Annual Report

2018 Interim Report Index 02 Chairman and CEO’s Review 03 Key Indicators 05 Governance 06 Corporate Bodies and Executive Committee 07 Board of Directors 11 Organisational Chart 12 Committees 21 Branches and Main Subsidiaries 22 Declaration of Conformity 23 Statement of the Auditing of the Accounts 25 Global Strategy and Main Developments 26 Global Strategy 27 Corporate Events 28 Macroeconomic Environment 30 Financial Overview 31 Rating 33 Business Activity 34 Business Model 35 Mergers and Acquisitions 38 Capital Markets 44 Structured Finance 47 FICC 50 Asset Management 52 Private Equity 54 Equities / Research 57 Treasury 61 Human Resources 65 Risk Management 77 Consolidated Financial Statements and Notes 165 Annexes Haitong Bank 2018 Interim Report 1 CHAIRMAN AND CEO’S REVIEW Since we started this turnaround project, there has been no doubt in our minds that the path ahead would be as challenging as it would be rewarding. Now, a full eight months into this project, we have not only seen encouraging progress but also a path to growth. Since the beginning of our mandate, our objective has been to restore the credibility of this Bank with the Regulators, Clients and the Wu Min | CEO Lin Yong | Chairman Shareholder. The first step was to put the house in order. That involved cutting costs to a sustainable level, developing a China-related strategy, ensuring capital support from the Shareholder and addressing key governance issues. That initial work has been generally completed with positive results during this first half of 2018. We now have a stronger balance sheet available to invest in new assets. We run at half of the cost-base compared to last year. We succeeded in reaching the targeted operating profit in the first half of the year. We have a new Board of Directors supported by a functioning governance structure. We have put in place new internal procedures and ultimately started to instil a corporate culture that follows the best standards in the industry. Group connectivity has been crucial for the Bank’s turnaround in terms of revenues and in terms of capital support, namely through the issuance of a USD 130 million subordinated additional TIER 1 instrument. Regarding the legacy credit portfolio and although there were some improvements, this is still holding back the results of the Bank and is taking significant Management attention. The Governance structure was one of the priorities of our turnaround process. We have created four Board committees chaired by Independent Directors that have provided constructive oversight of our business. At the Executive Committee level, we have created four business-related committees that have empowered our middle management and have given them more responsibilities as they participate in the decision-making process. From a business perspective, by the end of the first 6 months of the year, total banking income reached EUR 49 million, 40% above the same period last year. On the costs side, we have delivered operating costs 44% lower compared to the first half of 2017, allowing the Bank to return to operating profitability, which has been our main goal for this year. We expect the second half of 2018 to be more balance sheet driven through new credit transactions and trading activities as we start expanding the balance sheet and using the comfortable liquidity position. We also expect to see further pipeline conversion into actual transactions in investment banking. “The management team counts on the Thinking of our future, we will keep a continuous support of all our stakeholders! dynamic and innovative mind as we adapt Let’s keep moving forward together!” our business model to a changing industry. 2 KEY INDICATORS (million euros) 2018 2017 2016 June December December Total Assets 3,263 3,276 4,755 Total Liabilities 2,642 2,742 4,404 Equity 621 534 351 Banking Income 49 77 101 Operating Costs -39 -126 -120 Operating Profit 10 -50 -18 Impairment and Provisions -23 -86 -58 Net profit / loss -2 -130 -96 Cost-to-Income 77% 161% 244% ROE -0.7% -26.1% -51.5% ROA -0.1% -3.4% -1.7% Loan Portfolio (gross) 644 750 1,097 Loan Loss Charge 19 49 49 Non Performing Loans Rate 33% 37% 44% Non Performing Loans Coverage 52% 42% 52% CET1 ratio (phased-in) 22.1% 21.2% 7.1% CET1 ratio (fully-loaded) 21.9% 20.3% 5.3% Total capital ratio (phased-in) 28.0% 21.3% 9.7% Total capital ratio (fully-loaded) 27.7% 20.5% 8.4% Leverage Ratio (phased-in) 21.8% 15.0% 6.1% Leverage Ratio (fully-loaded) 21.6% 14.5% 5.2% Net Stable Funding Ratio 153% 149% 115% Total Headcount 392 462 663 Haitong Bank 2018 Interim Report 3 Governance 06 Corporate Bodies and Executive Committee 07 Board of Directors 11 Organisational Chart 12 Committees 21 Branches and Main Subsidiaries 22 Declaration of Conformity 23 Statement of the Auditing of the Accounts WHO WE ARE Haitong Bank, S.A. is part of Haitong Securities Co. Ltd, a leading investment bank and securities firms in China with a broad international footprint. Haitong Bank was established as an investment bank in 1993. After its