CHINA BANKING CORPORATION (CHIB) Investor Presentation SM Group Corporate Day /Macquarie Securities The Economic Backdrop
. Healthier and more inclusive GDP growth . Sound macroeconomic fundamentals . Improved governance and competitive indicators . Prudent monetary policy . Strong external position . Sound and stable banking system . IT’S MORE FUN TO INVEST IN THE PHILIPPINES!
Your Success Is Our Business CHINA BANK MILESTONES – 92 Years
1920‐1939 1940‐1959 1960‐1979 1980‐1999 2000‐2012 2000‐2012 2000‐2012 •1920 •1947 •1969 •1988 •2006 •2008 •2011 •Established •CHIB listed •Became the •Joined 7 other •Start of rapid •Launched •2x Gold by Chinese on the local 1st bank in banks in branch China Bank awardee immigrants stock Southeast setting up expansion; Savings (95%) in as the 1st exchange Asia to BancNet, the Completed its subsidiary corporate country’s first privately process largest ATM international •2009 governance owned local deposit network US$53 MN •Cited by awarded by commercial accounts ICD •1991 secondary Stern bank in the online •Acquired share offering Stewart as •2012 Phils. unibank •2007 one of the •Breached license •Signed a top 100 the 300- •1996 bancassurance ASEAN mark in JV with companies branch •Accessed Manulife; offshore acquired in terms of network; Ten capital Manila Banking delivering to one Stock markets by Corporation shareholder split; Bell issuing US$50 with 75 value for Awardee for MN FRCD branches 2002-2008 Corporate Governance
Your Success Is Our Business Competitive Landscape (Dec 2012)
Competitive Assets Deposits Net Loans Capital Branches Posture Amt Mkt Share Amt Mkt Share Amt Mkt Share Amt Mkt Share Institution (P BN) (%) (P BN) (%) (P BN) (%) (P BN) (%) TOTAL 7,733 100.0 5,481 100.0 3,738 100.0 861 100.0
BDO 1,250 16.2 930 17.0 738 19.7 156 18.1 763 MBT 1,038 13.4 739 13.5 509 13.6 122 14.1 828 Big Banks BPI 976 12.6 804 14.7 558 14.9 93 10.8 820 PNB/Allied 516 6.7 388 7.1 234 6.3 58 6.7 653 RCBC 369 4.8 249 4.5 178 4.8 42 4.9 418 Peer CHIB 322 4.2 272 5.0 187 5.0 39 4.5 316 Banks UBP 275 3.6 190 3.5 117 3.1 45 5.2 186 SECB 259 3.4 143 2.6 130 3.5 37 4.3 208 Gov't 1,046 13.5 721 13.2 388 10.4 118 13.7 Foreign Others Banks 977 12.6 505 9.2 415 11.1 56 6.5 Local Banks 706 9.1 541 9.9 284 7.6 97 11.2
Your Success Is Our Business Key Investment Merits
Sustained profitability
Strong balance sheet and asset quality
Solid capital base
Clear strategy for growth and expansion
Focused management, effective governance
Sustained delivery of superior value to shareholders
Your Success Is Our Business Net Income, ROE
Your Success Is Our Business ROE, ROA
Your Success Is Our Business Cost to Income
Branch network more than doubled from 148 in 2006 to 316 in 2012
Your Success Is Our Business Revenue Diversification Profile
In BN 19.3 17.5 17.9 16.9
14.5 14.5 14.1
Your Success Is Our Business Key Investment Merits
Sustained profitability Strong balance sheet and asset quality
Solid capital base
Clear strategy for growth and expansion
Focused management, effective governance
Sustained delivery of superior value to shareholders
Your Success Is Our Business Assets
Your Success Is Our Business Loan Portfolio - well collateralized
Excludes UDSCL
Your Success Is Our Business Much room for loans growth…
Gross Loans to Deposit Ratio
Your Success Is Our Business Improving asset quality, more than adequate reserve cover
*Industry LLR Ratio as of October 2012
Your Success Is Our Business Deposit, Funding Mix
272
213 216 193 174 140 122
Your Success Is Our Business Sustained growth in low-cost deposits
Your Success Is Our Business Key Investment Merits
Sustained profitability
