Information Disclosure of NCCB 2011
Contents
Chapter 1 Important Notes...... 1 Chapter 2 Brief Introduction to NCCB...... 2 Chapter 3 Financial Highlights...... 3 Chapter 4 Report of the Board of Directors...... 5 Chapter 5 Risk Management...... 10 Chapter 6 Shareholders and Related Party Transactions...... 14 Chapter 7 Information on Directors, Supervisors, Senior Management and Staff...... 15 Chapter 8 Corporate Governance...... 16 Chapter 9 Report of Supervisory Board...... 18 Chapter 10 Significant Events...... 21 Chapter 11 Audit Report...... 23
1 Chapter 1 Important Notes
The Board of Directors of Nanchong City Commercial Bank, the Supervisory Board, all their members and the Senior Management hereby acknowledge and warrant that the report contains no false records, misleading statements or major omissions, and assume joint and several liabilities as to the authenticity, accuracy and integrity of the content.
Relative contents have been approved by 15th Meeting of the Third Board of Directors on March 11, 2012.
Ascenda Certified Public Accountants Co., Ltd has audited the Financial Report according to Independent Auditing Standards for CPAs in China and issued its Audit Report without reservation.
Mr. Huang Guangwei, the Chairman of the Board, Mr. Xing Min, the President, and Mr. Guo Yue, the Chief Financial Officer, declare and guarantee the authenticity and completeness of the financial statements in this report.
Board of Directors
Nanchong City Commercial Bank Co., Ltd.
2 Chapter 2 Brief Introduction to NCCB
南充市商业银行股份有限公司 Legal Chinese Name Nanchong City Commercial Bank Co., Ltd. (Abbreviation: NCCB, hereinafter referred to as “the Bank”) Legal Representative Huang Guangwei Secretary to the Board Jian Ting Registered Office No.1 Fujiang Road, Shunqing District, Nanchong, Sichuan, China Business Address No. 301 Wenhua Road, Shunqing District, Nanchong, Sichuan, China Telephone 86-817-2228870 Fax 86-817-2220889 Website www.cgnb.cn E-mail [email protected]
Business Development 2008-2011
Unit: million Yuan
80000 70000 60000 50000 Loans 40000 Deposits 30000 Assets 20000 10000 0 2007 2008 2009 2010 2011
3 Chapter 3 Financial Highlights
1. Key profit indicators （from the consolidated financial statements） Unit: million Yuan Net interest income 1,453.43 Net intermediary business income 300.81 Other business income 2.26 Investment gains 252.01 Net amount of non-operating revenue and expenditure 8.70 Profit before capital loss reserve being raised 1,461.75 Gross profit 1,330.55 Net profit 1,058.03 Net cash flow Generated from operating activities 22,629.53 Net increase from cash and cash equivalents 20,274.16
2. Key financial data and indicators（from the consolidated financial statements） Unit: million Yuan, % Total assets 75,754.55 Total liabilities 72,046.73 Shareholders’ equity 3,707.82 Deposits 69,322.16 Loans 15,899.14 including: bank notes business 28.09 NPL 66.92 Excess reserves ratio (%) 10.62 Capital adequacy (%) 16.65 NPL ratio (%) 0.42 Loan loss provision adequacy (%) 405.22 Provision coverage ratio (%) 588.85 Loan-to-deposit ratio (%) 35.40 Liquidity ratio (%) 81.95 Inter-bank borrowing ratio (%) 0.29 Inter-bank lending ratio (%) 0.11 Loan Concentration ratio to top ten clients (%) 20.47 Loan Concentration ratio of a single client (%) 2.94 Loan Concentration ratio of a single group client (%) 4.69 Interest recovery ratio (%) 100.87 Average ROA (%) 1.78 Average ROE (%) 40.69
3. Changes in main operating indicators （from the consolidated financial statements）
4 Unit: million Yuan 2011 2010 2009 Total assets 75,754.55 43,113.33 24,155.06 Deposit balance 69,322.16 37,662.24 20,162.05 Loan balance 15,899.14 12,976.42 10,049.00 Operating income 3,585.68 1,543.56 947.78 Shareholders’ equity 3,707.82 1,493.06 963.18 Earnings per share (Yuan) 1.25 0.95 1.01 Cost to profit ratio (%) 22.00 27.40 29.69
