deposits

(Unit: RMB1,000)

Parent Company

Item Average balance Average interest rate (%)

Corporate demand deposits 82,807,632 1.29

Corporate time deposits 58,872,656 3.83

Personal demand deposits 22,682,705 0.42

Personal time deposits 58,569,325 3.48

Total 222,932,318 2.45

Note: Demand deposits include call deposits, while time deposits include margin deposits, principal-guaranteed wealth management

liabilities and large-value CDs issued.

2. Structures, average balances and average interest rates of major loans

(Unit: RMB1,000)

Parent Company

Item Average balance Average interest rate (%)

Corporate loans (short term, due within one year) 68,064,790 3.19

Corporate loans (medium and long term) 44,879,845 5.31

Personal loans 38,152,724 4.80

Total 151,097,359 4.22

Note: Corporate loans include trade financing, discounts, rediscounts and advances, and personal loans include credit card business.

vii. Debt securities investment

1. Types and amounts of financial bonds held by the Bank at the end of the reporting period

(Unit: RMB1,000)



45

Item Face value

Government bonds 87,036,972

Financial institution bonds 12,028,947

Central bank bills 0

Corporate bonds 5,221,879

Subordinated bonds 0

Other bonds 1,786,397

Total 106,074,195

2. Top five government bonds held by the Bank at the end of the reporting period


Bond name CodeFace value(RMB1,000)

Coupon rate (%) Maturity

18 Coupon-bearingT-bond 23

180023 5,210,000 3.29 18 October 2023


180028 4,560,000 3.22 6 December 2025


190003 3,280,000 2.69 7 March 2022


160017 3,055,000 2.74 4 August 2026


180019 2,840,000 3.54 16 August 2028

3. Top five central bank bills held by the Bank at the end of the reporting period

The Bank did not hold any central bank bills at the end of the reporting period.

4. Top five financial bonds held by the Bank at the end of the reporting period


Bond name CodeFace value

(RMB1,000)Coupon rate (%) Maturity

17 Harbin Bank GreenFinance 03

1720022 800,000 4.75 10 May 2022

19 Ping An Bank CD284 111911284 498,691 - 20 January 2020

18 CDB 03 180203 490,000 4.62 9 March 2021


46


Bond name CodeFace value

(RMB1,000)Coupon rate (%) Maturity

14 CDB 03 140203 420,000 5.79 14 January 2020

19 CDB 10 190210 420,000 3.65 6 July 2028

viii. Items designated at fair value

(Unit: RMB1,000)


ItemBeginningbalance

Profit/loss onchanges in fairvalue duringthe period

Accumulatedchanges in fairvalue recognizedinto equity

Impairmentprovisionsset asideduring thisperiod

Endingbalance

Financial assets

Incl.: 1. Financial assetsdesignated at fair value throughprofit or loss

13,042,298 35,887 0 0 1,822,570

Incl.: Derivativefinancial assets 0 0 0 0 0

2. Available-for-salefinancial assets 57,161,098 0 -144,276 0 69,517,090

Sub-total of financial assets 70,203,396 35,887 -144,276 0 71,339,660

Financial liabilities designated atfair value through profit or loss 13,190,558 0 0 0 0

Investment properties 0 0 0 0 0

Productive biological assets 0 0 0 0 0

Others 0 0 0 0 0

ix. Bad debt provisions for interest receivable and other receivables

In accordance with the Accounting Rules for Financial Corporations issued by the Ministry of Finance, the Group

did not set aside bad debt provisions for loan interest receivable. If loan interest receivable or the corresponding

loan principal is 90 days overdue, interest receivable shall be recorded off balance sheet to offset interest income

during the same period. For other receivables confirmed to be unrecoverable, the Group set aside bad debt

provisions using the specific identification method.


47

(Unit: RMB1,000)

Item


31 December2019

31 December2018

Increase/(decrease)

31 December2019

31 December2018

Increase/(decrease)

Otherreceivables 4,688,184 1,353,664 3,334,520 4,687,220 1,352,828 3,334,391

Bad debtprovisions 66,106 4,368 61,738 66,106 4,368 61,738

x. Balances and risk management of major off-balance-sheet items

Off-balance-sheet items of the Bank are incorporated in the Bank’s unified credits to the customers and deemed to

be on-balance-sheet items for management. They must conform to management procedures and requirements

including due diligence, examination, approval, contract execution, disbursement, post-disbursement and guarantee

or collateralization. For each type of off-balance-sheet items, dedicated management policies have been placed with

specified regulatory requirements. In addition to the “three investigations” into the authenticity of trade background,

the Bank maintained a reasonable level of margin ratios by applying percentage and limit management to

off-balance-sheet exposures.

As at the end of the reporting period, the balances of the Bank’s major off-balance-sheet items were as follows:

(Unit: RMB1,000)


Item 31 December 2019 31 December 2018 31 December 2017

Bank acceptance bills 20,488,412 16,233,495 18,464,131

Letters of guarantee 1,246,199 1,562,158 1,234,268

Letters of credit 5,319,239 2,836,565 1,530,073

III. Risk Exposures and Countermeasures of the Bank

i. Credit risk

Credit risk means the risk of economic losses caused to the creditor or financial instrument holder as a result of the

debtor or counterparty failing to perform contract or due to changes in credit quality, which affects the value of

financial products. The Bank’s on and off-balance-sheet credit assets and non-credit assets with counterparties are

all exposed to credit risk. During the reporting period, the Bank took the following measures to control credit risk:

1. The Bank tightened credit orientation and improved credit customer structure. The Bank formulated the 2019

Credit Orientation Policy and Guideline of Hankou Bank, kept serving development, the real economy and


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household consumption, adhered to green development, prudence and compliance, enhanced support for the real

economy, effectively promoted the continuous improvements in the Bank’s credit structure and achieved

high-quality development of credit business. The credit policy first encourages support for comprehensive health,

mega education, high-end equipment manufacturing, strategic emerging industries and modern service industries,

requires prudence in the financing of projects in the “heavy-polluting, energy-intensive and oversupplied”

industries, imposes strict control over credits to steel, cement, electrolytic aluminum, shipbuilding, flat glass, paper

making and coal chemicals industries, required resolute removal of ineffective supply by exiting from “zombie

enterprises” and requires unconditional exit from backward enterprises that fail to meet the standards for

environmental protection, seriously pollute the environment and are unable to take remedial actions.

2. The Bank stepped up its policy guidance for credit review and review. The 2019 Guidance of Hankou Bank on

Review of Corporate Credit was formulated, with credit results optimized to prevent credit risk. Credit review was

carried out under the principle of “objectivity, prudence, compliance, operation and continuity”. The Bank achieved

steady development of credit business under the basic strategy of “classified policy, penetrative review, cash flow

management and precision services” while striking a balance between business development and risk control.

3. The Bank strengthened risk prevention and management. The measures for management of potential risky loans

were effectively implemented with proper classification of potential risky loans, which were managed through

“dynamic adjustments”, “borrower-specific policy”, “differentiated management” and “strict assessment”. The risk

prediction and management were increasingly strengthened to enable early detection, prevention, reporting and

mitigation of potential risky loans.

4. The Bank evaluated the quality of credit assets more frequently. During the reporting period, the Bank stepped

up its monitoring and inspection of credit asset risks and evaluated the quality of credit assets every month; it

classified credit assets into five tiers and 12 grades so as to timely and accurately understand the risk status of credit

assets. The Bank regularly classified its non-credit risk assets, and timely classified, regularly monitored and

effectively managed all risk assets.

ii. Market risk

Market risk means the risk of potential loss on future earnings or cash flows arising from changes in the value of

financial instruments due to movements of market prices (interest rate, exchange rate, stock price and commodity

price, etc.). The market risk exposure of the Bank is mainly divided into interest rate risk and exchange rate risk.

The Bank has separated the front, middle and back offices of treasury operation and established a mutual check and

restraint mechanism by manual prevention and machine-based control. Risk measurement level was enhanced,

market risk capital occupancy was regularly calculated, monitoring functions were improved, the reporting

mechanism was standardized and the market risk profile was reported to the management regularly.

1. Interest rate risk

(i) Interest rate risk in the trading book management solutions

With regard to the interest rate risk in the trading book, the Bank monitored market risk limits on a daily basis

mainly through the treasury operation management system, conducted market value reassessment and VaR

measurement over the trading book and gradually strengthened combined operations and interest rate risk control


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for the trading book using such parameters as maturity, convexity and basis point value, having regard to the

market environment.

(ii) Interest rate risk in the banking book management solutions

The banking book market risk mainly arises from the mismatch of agreed-upon maturity date and re-pricing date

between interest-generating assets and interest-bearing liabilities. The Bank regularly monitored re-pricing maturity

gaps of assets and liabilities sensitive to interest rates using gap analysis and other methods and effectively

managed banking book interest rate risk by using FTP to actively adjust the percentages of short-term and

long-term, variable-rate and fixed-rate assets and liabilities.

2. Exchange rate risk

The Bank’s foreign currency assets represent a small part of total assets. Foreign exchange exposures are mainly

denominated in US dollars. The exchange rate risk the Bank takes mainly arises from price movements of foreign

exchange in stock and foreign exchange trading. The Bank reasonably controlled foreign exchange exposure

position to the extent permitted by policies according to its risk appetite and operation level and strictly controlled

exchange rate risk by proactively adjusting the mix of foreign currencies and the structure of assets and liabilities in

line with market conditions.

iii. Operational risk

Operational risk is defined as the risk that causes losses through imperfect or faulty internal procedures, employees

and IT systems, as well as external events. The Bank took the prevention and control of operational risk as an

important part of daily operations. Through performing inspections across the Bank, addressing both the symptoms

and root causes, combining punishment and prevention, the Bank was able to identify and rectify various types of

violations and non-compliances, thereby improving the policies and processes, ameliorating internal controls and

ensuring the continuous reasonable and steady development of all businesses.

During the reporting period, the Bank took the following key measures to control operational risk:

1. Special crackdown campaigns were carried out. A crackdown register was created and maintained with respect to

“three fields, one priority” to advance the crackdown work, with a focus on problems found in internal and external

inspections in recent years as well as various potential risks and management weaknesses exposed in the ordinary

course of business.

2. Swindle prevention and control were strengthened. 33 branches and sub-branches signed the Agreement on

Overall Management Responsibility for Swindle Prevention and Control, assigning the relevant duties to

responsible persons at all levels. The Work Plan of Hankou Bank for Swindle Prevention and Control in 2019,

including 74 special inspection plans of the Head Office’s departments and 22 self-inspection plans of branches and

sub-branches for internal control and swindle prevention.

3. Assessment and demerit scoring strictly conducted. The Bank conducted performance assessment and demerit

scoring for compliance and operational risk management of branches and sub-branches, made quarterly notification

of assessment results and underlying policies and required branches and sub-branches to avoid similar problems

and ensure compliance.


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4. Behavioral management was strengthened. The ten-point rule for risk management of employee behaviors was

implemented, with unusual employee behaviors screened continuously and employee mentality monitored on an

ongoing basis, which covered senior executives. The management measures for unusual employee behaviors

screening were formulated to further standardize the screening process of unusual employee behaviors. The

management of retiring and departing employees was strengthened, with behavioral screening completed for 1,475

retiring and departing employees of the Bank.

iv. Compliance risk

Compliance risk refers to the risk of exposing a commercial bank to legal punishment, regulatory penalty, material

financial loss and reputation damage due to the failure to comply with laws, regulations and rules. During the

reporting period, the Bank took the following measures to control compliance risk:

1. The compliance risk development was advanced. The Bank organized special training of medium and senior

management personnel to enhance their capability of internal control, compliance and swindle management,

general discussions on case-based warning and education, warning and education on credit compliance and

compliance lecturing by heads of Head Office departments. The “Internal Control and Compliance Management

Column” was optimized encouraging employees to share their compliance perceptions and exchange experience in

compliance management, with 876 articles regarding typical cases, compliance writings and study updates

published in the year. “Monthly Exam” on compliance was carried out, with the scores aggregated and included in

the institutional performance assessment and personal performance score. A total of 24,778 persons took the exams.

2. Internal control policies and procedures were improved continuously. The Head Office strengthened the annual

planning for policies and procedures, maintenance of system information on policies and procedures and the

development of non-Wuhan branches’ policies and procedures. The compliance, effectiveness and feasibility of the

Bank’s policies and procedures were thoroughly reviewed and streamlined through various work, including the

streamlining of policies on financing of private enterprises, the “Month of Internal Control Policy

Re-Optimization”, self-examination of comprehensive risk management policy and follow-up assessment of 2019

policies and procedures.

3. The anti-money laundering (AML) management was further improved. The AML management work mechanism

was improved. The leading group on AML held meetings to cause all AML management departments to fulfill their

respective compliance duties. Special tasks such as existing customer data cleanup and beneficiary owner

identification were carried out. 12 AML internal control policies were formulated or revised in line with regulatory

standards. The centralized management mode of suspicious transactions reporting was leveraged to enhance the

quality and efficiency of suspicious transactions reporting and effectively curtail the spreading of money laundering

risk. The money laundering risk management compliance culture was fostered, AML in-house training was

provided by tier and category, onsite examination was conducted over the AML duty performance of branches and

sub-branches and the staff in AML positions continued to enhance their sense and capability of performing duties in

a proactive manner.

v. Liquidity risk

Liquidity risk means the risk that occurs when a commercial bank cannot obtain sufficient funds in time at a

reasonable cost, to repay matured debts, perform other payment obligations and meet the other fund needs for


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normal business operation. It requires commercial banks must hold certain current assets or have smooth fund

borrowing channels.

The Bank has in place a governance structure fit for its objectives of liquidity risk management, which fully meets

regulatory requirements on the organizational structure for liquidity risk management of commercial banks.

Specifically, the Bank maintains a decision-making system composed of the Board of Directors and its special

committees, the senior management and the Asset and Liability Committee; the Planning and Finance Department

takes overall charge of liquidity management. The Financial Market Department, branches and sub-branches are

implementing bodies for day-to-day liquidity management; the Board of Supervisors, the Risk Management

Department, the Internal Control & Compliance Department and the Audit Department together constitute an

internal supervision system; the Operation Department and the Information Technology Department are supporting

departments. They constitute the Bank’s comprehensive, efficient and strong framework for liquidity risk

management to ensure liquidity safety of the Bank.

While meeting regulatory requirements and maintaining liquidity safety, under the principle of prudence and its

liquidity risk policy and management objectives, the Bank strikes a dynamic balance in yield of funds and liquidity

needs from time to time according to changes in market liquidity demands at home and abroad, thereby ensuring

safe and sound operation and good public image of the Bank.

During the reporting period, the Bank adhered to a robust liquidity risk appetite tilted towards prudence. The

overall liquidity position was sound, as evidenced by conformity and continued improvement of all regulatory

indicators. The overall capability of liquidity risk management continued to improve. During the reporting period,

the Bank mainly took the following measures to manage liquidity risk:

First, the assets and liabilities structure was further improved. The Bank managed the assets and liabilities structure

with a focus on liquidity risk in a proactive manner, followed the work approach of “managing real-time position,

short-term gap and medium- and long-term mismatches”, increased the proportion of core liabilities, balanced the

mature size an maturity of interbank liabilities, diversified the sources of funds and employed FTP for structural

optimization.

Second, intraday liquidity risk management was refined. Substantial fund flows were closely monitored bank-wide

to ensure sufficient intraday liquidity position and relevant financing arrangements and timely satisfaction of

intraday payment needs under normal and stress scenarios.

Third, liquidity risk monitoring was strengthened. The Bank set liquidity risk limits, identified, measured,

monitored and controlled liquidity risk and improved the tiered analysis and management mechanism for liquidity

gap in accordance with the Bank’s liquidity risk appetite policy, the monetary policy of PBOC, regulatory standards

and requirements, market liquidity changes and the actual operation and management objectives of the Bank, thus

ensuring the liquidity indicators met management targets and regulatory requirements.

Fourth, liquidity risk management under stress scenarios was strengthened. High-quality liquidity reserve assets

were steadily increased to effectively boost the ability to manage liquidity under stress scenarios. The liquidity risk

stress test was conducted regularly, with special stress tests carried out from time to time according to market

changes and internal management needs.


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Fifth, the capability of liquidity emergency management was enhanced. The Bank conducted liquidity emergency

drills, formulated the contingency funding plan, strictly implemented relevant work measures and boosted the

awareness of liquidity emergency management. The drill outcomes were used to improve the liquidity emergency

management mechanism, effectively tackle the external liquidity stock and improved the bank-wide capability of

liquidity emergency management.

vi. Reputational risk

Reputational risk is the risk of negative comments made on a commercial bank by its stakeholders due to any

operating, managerial or external events of the commercial bank. The Bank attached great importance to

reputational risk management and strengthened employee education on compliance management. It improved the

reputational risk management mechanism and revised management policies. It strengthened collaboration in

prevention of public opinion crisis, carried out continuous and proactive screening of risk areas and properly

handled and reduced potential reputational risks. It organized fruitful training and drills. It adhered to a routine

public opinion monitoring process, continued to step up positive publicity, cemented the good partnership with

various media outlets and created good atmosphere for the high-quality development of the Bank. No material

reputational risk events took place during the reporting period.

IV. Changes in the Business Environment and Macro Policies, Laws and

Regulations and Influences thereof

i. Influence of macro control

The global macro-economy was sluggish in 2019. Major developed economies remained in deceleration while

emerging economies were under higher downturn pressure. The global economic growth was throttled by the

Trump administration’s unilateralism and trade protectionism policy, coupled by the diminishing effects of

monetary and fiscal stimulus of developed economies, depressed global demand and continued downturn of

advanced economies. The US economy further slowed down. The Eurozone economy nearly came to a standstill.

The Japanese economy was under rising downward pressure due to stagnant exports. Emerging economies were

under rising downward pressure. Central banks of India, Brazil, Russia and some other emerging market countries

have cut interest rates several times to boost their economies. Malaysia and New Zealand even announced the first

rate cut since 2016.

In 2019, in the face of a situation complicated by rising risks both at home and abroad, China’s economy upheld the

general principle of seeking progress while keeping performance stable. China promoted high-quality development

focused on supply-side structural reform, made solid achievements in “six stabilities” and maintained sustained and

healthy economic and social development. The three major tough battles have made key progress, precision target

alleviation delivered remarkable results and financial risks were effectively prevented and controlled. Th overall

ecological environment quality was improved, the reform and opening-up achieved milestones, the supply-side

structural reforms continued to go further and new breakthroughs made in scientific and technological innovation.

People enjoyed a stronger sense of gain, of happiness and of security. The major indicators in the 13th Five-Year


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Plan met progress expectations. Major progress was made in building a moderately prosperous society in all

respects.

ii. Influence of reform in financial supervision

Since 2019, the regulatory authorities have provided a series of regulatory policy guidance and support in a bid to

support the high-quality development of the real economy, forestall and defuse risks and promote high-level

opening-up.

First, precision efforts were made to support high-quality economic development. The MSE and private enterprise

services were improved and the money and credit transmission mechanism were unclogged to lower the overall

financing cost of enterprises. Development, policy and commercial financial institutions played their respective

roles to support the major strategies and projects of the State. The credit supply structure was improved to increase

the weight of medium- and long-term manufacturing loans in support of technological innovation and advanced

manufacturing. With a focus on weaker areas of financial services, including poverty alleviation, elderly care and

health care, a wide variety of financial resources were mobilized to support the upgrading of consumption and

improvement of people’s livelihood.

Second, what risk prevention addressed shifted from “symptoms” to “root causes”. The write-off of non-performing

assets was continuously strengthened for consistent, look-through and full-coverage supervision of shadow banking.

Risks in major financial holding groups were dealt with by category. The real estate financing measurement and

monitoring system was improved to crack down on irregularities. Continued efforts were made to reign in internet

finance risks, including P2P lending, and contain the surge in illegal fundraising and other illegal financial

activities.

Third, a spectrum of measures were taken to promote high-level development. The financial institution system,

market system and product system were bettered. The Bank further reformed the system of city commercial banks

and rural credit cooperatives, promoted transformation of trust, wealth management and old-age insurance

industries and guided insurance companies and asset management companies back to their founding mission. The

equity structure of bancassurance institutions was optimized, the supervision of related party transactions was

strengthened and the incentive and constraint mechanism was refined.

V. Outlook

i. Industry development pattern and trend

COVID-19 has had a fundamental impact on the Chinese economy and also will send ripples to the banking

industry in the short term. In the long run, however, the banking industry is able to withstand risk shocks from

inside and outside and contribute positively to the high-quality development of China’s economy. The COVID-19

epidemic will not change the long-term development opportunities for China’s banking industry.

First, asset quality is under pressure in the short run but will remain under control over the long term. Enterprises

affected by the epidemic will have weaker operating capability, cash flows and debt service ability, which may

result in a certain size of non-performing loans or even bad debts. Also, a large number of enterprises and

individuals will see their income falling in the short term, which also will impact the deposit and lending business


54

of banks and impede fee-based business development. Overall, COVID-19 will have a negative impact on

short-term revenue of banks. In the long term, however, as the economic activity gradually gets back on track,

coupled with policy supports including tax cuts and capital market liquidity support, the economy is recovering in a

faster pace. The long-term impact on banks is limited.

Second, the destinations of credit flows will be changed. COVID-19 has impacted various industries more or less.

Retail and catering, hotels and tourism and real estate have been hit hard. Work-from-home, online education,

grocery delivery and biopharmaceutics burgeoned. The industry development adjustments will trigger adjustments

to fund demand. The bank credit will flow to different destinations, giving an impetus to the transformation and

upgrading of banks themselves.

Third, digital transformation will gain pace. COVID-19 has had a far-reaching impact on consumption behaviors of

consumers, forcing some consumers to try new modes of financial consumption. Massive transactions will move

from offline to online scenarios for dealing via internet or mobile banking. The future demand for online

transactions, including online transfer, savings deposit, investment and wealth management, will keep expanding.

Fintech-driven new business models will go deeper as a positive contributor, while offline outlets will speed up

their transformation.

ii. Possible external risks in future operation

The external risks faced by the Bank in its future operation will mainly come from the changes in economic

situation and financial policy. The slowdown of domestic and foreign economic growth, weak demand of real

economy, uncertainty over US-China trade frictions and the bond default risk that may spread to the credit market

will have an impact on commercial banks’ operating pattern and profitability.

iii. Challenges and opportunities in future operation

In the foreseeable future, the COVID-19 spreads will put micro, small and medium-sized enterprises in business

difficulties and at higher default risk, which may directly push up banks’ non-performing debts and NPL ratio. The

quality and profitability of banking assets will remain under pressure in the short term.

Challenges coexist with opportunities. Traditional retail builds on physical outlets. Against the backdrop of the

pandemic, however, digital retail business has become the mainstream model. COVID-19 outbreaks have slashed

consumer spending on tourism, catering and offline recreational and entertainment activities. Consumers show

uncertainty in willingness to spend again, likely to remain long prudent in buying consumer durables. In the future,

banks may establish a professional “Internet Plus” business mode, embrace a multi-channel, integrated and

differentiated approach to development and utilize mobile banking, Internet banking, etc. to further improve the

online service system, tap deep into customers’ financial needs in every respect, innovate financial products

specific to customer groups, provide targeted and diverse products and services and further boost and harness

consumer demand.

iv. Operating plan

1. Major operating targets for 2020

In 2020, the Bank will actively adapt itself to the fundamental changes in banking environment in line with the


55

macro-economic and financial policies, uphold the guiding principle of pursuing progress while ensuring stability,

unswervingly adhere to the new development philosophy and maintain strategic resolve. The Bank will maintain

wartime status to win the fight against the COVID-19 epidemic to bolster confidence, advance the reform and

opening-up, prevent and control risks as well as pursue high-quality development of the Bank. Overall, assets and

liabilities are expected to steadily expand in size in 2020 with continuous structural improvements, stable

profitability, sound quality of assets and conformity of regulatory indicators.

2. Major working measures for 2020

(1) Promote corporate business development vigorously

The Bank will make solid moves to expand the corporate customer base. The three chains (“industry chains, supply

chains and trade chains”) will be further extended to boost the capability of serving MSEs. The Bank will seize

opportunity to accelerate marketing to the “new infrastructure” segment. The “door-to-door service” campaign will

be well implemented to communicate policy, provide support and enhance the emotional bond with customers.

Credit supply will be quickened to increase user adhesion to, and harness the engine role of, transaction banking.

The bond with local governments will be strengthened in the post-epidemic stage. Comprehensive partnership with

new investors will be established and the service level will be enhanced on the backing of shareholders.

Breakthroughs will be made in the partnership with central government-run enterprises, state-owned enterprises

and strong private enterprises. Cooperation with banks and other financial institutions will be strengthened.

Collaboration will be strengthened between business lines, between front, middle and back offices and between

upper and lower levels.

(2) Effectively strengthen retail business development

Efforts will be intensified to expand such customer groups as technology finance, healthcare system, education and

individual shareholders. The Bank will strengthen customer acquisition and fully tap the potential of existing

customers. The consumption stimulus policy in Hubei will be harnessed and the credit features of credit cards and

the unique advantages of the trade union cards will be leveraged, thereby integrating products and services into the

wave of boosting consumption. Online banking and mobile banking will be upgraded by fully commencing the

“Online Hankou Bank” program and building the Bank into “Premier Bank” and “Preferred Bank”.

(3) Continue to promote technology finance

Focus will be placed on high-tech enterprises supported principally by the State, small and medium-sized tech firms

and gazelle enterprises on the State’s support list and customers in the emerging industries and new infrastructure

fields, such as 5G and new-generation information technology, so as to expand and improve the customer base.

Business modes will be duplicated to Chongqing and Hubei free trade zones. Reform will be deepened by

increasing the size of indirect investment and making bold innovation in direct investment. Technology finance will

shift from brand enhancer to profit contributor.

(4) The “mega asset management” business will be further advanced.

The Bank will seize the “window” provided by a series of monetary policies and capital policies and embrace the

opportunity of incremental factor market and declining market interest rates to develop the asset management

business with vigor. The value orientation of asset management and front-office marketing will be harmonized.


56

Connectivity will be established between traditional credit and funds, bonds, bills and other factor markets. The

pricing of asset and liability will be managed scientifically. The deposit rates will be taken as an important indicator

of deposit development quality to lower the costs of deposits.

(5) Strengthen risk control and management

Risk profiling will be conducted to assess the COVID-19 impact. Supervision will be focused on key industries and

support will be provided for troubled industries. “Iron Hand on Non-compliances” will be deepened. The

responsibility for credit approval management will be strengthened for personal consumption loans, MSE credit,

technology finance and financial market businesses. The potential economic and financial risks and the risks of

other city commercial banks that may be triggered by the epidemic will be strictly guarded against. A liquidity risk

prevention and control mechanism involving front, middle and back offices will be established in a faster pace.

Reputational risk management will be incorporated in the entire process of operation and management.

(6) Strengthen IT support

Information technology will penetrate into all departments and areas of management across the Bank, in a bid to

enhance the Bank’s IT capacity and management level on all fronts. The Bank will move faster forward in building

the new-generation risk management system Online Hankou Bank and other information system platforms and

invest more in boosting the digital governance capacity.

(7) Strengthen corporate cultural development

The market-oriented management mechanism reform will be furthered vigorously. Organizational reform will be

promoted actively. The performance assessment management mechanism will be adjusted and improved in a

well-targeted manner. Officers’ performance assessment will be strengthened with respect to epidemic containment,

financial services and return to work. An action plan for development and promotion of excellent young officers

will be formulated. A positivity culture will be fostered.

(8) Continue to deepen the development led by Party building

The Bank will thoroughly study the Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era

and keep consolidating the outputs of the “Staying True to Our Founding Mission” themed education program. The

model role of CPC members will be enhanced. The Party’s conduct will be further improved. The bad conducts that

impede development of the Bank will be fully screened again and the To-Don’t List will be further refined.

Officials’ political stance and sense of bigger picture will be heightened so that the key minority will keep playing a

good example.

VI. Work of the Board of Directors during the Reporting Period

i. Meetings of the Board of Directors and resolutions during the reporting period

The Board of Directors held 10 meetings in 2019.

1. The First Meeting of the Sixth Board of Directors of the Bank was held on 15 January 2019. Of the 10 directors

supposed to attend the meeting, 10 directors were present in person. The meeting reviewed and approved 10


57

proposals.

2. The SecondMeeting of the Sixth Board of Directors of the Bank was held on 4 March 2019. Of the 10 directors

supposed to attend the meeting, 10 directors were present in person. The meeting reviewed and approved 17

proposals and heard two reports.

3. The Third Meeting of the Sixth Board of Directors of the Bank was held on 24 April 2019. Of the 10 directors

supposed to attend the meeting, nine supervisors were present in person, and the other one attended by proxy. The

meeting reviewed and approved 27 proposals and heard five reports.

4. The Fourth Meeting of the Sixth Board of Directors of the Bank was held on 30 May 2019. Of the 10 directors

supposed to attend the meeting, nine supervisors were present in person, and the other one attended by proxy. The

meeting reviewed and approved eight proposals and heard three reports.

5. The Fifth Meeting of the Sixth Board of Directors of the Bank was held on 5 September 2019. Of the 10

directors supposed to attend the meeting, seven directors were present in person, and three attended by proxy. The

meeting reviewed and approved five proposals and heard eight reports.

6. The Sixth Meeting of the Sixth Board of Directors of the Bank was held through written circulation on 10

October 2019. All of the 10 directors supposed to vote were present in person. One proposal was reviewed and

approved at the meeting.

7. The Seventh Meeting of the Sixth Board of Directors of the Bank was held on 12 November 2019. Of the 10

directors supposed to attend the meeting, nine directors were present in person, and one attended by proxy. The

meeting reviewed and approved 12 proposals and heard six reports.

8. The Eighth Meeting of the Sixth Board of Directors of the Bank was held on 9 December 2019. Of the 10

directors supposed to attend the meeting, eight directors were present in person, and two attended by proxy. The

meeting reviewed and approved two proposals.

9. The Ninth Meeting of the Sixth Board of Directors of the Bank was held on 16 December 2019. Of the 10

directors supposed to attend the meeting, 10 directors were present in person. The meeting reviewed and approved

one proposal.

10. The 10th Meeting of the Sixth Board of Directors of the Bank was held on 24 December 2019. Of the 10

directors supposed to attend the meeting, 10 directors were present in person. The meeting reviewed and approved

two proposals.

ii. Implementation of the resolutions of Shareholders’ General Meeting by the Board ofDirectors

The Bank held three general meetings in 2019.

1. The Bank held the 2019 First Extraordinary General Meeting on 15 January 2019 and reviewed and approved the

16 proposals. All resolutions made at this general meeting have been fully implemented.

2. The Bank held the 2018 Annual General Meeting on 20 June 2019 and reviewed and approved the 12 proposals.

All resolutions made at this general meeting have been fully implemented.


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3. The Bank held the 2019 Second Extraordinary General Meeting on 27 November 2019 and reviewed and

approved the eight proposals.

iii. Performance of duties by the special committees of the Board of Directors

Strategy Committee

The Strategy Committee held two meetings in 2019:

1. The Strategy Committee of the Sixth Board of Directors held its first meeting on 24 April 2019, and reviewed

and approved five proposals and one report.

2. The Strategy Committee of the Sixth Board of Directors held its second meeting on 12 November 2019, and

reviewed and approved eight proposals and one report.

Audit Committee

The Audit Committee held three meetings in 2019:

1. The Audit Committee of the Sixth Board of Directors held its first meeting on 24 April 2019, and reviewed and

approved six proposals.

2. The Audit Committee of the Sixth Board of Directors held its second meeting on 5 September 2019 and heard

three reports.

3. The Audit Committee of the Sixth Board of Directors held its third meeting on 12 November 2019 and heard two

reports.

Risk and Related Party Transactions Control Committee

The Risk and Related Party Transactions Control Committee held eight meetings in 2019:

1. The Risk and Related Party Transactions Control Committee of the Sixth Board of Directors held its first

meeting on 24 April 2019 and reviewed and approved 12 proposals and heard two reports.

2. The Risk and Related Party Transactions Control Committee of the Sixth Board of Directors held its second

meeting on 13 May 2019 and reviewed and approved one proposal.

3. The Risk and Related Party Transactions Control Committee of the Sixth Board of Directors held its third

meeting on 30 May 2019 and reviewed and approved six proposals and heard two reports.

4. The Risk and Related Party Transactions Control Committee of the Sixth Board of Directors held its fourth

meeting on 8 August 2019 and reviewed and approved the following two proposals:

5. The Risk and Related Party Transactions Control Committee of the Sixth Board of Directors held its fifth

meeting on 5 September 2019 and reviewed and approved five proposals and heard three reports.

6. The Risk and Related Party Transactions Control Committee of the Sixth Board of Directors held its sixth

meeting on 12 November 2019 and reviewed and approved three proposals and heard one report.

7. The Risk and Related Party Transactions Control Committee of the Sixth Board of Directors held its seventh


59

meeting on 9 December 2019 and reviewed and approved two proposals.

8. The Risk and Related Party Transactions Control Committee of the Sixth Board of Directors held its eighth

meeting on 24 December 2019 and reviewed and approved one proposal.

Nomination and Compensation Committee

The Nomination and Compensation Committee held four meetings in 2019:

1. The Nomination and Compensation Committee of the Sixth Board of Directors held its first meeting on 24 April

2019, and reviewed and approved two proposals.

2. The Nomination and Compensation Committee of the Sixth Board of Directors held its second meeting on 30

May 2019, and reviewed and approved one proposal.

3. The Nomination and Compensation Committee of the Sixth Board of Directors held its third meeting on 12

November 2019, and reviewed and approved one proposal and heard one report.

4. The Nomination and Compensation Committee of the Sixth Board of Directors held its fourth meeting on 16

December 2019, and reviewed and approved one proposal.

Consumer Protection Committee

The Consumer Protection Committee held one meeting in 2019:

1．The Consumer Protection Committee of the Sixth Board of Directors held its first meeting on 30 May 2019 and

heard one report.

iv. Performance of strategic management functions by the Board of Directors

In 2019, the Board of Directors continued to push forward strategy management work, participated in decision

making on major strategic issues, paid close attention to regulatory policy developments, discussed and considered

major strategic issues including distribution of outlets and capital replenishment strategy, strengthened guidance

and supervision of the senior management’s behaviors, caused major decisions to be implemented, enhanced the

informed decision making of the Board of Directors and leveraged on the core functions of strategic

decision-making to promote another round of leap-forward development of the Bank.

v. Development of policies and procedures of the Board of Directors

In order to guarantee the smooth and efficient operation of mechanisms, the Board of Directors continuously

improved policies and procedures and standardized corporate governance behaviors according to regulatory

requirements and the Bank’s corporate governance conditions. In the reporting period, the Board of Directors

organized the formulation of relevant corporate governance policies and procedures. First, the Delegation of

Authority to President by the Board of Directors of Hankou Bank Co., Ltd. in 2019 and other corporate governance

policies were formulated. Second, the Articles of Association of Hankou Bank Co., Ltd. and the Administrative

Measures for the Connected Transactions of Hankou Bank Co., Ltd. were revised in a timely manner in accordance

with relevant regulatory requirements, playing a positive role in further improving corporate governance of the

Bank. Third, the procedural rules for corporate governance were continuously improved. The Procedural Rules of


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the Board of Directors of Hankou Bank Co., Ltd., the Procedural Rules of the Strategy Committee of the Board of

Directors of Hankou Bank Co., Ltd., the Procedural Rules of the Risk and Related Party Transactions Control

Committee of the Board of Directors of Hankou Bank Co., Ltd. and the Procedural Rules of the Nomination and

Compensation Committee of the Board of Directors of Hankou Bank Co., Ltd. were revised promptly. The

Procedural Rules of the Consumer Protection Committee of the Board of Directors of Hankou Bank Co., Ltd. was

formulated.

VII. Profit Distribution Plan during the Reporting Period

According to the standard unqualified auditor’s report issued by Union Power Certified Public Accountants LLP,

the Company’s profit available for distribution at the end of 2019 was RMB8,354,641,674.22. The preliminary plan

for profit distribution for 2019 is set as follows:

1. Set aside 10% or RMB236,290,242.16 as statutory surplus reserve;

2. In accordance with the Accounting Rules for Financial Corporations (MOF Order No.42) and the Administrative

Measures for Bad Debt Provisioning of Financial Corporations (C.J. [2012] No.20), RMB781,044,579.42 will be

set aside as general risk reserve;

3. Allot cash dividends of RMB0.12 (pre-tax) per share, totaling RMB495,341,496.96, based on the Company’s

outstanding 4,127,845,808.00 shares in 2019. The Company’s retained profit of RMB6,841,965,355.68 after the

profit distribution will be carried over the next year.

Year Dividend per share (RMB) Total outstanding shares(100 million)

Total dividends (RMB100million)

2017 0.10 41.28 4.13

2018 0.11 41.28 4.54

2019 0.12 41.28 4.95


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Chapter V Report of the Board of Supervisors

I. Work of the Board of Supervisors during the Reporting Period

i. Meetings of the Board of Supervisors and Resolutions

The Board of Supervisors held seven meetings in 2019.

1. The First Meeting of the Sixth Board of Supervisors of the Bank was held on 15 January 2019. Of the eight

supervisors supposed to attend the meeting, eight supervisors were present in person. The meeting heard the report

on election of employee supervisors for the Sixth Board of Supervisors of Hankou Bank Co., Ltd. and reviewed

and approved three proposals on election of Chairman of the Board of Supervisors election of members of the

Supervision Committee of the Sixth Board of Supervisors, etc.

2. The Second Meeting of the Sixth Board of Supervisors of the Bank was held on 4 March 2019. Of the eight

supervisors supposed to attend the meeting, eight supervisors were present in person. The meeting reviewed and

approved four proposals on revision of the procedural rules of the Board of Supervisors and its Supervision

Committee, etc. and heard three reports.

3. The Third Meeting of the Sixth Board of Supervisors of the Bank was held on 24 April 2019. Of the eight

supervisors supposed to attend the meeting, seven supervisors were present in person, and the other one attended

by proxy. The meeting reviewed and approved 20 proposals, including 2018 work report of the Board of

Supervisors, 2018 Annual Report and its summary, 2018 final accounts and 2019 financial budget and 2018 profit

distribution plan, and heard four reports.

4. The Fourth Meeting of the Sixth Board of Supervisors of the Bank was held on 30 May 2019. Of the eight


approved six proposals, including the comprehensive risk management report of the Bank for 2018 and the risk

appetite statement of the Bank for 2019, and heard four reports.

5. The Fifth Meeting of the Sixth Board of Supervisors of the Bank was held on 5 September 2019. Of the eight


approved three proposals, including the comprehensive risk management report of the Bank for the first half of

2019 and the consolidated management work report for the first half of 2019, and heard eight reports.

6. The Sixth Meeting of the Sixth Board of Supervisors of the Bank was held on 12 November 2019. Of the eight

supervisors supposed to attend the meeting, seven supervisors were present in person, and the other one attended

by proxy. The meeting reviewed and approved three proposals, including amendment to the Articles of Association

of the Bank and the capital plan for 2019-2022, and heard three reports.

7. The SeventhMeeting of the Sixth Board of Supervisors of the Bank was held on 9 December 2019. Of the eight


approved two proposals, including the proposal on batch transfer and write-off of non-performing loans in 2019.


62

ii. Performance of duties by the special committees of the Board of Supervisors

Supervision Committee

The Supervision Committee of the Board of Supervisors held six meetings in 2019:

1. The Supervision Committee of the Sixth Board of Supervisors held its first meeting on 4 March 2019 and

reviewed and approved two proposals and heard three reports.

2. The Supervision Committee of the Sixth Board of Supervisors held its second meeting on 24 April 2019 and

reviewed and approved 14 proposals and heard two reports.

3. The Supervision Committee of the Sixth Board of Supervisors held its second meeting on 30 May 2019 and

reviewed and approved four proposals and heard two reports.

4. The Supervision Committee of the Sixth Board of Supervisors held its fourth meeting on 5 September 2019 and

reviewed and approved two proposals and heard five reports.

5. The Supervision Committee of the Sixth Board of Supervisors held its fifth meeting on 12 November 2019 and

reviewed and approved two proposals and one report.

6. The Supervision Committee of the Sixth Board of Supervisors held its sixth meeting on 9 December 2019 and

reviewed and approved two proposals.

Nomination Committee

The Nomination Committee of the Board of Supervisors held three meetings in 2019:

1. The Nomination Committee of the Sixth Board of Supervisors held its first meeting on 4 March 2019 and

reviewed and approved one proposal.

2. The Nomination Committee of the Sixth Board of Supervisors held its second meeting on 24 April 2019 and

reviewed and approved five proposals.

3. The Nomination Committee of the Sixth Board of Supervisors held its third meeting on 30 May 2019 and

reviewed and approved two proposals.

iii. Supervisors’ attendance of the general meetings and the meetings of the Board of Directorsas non-voting delegates

During the reporting period, supervisors attended the 2019 First Extraordinary General Meeting, 2018 Annual

General Meeting and the 2019 Second Extraordinary General Meeting, attended nine onsite meetings of the Board

of Directors as non-voting attendees, and oversaw one offsite meeting of the Board of Directors.

iv. Supervision of duty performance

1. The Board of Supervisors assessed the duty performance of supervisors by means of supervisor self-assessment,

peer review and assessment by the Board of Supervisors according to the 2018 records on duty performance of

supervisors, supervisors’ duty performance reports as well as reading of and feedbacks to the information provided

by the Bank. The 2018 Supervisor Duty Performance Assessment Report was prepared and deliberated and


63

approved by the Board of Supervisors and the Annual General Meeting.

2. The Board of Supervisors conducted total-process supervision over decision making of the Board of Directors

and duty performance of directors by attending meetings of the Board of Directors and reviewing meeting

materials and minutes of the Board of Directors and its special committees. The Report on 2018 Director Duty

Performance Assessment by the Board of Supervisors was prepared according to the personal performance reports

of directors and the 2018 Director Duty Performance Assessment Report issued by the Board of Directors and

submitted to the Board of Supervisors and the Annual General Meeting for review and approval. The Report on

2018 Senior Executives Duty Performance Assessment by the Board of Supervisors was prepared according to the

implementation of resolutions of the Board of Directors by the senior management, management performance and

operating results of the Bank in 2018, taking into account senior executives’ personal work reports, and submitted

to the Board of Supervisors and the Annual General Meeting for review and approval.

3. The Board of Supervisors organized an assessment of the Board of Directors’ and the Senior Executives’

performance of liquidity risk management duties in 2018 in accordance with the CBIRC Liquidity Risk

Management Measures of Commercial Banks (Trial) and the Liquidity Risk Management Policy of Hankou Bank

(Revised). The assessment report was reviewed and approved by the Board of Supervisors and presented to the

Annual General Meeting.

4. In accordance with the regulatory guidelines and the Bank’s policies, the employee supervisors of the Fifth

Board of Supervisors presented the report on duty performance of employee supervisors to the Sixth Plenary

Session of the Third Employees’ (Members’) Congress of the Bank.

iv. Special work done

First, the Board of Supervisors conducted follow-up audit of the audit projects carried out by the Board of

Supervisors in 2019, the special audit of disposal of non-performing assets, the special audit of related party

transaction management, special audit of swindle risk prevention, general audit of Xiangyang Branch and

departure audit of selected senior executives. Second, the Board of Supervisors surveyed Xiantao Sub-branch,

Jianghan Sub-branch and Enshi Branch, conducted the survey on related party transaction management, the

special survey on financial services for private enterprises, the special survey on wealth management business

transformation under the New Regulation on Wealth Management, the special survey on liquidity management

and the special survey on swindle risk prevention and control, and organized supervisors to conduct field survey of

Yichang Branch and Xiangyang Branch based on the special audit on disposal of non-performing assets and the

general audit of Xiangyang Branch. Third, a special inspection was conducted over the corrective actions for

onsite examination findings with respect to swindle risk prevention and control to ensure effective rectification.

For outstanding problems, relevant departments were urged to take corrective actions until they were corrected.

v. Development of policies and procedures

During the reporting period, the Procedural Rules of the Board of Supervisors, the Procedural Rules of the

Supervision Committee of the Board of Supervisors and the Measures for Duty Performance Assessment of

Supervisors were revised, and the Management Measures for Duty Performance of Supervisors and the

Management Measures for Remuneration of Supervisors were formulated.


64

vi. Application of supervision findings

During the reporting period, the supervisory opinion of the Board of Supervisors was issued to the Board of

Directors and the senior management in accordance with the Management Measures for Application of

Supervision Findings of the Board of Supervisors (Trial), incorporating the opinions and suggestions given by the

Board of Supervisors in meeting supervision, surveys, interviews and special audits.

vii. Studies

In the reporting period, supervisors participated in the prudential supervision meetings held by regulators and

training programs organized by the Bank and studied national policies, economic and financial conditions,

regulatory rules and industry developments by a combination of massed learning and self-study.

II. Independent Opinions of the Board of Supervisors on Relevant Issues

The Board of Supervisors supervised the Company in accordance with the Company Law and the Articles ofAssociation of the Company and issued the following opinions:

i. Compliant operation of the Company

In the reporting period, the Bank operated in compliance with the Company Law, the Articles of Association and

other laws and regulations. The decision-making procedures were lawful and valid. No violation of the Articles of

Association of the Bank or laws or regulations or impairment of interests of shareholders was found.

ii. Authenticity of the financial statements of the Company

Union Power Certified Public Accountants LLP has audited the Bank in accordance with the new accounting

standards for business enterprises and issued a standard unqualified auditor’s report. The auditor’s report

authentically, objectively and fairly represent the Bank’s financial position and operating results.

iii. Acquisitions and sales of assets

The Bank had no material acquisitions or sales of assets during the reporting period.

iv. Related party transactions

During the reporting period, related party transactions of the Bank were fair and reasonable and found no

detrimental to the interests of shareholders or the Company.

v. Implementation of resolutions made by the general meetings

The Board of Supervisors raised no objection to reports and proposals submitted by the Board of Directors to the

general meetings during the reporting period. The Board of Supervisors supervised the implementation of

resolutions made by the general meetings and believed that the Board of Directors of the Company could

implement resolutions made by the general meetings earnestly.

vi. Risk management and internal control

In the reporting period, the Bank continued to strengthen risk management and internal control, further improvedthe comprehensive risk management and internal control system, fostered a total compliance atmosphere and


65

enhanced the ability to identify, measure, monitor and control risks.


66

Chapter VI Significant Events

I. Material Legal Proceedings and Arbitrations

As at the end of the reporting period, the Bank was involved in 48 pending lawsuits of equal to or more than

RMB10 million each as plaintiff, with RMB1,396.41 million of outstanding balance of principal involved.

II. Increase or Decrease of Registered Capital, Split-off and Merger

During the reporting period, the Company did not increase or decrease registered capital or had any split-off or

merger.

III. Material Asset Acquisition and Sale, Merger and Acquisition

The Company had no material asset acquisition or sale, merger or acquisition during the reporting period.

IV. Related Party Transactions

i. Related parties

In accordance with the Company Law, the Accounting Standard for Business Enterprises No. 36 - Disclosure of

Related Parties, the Administrative Measures for the Connected Transactions between the Commercial Banks and

Their Insiders and Shareholders and the Provisional Measures for Equity Management of Commercial Banks

issued by CBIRC and the Administrative Measures for Related Party Transactions of Hankou Bank Co., Ltd., the

Bank's related parties include related natural persons and related legal persons or other organizations.

The related natural persons of the Bank include the insiders of the Bank; major natural person shareholders of the

Bank, and close relatives of the Bank’s insiders and major natural person shareholders; the related legal persons of

the Bank or holding natural person shareholders, directors and key executives of other organizations related to the

Bank. The related legal persons or other organizations exclude the legal persons or other organizations that can be

directly, indirectly or jointly controlled or be greatly influenced by the Bank’s insiders, major natural person

shareholders and their close relatives; and other natural persons who have a significant influence on the Bank.

Related legal persons and other organizations of the Bank include major non-natural shareholders of the Bank;

controlling shareholders, de-facto controllers, related parties, persons acting in concert and ultimate beneficiaries

of major non-natural shareholders of the Bank; legal persons or other organizations directly or indirectly

controlled by the same enterprise as the Bank; legal persons or other organizations directly or indirectly controlled,

or under common control by or subject to significant influence of the Bank's insiders and major natural person

shareholders as well as their close relatives; other legal persons or other organizations who may directly, indirectly

or jointly control the Bank or have a significant influence on the Bank; and the Bank's subsidiaries and associate.

1. Shareholders holding 5% or more shares of the Bank as at 31 December 2019:


67

Shareholdercompany

Related partyrelationship

Company type Place of registrationLegal

RepresentativeBusinessnature

Registeredcapital(Unit:

RMB1,000)

Legend HoldingsCorporation Shareholder

Other limitedcompany(listed)

Room 1701, 17F,Building 1, Yard 2,Kexueyuan SouthRoad, HaidianDistrict, Beijing

Ning Min Investment 2,356,231

Wuhan Iron andSteel GroupCorporation

Shareholder

Limitedliabilitycompany (soleproprietorshipof legal personinvested orcontrolled by anon-naturalperson)

Changqian, QingshanDistrict, Wuhan City,Hubei Province

ZhouZhongming

Investment 4,739,610

WuhanDevelopment andInvestment Co., Ltd.

Shareholder

Limitedliabilitycompany (soleproprietorshipof legal personinvested orcontrolled by anon-naturalperson)

F20 & 21, XinheBuilding, No. 618,Jianshe Avenue,Jiang'an District,Wuhan City, HubeiProvince

Tang Wu Investment 3,000,000

2. Disclosure of information on subsidiaries of the Bank

Subsidiary TypeCompanytype

Place ofregistration

LegalRepresentative

Businessnature

Registeredcapital

(RMB10,000)

Combinedshareholdingpercentage(%)

Combinedpercentage ofvoting sharesheld (%)

UnifiedSocialCreditCode

HBZhijiangRuralBank , Ltd.

Controlledsubsidiary

Ajoint-stockcompany

Hubei Yin ZuoyinFinancialindustry

5,000 51% 51%9142050058549827XY

HBYangxinRuralBank , Ltd.

Controlledsubsidiary

Ajoint-stockcompany

Hubei Zou LihongFinancialindustry

5,000 80% 80%91420200594244829H

3. Disclosure of information on associate of the Bank

Associatename

Associatetype

Companytype

Place ofregistration

LegalRepresentative

Businessnature

Registeredcapital

(RMB10,000)

Combinedshareholdingpercentage(%)

Combinedpercentageof votingshares held

(%)

UnifiedSocialCreditCode


68

AerospaceScience &IndustryFinancialLeasing ,Ltd.

Associate

Otherlimitedliabilitycompanies

Hubei Li DongfengFinancialindustry

300,000 25% 25%91420112MA4KTG0Q7G

ii. Summary of related party transactions

Related party transactions of the Company are conducted in compliance with laws, administrative regulations,

unified accounting policy of the State and relevant banking regulatory rules, and are on normal commercial

principles that are not superior to similar transactions with non-related parties.

1. Balance of on-balance-sheet and off-balance-sheet credit

(Unit: RMB1,000)

Category 31 December 2019 31 December 2018

Related legal persons or other

organizations (on balance sheet)6,806,294 5,537,621


organizations (off balance sheet)2,846,738 1,896,814

Related natural persons (including

credit card overdrafts)37,561 33,200

2. Balance of deposits

(Unit: RMB1,000)



organizations5,668,406 4,528,187

Related natural persons 66,257 48,044

3. Loan interest income

(Unit: RMB1,000)


Related legal persons or otherorganizations

136,109 120,500

Related natural persons 3,582 1,323


69

4. Deposit interest expense

(Unit: RMB1,000)



69,008 37,644

Related natural persons 63 59

5. Off-balance sheet positions, net

(Unit: RMB1,000)



1,044,002 905,187

Related natural persons 0 0

6. Remunerations paid to key executives

The Bank had 22 key management members as at 31 December 2019, and 23 key management members as at 31

December 2018. The remunerations paid to them are as follows:

(Unit: RMB1,000)

Related party 31 December 2019 31 December 2018

Key executives 6,492 7,927

iii. General related party transactions

During the reporting period, the Bank conducted 228 general related party transactions totaling RMB19.42 billion,

of which 220 transactions with an aggregate value of RMB19,416 million were conducted with related legal

persons and eight transactions with an aggregate value of RMB4.45 million were conducted with related natural

persons.

(Unit: RMB1,000)

Type of related party transactions Number of transactions Amount

Related legal persons

Credit business 142 6,523,443

Treasury operation 71 12,189,570

Bond business 2 262,500


70

SPVs 1 200,000

Investment by principal-guaranteed

wealth management products4 240,000

Subtotal 220 19,415,513

Related natural persons Credit business 8 4,450

Total 228 19,419,963

iv. Major related party transactions

According to CBIRC’s Administrative Measures for the Connected Transactions between the Commercial Banks

and Their Insiders and Shareholders and the Bank’s Management Measures on Related Party Transactions, major

related party transaction means a transaction between the Bank and a related party that accounts more than 1% of

the Bank’s net capital and results in a balance of transactions between the Bank and the related party accounting

for more than 5% of the Bank’s net capital.