Strong balance sheet and asset quality Solid capital base
Clear strategy for growth and expansion
Focused management, effective governance
Sustained delivery of superior value to shareholders
Your Success Is Our Business From excess capital to efficient use of capital - Basel II 2007, acquired Manila Bank 2007, expansion
41 36
31 24 27
21 22
Your Success Is Our Business Capital & loss reserves well above stress test tresholds
Your Success Is Our Business Maintained top ratings from credit rating agencies
Standard Capital Fitch Ratings Moody's and Poor's Intelligence
Foreign Bank Financial Currency National Individual Strength Short-term Bank Rating Rating Rating (BSFR) Deposit Rating
BPI AAA C C- Not-Prime DBP AA+ C/D BDO C/D D Not-Prime CHIB AA- C/D BBB- SECB AA- D RCBC D D- Not-Prime ABC D E+ Not-Prime UBP A+ D LBP AA C/D(from D) BB Positive BB Positive MBT C/D (from D) D Not-Prime (from BB-) (from BB-) BB Positive BB Positive PNB D/E E+ Not-Prime (from BB-) (from BB-)
BB+ (from BB+ (from Philippines BB+ (from BB) Ba1 (from Ba2) BB) BB) Sources: Business World Online, PhilStar.com, The Wall Street Journal Digital Network, Bloomberg
Your Success Is Our Business Key Investment Merits
Sustained profitability
Strong balance sheet and asset quality
Solid capital base Clear strategy for growth and expansion
Focused management, effective governance
Sustained delivery of superior value to shareholders
Your Success Is Our Business Branches, ATM expansion on track…
3-Year Plan
440 415
383
316 293 269 255
216 188
22 Your Success Is Our Business Leverage bigger branch footprint to distribute products and services
Luzon ‐ 26%
Metro Manila ‐ 50%
Visayas ‐ 14%
Mindanao ‐ 10%
Your Success Is Our Business New branches – 24% of accounts
949,699 283 268 872,564 818,582 253 241 771,759 742,784 214 676,094 No.
of
598,193 180 Branches Accounts
of 148
No.
No. of accts in No. of accts in Existing branches New branches Existing branches New branches
Your Success Is Our Business Key challenges – Cost drag of new branches -- More than 85% of Opex covered
Operating Exp Adjusted Net (P MN) FY 2012 Income / (Loss) Opened in 2006 (7) (70.89) 23.40 Opened in 2007 (12) (115.20) (12.95) Opened in 2008 (34) (311.54) (49.50) Opened in 2009 (27) (256.35) 6.65 Opened in 2010 (12) (96.64) (54.49) Opened in 2011 (15) (110.39) (91.64) Opened in 2012 (15) (34.03) (29.33) Converted Manila Bank (20) (195.60) 30.08 TOTAL (142) (1,190.64) (177.76)
25 Your Success Is Our Business Key challenges –Margin squeeze due to system liquidity
Spread between average lending rates and fixed deposit rates
Your Success Is Our Business Asset mix towards more loans, less treasury
324
257 262 234 209 176
156
Your Success Is Our Business Faster growth in higher margin segments – consumer, commercial
CAGR= 20% 333 (2012-2015)
276 56% Consumer 224 194 150 24% Commercial 113
8% Corporate
Your Success Is Our Business Diversify Revenue streams
Maximize •Investment Banking •Bancassurance JV synergy with with Manulife existing “new” •Private Banking •Insurance businesses •Remittance
•Credit/Debit Launch “new” Cards businesses •FOREX Business •Derivatives
Your Success Is Our Business China Bank Savings - to become a major bottomline contributor by 2014
Expand distribution network
•Savings Bank •Acquisition opportunities • Unity Bank, rural bank from Central Luzon •Full & mini branches •Mini branch in SaveMore (SM) supermarkets •Fastest growth in branch network in the Thrift Banking Industry
Your Success Is Our Business Clear strategy for growth and expansion
New Core Banking System
