CHINA CONSTRUCTION BANK CORPORATION 2014 ANNUAL REPORT 60 YEARS ON OUR WORLDWIDE JOURNEY ANNUAL REPORT 2014 60 YEARS ON OUR WORLDWIDE JOURNEY China Construction Bank Corporation, established in October 1954 and headquartered in Beijing, is a leading large-scale joint stock commercial bank in Mainland China with world-renowned reputation. The Bank was listed on Hong Kong Stock Exchange in October 2005 (stock code: 939) and listed on the Shanghai Stock Exchange in September 2007 (stock code: 601939). At the end of 2014, the Bank’s market capitalisation reached US$207.9 billion, ranking fourth among listed banks in the world. With 14,856 branches and sub-branches in Mainland China, the Bank provides services to 3.48 million corporate customers and 314 million personal customers, and maintains close cooperation with the leading enterprises of strategic industries in the Chinese economy and a large number of high-end customers. The Bank maintains overseas branches in Hong Kong, Macau, Singapore, Frankfurt, Johannesburg, Tokyo, Osaka, Seoul, New York, Ho Chi Minh City, Sydney, Melbourne, Taipei, Luxembourg, Brisbane and Toronto, and has a number of subsidiaries, such as CCB Asia, CCB International, CCB London, CCB Russia, CCB Dubai, CCB Europe, CCB New Zealand, CCB Principal Asset Management, CCB Financial Leasing, CCB Trust, CCB Life, CCB Futures and Sino-German Bausparkasse. The Bank upholds its “customer-centric, market-oriented” business philosophy, adheres to its development strategy of “integration, multifunction and intensiveness”, and strives to provide customers with comprehensive, premium and modern financial services by accelerating innovation of products, channels and service modes. Being a market leader of a number of core business indicators, the Bank vigorously promotes the development of emerging businesses including investment banking, credit cards, electronic banking, private banking and consumer finance, while maintaining its traditional business advantages in infrastructure and housing finance. The Bank constantly optimises business and management processes, and increases investments in infrastructure like information systems, aiming to enhance its capability of risk prevention and control and market competitiveness. The Bank advocates the fulfilment of citizen responsibilities as its corporate mission and proactively combines business development with undertaking of social responsibilities, dedicated to building a bank with sustainable development that serves the general public, improves people’s livelihood, and promotes low carbon consumption and environmental protection. On cover (by counter clockwise, from left to right): Nelly Moswai Credit Analyst, Johannesburg Branch Wang Lihe Executive Vice Chairman of the labour union at Head Office, National Advanced Worker for Corporate Culture Liu Yan General Manager, Operations Department, Beijing Branch, National Labor Model Loren Lampros Chief Financial Officer and Head of For further information please visit Finance of New York Branch www.ccb.com Liu Fei Investor Relations Manager of Head Office Overview OVERVIEW Corporate Introduction ........................................................ 2 Financial Highlights .............................................................. 4 Corporate Information ......................................................... 6 Rankings and Awards .......................................................... 8 Chairman’s Statement ....................................................... 10 President’s Report ............................................................. 12 Management discussion & analysis MANAGEMENT DISCUSSION & ANALYSIS Financial Review ................................................................ 15 Business Review ................................................................ 29 Risk Management .............................................................. 54 Capital Management.......................................................... 63 Prospects ........................................................................... 66 Corporate governance CORPORATE GOVERNANCE Corporate Social Responsibilities ..................................... 68 Changes in Share Capital and Particulars of Shareholders .................................................................. 72 Profiles of Directors, Supervisors and Senior Management ....................................................... 75 Corporate Governance Report .......................................... 88 Report of the Board of Directors ..................................... 104 Report of the Board of Supervisors ................................. 108 Major Issues ..................................................................... 