In calculating the balance of the Bank’s transactions with related natural persons, their close relatives’ transactions

with the Bank should be included. In calculating the balance of the Bank’s transactions with related legal persons

or other organizations, the Bank’s transactions with the legal persons or other organizations under common control

with them should be included.

1. Major transactions with related natural persons

As of the end of the reporting period, the Bank had no major transactions with related natural persons.

2.Major transactions with related legal persons

First, amount of a single major related party transaction. During the reporting period, the Bank had six major

related party transactions accounting for over 1% of the Bank’s net capital individually, with an aggregate value of

RMB3,222 million. For details, see the table below:

(Unit: RMB1,000)

S/N Related legal persons Transaction type Date Amount

1Aerospace Science & Industry Financial

Leasing , Ltd.

Due from banks and other

financial institutions19 March 2019 400,000


71

2 Wuhan Financial Holdings (Group)

Investment of

non-principal-guaranteed

wealth management funds

29 March 2019 300,000

3 Wuhan Financial Holdings (Group) Entrusted loans 27 May 2019 900,000

4 Tianfeng Securities Co., Ltd. Reverse repurchase 11 July 2019 297,000

5 Tianfeng Securities Co., Ltd. Reverse repurchase 12 July 2019 297,000

6Wuhan Development and Investment Co.,

Ltd.Working capital loans 31 December 2019 1,028,000

Total 3,222,000

Second, cumulative balance of major related party transactions. As at the end of the reporting period, the following

major related party transactions of the Bank with group customers had a balance accounting for over 5% of the

Bank’s net capital: The balance of credit transactions with Wuhan Financial Holdings (Group) and its related

parties stood at RMB4,104 million; the balance of credit transactions with Wuhan State-owned Assets

Management Co., Ltd. and its related parties stood at RMB2,250 million.

V. Material Contracts and Performance of Obligations thereunder

i. Material trusts, sub-contracts and leases

During the reporting period, the Company had not entered into any material trusts, sub-contracts or leases.

ii. Material guarantees

During the reporting period, the Company did not have any other material guarantees necessary for disclosure

except for the financial guarantees within the business scope as approved by CBIRC.

iii. Other material contracts and performance of obligations thereunder

The Bank entered into no material contracts during the reporting period.

VI. Engagement and Dismissal of the Accounting Firm

During the reporting period, the Company engaged Union Power Certified Public Accounts LLP to audit the

financial statements. The auditor’s fee was RMB950,000.


72

VII. Regulatory Penalties on Directors, Supervisors and Senior Executives of the

Company

During the reporting period, no directors, supervisors or senior executives of the Company were subject to any

regulatory penalties.

VIII. Other Important Information Necessary to Inform the Public

i. Acquisition of business access qualifications

1. During the reporting period, the Bank obtained the qualification for online banking sale of savings treasury

bonds (electronic). In 2019, the Ministry of Finance and PBOC published an announcement approving the Bank to

launch the online banking sale of savings treasury bonds (electronic).

2. During the reporting period, four new institution of the Bank, 74 ones in total, were permitted to provide

exchange settlement and sales service to the personal customers.

ii. Establishment of institutions

During the reporting period, the Bank established eight institutions in total, among which one branch and two

sub-branches were sub-branches beyond Wuhan and five sub-branches in Wuhan.

iii. Other important information

1. Another round of share capital increase was implemented. The Bank implemented another round of share

capital increase and introduced strategic investors in 2019, which was reviewed and approved at the 2019 Second

Extraordinary General Meeting on 27 November 2019. Relevant matters are underway.

2. A wealth management subsidiary was established. The Bank planned to establish a wholly-owned wealth

management subsidiary, which was reviewed and approved at the 2019 Second Extraordinary General Meeting on

27 November 2019. Relevant matters are underway.

3. The Bank became the first SWIFT GPI banking corporation in Hubei Province. During the reporting period, the

Bank joined SWIFT’s Global Payments Innovation (GPI) program, the first Hubei-based banking corporation to

join the program. By creating a global network of SWIFT GPI interbank business, the GPI service program

enables quick receipt of payments, transparent charges, traceable status of remittances and complete transmission

of remittance information. The customers who conduct cross-border remittance via the Bank have access to a

number of value added services, including payment progress, total-process tracking and domestic and overseas

remittance fee inquiries. The cross-border payment experience has been significantly improved. Based on SWIFT

GPI, the Bank will further enrich and improve the cross-border payment and settlement product line, innovate

cross-order payment products for various channels and improve the quality and efficiency of cross-border

payments, so as to provide cross-border payment services of improved quality, speed, transparency and traceability

for the real economic development and importers’/exporters’ international settlement in Wuhan City and enhance

local enterprises’ competitiveness and brand awareness in international markets.


73

4. The Bank issued the first residential mortgage-backed security across the banking industry in Hubei Province.

During the reporting period, the Bank issued the “Jointown 2019 Residential Mortgage-Backed Security Tranche

I” (RMBS) in the China interbank market, with an issue size of RMB3,511 million. This RMBS issue came as the

first ever among Hubei-based banks, and also the first RMBS issued by a Chinese city commercial bank with an

AA+ issuer rating since 2017. The proceeds from this RMBS issue will be used to serve the national strategy for

consumer upgrades to meet local residents’ essential consumer demand.

5. The Bank successfully underwrote the first bond as an independent lead underwriter. During the reporting

period, the Bank successfully underwrote the 2019 first tranche of the commercial paper issued by Wuhan

Municipal Construction Group Co., Ltd. as its independent lead underwriter. The issue size was RMB300 million

and the one-year coupon rate was 4.67%. It came as the first bond underwitted by the Bank as independent lead

underwriter after the Bank became eligible as a Class B lead underwriter for debt financing instruments of

non-financial enterprises in 2016, based on ongoing expirations and buildup of experience in lead underwriting of

bonds. The Bank will take the opportunity to build an “asset-light bank” leveraging on its Class B independent

lead underwriter license, keep enriching the product series and financing channels and lay a solider financial

foundation for local economic growth.

6. The archive center opened for service. During the reporting period, the Bank’s archive center was completed

and put into service in Jiangxia District, Wuhan. The center has substantially improved the records retention and

archival service conditions of the Bank.

7. The Bank won a number of awards and honors during the reporting period, including the “Top Ten Innovators

in Mobile Banking” from The Chinese Banker, the “Model Partner for Cardless Business” from China UnionPay,

the first prize for excellent cases awarded by the Asian Financial Cooperation Association, “Cavalry -- Most

Socially Responsible Small and Medium-sized Banks” in 2019 from the Modern Bankers, “2019 Top Ten City

Commercial Banks” in the Chinese Financial Institutions Gold Metals List, the “Bank with Outstanding

Competitiveness in Brand Building in 2019” and the Golden Cicada Awards for “City Commercial Bank of the

Year 2019”, “Outstanding Contribution to FinTech Innovation in 2019”, “Excellent Bank Dealer” in 2019,

“Banking Technology Award in Hubei Province in 2019”, “Best Mobile Banking Security” in 2019, “Excellent

Equity Investment Service Provider in Hubei Province” and “Model Organization in the Pilot Program of Hubei

Provincial Banking Association on Collaborative Credit in 2019”.


74

Chapter VII Share Capital Changes and

Shareholders

I. Share Changes

i. List of share changes

See below for the changes in shares as at the end of 31 December 2019:

Item

At the end of the period At the beginning of the period

Quantity (shares) Percentage (%) Quantity (shares) Percentage (%)

State shares 205,199,820 4.97 123,369,000 2.99

Legal-person shares 3,764,319,907 91.19 3,846,150,727 93.17

Natural-person shares 158,326,081 3.84 158,326,081 3.84

Total share capital 4,127,845,808 100.00 4,127,845,808 100.00

ii. Share offerings in the three years before the end of the reporting period

The Bank did not issue any new shares in the three years before the end of the reporting period.

II. Shareholders

i. Total number of shareholders

The Bank had 4,084 shareholders at the end of the reporting period, including 235 state shareholders and

legal-person shareholders, and 3,849 natural-person shareholders.

ii. Major equity transfers

During the reporting period, in order to further improve the state-owned financial capital management system and

mechanism and perform its duty as a state-owned financial capital contributor, the Bank’s shareholder Wuhan

Bureau of Finance received 81.83 million state-owned shares in the Bank transferred to it.

iii. Shareholdings of the top 10 shareholders and changes thereof as at the end of the reportingperiod

(Unit: Share)


75

S/N Shareholder nameNumber of sharesat the end of the

period

Percentage(%)

Number ofshares at thebeginning of the

period

Percentage(%)

Number of sharespledged or locked up

1 Legend Holdings Corporation 633,000,000 15.33 633,000,000 15.33

2Wuhan Iron and Steel Group

Corporation550,600,000 13.34 550,600,000 13.34

3Wuhan Development and

Investment Co., Ltd.337,500,000 8.18 337,500,000 8.18

4 Wuhan Bureau of Finance 205,199,820 4.97 123,369,000 2.99

5 Good First Group Co., Ltd. 200,000,000 4.85 200,000,000 4.85 99,000,000, pledged

6

Wuhan Triumphal Conch

Investment Management Co.,

Ltd.1

200,000,000 4.85 200,000,000 4.85

7Wuhan Huahan Investment

Management Co., Ltd.176,000,000 4.26 176,000,000 4.26

8Wuhan Credit Risk Management

Co., Ltd.2150,988,499 3.66 150,988,499 3.66

9Wuhan Department Store Group

Co., Ltd.100,295,200 2.43 100,295,200 2.43

10Hainan Chuangqi Properties Co.,

Ltd.100,000,000 2.42 100,000,000 2.42

10Shanghai High Gain Industrial

Limited100,000,000 2.42 100,000,000 2.42

10 National Trust Co., Ltd.3 100,000,000 2.42 100,000,000 2.42

Note: Connected relations among the above-mentioned shareholders

1200 million shares in the Bank held by the company were transferred to Wuhan Financial Holdings (Group) in April 2020.2 151 million shares in the Bank held by the company were transferred to Wuhan Financial Holdings (Group) in April 2020.3100 million shares in the Bank held by the company were transferred to Wuhan Financial Holdings (Group) in April 2020.


76

(1) As at the end of the reporting period, Wuhan Development Investment Co., Ltd. is the wholly-owned subsidiary of Wuhan

Financial Holdings (Group) Co., Ltd., and Wuhan Credit Risk Management Co., Ltd. (now renamed “Wuhan Credit Risk

Management Financing Guarantee Co., Ltd.”) is the controlled subsidiary of Wuhan Financial Holdings (Group) Co., Ltd. Therefore,

Wuhan Development Investment Co., Ltd. and Wuhan Credit Risk Management Co., Ltd. have become related parties under the same

controller.

(2) Wuhan Huahan Investment Management Co., Ltd. and Wuhan Department Store Group Co., Ltd. are controlled by Wuhan

State-owned Assets Management Co., Ltd. Thus, the two have become related parties under common control.

iv. Substantial shareholders

1. Shareholders holding 5% or more shares as at the end of the reporting period

(1) Legend Holdings Corporation, with its Unified Social Credit Code being 911100001011122986, legal

representative Ning Min, registered capital RMB2,356,230,900 and date of establishment 9 November 1984.

Scope of business: Project investment; investment management; asset management; economic and trade advisory

services; investment advisory services; business management advisory services; technology development, transfer

and promotion; property management; sale of industrial chemicals (excluding hazardous chemicals and Class I

precursor chemicals); mineral products; import and export of goods, import and export of technologies and import

and export agency services; computer system services; data processing. Legend Holdings Corporation has no

controlling shareholder or de-facto controller. The final beneficiary of shares held in the Bank is Legend Holdings

Corporation. There is no person acting in concert with it. At the end of the period, Legend Holdings Ltd. held a

15.33% interest in the Bank and pledged no shares in the Bank.

(2) Wuhan Iron and Steel Group Corporation, with its Unified Social Credit Code being 914201001776819133,

legal representative Zhou Zhongming, registered capital RMB4,739.61 million and date of establishment 9

January 1990. Scope of business: Scope of business: intelligent equipment manufacturing; smart city development;

logistics services; software development and information technology services; energy conservation, environmental

protection and civil construction; elder service enterprise management; metallurgical products and their

byproducts, metallurgical mine products and extended steel products, chemical products (excluding hazardous

chemicals), building materials, metallurgical auxiliary materials, metallurgical plants, electromechanical

equipment design and manufacturing; sales of automobile (excluding sedans); gas production and supply;

industrial technology development and advisory services. The controlling shareholder and de-facto controller of

Wuhan Iron and Steel Group Corporation is China Baowu Iron and Steel Group Corp, and the final beneficiary is

Wuhan Iron and Steel Group Corporation. Persons acting in concert with it include Wuhan Iron and Steel Jiangbei

Group Corporation and Wisco Industrial Company, which together held a 13.36% interest in the Bank at the end of

the period, and had pledged no shares in the Bank.

(3) Wuhan Development and Investment Co., Ltd., with its Unified Social Credit Code being

91420100717953714H, legal representative Tang Wu, registered capital RMB3 billion and date of establishment

21 January 2000. Scope of business: Investment in energy resources, environmental protection, high and new

technology, urban infrastructure, real estate, ecological agriculture, commerce, trade and tourism; research and

development of energy-efficient new materials and technologies; machining; retail and wholesale of machinery,

electric appliances, general merchandise and hardware & electric materials; other approved activities (subject to

special regulations of the State, if any). The controlling shareholder and de-facto controller of Wuhan


77

Development Investment Co., Ltd. is Wuhan Financial Holdings (Group) Co., Ltd. The ultimate beneficiary is

Wuhan Development Investment Co., Ltd. At the end of the period, it held an 8.18% interest in the Bank and

pledged no shares in the Bank.

2. Other substantial shareholders defined by the Provisional Measures for Equity Management of

Commercial Banks

(1) Wuhan Financial Holdings (Group), with its Unified Social Credit Code being 91420100778164444G, legal

representative Chen Zanxiong, registered capital RMB4 billion and date of establishment 8 August 2005. Its main

scope of business includes: Financial-sector equity investment and management; investment in energy,

environmental protection, high and new technologies, urban infrastructure, agriculture, manufacturing, logistics,

real estate, commerce and trade, tourism, hotels and other fields related to industry structure adjustments; building

decoration materials, metallic and nonmetallic materials, agricultural and sideline products and wholesale and

retail sales of machinery and electric appliances; warehousing services; non-financial equity investment and

management; investment management advisory services; business management services; and financial information

and technology research.

The controlling shareholder and de-facto controller of Wuhan Financial Holdings (Group) Co., Ltd. is State-owned

Assets Supervision and Administration Commission of Wuhan Municipal Government. Wuhan Financial Holdings

(Group) Co., Ltd. directly holds 11.44% of shares in the Bank after acquiring shares in Wuhan Credit Risk

Management Co., Ltd. (now renamed “Wuhan Credit Risk Management Financing Guarantee Co., Ltd.”), Wuhan

Triumphal Conch Investment Management Co., Ltd., National Trust Co., Ltd., Wuhan Construction and

Investment Co., Ltd. and Wuhan Changxin Asset Management Co., Ltd. (its shareholder status was approved by

CBIRC Hubei Office in January 2020). Wuhan Financial Holdings (Group) Co., Ltd. and its related parties and

persons acting in concert Wuhan Development Investment Co., Ltd. and Wuhan Trade State-owned Holding

Group Co., Ltd. held a 19.61% interest in the Bank in aggregate.

(2) Wuhan State-owned Assets Management Co., Ltd., with its Unified Social Credit Code being

91420100177758917D, legal representative Wang Yubao, registered capital RMB4,138,564,000 and date of

establishment 12 August 1994. Its main scope of business includes: State-owned assets management within

mandate; ownership and equity investment; merger, acquisition and reorganization of businesses (assets); trading

in ownership of state-owned assets; information consulting, agency and intermediary services (business items

subject to statutory approval shall not be carried out without the approval of the competent authority).

The controlling shareholder and de-facto controller of Wuhan State-owned Assets Management Co., Ltd. is

State-owned Assets Supervision and Administration Commission of Wuhan Municipal Government. The ultimate

beneficiary is Wuhan State-owned Assets Management Co., Ltd. The related parties and the persons acting in

concert with it are Wuhan Wushang Group Co., Ltd., Wuhan Huahan Investment Management Co., Ltd. and

Wuhan Dongchuang Investment & Guarantee Co., Ltd. At the end of the period, Wuhan State-owned Assets

Management Co., Ltd. and its related parties and persons acting in concert with it together held a 7.69% interest in

the Bank. Wuhan Dongchuang Investment & Guarantee Co., Ltd. pledged 10,000,000 shares in the Bank,

accounting for 0.24% of the share capital of the Bank.

(3) Wuhan Bureau of Finance. Wuhan Municipal Bureau of Finance is a department of Wuhan Municipal


78

Government. It takes charge of public finance management in Wuhan, including formulating and organizing the

implementation of Wuhan’s fiscal development strategy, program and reform plans, managing the non-tax

revenues of the government and managing government-managed funds and managing all municipal government

revenues and expenditures. It is also responsible for formulating and organizing implementation of the annual

municipal budget and financial accounts, reviewing and approving the annual budget and final accounts of

departments (or entities) directly managed by the municipal government, organizing formulation of the treasury

management policy and the central treasury receipts and payments management policy, implementing the

regulations on state-owned assets of government agencies and public institutions and participating in the

formulation of regulations on budgeting of state-owned capital management.

As at the end of the reporting period, Wuhan Bureau of Finance held a 4.97% interest in the Bank after acquiring

some shares through transfer. Wuhan Bureau of Finance had no person acting in concert.

(4) Good First Group Co., Ltd., with its Unified Social Credit Code being 91310000612260305J, legal

representative Wu Di, registered capital RMB133 million and date of establishment 2 May 1995. Its main scope of

business includes: High-tech product research, development and sales; industrial investment; investment in

education, agriculture, industrial entertainment and health products; sales of photography and new building

materials; wholesale and retail sale of industrial chemicals (excluding hazardous chemicals and chemical subject

to control), knit goods, textile products, hardware & electric materials, general merchandise, metallic materials,

building materials, automobile (excluding passenger vehicles) and parts, ordinary machinery, electronic products

and communication equipment and mineral products licensed by the State.

The controlling shareholder of Good First Group Co., Ltd. is Huang Xi. The de facto controller is Huang Xi. The

final beneficiary is Huang Xi. There is no person acting in concert. At the end of the period, Good First Group Co.,

Ltd. held a 4.85% interest in the Bank and pledged 99,000,000 shares in the Bank, accounting for 2.40% of the

share capital of the Bank.


79

Chapter VIII Directors, Supervisors, Senior

Executives and Employees

I. Directors, Supervisors and Senior Executives

i. Basic information on the members of the Fifth Board of Directors and Board of Supervisorsand senior executives during the reporting period1

Name Post Gender Age TenureShareholding(shares)

Paid or not (√)

Chen Xinmin Chairman Male 5615 January 2019 to

expiration of tenure√

Ruan XuzhouDirector/Vice

President/Financial ControllerMale 56

15 January 2019 to

expiration of tenure500,000 √

Zhou Min Directors Male 4315 January 2019 to

expiration of tenure

Wen Fu Directors Male 4215 January 2019 to


Yao Ke Directors Male 4415 January 2019 to


Shao Bo Directors Female 3815 January 2019 to


Guo Li Independent Director Male 4415 January 2019 to


Hou Chengqi Independent Director Male 4315 January 2019 to


Zhang Yabing Independent Director Male 4715 January 2019 to


Wu Bin Independent Director Male 46 15 January 2019 to √


80


Paid or not (√)


Bai Junwei

Employee

Supervisor/Chairman of the

Board of Supervisors

Male 5615 January 2019 to


Yuan Wenjian Shareholder Supervisor Male 4815 January 2019 to


Zhang Li Shareholder Supervisor Male 5515 January 2019 to


Guo Tianyong External Supervisor Male 5115 January 2019 to


Cui Baoshun External Supervisor Male 5515 January 2019 to


Guo Wei External Supervisor Male 4515 January 2019 to


Sun ZhiqiangEmployee Supervisor/General

Manager of Audit DepartmentMale 53

15 January 2019 to


Yang CanEmployee Supervisor/Head of

Jianghan Sub-branchMale 46

15 January 2019 to


Sun Zhengbai Vice President Male 5115 January 2019 to


Lei Fengxin Vice President Male 5415 January 2019 to


Ding Rui Board Secretary Male 5515 January 2019 to



81


Paid or not (√)

Xu Jinming1 Vice President Male 4215 January 2019 to 29

September 2019

Zhan Tianle Chief Risk Officer Male 5515 January 2019 to


ii. Posts of directors and supervisors in shareholder entities and related enterprises

Name Shareholder entity Post

Zhou Min Legend Holdings CorporationExecutive Director of Financial Services &Investment Department

Wen FuWuhan Iron and Steel Green City Technology andDevelopment Co., Ltd.

General Manager

Yao Ke Wuhan Development and Investment Co., Ltd.Deputy General Manager and Party CommitteeMember

Shao Bo Wuhan State-owned Assets Management Co., Ltd.Manager of Strategic Research Department(Board of Directors’ Office)

Yuan Wenjian Good First Financial Holding Co., Ltd. Chief Fund Officer

Zhang Li Wuhan Bureau of Finance Chief of the Agriculture Division

iii. Major work experience and posts of directors, supervisors and senior executives at the endof the reporting period

1. Directors

Chen Xinmin, holder of doctoral degree and a senior accountant, is currently Chairman & Party Committee

Secretary of Hankou Bank. He formerly served as the deputy chief of the Banking Department of Shishou County

Sub-branch, Hubei Branch, Industrial and Commercial Bank of China; cadre, chief section member, deputy

division chief, deputy division chief of the Planning Department, head and Secretary of Party Committee of

Xiantao Sub-branch, Hubei Branch, Industrial and Commercial Bank of China, head and Secretary of Party

Committee of Huangshi City Branch, Hubei Branch, Industrial and Commercial Bank of China; Assistant

President, Deputy Head and member of Party Committee of Hubei Branch, Industrial and Commercial Bank of

China. He was Chairman of the Third/Fourth/Fifth Board of Directors of Hankou Bank.

Ruan Xuzhou, holder of master’s degree and an economist, is currently Director, Vice President, Financial

1According to the plan of the Wuhan Municipal Committee of CPC for attracting 100 officials directly managed by provincial andcentral governments to Wuhan City on secondment, Mr. Xu Jinming was appointed Vice President of the Bank upon approval of theSixth Board of Directors at its first meeting. Xu Jinming finished his secondment period on 29 September 2019. The Seventh Meetingof the Sixth Board of Directors of the Bank reviewed and approved the removal of Xu Jinming from the office of Vice President onsecondment.


82

Controller & Party Committee Member of Hankou Bank. Prior posts included Senior Staff Member and Principal

Staff Member of the Financial Management Division of Wuhan Branch of the People's Bank of China; Chief of the

Comprehensive Team of the Wuhan City Cooperative Bank Preparatory Office; and General Manager of the

Treasury Department, General Manager of the Credit Fund Management Department, and Vice President and Party

Committee Member of Wuhan City Commercial Bank. He was Chairman of the First Board of Supervisors and

served on the Second, the Third, the Fourth and the Fifth Board of Directors of Wuhan City Commercial Bank

(Hankou Bank).

Zhou Min, holder of a master’s degree from Cambridge University, is currently an executive director of the

Financial Services & Investment Department of Legend Holdings Ltd. He was a business director and business

manager of Legal Department of PICC Property and Casualty Company Limited, a division manager, a division

manager (in charge of work) of Legal and Compliance Department and Assistant to General Manager of the Credit

Credibility Assessment of The People’s Insurance Company (Group) of China Limited, and investment director of

the Financial Services & Investment Department of Legend Holdings Ltd.

Wen Fu, holder of bachelor’s degree, master candidate and accountant, is currently General Manager of Wuhan

Iron and Steel Green City Technology and Development Co., Ltd. Previously he was Staff Member, Senior Staff

Member and Principal Staff Member of the Cost Division and Budget Division of the Planning and Finance

Department at WISCO, Deputy Chief of the Price Investigation Division of the Financial and Assets Department

at China Iron and Steel Industry Association, Head of the Asset Management Division of the Planning and

Finance Department at WISCO, Senior Manager (Capital and State-owned Assets Management) of the Operation

and Finance Department at WISCO, Chief Accountant at Wuhan Iron & Steel Group Echeng Iron & Steel Co., Ltd.

and General Manager of the Operation and Finance Department (Investment Management Department) of Wuhan

Iron and Steel Group Corporation.

Yao Ke, holder of bachelor’s degree and master candidate, is currently Deputy General Manager and Party

Committee Member of Wuhan Development and Investment Co., Ltd. Previously he served as Project Manager of

the Financial Department of Wuhan Development and Investment Co., Ltd., Manager of Financial Department of

Wuhan Bohai Bioengineering Co., Ltd. (expatriated by Wuhan Development and Investment Co., Ltd.) and Project

Manager of Audit Department, Deputy Head and Head of Asset Department and Assistant to General Manager of

Wuhan Development and Investment Co., Ltd.

Shao Bo, master’s degree, is currently Manager of the Strategic Research Department (Board Office) at Wuhan

State-owned Assets Management Co., Ltd. Previously he served as Legal Secretary and Manager of Legal Affairs

Department of China Eastern Airlines Corporation Limited, Director of President Office and Manager of Legal

Department at Orientlucky Horse Industry Ltd. and Senior Executive and Vice Director of Executive Office (in

charge) of Wuhan State-owned Assets Management Co., Ltd.

Guo Li, holder of master’s degree, PhD in law and post-doctoral researcher in applied economics, is currently

Professor, Doctoral Supervisor, Party Secretary and Deputy Dean of Peking University Law School, Vice

Chairman of the China Banking Law Society, Executive Director of the Economic Law Division and Securities

Law Division of China Law Society and Alexander von Humboldt Research Fellow. Previously he was a lecturer

and associate professor at Peking University Law School, Independent Director of China Railway Tielong

Container Logistics Co., Ltd. and Independent Director of Beijing North Star Co., Ltd.


83

Hou Chengqi, a PhD of management and post-doctoral researcher in applied economics, is currently a professor,

doctoral supervisor and Dean of the Financial Department of the Economics and Management School of Wuhan

University, and Head of the Financial Research Center of Wuhan University. Previously he was a lecturer and

associate professor at the Economics and Management School of Wuhan University.

Zhang Yabing, MBA, Chinese Certified Public Accountant, Certified Public Valuer and qualified for securities

and futures business, is currently a partner of Daxin Certified Public Accountants LLP, independent director of

Beijing Water Business Doctor Co., Ltd. and Henan Yicheng New Energy Co., Ltd. Previously he was independent

director of Gpro Titanium Industry Co., Ltd.

Wu Bin, a PhD in Economies and lawyer, is currently President of Shanghai Zhongping Guoyu Asset

Management Co., Ltd., independent director of Shanghai AJ Trust Co., Ltd., independent director of CMBC

Capital Holdings Limited (listed in Hong Kong) and an equity and insurance PE fund appraisal expert at the

Insurance Asset Management Association of China. Previously he was Deputy General Manager of Haitong

Securities Co., Ltd., Chairman of Haitong Unitrust International Financial Leasing Co., Ltd., Vice President of

Shanghai Media & Entertainment Group Co., Ltd., Party Committee Secretary and Vice Chairman of Shanghai

Oriental Pearl Media Co., Ltd., Chairman of Shanghai Media & Entertainment Technology Development Co., Ltd.,

Chairman of Shanghai Jingwen Property (Group) Co., Ltd., Chairman of Shanghai Sony Music Co., Ltd.,

Chairman of Shanghai Shendi (Group) Co., Ltd., controlling director of China Business Network Co., Ltd. and

director of Shanghai Oriental TV Shopping Co., Ltd.

2. Supervisors

Bai Junwei, holder of bachelor’s degree and master candidate, is currently Chairman of the Board of Supervisors

(President Level) and Party Committee Member of Hankou Bank. He was Deputy Secretary of Youth League

Committee of Jiangxi Agricultural University (Deputy Division Chief Level) and Manager of the state-owned

Jiangxi Umbrella Factory and worked for Jiangxi Branch of the People’s Bank of China as Senior Supervisor of

the Supervision Office and Deputy Division Chief of the Investigation and Statistics Division, Deputy Division

Chief of the Statistics and Investigation Division of Wuhan Branch of the People’s Bank of China, Deputy Head

of Xinyu Central Sub-branch of the People’s Bank of China, Deputy Division Chief and Division Chief of the

Non-banking Financial Institution Supervision Division of Wuhan Branch of the People’s Bank of China, Division

Chief of the Joint-stock Bank Supervision Division and City Commercial Bank Supervision Division of Hubei

Banking Regulatory Bureau. He was Chairman of the Third/Fourth/Fifth Board of Supervisors of Hankou Bank.

Yuan Wenjian, master’s degree, is currently Chief Fund Officer of Good First Financial Holding Corporation. He

formerly served as a dealer of the Securities Department of Trust and Investment Company of Xiamen Branch of

Industrial and Commercial Bank of China, Deputy Manager of the Securities Department of Fujian Jiuzhou

(Group) Co., Ltd., Senior Manager of the Investment Banking Department of Tiantong Securities, Manager of the

Securities Department of Xiongzhen Industrial, Chairman of the Board of Supervisors of Chengtun Mining Group

Co., Ltd., Assistant President of the Financial Undertaking Department and Deputy General Manager of the

Science and Technology Undertaking Department of Good First Group, and Supervisor of the Fourth and Fourth

Board of Supervisors of Hankou Bank.


84

Zhang Li, postgraduate of a Party school, currently serves as Chief of the Agricultural Division of Wuhan Finance

Bureau. In Wuhan Finance Bureau, he was ever Section Staff, Deputy Section Chief, Section Chief and Deputy

Division Chief of the Industrial and Transport Division, Deputy Division Chief and Division Chief of the Statistical

Evaluation Division, Chief of Administrative and Public Institution Assets Management Division and Deputy

Secretary of Party Membership Committee. Previously he was Chief of the Financial Division of Wuhan Finance

Bureau and supervisor on the Fifth Board of Supervisors of Hankou Bank.

Guo Tianyong, holder of master’s degree and a PhD of finance, is currently Professor and Doctoral Supervisor of

the School of Finance of Central University of Finance and Economics, and Director of China Banking Research

Center of this University. He ever worked in Yantai Branch of the People’s Bank of China. He was Chairman of

the Fifth Board of Supervisors of Hankou Bank.

Cui Baoshun, holder of a master’s degree and a senior lawyer of China, is currently Director and Secretary of

Party General Branch of Hubei Rui Tong Tian Yuan Law Firm, Arbitrator of the Wuhan Arbitration Committee,

the Standing Director of Wuhan Lawyers Association, Part-time MA Student Adviser of the Law School of

Huazhong University of Science and Technology, Part-time Professor of Law School of Jianghan University and

Visiting Professor of Hubei University of Police. He was Chairman of the Fifth Board of Supervisors of Hankou

Bank.

Guo Wei, master’s degree and PhD in management science and engineering, is currently professor of the

Management School of Huazhong University of Science and Technology, director of the Accounting Association

of Hubei Province, Vice President of Hubei Alliance of Masters of Professional Accounting, Executive Director of

Wuhan Accounting Institute, member of the Wuhan Senior Accounting Positions Review Committee and member

of Wuhan Expert Review Panel for Top Accounting Talents. Previously he was Deputy Secretary-General of the

Systems Engineering Society of Wuhan.

Sun Zhiqiang, self-taught bachelor’s degree and a certified public accountant, is currently General Manager of the

Audit Department of Hankou Bank. Previously he worked at Wuhan Commercial Bank and its successor Hankou

Bank as Assistant Head of Hongshan Road Sub-branch, Deputy Head of Hongshan Road Sub-branch, Deputy

General Manager of Accounting and Settlement Department, Deputy Head of Wangjiaxiang Sub-branch, Deputy

Head of Wuluo Road Sub-branch, Deputy Head of Hongshan Sub-branch, Deputy Head (in charge) of Hongshan

Sub-branch and General Manager (deputy level) of Audit Department.

Yang Can, self-taught bachelor’s degree and master candidate, is currently Head and Party Committee Secretary

of the Jianghan Sub-branch of Hankou Bank. Previously he worked at Hankou Bank as Assistant Head of

Qiuchang Road Sub-branch, Assistant to General Manager of Corporate Banking Management Department,

Deputy General Manager (in charge) of Small Enterprise Finance Department, Deputy Head (in charge) of

Guanggu Sub-branch, Deputy Head (in charge) of Guanggu Sub-branch & Head of Technology Finance Service

Center, Head (in charge) of Guanggu Sub-branch & Head of Technology Finance Service Center, and General

Manager of Technology Finance Department & Head of Technology Finance Service Center.

3. Other senior executives

Sun Zhengbai, graduate degree and master’s degree, senior economist, is now Vice President (President Level)

and Party Committee Member of Hankou Bank. He acted as Senior Staff Member of the Management Committee


85

of Wuhan Economic and Technical Development Zone, Senior Staff Member, Principal Staff Member, Deputy

Division Chief and Division Chief of the Cadre Education Division, Division Chief of the Economic Cadre

Division, Associate Inspector and Division Chief of the Economic Cadre Division of the Organization Department

of CPC Wuhan Municipal Party Committee.

Lei Fengxin, holder of a master’s degree and a senior economist, is currently Vice President, Party Committee

Member and Chairman of the Labor Union of Hankou Bank. He previously worked for Zhongnan University of

Finance and Economics as a lecturer, for the People's Bank of China as a General Office member and a senior staff

member and principal staff member in the Policy Research Office of Wuhan Branch, for Wuhan Urban

Cooperative Bank as Head of the Asset Verification Team of the Preparatory Office, for Wuhan City Commercial

Bank as General Manager of the Market Development Department, President and Chief of the Executive Office of

Hongshan Road Sub-branch, Assistant President, Chief of Executive Office, General Manager of Development

Planning Department and Deputy Head and Party Committee Member and for Hankou Bank as Vice President,

Party Committee Member and Director of the General Office and General Manager of the Mass Affairs

Department. He was member of the Second Board of Directors and Board Secretary of Wuhan City Commercial

Bank.

Ding Rui, master’s degree and economist, is currently Board Secretary (Vice President Level) and Party

Committee Member of Hankou Bank. He formerly worked as a teacher and Deputy Chief of the Executive Office

of the Training Center of Hubei Provincial Planning Commission, General Secretary to the General Affairs Group

of Wuhan Urban Cooperative Bank and Chief of the Executive Office, General Manager of the Technology

Department and Board Secretary of Wuhan City Commercial Bank. He formerly served as Board Secretary of the

Second, the Third, Fourth and Fifth Board of Directors of Wuhan City Commercial Bank (Hankou Bank).

Zhan Tianle, holder of college degree, master’s degree and an economist, is currently Chief Risk Officer (Vice

President Level) of Hankou Bank. He served as Senior Staff Member and Principal Staff Member of the Planning

and Fund Division of Wuhan Branch of the People’s Bank of China; Director of Wuhan Changjiang Urban Credit

Cooperatives, as well as Director of Tangjiadun Sub-branch, Head of Dadongmen Sub-branch, General Manager

of the Credit Fund Management Department, General Manager of the Credit Management Department and

General Manager of the Asset Risk Control Department of Wuhan City Commercial Bank. He also took the

positions of Chief Risk Officer (Assistant President level) & General Manager of the Risk Management

Department, as well as Chief Risk Officer (Assistant President level) & Head of Honggangcheng Sub-branch,

Assistant President & Head of Qingshan Sub-branch of Hankou Bank, and Assistant President & General Manager

of Risk Management Department.

iv. Changes in directors, supervisors and senior executives during the reporting period

Changes in directors, supervisors and senior executives of the Bank during the reporting period are detailed below:

1. On 15 January 2019, the 2019 First Extraordinary General Meeting of the Bank elected members of the Sixth

Board of Directors. There were 10 new directors in total, namely executive directors Chen Xinmin and Ruan

Xuzhou, shareholder directors Zhou Min, Wen Fu, Yao Ke and Shao Bo and independent directors Guo Li, Hou

Chengqi, Zhang Yabing and Wu Bin.

2. On 10 January 2019, the Six Plenary Session of the Third Employees’ (Members’) Congress of the Bank was


86

held and elected employee supervisors to the Sixth Board of Supervisors. On 15 January 2019, the 2019 First

Extraordinary General Meeting of the Bank elected shareholder supervisors and external supervisors to the Sixth

Board of Supervisors. There were eight new supervisors in total, namely Employee supervisors Bai Junwei, Sun

Zhiqiang and Yang Can, shareholder supervisors Yuan Wenjian and Zhang Li, and external supervisors Guo

Tianyong, Cui Baoshun and Guo Wei.

3. On 15 January 2019, The first meeting of the Sixth Board of Directors of the Bank was held and appointed six

senior management members, namely Vice President Sun Zhengbai, Vice President and Financial Controller Ruan

Xuzhou, Vice President Lei Fengxin, Board Secretary Ding Rui, Vice President Xu Jinming and Chief Risk

Officer Zhan Tianle 。

4. On 29 September 2019, Xu Jinming finished his secondment period and was automatically removed from the

office of Vice President of Hankou Bank. The Seventh Meeting of the Sixth Board of Directors of the Bank

reviewed and approved the removal of Xu Jinming from the office of Vice President on secondment.

II. Remunerations of Directors, Supervisors, Senior Executives and Key

Management Personnel

1. Management structure, decision-making procedure and basis of determination of remuneration

The Shareholders’ General Meeting of the Bank sets the policy, determination methods and payment methods for

the remuneration of directors and supervisors The Board of Directors is responsible for designing the remuneration

management policies and procedures in accordance with relevant laws and regulations and assumes the ultimate

responsibility for remuneration management. The Nomination and Compensation Committee of the Board of

Directors carries out performance assessment and remuneration management of directors and senior executives of

the Bank and organizes research on the policy, plan and other issues regarding remuneration of directors and

senior executives of the Bank (in the reporting period, the Nomination and Compensation Committee of the Bank

consists of four directors, including three independent directors, and is chaired by an independent director). The

senior management of the Bank organizes the implementation of the Board of Directors’ resolutions on

remuneration management. The Human Resources Department of the Bank is responsible for implementing

specific matters. The risk control, compliance and planning and finance departments participate in and supervise

the execution of the remuneration mechanism and provide feedback for improvements. The audit department

conducts special audits over the design and execution of the remuneration system and reports findings to the

Board of Directors and the banking regulatory authority.

The Nomination and Compensation Committee of the Bank formulated the rules for remuneration of directors of

the Bank, submits them to the Board of Directors for review and approval and then reports them to the

Shareholders’ General Meeting for final approval. The Nomination Committee of the Board of Supervisors of the

Bank formulates the rules for remuneration of supervisors, submits them to the Board of Supervisors for review

and approval and then reports them to the Shareholders’ General Meeting for final approval. The Nomination and

Compensation Committee of the Bank formulates the rules for remuneration of senior executives and submits

them to the Board of Directors for review and approval.


87

The remuneration of directors and supervisors of the Bank was determined in accordance with the Policy on

Remuneration of Directors and Supervisors of Hankou Bank Co., Ltd., the Policy on Allowances to Independent

Directors of Hankou Bank Co., Ltd. and the Policy on Allowances to External Supervisors of Hankou Bank Co.,

Ltd. During the reporting period, for senior executives of the Bank who are officers in charge of financial

corporations managed by the Wuhan Municipal Committee of CPC, the remuneration payment standards,

performance assessment methods as well as the composition and payment methods of remuneration and benefits

are determined in accordance with the Provisional Measures for Management of Party-managed Financial

Corporations in Wuhan and Remuneration of Officers in Charge. The remuneration of the senior management of

the Bank consists of basic annual salary, annual performance pay and incentives pay linked to in-tenure

performance assessment. Specifically, basic annual pay is determined according to the average wages of in-service

employees of municipal state-owned enterprises in the previous year, while performance pay is linked to the

annual performance evaluation results.

2.Remunerations of directors, supervisors and senior executives during the reporting period

During the reporting period, the Company paid allowances of RMB1,001,500 (before tax) to incumbent

independent directors and external supervisors. The directors and supervisors appointed by shareholder entities

were not paid by the Company but received remunerations and allowances from their own employers. During the

reporting period, the directors, supervisors and senior executives of the Company received total annual

remunerations of RMB5,490,900 (before tax) from the Company (excluding the above RMB1,001,500 allowances

to independent directors and external supervisors).

III. Employees of the Bank

1. Staff structure

At the end of the reporting period, the Bank had 4,094 employees, including 178 senior executives and

middle-level officers. Among the employees, 13.6% have received master’s degree or above, 74.9% have received

bachelor’s degree and 11.5% have received junior college degree or below. At the end of the reporting period, 34

employees retired.

2. Total annual remuneration, beneficiaries and remuneration structure

Remuneration at the Bank consists of short-term compensation and defined contribution plan. Short-term

compensation items are listed below. For defined contribution plan items, please see notes to the auditor’s report.

Beneficiaries of remuneration include employees and other statutory beneficiaries.

(Unit: RMB1,000)

ItemProvisioning during thereporting period

Contribution during thereporting period

Wages, bonus, allowances and subsidies 944,008 963,442

Staff benefits 44,282 44,282


88

ItemProvisioning during thereporting period

Contribution during thereporting period

Social security contributions 91,233 127,681

Incl.: Medical insurance 87,395 123,953

Industrial injury insurance 528 421

Birth insurance 3,310 3,307

Housing provident funds 69,130 69,333

Labor union funds and staff education funds 40,820 33,783

Total 1,189,473 1,238,521

3. Standards for remuneration and performance measurement and risk adjustments

The Bank keeps improving the remuneration assessment system according to its operation and development

strategy, adheres to the basic remuneration principle of combining incentives with constraints and matching

compliance with value of post, remains oriented to operating results and links remuneration to performance

assessment to further boost the increase motivation of institutions and employees in workplace. With risk

indicators incorporated in the performance assessment system, the Bank conducts a comprehensive assessment of

operating results using a multi-dimensional indicator system and plays the constraint role of remuneration in risk

management in a bid to promote prudent operation and sustainable development of the Bank.

4. Deferred payment of remuneration and non-cash remuneration

In accordance with the Supervisory Guidelines on Sound Remuneration of Commercial Banks and other relevant

laws, regulations and policies, the Bank defers the payment of the performance-linked remunerations middle-level

executives, risk managers, credit review managers, customer managers and other personnel in positions which can

exert significant influence on risks and defines the rules about how to make deferred payment of

performance-linked remunerations, deferred recourse and charge-back, etc. The performance-linked remunerations

subject to deferred payment are pegged to the roles & responsibilities and the risks exposed in subsequent years

and they are paid by installments in subsequent years. At the end of the reporting period, the Bank recorded

RMB139.88 million in balance of deferred payments. Senior executives of the Bank who are Officers in Charge of

Party-managed Financial Corporations are entitled to in-tenure incentives pursuant to requirements of regulatory

authority. However, those who fail the comprehensive in-tenure assessment in the three-year assessment period

will be disqualified for in-tenure incentives income.

The Bank has paid for employees the contributions to endowment insurance, medical insurance, unemployment

insurance, work-related injury insurance, maternity insurance and housing provident funds, implemented the paid


89

leave system for employees and further improved the corporate annuity management system to safeguard the basic

interests of employees.

5. Others

(1) The Bank formulated the administrative measures for remunerations of Hankou Bank and the rules for deferred

payment of performance pay and had them reviewed and approved at the Employees’ Congress Senior executives

of the Bank who are Officers in Charge of Party-managed Financial Corporations are assessed in accordance with

the Provisional Measures for Management of Party-managed Financial Corporations in Wuhan and Remuneration

of Officers in Charge.

(2) In the reporting period, the Bank had no exceptions to its original remuneration plan.

(3) In accordance with the Provisional Measures for Management of Party-managed Financial Corporations in

Wuhan and Remuneration of Officers in Charge, during the reporting period, the remuneration of senior

executives of the Bank who were Officers in Charge of Party-managed Financial Corporations were temporarily

based on the annual base salary for 2018.


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Chapter IX Corporate Governance Practice

I. Corporate Governance during the Reporting Period

The Bank established a modern and effective corporate governance framework consisting of the Shareholders’

General Meeting (the highest power organ), the Board of Directors (the decision-making organ), the Board of

Supervisors (the supervisory organ) and the management (the executive organ) in accordance with the Company

Law, the Commercial Bank Law, the Guidelines on Corporate Governance of Commercial Banks and other

applicable laws, regulations and normative documents. During the reporting period, the Bank made continuous

improvements in the corporate governance level in strict compliance with regulatory requirements.

i. About shareholders and the Shareholders’ General Meeting

The Bank held three annual general meetings during the reporting period.

1. The First Extraordinary General Meeting in 2019

According to the resolution adopted at the 29th Meeting of the Fifth Board of Directors of the Bank, the Board of

Directors of the Bank published an announcement on the general meeting on the Bank’s website and the Hubei

Daily on 30 December 2018. The Bank convened the First Extraordinary General Meeting in 2019 on the 28th

Floor of Hankou Bank Mansion on 15 January 2019. The meeting reviewed and approved 16 proposals and heard

one report. 24 shareholders and proxies attended the First Extraordinary General Meeting in 2019, representing

2,833,283,553 shares or 68.64% of total shares. Chairman Chen Xinmin presided over the meeting. Some

directors, supervisors and senior executives of the Bank were present at the meeting.

2. 2018Annual General Meeting

According to the resolution adopted at the Fourth Meeting of the Sixth Board of Directors of the Bank, the Board

of Directors of the Bank published an announcement on the general meeting on the Bank’s website and the Hubei

Daily on 31 May 2019. The Bank convened the 2018 Annual General Meeting on the 28th Floor of Hankou Bank

Mansion on 20 June 2019. The meeting reviewed and approved 12 proposals and heard five reports. 33

shareholders and proxies attended the 2018 Annual General Meeting, representing 3,000,929,702 shares or

72.70% of total shares. Chairman Chen Xinmin presided over the meeting. Some directors, supervisors and senior

executives of the Bank were present at the meeting.

3. The Second Extraordinary General Meeting in 2019

According to the resolution adopted at the Seventh Meeting of the Sixth Board of Directors of the Bank, the Board

of Directors of the Bank published an announcement on the general meeting on the Bank’s website on 12

November 2019 and the Hubei Daily on 13 November 2019. The Bank convened the Second Extraordinary

General Meeting in 2019 on the 28th Floor of Hankou Bank Mansion on 27 November 2019. The meeting

reviewed and approved eight proposals and heard one report. 34 shareholders and proxies attended the 2019

Second Extraordinary General Meeting, representing 3,212,931,379 shares or 77.84% of total shares. Chairman

Chen Xinmin presided over the meeting. Some directors, supervisors and senior executives of the Bank were


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present at the meeting.

The notification, convening, holding and voting procedures of three annual general meetings conformed to the

Company Law and the Articles of Association of the Bank to ensure all shareholders equally and fully exercise the

right to be informed of, take part in and vote on significant corporate matters. Lawyers from King & Wood

Mallesons witnessed the entire process of and issued a legal opinion for the above meetings.

ii. About directors, the Board of Directors and special committees

The director qualifications and selection procedures of the Bank comply with the provisions of the Company Law,

the Commercial Bank Law and the regulatory rules, and the quorum and composition of the Board of Directors

satisfy the requirements of relevant laws, regulations and the Articles of Association. Directors possess the

knowledge and quality necessary for performance of their duties and meet conditions required by regulators.

The Board of Directors of the Bank consisted of 10 members, including four independent directors.

The Sixth Board of Directors of the Bank had six special committees with the following memberships at the end of

the reporting period:

Members of the Strategy Committee: Chen Xinmin (chairman), Zhou Min, Wen Fu and Yao Ke;

Members of the Technology Finance Committee: Chen Xinmin (chairman), Wen Fu, Zhou Min, Wen Fu and Yao

Ke;

Members of the Audit Committee: Zhang Yabing (chairman), Hou Chengqi, Wen Fu, Wen Fu and Ruan Xuzhou;

Members of the Risk and Related Party Transactions Control Committee: Hou Chengqi (chairman), Guo Li, Zhang

Yabing and Shao Bo;

Members of the Nomination and Compensation Committee: Wu Bin (chairman), Guo Li, Zhang Yabing and Zhou

Min;

Members of the Consumer Protection Committee: Guo Li (chairman), Hou Chengqi, Yao Ke, Shao Bo and Ruan

Xuzhou.

During the reporting period, the Board of Directors held 10 meetings, reviewed and approved 85 proposals and

heard 24 reports. The Strategy Committee held two meetings, reviewed and approved 13 proposals, and heard two

reports; the Audit Committee held three meetings, reviewed and approved six proposals and heard five reports; the

Risk and Related Party Transactions Control Committee held eight meetings, reviewed and approved 32 proposals

and heard eight reports; the Nomination and Compensation Committee held four meetings, reviewed and approved

15 proposals and heard one report. The Consumer Protection Committee held one meeting and heard one report.

iii. About supervisors, the Board of Supervisors and special committees

The supervisor qualifications and selection procedures of the Bank comply with the provisions of the Company

Law, the Commercial Bank Law and the regulatory rules, and the quorum and composition of the Board of

Supervisors satisfy the requirements of relevant laws, regulations and the Articles of Association. The supervisors

possess the knowledge and quality required for duty performance, and meet the conditions prescribed by the


92

regulatory authorities.

The Board of Supervisors of the Bank consisted of eight members, including two shareholder supervisors, three

external supervisors and three employee supervisors.

The Board of Supervisors of the Bank has two special committees. At the end of the reporting period, members of

the committees were listed below:

Members of the Supervision Committee: Guo Wei (chairman), Zhang Li, Cui Baoshun and Sun Zhiqiang

Members of the Nomination Committee: Guo Tianyong (chairman), Yuan Wenjian and Yang Can.

During the reporting period, the Board of Supervisors held seven meetings, and reviewed and approved 41

proposals and heard 23 reports; the Supervision Committee held six meetings, reviewed and approved 26 proposals

and heard 13 reports; the Nomination Committee held three meetings, and reviewed and approved eight proposals.

iv. About information disclosure and investor relations management

The Bank has continuously increased the timeliness, accuracy and completeness of information disclosure in

accordance with regulators’ requirements on information disclosure of commercial banks and with reference to

standards on listed banks, having regard to its particular conditions, thereby ensuring all shareholders have equal

access to information. In 2019, the Board of Directors prepared the 2018 Annual Report of Hankou Bank Co., Ltd.

in both Chinese and English in accordance with the CBIRC rules on information disclosure and the Information

Disclosure Management Measures of the Bank and published the summary of the annual report on the Financial

Times, published the full text of the annual report on the website of the Bank (www.hkbchina.com). Information

disclosure was accurate, authentic and complete. The Bank attached great importance to maintaining and improving

the investor relations box of its official website and maintained communication with small and medium investors

online. In addition, the Bank safeguarded the interests of all shareholders, especially small and medium investors,

though reasonable response to letters, calls, visits and inquiries from shareholders and stakeholders in accordance

with relevant policies.

II. Duty Performance of Independent Directors and External Supervisors

During the reporting period, the Bank’s independent directors and external supervisors diligently performed their

duties and attended meetings, aired professional opinions and exercised their voting rights as required. Those

unable to attend meetings in person all appointed proxies to attend and vote at the meetings on behalf of them.

Independent directors and external supervisors leveraged their expertise to fulfill duties as chairmen of special

committees, presided over or carried out work of special committees, provided independent professional opinions

on material related party transactions, internal audit and supervision and non-performing asset disposal of the Bank,

etc. and helped improve the efficiency and quality of decision making by the Board of Directors and supervision by

the Board of Supervisors.

i. Attendance of independent directors at Board of Directors’meetings

Independent director Number of meetings to be Attendance in Attendance by Absence Remarks


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attended this year person proxy

Guo Li 10 9 1 0

Hou Chengqi 10 10 0 0

Zhang Yabing 10 10 0 0

Wu Bin 10 10 0 0

ii. Attendance of external supervisors at Board of Supervisors’meetings

External supervisorNumber of meetings tobe attended this year

Attendance inperson

Attendance byproxy

Absence Remarks

Guo Tianyong 7 6 1 0

Cui Baoshun 7 7 0 0

Guo Wei 7 7 0 0

iii. Objections raised by independent directors and external supervisors to relevant matters ofthe Company

During the reporting period, neither independent directors nor external supervisors of the Bank raised any

objection to the Company’s proposals to the Board of Directors/Supervisors and other significant matters.

III. Operation Decision-making System of the Company

The Bank implements a system of “Level-one legal person, unified accounting” with the aim of “promoting

economic development and pursuing the maximum interests of shareholders by providing quality and efficient

financial services while ensuring compliance and creditability”. The Bank also implements an operating

mechanism of “operating independently at its own risk and profit/loss on a self-disciplined basis”. The

Shareholders’ General Meeting is the Bank’s highest authority, the Board of Directors performs the

decision-making and management functions and the Board of Supervisors performs the supervision function. The

President, appointed by the Board of Directors, assumes the overall responsibility for day-to-day operation

management of the Bank.

