Ping an Bank Co., Ltd. 2018 Annual Report
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Ping An Bank Co., Ltd. 2018 Annual Report [English translation for reference only. Should there be any inconsistency between the Chinese and English versions, the Chinese version shall prevail.] Section I Important Notes, Contents and Interpretations Important Notes 1.1. The board of directors (hereinafter referred to as the “Board”), the supervisory committee, the directors, the supervisors and senior management of the Bank guarantee the authenticity, accuracy and completeness of the contents of the Annual Report, in which there are no false representations, misleading statements or material omissions, and are severally and jointly liable for its contents. 1.2. The 23rd meeting of the 10th session of the Board of the Bank deliberated the 2018 Annual Report together with its summary. The meeting required 14 directors to attend, and 13 directors attended the meeting. Director Ip So Lan did not attend the meeting for business affairs and entrusted Director Yao Jason Bo to exercise voting rights on behalf of her. This Annual Report was approved unanimously at the meeting. 1.3. The 2018 financial report prepared by the Bank was audited by PricewaterhouseCoopers Zhong Tian LLP (hereinafter referred to as “PwC”) according to the China standards on Auditing and PwC issued a standard unqualified auditors’ report. 1.4. Xie Yonglin (the Bank’s Chairman), Hu Yuefei (the President), and Xiang Youzhi (the CFO/the head of the Accounting Department) guarantee the authenticity, accuracy and completeness of the financial report contained in the 2018 Annual Report. 1.5. The forward-looking statements such as plans for the future involved in the Report do not constitute a substantial commitment for investors. Investors and stakeholders shall be aware of risks therein and understand the differences among plans, forecasts and commitments. 1.6. The Bank advises investors to read the full text of this Annual Report with particular attention to the following risk factors: the Bank is faced with all kinds of risks during operation, mainly including credit risks, market risks, liquidity risks, operational risks, country risks, bank account interest rate risks, reputation risks, strategic risks, information technology risks and legal and compliance risks, and has taken various measures to effectively manage and control all kinds of the business risks. See Discussion and Analysis on Operation in Section V for details. 1.7. The Bank’s proposal for profit distribution of ordinary shares deliberated by the Board: cash dividend distribution of RMB1.45 per 10 shares (tax inclusive) to all shareholders based on the total share capital of the Bank of 17,170,411,366 shares as at 31 December 2018. There was no proposal to issue bonus shares or to convert public reserve to share capital. 1 Contents SECTION I IMPORTANT NOTES, CONTENTS AND INTERPRETATIONS .................... 1 SECTION II CHAIRMAN’S STATEMENT ................................................. 4 SECTION III COMPANY PROFILE AND MAJOR FINANCIAL INDICATORS ................. 9 SECTION IV COMPANY BUSINESS OVERVIEW ......................................... 15 SECTION V DISCUSSION AND ANALYSIS OF OPERATIONS .............................. 22 SECTION VI SIGNIFICANT EVENTS ................................................... 65 SECTION VII CHANGES IN SHARES AND SHAREHOLDERS .............................. 79 SECTION VIII PREFERENCE SHARES.................................................. 85 SECTION IX CONVERTIBLE CORPORATE BONDS ...................................... 88 SECTION X INFORMATION ABOUT DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT ........................................................ 90 SECTION XI CORPORATE GOVERNANCE ............................................. 105 SECTION XII CORPORATE BONDS ................................................... 111 SECTION XIII FINANCIAL REPORT .................................................. 112 SECTION XIV DOCUMENTS AVAILABLE FOR INSPECTION CATALOGUE ............... 113 2 Interpretations Item refer(s) to Contents Shenzhen Development Bank Co., Ltd. (“Shenzhen Development Bank” Ping An Bank, the Bank and the or “Shenzhen Development”), which is a renamed Bank completing the refer to Company integration by absorption and merger of the former Ping An Bank Co., Ltd. (“former Ping An Bank”) in 2012 a national joint-stock commercial bank established on 22 December Shenzhen Development Bank or refers to 1987, with its name changed to Ping An Bank after absorption and Shenzhen Development merger of the former Ping An Bank a joint-stock commercial bank established in June 1995 and registered on Former Ping An Bank refers to 12 June 2012 China Ping An, Ping An Group and refer to Ping An Insurance (Group) Company