4. The capital structure and its movement （from the consolidated financial statements） Unit: million Yuan 2011 2010 2009 Core capital 3,696.76 1,497.29 955.49 Paid-in capital 1,001.21 600.00 300.00 Capital reserve 809.70 7.97 7.97 Surplus reserve and common reserve 600.88 307.93 196.21 Undistributed profit 1,250.07 560.18 434.94 Minority equity 34.90 21.21 16.37 Supplementary capital 316.75 171.32 104.34 Fair-value variation 11.06 -4.23 3.85 Provision for loan loss 305.69 175.55 100.49 Long-term tier II bonds - - - Convertible bonds - - - Less: 174.00 9.00 - Goodwill - - - Investment in non-owner-occupied real estate - - - Capital investment in industrial or commercial - - - enterprises Unwritten-off part of loan loss - - - Unconsolidated capital investment in - - - non-banking financial institutions Unconsolidated capital investment in banking 174.00 9.00 - financial institutions Net capital 3,839.51 1,659.61 1,059.83
5 Chapter 4 Report of the Board of Directors
Since the constitution of the third board of directors of NCCB in April 2009, under the leadership of the board, senior management and staff of the Bank worked together to make NCCB a modern bank specialized in SMEs (Small and Medium size Enterprises) financial services. With the core value of “kindness in heart as water nourish the world” and bold entrepreneurship, the Bank accomplished Business development and transformation, professional development, risk management system upgrading and bank image promotion.
Ⅰ Main work and achievements in 2011
1. the Bank further enhanced the core decision-making role of the Board, corporate governance running well
The board of Directors held 4 board meetings and 1 general meeting of shareholders in 2011. With a high sense of responsibility, the Directors performed their duties conscientiously and strictly in accordance with company procedures in decision-making, to ensure that the Bank running on a standardized, efficient and secure orbit: First, the analysis of macroeconomic and financial trends is targeted and guiding. In the high quality board meetings, the directors use their expertise and professional knowledge to express their views freely and debate intensely. Analysis and understanding are moving in depth; Second, special committees conscientiously perform their duties to improve the efficiency and effectiveness of the board through pre-discussion and consultation; Third, the board reached a consensus on implementation of the strategy of the Bank. For instance, market positioning Services for SMEs and professionalism is the direction and foundation of the Bank’s sustainable development. To adapt the severe macroeconomic situation and approaching interest rate liberalization, the Bank must insist on the philosophy of “boutique bank, professional bank, and security bank”. Fourth, the board deepened understanding of cross-regional development and rural financial development. Fifth, the board reached a consensus on the corporate culture. Sixth, Board meetings are getting increasingly standardized, including the conditions of the meeting venue, quality of meeting materials, dress codes and other aspects had significantly improved and changed, illustrated that the Bank’s comprehensive quality improved continuously.
Thanks to the leadership of the board, senior management seriously implemented the resolutions around the objectives and tasks set by the board, strengthened management and risk control, promoted specialization, accelerated innovation and development, reached objectives and tasks of every year through fruitful hard work. Board of supervisors performed supervisory functions and strengthened the effectiveness of supervision, which made corporate governance become increasingly standardized. In addition, the Bank’s market-oriented mechanism and systems operated on the right track which ensured the proactiveness of client managers, tellers and management staff, kept the Bank’s steady and fast development.
2.The Bank was under rapid development with good indicators and growth potential.
6 Founded ten years in 2011, the Bank realized the objective of “ten years, one hundred times”. Assets scale, tax and profits were one hundred times of those at the beginning of establishment of the Bank. Meanwhile, rural financial works were getting new breakthrough: the total assets of Sichuan Yilong Huimin Village Bank broke though 1 billion. Shanghai Jinshan Huimin Village Bank with 300 million of register capital has started businesses at February 9, 2012.