IV. Assessment, Incentive and Constraint Mechanism for Senior Executives

The Bank kept improving the performance assessment system and the incentive and constraint mechanism for

senior executives. The performance and remuneration of senior executives of the Bank are carried out in

accordance with the relevant rules of Wuhan City for remuneration management of Officers in Charge of

Party-managed Financial Corporations. The remuneration consists of annual base salary, annual performance pay


94

and incentives pay linked to in-tenure performance assessment. Annual base salary is determined according to the

average wages of in-service employees of municipal state-owned enterprises in the previous year. The annual

performance pay of senior executives of the Bank is income linked to the annual performance assessment results

of senior executives. Taking annual base salary as the base for calculation, it is determined at an annual

performance pay adjustment coefficient according to the performance assessment score, assessment type and

results of internal annual performance assessment Annual performance pay is controlled within 1.5 times the

annual base salary. The Bank’s operating performance assessment indicators include profitability indicators,

development transformation indicators, risk management indicators, compliance indicators and social

responsibility indicators. The annual performance pay adjustment coefficient is determined according to the job

rank, functional nature of company and duty performance of senior executives of the Bank.

The in-tenure incentives income of senior executives of the Bank is income linked to the in-tenure assessment

results of senior executives in an assessment period of three years. The senior executives who fail the

comprehensive in-tenure assessment in the three-year assessment period will be disqualified for in-tenure

incentives income. Taking the aggregate annual salary of senior executives during their tenure as base for

calculation, the in-tenure incentives income is determined according to the in-tenure performance assessment

results, subject to a maximum of 30% of the aggregate annual salary in the tenor.


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Chapter X Internal Control

I. Statement of the Board of Directors on Internal Control Responsibilities

The Board of Directors and all directors of the Bank warrant that the information contained herein does not contain

any false records, misleading statements or material omissions, and shall bear the joint and several liabilities for the

authenticity, accuracy and integrity of its contents.

The Board of Directors is responsibility for establishing, improving and effectively implementing internal control;

the Board of Supervisors shall supervise the establishment and implementation of internal control by the Board of

Directors; the senior management is responsible for organizing and leading the daily operations of the Bank’s

internal control.

The objectives of the Bank’s internal control are to ensure the implementation of national laws and regulations and

the Bank’s rules and regulations; ensure that the Bank’s development strategy and business objectives are fully

implemented and fully realized; ensure the effectiveness of the risk management system, risk prevention and

protection of asset safety; ensure the timeliness, truthfulness, completeness and reliability of business records,

financial information and other management information; and ensure that the Bank’s business management meets

the prudential supervision requirements of regulatory authorities. Due to inherent limitations of internal control,

only reasonable assurance can be provided for the above target.

II. Basis of Internal Control over Financial Reporting and Internal Control

System Development

i. Basis of establishing internal control over financing reporting

The Bank has established a system of internal control over financing reporting on the basis of the Accounting Law,

the Accounting Standards for Business Enterprises, the Basic Standard for Internal Control of Business Enterprises

and applicable normative documents of regulatory authorities. The internal control over financial reporting for the

year did not have any material deficiencies.

ii. General plan on the establishment of internal control

The Bank has established an internal control system commensurate with the development strategy, business

size, scope of business, and risk characteristics in accordance with regulatory requirements on internal

control of commercial banks. The internal control system plays a positive role in maintaining continuity and

stability of business development and preventing financial risks.

During the reporting period, the Bank upheld the spirit of the national work conference on banking and

insurance regulation, implemented the requirements regarding “cementing the achievements in irregularities

crackdown and promoting compliance”, carried out the “Year of Reinforcing Internal Control and

Compliance Management” program and conducted the “Iron Hand on Non-compliances”. It also made solid


96

progress in the development of internal control policies and procedures, compliance education of all

employees, inspection of internal control case prevention and employee conduct management and

continuously increased the reasonableness and effectiveness of internal control.

iii. Establishment and improvement of internal control system

In accordance with the supervisory standards on internal control, the Bank has comprehensively diagnosed

and assessed the overall situation of internal control, established the compliance review and post-assessment

mechanism for policies and procedures, regularly evaluated and improved internal control policies and

procedures, continuously reviewed and optimized the Bank’s policies and procedures and improved internal

control policies. The principles, basic rules and procedures for formulating policies and procedures of

branches beyond Wuhan were unified. The total-process management of branches’ work on policies and

procedure by the Head Office was enhanced.

iv. Operation of internal control supervision mechanism

In the reporting period, the Bank carried out comprehensive, in-depth audit work in accordance with the

work plans of the Board of Directors and the Board of Supervisors and regulatory requirements of the PBOC

and CBIRC on a risk- and problem-oriented basis. With emphasis placed on the use of audit findings, internal

audit fully played its role as the “third line of defense”. The Bank also furthered conduct improvement,

advanced the non-corruption and discipline education, strengthened supervision, discipline and

accountability and gave full play to the supervision and inspection roles.

The Bank mainly carried out the following internal supervision work in 2019:

First, eight general audits, 13 special audits and six follow-up audits were conducted in the year to further

expand the depth and breadth of internal audit. A combination of general audits, special audits and follow-up

audits and a combination of direct audit by the Head Office and local audits by regional audit centers were

adopted on a risk-oriented basis and with a sharper focus on higher-risk institutions, businesses, steps and

posts. Regional audit centers played their role to the full.

Second, the professional value of audit was highlighted and the use of audit findings was strengthened. Over

100 Audit Opinions, Audit Recommendations, Audit Penalty Decisions and Risk Reminders were issued

against problems found in audits in the year. Relevant audit opinions and recommendations have been well

considered and adopted by audited entities, well demonstrating the value of auditing.

Third, the Bank urged and advanced the corrective actions for internal and external audit findings,

strengthened the application of internal audit and supervision outcomes, unleashed the role of internal audit

as the “third line of defense” and adhered to the work approach of “intra-year auditing, year-end clearing”.

Follow-up audit was conducted on problem correction at the end of the year. Relevant entities and business

lines were caused to put audit opinions into action and follow-up analysis was conducted on the

“troubleshooting program”.

Fourth, to urge implementation of the central Party leadership's eight-point decision on improving Party and

government conduct (the “Eight-point Decision”), the Disciplinary Case Studies Reader was compiled and

distributed, instructing all employees to learn from cases. Warning and education campaigns were carried out


97

thoroughly and integrity interviews were conducted at various levels. The Bank investigated clues to

problems with due care, handled cases assigned by overseeing and judicial authorities and dealt with and

strictly pursued liability for any detected violation of the Eight-point Decision, non-corruption policy or

discipline requirements.

Fifth, strict accountability for credit transactions was performed. The accountability for risky loans was

rigorously conducted against 226 persons in accordance with the Accountability Policy for Financial Assets

of Hankou Bank.

v. Internal control self-assessment

The Bank’s Board of Directors authorized the internal audit body to be responsible for specific organization and

implementation of internal control assessment, addressing internal control environment (including corporate

governance, organizational framework, development strategy, human resources, corporate culture and social

responsibilities), risk identification and assessment, internal control activities, information exchange and

communication, and internal supervision.

vi. Development and improvement of internal control

In 2020, the Bank will act on banking regulatory requirements, uphold the philosophy that “internal control

boost development, compliance creates value”, place focus on weaknesses in internal control, strengthen

strict bank governance, continue to foster the compliance culture, improve internal control policies and

procedures, strengthen internal control inspections, fortify the foundation, enhance benchmarking and

establish long-term mechanisms to ensure healthy and sustained business development of the Bank.


98

Chapter XI Financial ReportThe 2019 financial report of the Company has been audited by Union Power Certified Public Accountants

LLP under the Chinese auditing standards and signed by CPAs Zhu Ye and Xia Caiqu. A standard unqualified

auditor’s report (Z.H.S.Z. [2020] No. 011127) (see Annex) was issued.

Chapter XII List of Documents for ReferenceI. Financial statements bearing the signatures and seals of the legal representative, accounting supervisor and

principal of the accounting institution of the Company;

II. Original auditor’s report affixed with the stamp of the accounting firm as well as the signatures and seals of the

CPAs;

III. Articles of Association of the Bank.

Chapter XIII AnnexesThe 2019 Auditor’s Report and Notes to the Financial Statements of the Company.

Chairman: Chen Xinmin

The Board of Directors of Hankou Bank Co., Ltd.

29 May 2020

99

Written Confirmation of Directors and Senior Management of

Hankou Bank Co., Ltd. on the Company’s 2019 Annual Report

As directors and senior executives of Hankou Bank Co., Ltd., we hereby issue the following opinions after fullunderstanding and review of the Company’s 2019 Annual Report and its summary:

1. The Company operates in strict compliance with the Accounting Standards for Business Enterprises,Accounting System for Enterprises and Accounting Rules for Financial Enterprises. The Company’s 2019 AnnualReport and its summary fairly present the Company’s financial position and operating results for this year.

2. The 2019 financial report of the Company has been audited by Union Power Certified Public Accountants LLPunder the Chinese Auditing Standards, which has issued a standard unqualified auditor’s report.

3. We believe that the Company’s 2019 Annual Report and its summary do not include any false records,misleading statements or material omissions, and bear the joint and several liabilities for the authenticity, accuracyand integrity of its contents.

Signatures of directors, supervisors and senior management members:

Chen Xinmin________________ Ruan Xuzhou________________

Zhou Min________________ Yao Ke________________

Shao Bo________________ Guo Li________________

Hou Chengqi________________ Zhang Yabing________________

Wu Bin________________ Sun Zhengbai________________

Lei Fengxin________________ Ding Rui________________

Zhan Tianle________________

Page 1 of 3, Auditors’ Report

Auditors’ Report

Z.H.S.Z. (2020) No. 011127

To all the shareholders of Hankou Bank Co., Ltd.:

I. Opinion

We have audited the accompanying financial statements of Hankou Bank Co., Ltd. (the “Hankou

Bank”), which comprise the consolidated and corporate balance sheets as at 31 December 2019

and the consolidated and corporate income statements, consolidated and corporate statements of

cash flows and consolidated and corporate statements of changes in equity for the year then ended

and notes to financial statements.

In our opinion, the accompanying financial statements have been prepared in all material respects

in accordance with the Accounting Standards for Business Enterprises and presented fairly the

consolidated and parent company's financial position of Hankou Bank as at 31 December 2019

and the consolidated and parent company’s operating results and cash flows for the year then

ended.

II. Basis for Our Audit Opinion

We conducted our audit in accordance with the Auditing Standards for Chinese Certified Public

Accountants. The section “CPA’s Responsibility for Audit of the Financial Statements” in the

Auditor's Report further described our responsibility under the Auditing Standards. According to

the China Code of Ethics for Certified Public Accountants, we are independent from Hankou Bank,

and has performed other responsibilities in respect of the code of ethics. We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

III. Other Information

The management of Hankou Bank is responsible for other information, which include the

information contained in the 2019 Annual Report of Hankou Bank but exclude those contained in

the financial statements and our auditor's report.

Our audit opinion on the financial statements does not cover other information, and we do not

issue any forms of assurance conclusion on any other information.

In combination with our audit of the financial statements, our responsibility is to read other

information, during which process we shall consider whether there is any material inconsistency

between other information and the financial statements or what we have learned during our audit

or whether there seems to be any material misstatement.

If, based on the work we have performed, we conclude that there is a material misstatement of this

other information, we are required to report that fact. We have nothing to report in this regard.

IV. Responsibility of the Management and Those Charged with Governance for the

Financial Statements

The management (the “Management”) of Hankou Bank is responsible for the preparation of the


financial statements in accordance with the Accounting Standards for Business Enterprises. This

responsibility includes fairly presenting the financial statements, and designing, implementing and

maintaining internal control relevant to the preparation and fair presentation of the financial

statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the management is responsible for assessing the ability of

Hankou Bank to continue as a going concern, disclosing, as applicable, matters related to going

concern and using the going concern basis of accounting unless the management either intends to

liquidate Hankou Bank or to cease operations, or has no realistic alternative but to do so.

Those charged with governance is responsible for overseeing the financial reporting process of

Hankou Bank.

V. CPA’s Responsibility for Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a

whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's

report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a

guarantee that an audit conducted in accordance with the auditing standards will always detect a

material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could reasonably be expected to

influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with the auditing standards, we exercise professional judgment

and maintain professional skepticism throughout the audit. We also:

i. Identify and assess the risks of material misstatement of the financial statements, whether due to

fraud or error, design and perform audit procedures responsive to those risks, and obtain audit

evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not

detecting a material misstatement resulting from fraud is higher than for one resulting from error,

as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override

of internal control.

ii. Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of internal control.

iii. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by the management.

iv. Conclude on the appropriateness of the going-concern assumption used by the management.

And, based on the audit evidence obtained, draw a conclusion that whether a material uncertainty

exists in events or conditions that may cast significant doubt on the ability of Hankou Bank to

continue as a going concern. If we conclude that a material uncertainty exists, we are required to

draw attention in our auditor's report to the related disclosures in the financial statements or, if

such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit

evidence obtained up to the date of our auditor's report. However, future events or conditions may

cause Hankou Bank to cease to continue as a going concern.

v. Evaluate the overall presentation, structure and content of the financial statements (including the

disclosures) and whether the financial statements represent the underlying transactions and events

in a manner that achieves fair presentation.

vi. Obtain sufficient and appropriate audit evidence on the financial information of the entity or


business activity of Hankou Bank in order to issue our audit opinion on the financial statements.

We are responsible for instructing, overseeing and performing the group audit, and assume all the

responsibilities for the audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies

in internal control that we identify during our audit.

Union Power Certified Public Accountants Chinese CPA: Zhu Ye

(Special General Partnership)

Chinese CPA: Xia Caiqu

Wuhan, China 29 May 2020

Consolidated Balance Sheet (Assets) S.Y. Table 01

Prepared by Hankou Bank Co., Ltd. (Unit: RMB1,000)

Assets Note 31 December 2019 31 December 2018

Assets:

Cash and balances with central banks (VIII) 1 31,177,901 26,913,543

Deposits with banks and other financial institutions (VIII) 2 2,279,318 1,072,991

Precious metals

Lendings to banks and other financial institutions (VIII) 3 5,400,000 500,000

Financial assets designated at fair value through profit or loss (VIII) 4 1,822,570 13,042,298

Derivative financial assets

Financial assets under reverse repurchase agreements (VIII) 5 10,627,229 4,010,200

Loans and advances (VIII) 6 166,732,570 132,597,003

Available-for-sale financial assets (VIII) 7 69,517,090 57,161,098

Held-to-maturity investments (VIII) 8 79,155,034 41,149,070

Receivables investment (VIII) 9 26,625,119 34,873,459

Long-term equity investment (VIII) 10 822,813 787,643

Investment properties

Fixed assets (VIII) 11 1,484,510 1,474,700

Construction in progress (VIII) 12 11,790 36,370

Intangible assets (VIII) 13 69,576 71,614

Goodwill

Deferred income tax assets (VIII) 14 1,876,443 1,530,968

Other assets (VIII) 15 8,137,602 4,074,952

Total assets 405,739,565 319,295,909

Notes to Financial Statements provided in Pages 13 to 190 are an integral part of the Financial Statements.

Financial statements in Pages 1 to 12 are signed by the following individuals:

Legal representative: Chen Xinmin Person in charge of accounting: Ruan Xuzhou Head of accounting department: Li Daquan

Page 1 of 186

Consolidated Balance Sheet (Liabilities and Shareholders’ Equity) S.Y. Table 01


Liabilities and shareholders’ equity Note 31 December 2019 31 December 2018

Liabilities:

Borrowings from central banks (VIII) 17 63,000 1,700,000

Deposits from banks and other financial institutions (VIII) 18 9,210,489 4,799,804

Borrowings from banks and other financial institutions (VIII) 19 1,850,576 1,504,290

Financial liabilities designated at fair value through profit or loss (VIII) 20 13,190,558

Derivative financial liabilities

Financial assets under repurchase agreements (VIII) 21 34,414,642 17,496,238

Customer deposits (VIII) 22 250,341,491 188,829,166

Payroll payable (VIII) 23 352,494 406,046

Taxes payable (VIII) 24 162,150 150,507

Estimated liabilities

Bonds payable (VIII) 25 80,774,169 67,408,116

Deferred income tax liabilities (VIII) 14 73,822 122,432

Other liabilities (VIII) 26 6,648,890 3,646,473

Total liabilities 383,891,723 299,253,630

Shareholders’ equity:

Share capital (VIII) 27 4,127,846 4,127,846

Other equity instruments

Incl.: Preference shares

Perpetual bonds

Capital reserve (VIII) 28 3,260,371 3,259,204

Less: Treasury stock

Other comprehensive income (VIII) 29 219,942 364,218

Surplus reserves (VIII) 30 1,806,093 1,569,803

General risk reserve (VIII) 31 4,984,400 4,203,355

Retained profit (VIII) 32 7,406,786 6,461,342

Total equity attributable to owners of the parent company 21,805,438 19,985,768

Minority interest 42,404 56,511

Total shareholders’ equity 21,847,842 20,042,279

Total liabilities and owners’ equity 405,739,565 319,295,909




Page 2 of 186

Consolidated Income Statement S.Y. Table 02

Prepared by Hankou Bank Co., Ltd. (Unit: RMB1,000) Item Note 2019 2018

I. Operating income 6,472,600 6,076,108

Net interest income (VIII) 33 4,292,815 4,001,505

Interest income (VIII) 33 13,103,488 11,140,093

Interest expense (VIII) 33 8,810,673 7,138,588

Net fee and commission income (VIII) 34 888,084 613,744

Fee and commission income (VIII) 34 963,520 688,905

Fee and commission expense (VIII) 34 75,436 75,161

Investment income (Loss is presented with “-”) (VIII) 35 1,227,191 1,370,103

Incl.: Investment income on associates and joint ventures 35,170 24,434

Gain on changes in fair value (Loss is presented with “-”) (VIII) 36 35,886 60,020

Exchange gain (Loss is presented with “-”) 11,477 19,490

Other operating income (VIII) 37 10,099 7,703

Gain on disposal of assets (Loss is presented with “-”) (VIII) 38 97 (3,206)

Other gains (VIII) 39 6,951 6,749

II. Operating expenses 4,392,562 4,360,224

Business taxes and surcharges (VIII) 40 84,123 66,502

General and administrative expenses (VIII) 41 2,222,325 2,068,042

Impairment losses on assets (VIII) 42 2,086,044 2,225,578

Other operating costs (VIII) 37 70 102

III. Operating profit 2,080,038 1,715,884

Add: Non-operating income (VIII) 43 4,401 7,619

Less: Non-operating expenses (VIII) 44 7,757 7,742

IV. Total profit 2,076,682 1,715,761

Less: Income tax expense (VIII) 45 (342,220) (166,617)

V. Net profit 2,418,902 1,882,378

i. By operation continuity: 2,418,902 1,882,378

1. Net profit under going-concern (Net loss is presented with “-”) 2,418,902 1,882,378

2. Net profit under discontinued operation (Net loss is presented with “-”)

ii. By attribution of ownership: 2,418,902 1,882,378

1. Net profit attributable to equity holders of the parent company (Net loss is presented with “-”) 2,416,842 1,891,963

2. Minority interest (Net loss is presented with “-”) 2,060 (9,585)

VI. Other comprehensive income after tax, net (144,276) 566,304

i. Other comprehensive income that cannot be reclassified into profit or loss

1. Changes in net liabilities or net assets of defined benefit plans re-measured

2. Shares of other comprehensive income that cannot be reclassified into profit or loss in investees under the equity method

ii. Other comprehensive income that will be reclassified into profit or loss (144,276) 566,304

1. Shares of other comprehensive income that will be reclassified into profit or loss in investees under the equity method

2. Gains or losses on changes in fair value of available-for-sale financial assets (144,276) 566,304

3. Gains or losses on held-to-maturity investment reclassified into available-for-sale financial assets

VII. Total comprehensive income 2,274,626 2,448,682

i. Total comprehensive income attributable to owners of parent company 2,272,566 2,458,267

ii. Total comprehensive income attributable to minority shareholders 2,060 (9,585)

VIII. Earnings per share:

i. Basic earnings per share (RMB) (XIX) 2 0.59 0.46

ii. Diluted earnings per share (RMB) (XIX) 2 0.59 0.46


Financial statements in Pages 1 to 12 are signed by the following individuals:Legal representative: Chen Xinmin Person in charge of accounting: Ruan Xuzhou Head of accounting department: Li Daquan

Page 3 of 186

Consolidated Statement of Cash Flows S.Y. Table 03


I. Cash flows from operating activities Net increase in customer deposits and due from banks and other financial institutions 55,322,984 26,143,837 Net increase in borrowings from central banks 1,639,800 Net increase in placements from other financial institutions 346,286 Net increase in repurchase funds 16,643,167 2,226,436 Net decrease in deposits with central banks and other financial institutions 2,693,213 Interest, fees and commissions received 14,863,459 12,571,388 Cash received from other operating activities (VIII) 46 51,344 60,848 Cash inflows from operating activities, subtotal 87,227,240 45,335,522 Net increase in loans and advances to customers 40,015,669 25,306,083 Net increase in deposits with central banks and other financial institutions 1,238,690 Net decrease in borrowings from central banks 1,637,000 Net decrease in borrowings from banks and other financial institutions 121,115 Interest, fees and commissions paid 6,066,709 4,371,941 Cash paid to and for employees 1,407,598 984,346 Taxes and surcharges paid 706,068 867,006 Cash paid for other operating activities (VIII) 46 995,378 966,403 Cash outflows from operating activities, subtotal 52,067,112 32,616,894 Net cash flows from operating activities (VIII) 46 35,160,128 12,718,628

II. Cash flows from investing activities Cash received from disposal of investments 1,840,489,361 833,089,418 Return on investment 1,192,021 1,345,669 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 2,572 1,401 Net cash received from disposal of subsidiaries and other operating institutions Cash received from other investing activities Cash inflows from investing activities, subtotal 1,841,683,954 834,436,488 Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets 181,983 140,855 Cash paid for acquisition of investments 1,871,157,893 852,688,710 Net cash paid for acquisition of subsidiaries and other operating institutions Cash paid for other investing activities Cash outflows from investing activities, subtotal 1,871,339,876 852,829,565 Net cash flows from investing activities (29,655,922) (18,393,077)

III. Cash flows from financing activities: Cash received from investors Incl.: Cash received from equity investment of minority shareholders attracted by subsidiaries Cash received from bond issue 95,752,473 89,731,560 Cash received from other financing activities Cash inflows from financing activities, subtotal 95,752,473 89,731,560 Cash repayment of debts 83,117,130 83,684,950 Dividend and profit distributed or interest paid 2,366,857 2,898,571 Incl.: Dividends and profits paid to minority shareholders by subsidiaries 300 Cash paid for other financing activities 15,000 Cash outflows from financing activities, subtotal 85,498,987 86,583,521 Net cash flows from financing activities 10,253,486 3,148,039

IV. Effect of exchange rate changes on cash and cash equivalents 350 35

V. Net increase in cash and cash equivalents (VIII) 46 15,758,042 (2,526,375)Add: Cash and cash equivalents at the beginning of the period 10,440,095 12,966,470

VI. Cash and cash equivalents at the end of the period (VIII) 46 26,198,137 10,440,095 Notes to Financial Statements provided in Pages 13 to 190 are an integral part of the Financial Statements.


Page 4 of 186

Consolidated Statement of Changes in Equity S.Y. Table 04


Item

2019

Total equity attributable to shareholders of the parent company

Minority interest

Total shareholders’

equityShare capital

Other equity instrumentsCapital reserve

Less:Treasury

stock

Other comprehensive

incomeSurplus reserves General risk

reserve Retained profitPreference shares

Perpetual bonds Others Subtot

al

I. Balance at the end of last year 4,127,846 3,259,204 364,218 1,569,803 4,203,355 6,461,342 56,511 20,042,279

Add: Changes in accounting policies

Correction of previous errors

Others

II. Balance at the beginning of the year 4,127,846 3,259,204 364,218 1,569,803 4,203,355 6,461,342 56,511 20,042,279

III. Increase/decrease for the year (Decrease is presented with “-”) 1,167 -144,276 236,290 781,045 945,444 -14,107 1,805,563

i. Total comprehensive income -144,276 2,416,842 2,060 2,274,626

ii. Shareholders’ contribution and capital decrease 1,167 -16,167 -15,000

1. Ordinary shares contributed by shareholders

2. Contribution from other holders of other equity instruments

3. Share-based payment recognized into shareholders’ equity

4. Others 1,167 -16,167 -15,000

iii. Profit distribution 236,290 781,045 -1,471,398 -454,063

1. Appropriation to surplus reserve 236,290 -236,290

2. Appropriation to general risk reserve 781,045 -781,045

3. Distribution to shareholders -454,063 -454,063

4. Others

iv. Carry-forward of shareholders’ equity

1. Transfer of capital reserve to share capital

2. Transfer of surplus reserve to share capital

3. Surplus reserve for offsetting losses

4. Carry-over of changes in defined benefit plans to retained earnings

5. Carry-forward of other comprehensive income to retained earnings

6. Others

IV. Balance at the end of the year 4,127,846 3,260,371 219,942 1,806,093 4,984,400 7,406,786 42,404 21,847,842




Page 5 of 186

Consolidated Statement of Changes in Equity S.Y. Table 04


Item

2018

Total equity attributable to shareholders of the parent companyMinority interest

Total shareholders’

equity Share capitalOther equity instruments

Capital reserve

Less:Treasury

stock

Other comprehensive

incomeSurplus reserves General risk


Perpetual bonds Others Subtot

alI. Balance at the end of last year 4,127,846 3,259,204 -202,086 1,379,550 3,870,216 5,505,556 66,696 18,006,982



Others

II. Balance at the beginning of the year 4,127,846 3,259,204 -202,086 1,379,550 3,870,216 5,505,556 66,696 18,006,982

III. Increase/decrease for the year (Decrease is presented with “-”) 566,304 190,253 333,139 955,786 -10,185 2,035,297

i. Total comprehensive income 566,304 1,891,963 -9,585 2,448,682

ii. Shareholders’ contribution and capital decrease




4. Others

iii. Profit distribution 190,253 333,139 -936,177 -600 -413,385



3. Distribution to shareholders -412,785 -600 -413,385

4. Others







6. Others

IV. Balance at the end of the year 4,127,846 3,259,204 364,218 1,569,803 4,203,355 6,461,342 56,511 20,042,279




Page 6 of 186

Balance Sheet (Assets) S.Y. Table 01


Assets Note 31 December 2019 31 December 2018

Assets:

Cash and balances with central banks (IX) 1

31,085,483 26,813,564

Deposits with banks and other financial institutions(IX) 2

2,264,500 929,158

Precious metals

Lendings to banks and other financial institutions (IX) 3

5,400,000 500,000

Financial assets designated at fair value through profit or loss(IX) 4

1,822,570 13,042,298


Financial assets under reverse repurchase agreements(IX) 5

10,627,229 4,010,200

Loans and advances(IX) 6

166,105,969 132,013,585

Available-for-sale financial assets(IX) 7

69,517,090 57,161,098

Held-to-maturity investments(IX) 8

79,155,034 41,149,070

Receivables investment (IX) 9

26,621,369 34,843,459

Long-term equity investment (IX) 10

894,753 844,583

Investment properties

Fixed assets 1,474,664 1,473,703

Construction in progress 11,790 29,860

Intangible assets 69,576 71,614

Goodwill

Deferred income tax assets 1,866,731 1,524,250

Other assets (IX) 11

8,125,211 4,064,941

Total assets 405,041,969 318,471,383




Page 7 of 186

Balance Sheet (Liabilities and Shareholders’ Equity) S.Y. Table 01


Liabilities and shareholders’ equity Note 31 December 2019 31 December 2018

Liabilities:

Borrowings from central banks(IX) 12

1,650,000

Deposits from banks and other financial institutions(IX) 13

9,712,287 5,088,388

Borrowings from banks and other financial institutions(IX) 14

1,850,576 1,504,290

Financial liabilities designated at fair value through profit or loss(IX) 15

13,190,558


Financial assets under repurchase agreements(IX) 16

34,414,642 17,496,238

Customer deposits(IX) 17

249,303,848 187,861,314

Payroll payable 351,329 404,722

Taxes payable 159,498 150,502

Estimated liabilities

Bonds payable 80,774,169 67,408,116

Deferred income tax liabilities 73,822 122,432

Other liabilities(IX) 18

6,667,616 3,625,205


Shareholders’ equity:

Share capital 4,127,846 4,127,846


Incl.: Preference shares

Perpetual bonds

Capital reserve 3,258,594 3,258,594

Less: Treasury stock

Other comprehensive income 219,942 364,218

Surplus reserves 1,806,093 1,569,803

General risk reserve 4,984,400 4,203,355

Retained profit 7,337,307 6,445,802

Total shareholders’ equity 21,734,182 19,969,618

Total liabilities and owners’ equity 405,041,969 318,471,383




Page 8 of 186

Income Statement S.Y. Table 02


Item Note 2019 2018

I. Operating income 6,334,880 6,030,548

Net interest income (IX) 19 4,153,834 3,954,251

Interest income (IX) 19 12,955,545 11,076,517

Interest expense (IX) 19 8,801,711 7,122,266

Net fee and commission income (IX) 20 888,165 613,786

Fee and commission income (IX) 20 963,497 688,890

Fee and commission expense (IX) 20 75,332 75,104

Investment income (Loss is presented with “-”) (IX) 21 1,227,191 1,371,003

Incl.: Investment income on associates and joint ventures 35,170 24,434

Gain on changes in fair value (Loss is presented with “-”) 35,886 60,020

Exchange gain (Loss is presented with “-”) 11,477 19,490

Other operating income 11,597 9,201

Gain on disposal of assets (Loss is presented with “-”) 95 (3,206)

Other gains 6,635 6,003

II. Operating expenses 4,311,657 4,293,299

Business taxes and surcharges 83,087 66,326

General and administrative expenses (IX) 22 2,192,312 2,041,565

Impairment losses on assets (IX) 23 2,036,188 2,185,306

Other operating costs 70 102

III. Operating profit (Loss is presented with “-”) 2,023,223 1,737,249

Add: Non-operating income 4,381 7,577

Less: Non-operating expenses 7,700 7,449

IV. Total profit (Total loss is presented with “-”) 2,019,904 1,737,377

Less: Income tax expense (342,999) (165,150)

V. Net profit (Net loss is presented with “-”) 2,362,903 1,902,527

i. Net profit under going-concern (Net loss is presented with “-”) 2,362,903 1,902,527

ii. Net profit under discontinued operation (Net loss is presented with “-”)

VI. Other comprehensive income after tax, net (144,276) 566,304

i. Other comprehensive income that cannot be reclassified into profit or loss

1. Changes in net liabilities or net assets of defined benefit plans re-measured 2. Shares of other comprehensive income that cannot be reclassified into profit or loss in investees under the equity method

ii. Other comprehensive income that will be reclassified into profit or loss (144,276) 566,304 1. Shares of other comprehensive income that will be reclassified into profit or loss in investees under the equity method

2. Gains or losses on changes in fair value of available-for-sale financial assets (144,276) 566,304

3. Gains or losses on held-to-maturity investment reclassified into available-for-sale financial assets

VII. Total comprehensive income 2,218,627 2,468,831



Page 9 of 186

Statement of Cash Flows S.Y. Table 03


I. Cash flows from operating activities

Net increase in customer deposits and due from banks and other financial institutions 55,461,930 26,290,363

Net increase in borrowings from central banks 1,650,000

Net increase in placements from other financial institutions 346,286

Net increase in repurchase funds 16,643,167 2,226,436

Net decrease in deposits with central banks and other financial institutions 2,764,253

Interest, fees and commissions received 14,696,421 12,501,673

Cash received from other operating activities (IX) 24 95,881 61,560

Cash inflows from operating activities, subtotal 87,243,685 45,494,285

Net increase in loans and advances to customers 39,338,268 25,188,312

Net increase in deposits with central banks and other financial institutions 1,305,561

Net increase in placements with other financial institutions

Net decrease in borrowings from central banks 1,650,000

Net decrease in borrowings from banks and other financial institutions 121,115

Interest, fees and commissions paid 6,057,643 4,355,561

Cash paid to and for employees 1,393,501 974,186

Taxes and surcharges paid 702,693 863,157

Cash paid for other operating activities (IX) 24 979,308 954,333

Cash outflows from operating activities, subtotal 51,426,974 32,456,664

Net cash flows from operating activities (IX) 24 35,816,711 13,037,621

II. Cash flows from investing activities

Cash received from disposal of investments 1,840,459,361 832,137,784

Return on investment 1,192,021 1,346,569

Net cash received from disposal of fixed assets, intangible assets and other long-term assets 2,569 1,401

Net cash received from disposal of subsidiaries and other operating institutions

Cash received from other investing activities

Cash inflows from investing activities, subtotal 1,841,653,951 833,485,754

Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets 178,056 133,420

Cash paid for acquisition of investments 1,871,733,696 852,027,075

Net cash paid for acquisition of subsidiaries and other operating institutions

Cash paid for other investing activities

Cash outflows from investing activities, subtotal 1,871,911,752 852,160,495

Net cash flows from investing activities (30,257,801) (18,674,741)

III. Cash flows from financing activities:

Cash received from investors

Incl.: Cash received from equity investment of minority shareholders attracted by subsidiaries

Cash received from bond issue 95,752,473 89,731,560

Cash received from other financing activities

Cash inflows from financing activities, subtotal 95,752,473 89,731,560

Cash repayment of debts 83,117,130 83,684,950

Dividend and profit distributed or interest paid 2,366,857 2,898,271

Incl.: Cash dividend paid to minority shareholders by subsidiaries

Cash paid for other financing activities

Cash outflows from financing activities, subtotal 85,483,987 86,583,221

Net cash flows from financing activities 10,268,486 3,148,339

IV. Effect of exchange rate changes on cash and cash equivalents 350 35

V. Net increase in cash and cash equivalents (IX) 24 15,827,746 (2,488,746)

Add: Cash and cash equivalents at the beginning of the period 10,348,614 12,837,360

VI. Cash and cash equivalents at the end of the period (IX) 24 26,176,360 10,348,614



Page 10 of 186

Statement of Changes in Equity S.Y. Table 04


Item

2019

Total equity attributable to shareholders of the parent company

Total shareholders’ equityShare capital


Capital reserveLess:

Treasury stock

Other comprehensiv

e incomeSurplus reserves General risk


Perpetual bonds Others Subtota

l

I. Balance at the end of last year 4,127,846 3,258,594 364,218 1,569,803 4,203,355 6,445,802 19,969,618



Others

II. Balance at the beginning of the year 4,127,846 3,258,594 364,218 1,569,803 4,203,355 6,445,802 19,969,618

III. Increase/decrease for the year (Decrease is presented with “-”) -144,276 236,290 781,045 891,505 1,764,564

i. Total comprehensive income -144,276 2,362,903 2,218,627





4. Others

iii. Profit distribution 236,290 781,045 -1,471,398 -454,063




4. Others







6. Others

IV. Balance at the end of the year 4,127,846 3,258,594 219,942 1,806,093 4,984,400 7,337,307 21,734,182




Page 11 of 186

Statement of Changes in Equity S.Y. Table 04


Item

2018

Total equity attributable to shareholders of the parent companyTotal shareholders’

equityShare capitalOther equity instruments

Capital reserveLess:

Treasury stock

Other comprehensiv

e incomeSurplus reserves General risk


Perpetual bonds Others Subtota

lI. Balance at the end of last year 4,127,846 3,258,594 -202,086 1,379,550 3,870,216 5,479,452 17,913,572



Others

II. Balance at the beginning of the year 4,127,846 3,258,594 -202,086 1,379,550 3,870,216 5,479,452 17,913,572

III. Increase/decrease for the year (Decrease is presented with “-”) 566,304 190,253 333,139 966,350 2,056,046

i. Total comprehensive income 566,304 1,902,527 2,468,831





4. Others

iii. Profit distribution 190,253 333,139 -936,177 -412,785




4. Others







6. Others

IV. Balance at the end of the year 4,127,846 3,258,594 364,218 1,569,803 4,203,355 6,445,802 19,969,618




Page 12 of 186

Hankou Bank Co., Ltd. Notes to 2019 Financial Statements

Page 13 of 186

Notes to Financial Statements

(31 December 2019)

I. Company Profile:

Hankou Bank Co., Ltd. (the “Bank”) was a joint-stock bank incorporated in December 1997 with

the approval (Document Y.F. [1997] No. 156) of the People’s Bank of China (“PBOC”) and the

approval of the Wuhan Administration for Industry and Commerce, formerly known as Wuhan

Urban Cooperative Bank. In 1998, Wuhan Urban Cooperative Bank was renamed Wuhan

Commercial Bank Co., Ltd. with the approval (Document W.Y.Y.G. [1998] No. 64) of PBOC

Wuhan Branch; in May 2008, Wuhan Commercial Bank Co., Ltd. was renamed Hankou Bank Co.,

Ltd. with the approval (Y.J.F. [2008] No. 181) of China Banking Regulatory Commission

(“CBRC”). Currently the Bank has a Unified Social Credit Code of 91420100300248067P and a

PRC Financial Service License No. of B0187H242010002.

As at 31 December 2019, the Bank recorded a registered capital of RMB4,127,845,808.00 and a

paid-up capital of RMB4,127,845,808.00. Please refer to Note XIII.27 for particulars of the

paid-up capital (shareholders).

1. Place of registration, form of organization and address of headquarters of the Bank

Form of organization: a joint-stock company

Place of registration: 933 Jianshe Road, Jianghan District, Wuhan City, Hubei Province

Office address of headquarters: 933 Jianshe Road, Jianghan District, Wuhan City, Hubei Province

2. Business nature and main activity of the Bank

The Bank operates in the financial industry. Its main operating activities include: deposits taking,

extension of loans on a short-term, medium-term and long-term basis, domestic settlement, bill

discounting, issuance of financial bonds, commissioned issuance, encashment and underwriting of

government bonds, trading of government bonds, interbank lending, provision of security, agency

payment and insurance, provision of safety deposit box services, entrusted deposits and loans on

behalf of local public finance, foreign exchange deposits, foreign exchange loans, foreign

exchange settlement, foreign exchange sales, foreign exchange trading on its own behalf and as an

agent, foreign exchange borrowings, trading or agency trading of non-stock foreign currency

securities, policy-directed housing finance services, and other services approved by the CBRC

Hubei Office and the State Administration of Foreign Exchange.

Business scope of the Bank and its subsidiaries (collectively the “Group”): Commercial banking

services approved by PBOC.

3. Name of the parent company and the ultimate parent company of the Group

The Group has no ultimate parent company.

4. Who and when approved the disclosure of the financial statements

The Sixth Board of Directors of Hankou Bank approved the disclosure of the financial statements

at its 12th meeting on 29 May 2020.


Page 14 of 186

II. Scope of Consolidated Financial Statements for the Year and Its Changes

As at the end of the reporting period, a total of two subsidiaries were incorporated into the scope

of consolidated financial statements. See Note X.1 for details. For structured entities incorporated

into the scope of consolidated financial statements, please see Note X.4.

III. Basis for Preparation of Financial Statements:

Financial statements of the Group were prepared on a going concern basis according to

transactions and matters that had occurred, with all items measured and recognized in accordance

with the Accounting Standard for Business Enterprises-Basic Standard and other applicable

accounting standards.

IV. Statement on Compliance with Accounting Standards for Enterprises

The financial statements prepared by the Group truly and completely represent the financial

position, results of operations and cash flows of the Bank and the Group in compliance with the

Accounting Standards for Business Enterprises.

The Board of Directors and the Board of Supervisors of the Group and all directors, supervisors

and senior management members undertake that there are no false records or misleading

statements contained in, or material omissions from, this report, and severally and jointly accept

responsibility for the authenticity, accuracy and completeness of the information contained in this

report.

V. Major Accounting Policies and Accounting Estimates

1. Accounting period

The accounting period of the Group is a calendar year, i.e. from 1 January to 31 December each

year.

2. Bookkeeping base currency

RMB is the Group’s bookkeeping base currency.

3. Accounting for business combinations under the same control and not under the same control

(1) Any business combination involving entities under the same control within the reporting

period was accounted for using the pooling of interest method. The assets and liabilities that the

combining party obtains in a business combination shall be measured on the basis of the combined

party's carrying amount in the consolidated financial statements of the ultimate controller on the


Page 15 of 186

combining date. As for the balance between the carrying amount of the net assets obtained by the

combining party and the carrying amount of the consideration paid by it (or the total par value of

the shares issued), the additional paid-up capital shall be adjusted. If the balance of capital reserve

is not sufficient, any excess should be adjusted to retained earnings. The direct cost for the

business combination of the combining party shall, including the audit fees, assessment and legal

services paid, be recorded into profit or loss. The bonds issued for a business combination or the

fees, commissions and other expenses for assuming other liabilities shall be recorded into the

amount of initial measurement of the bonds or other debts. The fees, commissions and other

expenses for the issuance of equity securities for the business combination shall be offset against

the premium income on equity securities; if the premium income is not sufficient, the retained

earnings shall be offset. Where a relationship between a parent company and a subsidiary

company is formed due to a business combination, the consolidated financial statements will be

prepared in accordance with the accounting policy on “Consolidated Financial Statements”

formulated by the Group. The period for adjusting comparative data of the consolidated financial

statements shall be no earlier than the later time when the combining party or combined party is

under the control of ultimate controller.

(2) Any business combination involving entities not under the same control within the reporting

period was treated using the purchase method. The combination costs shall be determined

respectively in light of the following circumstances: (i) For a business combination realized by a

transaction of exchange, the combination costs should be fair values, on the acquisition date, of

the assets paid, the liabilities incurred or assumed and the equity securities issued in exchange for

the control on the acquiree. (ii) For a business combination realized by two or more transactions of

exchange, accounting treatment of shares held in the acquiree prior to the acquisition date should

be distinguished between individual financial statements and consolidated financial statements.

A. In the individual financial statements, the sum of the carrying amount of the equity investment

regarding original shareholdings in the acquiree and the additional investment cost are recognized

as initial cost of such investment which is changed to be calculated at the cost method. For other

comprehensive income recognized for equity investment held prior to the acquisition date due to

the adoption of the equity method, the disposal of such investment is accounted for adopting the

same basis for direct disposal of relevant assets or liabilities by the acquiree. The equity

investment held prior to the acquisition date shall be accounted for in accordance with the

Accounting Standard for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments, and the accumulated changes in fair value originally recognized in other

comprehensive income shall be transferred to profit or loss when they are changed to be calculated

at the cost method.

B. In the consolidated financial statements, shares held in the acquiree prior to the acquisition date

should be re-measured at their fair value on the acquisition date, with the difference between fair

value and carrying amount recorded in investment income. If shareholdings in the acquiree prior

to the acquisition date involve other comprehensive income under the equity method, such other

comprehensive income concerned will be transferred to investment income for the period on the

acquisition date. The Group discloses in notes the fair value of its shareholdings in the acquiree

prior to the acquisition date and re-measures relevant gain or loss at fair value.

(iii) Intermediary expenses incurred by the acquirer in connection with business combination,

including charges on audit, assessment and legal services and other administrative expenses

concerned should be recorded in profit or loss when incurred; the transaction cost of equity

securities or debt securities issued by the acquirer as the consideration of combination should be

included in the initially recognized amount of equity securities or debt securities; and (iv) Where

the combination contract or agreement covers future matters that may influence the combination

cost, the acquirer should include in the combination cost the future matters that are likely to take

place and whose influence on the combination cost is reliably measurable.

The Group, on the acquisition date, measures the assets given and liabilities incurred or assumed


Page 16 of 186

by an enterprise for a business combination at their fair value, and records the difference between

their fair value and carrying amount into profit or loss.

The Group allocates the combination costs on the acquisition date, and recognizes all identifiable

assets, liabilities and contingent liabilities it obtains from the acquiree as required. (i) The positive

balance between the combination costs and the fair value of the net identifiable assets it obtains

from the acquiree will be recognized as goodwill. (ii) If the combination costs are lower than the

fair value of the net identifiable assets it obtains from the acquiree, the Group will check the

measurement of fair value of the identifiable assets, liabilities and contingent liabilities it obtains

from the acquiree as well as the combination costs. If, after the check, the combination costs are

still less than fair value of the net identifiable assets it obtains from the acquiree, the Group will

record the difference into profit or loss.

Where a relationship between a parent company and a subsidiary company is formed due to a

business combination, the parent company shall prepare accounting books for future reference,

which shall record fair values of the identifiable assets, liabilities and contingent liabilities it

obtains from the subsidiary company on the acquisition date. When consolidated financial

statements are prepared, financial statements of the subsidiary company will be adjusted based on

fair values of identifiable assets, liabilities and contingent liabilities determined on the acquisition

date in accordance with the accounting policy of the Group on “Consolidated Financial

Statements”.

4. Preparation method of consolidated financial statements

(1) Scope of consolidation

The scope of consolidated financial statements shall be confirmed base on the control, including

the annual financial statements of the Bank and all subsidiaries by the year ended 31 December

2019. Subsidiary refers to the subject controlled by the Bank (including the dividable part in the

enterprise and investee, and the structured entity controlled by the Bank). Control means an

investor has the right on the investee, can enjoy variable return by participating the relevant

activities of investee and is capable to affect the return amount through its right on the investee.

(2) Preparation method of consolidated financial statements

The Bank prepared consolidated financial statements based on the financial statements of the Bank

and its subsidiaries, and other relevant materials.

When formulating consolidated financial statements, the Bank deems the whole enterprise group

as an accounting subject, and reflects the financial position, business performance and cash flows

of the enterprise group according to the requirements about the identification, measurement and

presentation of relevant accounting standard for business enterprises and the unified accounting

policies.

In case of any difference between the accounting policies or accounting periods adopted by the

Bank and its subsidiaries during the preparation of consolidated financial statements, the financial

statements of subsidiaries shall be adjusted based on the accounting policies and accounting

periods of the Bank. The financial statements of the subsidiary obtained through business

combination not under the same control shall be adjusted based on the fair value of net identifiable

assets on the acquisition date.

(3) Presentation of minority interests and profit or loss


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The owners’ equity of subsidiaries not attributable to the parent company is presented as “minority

interests” under the owners' equity in the consolidated balance sheet.

Net profit or loss of subsidiaries attributable to minority interests are presented as “minority profit

or loss” under the net profit in the consolidated income statement.

(4) Treatment of excess losses

In the consolidated financial statements, losses attributed to minority shareholders of a subsidiary

in excess of minority shareholders' share in owners' equity of the subsidiary at the beginning of the

reporting period should still be offset against minority interests.

(5) Subsidiaries added to or removed from consolidated financial statements

Where a subsidiary is added due to a business combination involving entities under the same

control in the reporting period, the beginning balance of the consolidated balance sheet should be

adjusted when it is prepared. Where a subsidiary is added due to a business combination involving

entities not under the same control, the beginning balance of the consolidated balance sheet should

not be adjusted when it is prepared. Where a subsidiary is disposed of in the reporting period, the

beginning balance of the consolidated balance sheet should not be adjusted when it is prepared.

Where a subsidiary is added due to a business combination involving entities under the same

control in the reporting period, income, expenses and profit of the subsidiary from the beginning

of the combination period to the end of the reporting period should be included in the consolidated

income statement, and cash flows of the subsidiary from the beginning of the combination period

to the end of the reporting period should be included in the consolidated statement of cash flows.

Where a subsidiary is added due to a business combination involving entities not under the same

control, income, expenses and profit of the subsidiary from the beginning of the combination

period to the end of the reporting period should be included in the consolidated income statement,

and cash flows of the subsidiary from the acquisition date to the end of the reporting period should

be included in the consolidated statement of cash flows. Where a subsidiary is disposed of in the

reporting period, income, expenses and profit of the subsidiary from the beginning of the reporting

period to the disposal date should be included in the consolidated income statement, and cash

flows of the subsidiary from the beginning of the period to the disposal date should be included in

the consolidated statement of cash flows.

When the control on the original subsidiary is lost due to the disposal of partial equity investment

or other reasons, the residual equity investment after disposal shall be re-measured at its fair value

on the date of losing control. The difference after the sum of consideration obtained in disposal of

equity and fair value of residual equity minus portions of net assets of the original subsidiary

calculated continuously from the acquisition date, which shall be enjoyed as calculated by the

original shareholding percentage, is recognized in investment income for the period of losing

control. Other comprehensive income relating to the original equity investment in the subsidiary

should be transferred to investment income for the period when losing control.

For any difference between the long-term equity investment obtained in acquisition of minority

interest and net identifiable assets of the subsidiary that shall be enjoyed as calculated by the

added shareholding percentage, as well as any difference between the proceeds obtained due to the

disposal of partial equity investment in the subsidiary without losing control and net assets of the

subsidiary that shall be enjoyed as corresponding to the disposal of long-term equity investment,

the share premium of capital reserve in the consolidated balance sheet should be adjusted. In case

of insufficient share premium of capital reserve for offset, retained earnings should be adjusted.

(6) Consolidated statement treatment of disposal of equity by step to loss of control


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If transactions incurred in the disposal of equity investment in the subsidiary by step to loss of

control belong to a package of transactions, these transactions shall be treated in accounting as one

transaction of disposal of the subsidiary to loss of control. However, the difference between each

disposal consideration before the loss of control and net assets of the subsidiary that shall be

enjoyed corresponding to the disposal of investment should be recognized as other comprehensive

income in the consolidated financial statements and transferred to profit or loss for the period of

losing control upon loss of control. If these transactions do not belong to a package, before and

when losing control, accounting treatment shall be conducted in accordance with the accounting

policy for partial disposal of equity investment in the subsidiary without loss of control and the

policy for loss of control on the original subsidiary.

When terms & conditions and economic impact of transactions involved in the disposal of equity

investment in the subsidiary meet one or more circumstances, these transactions shall be treated as

a package: (i) these transactions are concluded at the same time or based on the consideration of

mutual effect; (ii) only the whole of these transactions can reach a complete commercial result; (iii)

one transaction depends on at least one of other transactions; and (iv) one transaction

independently is not economical, but together with other transactions it becomes economical.

The disposal of equity by step to loss of control in individual financial statements is treated in

accordance with the accounting policy for the disposal of long-term equity investment.

5. Preparation method of consolidated financial statements of the Bank

The bank-wide consolidated financial statements of the Bank were prepared according to financial

statements and relevant materials of the Head Office, branches, the Banking Department of the

Head Office and sub-branches of the Bank. Material transactions inside the Bank and their

balances were offset against each other during consolidation.

6. Basis of bookkeeping and principle of pricing

The Group adopts the accrual basis of accounting. Except for some financial instruments, the

Bank adopts the historical cost principle for pricing. Allowance for impaired assets is set aside in

accordance with relevant rules.

7. Cash and cash equivalents

Cash and cash equivalents refer to cash on hand, deposits that can be used for payment at any time,

and short term investments with high liquidity, which are readily convertible into known amounts

of cash and subject to an insignificant risk of changes in value. Cash equivalents include

non-restricted balances with central banks, as well as deposits with banks and other financial

institutions, lendings to banks and other financial institutions and reverse repurchase agreements

with an original maturity of up to three months and bond investments with high liquidity in the

short term, that are readily convertible to cash in known amounts, exposed to an insignificant risk

of value change and due within three months as from purchase date.

8. Foreign currency translation


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The Group maintains separate accounts for each foreign currency. Foreign currency transactions

are recorded in the original currency when they take place.

Monetary items denominated in foreign currencies are translated on the balance sheet date at spot

exchange rate. Translation differences arising from items other than monetary securities classified

as available-for-sale are recorded in the income statement. Translation differences of monetary

securities measured in foreign currencies and classified as available-for-sale should be separated

into translation differences arising from changes in amortized cost and translation differences

arising from changes in other carrying amounts. Translation differences arising from changes in

amortized cost are recorded in the income statement, while translation differences arising from

changes in other carrying amounts are recorded in “Reserve for fair value changes in

available-for-sale financial assets” under other comprehensive income.

Non-monetary items denominated in foreign currencies that are measured at historical cost are

translated at the spot exchange rate applicable on the transaction date, with the amounts in

bookkeeping base currency remaining unchanged. Non-monetary items measured at fair value are

translated at the spot exchange rate applicable on the date of fair value determination, with

differences between amounts in bookkeeping base currency and amounts in original currency: in

the case of available-for-sale financial assets, recorded into “Reserve for fair value changes in

available-for-sale financial assets” under other comprehensive income; or in the case of financial

assets and financial liabilities designated at fair value through profit or loss, recorded into “Gains

or losses on changes in fair value” in the income statement.

9. Recognition and measurement of financial instruments

(1) Recognition of financial instruments

A financial asset or financial liability is recognized when the Group becomes a party to a financial

instrument contract.

(2) Classification and measurement of financial assets

(i) The Group, based on risk management, investment strategy, purpose for holding financial

assets and other reasons, classifies financial assets held into financial assets designated at fair

value through profit or loss, held-to-maturity investments, loans and receivables and

available-for-sale financial assets.

A. Financial assets designated at fair value through profit or loss

Financial assets designated at fair values through profit or loss, including held-for-trading

financial assets and financial assets designated at fair value through profit or loss upon initial

recognition.