acquisition by Haitong Securities in 2015, Haitong Bank aligned its product offering leveraging on its Sino- European and Sino-LatAm competitive position. Haitong Bank 2018 Interim Report 5 GOVERNANCE CORPORATE BODIES EXECUTIVE COMMITTEE GENERAL MEETING BOARD CEO Wu Min President Maria João Ricou Members Alan do Amaral Fernandes BOARD OF DIRECTORS Christian Georges Jacques Minzolini Chairman Paulo José Lameiras Martins Lin Yong Nuno Miguel Sousa Figueiredo Carvalho Members Senior Managers with a Seat on the Executive Committee Wu Min António Carlos Gomes Pacheco Alan do Amaral Fernandes Pedro Alexandre Martins Costa António Domingues Vasco Câmara Pires Santos Martins Christian Georges Jacques Minzolini Poon Mo Yiu Secretary Nuno Miguel Sousa Figueiredo Carvalho Pedro Alexandre Martins Costa Pan Guangtao Paulo José Lameiras Martins Vincent Marie L. Camerlynck Zhang Xinjun STATUTORY AUDITORS Deloitte & Associados, SROC S.A. represented by Secretary João Carlos Henriques Gomes Ferreira Pedro Alexandre Martins Costa SUPERVISORY BOARD Chairman Mário Paulo Bettencourt de Oliveira Members Cristina Maria da Costa Pinto Maria do Rosário Mayoral Robles Machado Simões Ventura Alternate Director Paulo Ribeiro da Silva 6 BOARD OF DIRECTORS First term of office starting date: April 2016 Professional Experience: Dr. Lin Yong He is one of the first set of sponsor has over 20 years of experience in the representatives of the China Securities investment banking industry. He joined Regulatory Committee and has been an Haitong Securities Co., Ltd in 1996 and assistant professor at the Management was a general manager of the Investment College of Xiamen University since 2010. Banking Department of Haitong Securities Dr. Lin Yong has been a non-Executive Lin Yong from 2001 to 2007. Since 2011, Dr. Lin Board Member of Haitong Bank since Chairman has been the Deputy Chairman and the April 2016 and became the Chairman in Chief Executive Officer of Haitong October 2017. International Securities Group Limited Academic Background: Mr. Lin Yong based in Hong Kong. gained a PhD in Economics from Xi’an Jiaotong University in 2004. First term of office starting date: October 2017 Professional Experience: Mr. Wu Min has Subsequently, in 2001, he obtained a substantial experience in management Master’s in Investment & Finance from functions in the financial services industry. At Middlesex University and in 2003 a Haitong Securities Co. Ltd. he founded the Master’s in Mathematical Trading & largest Debt Capital Markets team in China Finance from London City University. with over 500 professionals, underwriting He holds the following certifications: Wu Min around CNY 500 billion in bonds in 3 years, • Registered with the China Securities CEO with a client coverage network encompassing all the Chinese corporations Regulatory Commission (since 2003) • and enterprises with credit ratings above Qualified Trader License in China Inter- AA- and an institutional sales network, Bank Market (since 2005) covering over 3,000 institutional accounts. • Assessment expert of government procurement, Ministry of Finance, China Academic Background: Mr. Wu Min has a (since 2016) strong European academic background, • Registered expert of the fourth non- with degrees from well-regarded UK financial institution bond committee, universities. Mr. Wu Min obtained his NAFMII – 2017. bachelor’s degree in International Trade & Finance from Sichuan University in 2000. First term of office starting date: March 2013 Professional Experience: Mr. Alan Fernandes has been an Executive Board Fernandes has more than 25 years of Member of Haitong Bank since March 2013 professional experience in the financial and an Executive Board Member of sector. He has strong experience in Haitong Brasil since March 2014. He has Structured Finance involving all also been the Chief Executive Officer of infrastructure sectors, including private- Haitong Brasil since April 2016. Previously Alan Fernandes public partnerships, and has had an active Alan worked for Banco Itaú S.A., Banco Executive Director role in the privatisation of companies in the Itaú BBA S.A., Unibanco S.A., Algar electricity, telecommunications, mining and Telecom S.A., Deloitte & Touche Tohmatsu natural gas distribution sectors in Brazil, and the BNDES. including the privatization process of natural Academic Background: He gained a gas services in the State of S. Paulo. He degree in mechanical engineering from was also deeply involved in the restructuring Federal University of Rio de Janeiro and of the energy sector in Brazil (distribution, Aeronautical Engineering from ITA, the transmission and generation). Mr. Alan Technological Institute of Aeronautics, with a specialization in finance from IBMEC. Haitong Bank 2018 Interim Report 7 First term of office starting date: January 2018 Professional Experience: Mr. António Deputy General Director of the BPA - Domingues has extensive experience in the Banco Português do Atlantico in France; banking sector.

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