All the supervisory indicators kept excellence. Loan provision rate and leverage rate, which reached the order of Basel 3 three years ahead.
3. The Bank deepened specialization and business transformation construction works and effectiveness gradually appeared.
The strategy of specialization and professionalization is crucial to create a unique modern boutique bank, the specialization must be fully implemented not only on inter-banking business, intermediary business but also on international business and other business lines; In 2011, professional lines had been adjusted and merged, therefore, the basic structure of nine professional lines had been built such as small business finance, auto finance , real estate finance, trade finance, agricultural finance , public finance etc.
SMEs banking, automotive finance banking, trade and finance banking and real estate finance business lines adopted a made-to-fit industrial chain marketing measure, optimized the products, service work flow and refined related rules and regulations, set a role to other professional lines. Four departments stood out from the rest in the head office, which are intermediary business department, inter-bank department, bond investment department and IT supporting department. The first three departments contributed a lot to the profit and capital scale of the Bank which optimized the revenue structure of the Bank.
4. The Bank further implemented human resource strategy.
First, the Bank preliminary established the human resource strategy throughout the departments and branches of the Bank. Second, the Bank remedied and modified the regulations and rules of recruitment, training and HR management. Third, the Bank refined incentives and regulation mechanism which connected the development of the Bank to growth and welfare of staff. Fourth, the Bank enlarged recruitment and established innovation elite pool to support business transformation.
5. The Bank upgraded risk officer system and improved risk management and control.
First, full coverage risk officer system and team building was established; second, the Bank reinforced risk control including liquidity risk, new products and new financial services to ensured steady operation; Third, IT application control system was updated and improved.
Chapter 5 Risk Management
Ⅰ. The compliance of main regulatory indicators
7 As at December 31, 2011, the capital adequacy ratio of the Bank was 16.65%, the assets liquidity ratio was 81.95%, the inter-bank borrowing was 132.32 million Yuan, the inter-bank lending was 50 million Yuan, and each indicator of the Bank was fully complied with the regulations of supervision authorities.
Ⅱ. Major industrial distribution of loan (Top 5)
Industry Proportion (%) Wholesale and retailing 31.29 Manufacturing 17.09 Personal loan 13.77 Realty business 9.84 Construction Industry 6.01
Ⅲ. Top 10 loan clients
Loan Balance Proportion No. Name (million Yuan) (%) 1 Nanchong Jinjiang tourism development Co., Ltd 113.00 0.73 Nanchong Gaoping District state-owned property 2 98.00 0.63 investment & operation Co., Ltd Nanchong Shunqing District town and country 3 90.00 0.58 construction Co., Ltd Dujiangyan Hongdu Shuian Hotel administration 4 85.00 0.55 Co., Ltd 5 Sichuan Yonghe Industry Co., Ltd 80.00 0.52 6 Chengdu Shengxin real estate development Co., Ltd 70.00 0.45 7 Sichuan zhengxi investment industry Co., Ltd 67.00 0.43 Nanchong Jialing District state-owned property 8 63.00 0.41 operation & investment administration Co., Ltd 9 Nanchong Yintai Hotel Co., Ltd 60.00 0.39 Nanchong Gaoping District Lidong Land Reserve 10 60.00 0.39 and Development Co., Ltd
Ⅳ. NPL data
NPL as of December 31, 2011 (million Yuan) Proportion (%) 66.92 0.42
Ⅴ. For the opening balance, ending balance and movement of Loss Provisions and Write-off please refer to the table of Changes in Capital Loss Provision.
8 Ⅵ. Risk management of group clients
1. According to Group Clients Loan Risk Guide of CBRC, and the Group Clients Risk Management Operation Instruction of the Bank, the Group Clients database and the credit management information system were built up and updated promptly to control the credit of Group Clients effectively. By the end of 2011, the largest credit balance of group clients was 180 million Yuan equals to 4.69% of the Bank’s net capital.