Held-for-trading financial assets refer to those meet one of the following conditions: The purpose

to acquire the financial assets is mainly for selling in the short run; financial assets are a part of

recognizable combination of financial instruments which are managed in a centralized way and for

which there is objective evidence proving that the enterprise may manage the combination by way

of short-term profit making in the near future; financial assets are derivative instruments, except

the designated derivative instruments which are effective hedging instruments, or derivative

instruments to financial guarantee contracts, and the derivative instruments which are linked with

the equity instrument investments for which there is no quoted price in the active market, whose

fair value cannot be reliably measured, and which shall be settled by delivering the said equity


Page 20 of 186

instruments.

Financial assets that meet one of the following conditions can be financial assets designated at fair

value through profit or loss upon initial measurement: the designation is able to eliminate or

obviously reduce the discrepancies in the recognition or measurement of relevant gains or losses

arising from the different basis of measurement of the financial instruments; the official written

documents on risk management or investment strategies have recorded that the combination of

said financial instruments will be managed and evaluated on the basis of their fair values and be

reported to the key management personnel; the financial assets have one or more hybrid

instruments with an embedded derivative instrument, except when the embedded derivative

instrument does not significantly change the cash flow of hybrid instrument, or the embedded

derivative shall obviously not be split from relevant hybrid instruments; the financial assets have

the hybrid instruments with the embedded derivative instrument that needs to be split but cannot

be independently measured when it is obtained or subsequently on the balance sheet date.

The equity instrument investments for which there is no quoted price in the active market and

whose fair value cannot be reliably measured cannot be designated at fair value through profit or

loss.

B. Held-to-maturity investments

Held-to-maturity investments refer to non-derivative financial assets that have fixed or

determinable payments, a fixed maturity and the Group has the positive intention and ability to

hold to maturity.

C. Loans and receivables

Loans and receivables refer to non-derivative financial assets without quoted price in the active

market or with fixed or fixable recovery amount.

D. Available-for-sale financial assets

Available-for-sale financial assets refer to non-derivative financial assets designated as available

for sale upon initial recognition and financial assets other than the abovementioned types.

Some financial assets classified into financial assets designated at fair value through profit or loss

upon initial recognition by the Group cannot be reclassified as other financial assets; and other

financial assets cannot be reclassified into financial assets designated at fair value through profit

or loss, either.

(ii) Financial assets are measured at fair value upon initial recognition. Transaction costs relating

to financial assets designated at fair value through profit or loss are directly recorded in profit or

loss. Transaction costs relating to other types of financial assets are included in initially

recognized amounts.

(iii) Subsequent measurement of financial assets

A. Financial assets designated at fair value through profit or loss, including held-for-trading

financial assets and financial assets designated at fair value through profit or loss, are subsequently

measured at fair value. Gains or losses on changes in fair value are recorded in profit or loss.

B. Held-to-maturity investments are subsequently measured at amortized cost using the effective

interest method. Any gain or loss arising from derecognition, impairment or amortization is

recorded in profit or loss.


Page 21 of 186

C. Loans and receivables are subsequently measured at amortized cost using the effective interest

method. Any gain or loss arising from derecognition, impairment or amortization is recorded in

profit or loss.

D. Available-for-sale financial assets are subsequently measured at fair value. Any change in their

fair value is recorded in other comprehensive income and transferred to profit or loss when such

available-for-sale financial assets are impaired or derecognized. Any interest or cash dividend

realized during the holding period of available-for-sale financial assets is recorded in profit or loss.

Impairment losses on investments in equity instruments that do not have a quoted price in an

active market and whose fair value cannot be measured reliably, and derivative financial assets

linked to these equity instruments and settled through delivery of these equity instruments, are

measured at cost.

(iv) Allowance for impairment losses on financial assets

A. The Group checks carrying amount of financial assets other than financial assets designated at

fair value through profit or loss. If there is any objective evidence proving a financial asset is

impaired, impairment losses shall be recognized and the related allowance shall be set aside.

B. Objective evidences proving the impairment of the financial asset determined by the Group

include:

a) A serious financial difficulty occurs to the issuer or debtor;

b) The debtor breaches any contractual provisions, such as failing or delaying to pay interest or the

principal;

c) The creditor makes a concession to the debtor that is financially troubled due to economic or

legal considerations;

d) The debtor is likely to become bankrupt or enter into financial reorganizations in any other

form;

e) The financial asset can no longer continue to be traded in an active market due to serious

financial difficulties of the issuer;

f) Public data available show that, though it is impossible to identify whether the cash flow of a

certain asset within a portfolio of financial assets has decreased or not, an overall assessment finds

that the predicted future cash flow of the said portfolio of financial assets has indeed decreased

since it was initially recognized and such decrease is measurable, for example, the ability of the

debtor of the said portfolio of financial assets worsens gradually, the unemployment rate in the

region where the debtor is situated increases, the prices of collaterals drop markedly, or the sector

of the debtor in question is in slump;

g) Any material adverse change has occurred to the technical, market, economic or legal

environment where the debtor operates its business, which makes the investor in an equity

instrument unable to recover investment cost;

h) The fair value of investment in an equity instrument declines seriously or non-temporarily;

i) Other objective evidences showing the impairment of the financial asset.

C. Measurement of impairment losses on financial assets


Page 22 of 186

a) Measurement of impairment losses on held-to-maturity investments, loans and receivables

Allowance for impairment losses on held-to-maturity investments, loans and receivables (financial

assets subsequently measured at amortized cost) shall be set aside based on the difference of the

present value of expected future cash flows of the said financial asset lower than its carrying

amount and recorded in profit or loss.

The Group separately conducts impairment tests on financial assets in a significant amount

individually, and conducts impairment tests on financial assets in an insignificant amount

individually or in a portfolio of financial assets having similar credit risk characteristics. Financial

assets found unimpaired in separate impairment tests, no matter in significant or insignificant

amount individually, should be retested in a portfolio of financial assets having similar credit risk

characteristics. Financial assets whose impairment losses have been recognized separately should

not be tested for impairment in a portfolio of financial assets having similar credit risk

characteristics.

After the Bank recognizes impairment losses on a financial asset measured at amortized cost, if

there is an objective evidence proving the value of the said financial asset is restored, which is

objectively related to matters occurred after the recognition of the impairment losses, the formerly

recognized impairment losses should be reversed and recorded into profit or loss.

b) Available-for-sale financial assets

The Group conducts impairment tests on available-for-sale financial assets as single investments.

On the balance sheet date, the fair value of available-for-sale financial assets should be judged

whether dropped significantly or not temporarily: if the fair value of a single available-for-sale

financial asset drops by more than 50% of its cost or maintains falling for above one year, the said

available-for-sale financial assets can be identified as impaired, allowance for impairment losses

should be set aside based on the difference between its cost and fair value, and impairment losses

should be recognized. The cost of available-for-sale financial assets at the end of the period is the

amortized cost initially measured at the investment cost upon acquisition and calculated by the

weighted average method upon sale.

Where the fair value of an available-for-sale financial asset declines not temporarily, even if the

financial asset is not derecognized, the accumulative loss arising from the decline in fair value that

has been directly recorded in other comprehensive income should be transferred to profit or loss.

When available-for-sale investments in equity instruments that do not have a quoted price in an

active market and whose fair value cannot be measured reliably, or derivative financial assets

linked to these equity instruments and settled through delivery of these equity instruments are

impaired, the Group recognizes the difference between the carrying amount of the investment in

equity instrument or derivative financial asset and present value determined by discounting future

cash flows at the market yield rate of similar financial assets at that time as impairment losses and

records the difference in profit or loss.

After impairment losses are recognized for an available-for-sale debt instrument, if there is an

objective evidence proving the value of the said financial asset is restored, which is objectively

related to matters occurred after the recognition of the impairment losses, the formerly recognized

impairment losses should be reversed and recorded into profit or loss.

Any impairment losses on an available-for-sale investment in equity instrument should not be

reversed through profit or loss. Meanwhile, impairment losses on investments in equity

instruments that do not have a quoted price in an active market and whose fair value cannot be

measured reliably, or derivative financial assets linked to these equity instruments and settled

through delivery of these equity instruments, should not be written back.


Page 23 of 186

(3) Classification and measurement of financial liabilities

(i) Financial liabilities held by the Group are classified into financial liabilities designated at fair

value through profit or loss and other financial liabilities.

Financial liabilities designated at fair values through profit or loss, including held-for-trading

financial liabilities and financial liabilities designated at fair value through profit or loss upon

initial recognition.

Held-for-trading financial liabilities refer to those meet one of the following conditions: The

purpose to acquire the financial liabilities is mainly for repurchase in the short run; financial

liabilities are a part of recognizable combination of financial instruments which are managed in a

centralized way and for which there is objective evidence proving that the enterprise may manage

the combination by way of short-term profit making in the near future; financial liabilities are

derivative instruments, except the designated derivative instruments which are effective hedging

instruments, or derivative instruments to financial guarantee contracts, and the derivative

instruments which are linked with the equity instrument investments for which there is no quoted

price in the active market, whose fair value cannot be reliably measured, and which shall be

settled by delivering the said equity instruments.

Financial liabilities that meet one of the following conditions can be financial liabilities designated

at fair value through profit or loss upon initial measurement: the designation is able to eliminate or

obviously reduce the discrepancies in the recognition or measurement of relevant gains or losses

arising from the different basis of measurement of the financial instruments; the official written

documents on risk management or investment strategies have recorded that the combination of

said financial instruments will be managed and evaluated on the basis of their fair values and be

reported to the key management personnel; the financial liabilities have one or more hybrid

instruments with an embedded derivative instrument, except when the embedded derivative

instrument does not significantly change the cash flow of hybrid instrument, or the embedded

derivative shall obviously not be split from relevant hybrid instruments; the financial liabilities

have the hybrid instruments with the embedded derivative instrument that needs to be split but

cannot be independently measured when it is obtained or subsequently on the balance sheet date.

Some financial liabilities classified into financial liabilities designated at fair value through profit

or loss upon initial recognition by the Group cannot be reclassified into other financial liabilities;

and other financial liabilities cannot be reclassified into financial liabilities designated at fair value

through profit or loss, either.

(ii) Financial liabilities are measured at fair value upon initial recognition. Transaction costs

relating to financial liabilities designated at fair value through profit or loss are directly recorded

in profit or loss. Transaction costs relating to other financial liabilities are included in initially

recognized amounts.

(iii) Subsequent measurement of financial liabilities

A. Financial liabilities designated at fair value through profit or loss, including held-for-trading

financial liabilities and financial liabilities designated at fair value through profit or loss, are

subsequently measured at fair value. Gains or losses on changes in fair value are recorded in profit

or loss.

B. Other financial liabilities are subsequently measured at amortized cost using the effective

interest rate method.

(4) Recognition basis and measurement of financial assets transfer


Page 24 of 186

When the Group transfers almost all risks and benefits arising from the ownership of a financial

asset to the transferee, the said financial asset will be derecognized. Where the overall transfer of

the financial asset meets the derecognition conditions, the Group recognizes the difference

between the following two items in profit or loss:

(i) Carrying amount of the financial asset transferred;

(ii) Sum of the consideration received due to transfer and the accumulated changes in fair value

formerly recognized in other comprehensive income (where the financial asset transferred is

available-for-sale financial asset).

Where partial transfer of the financial asset of the Group meets derecognition conditions, the

overall carrying amount of the financial asset transferred shall be amortized at its relative fair

value respectively between the derecognized part and not derecognized part. The difference

between the following two items shall be recognized in profit or loss:

(i) Carrying amount of the derecognized part;

(ii) Sum of the consideration of the derecognized part and the amount corresponding to the

derecognized part in accumulated changes in fair value formerly recognized in other

comprehensive income (where the financial asset transferred is available-for-sale financial asset).

The amount corresponding to the derecognized part in accumulated changes in fair value formerly

recognized in other comprehensive income shall be determined after being amortized at the

relative fair values of the derecognized part and not derecognized part of the financial asset.

Where transfer of the financial asset does not meet derecognition conditions, the recognition of the

overall financial asset transferred shall be continued and the consideration received shall be

recognized as a financial liability.

For transfer of the financial asset under the continued involvement conditions, the Group

recognizes the relevant financial asset or liability based on the continued involvement degree of

the financial asset transferred, to completely reflect its reserved right and assumed obligation.

(5) Derecognition of financial liabilities

A financial liability cannot be derecognized in part or in whole until current obligations of the

Group under the liability is terminated in part or in whole. Where the Group and the creditor signs

an agreement to replace the existing financial liability by the way of assuming new financial

liability and the latter is substantially different from contract clauses of the existing one, the

existing financial liability shall be derecognized and the new financial liability shall be recognized

at the same time.

Where the financial liability is derecognized in whole or in part, the difference between the

carrying amount of derecognized part and the consideration paid (including non-cash assets

transferred out or new financial liability assumed) shall be recognized in profit or loss.

(6) Offset of financial assets and financial liabilities

Financial assets and financial liabilities are presented separately on the balance sheet and cannot

be offset with each other. But whenever the following conditions are met at the same time, they

shall be presented on the balance sheet at the net amount after offsetting: the Group has the legal

right to offset recognized amount and is able to execute this legal right; the Group plans to make

the settlement at a net amount or liquidate the financial assets at the same time of paying off the


Page 25 of 186

financial liabilities. If the transfer of financial assets does not satisfy the conditions of

derecognition, transferrer is not allowed to offset the transferred financial assets and financial

liabilities.

(7) Asset securitization

As part of business activities, for credit asset securitization, the Group generally sells the assets to

the structured entity that issues the securities to investors. The interests in securitized financial

assets are presented in the form of senior asset-backed securities or subordinated asset-backed

securities or other residual interests (“Retained Interests”).

For the credit asset securitization that does not satisfy the derecognition conditions, the relevant

financial assets shall not be derecognized and shall remain in the original category, and funds

raised from the third-party investors shall be treated as financing funds.

If securitization results in full or partial derecognition of a financial asset, the Group will allocate

the par value of transferred financial asset according to the fair value of derecognized financial

asset and financial asset with Retained Interests respectively. The gain or loss on securitization,

which is the difference between received consideration and the allocated par value of the

derecognized financial asset, is recorded in “investment income”. The retained earnings are

measured using the same method as that adopted before securitization.

In applying the accounting policy on securitized financial assets, the Group has considered the

transfer level of risks and rewards transferred to another entity and the level of control exercised

by the Group over the entity:

A． When the Group has transferred substantially all the risks and rewards of ownership of the

financial asset, the Group will derecognize said financial asset;

B. When the Group retains substantially all the risks and rewards of ownership of the financial

asset, the Group will continue to recognize said financial asset; and

C. When the Group has neither transferred nor retained substantially all the risks and rewards of

ownership of the financial asset, the Group will consider whether it has control over the financial

asset or not. If the Group has not retained control, the Group will derecognize the financial asset

and recognize the rights and obligations generated or retained in transfer as assets or liabilities

respectively. If the Group retains control, financial asset will be recognized according to the level

of continuous involvement in the financial asset.

10. Renegotiated loans

If conditions permit, the Group will strive to restructure loans instead of obtaining the ownership

of collaterals. This might involve the extended repayment and the new loan conditions. Once the

terms and conditions are re-negotiated, the loan will not be deemed as overdue. The Management

continues to review the restructured loans so that they could satisfy all conditions and the

following payment is likely to happen. Such loans continue to be assessed for impairment

individually or collectively and measured for allowance for impairment losses by adopting initial

effective interest rate.


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11. Derivative financial instruments and embedded derivative financial instruments

Derivative financial instruments include financial forward contracts, financial futures contracts,

financial swap and options and instruments combining any one or more features of financial

forward contracts, financial futures contracts and financial swap and options. Derivative financial

instruments have the following common characteristics:

(1) Their values vary with specific interest rate, price of financial instruments, commodity price,

exchange rate, price index, rate index, credit rating, credit index or similar variables;

(2) No initial net investment is required, or, as compared to contracts of other types with similar

responses to market changes, small initial net investment is required; and

(3) To be settled on a future date.

Such derivative financial instruments are initially recognized at fair value on the date when a

derivative contract is entered into and are subsequently re-measured at fair value. Changes in fair

value of derivative financial instruments are included in the gains or losses on changes in fair

value, and reflected in “derivative financial assets” or “derivative financial liabilities” on the

balance sheet.

Embedded derivative financial instruments are derivative financial instruments embedded into a

non-derivative contract (the “master contract”) that cause adjustments to cash flows of the master

contract, in part or in whole, to reflect changes in specific interest rate, price of financial

instruments, exchange rate, price index or rate index, credit rating or credit index or changes in

similar variables, such as conversion options embedded into the convertible corporate bonds

purchased. When an embedded derivative financial instrument is not tightly closed to the master

contract in respect of economic features and risks, the Bank removes it from the master contract as

an independent derivative financial instrument that is initially recognized and subsequently

measured at fair value.

After the embedded derivative financial instrument is removed from the master contract, the

master contract, if it is a financial instrument, is accounted for as financial asset or liability in the

relevant category.

12. Financial assets under reverse repurchase agreements and financial assets under repurchase

agreements

Financial assets under reverse repurchase agreements mean relevant assets (bonds, notes and loans)

are purchased by the Bank from the counterparty at a certain price pursuant to contract or

agreement and will be resold to counterparty at agreed price on the date specified in the contract or

agreement. Financial assets under reverse repurchase agreements are accounted for in the amounts

actually paid upon purchase and reflected on the balance sheet. Underlying assets that have

purchased under resale agreements are not recognized on the balance sheet.

Financial assets under repurchase agreements refer to financing in which relevant assets (including

bonds, notes and loans) are sold by the Bank and its subsidiaries to the counterparty at a certain

price pursuant to contract or agreement and will be repurchased from the counterparty at agreed

price on the date specified in the contract or agreement. Financial assets under repurchase

agreements are accounted for in the amount actually received upon sale and reflected on the

balance sheet.


Page 27 of 186

The bid-ask spread between reverse repurchase agreements and repurchase agreements is

amortized using the effective interest during the relevant transaction period and recognized

interest income or expense.

13. Measurement of long-term equity investment

Long-term equity investment includes equity investment in subsidiaries, joint ventures and

associates.

(1) Initial measurement

Long-term equity investment is initially measured by the Group as follows:

(i) The initial cost of a long-term equity investment acquired through a business combination

should be determined as follows:

A. For a business combination involving enterprises under the same control, if the consideration of

the combination is satisfied by paying cash, transfer of non-cash assets or assumption of liabilities

by the combining party, the initial cost of the long-term equity investment should be the combined

party's share of carrying amount of the owners' equity in the consolidated financial statements of

the ultimate controller on the combination date. The difference between the initial cost and the

carrying amount of cash paid, non-cash assets transferred and liabilities assumed should be

adjusted to capital reserve. If the balance of capital reserve is not sufficient, any excess should be

adjusted to retained earnings. The direct cost for the business combination of the combining party

should, including the expenses for audit, assessment and legal services, be recorded into the profit

or loss.

If the consideration of the combination is satisfied by the issue of equity securities, the initial cost

of the long-term equity investment should be the combined party's share of carrying amount of the

owners' equity in the consolidated financial statements of the ultimate controller on the

combination date. The aggregate face value of the shares issued should be accounted for as share

capital. The difference between the initial investment cost and the aggregate face value of the

shares issued should be adjusted to capital reserve. If the balance of capital reserve is not sufficient,

any excess should be adjusted to retained earnings. The fees, commissions and other expenses

arising from the issuance of equity securities during the business combination should be offset

against the issue premium income from equity securities, and any insufficiency of the issue

premium income should be offset against retained earnings.

B. In a business combination involving entities not under the same control, the Group determines

the combination cost as follows:

a) For a business combination realized by a transaction of exchange, the combination costs should

be fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the

equity securities issued in exchange for the control on the acquiree.

b) For a business combination realized by multiple transactions of exchange in steps, the initial

cost of such investment should be the sum of the carrying amount of equity investment held in the

acquiree prior to the acquisition date and the new investment cost on the acquisition date.

c) Intermediary expenses incurred by the acquirer in connection with business combination,

including charges on audit, assessment and legal services and other administrative expenses

concerned should be recorded in profit or loss when incurred; the transaction cost of equity


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securities or debt securities issued by the acquirer as the consideration of combination should be

included in the initially recognized amount of equity securities or debt securities; and

d) Where the combination contract or agreement covers future matters that may influence the

combination cost, the acquirer should include in the combination cost the future matters that are

likely to take place and whose influence on the combination cost is reliably measurable.

(ii) The initial cost of a long-term equity investment acquired other than through a business

combination should be determined as follows:

A. For a long-term equity investment acquired by paying cash, the initial cost should be the actual

purchase price paid. Initial investment cost includes the costs, taxes and other necessary

expenditures directly attributable to the acquisition of the long-term equity investment.

B. For a long-term equity investment acquired by the issue of equity securities, the initial

investment cost should be the fair value of the equity securities issued, excluding declared but

unpaid cash dividend or profit collected from the investee. Transaction costs incurred upon issue

or acquisition of its own equity instruments that can be directly attributable to the equity

transaction will be deducted from the equity.

C. For a long-term equity investment acquired through an exchange of non-monetary assets, the

initial investment cost should be determined in accordance with the Accounting Standard for Business Enterprises No.7 - Exchange of Non-Monetary Assets.

D. For a long-term equity investment acquired through debt restructuring, the initial investment

cost should be determined in accordance with the Accounting Standard for Business Enterprises

No.12 - Debt Restructurings.

(iii) Where a long-term equity investment is acquired by any means, the share of cash dividend or

profit declared but unpaid by the investee, which is included in the consideration paid when the

investment is acquired, should be separately accounted for as a receivable item and should not

constitute the initial cost of long-term equity investment.

(2) Subsequent measurement

Long-term equity investment that can exert control on the investee shall be accounted for based on

the cost method in individual financial statements. Long-term equity investment that does not

exert joint control or significant influence on the investee shall be accounted for based on the

equity method.

(i) The long-term equity investment accounted for based on the cost method shall be priced based

on the initial investment cost. If there are additional investments or recovered investments, the

cost of the long-term equity investment shall be adjusted. The cash dividend or profit which has

been declared to distribute by the investee shall be included into the investment income for the

period.

(ii) If the initial cost of a long-term equity investment is more than the Group's attributable share

of the fair value of the investee's identifiable net assets for the investment, the initial cost of the

long-term equity investment may not be adjusted. If the initial cost of a long-term equity

investment is less than the Group's attributable share of the fair value of the investee's identifiable

net assets for the investment, the difference shall be included into the profit or loss and the cost of

the long-term equity investment shall be adjusted simultaneously.

After the Group obtains a long-term equity investment, it shall, in accordance with the attributable


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share of the net profit or loss of the investee and other comprehensive income, recognize the

investment income and other comprehensive income respectively, and adjust the carrying amount

of the long-term equity investment; and in accordance with the cash dividend or profit which has

been declared to distribute by the investee, it shall reduce the carrying amount of the long-term

equity investment. Where any change is made to the owner’s equity other than the net profit or

loss, other comprehensive income and profit distribution of the investee, the carrying amount of

the long-term equity investment shall be adjusted and be included in the owner’s equity. The

Group shall, on the ground of the fair value of all identifiable net assets of the investee when it

obtains the investment, recognize the attributable share of the net profit or loss of the investee after

it adjusts the net profit of the investee. If the accounting policies and accounting periods adopted

by the investee are different from those adopted by the Group, an adjustment shall be made to the

financial statements of the investee in accordance with the accounting policies and accounting

periods of the Group and recognize the investment income and other comprehensive income. The

Group shall recognize the net losses of the investee until the carrying amount of the long-term

equity investment and other long-term rights and interests which substantially form the net

investment made to the investee are reduced to zero, unless the Group has the obligation to

undertake extra losses. If the investee realizes any net profit later, the Group shall, after the

amount of its attributable share of profit offsets against its attributable share of the un-recognized

losses, resume to recognize its attributable share of profit.

When the Group calculates and identifies attributable share of the net profit or loss of the investee,

the unrealized profit or loss of internal transactions with associates and joint venture shall offset

the part attributable to the Group according to the attributable share and the investment return shall

be identified accordingly. If the unrealized losses of internal transactions between the Group and

the investee are included into impairment losses, they shall be fully identified.

If some part of the equity investment in associates is indirectly held by the Group through the

venture capital institution, mutual fund, trust company or similar subjects including

investment-linked insurance fund, the Group shall record this part at fair value through profit or

loss and account the remaining part based on the equity method based on the provisions in the

Accounting Standards for Enterprises No.22-Recognition and Measurement of Financial

Instruments no matter whether the above subjects exert significant influence on this part of

investment.

(iii) When the Group disposes a long term equity investment, the difference between the carrying

amount of the said equity investment and the proceeds from its disposal should be recorded in

profit or loss. The disposal of the long-term equity investment calculated at the equity method,

shall be on the same basis for direct disposal of relevant assets or liabilities by the investee, and

the part formerly recognized in other comprehensive income shall be accounted for based on the

corresponding proportion.

(iv) In case of decreased shareholding ratio by the Group due to capital increase by other investors

in its subsidiaries, causing the Group to lose control but can still carry out joint control or exert

great influence, long-term equity investment shall be accounted for using the equity method

instead of the cost method in the individual financial statements. First, it shall be recognized the

difference between the attributable share of the investor in increased net assets of the original

subsidiary due to capital increase based on the new shareholding ratio and the carrying amount of

the long-term equity investment corresponding to the decrease in shareholding ratio that shall be

carried forward, with such difference recorded in profit or loss; then, deemed as the equity method

has been adopted in accounting since the investment was obtained, adjustment shall be made

according to the new shareholding ratio.

(3) Basis for determination of joint control or significant influence over the investee

Joint control refers to common control over certain arrangement as agreed, and relevant activities

of such arrangement cannot be decided unless being agreed unanimously by all participants to the


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joint control right. Relevant activities refer to activities that have significant influence on the

return of certain arrangement. Significant influence means the investor has the power to

participate in the decision-making for financial and operating polices of the investee but is unable

to control or jointly control with other parties the preparation of these policies.

(4) Impairment testing methods and impairment provisioning methods

The impairment testing methods and impairment provisioning methods shall be implemented in

accordance with the accounting policy on “Impairment of Assets” prepared by the Group.

14. Recognition and measurement of investment properties

(1) Investment properties of the Group refer to properties held for the purpose of earning rentals or

capital appreciation, or both of them, mainly including:

(i) Land use rights already leased;

(ii) Land use rights held for the purpose of transfer after appreciation; and

(iii) Buildings leased.

(2) An investment property of the Group that meets both of the following conditions should be

recognized:

(i) Financial benefits relating to the investment property are likely to flow into the Company; and

(ii) The cost of the investment property is reliably measurable.

(3) Initial measurement

An investment property is initially measured at cost.

(i) The cost of a purchased investment property comprises purchase price, relevant taxes and other

expenses directly attributable to the asset;

(ii) The cost of an investment property constructed at own cost comprises expenses incurred

necessary for the asset to reach the predefined serviceable condition;

(iii) The cost of investment properties acquired by other means is determined pursuant to relevant

accounting standards.

(4) Subsequent measurement

Investment properties of the Group are measured at cost. An investment property measured at cost

is depreciated or amortized using the same method as for fixed assets and intangible assets.

When the Group has strong evidence to show a change in the property purpose, i.e. changing a

property for self-use or inventory to an investment property or changing an investment property to

a property for self-use, the book value before change will be booked as the value after change.


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An investment property measured at cost is valuated at the lower of cost and recoverable amount

at the end of the reporting period. If the recoverable amount is lower than the cost, allowance for

impairment losses is set aside for the difference between them. Any allowance for impairment

losses set aside should not be reversed.

15. Recognition and measurement of fixed assets

Fixed assets of the Group refer to tangible assets held for production of cargoes, provision of

services, leasing or operation and with a service life of more than a fiscal year.

(1) A fixed asset that meets both of the following conditions is initially measured at cost:

(i) Financial benefits relating to the fixed asset are likely to flow into the Company; and

(ii) The cost of the fixed asset is reliably measurable.

(2) Depreciation of fixed assets

Subsequent expenses relating to fixed assets are recorded in the cost of fixed assets if they meet

the conditions set for recognition of fixed assets, or recorded directly in profit or loss upon

occurrence if they do not meet the conditions set for recognition of fixed assets.

Fixed assets of the Group are depreciated using the straight-line method.

The service life, residual value and annual depreciation rate of fixed assets are listed in the table

below:

Category Service life Estimated net residual

value

Annual depreciation

rate

Buildings and

structures 20 to 50 years

3% 4.85% to 1.94%

Transporting vehicles 6 years 1% 16.50%

Electronic equipment 3 to 5 years 0-3% 33.33% to19.80%

Furniture 5 years 1% 19.80%

The Group reviews the service life, estimated net residual value and depreciation method of fixed

assets at the end of each fiscal year. Where the service life is different from the previous estimate,

the service life of fixed assets should be adjusted; where the estimated net residual value is

different from the previous estimate, the estimated net residual value should be adjusted; where

there is any significant change in the way the economic benefits relating to fixed assets are

anticipated to be realized, the depreciation method of fixed assets should be changed. Changes in

the service life, estimated net residual value and depreciation method of fixed assets should be

deemed changes in accounting estimates.

(3) Fixed assets acquired through finance leasing

Where the Group substantially transfers all risks and benefits arising from a fixed asset leased to it,

leasing of the fixed asset is deemed finance leasing.


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The cost of the fixed asset acquired through financial leasing should be the lower of fair value of

the leased asset on the start date of lease and present value of the minimum lease payment.

Fixed assets acquired through financial leasing are depreciated using the same method as for

owned depreciable assets. Where there is a reasonable ground to believe that the ownership of a

leased asset is obtainable upon the expiration of lease, the leased asset should be depreciated over

its useful life; where there is no reasonable ground to believe that the ownership of a leased asset

is obtainable upon the expiration of lease, the leased asset should be depreciated over the shorter

of the lease term and its useful life.

(4) Impairment of fixed assets should be accounted for in accordance with the Group's accounting

policy on “Impairment of Assets”.

16. Accounting for construction in progress

(1) Pricing of construction in progress: The cost should be determined based on expenses actually

incurred. The cost of construction in progress should also include capitalized loan expenses and

exchange gains or losses.

(2) Construction in progress of the Group is transferred to fixed assets when it reaches the

predefined serviceable condition. Fixed assets that have been constructed to the predefined

serviceable condition but whose final accounts of completion are not conducted should be

recognized as fixed assets at estimated value and depreciated; after the final accounts are

completed, the original estimated value should be adjusted according to the actual cost, without

any adjustment made to depreciation.

(3) Impairment of construction in progress should be accounted for in accordance with the Group's

accounting policy on “Impairment of Assets”.

17. Recognition and measurement of intangible assets

“Intangible assets” of the Group refer to the identifiable non-monetary assets without any physical

shape possessed or controlled by the Group.

(1) Recognition of intangible assets

An intangible asset is recognized by the Group when it meets both of the following conditions:

(i) Financial benefits relating to the intangible asset are likely to flow into the Company; and

(ii) The cost of the intangible asset is reliably measurable.

(2) Measurement of intangible assets

(i) Intangible assets of the Group are initially measured at actual cost.

(ii) Subsequent measurement of intangible assets

A. For an intangible asset with a limited service life, the Group determines its service life upon

acquisition and subsequently amortizes it with the straight-line depreciation method over its


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service life, with amortized amount recorded into the relevant costs and expenses. An intangible

asset with an uncertain service life should not be amortized.

At the end of the reporting period, the service life and amortization method of intangible assets

with a limited service life will be reviewed. Any change in the same will be treated as a change in

the accounting estimates. In addition, the service life of intangible assets with an uncertain service

life will be reviewed. If there is any evidence proving that the period for such intangible asset to

bring economic benefits for the enterprise is foreseeable, its service life will be estimated and it

will be amortized based on the amortization policy for intangible assets with a limited service life.

The amortization period of the Group's intangible assets with a limited service life is as follows:

Land use rights are averagely amortized over residual statutory service life starting from the

month of acquisition; software expenses are averagely amortized over 5 years starting from the

month of acquisition; other intangible assets are averagely amortized over 5 to 10 years starting

from the month of acquisition; and the Bank has no intangible assets with an uncertain service life.

B. Impairment of intangible assets should be accounted for in accordance with the Group's

accounting policy on “Impairment of Assets”.

(3) Research and development expenses

The internal research and development expenses of the Group are divided into expenses incurred

at the research stage and expenses incurred at the development stage. Research means innovative

and planned research carried out to obtain and understand new scientific or technical knowledge.

Development means to apply research results or other knowledge to a plan or design before the

commercial production or use, so as to produce new or make substantial improvement to materials,

equipment and products etc.

Expenses incurred at the research stage are recorded into profit or loss upon occurrence.

Expenses incurred at the development stage which meet the following conditions are recognized

as intangible assets, but those which cannot meet the following conditions are recorded into profit

or loss:

(i) The technical feasibility of completing the intangible asset so that it will be available for use or

sale;

(ii) Its intention to complete the intangible asset and use or sell it;

(iii) How the intangible asset will generate probable future economic benefits; among other things,

the Company can demonstrate the existence of a market for the output of the intangible asset or

the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset;

(iv) There are adequate technical, financial and other resources to complete the development and

to use or sell the intangible asset; and

(v) Its ability to measure reliably the expenses attributable to the intangible asset during its

development.

Where expenses incurred at the research stage and expenses incurred at the development stage

cannot be distinguished between each other, all research and development expenses incurred will

be recorded into profit or loss.


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18. Accounting for other assets

(1) Accounting for long-term deferred expenses

The Group recognizes the improvement expenses and other expenses of fixed assets rented in

through commercial lease which have incurred and have an amortization period of more than one

year to be amortized in the current year and over the following periods as long-term deferred

expenses. Long-term deferred expenses are recorded into the amount actually incurred and

averagely amortized over the benefit period.

Expenses arising from the improvement of fixed assets acquired through operating leasing are

averagely amortized over the shorter of lease term and five years.

Where long-term deferred expenses do not produce any benefit in subsequent fiscal years, the

amortized value should be fully recorded in profit or loss.

(2) Accounting for other receivables

Other receivables are accounted for according to specific items and corporate (or individual)

counterparties. The Group regularly analyzes recoverability of other receivables. Where the

recoverable amount of receivables is lower than their carrying amount, allowance for bad debts is

set aside and recorded in profit or loss.

(3) Repossessed assets

Repossessed assets are initially recognized at their fair value and subsequently measured at the

lower of carrying amount and recoverable amount. For the repossessed assets with the recoverable

amount lower than the carrying amount, the allowance for impairment losses should be set aside.

19. Impairment of long-term assets

The following circumstances may constitute a sign of possible asset impairment:

(1) The current market price of an asset declines sharply, and the price drop is obviously higher

than the expected drop over time or due to the normal use;

(2) The economic, technological or legal environment in which the Group conducts its business

operations, or the market where an asset is located has or will have any significant change in the

current period or in the near future, and thus has or will have an adverse impact on the Group;

(3) The market interest rate or any other market investment return rate has risen in the current

period, and the enterprise' discount rate for calculating the present value of the expected future

cash flows of the asset is affected and thus leads to a large fall in recoverable amount of the asset;

(4) Any evidence shows that an asset has become obsolete or it has been damaged substantially;

(5) An asset has been or will be left unused, or the use of an asset has been or will be terminated,

or an asset has been or will be disposed of ahead of schedule;

(6) Any evidence in the internal report of the Group shows that the economic performance of an


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asset has been or will be lower than the expected performance, for example, net cash flows created

by an asset or business profit (or loss) realized (incurred) by an asset is lower (higher) than the

excepted amount, etc.; and

(7) Other evidence that indicates that an asset impairment has probably occurred.

The Group judges the assets applicable to the Accounting Standards for Business Enterprises No.

8-Asset Impairment like long-term equity investment, fixed assets, engineering materials,

construction in progress, intangible assets (except those with an uncertain service life on the

balance sheet date), conducts the impairment test and evaluates its recoverable amount in case of

impairment signs. The recoverable amount is the higher of the fair value of assets less disposal

costs or the present value of expected future cash flows of assets. Where the recoverable amount

of an asset is lower than its carrying amount, the Group writes down its carrying amount to the

recoverable amount, recognizes the written down amount as impairment losses on assets and

records it in profit or loss, and sets aside the relevant allowance for impairment losses on assets.

When there is a sign showing that the impairment of an asset has probably occurred, the Group

estimates the recoverable amount of the asset individually. Where it is difficult to estimate the

recoverable amount of an individual asset, the recoverable amount of the asset group including the

asset is estimated.

The asset group refers to the minimum combination of assets that may be recognized by the Group

and the cash inflow generated by which shall be generally independent from those generated by

other assets or asset groups. The asset group is composed of assets generating the cash inflow. An

asset group is identified based on whether the main cash inflow from the asset group is

independent of cash inflows from other assets or asset groups.

The Group conducts an impairment test on the goodwill formed by merger of enterprises and

intangible assets with an uncertain useful life every year, no matter whether or not there is any

sign of possible impairment. The impairment test on the business reputation is conducted together

with relevant asset group or combination of asset groups.

Once recognized, the foregoing impairment losses on assets should not be reversed in subsequent

fiscal years.

20. Bonds payable

Bonds payable of the Group comprise general financial bonds, subordinated bonds and interbank

CDs.

Bonds payable are recorded at fair value, i.e. amounts received (fair value of consideration

received) less transaction costs. Bonds payable are measured at amortized cost using the effective

interest rate method, i.e. the difference between the net amount received and the amount repayable

when due is amortized over the borrowing period using the effective interest rate method, with the

amortization amount recorded in profit or loss.

21. Staff compensation

Staff compensation refers to all kinds of payments and other relevant expenditures given by the

Group in exchange of the services offered by the staff or for terminating the labor relationship.


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The staff compensation shall include short-term compensation, welfare after resignation, dismiss

welfare and other long-term staff benefits. It also includes the benefits offered by the Group for

spouse, children, supported person of staff, family dependents and other beneficiaries of deceased

staff.

(1) Short-term compensation

The Group shall recognize the actual short-term compensation as liabilities during the accounting

period when the staff provide services and record it into current profit or loss or relevant asset

cost.

(2) Welfare after resignation

The Group classifies the welfare after resignation into defined contribution plan and defined

benefit plan. Welfare plan after resignation refers to the agreement about the welfare after

resignation concluded between the Group and staff or the regulations or measures formulated by

the Group about the welfare after the resignation of staff. Defined contribution plan refers to the

welfare plan after resignation where the Group does not assume the payment obligation after

contributing fixed fee to an independent fund; defined benefit plan refers to the welfare plan after

resignation except defined contribution plan.

A. Defined contribution plan

The Group recognizes the amount payable calculated based on the defined contribution plan as

liabilities during the accounting period when the staff provide services and record it into profit or

loss or relevant asset cost.

B. Defined benefit plan

The Group has not defined benefit plan or other long-term staff benefits satisfying the conditions

of defined benefit plan.

(3) Dismissal welfare

When providing dismiss welfare for staff, the Group recognizes the staff compensation due to

dismiss welfare as liabilities in the following circumstances whichever occurs earlier, and records

it in profit or loss: When the Group is not allowed to unilaterally cancel the dismiss welfare due to

labor relationship removal plan or the lay-off proposal;

When the Group recognizes the cost or fee related to the reorganization involving the payment of

dismiss welfare.

(4) Other long-term staff benefits

The other long-term staff benefits provided by the Group that meet the conditions of defined

contribution plan are treated based on the above accounting policies of defined contribution plan,

while the net liabilities or net assets of others are recognized and measured based on the above

account policies of defined benefit plan.

22. Accounting for income taxes


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Income taxes of the Group are treated using the balance sheet liability approach.

(1) Deferred income tax assets

(i) Where there is a deductible temporary difference between the carrying amount of an asset or

liability and its tax base, the deferred income tax asset arising from deductible temporary

difference should be calculated and recognized at the tax rate applicable in the period of

anticipated recovery of the asset or discharge of the liability, subject to a maximum of the taxable

income that is likely to be available in future periods to offset the deductible temporary difference.

(ii) Where there is irrefutable evidence that sufficient taxable income is likely to be available in

future periods to offset the deductible temporary difference, deferred income tax assets that are not

recognized in previous periods should be recognized on the balance sheet date.

(iii) The carrying amount of deferred income tax assets is reviewed on the balance sheet date.

Where it is likely that insufficient taxable income will be available in future periods to offset the

deductible temporary difference, the carrying amount of the deferred income tax assets should be

written down. The written down amount should be reversed when sufficient taxable income

becomes likely to be available.

(2) Deferred income tax liabilities

Where there is a deductible temporary difference between the carrying amount of an asset or

liability and its tax base, the deferred income tax liability arising from deductible temporary

difference should be recognized at the tax rate applicable in the period of anticipated recovery of

the asset or discharge of the liability.

23. Estimated liabilities

(1) Criteria for recognizing estimated liabilities

If any obligation relevant to the contingent matters meets the following conditions, the Group will

recognize it as estimated liabilities:

(i) It is a current obligation of the Group;

(ii) Performance of the obligation will likely lead to the outflow of economic benefit from the

Group;

(iii) The amount of the obligation can be reliably measured.

(2) Measurement of estimated liabilities

The estimated liabilities are initially measured in accordance with the best estimate of the

necessary expenses for the performance of the current obligation. If there is a sequent range for the

necessary expenses and if all the outcomes within this range are equally likely to occur, the best

estimate is determined in accordance with the median estimate within the range. In other cases, the

best estimate shall be conducted in accordance with the following situations, respectively:

(i) If the contingencies concern a single item, it shall be determined in the light of the most likely

outcome.


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(ii) If the contingencies concern two or more items, the best estimate should be calculated and

determined in accordance with all possible outcomes and the relevant probabilities.

To determine the best estimate, the Group takes into full consideration of the risks, uncertainties,

time value of money, and other factors pertinent to the contingencies. If the time value of money is

of great significance, the best estimate shall be determined after discounting the relevant future

outflows of cash.

When all or some of the expenses necessary for the liquidation of estimated liabilities of the

Group is expected to be compensated by a third party, the compensation should be separately

recognized as an asset only when it is virtually certain that the reimbursement will be obtained.

The amount recognized for the reimbursement should not exceed the carrying amount of the

estimated liabilities.

The Group checks the carrying amount of the estimated liabilities on the balance sheet date. If

there is any irrefutable evidence indicating that the carrying amount cannot truly reflect the current

best estimate, the Group adjusts the carrying amount in accordance with the current best estimate.

24. Principles for recognition of income

Income of the Group is recognized under the following principles when economic benefits relating

to transactions are likely to flow into the Group and the amount of relevant income is reliably

measurable:

(1) Interest income and expense

For a financial instrument measured at amortized cost, its interest income or expense is measured

at the effective interest rate. The effective interest rate refers to the rate that exactly discounts

estimated future cash inflows or outflows over the expected life of a financial instrument or a

shorter period, where appropriate, to the net carrying amount of the financial asset or financial

liability. The calculation of interest income should take into account contract provisions of the

financial instrument and include all expenses attributable to effective interest rate components and

all transaction costs, yet exclusive of future loan losses. Where the Bank changes its estimate of

future income or expenses, the carrying amount of financial assets or liabilities may be adjusted

accordingly. As adjusted carrying amount is calculated at the original effective interest rate,

changes are also recorded in interest income or interest expense.

(2) Fee and commission income and other income

Fee and commission income and other income are recognized when relevant services are rendered

and the amounts receivable can be reasonably estimated. Fee and commission income and other

income are recognized on an accrual basis when relevant services are rendered.

(3) Dividend income

Dividend income is recognized when the Bank acquires the right to receive dividend and recorded

in profit or loss.

(4) Rental income

Rental income from investment properties relating to operating leasing is recorded in profit or loss


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on a straight line basis over the lease term.

25. Recognition and measurement of government subsidies

The Group's government subsidies are divided into government subsidies relating to assets and

ones relating to income. Government subsidies relating to assets refer to government subsidies

obtained by the Group for purchasing and building long-term assets or forming long-term assets

by other ways. Government subsidies relating to income refer to government subsidies other than

those relating to assets. If government subsidy document does not clearly define the subsidy

recipients, the Group will make judgment on the basis of the basic conditions necessary to get the

subsidiary, recognize those subsidies the basic conditions of which are forming long-term assets

by purchase, construction or other methods as the assets-related government subsidies and all the

other subsidies as the income-related government subsidies.

(1) Recognition of government subsidies

The monetary assets or non-monetary assets received by the Group from governments for free are

recognized as government subsidies in case of meeting the following conditions:

(i) Meet the conditions attached to the government subsidy;

(ii) Be able to receive the government subsidy.

(2) Measurement of government subsidies:

(i) Where the government subsidy is monetary asset, it is measured at the amount received or

receivable. Where the government subsidy is non-monetary asset, it is measured at fair value. In

case the fair value cannot be reliably obtained, it is measured at nominal amount.

(ii) Government subsidies relating to assets are recognized as deferred income upon acquisition by

the Group. When the relevant asset comes to the useful status intended, it shall be recorded into

profit or loss in different periods in reasonable and systematic ways within the service life of the

asset. Where relevant asset is sold, transferred, retired or damaged before the end of its service life,

related deferred income balance not distributed shall be transferred to profit or loss of the disposal

period.

Government subsidies relating to income for compensating relevant cost expenses or losses in the

subsequent periods are recognized as deferred income upon acquisition and recorded into profit or

loss for the period of relevant expenses or losses. Government subsidies relating to income for

compensating relevant cost expenses or losses incurred are directly recorded into profit or loss

upon acquisition.

Government subsidies relating to daily activities are recorded into other income; and those not

relating to daily activities are recorded into non-operating income and expenses.

(iii) Recognized government subsidies to be refunded are treated as follows:

A. Where there is any deferred income, write down its carrying amount and the excess part is

recorded in profit or loss.

B. Where there is no deferred income, they are directly recorded into profit or loss.


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26. Accounting treatments for operating leases and finance leases

(1) Operating leases

As the lessee, the Group records the rents of the operating leases in the relevant asset cost or profit

or loss by using the straight-line method over each period of the lease term; the initial direct costs

incurred by a lessee are recognized into profit or loss; the contingent rents are recorded into profit

or loss in which they actually arise.

As the lessor, the Group includes the assets subject to operating leases in relevant items of its

balance sheets in light of the nature of the asset; the rents from operating leases are recorded in

profit or loss by using the straight-line method over each period of the lease term, unless there are

other more reasonable methods; the initial direct costs incurred are recorded into profit or loss; as

for the fixed assets subject to operating leases, the Group calculates its depreciation by adopting

depreciation policy for similar assets; as for other leased assets, systematic and reasonable

methods are adopted for its amortization; the contingent rents are recorded in profit or loss when

they actually arise.

(2) Finance leases

As the lessee, the Group records the lower one of the fair value of the leased asset and the present

value of the minimum lease payments on the lease beginning date as the bookkeeping value in an

account, recognizes the amount of the minimum lease payments as the bookkeeping value in an

account of long-term account payable, and treats the balance between the recorded amount of the

leased asset and the long-term account payable as unrecognized financing charges; the initial

direct costs such as commissions, attorney fees and traveling expenses, stamp duties directly

attributable to the leased item incurred during the process of lease negotiating and signing the

leasing agreement are recorded in the asset value; the unrecognized financing charge is amortized

to each period during the lease term. The Group adopts the effective interest rate method to

calculate and recognize the financing charge in the current period; the contingent rents are

recognized into profit or loss when they are actually incurred.

When the Group calculates the present value of the minimum lease payments, if it can obtain the

lessor's interest rate implicit in the lease, it adopts the interest rate implicit in the lease as the

discount rate. Otherwise, it adopts the interest rate provided in the lease agreement as the discount

rate. In case the Group cannot obtain the lessor's interest rate implicit in the lease and no interest

rate is provided in the lease agreement, the Group adopts the loan interest rate of the bank for the

same period as the discount rate.

In depreciating a leased asset, the Group adopts a depreciation policy for leased assets consistent

with that for self-owned fixed assets. Where there is a reasonable ground to believe that the

ownership of a leased asset is obtainable upon the expiration of lease, the leased asset should be

depreciated over its useful life; where there is no reasonable ground to believe that the ownership

of a leased asset is obtainable upon the expiration of lease, the leased asset should be depreciated

over the shorter of the lease term and its useful life.

As the lessor, the Group recognizes the sum of the minimum lease receipts on the lease beginning

date and the initial direct costs as the bookkeeping value in an account of the financing lease

values receivable, and records the unguaranteed residual value at the same time. The balance

between the sum of the minimum lease receipts, the initial direct costs and the unguaranteed

residual value, and the sum of their present values is recognized as unrealized financing income.

The unrealized financing income is allocated to each period during the lease term. The Group

calculates the financing income at the current period by adopting the effective interest rate method.


Page 41 of 186

The contingent rents are recorded into profit or loss when they actually arise.

27. Trustee services

The Group acts as an agent to hold and manage assets of customers. Assets involved in such

activities and relevant profit or loss do not belong to the Bank. Trustee services of the Group

mainly include entrusted loans and entrusted wealth management.

Entrusted loans means funds supplied by the customer (as trustor) and lent by the Group (as

trustee) to such borrower for such purposes, in such an amount, for such a term and at such an

interest rate as determined by the trustor, and overseen and recovered by the Bank on behalf of the

trustor, at the risk of the trustor. Funds supplied by the trustor are recorded in entrusted funds in

the amount received by the Group, and recorded in entrusted loans in the amount lent or invested

when the Group extends the loan at the will of the trustor. The Group only charges fees when

transacting entrusted loans, without advancing any payment for customers or taking any credit

risk.

28. Contingent liabilities

A contingent liability is a possible obligation that arises from past transactions or events and

whose existence will be confirmed only by whether one or more uncertain future events beyond

the control of the Bank occur or not. A contingent liability may also be a current obligation arising

from past events that is not recognized because the obligation is unlikely to result in outflows of

economic benefits or its amount is not reliably measurable. Such contingent liabilities are only

disclosed in notes.

29. Related parties

When a party separately or jointly controls or exerts significant influence over another party, or

two or more parties are controlled separately or jointly by a party, these parties constitute related

parties.

30. Profit distribution

The Bank distributes profit, allocates statutory surplus reserves and general reserve in accordance

with the Company Law and its Articles of Association.

In accordance with the Notice concerning Issuance of the Administrative Measures for Setting

Aside Reserve Funds of Financial Enterprises [C.J. (2012) No. 20], general reserve means reserve

set aside by a financial corporation in proportion to its net profit for the purpose of covering

unidentified possible losses. Setting aside general reserve is deemed profit distribution and

constitutes part of the owners’ equity. General reserve is set aside in proportion to the balance of

assets that assume risks and losses. In principle, the balance of general reserve should not be lower

than 1.5% of the balance of risk assets at the end of the reporting period. If the proportion of

general reserve of financial enterprises to the balance of risk assets at the end of the period is

difficult to reach 1.5%, it can be put in place over years (not exceeding 5 years in principle).


Page 42 of 186

31. Changes in major accounting policies and accounting estimates

(1) Changes in accounting policies

The Ministry of Finance issued the revised Accounting Standard for Business Enterprises No.7 - Exchange of Non-Monetary Assets (the “Standard for Exchange of Non-Monetary Assets”) and

the Accounting Standard for Business Enterprises No.12 - Debt Restructurings (the “Standard for

Debt Restructuring”) effective on 1 January 2019. The Bank does not need to restate comparable

data in previous periods. The Bank has adopted the above standards in preparing the 2019

financial statements. The revised Standard for Exchange of Non-Monetary Assets and Standard

for Debt Restructuring have no significant impact on the Bank’s financial position, operating

results or cash flows.

(2) Changes in accounting estimates

The Group made no changes in accounting estimates in the reporting period.

32. Segmental reporting

The Group identifies the business segments based on the internal organizational structure,

management requirements and internal reporting regulations, and accordingly identifies the report

segments and discloses the segment information.

Business segments refer to the components in the Group that satisfy the following conditions: (1)

these components can generate income and incur expenses during the daily activities; (2) the

Management of the Group can regularly evaluate the business performance of these components to

allocate the resources and evaluate their performance; (3) the Group can obtain the financial

position, operating results, cash flow and other accounting information of these components. Two

or more business segments with similar economic features can be consolidated into one business

segment as long as some conditions are met.

VI. Significant Accounting Estimates and Judgments

The Group makes the following uncertain estimates at the end of the reporting period according to

historical experience and reasonable anticipation of future events and will make ongoing

assessment of them subsequently.

1. Allowance for impairment losses on loans and receivables.

The Group regularly evaluates impairment losses on loan portfolios, in addition to separate

evaluations on impairment losses on identified loans impaired. For a loan portfolio composed of

loans not found to decrease in cash flows in an individual test, the Group makes judgment on

whether any sign exists to indicate decrease in anticipated future cash flows of the portfolio, so as

to determine the necessity of setting aside allowance for impairment losses on loans. Signs of

decrease in anticipated cash flows include deterioration in debt service ability of borrowers in the

loan portfolio or adverse changes in the economic environment where borrowers operate that

cause default of borrowers in the portfolio. The Bank makes impairment estimates on loan


Page 43 of 186

portfolios showing signs of impairment based on historical losses on asset portfolios with similar

credit risk characteristics. For methods and assumptions used to estimate the timing and amount of

anticipated future cash flows, the Group makes regular assessments to reduce difference between

actual impairment losses on loans and estimated loss.

