Shengjing Bank Co., Ltd.* (A Joint Stock Company Incorporated in the People's Republic of China with Limited Liability) Stock Code: 02066 Annual Report Contents
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Shengjing Bank Co., Ltd.* (A joint stock company incorporated in the People's Republic of China with limited liability) Stock Code: 02066 Annual Report Contents 1. Company Information 2 8. Directors, Supervisors, Senior 68 2. Financial Highlights 4 Management and Employees 3. Chairman’s Statement 7 9. Corporate Governance Report 86 4. Honours and Awards 8 10. Report of the Board of Directors 113 5. Management Discussion and 9 11. Report of the Board of Supervisors 121 Analysis 12. Social Responsibility Report 124 5.1 Environment and Prospects 9 13. Internal Control 126 5.2 Development Strategies 10 14. Independent Auditor’s Report 128 5.3 Business Review 11 15. Financial Statements 139 5.4 Financial Review 13 16. Notes to the Financial Statements 147 5.5 Business Overview 43 17. Unaudited Supplementary 301 5.6 Risk Management 50 Financial Information 6. Significant Events 58 18. Organisational Chart 305 7. Change in Share Capital and 60 19. The Statistical Statements of All 306 Shareholders Operating Institution of Shengjing Bank 20. Definition 319 * Shengjing Bank Co., Ltd. is not an authorised institution within the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong), not subject to the supervision of the Hong Kong Monetary Authority, and not authorised to carry on banking and/or deposit-taking business in Hong Kong. COMPANY INFORMATION Legal Name in Chinese 盛京銀行股份有限公司 Abbreviation in Chinese 盛京銀行 Legal Name in English Shengjing Bank Co., Ltd. Abbreviation in English SHENGJING BANK Legal Representative ZHANG Qiyang Authorised Representatives ZHANG Qiyang and ZHOU Zhi Secretary to the Board of Directors ZHOU Zhi Joint Company Secretaries ZHOU Zhi and KWONG Yin Ping, Yvonne Registered and Business Address No. 109 Beizhan Road, Shenhe District, Shenyang, Liaoning Province, the PRC Contact Number 86–24–22535633 Website www.shengjingbank.com.cn Principal Place of Business in Hong Kong Unit 3209, 32/F, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong Website of the Hong Kong Stock Exchange www.hkexnews.hk on which the H Share Annual Report is Published Place of Maintenance of the Annual Report Office of the Board of Directors of Shengjing Bank Stock Name Shengjing Bank 2 Shengjing Bank Co., Ltd. COMPANY INFORMATION (CONTINUED) Stock Code 02066 Share Registrar and its Business Address Computershare Hong Kong Investor Services Limited Shops 1712–1716, 17th Floor, Hopewell Centre 183 Queen’s Road East, Wanchai, Hong Kong Legal Advisor as to PRC Laws and its Tian Yuan Law Firm Business Address 10/F, China Pacific Insurance Plaza 28 Fengsheng Hutong Xicheng District Beijing, the PRC Legal Advisor as to Hong Kong Law and its Freshfields Bruckhaus Deringer Business Address 55th Floor, One Island East, Taikoo Place Quarry Bay, Hong Kong Auditor and its Business Address KPMG 8th Floor, Prince’s Building 10 Chater Road Hong Kong Annual Report 2018 3 FINANCIAL HIGHLIGHTS Year-on- year change (Expressed in thousands of between Renminbi, unless otherwise stated) 2018 2017 2018 and 2017 2016 2015 2014 Rate of change (%) Operating Results Interest income 42,805,495 42,277,528 1.2 36,055,533 31,479,529 25,415,004 Interest expense (30,387,931) (30,201,911) 0.6 (22,837,867) (19,530,998) (15,513,832) Net interest income 12,417,564 12,075,617 2.8 13,217,666 11,948,531 9,901,172 Net fee and commission income 626,699 1,612,758 (61.1) 1,913,907 1,204,189 1,368,431 Net trading gains/(losses), net gains/(losses) arising from investments, Net foreign exchange gains/(losses), other operating income 2,841,203 (438,692) N/A 982,303 1,031,436 (64,840) Operating income 15,885,466 13,249,683 19.9 16,113,876 14,184,156 11,204,763 Operating expenses (3,945,215) (3,617,442) 9.1 (3,730,598) (4,102,162) (3,211,887) Impairment losses on assets (6,401,249) (1,403,284) 356.2 (3,675,411) (1,955,377) (934,151) Operating profit 5,539,002 8,228,957 (32.7) 8,707,867 8,126,617 7,058,725 Share of profits of associates – – – – – 2,338 Profit before taxation 5,539,002 8,228,957 (32.7) 8,707,867 8,126,617 7,061,063 Income tax expense (412,854) (654,818) (37.0) (1,829,575) (1,902,790) (1,637,225) Net profit 5,126,148 7,574,139 (32.3) 6,878,292 6,223,827 5,423,838 Net profit attributable to equity shareholders of the Bank 5,128,717 7,580,055 (32.3) 6,864,520 6,211,334 5,404,933 4 Shengjing Bank Co., Ltd. FINANCIAL HIGHLIGHTS (CONTINUED) Year-on- year