of China, Ltd. the Group Ping An Life Insurance refers to Ping An Life Insurance Company of China, Ltd. PBoC refers to The People's Bank of China CSRC and Securities Regulatory refer to China Securities Regulatory Commission Commission CBIRC and Banking and Insurance refer to China Banking and Insurance Regulatory Commission Regulatory Commission 3 Section II Chairman’s Statement The year 2018 marks the 40th anniversary of the reform and opening up, a magnificent historical period that witnessed the ongoing transformation and development of Ping An Bank. Now in its thirties, the Bank has grown into a commercial bank with distinctive features in retail banking and leading advantages in technology. Last year, our performance excited us in reward of our hard work. In 2018, the business performance of Ping An Bank kept a good momentum as the operating income amounted to RMB116,716 million, up 10.3% year on year and the net profit was RMB24,818 million, up 7.0% year on year. The efficient and successful issuance of financial bonds of RMB35 billion and convertible corporate bonds of RMB26 billion not only represented an endorsement of the capital market, but also laid a solid foundation for the long-term steady development of the Bank. Last year, our steady innovation helped lay a foundation for our development. With keen judgments on market trends and foresighted response to risks, we’ve made remarkable improvements in asset quality. As a result, the deviation of non-performing loans reduced to below 1, loans overdue for more than 90 days down 0.73 percentage point and the provision coverage ratio of loans overdue for more than 90 days up 54 percentage points over the end of previous year. In this way, the risk compensation capabilities of the Bank were significantly enhanced. Taking full advantage of new technology and new instruments, we launched smart finance and smart risk control platforms to achieve constant progress in the smart operation capacity of the Bank. Last year, our faith and responsibility enriched the transformation of the Bank. Upholding the principle of “correcting conducts, strengthening management, and promoting development through party construction”, we’ve kept the transformation of the Bank stay in the right track. In issuing breeding loans, planting loans and hydro power loans, as well as varied poverty alleviation bonds and green financial bonds to support the State’s initiatives in poverty alleviation and building a Beautiful China, we’ve linked the Bank’s transformation and development up closely with national economy and people’s livelihood. Looking back, we’ve been moving forward firmly towards the clear goal of “domestic best performer and global leader in intelligent retail banking”; our courageous teams never shrunk in the face of challenges and difficulties; and our continuous innovation rejuvenated traditional banking businesses with the power of technology. Technology-empowered finance to double the might of transformation Science and technology constitute the primary productive force while innovation is the primary driving force for development. In the past decade, Ping An Group has invested over RMB50 billion in scientific 4 research, created more than 10 new technology companies, 25 scientific research labs and 6 technical innovation institutions, and applied for over 12,000 technology patents. Since banks always develop the most diversified scenarios, we’ve been making constant efforts to leverage the Group’s advantages of technology to empower products, services and management in all aspects so as to improve efficiency, optimize customer experience, drive innovation and enhance risk control. Credit cards, once require 2 weeks to get approval, now could be dealt with in only 8 seconds and delivered to customers within 48 hours. Intelligent customer service, available 7X24 hours, is more user-friendly and intelligent to address issues regarding customer needs and questions. By means of KYB (Know Your Business), the small enterprise digital finance platform, we established a service model under which unsecured and unguaranteed loans could be applied and reviewed online in a second, which significantly lowered the financing cost and threshold and served as a beneficial attempt to solve SMEs’ financing difficulties. By the end of 2018, through the platform, we have offered services to 14,000 enterprises, granted loans of RMB10.7 billion in total, and controlled the NPL ratio under 1%. After setting up an intelligent risk control platform, we achieved digitalization, labelling and modulization of business processes, which not only reduced the risk from manual operation, but also enabled intelligent early warning against risks with the help of big data and artificial intelligence. Benefits brought by technology to our transformation