2. Impairment losses on other assets

The Group regularly assesses impairment on assets other than loans and advances and checks

them for any impairment loss. If any impairment loss is discovered, the Group will set aside

allowance for impairment losses and record it in profit or loss.

3. Fair value of financial instruments

Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in

an orderly transaction between market participants on the measurement date. The Group measures

the assets or liabilities at fair value by taking into account the features of the assets or liabilities; it

assumes that the market participant sells an asset or transfer a liability in an orderly transaction on

the current market on the measurement date; it assumes that the orderly transaction where an asset

is sold or a liability is transferred is conducted on the main market of relevant asset or liability;

where there is no such main market, it assumes that the transaction is conducted on the most

advantageous market of relevant asset or liability. The Group uses the assumptions that market

participants would use to achieve the maximum economic benefits when pricing the asset or

liability.

The Group judges whether the fair value equals to the transaction price during the initial

recognition based on the transaction nature and features of relevant assets or liabilities; where the

transaction price does not equal to the fair value, it records relevant gains or losses into profit or

loss, except as otherwise provided in the accounting standards.

The Group adopts the valuation technique applicable in the current circumstance and with

adequate available data and other information support. The valuation technique used mainly

includes market-based approach, income approach and cost approach. During the application of

valuation technique, the Group gives the highest priority to observable inputs and uses

unobservable inputs only when the observable inputs cannot be obtained or the obtaining of

observable inputs is not feasible.

The Group categorizes into three levels the inputs used to measure fair value and gives the highest

priority to Level-1 inputs and the lowest priority to Level-3 inputs. Level-1 inputs are quoted

prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at

the measurement date. Level-2 inputs are inputs other than quoted prices included within Level-1

that are observable for the asset or liability, either directly or indirectly. Level-3 inputs are

unobservable inputs for the asset or liability.

In the measurement of non-financial assets at fair value, the Group considers the ability of the

market participant to make the best use of asset and generate the economic benefits, or to sell the

asset to other market participant who can make the best use of asset to generate the economic

benefits. In the measurement of liabilities at fair value, the Group assumes that the liability is

transferred to other market participant on the measurement date, the liability remains outstanding

and the market participant transferee is required to fulfill the obligation. In the measurement of its

own equity instrument, the Group assumes that its own equity instrument is transferred to other

market participant on the measurement date, its own equity instrument remains outstanding and

the market participant transferee would take on the rights and responsibilities associated with the

instrument.

4. Held-to-maturity investments


Page 44 of 186

Held-to-maturity investments refer to non-derivative financial assets that have fixed or

determinable payments, a fixed maturity and the Group has the positive intention and ability to

hold to maturity. The Management needs to make significant judgments when assessing whether a

financial asset is classified as held-to-maturity investments. Where any deviation takes place from

the judgment that the Group has the explicit intention and ability to hold an investment to maturity,

the investment portfolio including the investment will be reclassified as available-for-sale

financial assets and measured at fair value other than at amortized cost.

5. Judgment about the control on the investment target

The Management judges whether the Group controls securitization instrument,

non-principal-guaranteed wealth management product, special asset management plan and

asset-backed financing based on the control elements presented in Note V.4.

(1) Securitization instrument

The Group initiates and establishes some securitization instruments that are operated based on the

established contract during the initiation. The Group obtains variable returns by issuing bonds

through some securitization instruments and performs the daily management of assets of

securitization instruments based on the loan service contract. Generally, other parties need to be

involved in the key decision-making only when there is default on the asset. Therefore, the Group

judges whether these securitization instruments are controlled by considering whether it is able to

use the rights of these instruments to affect its variable returns.

(2) Non-principal-guaranteed wealth management products, special asset management plans and

asset-backed financing

The Group manages or invests many non-principal-guaranteed wealth management products,

special asset management plans and asset-backed financing. For the judgment on whether the

structured entity is controlled, the Group mainly evaluates the overall economic benefits it enjoys

in the structured entity (including benefits out of direct holding and expected management fee)

and the extent of decision-making authority on the structured entity. The Group's overall economic

benefits are insignificant in the structured entity. Meanwhile, according to the laws and

supervision regulations, the initiation, sale and management behaviors of the decision maker about

the structured entity should be strictly controlled in the investment agreement. Therefore, the

Group believes that as the agent instead of major responsible person, it does not need to include

the structured entity into the consolidated financial statement.

Please refer to Notes X.3 and X.4 for the securitization instruments where the Group has

beneficial interest or acts as an initiator and that have been included in the consolidated financial

statements, and the for non-principal-guaranteed wealth management products, special asset

management plans and asset-backed financing where the Group has beneficial interest or acts as

an initiator but that have not been included in the consolidated financial statements.

6. Income tax

The deferred income tax assets arising from deductible temporary differences are recognized to

the extent of the taxable income likely to be available for offsetting deductible temporary

differences. The Group checks the carrying amount of deferred income tax assets on the balance

sheet date. Where it is likely that insufficient taxable income will be available in future periods to

offset deductible temporary differences, the carrying amount of the deferred income tax assets

should be written down. Therefore, the Group needs to make significant judgments on tax-related

treatment of relevant transactions in accordance with relevant tax laws and regulations and make

significant estimates on the likelihood of sufficient taxable income available to offset deferred

income tax assets.


Page 45 of 186

VII. Taxes

1. The VAT rate is 6% of operating income.

2. The urban maintenance and construction tax rate is 7% of turnover tax payable.

3. The education surcharge rate is 3% of turnover tax payable.

4. Local education surcharges are 1.5% of turnover tax payable in Hubei, and 2% of turnover

tax payable in Chongqing.

5. Corporate income tax: The corporate income tax rate applicable to the Group is 25%.

VIII. Notes to Main Items of Consolidated Financial Statements

(Amounts in thousands of RMB unless otherwise stated)

1. Cash and balances with central banks

Item 31 December 2019 31 December 2018

Cash 913,538 757,835

Balances with central banks 30,264,363 26,155,708

Legal reserve 22,788,233 21,888,315

Excess reserve 7,378,052 4,159,069

Public finance reserve 98,078 108,324

Total 31,177,901 26,913,543

Note: (1) The Group deposited legal reserve with PBOC, which should not be used for daily

business operation of the Group.

As at 31 December 2019, the Group's ratio of legal reserve was:


Ratio of RMB legal reserve 10.5% 12%

Ratio of foreign-currency legal

reserve 5% 5%

Note: (2) Excess reserve with central banks is mainly used for fund clearing.

2. Deposits with banks and other financial institutions


Clearing deposits with banks and

other financial institutions 532,301 609,897

General deposits with banks and

other financial institutions 1,404,760 130,000

Deposits with overseas banks and


Subtotal 2,279,318 1,072,991

Less: Allowance for bad debts with

banks and other financial institutions


Page 46 of 186


Carrying amount of balances with

banks and other financial institutions 2,279,318 1,072,991

Note: The 2019 balances with banks and other financial institutions increased by 112.43% over

the 2018 figure due to the increase in general deposits with banks and other financial institutions.

3. Lendings to banks and other financial institutions


Placements with domestic banks and

other financial institutions 4,600,000 500,000

Placements with overseas banks and

other financial institutions

Placements with domestic

non-banking financial institutions

800,000

Subtotal 5,400,000 500,000

Less: Allowance for losses on

lendings to banks and other financial

institutions

Carrying amount of lendings to

banks and other financial institutions 5,400,000 500,000

4. Financial assets designated at fair value through profit or loss


Held-for-trading bond investment

(Classified by issuer):

Governments and central banks 1,392,400

Banks and other financial institutions 20,005

Enterprises 410,165 231,536

Subtotal 1,822,570 231,536

Financial assets measured at fair value

through profit or loss


Governments and central banks 77,820

Policy banks 1,296,199

Banks and other financial institutions 5,587,083

Enterprises 5,849,660

Subtotal 12,810,762

Total 1,822,570 13,042,298

Note: As at 31 December 2019, of the held-for-trading bond assets held by the Group, bonds with

a par value of RMB200,000,000 were pledged for handling pledge-type repurchase business.

5. Financial assets under reverse repurchase agreements


Page 47 of 186


Classified by collateral:

Bonds under reverse repurchase

agreements 10,427,229 3,510,200

Incl.: Government bonds 2,220,183 1,300,000

Financial bonds 8,207,046 2,210,200

Bills under reverse repurchase

agreements 200,000

Incl.: Bank acceptance bills 200,000

Commercial acceptance

bills

Interbank CDs under reverse

repurchase agreements 500,000

Total financial assets under reverse

repurchase agreements 10,627,229 4,010,200

Less: Allowance for bad debts of

financial assets under reverse

repurchase agreements

Carrying amount of financial

assets under reverse repurchase

agreements

10,627,229 4,010,200

Classified by counterparty:

Non-banking financial institutions 9,942,229 675,000

From banks 685,000 3,335,200

Total financial assets under

reverse repurchase agreements 10,627,229 4,010,200


financial assets under reverse


Carrying amount of financial

assets under reverse repurchase

agreements

10,627,229 4,010,200

6. Loans and advances

(1) Loans and advances by personal and corporate borrowers are presented as follows:


Personal loans and advances: 44,509,179 35,336,734

Personal consumption loans 33,268,906 25,249,545

Personal business loans 7,663,261 7,442,801

Advance expenditure of credit

cards 3,577,012

2,644,388

Corporate loans and advances: 128,101,998 101,851,286

Loans 82,844,309 73,266,363

Discounting 38,488,847 24,375,970

Advances 287,689 379,084

Trade finance 6,481,153 3,829,869

Total loans and advances 172,611,177 137,188,020

Less: Allowance for impairment

losses on loans 5,878,607

4,591,017

Incl.: Individually assessed 2,843,605 1,989,989

Collectively assessed 3,035,002 2,601,028


Page 48 of 186


Carrying amount of loans and

advances 166,732,570

132,597,003

Notes: (1) As at 31 December 2019, the Group did not use the foregoing assets as collateral when

entering into repurchase agreements with other financial institutions.

(2) For the loan balance of shareholders holding 5% or more voting shares in the Bank, please

refer to Note XV.2(1).

(2) Discounting of bills by type:


Bank acceptance bills 35,707,210 22,867,182

Commercial acceptance

bills 2,781,637 1,508,788

Total 38,488,847 24,375,970

(3) Advances by type:


Acceptance advances 287,689 379,084

Total 287,689 379,084

(4) Loans and advances by industry sector:



Manufacturing 17,803,214 12,966,285

Wholesale and retail 19,410,738 17,743,801

Transport, storage and post 3,605,518 2,463,749

Farming, forestry, animal husbandry and

fishery 834,585 762,076

Power/heat/gas/water production and

supply 2,071,807 2,617,055

Real estate 19,353,038 14,219,433

Construction 9,080,755 8,920,116

Education 3,000 3,000

Financial industry 26,351,963 12,743,056

Neighborhood services and others 256,207 112,253


management 3,695,589 3,974,539

Culture, sports and entertainment 366,503 330,862

Information transmission, computer

service and software 2,231,192 1,566,802

Lodging and catering services 1,188 800

Leasing and commercial services 16,788,354 12,565,110

Mining 724,956 360,837


Page 49 of 186


Others 5,523,391 10,501,512



Less: Allowance for impairment losses on

loans 5,878,607

4,591,017



Carrying amount of loans and advances 166,732,570 132,597,003

(5) Loans and advances by the mode of guarantee are presented as follows:


Unsecured loans 30,704,583 21,102,365

Guaranteed loans 27,373,589 27,379,390

Collateralized loans 114,533,005 88,706,265

- Loans secured by mortgages 64,069,292 56,022,731

- Pledged loans 50,463,713 32,683,534




4,591,017





132,597,003

(6) Loans and advances by geographical distribution are presented as follows:


Wuhan 139,753,193 111,221,758

Ezhou 1,937,522 1,431,151

Yichang 5,027,768 4,030,556

Huangshi 4,415,290 4,130,084

Jingmen 2,256,009 1,960,281

Xiangyang 2,825,460 1,877,636

Jingzhou 2,264,055 1,344,043

Enshi 1,686,980 1,648,941

Shiyan 870,100 1,052,131

Xiaogan 1,941,566 1,458,275

Xianning 800,727 460,932

Huanggang 390,189 187,564

Xiantao 585,922

Suizhou 229,540

Chongqing 7,626,856 6,384,668




4,591,017





132,597,003

(7) Overdue loans are presented as follows:

Item

31 December 2019

Overdue for

less than 3

months

Overdue for

3-12 months

Overdue for

1-3 years

Overdue

for over 3

years

Total


Page 50 of 186

Item

31 December 2019

Overdue for

less than 3

months

Overdue for

3-12 months

Overdue for

1-3 years

Overdue

for over 3

years

Total

Unsecured loans 10,082 19,446 47,547 30,000 107,075

Guaranteed loans 68,440 191,257 65,780 859,945 1,185,422

Collateralized

loans

- Loans secured by

mortgages 291,840 362,665 133,906 437,488 1,225,899

- Pledged loans 1,899 10,000 11,445 230,077 253,421

Total loans and

advances 372,261 583,368 258,678 1,557,510 2,771,817

Item

31 December 2018

Overdue for

less than 3

months

Overdue for

3-12 months

Overdue for

1-3 years

Overdue

for over 3

years

Total

Unsecured loans 15,309 15,836 59,337 30,745 121,227

Guaranteed loans 23,385 88,710 217,080 1,060,968 1,390,143

Collateralized loans

- Loans secured by

mortgages 167,681 106,307 301,274 736,439 1,311,701

- Pledged loans 3,674 7,945 25,412 251,355 288,386

Total loans and

advances 210,049 218,798 603,103 2,079,507 3,111,457

(8) Changes in allowance for impairment losses on loans:


Beginning balance 4,591,017 4,341,694

Provisioning during the period 2,011,485 2,208,581

Transfer-out during the period

Write-off during the period 997,309 2,024,479

Reversed during the period 273,414 65,221

- Loans and advances written off in

previous years and recovered during the

period

272,839 64,785

- Reversed due to rise in discounted value

- Exchange gains or losses and other

adjustments 575 436

Ending balance 5,878,607 4,591,017


Allowance for impairment losses on

corporate loans: 4,994,091

3,756,580

Individually assessed 2,837,914 1,935,207



Page 51 of 186



personal loans: 884,516 834,437

Individually assessed 5,691 54,782

Collectively assessed 878,825 779,655

Total 5,878,607 4,591,017

(9) Write-off of non-performing loans and off-balance-sheet accrued interest receivable:

Item 2019 2018

Loan principal written off 997,309 2,024,479

Off-balance-sheet accrued interest

receivable written off 446,270

1,002,280

Total 1,443,579 3,026,759

7. Available-for-sale financial assets

(1) Classification of available-for-sale financial assets

Item 31 December 2019

Book balance Allowance for

impairment

losses

Carrying

amount

Available-for-sale debt instruments 69,501,508 69,501,508

Available-for-sale equity instruments 15,582 15,582

Incl.: Equity instruments at fair value

Equity instruments at cost 15,582 15,582

Total 69,517,090 69,517,090



impairment losses

Carrying

amount

Available-for-sale debt instruments 57,145,516 57,145,516

Available-for-sale equity instruments 15,582 15,582

Incl.: Equity instruments at fair value

Equity instruments at cost 15,582 15,582

Total 57,161,098 57,161,098

(2) Available-for-sale financial assets at fair value at the period end

Classification of available-for-sale financial

assets

Available-for

-sale equity

instruments

Available-for-

sale debt

instruments

Total

Amortized cost 69,208,252 69,208,252

Fair value 69,501,508 69,501,508

Changes in fair value accumulatively recognized

in other comprehensive income

293,256 293,256

Impairment amount set aside

(3) Available-for-sale financial assets at cost at the period end

For the equity investment without quoted price in an active market and its fair value cannot

be reliably measured, the Group measures it at cost and has no disposal plan for relevant equity

investment in the foreseeable future. As at the end of the reporting period, the equity investment

measured at cost is presented as follows:


Page 52 of 186

Name of investee

Book balance

Shareholding

percentage in

investee (%) 31 December

2018

Incre

ase

durin

g the

perio

d

Decr

ease

durin

g the

perio

d

31

December

2019

Wuhan Steel Electricity Co.,

Ltd.

8,030 8,030 0.88

China UnionPay Co., Ltd. 7,152 7,152 0.27

Urban Commercial Bank

Clearing Center 400

400 1.33

Total 15,582 15,582

Name of investee

Allowance for impairment losses Cash

dividend

during the

period

31

December

2018

Increase

during the

period

Decrease

during the

period

31

December

2019


Ltd.

522

China UnionPay Co., Ltd. 1,200


Clearing Center

Total 1,722

Notes: (1) As at 31 December 2019, available-for-sale financial assets held by the Group had

not been impaired, so no allowance for impairment losses was set aside for available-for-sale

financial assets.

(2) As at 31 December 2019, the Group’s available-for-sale financial assets included no

bonds pledged as collaterals.



Government bonds 69,933,057 33,892,122


Bonds of policy banks 3,173,090 3,213,148

Bank bonds 870,000 910,000

Interbank CDs 1,244,223

Corporate bonds 2,680,864 1,704,626

Other bonds 1,253,800 1,429,174

Total 79,155,034 41,149,070


losses on held-to-maturity

investments

Carrying amount of

held-to-maturity investments 79,155,034 41,149,070

Notes: (1) As at 31 December 2019, held-to-maturity bonds held by the Bank had not been

impaired, so no allowance for impairment losses was set aside for held-to-maturity investments.

(2) As at 31 December 2019, of the held-to-maturity financial assets held by the Group, bonds

with a par value of RMB52,643,412,500 were pledged for handling pledge-type repurchase

business, time deposit business of treasury bonds and corporate negotiated deposits.


Page 53 of 186

9. Receivables investment


Government bonds 29,115 28,088

Wealth management products 30,000

Asset management plans and fund

trust plans 26,908,233 35,661,360

Asset-backed securities 725,064 200,000

Other investments 1,164 1,164

Total 27,663,576 35,920,612


losses on receivables investment 1,038,457

1,047,153

Receivables investment 26,625,119 34,873,459

Changes in allowance for impairment losses on receivables investment:



Provisioning during the period -8,696 3,094


Write-off during the period

Reversed during the period

Ending balance 1,038,457 1,047,153

10. Long-term equity investment

Investee 31 December 2019 31 December 2018

Book

balance

Allo

wanc

e for

impai

rment

losse

s

Carrying

amount

Book

balance

Allo

wanc

e for

impai

rment

losse

s

Carrying

amount

Associate:

Aerospace Science & Industry

Financial Leasing Co., Ltd.

822,813 822,813 787,643 787,643

Total 822,813 822,813 787,643 787,643

(continued)

Investee

Change during the period

Addi

tiona

l

inves

tmen

t

Redu

ced

inves

tmen

t

Investment

gain or loss

recognized

under equity

method

Other

compreh

ensive

income

adjustme

nts

Other

equity

change

s

Announced

payment of

cash

dividend or

profit

Allow

ance

for

impair

ment

losses

set

aside

Ot

her

s

Associate:

Aerospace

Science &

35,170


Page 54 of 186

Investee

Change during the period

Addi

tiona

l

inves

tmen

t

Redu

ced

inves

tmen

t

Investment

gain or loss

recognized

under equity

method

Other

compreh

ensive

income

adjustme

nts

Other

equity

change

s

Announced

payment of

cash

dividend or

profit

Allow

ance

for

impair

ment

losses

set

aside

Ot

her

s

Industry

Financial

Leasing Co.,

Ltd.

Total 35,170

Detailed information on the associate:

Company

name

Shareholdi

ng

percentage

(%)

Voting

right

percentage

(%)

Place of registration Busin

ess

natur

e

Registere

d capital

Aerospace

Science &

Industry

Financial

Leasing Co.,

Ltd.

25 25 F/4 & 5, Wealth Plaza, 18

Jinyinhu Road, Dongxihu

District, Wuhan City (11)

Finan

cial

leasin

g

3,000,000

Note: Please refer to Note X.2 for information on equity in the associate.

11. Fixed assets, accumulated depreciation and allowance for impairment losses on fixed assets


Fixed assets 1,484,510 1,474,700

Disposal of fixed assets

Total 1,484,510 1,474,700

(1) Fixed assets

Item Buildings and

structures

Transporti

ng

vehicles

Electronic

equipment

Furniture Total

I. Original book value

1. Beginning balance 1,956,412 25,727 549,395 40,521 2,572,055

2. Increase during the

period

87,495 666 45,669 2,674 136,504

(1) Purchases 666 45,423 2,421 48,510

(2) Transfer-in of

construction in

progress

87,495 246 253 87,994

(3) Increase in business

combination

3. Decrease during the

period

1,337 15,589 528 17,454


Page 55 of 186

Item Buildings and

structures

Transporti

ng

vehicles

Electronic

equipment

Furniture Total

Disposal or

retirement

1,337 15,589 528 17,454

4. Ending balance 2,043,907 25,056 579,475 42,667 2,691,105

II. Accumulated

depreciation

1. Beginning balance 614,138 22,943 423,901 34,886 1,095,868


period

61,273 925 59,705 2,287 124,190

Provisions 61,273 925 59,705 2,287 124,190


period

1,314 13,128 508 14,950

Disposal or

retirement

1,314 13,128 508 14,950

4. Ending balance 675,411 22,554 470,478 36,665 1,205,108

III. Allowance for

impairment losses

1. Beginning balance 1,487 1,487


period

Provisions


period

Disposal or

retirement

4. Ending balance 1,487 1,487

IV. Carrying amount

1. Ending carrying

amount

1,367,009 2,502 108,997 6,002 1,484,510

2. Beginning carrying

amount

1,340,787 2,784 125,494 5,635 1,474,700

Notes: (1) As at 31 December 2019, no fixed assets of the Group were from significant leases in

lieu of purchase or finance leases.

(2) Fixed assets without title deed in place:

As at 31 December 2019, the Group had four real properties without title deed due to problems

left over from history, with original value being RMB17,679,000 and carrying amount being

RMB607,000. The foregoing matters do not affect the Group's rights in these properties.

12. Construction in progress

（1） Basic information on construction in progress

Item Ending balance Beginning balance

Book

balance

Allowanc

e for

impairme

Net

carrying

amount

Book

balance

Allowanc

e for

impairme

Net

carrying

amount


Page 56 of 186

nt losses nt losses

Business

properties and

fit-outs

2,944 2,944 36,038 36,038

Others 8,846 8,846 332 332

Total 11,790 11,790 36,370 36,370

（2） Changes in important projects under construction

Name of project

Beginn

ing

balanc

e

Increase

during the

period

Transferred

to fixed

assets during

the period

Other

decreas

es

Ending

balance

Interest

capitalizatio

n ratio (%)

Business

properties and

fit-outs

36,038 54,900 87,994 2,944

Others 332 8,514 8,846

Total 36,370 63,414 87,994 11,790

Notes: (1) There was no interest capitalization expense during construction in progress.

(2) As at 31 December 2019, no construction in progress of the Group had been impaired.

13. Intangible assets

Details of intangible assets (a):

Item Software Land use rights Total

I. Original book value

1. Beginning balance 119,971 76,276 196,247


period

12,469 12,469

(1) Purchases 12,469 12,469

(2) In-house research

and development

(3) Increase in

business combination


period

Disposal

4. Ending balance 132,440 76,276 208,716

II. Accumulated

amortization

1. Beginning balance 99,358 25,275 124,633


period

10,645 3,862 14,507

Amortization 10,645 3,862 14,507


period

Disposal

4. Ending balance 110,003 29,137 139,140

III. Allowance for

impairment losses

1. Beginning balance


period


Page 57 of 186

Item Software Land use rights Total

Provisions


period

Disposal

4. Ending balance

IV. Carrying amount

1. Ending carrying

amount

22,437 47,139 69,576

2. Beginning carrying

amount

20,613 51,001 71,614

Details of intangible assets (b):

Item

Way of

acquisition

Original

value

Accumulated

amortization

Remaining

amortization period

Software Purchase 132,440 110,003 2 to 5 years

Land use rights Purchase 76,276 29,137 32 years

Total 208,716 139,140

14. Deferred income tax assets and deferred income tax liabilities

(1) Recognized deferred income tax assets and deferred income tax liabilities:

Item 31

December

2019

31

December

2018

I. Deferred income tax assets

Allowance for impairment losses on assets 1,667,966 1,309,778

Difference in amortization years of long-term deferred expenses 17 57

Difference in amortization years of intangible assets 8,849 9,251

Gains on changes in fair value of financial liabilities designated at

fair value through profit or loss

9,489

Others 199,611 202,393

Total 1,876,443 1,530,968

II. Deferred income tax liabilities

Gains on changes in fair value of financial assets designated at fair

value through profit or loss

508 1,026

Unrealized gains on available-for-sale financial assets 73,314 121,406

Total 73,822 122,432

Note: Balance of deferred income tax liability in 2019 fell by 39.70% from 2018 due to decrease

in unrealized gains on available-for-sale financial assets.


Page 58 of 186

(2) Asset or liability items giving rise to temporary differences

Item

Temporary difference

Amount on

31 December

2019

Amount on

31 December

2018

I. Deductible temporary difference items giving rise to deferred

income tax assets

Allowance for impairment losses on assets 6,671,864 5,239,110

Deductible temporary differences arising from different

amortization periods of long-term deferred expenses

68 227

Deductible temporary differences arising from different

amortization periods of intangible assets

35,396 37,004

Gains on changes in fair value of financial liabilities designated at


37,958

Others 798,444 809,572

Total 7,505,772 6,123,871

II. Taxable temporary difference items giving rise to deferred

income tax liabilities

Gains on changes in fair value of financial assets designated at


2,033 4,105

Unrealized gains on available-for-sale financial assets 293,256 485,624

Total 295,289 489,729

15. Other assets

Other assets are presented by item as follows:


Deferred expenses 64,301 57,406

Dividend payable 522 522

Other receivables 4,622,078 1,349,296

Repossessed assets 381,767 224,294

Long-term deferred expenses 118,932 117,335

Agency securities 8,690 13,069

Deposits with correspondent banks 9,019

Interest receivable 2,229,458 2,289,154

Assets from continuous involvement 560,803

Others 142,032 23,876

Total 8,137,602 4,074,952

Note: Balance of other assets in 2019 rose by 99.70% over 2018 due to increase in


Page 59 of 186

non-recourse factoring.

(1) Other receivables

A. Other receivables are presented by item as follows:


Factoring receivable (domestic

factoring without recourse) 4,158,611

1,088,996

Other current account and temporary

payment 528,933

263,638

Refundable deposits 640 1,030

Subtotal 4,688,184 1,353,664

Less: Bad debt provisions 66,106 4,368

Carrying amount of other receivables 4,622,078 1,349,296

B. Changes in allowance for impairment losses on other receivables

Item 2019 2018

Beginning balance 4,368 992

Provisioning during the year 68,645 13,903

Reversed during the year 3,776 1,790

Write-off during the year 10,683 12,317

Ending balance 66,106 4,368

Note: As at 31 December 2019, other receivables had no arrears of shareholders holding 5%

or more shares of the Bank.

C. Other receivables are presented by account age as follows:


Within 1 year 4,550,617 1,277,702

1-2 years 76,885 39,894

2 to 3 years 34,213 19,501

Over 3 years 26,469 16,567

Subtotal 4,688,184 1,353,664

Less: Bad debt provisions 66,106 4,368

Carrying amount of other

receivables 4,622,078

1,349,296

(2) Long-term deferred expenses

Item Beginnin

g balance

Increase

during the

period

Amortizatio

n during the

period

Other

decreases

Ending

balance

Reason

for other

decreases

Renovation

and

improvement

expenses

117,335 57,595 55,998 118,932

Total 117,335 57,595 55,998 118,932

(3) Agency securities


Securities issued on an agency basis -32,849 -33,473

Securities cashed on an agency basis 41,628 46,632

Others -89 -90

Total 8,690 13,069

(4) Interest receivable


Page 60 of 186


Interest receivable from bonds 1,864,621 1,504,605

Interest receivable from loans and

advances 334,728 290,141

Interest from transactions with

financial institutions 30,109 29,109

Interest receivable from

principal-guaranteed wealth

management products

465,299

Total 2,229,458 2,289,154

Changes in interest receivable

Item 2019 2018


Provisioning during the year 13,103,488 11,140,093

Received during the year 13,163,184 10,568,907

Ending balance 2,229,458 2,289,154

16. Allowance for impairment losses on assets

Item

31

December

2018

Provisioni

ng during

the period

Reverse

d

during

the

period

Write-off

during the

period

31

December

2019

Allowance for losses on

loans and advances 4,591,017

2,011,485 273,414 997,309 5,878,607

Bad debt provisions 4,368 68,645 3,776 10,683 66,106

Allowance for impairment

losses on receivables

investment

1,047,153 -8,696 1,038,457


losses on fixed assets 1,487 1,487


losses on repossessed assets 14,610 -1,600 13,010

Total 5,644,025 2,086,044 275,590 1,007,992 6,997,667

17. Borrowings from central banks


Borrowings from central banks 63,000 1,700,000

Total 63,000 1,700,000

Note: The balance of borrowings from central banks at the end of 2019 fell by 96.29% as

compared to 2018 due to decline in the Group’s relending supporting small enterprises.

18. Deposits from banks and other financial institutions


Money for clearing from domestic

banks

240,890 110,749

General deposits from domestic banks 8,102,936 1,100,013



863,614 991,893

General deposits from domestic


3,049 2,597,149

Total 9,210,489 4,799,804


Page 61 of 186

19. Borrowings from banks and other financial institutions


Placements from domestic banks and

other financial institutions 1,850,576 1,500,000

Placements from overseas banks and

other financial institutions 4,290

Total 1,850,576 1,504,290

From banks 1,850,576 1,504,290

Total 1,850,576 1,504,290

20. Financial liabilities designated at fair value through profit or loss


Principal-guaranteed wealth management

products issued 13,190,558

Total 13,190,558

Note: Principal-guaranteed wealth management products issued by the Group and financial assets

invested by it constitute a part of financial instrument portfolio managed at fair value, and are

recognized as financial liabilities and financial assets designated at fair value through profit or loss,

respectively. As of 31 December 2019, the balance of the above-mentioned issued

principal-guaranteed wealth management products was zero.

21. Financial assets under repurchase agreements


Securities under repurchase agreements:



Subtotal 16,676,250 5,615,100

Bills under repurchase agreements:


Subtotal 17,738,392 11,881,138

Total 34,414,642 17,496,238

22. Customer deposits

(1) Customer deposits are presented by deposit type as follows:


Demand deposits:

109,526,753 107,711,523

Corporate customers

86,188,086 87,732,106


Page 62 of 186


Personal customers

23,338,667 19,979,417

Time deposits:

101,465,491 53,773,663

Corporate customers

56,267,196 28,323,277

Personal customers

45,198,295 25,450,386

Margin deposits

9,265,067 7,854,304

Other deposits

30,084,180 19,489,676

Total

250,341,491 188,829,166

Notes: 1. Other deposits mainly include large-value CDs issued and treasury term deposits.

2. For the deposit balance of shareholders holding 5% or more voting shares in the Group, please

refer to Note XV.2(2).

(2) Details of margin deposits received that are included in the customer deposits are presented as

follows:


Margin on acceptance bills 6,221,808 5,063,324

Margin on L/C issuance 914,194 346,424

Margin on guarantee 380,821 462,723

Other margins 1,748,244 1,981,833

Total 9,265,067 7,854,304

(3) Customer deposits are presented by geographical distribution as follows:


Wuhan 214,752,470 162,757,085

Huangshi 4,073,148 3,317,988

Yichang 6,315,904 4,798,239

Ezhou 2,398,308 1,616,904

Jingmen 1,230,771 1,221,150

Xiangyang 2,459,613 686,210

Jingzhou 5,124,517 4,130,281

Enshi 2,005,738 2,216,791

Shiyan 851,516 1,253,350

Xiaogan 1,660,530 1,140,658


Page 63 of 186


Xianning 1,036,899 703,838

Huanggang 920,926 460,649

Xiantao 313,258 13,289

Chongqing 7,197,893 4,512,734

Total 250,341,491 188,829,166

23. Payroll payable

(1) Classification of payroll payable

Item Beginning

balance

Increase

during the

period

Decrease

during the

period

Ending

balance

I. Short-term compensation 397,616 1,189,473 1,238,521 348,568

II. Welfare after resignation - Defined

contribution plan 8,430 164,573 169,077 3,926

Total 406,046 1,354,046 1,407,598 352,494

(2) Presentation of short-term compensation

Item Beginning

balance

Increase

during the

period

Decrease

during the

period

Ending

balance

1. Wages, bonus, allowances

and subsidies 302,834 944,008 963,442 283,400

2. Staff benefits 44,282 44,282

3. Social security contributions 38,974 91,233 127,681 2,526

Incl.: Medical insurance 38,644 87,395 123,953 2,086

Industrial injury

insurance 326 528 421 433

Birth insurance 4 3,310 3,307 7

4. Housing provident funds 412 69,130 69,333 209

5. Labor union funds and staff

education funds 55,396 40,820 33,783 62,433

Total 397,616 1,189,473 1,238,521 348,568

(3) Presentation of defined contribution plan

Item Beginning

balance

Increase

during the

period

Decrease

during the

period

Ending

balance

1. Basic endowment insurance 199 89,594 89,548 245

2. Unemployment insurance 115 3,611 3,609 117

3. Enterprise annuity

contribution 8,116 71,368 75,920 3,564

Total 8,430 164,573 169,077 3,926

Note: As at 31 December 2019, payroll payable excluded any payables in arrears.

24. Taxes payable


VAT payable 121,226 124,264


Page 64 of 186


Surcharges payable 13,689 9,961

Property tax payable 3,420 3,216

Land use tax payable 130 293

Land appreciation tax payable 7,868 7,700

Personal income tax payable 11,435 4,587

Corporate income tax payable 2,071

Others 2,311 486

Total 162,150 150,507

25. Bonds payable

Bond name 31 December 2019 31 December 2018


Tier-2 capital bonds 4,996,409 4,995,998

Interbank CDs 73,178,436 58,413,417

Total 80,774,169 67,408,116

Bond name Date of issue Term Interest

rate

Total par

value

Ending

balance

16 Hankou Bank MSE

02

22 August 2016 5 years 3.40% 1,500,000 1,499,615

16 Hankou Bank MSE

04

6 September 2016 5 years 3.40% 1,100,000 1,099,709

16 Hankou Bank

Tier-2

23 December 2016 10 years 4.50% 2,000,000 1,998,265

17 Hankou Bank

Tier-2

27 April 2017 10 years 5.00% 3,000,000 2,998,144

19 Hankou Bank

CD001

7 January 2019 12

months

3.40% 1,000,000 967,118

19 Hankou Bank

CD011

17 January 2019 12

months

3.30% 550,000 532,336

19 Hankou Bank

CD013

23 January 2019 12

months

3.23% 900,000 871,316

19 Hankou Bank

CD018

6 March 2019 12

months

3.20% 780,000 755,686

19 Hankou Bank

CD021

7 March 2019 12

months

3.18% 1,200,000 1,162,917

19 Hankou Bank

CD027

21 March 2019 12

months

3.25% 200,000 193,688

19 Hankou Bank

CD030

22 March 2019 12

months

3.27% 1,500,000 1,452,502

19 Hankou Bank

CD032

25 March 2019 12

months

3.23% 500,000 484,356

19 Hankou Bank

CD034

2 April 2019 9

months

3.05% 100,000 97,759

19 Hankou Bank

CD035

2 April 2019 12

months

3.17% 990,000 959,581

19 Hankou Bank

CD036

4 April 2019 12

months

3.15% 1,000,000 969,462


Page 65 of 186


rate

Total par

value

Ending

balance

19 Hankou Bank

CD037

4 April 2019 9

months

3.05% 100,000 97,759

19 Hankou Bank

CD038

9 April 2019 9

months

3.05% 50,000 48,880

19 Hankou Bank

CD039

11 April 2019 9

months

3.10% 180,000 175,888

19 Hankou Bank

CD040

11 April 2019 12

months

3.23% 570,000 552,117

19 Hankou Bank

CD042

12 April 2019 12

months

3.25% 400,000 387,409

19 Hankou Bank

CD044

15 April 2019 12

months

3.25% 70,000 67,796

19 Hankou Bank

CD045

16 April 2019 12

months

3.27% 260,000 251,767

19 Hankou Bank

CD047

17 April 2019 12

months

3.27% 700,000 677,717

19 Hankou Bank

CD048

18 April 2019 12

months

3.30% 180,000 174,234

19 Hankou Bank

CD051

7 May 2019 9

months

3.28% 200,000 195,138

19 Hankou Bank

CD052

7 May 2019 12

months

3.36% 400,000 386,997

19 Hankou Bank

CD053

9 May 2019 9

months

3.25% 240,000 234,259

19 Hankou Bank

CD055

13 May 2019 12

months

3.36% 240,000 232,198

19 Hankou Bank

CD057

14 May 2019 12

months

3.38% 1,500,000 1,450,958

19 Hankou Bank

CD059

17 May 2019 9

months

3.30% 180,000 175,629

19 Hankou Bank

CD060

17 May 2019 12

months

3.38% 330,000 319,211

19 Hankou Bank

CD062

20 May 2019 12

months

3.38% 260,000 251,499

19 Hankou Bank

CD063

20 May 2019 9

months

3.30% 20,000 19,514

19 Hankou Bank

CD065

21 May 2019 12

months

3.40% 570,000 551,257

19 Hankou Bank

CD066

22 May 2019 9

months

3.32% 350,000 341,451

19 Hankou Bank

CD067

24 May 2019 12

months

3.42% 600,000 580,159

19 Hankou Bank

CD069

30 May 2019 9

months

3.40% 100,000 97,500

19 Hankou Bank

CD071

4 June 2019 12

months

3.50% 150,000 144,928

19 Hankou Bank

CD073

12 June 2019 12

months

3.63% 600,000 578,872

19 Hankou Bank

CD075

14 June 2019 12

months

3.72% 200,000 192,827

19 Hankou Bank

CD076

17 June 2019 12

months

3.78% 500,000 481,789

19 Hankou Bank

CD078

18 June 2019 12

months

3.70% 900,000 867,888

19 Hankou Bank 21 June 2019 9 3.55% 1,000,000 974,111


Page 66 of 186


rate

Total par

value

Ending

balance

CD080 months

19 Hankou Bank

CD081

21 June 2019 12

months

3.78% 1,000,000 963,577

19 Hankou Bank

CD082

24 June 2019 9

months

3.55% 500,000 487,056

19 Hankou Bank

CD083

2 July 2019 6

months

3.40% 500,000 491,597

19 Hankou Bank

CD084

2 July 2019 9

months

3.50% 490,000 477,444

19 Hankou Bank

CD085

2 July 2019 12

months

3.65% 1,000,000 964,785

19 Hankou Bank

CD087

4 July 2019 6

months

3.35% 400,000 393,340

19 Hankou Bank

CD088

8 July 2019 9

months

3.40% 980,000 955,588

19 Hankou Bank

CD089

8 July 2019 12

months

3.55% 1,000,000 965,717

19 Hankou Bank

CD090

16 July 2019 6

months

3.20% 500,000 492,084

19 Hankou Bank

CD091

6 August 2019 12

months

3.28% 50,000 48,412

19 Hankou Bank

CD092

7 August 2019 6

months

3.10% 500,000 492,245

19 Hankou Bank

CD093

7 August 2019 12

months

3.28% 490,000 474,356

19 Hankou Bank

CD094

15 August 2019 12

months

3.28% 460,000 445,353

19 Hankou Bank

CD095

20 August 2019 9

months

3.15% 50,000 48,848

19 Hankou Bank

CD096

20 August 2019 12

months

3.28% 70,000 67,777

19 Hankou Bank

CD097

21 August 2019 6

months

3.13% 500,000 492,171

19 Hankou Bank

CD098

22 August 2019 6

months

3.10% 100,000 98,457

19 Hankou Bank

CD099

22 August 2019 12

months

3.28% 200,000 193,632

19 Hankou Bank

CD100

23 August 2019 6

months

3.18% 1,000,000 984,264

19 Hankou Bank

CD101

23 August 2019 12

months

3.35% 750,000 725,690

19 Hankou Bank

CD102

27 August 2019 6

months

3.18% 720,000 708,670

19 Hankou Bank

CD103

27 August 2019 12

months

3.40% 1,000,000 967,118

19 Hankou Bank

CD104

28 August 2019 9

months

3.35% 300,000 292,660

19 Hankou Bank

CD105

3 September 2019 9

months

3.45% 990,000 965,074

19 Hankou Bank

CD106

3 September 2019 12

months

3.45% 280,000 270,662

19 Hankou Bank

CD107

4 September 2019 9

months

3.45% 890,000 867,592

19 Hankou Bank

CD108

4 September 2019 12

months

3.50% 990,000 956,345


Page 67 of 186


rate

Total par

value

Ending

balance

19 Hankou Bank

CD109

5 September 2019 9

months

3.45% 330,000 321,632

19 Hankou Bank

CD110

5 September 2019 12

months

3.50% 850,000 821,180

19 Hankou Bank

CD111

6 September 2019 9

months

3.45% 1,000,000 974,822

19 Hankou Bank

CD112

6 September 2019 12

months

3.50% 1,000,000 966,184

19 Hankou Bank

CD113

12 September 2019 12

months

3.40% 600,000 580,271

19 Hankou Bank

CD114


months

3.40% 1,000,000 967,118

19 Hankou Bank

CD115


months

3.40% 390,000 377,176

19 Hankou Bank

CD116


months

3.40% 360,000 348,162

19 Hankou Bank

CD117


months

3.40% 500,000 483,559

19 Hankou Bank

CD118

10 October 2019 9

months

3.30% 200,000 195,144

19 Hankou Bank

CD119

10 October 2019 12

months

3.35% 920,000 890,100

19 Hankou Bank

CD120

15 October 2019 9

months

3.30% 200,000 195,178

19 Hankou Bank

CD121

15 October 2019 12

months

3.35% 300,000 290,276

19 Hankou Bank

CD122

16 October 2019 9

months

3.35% 450,000 438,990

19 Hankou Bank

CD123

16 October 2019 12

months

3.40% 1,000,000 966,944

19 Hankou Bank

CD124

17 October 2019 3

months

3.10% 190,000 188,499

19 Hankou Bank

CD125

17 October 2019 9

months

3.30% 50,000 48,786

19 Hankou Bank

CD126

23 October 2019 12

months

3.38% 130,000 125,727

19 Hankou Bank

CD127

24 October 2019 12

months

3.40% 350,000 338,461

19 Hankou Bank

CD128

24 October 2019 9

months

3.35% 100,000 97,536

19 Hankou Bank

CD129

24 October 2019 6

months

3.25% 50,000 49,192

19 Hankou Bank

CD130

28 October 2019 6

months

3.30% 500,000 491,884

19 Hankou Bank

CD131

28 October 2019 9

months

3.35% 170,000 165,841

19 Hankou Bank

CD132

29 October 2019 9

months

3.38% 750,000 731,491

19 Hankou Bank

CD133

4 November 2019 3

months

3.20% 250,000 248,005

19 Hankou Bank

CD134

4 November 2019 12

months

3.40% 330,000 319,149

19 Hankou Bank

CD135

5 November 2019 6

months

3.30% 50,000 49,193

19 Hankou Bank 5 November 2019 9 3.40% 100,000 97,518


Page 68 of 186


rate

Total par

value

Ending

balance

CD136 months

19 Hankou Bank

CD137

5 November 2019 12

months

3.43% 150,000 145,026

19 Hankou Bank

CD138

5 November 2019 12

months

3.43% 500,000 483,419

19 Hankou Bank

CD139

6 November 2019 3

months

3.25% 1,000,000 991,897

19 Hankou Bank

CD140

8 November 2019 12

months

3.45% 1,000,000 966,651

19 Hankou Bank

CD141

8 November 2019 9

months

3.40% 200,000 195,036

19 Hankou Bank

CD142

11 November 2019 12

months

3.50% 1,000,000 966,184

19 Hankou Bank

CD143

11 November 2019 9

months

3.45% 50,000 48,741

19 Hankou Bank

CD144

12 November 2019 6

months

3.35% 120,000 118,034

19 Hankou Bank

CD145

12 November 2019 12

months

3.45% 60,000 57,999

19 Hankou Bank

CD146

13 November 2019 12

months

3.50% 120,000 115,921

19 Hankou Bank

CD147

14 November 2019 6

months

3.38% 100,000 98,347

19 Hankou Bank

CD148

14 November 2019 12

months

3.50% 50,000 48,305

19 Hankou Bank

CD149

15 November 2019 9

months

3.45% 40,000 38,993

19 Hankou Bank

CD150

15 November 2019 12

months

3.50% 150,000 144,928

19 Hankou Bank

CD151

18 November 2019 12

months

3.53% 320,000 309,089

19 Hankou Bank

CD152

18 November 2019 9

months

3.48% 50,000 48,730

19 Hankou Bank

CD153

19 November 2019 3

months

3.30% 820,000 813,254

19 Hankou Bank

CD154

19 November 2019 6

months

3.40% 100,000 98,337

19 Hankou Bank

CD155

19 November 2019 9

months

3.48% 80,000 77,969

19 Hankou Bank

CD156

19 November 2019 12

months

3.53% 500,000 482,952

19 Hankou Bank

CD157

19 November 2019 12

months

3.53% 70,000 67,613

19 Hankou Bank

CD158

20 November 2019 9

months

3.50% 1,000,000 974,467

19 Hankou Bank

CD159

20 November 2019 6

months

3.40% 660,000 649,027

19 Hankou Bank

CD160

20 November 2019 3

months

3.30% 700,000 694,241

19 Hankou Bank

CD161

20 November 2019 12

months

3.53% 470,000 453,890

19 Hankou Bank

CD162

21 November 2019 6

months

3.45% 1,000,000 983,133

19 Hankou Bank

CD163

21 November 2019 9

months

3.53% 1,000,000 974,070


Page 69 of 186


rate

Total par

value

Ending

balance

19 Hankou Bank

CD164

21 November 2019 12

months

3.55% 1,000,000 965,627

19 Hankou Bank

CD165

22 November 2019 9

months

3.53% 1,000,000 974,253

19 Hankou Bank

CD166

9 December 2019 3

months

3.20% 1,000,000 992,107

19 Hankou Bank

CD167

9 December 2019 6

months

3.35% 1,000,000 983,526

19 Hankou Bank

CD168

10 December 2019 3

months

3.20% 180,000 178,579

19 Hankou Bank

CD169

11 December 2019 3

months

3.25% 500,000 495,992

19 Hankou Bank

CD170

11 December 2019 1 month 3.25% 50,000 49,858

19 Hankou Bank

CD171

12 December 2019 3

months

3.25% 1,000,000 991,984

19 Hankou Bank

CD172

12 December 2019 1 month 3.25% 100,000 99,726

19 Hankou Bank

CD173

13 December 2019 3

months

3.25% 1,000,000 991,984

19 Hankou Bank

CD174

13 December 2019 1 month 3.25% 390,000 388,929

19 Hankou Bank

CD175

13 December 2019 1 month 3.25% 400,000 398,902

19 Hankou Bank

CD176

16 December 2019 3

months

3.25% 1,500,000 1,487,976

19 Hankou Bank

CD177

16 December 2019 1 month 3.25% 650,000 648,216

19 Hankou Bank

CD178

17 December 2019 3

months

3.20% 780,000 773,843

19 Hankou Bank

CD179

18 December 2019 1 month 3.25% 500,000 498,628

19 Hankou Bank

CD180

18 December 2019 3

months

3.20% 150,000 148,816

19 Hankou Bank

CD181

19 December 2019 1 month 3.25% 980,000 977,310

19 Hankou Bank

CD182

20 December 2019 1 month 3.25% 300,000 299,177

19 Hankou Bank

CD183

23 December 2019 3

months

3.20% 1,000,000 992,106

19 Hankou Bank

CD184

24 December 2019 1 month 3.25% 300,000 299,018

19 Hankou Bank

CD185

24 December 2019 3

months

3.18% 1,000,000 992,155

19 Hankou Bank

CD186

27 December 2019 3

months

3.20% 1,000,000 992,106

19 Hankou Bank

CD187

30 December 2019 3

months

2.95% 500,000 496,360

Total 82,590,000 80,774,169

Note: 1) Description on financial bonds:

The Group was approved to issue financial bonds by the official document Y.SH.CH.X.ZH.Y.Z.

[2016] No. 104 issued by the People's Bank of China and the document Y.J.F. [2015] No. 413


Page 70 of 186

issued by CBRC in 2016. The details are as follows:

On 22 August 2016, Hankou Bank Co., Ltd. issued 5-year financial bonds with a fixed interest

rate. The bond name is 16 Hankou Bank MSE 02 with a par value of RMB1.5 billion, the issue

expenses of RMB975,000 and an annual interest rate of 3.40%. Interest will be paid regularly

every year.

On 6 September 2016, Hankou Bank Co., Ltd. issued 5-year financial bonds with a fixed interest

rate. The bond name is 16 Hankou Bank MSE 04 with a par value of RMB1.1 billion, the issue

expenses of RMB715,000 and an annual interest rate of 3.40%. Interest will be paid regularly

every year.

(2) Description on tier-2 capital bonds:

The Group was approved to issue tier-2 capital bonds by the official documents

Y.SH.CH.X.ZH.Y.Z. [2016] No. 233 issued by the People's Bank of China and the document

E.Y.J.F. [2016] No. 205 issued by CBRC Hubei Office in 2016. The details are as follows:

On 23 December 2016, Hankou Bank Co., Ltd. publicly issued tier-2 capital bonds with a fixed

interest rate on the interbank bonds market. The bond name is 16 Hankou Bank Tier-2 with a par

value of RMB2.0 billion, the issue expense of RMB3,000,000 and the bond term of 10 years.

These bonds are accompanied with the redemption right of issuer at the end of the fifth year. The

interest rate of these bonds is 4.50% and the interest will be paid regularly every year.

The Group was approved to issue tier-2 capital bonds by the official documents

Y.SH.CH.X.ZH.Y.Z. [2016] No. 233 issued by the People's Bank of China in 2016 and the

document E.Y.J.F. [2017] No. 9 issued by CBRC Hubei Office in 2017. The details are as follows:

On 27 April 2017, Hankou Bank Co., Ltd. publicly issued tier-2 capital bonds with a fixed interest

rate on the interbank bonds market. The bond name is 17 Hankou Bank Tier-2 with a par value of

RMB3.0 billion, the issue expense of RMB2,400,000 and the bond term of 10 years. These bonds

are accompanied with the redemption right of issuer at the end of the fifth year. The interest rate of

these bonds is 5.00% and the interest will be paid regularly every year.

(3) Description on interbank CDs:

The Group issued the document S.L.F. [2014] No. 4 based on the market interest rate pricing

self-discipline mechanism in 2014, deciding to include Hankou Bank as its basic member to issue

interbank CDs. The details are as follows:

On 7 January 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on

the interbank bond market. The bond name is 19 Hankou Bank CD001 with a par value of

RMB100 each, totaling RMB1.0 billion, and the issue price of RMB96.7118. Its value date is 8

January 2019 with a term of 1 year and the interest will be paid upon maturity.


Page 71 of 186



RMB100 each, totaling RMB550 million, and the issue price of RMB96.7885. Its value date is 18






On 6 March 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on the

interbank bond market. The bond name is 19 Hankou Bank CD018 with a par value of RMB100

each, totaling RMB780 million, and the issue price of RMB96.8828. Its value date is 7 March

2019 with a term of 1 year and the interest will be paid upon maturity.

On 7 March 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on the


each, totaling RMB1.2 billion, and the issue price of RMB96.9098. Its value date is 8 March 2019

with a term of 1 year and the interest will be paid upon maturity.

On 21 March 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on



March 2019 with a term of 1 year and the interest will be paid upon maturity.









On 2 April 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on the


each, totaling RMB100 million, and the issue price of RMB97.7597. Its value date is 3 April 2019

with a term of 9 months and the interest will be paid upon maturity.






Page 72 of 186



each, totaling RMB1.0 billion, and the issue price of RMB96.9462. Its value date is 8 April 2019












each, totaling RMB180 million, and the issue price of RMB97.7157. Its value date is 12 April

2019 with a term of 9 months and the interest will be paid upon maturity.






















Page 73 of 186





On 7 May 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on the


each, totaling RMB200 million, and the issue price of RMB97.5692. Its value date is 8 May 2019
















each, totaling RMB1.5 billion, and the issue price of RMB96.7305. Its value date is 15 May 2019















Page 74 of 186





















On 4 June 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on the


each, totaling RMB150 million, and the issue price of RMB96.6184. Its value date is 5 June 2019















Page 75 of 186







each, totaling RMB1.0 billion, and the issue price of RMB97.4111. Its value date is 24 June 2019




each, totaling RMB1.0 billion, and the issue price of RMB96.3577. Its value date is 24 June 2019






On 2 July 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on the


each, totaling RMB500 million, and the issue price of RMB98.3194. Its value date is 3 July 2019








each, totaling RMB1.0 billion, and the issue price of RMB96.4785. Its value date is 3 July 2019











Page 76 of 186



each, totaling RMB1.0 billion, and the issue price of RMB96.5717. Its value date is 9 July 2019






On 6 August 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on



August 2019 with a term of 1 year and the interest will be paid upon maturity.