Ⅶ. Main capital loss provision data
Changes in Capital Loss Provision
Unit: million Yuan
Write-off Drawn Beginning New Sold Other Ending Item capital by back balance provision assets change balance provision provision
Normal 175.55 130.14 - - - - 305.69 Loan Loss Program 89.20 3.29 4.28 - 0.16 - 88.37 Provision Special ------Total 264.75 133.43 4.28 - 0.16 - 394.06 Other Capital Loss 15.59 -3.03 - 1.45 - - 11.11 Provision Total 280.34 130.40 4.28 1.45 0.16 - 405.17
Ⅷ. The category, balance and proportion of debt assets
Balance Proportion (%) Category (million Yuan) House 17.99 98.90 Land - - Others 0.20 1.10 Total 18.19 100.00
Ⅸ. Investment in other business
By the end of 2011 the Bank invested 12,757.82 million in bonds and no other entities invested or owned by the Bank.
9 Ⅹ. Overdue loans management
Adopting the method of “quarterly alert, monthly feedback”, the Bank’s overdue loans achieved good results. By the end of 2011, total overdue loans were 64.56 million Yuan, with a ratio of 0.41%
Ⅺ. Major policies, measures and results of NPL management
1. The major policies and measures
First, the Bank formulated the Assessment Measures of Clearing and Management on Non-performing Loans of Nanchong City Commercial Bank and carried out the principle of “fixing the goal, limiting the balance, assessing branches’ quarterly performance based on their NPL management”.
Second, in the beginning of a calendar year, the Bank made a list of NPL and allocated the major clearing objects to each branch. Moreover, clearing NPL was a main and important task for presidents, vice presidents, chief risk officers and customer managers of branches and closely tied to everyone’s evaluation performance record.
Third, for those borrowers with low credit reputation or repayment willing, the Bank adopted law suit to clear NPLs up, at the same time, followed every step of the law suit procedure to increase its success rate.
Fourth, the Bank appealed for help from local government to solve some tough problems in NPL clearing. The Bank tried to handle issues left over with a long history due to administrational causes in various ways such as clearing, revitalizing assets and assets replacement.
Fifth, a non-performing loan clearing team has been grouped up by those professional lawyers and clerks with rich related experience which directly reported to risk management department of head bank. The team is specialized in cracking “hard nuts”, they integrated the uncollectible loans from branch and sub-branch banks and cope with each case efficiently with professional knowledge and broad social networks.
Sixth, the Bank ensured high quality of new loans comparatively. The Bank has understood that to improve the assets quality, clearing NPLs and ensuring the quality of new loans should go hand in hand. Therefore, the Bank has formulated Measures on Strengthening Management on Credit Loans. The whole work flow of loan business have been regulated and controlled, such as authorizing, processing, applicant’s qualification, credit rating, the rights of loan approval committee, after-loan examining, documentation management and so forth. In addition, the Bank tailored authorization degree according to management level of branch and sub-branch client manager team. As a result, the Bank perfected regulations and made a great shift in mind in loan management. The Bank took severe claim approaches to relevant responsible persons for NPLs added according to Non-performing Loans Claim Management Procedures which effectively reduce non-performing loans. In practical work, supervisory departments comply with regulations of CBRC internal rules according to the principle of “proper execution” which ensured high quality of new loans.
10 2. The results of NPL management
With hard work of the Bank, 23.97 million of NPL was taken back already and 4.28 million of NPL was written off already in 2011. By the end of 2011, the NPL balance was 66.92 million with a ratio of 0.42%.
Ⅻ. Main off-balance-sheet items and risk management
The main off-balance-sheet items of the Bank include interest receivable, guarantee letter and bank acceptance.
1. The interest receivable on off -balance sheet was 39.66 million Yuan, including 8.77 million Yuan from standard loans. The Bank actively called its return. If receivable interest over due a long period of time and identified as not to be received through strict identification procedure, it was timely written off.
2. The guarantee letter was 321.79 million Yuan. Without permission, any branch can't carry out guarantee business, which ensured compliance and risk-avoided of guarantee business.