Robust New ATM Switch Platforms, Cost Credit Card/ Debit Card System Effective Processes Roll our new ALM System (Sungard) Rolled out Reuters, Kondor + Treasury System
Your Success Is Our Business Key Investment Merits
Sustained profitability
Strong balance sheet and asset quality
Solid capital base
Clear strategy for growth and expansion
Focused management, effective governance
Sustained delivery of superior value to shareholders
Your Success Is Our Business Focused management, effective governance
Respected Management
.Management team is highly respected in the banking industry especially among Chinese Filipino businessmen
.Hans T. Sy – Chairman since 2011 .Gilbert U. Dee – Vice Chairman .Peter S. Dee – President & CEO .Ricardo R. Chua – SEVP & COO
.Mgt team strengthened by recent key executives hiring .William Whang – Head of Institutional Banking .Virgilio Chua – Head of Investment Banking
Your Success Is Our Business Focused management, effective governance
Strong Shareholder Support
.SM Synergy .Bank’ branches/ATMS in malls .Savings bank in Savemore stores . SM suppliers, merchants, contractors
.Foreign ownership of Dec 2012 . 24% share
Your Success Is Our Business Focused management, effective governance
Excellence in Governance - awards and citations
2011 – Gold (score of 95% above)
2010 – Gold (score of 95% above)
2009 –Silver (score of 90%)
Your Success Is Our Business Focused management, effective governance
Excellence in Governance - awards and citations 2012: Bell Award for Excellence in Corporate Governance from the Philippine Stock Exchange (PSE)
•The only bank among the five publicly-listed companies awarded, from among 255 publicly-listed companies
Your Success Is Our Business Key Investment Merits
Sustained profitability
Strong balance sheet and asset quality
Solid capital base
Clear strategy for growth and expansion
Focused management, effective governance
Sustained delivery of superior value to shareholders
Your Success Is Our Business Sustained delivery of superior value to shareholders
10:1 stock split in September 2012 BN
P 71
P 51 P 46 P 47 P 42 P 35 P 36
Your Success Is Our Business Sustained delivery of superior value to shareholders
Your Success Is Our Business Sustained delivery of superior value to shareholders
Your Success Is Our Business Sustained delivery of superior value to shareholders
During the stockholders meeting last May 2012, the Bank declared cash dividend of P12/share and stock dividend of P10/share
Dividend History 2006 2007 2008 2009 2010 2011 2012 Market Value Per Share (P) 680.00 660.00 395.00 370.00 434.00 398.00 54.60 Adjusted for stock split* 68.00 66.00 39.50 37.00 43.40 39.80 54.60 Cash Dividends Paid (P MN) 1,480 1,542 1,542 1,064 1,170 1,287 1,416 Cash Dividends Per Share (P) 30 25 20 12 12 12 12 Stock Dividends Paid (P MN) 1,233 1,542 1,156 887 975 1,073 1,180 Stock Dividends Per Share (%) 25 25 15 10 10 10 10 EPS (P) Adjusted for stock split* 2.73 2.84 2.25 3.16 3.86 3.86 3.89 BVPS (P) Adjusted for stock split* 19.25 20.50 19.88 23.40 27.30 30.25 32.58 P/E Ratio Adjusted for stock split* 24.94 23.26 17.59 11.71 11.26 10.31 14.04 Dividend Yield 4.41% 3.79% 5.06% 3.24% 2.76% 3.02% 2.20% Price to Book 3.53 3.22 1.99 1.58 1.59 1.32 1.68
* Restated based on the new par value of P10 per share (previously P100) which took effect on Sept 6, 2012
Your Success Is Our Business Key Investment Merits
Sustained profitability
Strong balance sheet and asset quality
Solid capital base
Clear strategy for growth and expansion
Focused management, effective governance
Sustained delivery of superior value to shareholders
Your Success Is Our Business Thank you!
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