August 2019 with a term of 6 months and the interest will be paid upon maturity.






















Page 77 of 186





























On 3 September 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs

on the interbank bond market. The bond name is 19 Hankou Bank CD105 with a par value of


September 2019 with a term of 9 months and the interest will be paid upon maturity.




September 2019 with a term of 1 year and the interest will be paid upon maturity.


Page 78 of 186






































Page 79 of 186









On 10 October 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on



October 2019 with a term of 9 months and the interest will be paid upon maturity.




October 2019 with a term of 1 year and the interest will be paid upon maturity.






















Page 80 of 186

































On 4 November 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on



November 2019 with a term of 3 months and the interest will be paid upon maturity.


Page 81 of 186




November 2019 with a term of 1 year and the interest will be paid upon maturity.





























On 11 November 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs





Page 82 of 186























RMB100 each, totaling RMB50 million, and the issue price of RMB96.6094 Its value date is 15















Page 83 of 186






































Page 84 of 186





















On 9 December 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on



December 2019 with a term of 3 months and the interest will be paid upon maturity.

On 9 December 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs on




On 10 December 2019, Hankou Bank Co., Ltd. made public issue of zero-coupon interbank CDs









Page 85 of 186




December 2019 with a term of 1 month and the interest will be paid upon maturity.























RMB100 each, totaling RMB1.5 billion and the issue price of RMB99.1984. Its value date is 17




RMB100 each, totaling RMB650 million and the issue price of RMB99.7255. Its value date is 17







Page 86 of 186






































Page 87 of 186

26. Other liabilities


Outward remittance 10,479 13,982

Other payables 223,160 225,932

Dividend payable 69,489 55,641

Deposits from correspondent

banks

3,378

Interest payable 4,753,593 3,192,044

Deferred income 106,474 93,414

On-lending funds 804,660

Liabilities from continuous

involvement 560,803

Other current liabilities 120,232 62,082

Total 6,648,890 3,646,473

(1) Other payables are presented by content as follows:


Amounts pending settlement and

clearing 26,011

78,168

Accrued expenses payable 105,607 99,619

Unclaimed funds 14 3

Others 91,528 48,142

Total 223,160 225,932

Note: Other payables at the end of the year included no amounts owed to corporate shareholders

holding 5% or more voting shares in the Group.

(2) Dividend payable

Main investor 31 December 2019 31 December 2018 Reason for

non-payment

Corporate

shareholders

68,126 54,480 Unclaimed

Natural person

shareholders

1,363 1,161 Unclaimed

Total 69,489 55,641

Note: The 2018 Annual General Meeting of the Group was held on 20 June 2019, at which the

Proposal on 2018 Profit Distribution Plan was reviewed and approved. Based on a total of

4,127,846,000 shares as at 31 December 2018 and a cash dividend of RMB0.11 (pre-tax) per share,

RMB454,063,000 of cash dividend was distributed in total.

(3) Interest payable


Interest to transactions with financial

institutions 31,130 26,284

Interest payable on customer deposits 3,754,256 1,897,708

Interest payable and receivable from bonds 965,377 1,150,895

Interest payable on principal-guaranteed

wealth management products 117,157


Page 88 of 186


Other interest payable 2,830

Total 4,753,593 3,192,044

Changes in interest payable

Item 2019 2018



Paid during the year 7,249,124 7,196,190

Ending balance 4,753,593 3,192,044

27. Share capital

Name of

investor 31 December 2018

Increase

during the

period

Transfer-out

during the

period 31 December 2019

Non-natural

person

shareholders 3,969,520 3,969,520

Natural person

shareholders 158,326 158,326

Total 4,127,846 4,127,846

Particulars on shareholders holding 5% or more shares of the Group:

Name of shareholder

31 December 2019 31 December 2018

Amount

Shareholding

percentage (%) Amount

Shareholding

percentage (%)

Legend Holdings Ltd. 633,000 15.33 633,000 15.33

Wuhan Iron and Steel Group

Corporation 550,600 13.34 550,600 13.34

Wuhan Development and

Investment Co., Ltd. 337,500 8.18 337,500 8.18

Total 1,521,100 36.85 1,521,100 36.85

28. Capital reserve

Item 31 December 2018 Increase during

the period

Decrease

during the

period

31 December 2019

Share

premium 3,259,204 1,167

3,260,371

Total 3,259,204 1,167 3,260,371

29. Other comprehensive income

Item

Balance

at the

end of

last

year

Amounts generated this year Ending

balance


Page 89 of 186

Amoun

ts

generat

ed this

year

before

income

tax

Less: Amount

transferred

into profit or

loss from

other

comprehensiv

e income

recognized in

previous

periods

Less:

Income

tax

expense

Attribut

able to

sharehol

ders of

the

parent

compan

y after

tax

Attrib

utable

to

minori

ty

shareh

olders

after

tax

Other

comprehensive

income that will

be reclassified

into profit or loss

Incl.: Other

comprehensive

income that can

be reclassified

into profit or loss

under equity

method

Gains or losses

on changes in fair

value of

available-for-sale

financial assets

364,218 -54,208 138,160 -48,092 -144,276 219,942

Other

comprehensive

income, total

364,218 -54,208 138,160 -48,092 -144,276 219,942

30. Surplus reserves


Increase

during the

period

Decrease

during the

period

31 December 2019

Statutory

surplus reserve 1,569,803 236,290 1,806,093

Total 1,569,803 236,290 1,806,093

Notes: (1) In accordance with the Company Law of the People’s Republic of China, the Articles of

Association of the Group and resolutions adopted by the Board of Directors of the Group, the

Group set aside 10% of net profit under Chinese accounting standards as statutory surplus reserve.

Statutory surplus reserve may not be charged further when the Group's total surplus reserves

reached 50% of its share capital. Upon approval by the General Meeting of Shareholders, the

statutory surplus reserve of the Group may be used for loss recovery or conversion to share capital.

After conversion of surplus reserve to share capital, the retained statutory surplus reserve shall not

be less than 25% of share capital.


Page 90 of 186

(2) The Group set aside 10% of net profit under PRC GAAP as statutory surplus reserve, totaling

RMB236,290,000 in 2019. Statutory surplus reserve was set aside on the basis of annual after-tax

profit. No discretionary surplus reserve was set aside by the Group.

31. General reserve

Item 31 December 2018 Increase

during the

period

Decrease

during the

period

31 December 2019

General

reserve

4,203,355 781,045 4,984,400

Total 4,203,355 781,045 4,984,400

Note: In accordance with the Notice concerning Issuance of the Administrative Measures for

Setting Aside Reserve Funds of Financial Enterprises [C.J. (2012) No. 20], general reserve means

reserve set aside by a financial corporation in proportion to its net profit for the purpose of

covering unidentified possible losses. Setting aside general reserve is deemed profit distribution

and constitutes part of the owners’ equity. General reserve is set aside in proportion to the balance

of assets that assume risks and losses. In principle, the balance of general reserve should not be

lower than 1.5% of the balance of risk assets at the end of the reporting period. If the proportion of

general reserve of financial enterprises to the balance of risk assets at the end of the period is

difficult to reach 1.5%, it can be put in place over years (not exceeding 5 years in principle). On

31 December 2019, the Group set aside general risk reserve of 1.5% of balance of risk assets at the

end of reporting period.

32. Retained profit

Item Distribution policy Amount

Retained profit at 31 December 2018 6,461,342

Add: Adjustments to retained profit at the

year beginning

Retained profit after retrospective

adjustments 6,461,342

Add: Net profit transferred in during the

year 2,416,842

Less: Statutory surplus reserve set aside 10% of net profit 236,290

Appropriation to general risk reserve 781,045

Discretionary surplus reserve set

aside

Common share dividend payable 454,063

Common share dividend converted to

share capital

Retained profit at 31 December 2019 7,406,786

Note: The 2018 Annual General Meeting of the Group was held on 20 June 2019, at which the

Proposal on 2018 Profit Distribution Plan was reviewed and approved. Based on a total of

4,127,846,000 shares as at 31 December 2018 and a cash dividend of RMB0.11 (pre-tax) per share,

RMB454,063,000 of cash dividend was distributed in total.

33. Net interest income


Page 91 of 186

Item 2019 2018

Interest income:

1) Balances with central banks 381,665 391,232

2) Deposits with banks and other


3) Lendings to banks and other


4) Financial assets under reverse

repurchase agreements 225,609 207,643

5) Loans and advances 7,140,676 6,029,831

- Corporate loans and advances 3,978,067 3,769,709

- Personal loans 1,975,364 1,418,636

- Discounted bills 997,031 747,201

- Trade finance 190,214 94,285

6) Bond and other investments 5,026,801 3,862,081

7) Interest income from


management products 298,827

608,038

Total interest income 13,103,488 11,140,093

Interest expense:

1) Borrowings from central banks 27,103 26,892

2) Deposits from banks and other


3) Borrowings from banks and


4) Financial assets under


5) Customer deposits 5,208,992 2,900,925

6) Bonds payable 2,509,790 2,856,411

7) On-lending funds 4,570

8) Interest expense from



602,469

Total interest expenses 8,810,673 7,138,588

Net interest income 4,292,815 4,001,505

By geographical distribution:

Item 2019 2018

Interest income Interest expense Interest income Interest expense

Wuhan 11,685,272 8,055,171 9,798,595 6,793,480

Ezhou 92,986 57,947 63,106 17,244

Yichang 234,049 128,802 220,292 78,151

Huangshi 191,143 95,277 217,412 44,639

Jingzhou 90,184 89,978 67,422 48,408

Jingmen 80,522 25,160 95,897 18,319

Xiangyang 147,889 13,134 159,159 13,793

Enshi 85,967 42,993 87,973 24,084

Shiyan 54,447 18,139 56,656 9,848

Xiaogan 89,969 31,327 67,547 16,919

Xianning 32,633 12,928 17,860 6,421

Huanggang 14,526 14,721 4,331 5,816

Xiantao 13,984 3,297 1 28

Suizhou 4,522 1,011

Chongqing 285,395 220,788 283,842 61,438

Total 13,103,488 8,810,673 11,140,093 7,138,588

34. Net fee and commission income


Page 92 of 186

Item 2019 2018

Fee and commission income:

Settlement fee income 24,296 20,594

Agency service income 467,697 359,478

Bank card service fee income 148,566 93,504

Securities service fee income 99,787 63,897

Loan and guarantee fee income 175,718 83,027

Other fee income 47,456 68,405

Total fee and commission income 963,520 688,905

Fee and commission expenses:

Settlement fee expense 8,326 5,918

Agency service expense 1,407 594

Bank card service fee expenses 15,000 14,477

Bond fee expenses 23,497 14,438

Other fee expenses 27,206 39,734

Total fee and commission expenses 75,436 75,161

Net fee and commission income 888,084 613,744

35. Investment income

Source 2019 2018

Investment income from financial assets designated at fair value

through profit or loss during their holding period -10,313

-12,723

Investment income from long-term equity during the holding period 35,170 24,434

Investment income from available-for-sale financial assets during

their holding period 1,202,334

1,358,392

Total 1,227,191 1,370,103

36. Gains or losses on changes in fair value

Source of gains on fair value changes 2019 2018

Financial assets designated at fair value through profit or

loss -2,072

129,060

Financial liabilities designated at fair value through profit

or loss 37,958

-69,040

Total 35,886 60,020

37. Other operating income and other operating costs

(1) Other operating income

Item 2019 2018

Rental income from properties 6,727 5,221

Others 3,372 2,482

Total 10,099 7,703

(2) Other operating costs

Item 2019 2018


Page 93 of 186

Others 70 102

Total 70 102

38. Gain on disposal of assets

Item 2019 2018

Gain on disposal of non-current assets (“-” for

loss) 97 -3,206

Total 97 -3,206

39. Other gains

(1) Classification of other gains

Item 2019 2018 Amount recognized into current-period

non-recurring profit or loss

Government

subsidies 6,951 6,749 6,951

Total 6,951 6,749 6,951

(2) Government subsidies recognized into current-period profit or loss

Subsidy item 2019 2018 Assets/income-related

Subsidy fund for fixed-purpose fees of

financial institutions Income-related

Award for increase in

agriculture-related loans of financial

institutions

578 Income-related

Rental subsidies and tax contribution

award of financial institutions 696 696 Income-related

Policy-related subsidies for

development zones 870 1,157

Income-related

Interest subsidies for poverty

alleviation loans 279 150 Income-related

Government's employment

stabilization subsidies 2,949 3,030 Income-related

Individual income tax refund 50 1,118 Income-related

Subsidy for new establishments 2,000 Income-related

Others 107 20 Income-related

Total 6,951 6,749

Note: (1) According to the notice issued by seven government agencies of Hubei Province,

including the Department of Human Resources and Social Security and the Department of Finance,

on the Implementation Measures for Refund of Unemployment Insurance Premiums in Hubei

Province (E.R.S.F. [2019] No. 30), the enterprises that do not cut staff (with the staff cut ratio

below or equal zero, the same below) or included in the list for over-capacity cuts will be entitled

to a 70% refund of unemployment insurance premiums paid by employers and employees in the

relevant year. Besides, the enterprises with no more than 1,000 insured employees and with a staff

cut ratio below the national surveyed unemployment rate control target, and the enterprises with

more than 1,000 insured employees and with a staff cut ratio below the provincial urban registered

unemployment rate control target, will be entitled to a 50% refund of unemployment insurance

premiums paid by employers and employees in the relevant year.


Page 94 of 186

(2) According to the Notice on Further Improving the Secured Microloan Policy (E.R.S.F. [2013]

No. 33) issued by the Department of Human Resources and Social Security and the Department of

Finance of Hubei Province and the Wuhan Branch of PBOC, a reward equal 1% of the total

amount of local secured micro loans issued in the year was granted to participating financial

institutions, guarantee organizations, public service organizations for employment and business

startups (including credit communities) and fiscal review organizations.

(3) According to the notice by Wuhan Municipal Bureau of Human Resources and Social Security

and Wuhan Municipal Bureau of Finance on issuing the Measures for the Implementation of an

Employment Stabilization Subsidy in Wuhan City (W.R.S.F. [2015] No. 82), a company that

complies with the regulations and did not lay off employees in the previous year can be granted

the employment stabilization subsidy which is equal to 50% of total unemployment insurance fees

paid by the company and its employees in the previous year; a company that complies with the

regulations but laid off employees in the previous year at a rate lower than the city's registered

unemployment rate can be granted the employment stabilization subsidy which is equal to 40% of

total unemployment insurance fees paid by the company and its employees in the previous year.

(4) According to the notice issued by the Management Commission of Wuhan East Lake

High-tech Development Zone on the Implementation Measures of the East Lake Independent

Innovation Demonstration Zone on Promoting the Development of Specialized Financial Services

Providers for High-Tech SMEs, the East Lake High-tech Development Zone approved and granted

RMB870,000 of subsidy to Technology Finance Service Center of Hankou Bank for 2018 for the

purpose of further enhancing the financing support for high-tech SMEs in the Wuhan East Lake

High-tech Development Zone and enhancing the innovative high-tech finance services.

(5) According to the reply of Xianning Municipal Bureau of Finance to the Request for the

Municipal Government's Approval for Rent Subsidy to Hankou Bank Xianning Branch and Article

3 of the Xianning Municipal Government's Reply to the Request for Policy Support for Hankou

Bank Xianning Branch, which reads that “an annual subsidy equal to 50% of the housing rent will

be granted for three consecutive years in accordance with the Opinions of the Municipal

Government on Accelerating Development of the Hesheng Financial Town (X.Z.B.F. [2016] No.

14)”, Xianning Municipal Bureau of Finance has approved RMB696,000 of rent subsidy to be

granted.

(6) According to the Opinion of CPC Jingmen Committee and Jingmen Municipal Government on

Adhering to the Capital-driven Approach to Leap-frog Development of Jingmen (J.F. [2016] No.

9), the top three banking institutions by growth rate of microloans that met the “Three No Less

Than’s” targets were granted a reward of RMB150,000, RMB100,000 and RMB50,000

respectively. Jingmen Government paid RMB50,000 of award to Jingmen Branch of Hankou

Bank.

(7) According to the Trial Measures for Attracting Banking Institutions to Huanggang City

(H.Z.B.F. [2014] No. 8), a subsidiary of RMB1 million was paid for a bank branch newly


Page 95 of 186

established in the city. Huanggang Government paid RMB1,000,000 of award to Huanggang

Branch of Hankou Bank.

(8) According to the Opinion of Suizhou Government on Supporting Faster Development of Real

Economy (S.Z.F. [2017] No. 22), the municipal government undertook to place at least RMB200

million of deposits with the joint-stock commercial bank that opened a local branch and granted a

one-off subsidy of RMB1 million for its office premises. Suizhou Government paid

RMB1,000,000 of award to Suizhou Branch of Hankou Bank.

(9) According to the notice by Zhijiang Municipal Bureau of Human Resources and Social

Security on Application for Subsidies for Employment Stabilization Posts of Enterprises in 2018

(Z.R.S.F. [2018] No. 18) a company that complies with the regulations and did not lay off

employees in the previous year can be granted the employment stabilization subsidy which is

equal to 70% of total unemployment insurance fees paid by the company and its employees in the

previous year; a company that complies with the regulations but laid off employees in the previous

year at a rate lower than the city's registered unemployment rate (2.38%) can be granted the

employment stabilization subsidy which is equal to 50% of total unemployment insurance fees

paid by the company and its employees in the previous year.

(10) According to the Request for Allocating the Subsidies for Lead Manager of the Poverty

Alleviation Microloans in 2018 of the Office of the Yangxin County Leading Group on Financial

Work, subsidies were paid to four banks that met the target set by the county government. Yangxin

Government paid RMB279,000 of award to HB Yangxin Rural Bank, Ltd.

40. Business taxes and surcharges

Item 2019 2018 Rate

Urban maintenance and

construction tax

34,048 24,554 7% of turnover tax payable

Educational surcharges 14,587 10,525 3% of turnover tax payable

Local education

development fee

7,362 5,367 2% of turnover tax payable

Stamp tax 4,518 3,606

Land appreciation tax 168

House property tax 16,899 16,599

Vehicle and vessel use tax 45 54

Land use tax 389 506

Disabled person security 6,107 5,291

Total 84,123 66,502

Note: According to the document E.C.Z.F. [2015] No. 39, Hubei Province suspended the

collection of urban embankment charges from 1 October 2015.


Page 96 of 186

41. General and administrative expenses

Item 2019 2018

Staff costs 1,354,046 1,208,546

Operating expenses 673,584 678,298

Depreciation of fixed assets 124,190 124,588

Amortization of intangible assets 14,507 12,204

Amortization of long-term deferred expenses 55,998 44,406

Total 2,222,325 2,068,042

42. Impairment losses on assets

Item 2019 2018

Impairment losses/allowance reverse on loans and

advances 2,011,485

2,208,581

Bad debt losses/allowance reverse 68,645 13,903

Allowance for impairment losses/allowance reverse on

receivables investment -8,696

3,094

Impairment losses on repossessed assets 14,610

Total 2,086,044 2,225,578

43. Non-operating income

Item 2019 2018

Settlement fines and penalty income 1,786 910

Income from unclaimed funds 2,535 2,958

Other income 80 3,751

Total 4,401 7,619

44. Non-operating expenses

Item 2019 2018

Expenditure on unclaimed funds 648 551

Donation expense 2,520 1,351

Spending on fines, penalties and damages 4,368 2,735

Others 221 3,105

Total 7,757 7,742

45. Income tax expense

Item 2019 2018

Income tax calculated under tax laws and relevant regulations 3,773 1,390

Add: Deferred income tax expense (gains are presented with “-”) -345,993 -168,007

Income tax expense -342,220 -166,617

Profit before tax 2,076,682 1,715,761

Income tax at statutory rate 519,171 428,940

Tax adjustments:


Page 97 of 186

Item 2019 2018

Effects of different tax rates applicable to subsidiaries

Effects of adjustments to income taxes for previous periods 58

Effects of tax-free income -880,236 -614,187

Effects of non-deductible costs, expenses and losses 19,287 14,849

Effects of using deductible losses of unrecognized deferred income tax

assets for previous periods -442

Effects of deductible temporary difference or deductible losses of

unrecognized deferred income tax assets for the period

3,723

Other effects

Income tax expense -342,220 -166,617

Note: Income tax expenses fell by 105.39% in 2019 from 2018, mainly due to increase in

tax-exempt income;

46. Supplementary data for the statement of cash flows

(1) Net profit adjusted to cash flows from operating activities

Item 2019 2018

Net profit 2,418,902 1,882,378

Add: Impairment losses on assets 2,086,044 2,225,578

Depreciation of fixed assets and investment properties 124,190 124,588



Losses on disposal of fixed assets, intangible assets and other

long-term assets (gains are presented with “-”)

-97 3,206

Losses on retirement of fixed assets (gains are presented with

“-”)

31

Losses on changes in fair value (gains are presented with “-”) -35,886 -60,020

Investment loss (income is presented with “-”) -1,227,191 -1,370,103

Interest expense on bonds issued 2,509,790 2,856,411

Decrease in deferred income tax assets ((increase is presented

with “-”)

-345,475 -161,263

Increase in deferred income tax liability (decrease is presented

with “-”)

-518 -6,744

Decrease in operating receivables (increase is presented with

“-”) -41,640,454

-22,647,141

Increase in operating payables (decrease is presented with “-”) 71,200,287 29,815,128

Provisioning for estimated liabilities


(2) Net changes in cash and cash equivalents

Item 2019 2018

Cash at the end of the period 913,538 757,835

Less: Cash at the beginning of the period 757,835 570,468

Add: Cash equivalent at the end of the period 25,284,599 9,682,260

Less: cash equivalents at the beginning of the period 9,682,260 12,396,002

Net increase in cash and cash equivalents 15,758,042 -2,526,375


Page 98 of 186

(3) Cash and cash equivalents

Item 2019 2018

A. Cash 913,538 757,835

B. Cash equivalents 25,284,599 9,682,260

Incl.: Balances with central banks available for payment 7,378,052 4,159,069

Original maturity no more than three months: Deposits

with banks and other financial institutions 1,879,318 1,012,991

Original maturity no more than three months: Placements

with banks and other financial institutions 5,400,000 500,000

Original maturity no more than three months: Assets

under reverse repurchase agreements 10,627,229 4,010,200

Original maturity no more than three months: Bond

investments

Cash and cash equivalents at the end of the period 26,198,137 10,440,095

(4) Cash received from other operating activities

Item 2019 2018

Income from disposal of repossessed assets 7,750

Rental income 6,727 5,221

Suspense credits and other income 44,617 47,877

Total 51,344 60,848

(5) Cash paid for other operating activities

Item 2019 2018

Non-operating expenses 2,520 2,501

Business promotion, rent and other administrative expenses and other

expenses 992,858 963,902

Total 995,378 966,403

47. Transfer of financial assets

In the credit asset securitization process, the Group transferred credit assets to the structured entity,

which issued asset-backed securities as issuer. The Group held the subordinated tranche of

asset-backed securities and maintained contiguous involvement in transferred credit assets. The

Group will recognize the asset in the balance sheet pursuant to the continuous involvement

procedure of the Group and derecognize other parts.

On 31 December 2019, of the securitization deals in which the Group was continuously involved

to some degree, the securitized credit assets had a par value of RMB3,510,803,000. The Group

continued to recognize assets with a par value of 560,803,000. Assets from continuous

involvement and liabilities from continuous involvement recognized by the Group stood at RMB

560,803,000.

IX. Notes to main items of parent company financial statements

(Amounts in thousands of RMB unless otherwise stated)

1. Cash and balances with central banks



Page 99 of 186


Cash 906,579 750,187


Legal reserve 22,702,774 21,795,985

Excess reserve 7,378,052 4,159,069

Public finance reserve 98,078 108,323

Total 31,085,483 26,813,564

Notes: (1) The Bank deposited legal reserve with PBOC, which should not be used for daily

business operation of the Bank.

As at 31 December 2019, the Bank's ratio of legal reserve was:


Ratio of RMB legal reserve 10.50% 12%

Ratio of foreign-currency legal

reserve 5%

5%

(2) Excess reserve with central banks is mainly used for fund clearing.

2. Deposits with banks and other financial institutions


Clearing deposits with banks and


General deposits with banks and

other financial institutions 1,400,000

Deposits with overseas banks and


Subtotal 2,264,500 929,158

Less: Allowance for bad debts with


Carrying amount of balances with

banks and other financial institutions 2,264,500 929,158

Note: The 2019 balances with banks and other financial institutions increased by 143.72% over

the 2018 figure due to the increase in general deposits with banks and other financial institutions.

3. Lendings to banks and other financial institutions


Placements with domestic banks and

other financial institutions 4,600,000

500,000

Placements with overseas banks and


Placements with domestic


800,000

Subtotal 5,400,000 500,000

Less: Allowance for losses on

lendings to banks and other financial

institutions

Carrying amount of lendings to


5,400,000 500,000


Page 100 of 186

Note: The balance of lendings to banks and other financial institutions for 2019 increased by

980.00% as compared to 2018, due to the structural adjustment in interbank business and the

increase in lendings to banks and other financial institutions.

4. Financial assets designated at fair value through profit or loss

Item 31

December

2019

31

December

2018

Held-for-trading bond investment


Governments and central banks 1,392,400

Banks and other financial institutions 20,005

Enterprises 410,165 231,536

Subtotal 1,822,570 231,536

Financial assets measured at fair value through profit or loss


Governments and central banks 77,820

Policy banks 1,296,199

Banks and other financial institutions 5,587,083

Enterprises 5,849,660

Subtotal 12,810,762

Total 1,822,570 13,042,298

Note: As at 31 December 2019, of the held-for-trading bond assets held by the Bank, bonds with a

par value of RMB200,000,000 were pledged for handling pledge-type repurchase business.

5. Financial assets under reverse repurchase agreements


Classified by collateral:

Bonds under reverse repurchase

agreements 10,427,229 3,510,200

Incl.: Government bonds 2,220,183 1,300,000


Bills under reverse repurchase

agreements 200,000

Interbank CDs under reverse repurchase

agreements 500,000



Less: Allowance for bad debts of financial

assets under reverse repurchase agreements

Carrying amount of financial assets under


Classified by counterparty:

Non-banking financial institutions 9,942,229 675,000


Page 101 of 186


Banking institutions 685,000 3,335,200




financial assets under reverse repurchase

agreements

Carrying amount of financial assets under


6. Loans and advances

(1) Loans and advances by personal and corporate borrowers are presented as follows:



Personal consumption loans 33,123,210 25,125,945

Personal business loans 7,385,990 7,199,368

Credit cards 3,577,012 2,644,388


Loans 82,599,448 73,016,020

Discounting 38,488,847 24,369,080

Advances 287,689 379,084

Trade finance 6,481,153 3,829,869




4,550,169





132,013,585

As at 31 December 2019, the Bank did not use the foregoing assets as collateral when entering

into repurchase agreements with other financial institutions.

For the loan balance of shareholders holding 5% or more voting shares in the Bank, please refer to

Note XV.2(1).

(2) Discounting of bills by type:



Commercial acceptance bills 2,781,637 1,508,788

Total 38,488,847 24,369,080

(3) Loans and advances by industry sector:



Manufacturing 17,675,544 12,840,802


Page 102 of 186


Wholesale and retail 19,388,815 17,716,136

Transport, storage and post 3,583,918 2,447,049

Farming, forestry, animal husbandry

and fishery 813,755 732,369

Power/heat/gas/water production and

supply 2,070,607 2,617,055

Real estate 19,353,038 14,219,433

Construction 9,066,855 8,900,769

Financial industry 26,351,963 12,743,056

Neighborhood services and others 255,907 112,173


management 3,689,589 3,968,539

Culture, sports and entertainment 362,703 330,862

Information transmission, computer

service and software 2,231,193 1,566,802

Leasing and commercial services 16,770,354 12,542,110

Mining 719,506 355,387

Others 5,523,390 10,501,511



Less: Allowance for impairment losses on

loans 5,837,380 4,550,169



Net carrying amount of loans and

advances 166,105,969 132,013,585

(4) Loans and advances by the mode of guarantee are presented as follows:


Unsecured loans 30,678,709 21,066,107



- Loans secured by mortgages 63,786,713 55,750,927

- Pledged loans 50,447,811 32,645,695



losses on loans 5,837,380 4,550,169




advances 166,105,969 132,013,585

(5) Loans and advances by geographical distribution are presented as follows:


Wuhan 139,753,193 111,221,758

Ezhou 1,623,659 1,431,151

Yichang 4,673,804 3,677,675

Huangshi 4,415,290 3,858,699

Jingmen 2,256,009 1,960,281


Page 103 of 186


Xiangyang 2,825,460 1,877,636

Jingzhou 2,264,054 1,344,043

Enshi 1,686,980 1,648,941

Shiyan 870,100 1,052,131

Xiaogan 1,941,566 1,458,275

Xianning 800,727 460,932

Huanggang 390,189 187,564

Xiantao 585,922

Suizhou 229,540

Chongqing 7,626,856 6,384,668



losses on loans 5,837,380 4,550,169




advances 166,105,969 132,013,585

(6) Overdue loans are presented as follows:


Overdue for

less than 3

months

Overdue for

3-12 months

Overdue

for 1-3

years

Overdue for

over 3 years

Total

Unsecured loans 9,968 19,446 47,540 30,000 106,954

Guaranteed loans 61,413 189,060 61,659 859,230 1,171,362


- Loans secured by

mortgages 288,250 356,843 122,336 437,488 1,204,917

- Pledged loans 10,000 11,445 230,077 251,522

Total loans and

advances 359,631 575,349 242,980 1,556,795 2,734,755

Item

31 December 2018

Overdue for

less than 3

months

Overdue for

3-12 months

Overdue for

1-3 years

Overdue

for over 3

years

Total

Unsecured loans 15,289 15,792 59,336 30,000 120,417

Guaranteed loans 13,919 87,384 213,369 1,057,115 1,371,787


- Loans secured by

mortgages

164,481 94,693 294,614 730,014 1,283,802

- Pledged loans 1,564 7,945 25,412 251,355 286,276

Total loans and

advances

195,253 205,814 592,731 2,068,484 3,062,282

(7) Changes in allowance for impairment losses on loans:




Page 104 of 186


Provisioning during the period 2,005,786 2,168,429


Write-off during the period 985,997 1,996,770

Reversed during the period 267,422 65,196

- Loans and advances written off in previous

years and recovered during the period 266,847 64,760

- Reversed due to rise in discounted value

- Exchange gains or losses and other

adjustments 575 436

Ending balance 5,837,380 4,550,169



corporate loans: 4,972,430 3,732,256

Individually assessed 2,824,758 1,917,642



personal loans: 864,950 817,913

Individually assessed 47,419

Collectively assessed 864,950 770,494

Total 5,837,380 4,550,169

(8) Write-off of non-performing loans and off-balance-sheet accrued interest receivable:

Item 2019 2018

Loan principal written off 985,997 1,996,770

Off-balance-sheet accrued interest

receivable written off 444,839 984,967

Total 1,430,836 2,981,737

7. Available-for-sale financial assets

(1) Classification of available-for-sale financial assets


Available-for-sale debt instruments

Incl.:



Bonds of commercial banks and


805,375 1,058,835

Interbank CDs 589,155



Securities investment funds 42,106,766 30,047,802


Page 105 of 186


Purchase of wealth management

products issued by other banks and

others

2,654,996 2,455,936

Subtotal 69,501,508 57,145,516

Equity investment measured at cost 15,582 15,582


losses on available-for-sale financial

assets

Subtotal 15,582 15,582

Carrying amount of

available-for-sale financial assets

69,517,090 57,161,098

(2) Available-for-sale financial assets at fair value at the period end

Classification of available-for-sale financial

assets

Available-for

-sale equity

instruments

Available-for-

sale debt

instruments

Total

Amortized cost 69,208,252 69,208,252

Fair value 69,501,508 69,501,508

Changes in fair value accumulatively recognized

in other comprehensive income

293,256 293,256

Impairment amount set aside

(3) Available-for-sale financial assets at cost at the period end

For the equity investment without quoted price in an active market and its fair value cannot be

reliably measured, the Group measures it at cost and has no disposal plan for relevant equity

investment in the foreseeable future. As at the end of the reporting period, the equity investment

measured at cost is presented as follows:

Name of investee

Book balance

Shareholding

percentage in

investee (%) 31 December

2018

Incre

ase

durin

g the

perio

d

Decr

ease

durin

g the

perio

d

31

December

2019


Ltd.

8,030 8,030 0.88

China UnionPay Co., Ltd. 7,152 7,152 0.27


Clearing Center 400

400 1.33

Total 15,582 15,582

Name of investee


dividend

during the

period

31

December

2018

Increase

during the

period

Decrease

during the

period

31

December

2019

Wuhan Steel Electricity Co., 522


Page 106 of 186

Name of investee


dividend

during the

period

31

December

2018

Increase

during the

period

Decrease

during the

period

31

December

2019

Ltd.

China UnionPay Co., Ltd. 1,200


Clearing Center

Total 1,722

Notes: (1) As at 31 December 2019, available-for-sale financial assets held by the Bank had

not been impaired, so no allowance for impairment losses was set aside for available-for-sale

financial assets.

(2) As at 31 December 2019, the Bank’s available-for-sale financial assets included no bonds

pledged as collaterals.






Bank bonds 870,000 910,000

Interbank CDs 1,244,223


Other bonds 1,253,800 1,429,174

Total 79,155,034 41,149,070

Less: Allowance for impairment losses

on held-to-maturity investments

Carrying amount of held-to-maturity

investments 79,155,034 41,149,070

Notes: (1) As at 31 December 2019, held-to-maturity bonds held by the Bank had not been

impaired, so no allowance for impairment losses was set aside for held-to-maturity investments.

(2) As at 31 December 2019, of the held-to-maturity financial assets held by the Group, bonds

with a par value of RMB52,643,412,500 were pledged for handling pledge-type repurchase

business, time deposit business of treasury bonds and corporate negotiated deposits.

9. Receivables investment


Government bonds 29,115 28,088

Asset management plans and fund

trust plans 26,908,233 35,661,360


Other investments 1,164 1,164

Total 27,617,404 35,890,612


losses on receivables investment 996,035 1,047,153



Page 107 of 186

Changes in allowance for impairment losses on receivables investment:



Provisioning during the period -51,118 3,094


Write-off during the period

Reversed during the period

Ending balance 996,035 1,047,153

10. Long-term equity investment


Book

balance

Allowance

for

impairmen

t losses

Carrying

amount

Book

balance

Allowance

for

impairmen

t losses

Carrying

amount

Investment in

subsidiaries 71,940

71,940 56,940

56,940

Investment in

associate 822,813

822,813 787,643

787,643

Total 894,753 894,753 844,583 844,583

(1) Investment in subsidiaries

Investee Beginning

balance

Increase

during the

period

Decr

ease

durin

g the

perio

d

Ending

balance

Allowance

for

impairmen

t losses set

aside

during the

period

Ending

balance of

impairment

losses

1. HB Zhijiang Rural

Bank, Ltd.

25,500 25,500

2. HB Yangxin Rural

Bank, Ltd.

31,440 15,000 46,440

Total 56,940 15,000 71,940

(2) Investment in associate

Investee Ending balance


impairment

losses

Carrying

amount

Aerospace Science & Industry Financial

Leasing Co., Ltd. 822,813

822,813

Total 822,813 822,813

(continued)

Investee Change during the period

Addi Redu Investment Other Other Announced Allow Ot


Page 108 of 186

tiona

l

inves

tmen

t

ced

inves

tmen

t

gain or loss

recognized

under equity

method

compreh

ensive

income

adjustme

nts

equity

change

s

payment of

cash

dividend or

profit

ance

for

impair

ment

losses

set

aside

her

s

Aerospace

Science &

Industry

Financial

Leasing Co.,

Ltd.

35,170

Total 35,170

Notes: (1) As at 31 December 2019, the Bank's long-term equity investments had not been

impaired, so no allowance for impairment losses was set aside for long-term equity investments.

(2) As at 31 December 2019, the Bank had no significant restrictions on inward remittance of

gains on and proceeds from disposal of long-term equity investments.

(3) Please refer to Note X.1 and Note X.2 for information on equity stakes in the subsidiaries

and associate.

11. Other assets


Deferred expenses 63,030 56,130

Dividend payable 522 522

Other receivables 4,621,114 1,348,460

Long-term deferred expenses 117,006 115,098

Repossessed assets 381,030 223,557

Agency securities 8,690 13,069

Deposits with correspondent banks 9,019

Interest receivable 2,222,052 2,285,189

Assets from continuous involvement 560,803

Others 141,945 22,916

Total 8,125,211 4,064,941

(1) Interest receivable:


Interest receivable from bonds 1,864,621 1,504,605

Interest receivable from loans and

advances 327,687 287,780

Interest from transactions with


Interest receivable from


management products

465,299

Total 2,222,052 2,285,189

Changes in interest receivable



Page 109 of 186



Received during the year 13,018,682 10,501,259

Ending balance 2,222,052 2,285,189

12. Borrowings from central banks


Borrowings from central banks 1,650,000

Total 1,650,000

13. Deposits from banks and other financial institutions



banks 742,689 349,333

General deposits from domestic banks 8,102,935 1,150,013


non-banking financial institutions 863,614 991,893

General deposits from domestic

non-banking financial institutions 3,049 2,597,149

Total 9,712,287 5,088,388

14. Borrowings from banks and other financial institutions


Placements from domestic banks and

other financial institutions 1,850,576 1,500,000

Placements from overseas banks and


Total 1,850,576 1,504,290

15. Financial liabilities designated at fair value through profit or loss


Wealth management products issued 13,190,558

Total 13,190,558

16. Financial assets under repurchase agreements


Securities under repurchase agreements:



Subtotal 16,676,250 5,615,100

Bills under repurchase agreements:


Subtotal 17,738,392 11,881,138

Total 34,414,642 17,496,238

17. Customer deposits



Page 110 of 186


Demand deposits: 109,293,843 107,453,187

Corporate customers 86,011,416 87,530,173

Personal customers 23,282,427 19,923,014

Time deposits: 100,705,929 53,107,200

Corporate customers 56,131,654 28,190,818

Personal customers 44,574,275 24,916,382

Margin deposits received 9,219,896 7,811,302

Other deposits 30,084,180 19,489,625

Total 249,303,848 187,861,314

Notes: 1. Other deposits mainly include large-value CDs issued and treasury term deposits.

2. For the deposit balance of shareholders holding 5% or more voting shares in the Bank,

please refer to Note XV.2.

Details of margin deposits received that are included in the customer deposits are presented

as follows:


Margin on acceptance bills 6,221,808 5,063,324

Margin on L/C issuance 914,194 346,424

Margin on guarantee 353,933 419,721

Other margins 1,729,962 1,981,833

Total 9,219,897 7,811,302

Customer deposits are presented by geographical distribution as follows:


Wuhan 214,752,470 162,757,085

Ezhou 2,398,308 1,616,904

Yichang 5,710,708 4,187,903

Jingmen 1,230,771 1,221,150

Xiangyang 2,459,612 686,210

Huangshi 3,640,702 2,960,472

Jingzhou 5,124,517 4,130,281

Enshi 2,005,738 2,216,791

Shiyan 851,516 1,253,350

Xiaogan 1,660,530 1,140,658

Xianning 1,036,899 703,838

Huanggang 920,926 460,649

Xiantao 313,258 13,289

Chongqing 7,197,893 4,512,734

Total 249,303,848 187,861,314

18. Other liabilities



Page 111 of 186


Outward remittance 10,479 13,982

Other payables 278,475 222,424

Dividend payable 69,189 55,341

Deferred income 106,474 93,413

Deposits from correspondent

banks 3,378

Interest payable 4,730,646 3,175,376

On-lending funds 804,660

Liabilities from continuous

involvement 560,803

Other current liabilities 106,890 61,291

Total 6,667,616 3,625,205

(1) Interest payable:


Interest to transactions with financial

institutions 31,430

27,613

Interest payable on customer deposits 3,731,010 1,879,711

Bond interest payable 965,376 1,150,895

Interest payable on principal-guaranteed

wealth management products

117,157

Other interest payable 2,830

Total 4,730,646 3,175,376

Changes in interest payable

Item 2019 2018



Paid during the year 7,246,441 7,182,364

Ending balance 4,730,646 3,175,376

19. Net interest income

Item 2019 2018

Interest income:

1) Balances with central banks 380,410 389,858

2) Deposits with banks and other


3) Lendings to banks and other


4) Financial assets under reverse


5) Loans and advances 6,975,574 5,984,381


- Personal loans 1,830,349 1,392,350

- Discounted bills 996,968 746,879

- Trade finance 190,214 94,285

6) Bond and other investments 5,046,724 3,853,973

7) Interest income from


management products

298,827 608,038

Total interest income 12,955,545 11,076,517

Interest expense:


Page 112 of 186

Item 2019 2018

1) Borrowings from central banks 25,946 24,878

2) Deposits from banks and other

financial institutions 165,020

172,050

3) Borrowings from banks and


76,889

4) Financial assets under

repurchase agreements 559,238

507,083

5) Customer deposits 5,185,650 2,882,486

6) Bonds payable 2,509,790 2,856,411

7) On-lending funds 4,570

8) Interest expense from



602,469

Total interest expenses 8,801,711 7,122,266

Net interest income 4,153,834 3,954,251

By geographical distribution:

Item 2019 2018

Interest income Interest expense Interest income Interest expense

Wuhan 11,604,451 8,070,711 9,798,595 6,793,480

Ezhou 92,987 57,947 63,106 17,244

Yichang 200,407 112,594 184,759 65,520

Huangshi 157,662 86,983 189,369 40,948

Jingmen 80,522 25,160 95,897 18,319

Xiangyang 147,889 13,134 159,159 13,793

Jingzhou 90,184 89,978 67,422 48,408

Enshi 85,967 42,993 87,973 24,084

Shiyan 54,447 18,139 56,656 9,848

Xiaogan 89,969 31,327 67,547 16,919

Xianning 32,633 12,928 17,860 6,421

Huanggang 14,526 14,721 4,331 5,816

Xiantao 13,984 3,297 1 28

Suizhou 4,522 1,011

Chongqing 285,395 220,788 283,842 61,438

Total 12,955,545 8,801,711 11,076,517 7,122,266

20. Net fee and commission income

Item 2019 2018

Fee and commission income:

Settlement and clearing fee income 24,292 20,590

Agency service income 467,697 359,479

Bank card service fee income 148,547 93,492

Securities service fee income 99,787 63,897


Page 113 of 186

Item 2019 2018

Loan and guarantee fee income 175,718 101,237

Other fee income 47,456 50,195

Total fee and commission income 963,497 688,890

Fee and commission expenses:

Settlement fee expense 8,325 5,914

Agency service expense 1,407 594

Bank card service fee expenses 14,899 14,424

Bond fee expenses 23,496 14,438

Other fee expenses 27,205 39,734

Total fee and commission expenses 75,332 75,104

Net fee and commission income 888,165 613,786

21. Investment income

Source 2019 2018

Investment income from financial assets designated at fair value

through profit or loss during their holding period -10,313

-12,723

Investment income from long-term equity during the holding period 35,170 25,334

Investment income from available-for-sale financial assets during

their holding period 1,202,334

1,358,392

Total 1,227,191 1,371,003

22. General and administrative expenses

Item 2019 2018

Staff costs 1,340,107 1,198,573

Operating expenses 659,385 663,756

Depreciation of fixed assets 123,496 124,069



Total 2,192,312 2,041,565

23. Impairment losses on assets

Item 2019 2018

Impairment losses/allowance reverse on loans and

advances 2,005,786 2,168,429

Bad debt losses/allowance reverse 68,510 13,783

Allowance for impairment losses/allowance reverse on

receivables investment -51,118 3,094

Impairment losses on repossessed assets 13,010

Total 2,036,188 2,185,306

24. Supplementary data for the statement of cash flows

(1) Net profit adjusted to cash flows from operating activities

Item 2019 2018


Page 114 of 186

Item 2019 2018

Net profit 2,362,903 1,902,527

Add: Impairment losses on assets 2,036,188 2,185,306

Depreciation of fixed assets and investment properties 123,496 124,069



Losses on disposal of fixed assets, intangible assets and

other long-term assets (gains are presented with “-”)

-95 3,206

Losses on retirement of fixed assets (gains are presented

with “-”)

Losses on changes in fair value (gains are presented with

“-”)

-35,886 -60,020

Investment loss (income is presented with “-”) -1,227,191 -1,371,003

Interest expense on bonds issued 2,509,790 2,856,411

Decrease in deferred income tax assets ((increase is

presented with “-”)

-342,481 -158,406

Increase in deferred income tax liability (decrease is

presented with “-”)

-518 -6,744

Decrease in operating receivables (increase is presented

with “-”) -40,778,267

-22,229,795

Increase in operating payables (decrease is presented with

“-”) 71,099,448

29,736,903

Provisioning for estimated liabilities


(2) Net changes in cash and cash equivalents

Item 2019 2018

Cash at the end of the period 906,579 750,187

Less: Cash at the beginning of the period 750,187 563,431

Add: Cash equivalent at the end of the period 25,269,781 9,598,427

Less: cash equivalents at the beginning of the period 9,598,427 12,273,929

Net increase in cash and cash equivalents 15,827,746 -2,488,746

(3) Cash and cash equivalents

Item 2019 2018

A. Cash 906,579 750,187

B. Cash equivalents 25,269,781 9,598,427

Incl.: Balances with central banks available for payment 7,378,052 4,159,069

Original maturity no more than three months: Deposits


Original maturity no more than three months: Placements


Original maturity no more than three months: Assets

under reverse repurchase agreements 10,627,229 4,010,200

Cash and cash equivalents at the end of the period 26,176,360 10,348,614

(4) Cash received from other operating activities

Item 2019 2018

Income from disposal of repossessed assets 7,750

Rental income 6,727 5,221

Suspense credits and other income 89,154 48,589


Page 115 of 186

Total 95,881 61,560

(5) Cash paid for other operating activities

Item 2019 2018

Non-operating expenses 2,495 2,458

Business promotion, rent and other administrative expenses and

other expenses 976,813 951,875

Total 979,308 954,333

X. Equity in Other Subjects

1. Equity in subsidiaries

(1) Composition of the enterprise group

Subsidiary

Principa

l place

of

business

Place of registration

Busin

ess

nature

Shareholding

percentage

(%)

Votin

g

right

perce

ntage

(%)

Way

of

acquis

ition Direct

Indir

ect

HB Zhijiang Rural

Bank, Ltd.

Zhijiang

City,

Hubei

Province

34 Tuanjie Road,

Zhijiang City, Hubei

Finan

cial

indust

ry

51 51 Establ

ishme

nt

HB Yangxin Rural

Bank, Ltd.

Yangxin

County,

Hubei

Province

15, Lingyuan

Avenue, Xingguo

Town, Yangxin

County, Hubei

Finan

cial

indust

ry

80 80 Establ

ishme

nt

(2) Important non-wholly-owned subsidiaries

Equity held by minority shareholders of important non-wholly-owned subsidiaries and their

profit or loss is as follows: (Unit: RMB1,000, %)

Subsidiary Shareholding

percentage of

minority

shareholders (%)

Profit or loss

attributable to

minority

shareholders for

the period

Dividend

declared to

minority

shareholders for

the period

Equity balance

of minority

shareholders at

the period end

HB Zhijiang Rural

Bank, Ltd.

49 799 26,230

HB Yangxin Rural

Bank, Ltd.

20 1,261 16,174

(3) Main financial information on important non-wholly-owned subsidiaries

31 December 2019

Item HB Zhijiang Rural Bank,

Ltd.

HB Yangxin Rural Bank,

Ltd.

Cash and balances with central banks 46,006 46,323

Deposits with banks and other

financial institutions

302,865 213,824


Page 116 of 186


Ltd. HB Yangxin Rural Bank,

Ltd.

Loans and advances 333,969 292,632

Total assets 693,139 570,336

Borrowings from central banks 15,000 48,000

Customer deposits 605,197 432,446

Total liabilities 639,608 489,467

Paid-up capital 50,000 50,000

Retained profit -7,924 19,713

Total owners' equity 53,531 80,869

31 December 2018


Ltd.

HB Yangxin Rural Bank,

Ltd.

Cash and balances with central banks 56,829 43,150



Loans and advances 329,195 254,222

Receivables investment 30,000

Total assets 678,351 493,122

Borrowings from central banks 50,000

Customer deposits 610,336 357,516

Total liabilities 626,450 415,423

Paid-up capital 50,000 50,000

Retained profit -9,553 17,914

Total owners' equity 51,901 77,699

2. Equity in associates

(1) Basic information on key associate

Name of investee

Principa

l place

of

business

Place of

registration

Business

nature

Shareholding

percentage (%)

Account

ing

treatme

nt

method Direct Indirect

Aerospace Science

& Industry Financial

Leasing Co., Ltd.

Wuhan F/4 & 5, Wealth

Plaza, 18

Jinyinhu Road,

Dongxihu

District, Wuhan

City (11)

Financial

leasing

25 Equity

method

(2) Main financial information on key associate

Item Aerospace Science & Industry Financial

Leasing Co., Ltd.

Ending balance Beginning balance

Bank deposit 1,034,531 749,351

Deposits with banks and other financial

institutions 1,150,000

Financial lease receivable 13,352,512 11,978,903

Total assets 15,423,643 14,702,775


Page 117 of 186

Item Aerospace Science & Industry Financial

Leasing Co., Ltd.

Ending balance Beginning balance

Borrowings 10,145,000 8,740,000

Deposits from banks and other financial

institutions 910,000


Paid-up capital 3,000,000 3,000,000

Retained profit 39,888

Total owners' equity 3,291,250 3,150,573

3. Equity in the structured entities that are not included in the consolidated financial

statement

(1) Equity in the structured entities initiated and established by the third-party institutions

The Group enjoys the equity in the structured entities initiated and established by the

third-party institutions through direct holding of investment. Those structured entities that are not

included in the consolidated financial statement of the Group mainly include investment fund,

wealth management products, special asset management plans and asset-backed financing bonds.

The nature and objective of these structured entities are mainly to manage the investor's assets and

earn the management fee and the financing method is issuing investment products to investors.

Below is the carrying amount of assets and liabilities and maximum loss exposure related to

the equity due to the Group in the structured entities initiated and established by the third-party

institutions through direct holding of investment: (Unit: RMB1,000)

Item

31 December 2019

Carrying amount

Maximum

loss

exposure

Held-to

-maturit

y

investm

ents

Available-f

or-sale

financial

assets

Receivable

s

investment

Financial

assets

measured at

fair value

through

profit or loss

Total

Fund

investment

42,106,766 42,106,766 42,106,766

Asset

management

plans and

fund trust

plans

2,358,475 26,908,233 29,266,708 29,266,708

Asset-backed

securities

893,799 311,851 725,064 1,930,714 1,930,714

Total 893,799 44,777,092 27,633,297 73,304,188 73,304,188

Item

31 December 2018

Carrying amount Maximum

loss


Page 118 of 186

Held-to-

maturity

investme

nts

Available-f

or-sale

financial

assets

Receivables

investment

Financial

assets

measured at

fair value

through

profit or loss

Total

exposure

Fund

investment

30,047,802 30,047,802 30,047,802

Wealth

management

products

30,000 12,810,762 12,840,762 12,840,762

Asset

management

plans and

fund trust

plans

1,257,856 35,661,360 36,919,216 36,919,216

Asset-backed

securities

288,616 200,000 488,616 488,616

Total 31,594,274 35,891,360 12,810,762 80,296,396 80,296,396

The maximum loss exposure of wealth management products, fund investment, asset management

plans, fund trust plans and asset-backed financing bond is its amortized cost or fair value on the

reporting date based on its category recognized on the balance sheet.

(2) Equity in the structured entities initiated by the Group but not included in the consolidated

financial statement

A. The structured entities initiated and established by the Group but not included in the

consolidated financial statement are mainly the non-principal-guaranteed wealth management

product issued by the Group. The nature and objective of these structured entities are mainly to

manage the investor's assets and collect the management fee and the financing method is issuing

investment products to investors. The equity due to the Group in the structured entities that are not

included in the consolidated financial statement mainly includes directly holding investment or

charging management fee by managing these structured entities. As at 31 December 2019, the

Group had insignificant carrying amount of assets in the balance sheet due to direct holding of

investment and fee receivable.

As at 31 December 2019, the balance of non-principal-guaranteed asses initiated and established

by the Group but not included in the consolidated financial statement was RMB55,796,218,000.

B. Structured entities initiated and established by the Group but not included in the consolidated

financial statement and where the Group did not enjoy equity from 31 December 2019. In 2019,

the commission and fee income earned by the Group from the non-principal-guaranteed wealth

management products was RMB284,606,000.


Page 119 of 186

4. Structured entities included in the consolidated financial statement

The structured entities initiated and established by the Group and included in the consolidated

financial statement are mainly the principal-guaranteed wealth management product (Notes VIII.4

and VIII.20) and securitization instruments (Note VIII.47) issued and managed by the Group.