change (Expressed in thousands of between Renminbi, unless otherwise stated) 2018 2017 2018 and 2017 2016 2015 2014 Change Calculated on a per share basis (RMB) Basic and diluted earnings per share 0.88 1.31 (0.43) 1.18 1.07 1.25 Dividend per share 0.12 0.18 (0.06) 0.25 (0.28) 0.275 Rate of change (%) Major indicators of assets/ liabilities Total assets 985,432,940 1,030,617,431 (4.4) 905,482,647 701,628,500 503,370,514 Of which: total loans and advances to customers(11) 376,597,360 279,513,418 34.7 235,416,650 195,460,365 158,644,499 Total liabilities 928,403,456 978,361,775 (5.1) 859,108,021 659,913,547 467,237,029 Of which: total deposits from customers(11) 514,166,997 473,580,808 8.6 415,246,159 402,379,086 315,943,789 Share capital 5,796,680 5,796,680 – 5,796,680 5,796,680 5,646,005 Equity attributable to equity shareholders of the Bank 56,457,868 51,681,375 9.2 45,794,429 41,268,528 35,699,553 Total equity 57,029,484 52,255,656 9.1 46,374,626 41,714,953 36,133,485 Change Profitability Indicators (%) Return on average total assets(1) 0.51 0.78 (0.27) 0.86 1.03 1.26 Return on average equity(2) 9.38 15.36 (5.98) 15.62 15.99 18.83 Net interest spread(3) 1.33 1.36 (0.03) 1.65 2.00 2.07 Net interest margin(4) 1.43 1.50 (0.07) 1.75 2.14 2.32 Net fee and commission income to operating income 3.95 12.17 (8.22) 11.88 8.49 12.21 Cost-to-income ratio(5) 24.13 26.22 (2.09) 19.31 19.04 19.06 Change Asset quality indicators (%) Non-performing loan ratio (6) 1.71 1.49 0.22 1.74 0.42 0.44 Allowance to non-performing loans (7) 160.81 186.02 (25.21) 159.17 482.38 387.42 Allowance to total loans (8) 2.75 2.77 (0.02) 2.78 2.01 1.70 Annual Report 2018 5 FINANCIAL HIGHLIGHTS (CONTINUED) Year-on- year change (Expressed in thousands of between Renminbi, unless otherwise stated) 2018 2017 2018 and 2017 2016 2015 2014 Change Capital adequacy indicators (%) Core Tier-one capital adequacy ratio(9) 8.52 9.04 (0.52) 9.10 9.42 11.04 Tier-one capital adequacy ratio (9) 8.52 9.04 (0.52) 9.10 9.42 11.04 Capital adequacy ratio (9) 11.86 12.85 (0.99) 11.99 13.03 12.65 Total equity to total assets ratio 5.79 5.07 0.72 5.12 5.95 7.18 Change Other indicators (%) Loan-to-deposit ratio (10) 73.24 59.02 14.22 56.69 48.58 50.21 Note: (1) Calculated by dividing the net profit by the average of total assets at the beginning and at the end of the period. (2) Representing the net profit during the period as a percentage of the average balance of total equity at the beginning and the end of the period. (3) Calculated by deducting the average interest rate of interest-bearing liabilities from the average return rate of interest-earning assets. (4) Calculated by dividing net interest income by the average interest-earning assets. (5) Calculated by dividing operating expenses (less tax and surcharges) by operating income. (6) Calculated by dividing the balance of non-performing loans by total balance of loans and advances to customers. (7) Calculated by dividing the balance of provision for impairment on loans by the balance of non-performing loans. (8) Calculated by dividing the balance of the provision for impairment on loans by the total balance of loans and advances to customers. (9) Core Tier-one capital adequacy ratio, core capital adequacy ratio and capital adequacy ratio were calculated in accordance with the latest guidance promulgated by the CBIRC (effective from 1 January 2013). (10) The loan-to-deposit ratio is calculated by dividing the total balance of loans and advances to customers by total deposits from customers. (11) Total balance of loans and advances to customers excludes interest receivables, total deposits from customers excludes interest payables. 6 Shengjing Bank Co., Ltd. CHAIRMAN’S STATEMENT The development environment of the banking industry was still challenging in 2018. Outside China, the global economy was in a complicated situation with its development and expected growth being handicapped and hindered by increasing uncertainties. Within China, under the background of the implementation of de-leveraging and enhanced regulation on domestic economy, both industrial enterprises and financial institutions were under the pressure of adjustment and transformation. Facing the change in the internal and external business environments, Shengjing Bank put forward new goals and transformation requirements, asking the entire Bank to make efforts to achieve its development target, namely, to develop itself into “a comprehensive, diversified and quality joint-stock commercial bank with a leading position among banks of the same type”.