110 Financial statements and others FINANCIAL STATEMENTS AND OTHERS Independent Auditor’s Report ......................................... 113 Financial Statements ....................................................... 114 Unaudited Supplementary Financial Information ............ 262 Organisational Structure .................................................. 265 Branches and Subsidiaries .............................................. 267 Definitions ........................................................................ 275 1 Key milestones in our 60 years of history For the past 60 years, focusing on serving national economic development, with development as the keynote and reform as the momentum, we were bold enough to take the initiative and make continuous innovation to constantly improve market competitiveness and financial service quality. Since the founding Since the reform and In 1994, through in 1954, capitalizing opening up in 1979, we commercialization, on infrastructure actively explored new concentrated operation 1979 1954 construction as areas of commercial 1994 and comprehensive our expertise, we banking including development, we made historical infrastructure construction became the pacesetter contribution to the financing, deposit in reform and innovation nation’s infrastructure business, international for domestic banks. construction and the business, credit card, foundation-laying for housing finance and other modern industrialization. businesses. 2 Overview The establishment of In 2005, we were the Management discussion & analysis China Cinda Asset first among the big four Management Corporation state-owned banks to in 1999 laid a foundation be listed on Hong Kong 2014 for the joint stock reform. Stock Exchange. In The establishment of 2007, back to domestic joint stock company in capital market, we were The year of 2014 1999 - 2004 - 1999 2005 - 2007 2004 built and refined listed on Shanghai Stock witnessed the historical the modern corporate Exchange. moment of the 60th governance structure. anniversary. We are becoming a large global Corporate governance joint-stock bank and striving to continuously enhance the level of integration, multifunction, and intensiveness of operation and management. Financial statements and others 3 Overview Financial highlights The financial information set forth in this annual report is prepared on a consolidated basis in accordance with the IFRS, and expressed in RMB unless otherwise stated. (Expressed in millions of RMB unless otherwise stated) 2014 2013 Change (%) 2012 2011 2010 For the year Net interest income 437,398 389,544 12.28 353,202 304,572 251,500 Net fee and commission income 108,517 104,283 4.06 93,507 86,994 66,132 Other operating income 10,825 17,313 (37.47) 15,824 7,837 8,148 Operating income 556,740 511,140 8.92 462,533 399,403 325,780 Operating expenses (195,988) (188,185) 4.15 (171,081) (144,537) (121,366) Impairment losses (61,911) (43,209) 43.28 (40,041) (35,783) (29,292) Profit before tax 299,086 279,806 6.89 251,439 219,107 175,156 Net profit 228,247 215,122 6.10 193,602 169,439 135,031 Net profit attributable to equity shareholders of the Bank 227,830 214,657 6.14 193,179 169,258 134,844 As at 31 December Gross loans and advances to customers 9,474,523 8,590,057 10.30 7,512,312 6,496,411 5,669,128 Allowances for impairment losses on loans (251,613) (228,696) 10.02 (202,433) (171,217) (143,102) Total assets 16,744,130 15,363,210 8.99 13,972,828 12,281,834 10,810,317 Deposits from customers 12,898,675 12,223,037 5.53 11,343,079 9,987,450 9,075,369 Total liabilities 15,491,767 14,288,881 8.42 13,023,283 11,465,174 10,109,157 Total equity attributable to equity shareholders of the Bank 1,242,179 1,065,951 16.53 941,668 811,140 697,047 Qualifying common share capital 250,011 250,011 – 250,011 250,011 250,011 Total capital after deductions 1 1,516,928 1,316,724 15.20 N/A N/A N/A Risk-weighted assets 1 10,203,643 9,872,790 3.35 N/A N/A N/A Per share (In RMB) Basic and diluted earnings per share 0.91 0.86 5.81 0.77 0.68 0.56 Final cash dividend proposed after the reporting period 0.301 0.30 0.33 0.268 0.2365 0.2122 Net assets per share 5.01 4.30 16.51 3.80 3.27 2.80 1. Capital adequacy ratios were calculated in accordance with the relevant regulations of the Capital Rules for Commercial Banks (Provisional). The advanced capital measurement approaches have been adopted to calculate capital adequacy ratios, and the regulations during the transition period have been applicable to the calculation of ratios since the second quarter of 2014. 4 Overview Financial ratios (%) 2014 2013 Change +/(-) 2012 2011 2010 Profitability indicators Return on average assets 1 1.42 1.47 (0.05) 1.47 1.47 1.32 Return on average equity 19.74 21.23 (1.49) 21.98 22.51 22.61 Net interest