The Group provided liquidity support for structured entities not included in the scope of

consolidation in 2019. (2018: None)

As the Group has power over such structured entities and is entitled to variable return by

participating the relevant activities and capable to influence the return amount through its right on

the investee, the Group has control over such structured entities.

XI. Segmental reporting

The Management of the Group assesses the performance results of corporate banking business,

personal banking business and treasury operation business respectively. Segment income,

operating result and assets presented in the business segments are directly attributable to all

segments and relevant items allocated to segments based on reasonable standards. As a part of

asset and liability management, the Group measures transactions between segments at actual

transaction price. Interest rate is determined by adding a certain interest spread to weighted

average financing cost when funds are allocated across business segments. In addition, there is no

significant income or expenses between business segments. These internal transactions have been

offset in preparing the statements.

Banking services the corporate banking segment provides to corporate customers include

corporate loans, bills issued, trade finance, corporate deposits and remittance.

Banking services the personal banking segment provides to personal customers include retail loans,

savings deposits, credit card business and remittance.

The treasury operation segment includes held-for-trading financial instruments, bond investment,

repurchases and resale and inter-bank lending.

Other businesses refer to those that have not formed a separate segment to be presented or that are

unable to be allocated based on the reasonable standards.

The Management of the Group monitors operating results of all business segments, so as to decide

resources allocated to them and assess their performance.

The preparation of segment information adopts the same accounting policy as the preparation of

financial statements by the Group.

Consolidated:


Page 120 of 186

2019

Corporate

banking

Personal

banking

Treasury

operation Others Total

I. Operating income 4,035,791 1,918,279 464,489 53,971 6,472,530

Net interest income -

external 3,099,996 -184,875 1,377,691 3 4,292,815


internal 518,056 1,782,905 -2,300,961

Net interest income 3,618,052 1,598,030 -923,270 3 4,292,815

Net fee and

commission income 411,469 320,065 156,550 888,084

Investment income 1,190,300 36,891 1,227,191

Gains or losses on

changes in fair value 35,886 35,886

Exchange gains or

losses 6,270 184 5,023 11,477

Other net operating

income/expenses 10,029 10,029

Gain on disposal of

assets 97 97


II. Operating expenses 2,939,477 1,276,688 174,158 2,169 4,392,492

Operating expenses 1,061,034 1,087,253 155,992 2,169 2,306,448

Impairment losses on

assets 1,878,443 189,435 18,166 2,086,044

III. Operating profit 1,096,314 641,591 290,331 51,802 2,080,038

Net non-operating

income/expenses -3,356 -3,356

IV. Total profit 1,096,314 641,591 290,331 48,446 2,076,682

Income tax -- -- -- -- -342,220

V. Net profit -- -- -- -- 2,418,902

31 December 2019

Segment assets 142,645,702 55,435,072 197,544,257 10,114,534 405,739,565

Segment liabilities 162,152,824 91,050,086 127,330,594 3,358,219 383,891,723

2018

Corporate

banking

Personal

banking

Treasury




external 3,865,539 159,542 -23,576 4,001,505


internal -71,403 1,169,831 -1,098,428

Net interest income 3,794,136 1,329,373 -1,122,004 4,001,505

Net fee and



Gains or losses on


Exchange gains or

losses 5,369 263 13,858 19,490

Other net operating



Page 121 of 186

Corporate

banking

Personal

banking

Treasury


Gain on disposal of

assets -3,206 -3,206

Other gains 728 6,021 6,749


Operating expenses 1,064,812 901,586 155,543 12,603 2,134,544


assets 1,711,404 511,079 3,095 2,225,578

III. Operating profit 1,352,314 110,886 254,871

-2,187 1,715,884

Net non-operating

income/expenses -123 -123

IV. Total profit 1,352,314 110,886 254,871

-2,310 1,715,761

Income tax -- -- -- -- -166,617

V. Net profit -- -- -- -- 1,882,378

31 December 2018

Segment assets 116,804,922 56,231,558 140,964,410 5,295,019 319,295,909

Segment liabilities 133,512,967 70,558,684 94,375,634 806,345 299,253,630

The Bank:

2019

Corporate

banking

Personal

banking

Treasury




external 3,089,029 -295,611 1,360,416 4,153,834


internal 518,056 1,782,905 -2,300,961

Net interest income 3,607,085 1,487,294 -940,545 4,153,834

Net fee and


Investment income 1,190,300 36,891 1,227,191

Gains or losses on


Exchange gains or

losses 6,270 184 5,023 11,477

Other net operating


Gain on disposal of

assets 95 95



Operating expenses 1,061,034 1,056,204 155,992 2,169 2,275,399


assets 1,877,712 140,310 18,166 2,036,188

III. Operating profit 1,086,159 611,029 273,056 52,979 2,023,223

Net non-operating -3,319 -3,319


Page 122 of 186

Corporate

banking

Personal

banking

Treasury


income/expenses

IV. Total profit 1,086,159 611,029 273,056 49,660 2,019,904

Income tax -- -- -- -- -342,999

V. Net profit -- -- -- -- 2,362,903

Segment assets 142,400,778 54,283,709 198,036,309 10,321,173 405,041,969


2018

Corporate

banking

Personal

banking

Treasury


I. Operating income 4,113,439 1,510,909 394,202

11,896 6,030,446


external 3,850,441 147,628 -43,818 3,954,251


internal -71,403 1,169,831 -1,098,428

Net interest income 3,779,038 1,317,459 -1,142,246

3,954,251

Net fee and



Gains or losses on


Exchange gains or

losses 5,369 263 13,858 19,490

Other net operating


Gain on disposal of

assets -3,206 -3,206



Operating expenses 1,036,659 901,586 155,543 14,103 2,107,891


assets 1,688,733 493,478 3,095 2,185,306

III. Operating profit 1,388,047 115,845 235,564

-2,207 1,737,249

Net non-operating

income/expenses 128 128

IV. Total profit 1,388,047 115,845 235,564

-2,079 1,737,377

Income tax -- -- -- -- -165,150

V. Net profit -- -- -- -- 1,902,527

Segment assets 116,571,229 55,879,472 140,398,987 5,621,695 318,471,383


XII. Main Off-balance-sheet Businesses


Page 123 of 186

1．Off-balance-sheet businesses refer to all businesses that are not reflected on the balance sheet.

They consist of two parts: Off-balance-sheet businesses with contingent risk, i.e. provision of

guarantees for customers' debt service ability and bearing the risk of customer default; and

risk-free off-balance-sheet activities, mainly including settlement and agency services.

2．Contingent risk

(1) Bank’s acceptance bills are commercial drafts for which the applicant applies to the Bank and

which the Bank examines and agrees to accept.

(2) L/C refers to a written guarantee document issued upon request and instruction by the

applicant by the Bank for the beneficiary, whereby a certain amount will be paid based on the

required document within a certain period at the designated place.

(3) Bank guarantee refers to a credit business in which the Bank, upon the request of the applicant

or client, makes a commitment to the beneficiary by issuing a letter of guarantee that the Bank will

fulfill obligation or assume responsibility in accordance with the letter of guarantee if the

applicant fails to perform the obligation or commitment set forth in the contract.

(4) Balances of the Bank's main off-balance-sheet items with contingent risk are as follows



Letters of guarantee issued 1,246,199 1,562,158

Letters of credit issued 5,319,239 2,836,565

Unused limit of credit cards 5,111,886 7,711,760

Unused online loan limit 1,858,695 19,013

Subtotal 34,024,430 28,362,991

Net exposure of main

off-balance-sheet items with

contingent risk

17,786,863 15,238,782

Note: The Group has commitment to loan limits at any time point, including unused credit limits

provided to credit card customers and loan limits contracted.

XIII. Financial Risk Management

In accordance with disclosure requirements set forth in the Accounting Standard for Business

Enterprises No. 37 - Presentation of Financial Instruments, relevant information on credit risk,

market risk, liquidity risk and operational risk in 2019 and 2018 is disclosed by the Group.

Financial risk management mainly discloses risk taken by the Group as well as management and

monitoring of risks, in particular main risks in the use of financial instruments.

Credit risk means the risk that the Bank will sustain a loss if the Bank's customer or counterparty


Page 124 of 186

fails to perform contractual obligations.

Market risk means the exposure affected by observable market economic factors, such as

fluctuations in interest rate, exchange rate, stocks and commodities.

Liquidity risk means the risk that the Bank may become unable to pay debts when due in normal

or stagnant market environment.

Operational risk means the financial or reputational loss arising from failure to comply with

systems and procedures or frauds.

The Group has developed a series of policies and procedures to identify the foregoing risks and set

appropriate risk limits and control mechanisms. The Group sets up the Risk Management

Committee and designates a specialized department-the Risk Management Department to take

charge of risk management. Departments responsible for risk management, with their duties well

defined, are relatively independent of business departments taking risks and provides independent

risk reports to the Board of Directors and the Senior Management. The Risk Management

Committee has developed risk management policies and procedures applicable to the Group and

set appropriate risk limits and management mechanisms. In addition to regular meetings, the Risk

Management Committee also holds meetings irregularly according to market conditions to adjust

and modify relevant risk policies and procedures.

i. Credit risk

Credit risk means the possibility of loss the Bank sustains due to default or deteriorated credit

quality of the customer or counterparty. The credit risk the Bank takes is mainly related to loans,

guarantees, bonds and interbank lending.

At present, the Bank adopts a proactive and prudent policy for credit risk and the Board of

Directors assumes the ultimate responsibility for monitoring credit risk management, so as to

ensure that the Bank effectively identifies, assesses, measures, monitors and controls the credit

risk in all areas of business.

As for management of credit assets, the Bank has developed a full set of credit approval policies

and procedures, including credit investigation and declaration, credit examination and approval,

loan issuance, post-disbursement management and NPL management, which are implemented

bank-wide. Meanwhile, in accordance with the Guidelines on Risk-Based Loan Classification

issued by PBOC and the Implementation Opinion on Five-tier Classification of Loan Quality of

Urban Commercial Banks issued by CBRC, the Bank developed the Implementation Rules and

Standards of Hankou Bank for Five-tier Classification of Loan Quality. Based on the five-tier

classification system of CBRC, the Bank classifies loans into five tiers and twelve sub-tiers

according to the borrowers' ability to pay, repayment records, willingness to pay, security, legal

responsibility for loan repayment as well as financial and non-financial indicators of borrowers.

Classifications are adjusted in due time on the basis of real-time classification, regular review and


Page 125 of 186

re-classification at appropriate times to improve refined management of credit risk.

1. Maximum credit risk exposures

Below are the maximum credit risk exposures of the Group as at 31 December 2019 and 31

December 2018, regardless of collaterals and other credit enhancement measurements. For balance

sheet items, the risk exposure of financial assets is the carrying amount on the balance sheet date.

Consolidated:


Credit risk exposure relating to

on-balance-sheet items:


Deposits with banks and other financial

institutions 2,279,318 1,072,991

Lendings to banks and other financial

institutions 5,400,000 500,000

Financial assets designated at fair value

through profit or loss 1,822,570 13,042,298


Financial assets under reverse repurchase

agreements 10,627,229 4,010,200

Loans and advances 166,732,570 132,597,003


- Personal loans 43,624,663 34,502,297

Available-for-sale financial assets (excluding

equity investment) 69,501,508 57,145,516

Held-to-maturity investments 79,155,034 41,149,070


Other financial assets 6,851,536 3,467,648

Subtotal 399,259,247 314,013,893

Risk exposure of off-balance-sheet credit

commitment:






Subtotal 34,024,430 28,362,991

Total 433,283,677 342,376,884

The Bank:

Item 31 December

2019

31 December

2018

Credit risk exposure relating to on-balance-sheet items:


Deposits with banks and other financial institutions 2,264,500 929,158

Lendings to banks and other financial institutions 5,400,000 500,000

Financial assets designated at fair value through profit or

loss 1,822,570 13,042,298


Financial assets under reverse repurchase agreements 10,627,229 4,010,200

Loans and advances 166,105,969 132,013,585



Page 126 of 186

Item 31 December

2019

31 December

2018

- Personal loans 43,221,262 34,151,788

Available-for-sale financial assets (excluding equity

investment) 69,501,508

57,145,516



Other financial assets 6,843,166 3,463,683

Subtotal 398,520,249 313,160,346

Risk exposure of off-balance-sheet credit commitment:






Subtotal 34,024,430 28,362,991

Total 432,544,679 341,523,337

Notes: (1) Financial assets measured at fair value through profit or loss does not include

held-for-trading equity instrument investments;

(2) Available-for-sale financial assets exclude the carrying amount of equity investment.

2. Overdue and impairment of financial assets

Impairment and overdue of loans and advances, deposits with banks and other financial

institutions, lendings to banks and other financial institutions, financial assets under reverse

repurchase agreements, available-for-sale financial assets, held-to-maturity investments and

receivables investment are presented as follows:


Page 127 of 186

Consolidated:

Item

Loans and advances Deposits

with banks

and other

financial

institutions

Lendings to

banks and

other

financial

institutions

Financial

assets under

reverse

repurchase

agreements

Available-f

or-sale

financial

assets

Held-to-mat

urity

investments

Receivables

investment

Corporate

loans

Personal

loans Total

31 December 2019

Neither overdue nor

impaired 125,235,065 44,076,475 169,311,540 2,279,318 5,400,000 10,627,229 69,517,090 79,155,034 26,817,499

Overdue but not impaired 135,173 138,479 273,652

Impaired 2,731,760 294,225 3,025,985 846,077

Total 128,101,998 44,509,179 172,611,177 2,279,318 5,400,000 10,627,229 69,517,090 79,155,034 27,663,576

Less: Allowance for

impairment losses 4,994,091 884,516 5,878,607 1,038,457

Net value 123,107,907 43,624,663 166,732,570 2,279,318 5,400,000 10,627,229 69,517,090 79,155,034 26,625,119

31 December 2018

Neither overdue nor

impaired 99,333,396 34,743,167 134,076,563 1,072,991 500,000 4,010,200 57,161,098 41,149,070 35,251,535


Impaired 2,450,246 451,162 2,901,408 669,077

Total 101,851,286 35,336,734 137,188,020 1,072,991 500,000 4,010,200 57,161,098 41,149,070 35,920,612

Less: Allowance for


Net value 98,094,706 34,502,297 132,597,003 1,072,991 500,000 4,010,200 57,161,098 41,149,070 34,873,459

The Bank:

Item

Loans and advances Deposits

with banks

and other

financial

institutions

Lendings to

banks and

other

financial

institutions

Financial

assets under

reverse

repurchase

agreements

Available-f

or-sale

financial

assets

Held-to-mat

urity

investments

Receivables

investment

Corporate

loans

Personal

loans Total

31 December 2019

Neither overdue nor impaired 125,015,417 43,664,587 168,680,004

2,264,500 5,400,000 10,627,229 69,517,090 79,155,034 26,771,327


Page 128 of 186


Impaired 2,714,897 287,595 3,002,492 846,077

Total 127,857,137 44,086,212 171,943,349 2,264,500 5,400,000 10,627,229 69,517,090 79,155,034 27,617,404

Less: Allowance for

impairment losses 4,972,430 864,950 5,837,380 996,035

Net value 122,884,707 43,221,262 166,105,969 2,264,500 5,400,000 10,627,229 69,517,090 79,155,034 26,621,369

31 December 2018

Neither overdue nor

impaired 99,110,457 34,391,015 133,501,472 929,158 500,000 4,010,200 57,161,098 41,149,070 35,221,535


Impaired 2,426,332 440,697 2,867,029 669,077

Total 101,594,053 34,969,701 136,563,754 929,158 500,000 4,010,200 57,161,098 41,149,070 35,890,612

Less: Allowance for


Net value 97,861,797 34,151,788 132,013,585 929,158 500,000 4,010,200 57,161,098 41,149,070 34,843,459


Page 129 of 186

(1) The following table presents the five-tier classification of loans and advances that were neither

overdue nor impaired as at 31 December 2019 and 31 December 2018.

Consolidated:


Corporate loans 125,235,065 99,333,396

Pass 113,118,822 88,880,693

Special mention 12,116,243 10,452,703

Personal loans 44,076,475 34,743,167

Pass 44,007,412 34,689,289

Special mention 69,063 53,878

Total 169,311,540 134,076,563

The Bank:


Corporate loans 125,015,417 99,110,457

Pass 112,910,800 88,667,324

Special mention 12,104,617 10,443,133

Personal loans 43,664,587 34,391,015

Pass 43,610,495 34,344,520

Special mention 54,092 46,495

Total 168,680,004 133,501,472

In addition to the foregoing loans and advances, deposits with banks and other financial

institutions, lendings to banks and other financial institutions, financial assets under reverse

repurchase agreements, available-for-sale financial assets, held-to-maturity investments and

receivables investment that were neither overdue nor impaired were classified as pass as at 31

December 2019 (31 December 2018: Pass).

(2) Overdue but not impaired

The Group holds that overdue loans under this section can be repaid by borrowers' operating

income, guarantor's compensation and disposal of collaterals or sealed-up property, and therefore

are not identified as impaired loans. Financial assets overdue but not impaired are disclosed as

follows by the number of days overdue:

Consolidated:

Item Loans and advances

Corporate loans Personal loans Total

31 December 2019

Overdue for less than 30 days 50,346 95,696 146,042

Overdue for 30 to 60 days 70,417 32,307 102,724


Overdue for over 90 days

Total 135,173 138,479 273,652

31 December 2018

Overdue for less than 30 days 44,363 86,736 131,099




Page 130 of 186

Overdue for over 90 days

Total 67,644 142,405 210,049

The Bank:

Item Loans and advances

Corporate loans Personal loans Total

31 December 2019

Overdue for less

than 30 days 42,446 95,235 137,681

Overdue for 30 to 60

days 69,967 28,789 98,756


days 14,410 10,006 24,416

Overdue for over 90

days

Total 126,823 134,030 260,853

31 December 2018

Overdue for less

than 30 days 42,563 86,106 128,669


days 9,000 25,324 34,324


days 5,701 26,559 32,260

Overdue for over 90

days

Total 57,264 137,989 195,253

As at 31 December 2019, the deposits with banks and other financial institutions, lendings to

banks and other financial institutions, financial assets under reverse repurchase agreements,

available-for-sale financial assets, held-to-maturity investments and receivables investment were

not overdue and not impaired.

(3) Impaired financial assets

(i) Impaired loans and advances are classified as follows by the mode of guarantee:

Consolidated:


Unsecured loans 97,867 105,918



- Loans secured by

mortgages 1,247,342 1,144,020

- Pledged loans 251,522 284,712

Total 3,025,985 2,901,408

The Bank:


Unsecured loans 97,867 105,128



- Loans secured by

mortgages 1,230,720

1,119,321


Page 131 of 186

- Pledged loans 251,522 284,712

Total 3,002,492 2,867,029

As at 31 December 2019, fair value of collateral for impaired corporate loans of the Group was

RMB2,829,829,000 (2018: RMB3,668,763,000).

Personal loans issued by the Group are concentrated on home mortgages and housing

mortgage-backed loans. On 31 December 2019, these loans accounted for about 65.72% of total

personal loans (31 December 2018: 73.14%) The Group strictly followed requirements of PBOC

and CBRC on housing loans. The mortgage rate for home mortgages is capped at 70% to ensure

sufficient collateral value and effective control of credit risk. In the meantime, the Group created

the five-tier classification and rating system for personal loans, with regard to the collateral value,

days overdue, borrowers' ability and willingness to pay and other risk identification factors,

thereby enhancing credit risk management through loan classification.

As at 31 December 2019, the Group set aside RMB194,521,000 (31 December 2018:

RMB285,430,000) as allowance for impairment losses on impaired personal loans (mainly

problem loans left over from history). As at 31 December 2019, fair value of collateral for

impaired personal loans of the Group was RMB553,845,000 (2018: RMB1,436,463,000).

(ii) Other impaired financial assets

The Group has set aside allowance for impairment losses on receivables investment. As at 31

December 2019, RMB609,796,000 (2018: RMB371,342,000) of allowance had been set aside for

impairment on receivables investment.

(4) Renegotiated loans

Renegotiated loans refer to loans for which the loan agreement clauses are adjusted by the Bank

due to deteriorated financial position or inability of the borrower to repay.

As at 31 December 2019, the balance of renegotiated loans of the Group was RMB16,295,067,000

(31 December 2018: RMB15,211,157,000).

3. Investment bonds

The table below presents the ratings assigned by external rating agencies to bonds held by the

Group as at 31 December 2019 and 31 December 2018.

Consolidated:

31 December 2019


Page 132 of 186

Item Financial

assets

designated

at fair value

through

profit or

loss

Available-f

or-sale

financial

assets

Receivable

s financial

assets

Held-to-ma

turity

investment

s

Total

RMB medium- and long-term bonds (due in 1 year or above):

AAA 1,715,791 20,747,874 22,463,665

A- to AA+ 1,523,454 809,905 2,333,359

Unrated

- Government bonds 351,214 8,026,836 29,115 47,406,079 55,813,244

- Central bank bills

- Financial bonds of policy

banks

4,170,255 3,173,090 7,343,345

- Interbank CDs

- Local Government bonds 3,415,180 3,415,180

- Bond issued by

government-backed

agencies

100,000 100,000

- Corporate bonds 599,588 1,054,920 1,654,508


Fund investment 42,106,766 42,106,766

Asset management plans

and fund trust plans

2,358,474 25,862,487 28,220,961

Wealth management

investment

Subordinated debts

Equity investment 15,582 15,582

Subtotal 351,214 60,516,746 26,616,666 76,707,048 164,191,674

RMB short-term bonds (due within 1 year):

AAA 203,950 203,950

A- to AA+ 10,271 10,271


Page 133 of 186

Item Financial

assets

designated

at fair value

through

profit or

loss

Available-f

or-sale

financial

assets

Receivable

s financial

assets

Held-to-ma

turity

investment

s

Total

Unrated

- Government bonds 1,041,186 7,615,228 999,683 9,656,097



banks

20,005 500,321 520,326

- Interbank CDs 589,155 1,244,223 1,833,378

- Local Government bonds

- Bond issued by

government-backed

agencies

- Corporate bonds 399,894 91,690 204,080 695,664

Asset-backed securities

Fund investment



1,046,910 1,046,910

Wealth management

investment

Subordinated debts

Equity investment

Subtotal 1,471,356 9,000,344 1,046,910 2,447,986 13,966,596

Foreign currency bonds:

AAA

Unrated


banks

Subtotal

Total 1,822,570 69,517,090 27,663,576 79,155,034 178,158,270


Page 134 of 186

The Bank:

31 December 2019

Item

Financial

assets

designated

at fair

value

through

profit or

loss

Available-f

or-sale

financial

assets

Receivable

s financial

assets

Held-to-m

aturity

investment

s

Total


AAA 1,715,791 20,747,874 22,463,665

A- to AA+ 1,523,454 809,905 2,333,359

Unrated

- Government bonds 351,214 8,026,836 29,115 47,406,079 55,813,244


- Financial bonds of

policy banks

4,170,255 3,173,090 7,343,345

- Interbank CDs

- Local Government

bonds

3,415,180 3,415,180

- Bond issued by

government-backed

agencies

100,000 100,000

- Corporate bonds 599,588 1,054,920 1,654,508


Fund investment 42,106,766 42,106,766



2,358,474 25,862,487 28,220,961

Wealth management

investment

Subordinated debts


Subtotal 351,214 60,516,746 26,570,494 76,707,048 164,145,502


Page 135 of 186

Item

Financial

assets

designated

at fair

value

through

profit or

loss

Available-f

or-sale

financial

assets

Receivable

s financial

assets

Held-to-m

aturity

investment

s

Total


AAA 203,950 203,950

A- to AA+ 10,271 10,271

Unrated

- Government bonds 1,041,186 7,615,228 999,683 9,656,097



policy banks

20,005 500,321 520,326

- Interbank CDs 589,155 1,244,223 1,833,378

- Local Government

bonds

- Bond issued by

government-backed

agencies

- Corporate bonds 399,894 91,690 204,080 695,664

Asset-backed securities

Fund investment



1,046,910 1,046,910

Wealth management

investment

Subordinated debts

Equity investment

Subtotal 1,471,356 9,000,344 1,046,910 2,447,986 13,966,596


AAA


Page 136 of 186

Item

Financial

assets

designated

at fair

value

through

profit or

loss

Available-f

or-sale

financial

assets

Receivable

s financial

assets

Held-to-m

aturity

investment

s

Total

Unrated


policy banks

Subtotal

Total 1,822,570 69,517,090 27,617,404 79,155,034 178,112,098

Consolidated:

31 December 2018

Item Financial

assets

designated

at fair value

through

profit or

loss

Available-f

or-sale

financial

assets

Receivables

financial

assets

Held-to-mat

urity

investments

Total


AAA 3,299,484 13,696,742 16,996,226

A- to AA+ 1,834,418 460,000 2,294,418

Unrated

- Government bonds 11,355,233 23,762 17,512,902 28,891,897



policy banks

6,976,217 3,173,403 10,149,620

- Interbank CDs

- Local Government

bonds

3,415,180 3,415,180

- Bond issued by

government-backed

agencies

100,000 100,000

- Corporate bonds 587,622 654,969 1,242,591

Asset-backed 200,000 200,000


Page 137 of 186

Item Financial

assets

designated

at fair value

through

profit or

loss

Available-f

or-sale

financial

assets

Receivables

financial

assets

Held-to-mat

urity

investments

Total

securities

Fund investment 30,047,802 30,047,802

Asset management

plans and fund trust

plans

595,941 26,095,506 26,691,447

Wealth management

investment

Subordinated debts


Subtotal 54,712,299 26,319,268 39,013,196 120,044,763


AAA 90,236 751,050 841,286

A- to AA+ 220,963 40,000 260,963

Unrated

- Government bonds 848,109 4,326 699,589 1,552,024



policy banks

130,459 39,745 170,204

- Interbank CDs

- Local Government

bonds

405,150 405,150

- Bond issued by

government-backed

agencies

- Corporate bonds 231,536 497,117 200,340 928,993

Asset-backed

securities

Fund investment


Page 138 of 186

Item Financial

assets

designated

at fair value

through

profit or

loss

Available-f

or-sale

financial

assets

Receivables

financial

assets

Held-to-mat

urity

investments

Total

Asset management


plans

661,915 9,567,018 10,228,933

Wealth management

investment

12,810,762 - 30,000 12,840,762

Subordinated debts

Equity investment

Subtotal 13,042,298 2,448,799 9,601,344 2,135,874 27,228,315


AAA

Unrated


policy banks

Subtotal

Total 13,042,298 57,161,098 35,920,612 41,149,070 147,273,078

The Bank:

31 December 2018

Item

Financial

assets

designated

at fair value

through

profit or loss

Available-f

or-sale

financial

assets

Receivables

financial

assets

Held-to-mat

urity

investments

Total


AAA 3,299,484 13,696,742 16,996,226

A- to AA+ 1,834,418 460,000 2,294,418

Unrated

- Government bonds 11,355,233 23,762 17,512,902 28,891,897


Page 139 of 186

Item

Financial

assets

designated

at fair value

through

profit or loss

Available-f

or-sale

financial

assets

Receivables

financial

assets

Held-to-mat

urity

investments

Total



policy banks

6,976,217 3,173,403 10,149,620

- Interbank CDs

- Local Government

bonds

3,415,180 3,415,180

- Bond issued by

government-backed

agencies

100,000 100,000

- Corporate bonds 587,622 654,969 1,242,591

Asset-backed

securities

200,000 200,000

Fund investment 30,047,802 30,047,802

Asset management


plans

595,941 26,095,506 26,691,447

Wealth management

investment

Subordinated debts


Subtotal 54,712,299 26,319,268 39,013,196 120,044,763


AAA 90,236 751,050 841,286

A- to AA+ 220,963 40,000 260,963

Unrated

- Government bonds 848,109 4,326 699,589 1,552,024



policy banks

130,459 39,745 170,204


Page 140 of 186

Item

Financial

assets

designated

at fair value

through

profit or loss

Available-f

or-sale

financial

assets

Receivables

financial

assets

Held-to-mat

urity

investments

Total

- Interbank CDs

- Local Government

bonds

405,150 405,150

- Bond issued by

government-backed

agencies

- Corporate bonds 231,536 497,117 200,340 928,993

Asset-backed

securities

Fund investment

Asset management


plans

661,915 9,567,018 10,228,933

Wealth management

investment

12,810,762 12,810,762

Subordinated debts

Equity investment

Subtotal 13,042,298 2,448,799 9,571,344 2,135,874 27,198,315


AAA

Unrated


policy banks

Subtotal

Total 13,042,298 57,161,098 35,890,612 41,149,070 147,243,078

3. Credit risk concentration of financial assets

Geographical concentration

Customer loans, financial guarantees and related credit commitments of the Bank are concentrated


Page 141 of 186

in China. As at 31 December 2019 and 31 December 2018, financial assets held by the Bank were

concentrated in Chinese mainland.

Industry concentration

As at 31 December 2019 and 31 December 2018, financial assets of the Bank were mainly

composed of loans (including loans and advances) and securities investment (including financial

assets designated at fair value through profit or loss, available-for-sale financial assets, receivables

financial assets and held-to-maturity investment). For industry concentration of these main

financial assets, please refer to Note VIII to the financial statements.

ii. Market risk

Market risk refers to the risk of a loss in a bank's on-balance-sheet or off-balance-sheet business

due to adverse changes in the market price. It mainly includes interest rate risk, exchange rate risk

and stock and commodity price risk.

Currently, the Group has further improved the market risk management system and preliminarily

established three lines of defense: front-office, middle-office and back-office. The Financial

Market Department, as the first line of defense for market risk management, assumes the primary

responsibility for the Group's trading-book market risk. Its responsibility includes managing

domestic and foreign currency investment portfolios of the Group, carrying out proprietary and

agency trading, executing market risk management policies and procedures and conducting

identification, measurement, evaluation and control of daily risks. The Planning and Financial

Department is responsible for managing the banking-book market risk, setting the Group's

maturity structure of assets and liabilities and providing suggestions on interest rate adjustment.

The Risk Management Department, under authorization by the Risk Management Committee,

develops the market risk policy and manages the overall exposure to market risk, sets risk limits,

regularly assesses the Group's market risk profile and adjusts the investment strategy for the next

stage according to assessment results.

The Group assesses and measures the position and level of trading-book market risk through

revaluation, sensitivity analysis, bond asset risk classification and stress testing using such

indicators as yield to maturity, duration, convexity and unrealized profit or loss; and it also

assesses and measures the position and level of banking-book market risk through gap analysis,

bond asset risk classification and stress testing. The Group establishes a market risk monitoring

and reporting system for regular and irregular reporting to the Senior Management.

The Group has a treasury operations management system for treasury operations mainly exposed

to market risk and makes continuous improvements in its analysis and real-time monitoring

function.

(1) Currency risk


Page 142 of 186

The Group's majority businesses are denominated in RMB, supplemented by a few USD, HKD

and other foreign currencies. Exchange rate changes will affect the financial position and cash

flows of the Group. Given the Group's small volume of foreign currency business, the exchange

rate risk of foreign currencies has an insignificant impact on the Group. The Group controls

currency risk under the principle that assets and liabilities are matched in respect of each currency

as much as possible and currency exposures are monitored on a routine basis.

The table below summarizes foreign currency exposures of the Group's financial assets and

financial liabilities, with the carrying amounts of foreign currency assets, liabilities and

off-balance-sheet credit commitments converted to RMB equivalents.

Consolidated:

31 December 2019

Item RMB RMB

equivalent

of USD

RMB

equivalent

of HKD

RMB

equivalent

of other

currencies

Total

Financial assets

Cash and balances

with central banks

31,134,213 39,977 1,521 2,190 31,177,901

Deposits with banks

and other financial

institutions

1,793,038 422,081 10,169 54,030 2,279,318

Lendings to banks and

other financial

institutions

5,400,000 5,400,000

Financial assets

designated at fair

value through profit or

loss

1,822,570 1,822,570

Financial assets under

reverse repurchase

agreements

10,627,229 10,627,229

Loans and advances 166,076,632 655,938 166,732,570

Available-for-sale

financial assets

69,517,090 69,517,090

Held-to-maturity

investments

79,155,034 79,155,034


Page 143 of 186

Item RMB RMB

equivalent

of USD

RMB

equivalent

of HKD

RMB

equivalent

of other

currencies

Total

Receivables

investment

26,625,119 26,625,119

Other financial assets 6,836,719 14,817 6,851,536

Total financial assets 398,987,644 1,132,813 11,690 56,220 400,188,367

Financial liabilities

Borrowings from

central banks

63,000 63,000

Deposits from banks

and other financial

institutions

9,173,312 28,916 8,248 13 9,210,489

Borrowings from

banks and other


1,600,000 244,167 6,409 1,850,576


designated at fair


loss


repurchase

agreements

34,414,642 34,414,642

Customer deposits 249,666,289 642,560 4,657 27,985 250,341,491

Bonds payable 80,774,169 80,774,169

Other financial

liabilities

5,835,495 15,371 13 23 5,850,902

Total financial

liabilities

381,526,907 931,014 12,918 34,430 382,505,269

Net balance sheet

position

17,460,737 201,799 -1,228 21,790 17,683,098

Off-balance-sheet

credit commitments

31 December 2018


Page 144 of 186

Item RMB

RMB

equivalent

of USD

RMB

equivalent

of HKD

RMB

equivalent

of other

currencies

Total

Financial assets

Cash and balances

with central banks

26,873,155 37,311 1,073 2,004 26,913,543

Deposits with banks

and other financial

institutions

536,798 493,571 11,058 31,564 1,072,991


other financial

institutions

500,000 500,000

Financial assets

designated at fair


loss

13,042,298 13,042,298


reverse repurchase

agreements

4,010,200 4,010,200


Available-for-sale

financial assets

57,161,098 57,161,098

Held-to-maturity

investments

41,149,070 41,149,070

Receivables

investment

34,873,459 34,873,459




Borrowings from

central banks

1,700,000 1,700,000

Deposits from banks

and other financial

institutions

4,570,524 221,195 8,072 13 4,799,804

Borrowings from

banks and other


1,500,000 4,290 1,504,290


Page 145 of 186

Item RMB

RMB

equivalent

of USD

RMB

equivalent

of HKD

RMB

equivalent

of other

currencies

Total


designated at fair


loss

13,190,558 13,190,558

Derivative financial

liabilities


repurchase

agreements

17,496,238 17,496,238


Bonds payable 67,408,116 67,408,116

Other financial

liabilities

3,268,751 2,117 16 13,321 3,284,205

Total financial

liabilities

297,299,662 857,257 12,428 43,030 298,212,377

Net balance sheet

position

16,411,797 172,895 -297 -9,462 16,574,933

Off-balance-sheet

credit commitments

The Bank:

31 December 2019

Item RMB RMB

equivalent

of USD

RMB

equivalen

t of HKD

RMB

equivalen

t of other

currencie

s

Total

Financial assets

Cash and balances with

central banks

31,041,795 39,977 1,521 2,190 31,085,483

Deposits with banks and


1,778,220 422,081 10,169 54,030 2,264,500

Lendings to banks and other


5,400,000 5,400,000


Page 146 of 186

Item RMB RMB

equivalent

of USD

RMB

equivalen

t of HKD

RMB

equivalen

t of other

currencie

s

Total

Financial assets designated at

fair value through profit or

loss

1,822,570 1,822,570

Financial assets under reverse


10,627,229 10,627,229


Available-for-sale financial

assets

69,517,090 69,517,090






Borrowings from central

banks

Deposits from banks and

other financial institutions 9,675,110 28,916 8,248 13 9,712,287

Borrowings from banks and

other financial institutions 1,600,000 244,167 6,409 1,850,576


designated at fair value





Bonds payable 80,774,169 80,774,169

Other financial liabilities 5,867,564 15,371 13 23 5,882,971

Total financial liabilities 380,960,131 931,014 12,918 34,430 381,938,493

Net balance sheet position 17,281,556 201,799 -1,228 21,790 17,503,917

Off-balance-sheet credit

commitments


Page 147 of 186

31 December 2018

Item RMB RMB

equivalent

of USD

RMB

equivalen

t of HKD

RMB

equivalen

t of other

currencie

s

Total

Financial assets


central banks

26,773,176 37,311 1,073 2,004 26,813,564

Deposits with banks and


392,965 493,571 11,058 31,564 929,158

Lendings to banks and other


500,000 500,000


fair value through profit or

loss

13,042,298 13,042,298

Financial assets under reverse


4,010,200 4,010,200



assets

57,161,098 57,161,098







banks

1,650,000 1,650,000

Deposits from banks and


4,859,108 221,195 8,072 13 5,088,388



1,500,000 4,290 1,504,290




13,190,558 13,190,558



17,496,238 17,496,238


Page 148 of 186

Item RMB RMB

equivalent

of USD

RMB

equivalen

t of HKD

RMB

equivalen

t of other

currencie

s

Total


Bonds payable 67,408,116 67,408,116

Other financial liabilities 3,252,083 2,117 16 13,321 3,267,537

Total financial liabilities 296,553,726 857,257 12,428 43,030 297,466,441

Net balance sheet position 16,296,538 172,895 -297 -9,462 16,459,674

Off-balance-sheet credit

commitments

(2) Interest rate risk

Interest rate risk refers to the risk of volatility of fair value or future cash flows of financial

instruments due to market interest rate changes.

The interest rate risk of cash flows refers to the risk of volatility of future cash flows of financial

instruments due to market interest rate changes. The interest rate risk of fair value refers to the risk

of volatility of financial instruments' value due to changes in market interest rates.

The interest rate risk exposures of the Group are faced with interest rate risk in fair value and cash

flows due to changes in main market interest rates.

Interest rate fluctuations may either lead to widening interest spread of the Group or result in

narrowing interest spread or even incur a loss due to unexpected changes. The Group mainly

operates business within the interest rate framework of the PBOC. According to historical

experience, PBOC generally adjusts benchmark interest rates of interest-generating loans and

interest-bearing deposits in the same direction (yet maybe in different magnitudes), so the Group

controls its interest rate risk mainly through controlling the maturity distribution of loans and

deposits.

In accordance with PBOC rules, RMB loan interest rates may float upwards or downwards from

the benchmark rate. The RMB benchmark interest rate published by PBOC sets a cap on the RMB

loan interest rate. The discount rate of RMB bills is market-based, subject to a minimum of the

PBOC-specified rediscount rate, and the cap of discount rate shall not exceed the same-period loan

interest rate (including floating).

The Group pays close attention to movements in the interest rates of RMB and foreign currencies,

adjusts RMB and foreign currency deposit and loan rates from time to time to reflect changes in


Page 149 of 186

market interest rates and endeavors to prevent interest rate risk.

The table below provides a summary of the Group's interest rate risk exposures. Assets and

liabilities listed in the table are as at the earlier of the repricing date and the maturity date.

Financial assets and liabilities are presented at carrying amount.

Consolidated:

31 December 2019

Item Within 1

month

1 to 3

months

3 to 12

months

1 to 5 years Over 5

years

Interest

free

Total

Financial assets

Cash and

balances

with central

banks

30,166,285 1,011,616 31,177,901

Deposits

with banks

and other

financial

institutions

879,318 1,000,000 400,000 2,279,318

Lendings to

banks and

other

financial

institutions

5,400,000 5,400,000

Financial

assets

designated

at fair value

through

profit or

loss

20,006 399,893 1,051,457 351,214 1,822,570

Financial

assets under

reverse

repurchase

agreements

10,627,229 10,627,229

Loans and

advances 13,786,471 15,880,472 58,222,494 45,422,350 33,420,783 166,732,570

Available-f

or-sale

financial

assets

22,782,310 15,158,210 7,334,387 12,617,933 11,608,668 15,582 69,517,090

Held-to-mat

urity

investments

1,119,774 190,006 8,270,385 34,055,412 35,519,457 79,155,034

Receivables

investment 795,646 622,096 2,479,559 19,843,500 2,884,318 26,625,119


Page 150 of 186

Item Within 1 month

1 to 3 months

3 to 12 months

1 to 5 years Over 5 years

Interest free

Total

Other

financial

assets

493,924 886,381 2,478,676 237,500 2,755,055 6,851,536

Total

financial

assets

86,070,963 34,137,058 80,236,958 112,527,909 83,433,226 3,782,253 400,188,367


Borrowings

from central

banks

63,000 63,000

Deposits

from banks

and other

financial

institutions

2,510,489 1,700,000 5,000,000 9,210,489

Borrowings

from banks

and other

financial

institutions

480,814 1,200,000 169,762 1,850,576

Financial

liabilities

designated

at fair value

through

profit or

loss

Financial

assets under


33,911,578 503,064 34,414,642

Customer

deposits

119,801,065 11,813,411 33,426,889 85,157,587 142,539 250,341,491

Bonds

payable

8,016,340 21,631,020 43,531,076 2,599,324 4,996,409 80,774,169

Other

financial

liabilities

804,659 5,046,243 5,850,902

Total

financial

liabilities

165,524,945 36,847,495 82,190,727 87,756,911 5,138,948 5,046,243 382,505,269

Total

interest rate

sensitivity gap

-79,453,982 -2,710,437 -1,953,769 24,770,998 78,294,278 -1,263,990 17,683,098

31 December 2018


Page 151 of 186

Item Within 1

month

1 to 3

months

3 to 12

months 1 to 5 years Over 5

years

Interes

t free Total

Financial assets

Cash and

balances with

central banks

5,078,843 21,795,985 38,715 26,913,543

Deposits with

banks and

other

financial

institutions

902,991 110,000 60,000 1,072,991

Lendings to

banks and

other

financial

institutions

500,000 500,000

Financial

assets

designated at

fair value

through

profit or loss

1,930,239 4,177,549 6,910,391 24,119 13,042,298

Financial

assets under

reverse

repurchase

agreements

4,010,200 4,010,200

Loans and

advances

9,596,497 13,273,919 49,010,004 36,075,896 24,640,687 132,597,003

Available-for

-sale

financial

assets

8,068,895 3,224,802 21,222,695 13,276,830 11,352,294 15,582 57,161,098

Held-to-matu

rity

investments

70,419 239,186 1,943,334 26,429,777 12,466,354 41,149,070

Receivables

investment

30,000 1,049,868 7,848,021 22,896,504 3,049,066 34,873,459

Other

financial

assets

3,459,634 4,049 3,965 3,467,648

Total

financial

assets

33,147,718 22,079,373 87,494,445 98,703,126 73,304,386 58,262 314,787,310


Borrowings

from central

banks

1,700,000 1,700,000

Deposits

from banks

-13,353 1,503,328 3,223,969 17,172 68,688 4,799,804


Page 152 of 186

Item Within 1

month

1 to 3

months

3 to 12

months 1 to 5 years Over 5

years

Interes

t free Total

and other

financial

institutions

Borrowings

from banks

and other

financial

institutions

304,290 700,000 500,000 1,504,290

Financial

liabilities

designated at

fair value

through

profit or loss

1,938,738 4,316,581 6,935,239 13,190,558

Financial

assets under

repurchase

agreements

12,466,166 1,911,168 3,118,904 17,496,238

Customer

deposits

118,607,233 8,039,874 29,120,868 32,840,859 220,332 188,829,166

Bonds

payable

6,409,846 12,740,012 40,663,326 2,598,934 4,995,998 67,408,116

Other

financial

liabilities

275,697 1,524,967 1,466,872 16,669 3,284,205

Total

financial

liabilities

139,988,617 30,735,930 86,729,178 35,456,965 5,285,018 16,669 298,212,377

Total interest

rate

sensitivity

gap

-106,840,899 -8,656,557 765,267 63,246,161 68,019,368 41,593 16,574,933

The Bank:

31 December 2019

Item Within 1 month

1 to 3 months

3 to 12 months


Interest free

Total

Financial assets

Cash and

balances

with

central banks

30,080,826 1,004,657 31,085,483

Deposits

with

banks and

other

financial

institution

864,500 1,000,000 400,000 2,264,500


Page 153 of 186

Item Within 1 month

1 to 3 months

3 to 12 months


Interest free

Total

s

Lendings

to banks

and other

financial

institutions

5,400,000 5,400,000

Financial

assets

designate

d at fair

value

through

profit or loss

20,006 399,893 1,051,457 351,214 1,822,570

Financial

assets

under

reverse

repurchas

e

agreements

10,627,229 10,627,229

Loans and

advances

13,750,429 15,826,499 57,905,850 45,330,641 33,292,550 166,105,969

Available-

for-sale

financial assets

22,782,310 15,158,210 7,334,387 12,617,933 11,608,668 15,582 69,517,090

Held-to-m

aturity

investments

1,119,774 190,006 8,270,385 34,055,412 35,519,457 79,155,034

Receivabl

es

investmen

t

795,646 622,096 2,521,981 19,843,500 2,838,146 26,621,369

Other

financial assets

489,832 886,381 2,478,676 237,500 2,750,777 6,843,166

Total

financial assets

85,930,552 34,083,085 79,962,736 112,436,200 83,258,821 3,771,016 399,442,410


Borrowin

gs from

central

banks


Page 154 of 186

Item Within 1 month

1 to 3 months

3 to 12 months


Interest free

Total

Deposits

from

banks and

other

financial

institutions

3,012,287 1,700,000 5,000,000 9,712,287

Borrowin

gs from

banks and

other

financial

institution

s

480,814 1,200,000 169,762 1,850,576

Financial

liabilities

designate

d at fair

value

through

profit or loss

Financial

assets

under

repurchas

e

agreements

33,911,578 503,064 34,414,642

Customer

deposits

119,512,781 11,669,158 33,165,030 84,814,340 142,539 249,303,848

Bonds

payable

8,016,340 21,631,020 43,531,076 2,599,324 4,996,409 80,774,169

Other

financial liabilities

804,660 5,078,311 5,882,971

Total


165,738,460 36,703,242 81,865,868 87,413,664 5,138,948 5,078,311 381,938,493

Total

interest

rate

sensitivity gap

-79,807,908 -2,620,157 -1,903,132 25,022,536 78,119,873 -1,307,295 17,503,917

31 December 2018

Item Within 1

month

1 to 3

months

3 to 12

months 1 to 5 years

Over 5

years

Interes

t free Total

Financial assets


Page 155 of 186

Item Within 1

month

1 to 3

months

3 to 12

months 1 to 5 years

Over 5

years

Interes

t free Total

Cash and

balances with

central banks

5,017,579 21,795,985 26,813,564

Deposits with

banks and

other

financial

institutions

879,158 50,000 929,158

Lendings to

banks and

other

financial

institutions

500,000 500,000

Financial

assets

designated at

fair value

through

profit or loss

1,930,239 4,177,549 6,910,391 24,119 13,042,298

Derivative

financial

assets

Financial

assets under

reverse

repurchase

agreements

4,010,200 4,010,200

Loans and

advances

9,551,239 13,214,148 48,680,541 36,026,062 24,541,595 132,013,585

Available-for

-sale

financial

assets

8,068,895 3,224,802 21,222,695 13,276,830 11,352,294 15,582 57,161,098

Held-to-matu

rity

investments

70,419 239,186 1,943,334 26,429,777 12,466,354 41,149,070

Receivables

investment

1,049,868 7,848,021 22,896,504 3,049,066 34,843,459

Other

financial

assets

3,459,634 4,049 3,463,683

Total

financial

assets

32,987,363 21,959,602 87,104,982 98,653,292 73,205,294 15,582 313,926,115



Page 156 of 186

Item Within 1

month

1 to 3

months

3 to 12

months 1 to 5 years

Over 5

years

Interes

t free Total

Borrowings

from central

banks

1,650,000 1,650,000

Deposits

from banks

and other

financial

institutions

275,231 1,503,328 3,223,969 17,172 68,688 - 5,088,388

Borrowings

from banks

and other

financial

institutions

304,290 700,000 500,000 1,504,290

Financial

liabilities

designated at

fair value

through

profit or loss

1,938,738 4,316,581 6,935,239 13,190,558

Derivative

financial

liabilities

Financial

assets under

repurchase

agreements

12,466,166 1,911,168 3,118,904 17,496,238

Customer

deposits

118,326,986 8,029,046 28,702,378 32,582,572 220,332 187,861,314

Bonds

payable

6,409,846 12,740,012 40,663,326 2,598,934 4,995,998 67,408,116

Other

financial

liabilities

275,698 1,524,967 1,466,872 3,267,537

Total

financial

liabilities

139,996,955 30,725,102 86,260,688 35,198,678 5,285,018 297,466,441

Total interest

rate

sensitivity

gap

-107,009,592 -8,765,500 844,294 63,454,614 67,920,276 15,582 16,459,674

The Group measured and controlled the interest rate risk mainly through sensitivity analysis. For

the financial assets and liabilities designated at fair value through profit or loss, the Management

believed that the interest rate risk of the Group was not significant. For other financial assets and

liabilities, the Group measured and controlled their interest rate risk mainly through gap analysis.


Page 157 of 186

Below is the result from the gap analysis on the financial assets and liabilities (except those

designated at fair value through profit or loss) as at 31 December 2019 and 31 December 2018:

Net interest income


Consolidate

d

The Bank Consolidate

d

The Bank

Benchmark rate yield moves up by 50

basis points -399,394 -400,618

-545,894 -547,008

Benchmark rate yield moves down by

50 basis points 399,394

400,618 545,894 547,008

The above gap analysis was based on the assumption that financial assets and liabilities (except

those designated at fair value through profit or loss) have static interest rate risk structure.

The sensitivity analysis of net interest income was based on the financial assets and liabilities

(except those designated at fair value through profit or loss) held by the Bank at the end of the

year and estimated influence of interest rate variation on the net interest income within a year. The

above influence on the net interest income did not take into account the influence of relevant

changes on the income tax.

The above analysis is based on the following assumptions: all assets and liabilities re-priced or

matured within a month, after a month but within three months, and after three months but within

one year are re-priced or matured duly; and the yield curve moves parallel with the interest rate

variation.

Due to the above assumption, there might be some difference between the actual change of the

Bank's net interest income due to interest rate variation and the result of sensitivity analysis.

iii. Liquidity risk

Liquidity risk means the risk that the Group is unable to acquire sufficient fund in time or could

not acquire sufficient fund at a reasonable cost to cope with the assets growth or pay matured

debts in spite of its solvency.

The Asset and Liability Management Committee of the Group is responsible for liquidity risk

management of the whole bank, developing the liquidity risk management policy, defining the

liquidity risk monitoring indicators, formulating the contingency plan for liquidity risk, regularly

analyzing and examining execution of indicators, providing suggestions on improving liquidity

risk management and reviewing bank-wide liquidity risk management on a quarterly basis.

The table below presents the distribution of cash flows in the remaining maturity of financial

assets and financial liabilities of the Group, except for derivative financial instruments. The

remaining maturity is the period from the balance sheet date to the maturity date specified in the

contract. Amounts of financial liabilities under each time period are contract cash flows that are

not discounted; amounts of financial assets under each time period are cash flows anticipated to be

recovered.


Page 158 of 186

Consolidated:

31 December 2019

Item Repayable

on demand

Within 1

month

1 to 3

months

3 to 12

months

1 to 5 years Over 5

years

Overdue/un

limited

term

Total

Financial assets

Cash and balances

with central

banks

8,291,590 22,886,311 31,177,901

Deposits

with banks and other

financial

institutions

874,558 4,760 1,000,000 400,000 2,279,318


other


5,400,000 5,400,000

Financial assets

designated at

fair value

through

profit or loss

20,006 399,893 1,121,700 280,971 1,822,570

Financial

assets under reverse

repurchase

agreements

10,627,229 10,627,229

Loans and advances

13,788,396 18,968,747 58,234,102 45,432,366 33,423,600 2,763,966 172,611,177

Available-for-sale

financial

assets

22,782,310 15,158,210 7,334,387 12,617,933 11,608,668 15,582 69,517,090

Held-to-mat

urity investments

1,098,074 259,896 8,200,495 34,077,112 35,519,457 79,155,034

Receivables investment

795,645 772,055 2,521,981 19,843,500 2,885,483 844,912 27,663,576

Other financial

assets

464,291 2,713,875 1,021,954 2,478,676 237,500 1,346 6,917,642

Total financial

assets

(Expected

maturity)

9,630,439 57,230,295 37,580,755 80,291,341 112,489,382 83,437,208 26,512,117 407,171,537



banks

63,000 63,000


Page 159 of 186

Item Repayable on demand

Within 1 month

1 to 3 months

3 to 12 months


Overdue/unlimited

term

Total

Deposits

from banks

and other


1,104,505 1,405,984 1,700,000 5,000,000 9,210,489

Borrowings from banks

and other

financial

institutions

480,814 1,200,000 169,762 1,850,576

Financial

liabilities


through

profit or loss

Financial

assets under

repurchase

agreements

33,911,578 503,064 34,414,642

Customer

deposits

101,891,347 17,909,718 11,813,411 33,426,889 85,157,587 142,539 250,341,491

Bonds payable

8,016,340 21,631,020 43,531,076 2,599,324 4,996,409 80,774,169

Other financial

liabilities

27,153 594,958 1,648,087 3,580,704 5,850,902

Total financial

liabilities

(Contract

maturity)

103,023,005 62,319,392 38,495,582 85,771,431 87,756,911 5,138,948 382,505,269

Liquidity

exposure

-93,392,566 -5,089,099 -914,827 -5,480,090 24,732,471 78,298,260 26,512,117 24,666,268

31 December 2018

Item Repayabl

e on demand

Within 1

month

1 to 3

months

3 to 12

months

1 to 5

years

Over 5

years

Overdue/un

limited term

Total

Financial assets

Cash and

balances with

central banks

4,916,904 21,996,639 26,913,543

Deposits with

banks and other

financial

institutions

902,991 110,000 60,000 1,072,991


other


500,000 500,000


Page 160 of 186

Item Repayable on

demand

Within 1 month

1 to 3 months

3 to 12 months

1 to 5 years

Over 5 years

Overdue/unlimited

term

Total

Financial

assets

designated at

fair value through

profit or loss

2,161,776 4,167,326 6,689,077 24,119 13,042,298


reverse

repurchase

agreements

4,010,200 4,010,200

Loans and

advances

2,908,350 9,581,656 13,273,919 49,010,004 36,075,896 26,338,195 137,188,020

Available-for

-sale financial

assets

12,859,004 4,710,921 1,979,795 13,296,620 24,299,176 15,582 57,161,098

Held-to-maturity

investments

22,539 170,000 1,943,334 26,546,843 12,466,354 41,149,070

Receivables

investment

674,619 30,000 1,049,868 7,848,021 22,896,504 3,421,600 35,920,612

Other

financial

assets

3,463,388 4,260 3,467,648

Total

financial assets

(Expected

maturity)

3,582,969 37,948,458 23,486,294 68,030,231 98,839,982 66,525,325 22,012,221 320,425,480



banks

1,700,000 1,700,000

Deposits from banks

and other

financial

institutions

-13,353 1,503,328 3,223,969 17,172 68,688 4,799,804

Borrowings

from banks and other

financial

institutions

304,290 700,000 500,000 1,504,290


designated at

fair value


1,938,738 4,316,581 6,935,239 13,190,558


repurchase

agreements

12,466,166 1,911,168 3,118,904 17,496,238


Page 161 of 186

Item Repayable on

demand

Within 1 month

1 to 3 months

3 to 12 months

1 to 5 years

Over 5 years

Overdue/unlimited

term

Total

Customer

deposits

118,607,233 8,039,874 29,120,868 32,840,859 220,332 188,829,166

Bonds

payable

6,409,846 12,740,012 40,663,326 2,598,934 4,995,998 67,408,116

Other

financial

liabilities

274,398 1,524,994 1,471,920 12,893 3,284,205

Total


(Contract

maturity)

139,987,318 30,735,957 86,734,226 35,469,858 5,285,018 298,212,377

Liquidity exposure

3,582,969 -102,038,860 -7,249,663 -18,703,995 63,370,124 61,240,307 22,012,221 22,213,103

The Bank:

31 December 2019

Item Repayable

on demand

Within 1

month

1 to 3

months

3 to 12

months

1 to 5 years Over 5

years

Overdue/un

limited

term

Total

Financial assets

Cash and balances

with central

banks

8,284,631 22,800,852 31,085,483

Deposits

with banks

and other financial

institutions

864,500 1,000,000 400,000 2,264,500


other

financial

institutions

5,400,000 5,400,000

Financial

assets designated at

fair value

through

profit or loss

20,006 399,893 1,121,700 280,971 1,822,570

Financial

assets under

reverse repurchase

agreements

10,627,229 10,627,229

Loans and advances

13,750,429 18,929,123 57,905,850 45,330,641 33,292,550 2,734,756 171,943,349

Available-for-sale

financial

assets

22,782,310 15,158,210 7,334,387 12,617,933 11,608,668 15,582 69,517,090


Page 162 of 186

Item Repayable on demand

Within 1 month

1 to 3 months

3 to 12 months


Overdue/unlimited

term

Total

Held-to-mat

urity

investments

1,098,074 259,896 8,200,495 34,077,112 35,519,457 79,155,034

Receivables

investment

795,645 772,055 2,521,981 19,843,500 2,839,311 844,912 27,617,404

Other

financial assets

464,032 2,706,470 1,021,954 2,478,676 237,500 640 6,909,272

Total financial

assets

(Expected

maturity)

9,613,163 57,180,163 37,541,131 79,963,089 112,387,657 83,259,986 26,396,742 406,341,931



banks

Deposits from banks

and other

financial

institutions

1,606,303 1,405,984 1,700,000 5,000,000 9,712,287

Borrowings from banks

and other

financial

institutions

480,814 1,200,000 169,762 1,850,576

Financial

liabilities

designated at

fair value through

profit or loss


repurchase

agreements

33,911,578 503,064 34,414,642

Customer

deposits

101,658,435 17,854,346 11,669,158 33,165,030 84,814,340 142,539 249,303,848

Bonds

payable

8,016,340 21,631,020 43,531,076 2,599,324 4,996,409 80,774,169

Other


26,011 645,596 1,648,074 3,563,290 5,882,971

Total financial

liabilities

(Contract

maturity)

103,290,749 62,314,658 38,351,316 85,429,158 87,413,664 5,138,948 381,938,493

Liquidity

exposure

-93,677,586 -5,134,495 -810,185 -5,466,069 24,973,993 78,121,038 26,396,742 24,403,438

31 December 2018


Page 163 of 186

Item Repayable on

demand

Within 1 month

1 to 3 months

3 to 12 months

1 to 5 years

Over 5 years

Overdue/unlimited

term

Total

Financial assets


central banks

4,909,256 21,904,308 26,813,564


financial

institutions

879,158 50,000 929,158

Lendings to

banks and other financial

institutions

500,000 500,000


fair value

through profit

or loss

2,161,776 4,167,326 6,689,077 24,119 13,042,298

Financial assets

under reverse repurchase

agreements

4,010,200 4,010,200

Loans and advances

2,862,480 9,551,239 13,214,148 48,680,541 36,026,062 26,229,284 136,563,754


assets

12,859,004 4,710,921 1,979,795 13,296,620 24,299,176 15,582 57,161,098

Held-to-maturit

y investments

22,539 170,000 1,943,334 26,546,843 12,466,354 41,149,070

Receivables

investment

674,619 1,049,868 7,848,021 22,896,504 3,421,600 35,890,612

Other financial

assets

3,459,634 4,049 3,463,683

Total financial

assets

(Expected maturity)

3,537,099 37,852,806 23,366,312 67,640,768 98,790,148 66,416,414 21,919,890 319,523,437


Borrowings

from central

banks

1,650,000 1,650,000

Deposits from

banks and other financial

institutions

275,231 1,503,328 3,223,969 17,172 68,688 5,088,388


other financial

institutions

304,290 700,000 500,000 1,504,290

Financial

liabilities


1,938,738 4,316,581 6,935,239 13,190,558


Page 164 of 186

Item Repayable on

demand

Within 1 month

1 to 3 months

3 to 12 months

1 to 5 years

Over 5 years

Overdue/unlimited

term

Total

through profit

or loss


repurchase

agreements

12,466,166 1,911,168 3,118,904 17,496,238

Customer

deposits

118,326,986 8,029,046 28,702,378 32,582,572 220,332 187,861,314

Bonds payable 6,409,846 12,740,012 40,663,326 2,598,934 4,995,998 67,408,116

Other financial

liabilities

275,698 1,524,967 1,466,872 3,267,537

Total financial

liabilities

(Contract maturity)

139,996,955 30,725,102 86,260,688 35,198,678 5,285,018 297,466,441

Liquidity exposure

3,537,099 -102,144,149 -7,358,790 -18,619,920 63,591,470 61,131,396 21,919,890 22,056,996

iv. Operational risk

Operational risk is defined as the risk that causes losses through imperfect or faulty internal

procedures, employees and IT systems as well as external incidents, including internal fraud,

external fraud, employment policy and workplace safety, customers (products) and business

activities, damage to physical assets, information technology systems, settlement execution and

process management.

The Risk Management Department of the Group is responsible for developing the operational risk

management policy and supervising its execution. Based on work done previously, the Group has

mainly carried out the following work in relation to operational risk management:

The Operational Risk Management Policy of Hankou Bank was developed and submitted to the

Board of Directors for discussion. The policy sets out the Group's basic principles and

management strategies for operational risk management and points out the direction of the Group's

operational risk management in coming years.

The operational risk incident monitoring and reporting procedures were revised and improved to

clarify the reporting line for operational risk incidents and the duties for operational risk

management; the four-tier account system for operational risk incidents was developed according

to the New Basel Capital Accord, regulatory guidelines and the Bank's particularities. The Group

tried to classify operational risk incidents by incident types, product lines and driving factors, with

the aim of gradually improving the quality of operational risk incident monitoring.

The operational risk management of information technology systems was further enhanced. On the

one hand, the Information Technology Risk Management Policy of Hankou Bank was developed

and submitted to the Board of Directors, providing basic standards and direction for information


Page 165 of 186

technology risk management. On the other hand, the Group steadily pushed forward the

information technology risk assessment, safeguarded security of information systems and

gradually improved the structure of information technology management to prevent information

technology risk.

The annual plan for internal control inspection was developed to set out items, content and timing

of internal control inspection of all business lines in the year. In the reporting period, the Group

strictly conducted inspections as planned, detected internal control loopholes in a timely manner,

corrected internal control problems, implemented internal control measures and improved internal

control procedures.

1．Fair value of financial assets and financial liabilities

(1) Fair value of financial instruments

The table below presents fair values of financial instruments, including the fair values of financial

assets and financial liabilities whose carrying amounts are different from fair values, but does not

reflect the fair values of financial assets and financial liabilities whose carrying amounts are

consistent with fair values, and the fair values of non-financial assets or liabilities (such as fixed

assets).

Item


Carrying

amount Fair value Carrying amount Fair value

Financial assets

Held-to-maturity

investments

79,155,034

80,314,134 41,149,070 41,741,539

There are no market prices or market interest rates for some financial assets or financial liabilities

held or issued by the Group. Therefore, their fair values are calculated by the Group using the

valuation models, including the cash flow discounting analysis model. Values estimated by the

Group using these techniques are subject to significant impact of model selection and internal

assumptions, such as the amount and inflow time of future cash flows, discount rate, volatility and

credit risk. In addition, only observable data are used where possible for valuation models, but the

Group still needs to estimate such factors as credit risk of both parties to transactions, market

volatility and correlation. Changes in assumptions concerning the foregoing factors will affect the

assessment of fair value of financial instruments.

Below are methods and important assumptions the Group uses to determine the fair values of

financial assets and financial liabilities listed in the table above.

a. Cash and balances with central banks, deposits with banks and other financial institutions,

lendings to banks and other financial institutions, deposits from banks and other financial

institutions and borrowings from banks and other financial institutions.

Since the maturity dates of the above financial assets and liabilities are within one year, their


Page 166 of 186

carrying amount is close to their fair value.

b. Loans and advances and receivables investment

Loans and advances and receivables investment are presented at the value net of allowance for

impairment losses, with the fair value being estimated to be the present value of cash flows

expected to be received in the future discounted at the current market interest rate.

c. Customer deposits and deposits from banks and other financial institutions

The fair values of check accounts, savings accounts and short-term money market deposits are the

amount payable to customers on demand. The fair value of fixed-rate deposits without quoted

market price is calculated using the cash flow discounting model, with the discount rate being the

current time deposit interest rate similar to that for the remaining maturity.

d. Repurchase and reverse repurchase agreements

Repurchase and reverse repurchase agreements mainly involve bills, loans and bond investment.

Specifically, financial assets under reverse repurchase agreements are presented at the value net of

allowance for impairment losses, with the fair value being estimated to be the present value of

cash flows expected to be received in the future discounted at the current market interest rate.

Repurchase agreements are short-term financing arrangements, with the fair value approximate to

carrying amount.

e. Bonds payable

The fair value of bonds payable is calculated at quoted market price. If the quoted market price is

unavailable, the fair value should be calculated using the cash flow discounting model, with the

discount rate being the current market interest rate for similar bonds with similar remaining

maturity.

(2) Financial instruments at fair value are classified into three tiers:

First tier: Quoted prices of the same assets or liabilities in an active market, including securities

traded on exchanges and some government bonds.

Second tier: Valuation techniques - all directly or indirectly use observable input values other than

quoted market prices of assets or liabilities in the first tier, including the majority of OTC

derivative contracts and bonds whose prices (including CCDC valuation and CCDC settlement

price) are acquired from the website of the price provider or the China Central Depository Trust &

Clearing Co. Ltd. (“CCDC”).

Third tier: Valuation techniques - use any input values not based on observable market data

(non-observable input values), mainly OTC structured credit derivatives.


Page 167 of 186

If the publicly quoted market price is unavailable, the Group determines the fair value of financial

instruments using some valuation techniques or inquiry.

For financial instruments held by the Group, main parameters of valuation techniques used include

bond price, interest rate, exchange rate, equity and stock prices, volatility and correlation of price

and options, advance repayment ratio and credit spread of counterparties, all of which are

observable and available in an open market.

Third-tier financial instruments of the Group are mainly composed of OTC structured credit

derivatives. The Management has assessed the impact of changes in macro-economic factors and

other input values to decide whether or not to make necessary adjustments to the fair value of

third-tier financial instruments. The Group has established relevant internal control procedures to

monitor and restrict the Group's exposures to such financial instruments.

The table below presents the valuation techniques or methods for financial instruments measured

at fair value:

Item First tier Second

tier

Third tier Total

31 December 2019



1,822,570 1,822,570


Available-for-sale financial assets 69,501,508 15,582 69,517,090

Subtotal 71,324,078 15,582 71,339,660


Financial liabilities designated at fair


31 December 2018



9,107,604 3,934,694 13,042,298


Available-for-sale financial assets 57,145,516 15,582 57,161,098

Subtotal 66,253,120 3,950,276 70,203,396


Financial liabilities designated at fair


13,190,558 13,190,558


Page 168 of 186

XIV. Capital Management

Capital management of the Group, centered on capital adequacy ratio and return on capital, aims

to strike a balance between expansion and profitability, capital size and structural optimization as

well as the optimal capital size and return on capital in line with the development plan.

The Group calculated capital adequacy ratios in accordance with the Regulation Governing

Capital of Commercial Banks (Provisional) issued by CBRC on June 2012. According to

requirements, credit risk weighted assets for the reporting period are measured at the weighted

approach, market risk weighted assets are measured at the standardized approach and operational

risk weighted assets are measured at the basic indicator approach.

As at 31 December 2019, the Group's core tier-1 capital adequacy ratio, tier-1 capital adequacy

ratio and capital adequacy ratio are as follows: (Unit: RMB1,000)


Core tier-1 capital:

Valid portion of paid-up capital 4,127,846

Valid portion of capital reserve 3,260,371

Surplus reserves 1,806,093

General risk reserve 4,984,400

Retained profit 7,406,786

Other comprehensive income 219,942

Valid portion of minority interests 42,404

Total core tier-1 capital 21,847,842

Total deducted items 22,437

Net other intangible assets (excluding land use rights) after deducting

relevant deferred tax liabilities

22,437

Net deferred tax assets that rely on future profitability excluding those

arising from temporary differences

Investment in core tier-1 capital instruments issued by financial

institutions that are under control but not subject to consolidation

Threshold deduction items

Additional tier-1 capital:


Others

Total additional tier-1 capital 1,291

Tier-2 capital:

Valid portion of tier-2 capital instruments and related premium 4,996,409

Surplus provision for loan impairment 2,579,199


Others

Total tier-2 capital 7,578,750

Total deducted items

Threshold deduction items

Net capital

Net core tier-1 capital 21,825,405

Net tier-1 capital 21,826,696

Total net capital 29,405,446



Page 169 of 186


Credit risk weighted assets

On-balance-sheet risk weighted assets 193,508,229

Off-balance-sheet risk weighted assets 15,406,870

Total credit risk weighted assets: 208,915,099

Market risk weighted assets 556,703

Operational risk weighted assets 11,421,716

Total risk weighted assets after application of capital bottom line: 220,893,518

Core tier-1 capital adequacy ratio (%) 9.88%

Tier-1 capital adequacy ratio (%) 9.88%

Capital adequacy ratio (%) 13.31%

XV. Related Parties and Connected Transactions

1．Related parties of the Bank and related party relationship:

In accordance with the Company Law, the Accounting Standard for Business Enterprises No. 36:

Disclosure of Related Parties, the Administrative Measures for the Connected Transactions

between the Commercial Banks and Their Insiders and Shareholders issued by CBRC and the

Administrative Measures for Related Party Transactions of Hankou Bank Co., Ltd., the Bank's

related parties include related natural persons and related legal persons or other organizations.

The related natural persons of the Bank include the insiders of the Bank; major natural person

shareholders of the Bank, and close relatives of the Bank’s insiders and major natural person

shareholders; the related legal persons of the Bank or holding natural person shareholders,

directors and key executives of other organizations related to the Bank. The related legal persons

or other organizations exclude the legal persons or other organizations that can be directly,

indirectly or jointly controlled or be greatly influenced by the Bank’s insiders, major natural

person shareholders and their close relatives; and other natural persons who have a significant

influence on the Bank.

Related legal persons and other organizations of the Bank include major non-natural shareholders

of the Bank; legal persons or other organizations directly or indirectly controlled by the same

enterprise as the Bank; legal persons or other organizations directly or indirectly controlled, or

under common control by or subject to significant influence of the Bank's insiders and major

natural person shareholders as well as their close relatives; other legal persons or other

organizations who may directly, indirectly or jointly control the Bank or have a significant

influence on the Bank; and the Bank's subsidiaries and associate.

(1) Information on the shareholders holding 5% or more shares of the Bank:


Page 170 of 186

Sharehol

der

company

Rela

ted

part

y

relat

ions

hip

Company type Place of registration

Leg

al

Repr

esen

tativ

e

Busi

ness

natu

re

Registered

capital (Unit:

RMB1,000)

Legend

Holdings

Corporati

on

Shar

ehol

der

Other limited

company (listed)

Room 1701, 17F,

Building 1, Yard 2,

Kexueyuan South

Road, Haidian

District, Beijing

Nin

g

Min

Inve

stme

nt

2,356,231

Wuhan

Iron and

Steel

Group

Corporati

on

Shar

ehol

der

Limited liability

company (sole

proprietorship of

legal person

invested or

controlled by a

non-natural person)

999 Youyi Road,

Wuhan City, Hubei

Province

Zho

u

Zho

ngm

ing

Inve

stme

nt

4,739,610

Wuhan

Develop

ment and

Investme

nt Co.,

Ltd.

Shar

ehol

der

Limited liability

company (sole

proprietorship of

legal person

invested or

controlled by a

non-natural person)

F20 & 21, Xinhe

Building, No. 618,

Jianshe Avenue,

Jiang'an District,

Wuhan City, Hubei

Province

Tan

g

Wu

Inve

stme

nt

3,000,000

Note 1: Legend Holdings Corporation changed its legal representative from Liu Chuanzhi to Ning

Min on 9 January 2020.

Note 2: Wuhan Iron and Steel Group Corporation is the new name after name change on 15

November 2017, and its predecessor is Wuhan Iron and Steel (Group) Corporation. The company

type was changed to a limited liability company (sole proprietorship of legal person invested or

controlled by a non-natural person), and its legal representative was changed to Guo Bin. The

legal representative was changed from Guo Bin to Zhou Zhongming on 22 August 2019.

Note 3: Wuhan Development and Investment Co., Ltd changed its legal representative from Xiong

Wei to Tang Wu on 17 August 2018. The type of market entity was changed on 28 March 2019. It

was changed from a limited liability company (solely state-owned) to a limited liability company

(sole proprietorship of legal person invested or controlled by a non-natural person).

(2) As at 31 December 2019, names and shareholding status of shareholders holding 5% or more

shares of the Bank are as follows:


Page 171 of 186

Shareholder

company

Shares

(’000)

Shareholdin

g

percentage

(%)

Voting right

percentage (%)

Ultimate

controller

of the

Bank

Unified Social Credit

Code

Legend

Holdings

Corporation

633,000 15.33 15.33 911100001011122986

Wuhan Iron

and Steel

Group

Corporation

550,600 13.34 13.34 914201001776819133

Wuhan

Development

and

Investment

Co., Ltd.

337,500 8.18 8.18 91420100717953714H

(3) Shares (or interests) held by the shareholders with a 5% or more stake in the Bank and

changes thereof

Company Beginning

balance

Increase during

the period

Decrease during

the period

Ending balance

Amount

(RMB1,

000)

Percen

tage

(%)

Amoun

t

(RMB

1,000)

Perce

ntage

(%)

Amoun

t

(RMB

1,000)

Perce

ntage

(%)

Amount

(RMB1,

000)

Percen

tage

(%)

Legend Holdings

Corporation

633,000 15.33 633,000 15.33

Wuhan Iron and

Steel Group

Corporation

550,600 13.34 550,600 13.34

Wuhan

Development and

Investment Co.,

Ltd.

337,500 8.18 337,500 8.18

(4) Information disclosure concerning subsidiaries of the Bank:

Subsidiar

y

Typ

e

Com

pany

type

Pla

ce

of

reg

istr

atio

n

Le

gal

Re

pr

es

ent

ati

ve

Bus

ine

ss

nat

ure

Regi

stere

d

capit

al

(RM

B10,

000)

Com

bined

share

holdi

ng

perce

ntage

(%)

Combin

ed

percenta

ge of

voting

shares

held (%)


Code


Page 172 of 186

Subsidiar

y

Typ

e

Com

pany

type

Pla

ce

of

reg

istr

atio

n

Le

gal

Re

pr

es

ent

ati

ve

Bus

ine

ss

nat

ure

Regi

stere

d

capit

al

(RM

B10,

000)

Com

bined

share

holdi

ng

perce

ntage

(%)

Combin

ed

percenta

ge of

voting

shares

held (%)


Code

HB

Zhijiang

Rural

Bank,

Ltd.

Cont

rolle

d

subs

idiar

y

a

joint-

stock

com

pany

Hu

bei

Yi

n

Zu

oy

in

Fin

anc

ial

ind

ustr

y

5,000 51% 51% 9142050058549827XY

HB

Yangxin

Rural

Bank,

Ltd.

Cont

rolle

d

subs

idiar

y

a

joint-

stock

com

pany

Hu

bei

Zo

u

Li

ho

ng

Fin

anc

ial

ind

ustr

y

5,000 80% 80% 91420200594244829H

Note 1: HB Zhijiang Rural Bank, Ltd. changed its legal representative from Ba Jun to Yin Zuoyin

on 5 September 2019.

Note 2: HB Yangxin Rural Bank, Ltd. changed its legal representative from Ba Jun to Zou Lihong

on 28 October 2019.

(5) The Bank's associates

Information on the associate:

Associa

te name

Co

mp

any

type

Comp

any type

Pla

ce

of

reg

istr

ation

Leg

al

Rep

rese

ntative

Bus

ines

s

nature

Registered

capital

(RMB10,000)

Combin

ed

sharehol

ding

percentage (%)

Combined

percentag

e of

voting

shares held (%)


Code

Aerospa

ce

Science

&

Industry

Financi

al

Leasing

Co., Ltd.

Ass

ociate

Other

limite

d

liabili

ty

companies

Hu

bei

Li

Do

ngfeng

Fin

anci

al

ind

ustr

y

300,000 25% 25% 91420112MA4KTG0Q7G


Page 173 of 186

(6) Other related parties

Other related parties include legal persons or other organizations directly or indirectly controlled

by the same enterprise as the Bank; legal persons or other organizations directly or indirectly

controlled, or under common control by or subject to significant influence of the Bank's insiders as

well as their close relatives; and other legal persons or other organizations who may directly,

indirectly or jointly control the Bank or have a significant influence on the Bank.

Name of other related party Unified Social Credit Code

or Company Code

Remarks

Wuhan Credit Risk Management Financing

Guarantee Co., Ltd. 914201007179583631

Wuhan State-owned Assets Management Co.,

Ltd. 91420100177758917D

Good First Group Co., Ltd. 91310000612260305J

Lenovo Group Limited 0450816 Registered in

Hong Kong

Nanming Co., Ltd. 0209070 Registered in

Hong Kong

Legend Holdings (Tianjin) Ltd. 911201165864155792

Legend Capital Co., Ltd. 911101087263402318

Beijing Junlian VC Center (Limited

Partnership) 911100007642185019

Beijing Huaxia Liantong Management

Consulting Co., Ltd. 91110108597716270M

Beijing Huaxia Lianhe Auto Network

Technology Co., Ltd. 91110108775453830B

Beijing Legend Star VC Co., Ltd. 91110108697673095D

Duilong Deqing Xingchen VC Co., Ltd. 91120116589752466M

Raycom Real Estate Development Co., Ltd. 911101087263421223

Reycom Property Investment Limited 91110108790650314X

Raycom Real Estate Holdings Limited 91440300791710104J

Joyvio Group Co., Ltd. 911101085960368637

Zeny Supply Chain Co., Ltd. 91110108051437499P

Levima Group Co., Ltd. 91110108593846502N

Zhengqi Financial Holding Co., Ltd. 91340100054499919H

Taikang Bybo Medical Group Co., Ltd. 91440400714842859E

Tibet Dongfang Qihui Investment Co., Ltd. 91540126396977765P

Tibet Dazi Lianke Investment Co., Ltd. 91540126718788968F

Tibet Lianheng Medical Investment Co., Ltd. 91540126MA6T19YC97

Tibet Cola Technological Development Co.,

Ltd. 91540195MA6T1GP96K

Beijing Legend Star Investment Management

Co., Ltd. 91110108MA001H6E1G

Shanghai Weimin Hospital Investment

Management Co., Ltd. 91310107560111550E

JC International Finance & Leasing Co., Ltd. 91310000MA1FL0E14K

Legend Insurance and Investment Group

Limited 911100000535983410

Hefei Guozheng Tech Microlending Co., Ltd. 913401006836186347

Anhui Zhengqi Finance & Leasing Co., Ltd. 91340100058470291H

JC (Beijing) Asset Management Co., Ltd. 91110111MA00BJNQ8A

Anhui Zhidao Investment Co., Ltd. 91340100065204899D

Zhengqi Supply Chain Management Co., Ltd. 91420105MA4KPPMK04

Zhengqi International Commercial Factoring 91340100MA2MQ07M70


Page 174 of 186


or Company Code

Remarks

Co., Ltd.

Anhui Zhengqi Supply Chain Management

Co., Ltd. 913401003487344786

Shenzhen Chengzheng Technology

Microlending Co., Ltd. 91440300311875007D

Gain Cold Chain (Wuhan) Co., Ltd. 91420111070513020L

Gain Food (Wuhan) Co., Ltd. 914201110520409443

Better Sun Educational Group Corp. Registered

overseas

Zeny Supply Chain (Tianjin) Co., Ltd. 91120118MA05RXCX5F

Dongpinbang (Tianjin) Supply Chain Co.,

Ltd. 91120118MA05T75A2K

Motorola (Wuhan) Mobile Technology

Communication Co., Ltd. 91420100597900924B

Lenovo Mobile Inc. 91350200705499032F

Wuhan Guozheng Microlending Co., Ltd. 91420105MA4KY5CAXM

Tibet Liantou Qihui Enterprise Management

Limited 91540125MA6T4WFN78

Shenzhen Lenovo Technology Park Co., Ltd. 91440300727178731X

Yuxiang (Guangzhou) Investment Co., Ltd. 91440101MA59TDAK5Y

Shanghai Sanyu Educational Management

Co., Ltd. 91310112744910816X

Zeny Supply Chain (Jilin) Co., Ltd. 91220294598844477R

Lenovo (Tianjin) Commercial Factoring Co.,

Ltd. 91120118MA05P2FX9A

Hony Capital (Tianjin) Co., Ltd. 91120116673716847F

CAR Inc. F0020650 Registered not in

Hong Kong

Lakala Payment Co., Ltd. 91110108770425654N

Wenkang Group Co., Ltd. 911101086646244493

Eastern Air Logistics Co., Ltd. 91310000766454452W

Bluefocus Intelligent Communications Group

Co., Ltd. 91110000744727456H

Huawen Food Co., Ltd. 91430600559532577G

Hebei Hengshui Laobaigan Liquor Co., Ltd. 911311007216760190

China Baowu Iron and Steel Group Corp. 91310000132200821H

Wuhan Iron & Steel Group Echeng Iron &

Steel Co., Ltd. 9142070070691922XN

Wuhan Iron and Steel Resources Group

Corporation 91420100711992632A

Wuhan Iron and Steel Green City

Construction and Development Co., Ltd. 914201008777484103

Wuhan Iron and Steel Jiangbei Group

Corporation 9142010072575458XJ

Baosight Software (Wuhan) Co., Ltd. 91420100737504908J

Wuhan Iron and Steel Heavy Industries Group

Corporation 91420100711943873D

Wuhan Steel Electricity Co., Ltd. 91420100300050720E

Wuhan Iron and Steel Group Finance Co., Ltd. 91420107300271101E

Wuhan Iron and Steel Group Refractory

Material Co., Ltd. 914201007119198229

Wuhan Iron and Steel Group Xiangyang

Heavy Equipment and Material Co., Ltd. 91420607706882770F

Wisco Logistics Co., Ltd. 9142010771192818X1

Wuhu Weishike Material Technology Co., Ltd. 9134020066144360X4


Page 175 of 186


or Company Code

Remarks

Taicang Wisco Distribution Co., Ltd. 91320585755868596U

Guangxi Iron and Steel Group Company

Limited 9145000078213554XP

Wisco Brazil Metallurgy Investment Co., Ltd. Registered

overseas

Shanghai Wisco Steel Processing Co., Ltd. 91310110564797983D

Wisco (Beijing) New Materials Research Co.,

Ltd. 91110114562075688U

Wuhan International Resources Development

Investment Co., Ltd. 1462440

Registered in

Hong Kong

Wisco Modern City Services (Wuhan) Group

Corporation 91420107063009416B

Wisco Asset Management Co., Ltd. 9142010708196293XU

Qinhuangdao Beidaihe Beihuayuan Sea View

Hotel Co., Ltd. 91130304692065664A

Baoshan Iron & Steel Co., Ltd. 91310000631696382C

Wuhan Iron and Steel Co., Ltd. 91420100MA4KQ8JQX5

Wuhan Pingmei Wugang Unite Coking

Chemical Co., Ltd. 91420107711961422L

Wisco Hanyang Steelworks 91420100177688752B

Baosteel Huangshi Coated and Galvanized

Co., Ltd. 91420200615435780U

Wisco Industrial Company 91420107177661541Y

Wisco Packaging Materials Plant 91420107177683791D

Wisco Maintenance Services Company 914201071776833966

Wisco Industrial Jinyuan Materials Industrial

Development Co., Ltd. 91420107717910394K

Wisco Industrial Jinyuan Furnace Charge Co.,

Ltd. 914201077282775555

Wuhan Gangye Xincheng Maintenance

Services Co., Ltd. 914201077310504588

Wuhan Fire-resistant Metallurgical Powder

Plant 91420107177680611R

Wuhan Wugang Jiaoyun Guangda Motor

Transport Co., Ltd. 9142010717768804XB

Wuhan ABC International-Wisco Fund

Management Co., Ltd. 91420107MA4KNY8J7N

Wuhan Wisco Industrial Investment Fund

Management Co., Ltd.

91420107303637615H

Wuhan WISCO Good Life Service Co., Ltd. 91420107725755507J

WISCO-MCC Industrial Technology Service

Co., Ltd. 91420107MA4L0L8F4A

Wisco Hainan Co., Ltd. 91460000201285006X

Wuhan Qingqing Education Management Co.,

Ltd. 91420107MA4L0XMJ9P

Wuhan Iron and Steel Green City Technology

and Development Co., Ltd. 91420107744752096L

Wisco Second Staff Hospital 12420000MB1362521D

Wuhan Iron and Steel Industrial Commerce

Co., Ltd. 914201071777276199

Wugang Wulongquan Mine Industry Co., Ltd. 91420115717903071P

China Resources WISCO (Hubei) Hospital

Management Co., Ltd. 914201000705015803

China Resources-WISCO General Hospital 12420000MB0M080027

Wuhan Financial Holdings (Group) 91420100778164444G


Page 176 of 186


or Company Code

Remarks

Wuhan Jinkong New-Energy Vehicle Lease

Co., Ltd. 9142010034720626XD

Wuhan Yangluo Development Co., Ltd. 914201007119145110

Wuhan Trade State-owned Holding Group

Co., Ltd. 91420100724692452X

Wuhan Transportation Construction and

Investment Co., Ltd. 91420100717995703T

Yangtze River Economic United Development

(Group) Co., Ltd. 914201023000248722

Food Logistics Industry in Wuhan Economic

Development Investment Co., Ltd. 9142011779632291XB

Wuhan Financial Assets Exchange Co., Ltd. 91420100581846716M

Wuhan Yangtze Jiashi Trade Co., Ltd. 914201000705406788

Wuhan Yangtze Financial Services Co., Ltd. 91420100070528070P

Wuhan Rongwei Escort Security Service Co.,

Ltd. 91420100717921448A

Hubei Financial Leasing Co., Ltd. 91420100333576905P

Wuhan Financial Holdings Energy (Group)

Co., Ltd. 91420103MA4KLFK72L

Guotong Trust Co., Ltd. 91420100441385161G

Wuhan Youyi Non-Staple Food Commerce

Co., Ltd. 914201007310420798

Wuhan Non-Staple Food Commercial

Reserves Co., Ltd. 914201043000938353

Wuhan Yangtze Shaou Vegetable Oil Co., Ltd. 91420106731070950W

Wuhan Yangtze Shaou Oils Trading Co., Ltd. 91420100347194158A

Hubei Yujiatou Group Co., Ltd. 91420000707090070E

Wuhan Shengshi Boyang Investment

Management Co., Ltd. 91420102077711150E

Wuhan Xinneng Properties Co., Ltd. 91420100711958856G

Wuhan Xinneng Industrial Development Co.,

Ltd. 91420100300244170U

Wuhan Kaicheng Mining Investment Co., Ltd. 9142011207050495XJ

Huaneng Wuhan Power Generation Co., Ltd. 9142010030024252XQ

Wuhan Yijing Jiangnan Properties Co., Ltd. 91420115691853554F

Wuhan Xinneng Yijing Investment

Management Co., Ltd. 91420103333462182D

Wuhan Kaidaxin Equity Investment

Management Co., Ltd. 91420100MA4KNBDW2F

Wuhan Nanhua High Speed Ship Engineering

Co., Ltd. 9142010074143034XA

Wuhan High-tech Thermal Power Co., Ltd. 91420100271931552L

Wuxin Investment Holding (Shenzhen) Co.,

Ltd. 91440300MA5DE7UC2W

Wuhan Credit Risk Management Co., Ltd. 91420100MA4KMTK5X2

Wuhan Yangtze Communications Industry

Group Co., Ltd. 9142000030019146XY

Wuhan Micro Credit Co., Ltd. 9142010068234394XA

Wuhan Investment & Development

(Overseas) Co., Ltd. 91420100MA4KL86R82

Wuhan Industrial State-owned Investment

Co., Ltd. 91420100725751370N

Wuhan Construction and Investment Co., Ltd. 91420100177738326R

Wuhan Tianli Industrial Co., Ltd. 91420100300059290A

Wuhan Energy Conservation Investment Co., 91420100300055695K


Page 177 of 186


or Company Code

Remarks

Ltd.

Wuhan Yangtze Optical Communications

Industry Group Co., Ltd. 91420100177728574C

Wuhan Venture Financing Guarantee Co., Ltd. 9142010075181358XC

Wuhan Jiayuan Micro Electric Technology

Co., Ltd. 914201007119948223

Wuhan Electrical Power Development Co.,

Ltd. 91420100177737606H

Wuhan Credit Investment Group Co., Ltd. 91420100574904121T

Wuhan Credit Financing Guarantee (Group)

Co., Ltd. 91420100551953860C

Wuhan SME Credit Financing Guarantee Co.,

Ltd. 914201007179318817

Wuhan Credit Development Investment

Management Co., Ltd. 91420100555030457N

Wuhan Chengsheng Pawnbrokers Co., Ltd. 91420100685441748L

Wuhan Zhengda Logistics Co., Ltd. 91420104748311132L

Wuhan Jinkong Modern Supply Chain

Management Co., Ltd. 91420117MA4L09CF7A

Wuhan Huahan Investment Management Co.,

Ltd. 91420104707122757K

Wuhan Dongchuang Financing Guarantee

Co., Ltd. 91420100675812330C

Easyhome New Retail Group Co Ltd. 91420100177691433G

Wuhan Department Store Group Co., Ltd. 91420100300251645N

Wuhan Guochuang Innovative Investment

Co., Ltd. 91420100MA4KMDDK43

Wuhan Guochuang Financial Services Co.,

Ltd. 914201006823410122

Wuhan Xinke Investment Co., Ltd. 914201007310404288

Wuhan Huahan Real Estate Group

Corporation 91420100077740218U

Wuhan Xinxing Pharmaceutical Technology

Co., Ltd. 91420115725785183H

Wuhan Selline Group Co., Ltd. 91420100799790313Q

Zhongbai Holdings Group Co., Ltd. 91420100177682019R

Wuhan Hantong Investment Co., Ltd. 91420100675828770A

Wuhan Donghu Creative Technology

Investment Co., Ltd. 91420100717945693P

Wuhan Guochuang Capital Investment Co.,

Ltd. 914201000591964661

Wuhan Optics-Valley Finance Leasing Co.,

Ltd. 91420100594515713T

Zhongbai Warehouse Supermarket Co. Ltd. 91420100300085552P

Zhongbai Warehouse Xiaogan Shopping Mall

Co. Ltd. 91420900757001726X

Wuhan Zhongbai Department Store Co., Ltd. 91420100761236122K

Zhongbai Supermarket Co. Ltd. 91420100300209391H

Wuhan Zhongbai Electric Appliances Co.,

Ltd. 91420104MA4KM4TU3T

Shanghai Optics-Valley Finance Leasing Co.,

Ltd. 91310115MA1K3QPQ6M

Wuhan Huayu Custody Co., Ltd. 91420100755100739X

Wuhan Pharmaceutical Industry Base

Investment Co., Ltd. 91420115741409591M


Page 178 of 186


or Company Code

Remarks

Gongxiao Zhongbai Payment Co., Ltd. 91420100724685252G

Wuhan Big Data Development Co., Ltd. 91420100MA4KQKAN0B

Wuhan Zhongtian Huigou E-commerce

Services Co., Ltd. 914201063034850848

Wuhan Haier Electric Appliance Co. Ltd. 91420100177721700H

Tianfeng Securities Co., Ltd. 91420100711894442U

Wuhan Sports Development Investment Co.,

Ltd. 914201005519741785

Wuhan Donghu Changrui Investment

Management Co., Ltd. 91420100059166611G

Optical Valley Venture Capital PE Fund

Management Co., Ltd. 91420100574902425R

Wuhan Intelligence Industrial Equity

Investment Fund Management Co., Ltd. 91420100086600903D

Wuhan Donghu Huake Investment

Management Co., Ltd. 91420100303555783H

Wuhan Donghu Guolong Equity Investment

Fund Management Co., Ltd. 91420100MA4KNXP31D

Wuhan Hantang High-tech Agricultural

Technology Co., Ltd. 91420100052022623X

Bio-industry Wuhan Optical Valley Venture

Capital Fund Limited 9142010069186494XR

Hubei Tianqian Asset Management Co., Ltd. 91420100MA4KQ3N84R

Wuhan Kaiyuan Technology Venture

Investment Co., Ltd. 91420100722706240Q

Wuhan Huahan Shuncheng Property

Management Co., Ltd. 914201040668207306

Wuhan Huaxin Management Co., Ltd. 91420100616434595T

Hubei Jingchu Grain and Oil Co., Ltd. 9142000008234667XQ

Hubei Zhongbai Huitong Department Store

Co., Ltd. 91421300MA48W7BF85

Hubei Yonghui Zhongbai Supermarket Co.,

Ltd. 91420104MA4KU9YA95

Hubei Central Department Store Co., Ltd. 91421023MA4945JD5N

Tianjin Fuxin Datang Investment Co., Ltd. 91120116562679959A

Tibet Fuju Investment Co., Ltd. 91540195MA6T1A2K32

Xiamen Xindi Industry Co., Ltd. 91350200705403758T

Xiamen Rongyin Trade Co., Ltd. 91350200612313921N

Xiamen Hongfu Trade Co., Ltd. 91350205769270800B

Xiamen Fuxin Yintai Investment Co., Ltd. 91350200664711075P

Tianjin Tangmen Investment Co., Ltd. 91120116562686315R

Tianjin Tangmei Investment Co., Ltd. 91120116562686307Y

Xiamen Fuxin Real Estate Co., Ltd. 91350200612013750K

Xiamen Tangren Property Management Co.,

Ltd. 91350203260143438Y

Guizhou Tangshengmei Trade Co., Ltd. 91510700MA6242QX2L

Jinan Qilibao Market Co., Ltd. 91370112779710670Y

Shanghai Newgenco Biotechnology Co., Ltd. 913101157034143223

Guizhou Jintongda Trade Co., Ltd. 91522620580672638F

Xi’an Tangmei Property Management Co.,

Ltd. 91610104MA6TX1FF56

Guiyang Yunyan Xindi Properties Co., Ltd. 915201036707202930

Newgen (Shanghai) Biotech Co., Ltd. 91310115MA1H7ABF2G

Good First Financial Holding Co., Ltd. 91350921574717561A

Xiamen Fuxin Photoelectric Integration Co., 91350200260087894D


Page 179 of 186


or Company Code

Remarks

Ltd.

Jiangxin Xindi Investment Co., Ltd. 91360100787297097D

Nanchang Guangmao Fruits Co., Ltd. 91360121309253014U

Xiamen Fuxin Culture Equity Investment

Management Co., Ltd. 91350203079388430H

Nanchang Zhuomei Gardening Co., Ltd. 91360121309243836R

Hua’an Fumei Bio-agriculture Co., Ltd. 91350629MA31LJMP4W

Xiamen Hexin Guarantee Co., Ltd. 91350200671272840T

Zhejiang Fuxu Trade Co., Ltd. 91330102MA2CFT7U2E

Jinan Qilibao Trade Co., Ltd. 91370112MA3DM40R69

Guiyang Xindi Weiye Properties Co., Ltd. 91520103MA6E2AHX76

Nanjing Xindi Property Services Co., Ltd. 91450103794323492H

Xiamen University Electronic Information

Technology Co., Ltd. 91350200612332065C

Zhong Ou Fund Management Co., Ltd. 91310000717866389C

Ruihua Certified Public Accountants (LLP) 9111010856949923XD

Beijing Water Business Doctor Co., Ltd. 91110000634358477D

Shanghai Zhongping Guoyu Asset

Management Co., Ltd. 91310107MA1G06LE8W

Shanghai AJ Trust Co., Ltd. 91310000132202077A

CMBC Capital Holdings Limited F0008826 Registered not in

Hong Kong

Digiwin Software Co., Ltd. 91310000734084709Q

Hundsun Electronics Co., Ltd. 913300002539329145

Tianjin Huitong Information Technology

Partnership (LLP) 91120118MA05LNHQXP

Wuhan Shunxin Steel Mould Manufacturing

Co., Ltd. 91420116568373854B

Hubei Ruitong Tianyuan Law Firm 31420000F996627231

Wuhan Smart Subway Technology Co., Ltd. 91420100MA4KLPEG59

Note 1: Wuhan Credit Risk Management Financing Guarantee Co., Ltd. is the new name after

name change on 3 January 2020, and its predecessor is Wuhan Credit Risk Management Co., Ltd.;

Note 2: Duilong Deqing Xingchen VC Co., Ltd. is the new name after name change on 30 October

2018, and its predecessor is Tianjin Legend Star VC Co., Ltd.;

Note 3: Taikang Bybo Medical Group Co., Ltd. is the new name after name change on 12 March

2020, and its predecessor is Bybo Medical Group Co., Ltd.;

Note 4: Baosight Software (Wuhan) Co., Ltd. is the new name after name change on 24 October

2019, and its predecessor is Wuhan Iron and Steel Engineering Technology Group Corporation;

Note 5: Wuhan WISCO Green City Technology Development Co., Ltd. is the new name after

name change on 27 May 2019, and its predecessor is Wuhan Iron and Steel Engineering

Technology Group Communications Corporation;

Note 6: Wuhan Venture Financing Guarantee Co., Ltd. is the new name after name change on 3

January 2020, and its predecessor is Wuhan Venture Guarantee Co., Ltd.;


Page 180 of 186

Note 7: Wuhan Credit Financing Guarantee (Group) Co., Ltd. is the new name after name change

on 23 December 2019, and its predecessor is Wuhan Credit Guarantee (Group) Co., Ltd.;

Note 8: Wuhan SME Credit Financing Guarantee Co., Ltd. is the new name after name change on

20 December 2019, and its predecessor is Wuhan SME Credit Guarantee Co., Ltd.;

Note 9: Easyhome New Retail Group Co Ltd. is the new name after name change on 23 December

2019, and its predecessor is Wuhan Zhongnan Commercial (Group) Co., Ltd.;

Note 10: Optical Valley Venture Capital PE Fund Management Co., Ltd. is the new name after

name change on 21 May 2019, and its predecessor is Optical Valley Venture Capital Fund

Management Co., Ltd.;

2．Main connected transactions of the Bank in the reporting period

The Bank's connected transactions conform to laws, regulations, national accounting standards

and relevant banking regulatory requirements, observe commercial principles and are based on

conditions that are more favorable than those offered to non-connected transactions in similar

transactions.

（1） Balance of loans


Shareholders holding 5% or more shares of

the Bank

Legend Holdings Corporation and its

related companies 570,034 215,000


Corporation and its related companies 668,000 688,224

Wuhan Development Investment Co.,

Ltd. and its related companies 1,709,684 468,250

Other non-natural-person related parties 1,088,575 931,892

Natural-person related parties

Directors, Supervisors and Senior

Executives

Others 23,972 33,200

(2) Balance of deposits



the Bank


related companies

640,564 179,932


Corporation and its related companies

178,063 1,326,677


Ltd. and its related companies

2,197,422 735,810


Page 181 of 186


Other non-natural-person related parties 2,652,358 2,285,768



Executives

5,149 7,952

Others 61,108 40,092

(3) Loan interest income



the Bank


related companies

25,794 16,731



28,268 34,021



39,164 27,270

Other non-natural-person related parties 42,883 42,478



Executives

Others 3,582 1,323

(4) Deposit interest expense



the Bank


related companies 3,626 2,813


Corporation and its related companies 10,214 8,842


Ltd. and its related companies 21,329 7,357




Executives 4 10

Others 58 49

(5) Off-balance-sheet positions, net



the Bank


related companies

467,008 522,946



203,086 108,071



14,977 -3,750



Page 182 of 186

(6) Remunerations paid to key executives

The Bank had 22 key management members as at 31 December 2019, and 23 key management

members as at 31 December 2018. The remunerations paid to them are as follows:

Related party 31 December 2019 31 December 2018

Key executives 6,492 7,927

XVI. Commitments

1．Capital expenditure commitments

Capital commitments mean capital expenditure commitments including equity investment,

equipment purchase and system development. The Management of the Group believes that future

profitability will meet the foregoing commitments.

Below are capital expenditure commitments as at 31 December 2019:

Contract price Paid Unpaid

System software 119,596 25,582 94,014

Below are capital expenditure commitments as at 31 December 2018:

Contract price Paid Unpaid

System software 111,183 27,214 83,969

2．Leasing commitments

Property leasing commitments mainly reflect rental payable for business premises and office

buildings to be rented of the Group as needed.

Rentals set forth in lease agreements:


Within 1 year (inclusive) 173,852 168,889

1-3 years (inclusive) 182,988 215,033

Over 3 years 75,176 176,534

Total 432,016 560,456

3．Certificate government bonds

The Group acts as an agent of the Ministry of Finance to issue the certificate government bonds.

Holders of certificate government bonds may request earlier redemption of certificate government

bonds, with the redemption amount being the principal amount of certificate government bonds

plus interest accrued up to the date of redemption. As at 31 December 2019, the accumulated

balance of certificate government bonds issued by the Group as an agent but unmatured and

unredeemed was RMB1,078,426,000. As at 31 December 2018, the accumulated balance of


Page 183 of 186

certificate government bonds issued by the Group as an agent but unmatured and unredeemed was

RMB1,078,329,000.

XVII. Contingencies

1. Pending actions and disputes

As at 31 December 2019, pending lawsuits with the Group as defendant involved a total amount of

RMB19,087,300 (31 December 2018: RMB7,462,900). Hearings on relevant cases are not held

yet.

2. Contingent liabilities

Repossessed assets without title deeds that were obtained by the credit cooperative, the

predecessor of the Bank before the joint-stock reform, exposed the Bank to lawsuit risk possibly

because of some legal defects.

XVIII. Other Significant Matters

None

XIX. Supplementary Data

1．List of non-recurring gains or losses

(Gains are presented in positive numbers, losses are presented in negative numbers)

Item 2019

i. Gains/losses on disposal of non-current assets, including the offset part of

allowance for impairment losses on assets set aside

97

ii. Over-power approval, absence of formal approval documents, or incidental tax

rebates and exemptions

iii. Government subsidy recognized in the current profit or loss, excluding the

government subsidy closely relating to the Company's normal business operation,

complying with national policies and enjoyed by the Company at a fixed amount or

quantity according to certain standards

6,951

iv. Fund occupation charges on non-financial companies recorded in profit or loss


Page 184 of 186

Item 2019

v. Gains generated when the investment cost of acquiring subsidiaries, affiliates and

joint ventures is lower than the fair value of net identifiable assets of the investee

available upon acquisition

vi. Gains or losses on exchange of non-monetary assets

vii. Gains or losses on investment or asset management by agents

viii. Allowance for impairment losses on assets against force majeure, e.g. natural

disaster

ix. Gains or losses on debt restructuring

x. Business restructuring expenses, e.g. employee placement expenses and

integration expenses

xi. Gains or losses on the obviously unfair transaction price in excess of fair value

xii. Net gains or losses on business combination involving entities under the same

control from the beginning of the year to the combination date

xiii. Gains or losses on contingencies irrelevant to normal business operations of the

Company

xiv. Gains or losses on changes in the fair value of financial assets designated at fair

value through profit or loss and financial liabilities designated at fair value through

profit or loss and investment income from disposal of financial assets designated at

fair value through profit or loss, financial liabilities designated at fair value through

profit or loss and available-for-sale financial assets, exclusive of valid hedging

transactions relating to normal business operations of the Bank

xv. Reverse of allowance for impairment losses on receivables individually tested

for impairment

xvi. Gains or losses on external entrusted loans

xvii. Gains or losses on changes in the fair value of investment properties

subsequently measured at fair value

xviii. Effects of one-off adjustments to profit or loss under tax and accounting laws

and regulations on the profit or loss

xix. Income from custody fees on entrusted operations

xx. Recovery of loans written off in previous years during the year 272,839

xxi. Other non-operating income and expenses -3,356

xxii. Other gains or losses that meet the definition of non-recurring gains or losses

Subtotal 276,531


Page 185 of 186

Item 2019

xxiii. Income tax effects of non-recurring gains or losses 70,766

xxiv. Effects of minority interests 2,231

Total 203,534

The Group calculates the non-recurring gains or losses in accordance with the Explanatory

Announcement on Information Disclosure for Companies Offering Securities to the Public No. 1 -

Non-recurring Gains or Losses [2008] issued as CSRC Announcement [2008] No. 43.

Gains or losses on changes in the fair value of financial assets designated at fair value through

profit or loss and the investment income from disposal of financial assets designated at fair value

through profit or loss and available-for-sale financial assets are normal business operations of the

Group and not considered as non-recurring.

2．ROE and earnings per share:

ROE and earnings per share are calculated in accordance with the Compilation Rules for

Information Disclosure by Companies Offering Securities to the Public No. 9 - Calculation and

Disclosure of Return on Equity and Earnings per Share (as revised in 2010) issued by CSRC:

2019

Weighted

average

ROE (%)

Earnings per share

(RMB/share)

Basic

earnings

per share

Diluted

earnings

per share

Net profit attributable to common shareholders of the

Company 11.55 0.59 0.59


Company net of non-recurring gains or losses 10.58 0.54 0.54

2018

Weighted

average

ROE (%)

Earnings per share

(RMB/share)

Basic

earnings

per share

Diluted

earnings

per share


Company 9.96 0.46 0.46


Company net of non-recurring gains or losses 9.70 0.45 0.45

XX. Events after the balance sheet date


Page 186 of 186

The COVID-19 virus started to spread across the country in January 2020. The Group

strengthened its support for the outbreak containment work in accordance with the Notice on

Further Strengthening Financial Support for Preventing and Controlling the COVID-19 Epidemic

jointly issued by the People’s Bank of China, the Ministry of Finance, China Banking and

Insurance Regulatory Commission, China Securities Regulation Commission and the State

Administration of Foreign Exchange.

COVID-19 will have certain impact on business activities and overall economic performance in

some provinces, including Hubei, and some industries and affect the quality and return on credit

assets and investment assets of the Group. The level of impact depends on the containment and

duration of the epidemic and the implementation of regulation policies. The assessment is

underway on the release date of this Report.

Legal representative: Chen

Xinmin

Person in charge of accounting:

Ruan Xuzhou

Head of accounting

department: Li Daquan