3. The Bank acceptance was 3,968.86 million Yuan. The Bank formulated the Rules on Bank Acceptance Business which regulated all process and management of bank acceptance business, such as customers’ application, examining, approving and discounting. The Bank took much care of the trade background and the deadline of the draft and strictly forbad violation or bank’s cash advance.
Chapter 6 Shareholders and Related Party Transactions
Ⅰ. Total shares and capital structure on the basis of sending 0.3 billion shares to all the shareholders with the ratio of 1:1 , the bank raised direct 401.21 million shares to domestic institutions. June 24, 2011,Sichuan Banking Regulatory Bureau approved that the Bank can change registered capital to 1,001.21 million Yuan. By the end of 2011, the amount of share capital reached 1,001.21 million Yuan.
Ⅱ. Shareholders holding 5% shares (including 5%) or above
Name of shareholders Shares (1 share) Proportion (%) Sichuan Mingyu Group Co., Ltd 99,940,000 9.98 Nanchong Lianyin Trade Co., Ltd 99,940,000 9.98 Chengdu Yunji Real Estate Development Co., 99,460,000 9.98 Ltd DEG 60,000,000 6.00 Sichuan Jiaxin Trade Co., Ltd 59,940,000 5.99
11 Ⅲ. Related Parties with transactions
Name of Related Parties Relation
1 Sichuan Mingyu Group Co., Ltd Shareholder
2 Sichuan Jiaxin Trade Co., Ltd Shareholder
3 Sichuan Lianyin Industry Co., Ltd Shareholder
Chengdu Yunji Real Estate Development Co., 4 Shareholder Ltd
5 Nanchong Yuhao Golden Bay Hotel Co., Ltd Shareholder’s holding company
6 Chengdu Yuhao Hotel Co., Ltd Shareholder’s holding company
Sichuan Mingyu Real Estate Development 7 Shareholder’s holding company Co., Ltd Nanchong Yuhao Property Management Co., 8 Shareholder’s holding company Ltd
9 Sichuan Estin Hotel Management Co., Ltd Shareholder’s holding company
Ⅳ.Material related party great transactions
By the end of 2011, there was no great transaction of related parties
Chapter 7 Information on Directors, Supervisors, Senior
Management and Staff
Ⅰ. Directors, Supervisors and Senior Management
1. Current Directors
Name Gender Age Position Tenure Huang Guangwei Male 47 Chairman April 2009 – April 2012 Xing Min Male 49 Director April 2009 – April 2012 Carsten Steffan Male 46 Director April 2009 – April 2012 Du Jun Male 47 Director April 2009 – April 2012 Zhang Jianming Male 48 Director April 2009 – April 2012 Zhang Bin Male 51 Director April 2009 – April 2012 Wang Renguo Male 39 Director April 2009 – April 2012
12 Tian Jian Male 59 Director April 2009 – April 2012 Zhu Zengjin Male 47 Director April 2009 – April 2012 Hu Xiaoping Male 61 Director April 2009 – April 2012 Huang Shunlai Male 47 Director April 2009 – April 2012 Xiong Zhijian Male 49 Director April 2009 – April 2012 Hao Mingwei Male 59 Director April 2009 – April 2012 Han Kun Male 45 Director April 2009 – April 2012 Huang Yi Male 43 Director April 2009 – April 2012
2. Current Supervisor
Name Gender Age Position Tenure Yuan Yuan Male 49 Chairman April 2009 – April 2012 Yang Gangcai Male 66 Supervisor April 2009 – April 2012 Ba Shusong Male 42 Supervisor April 2009 – April 2012 Yao Hong Female 44 Supervisor April 2009 – April 2012 Li Kelun Male 56 Supervisor April 2009 – April 2012
3. Current Senior management
Name Gender Age Position Tenure Xing Min Male 49 President April 2009 – April 2012 Han Kun Male 45 Chief Risk Officer April 2009 – April 2012 Dong Ke Male 47 Vice President April 2009 – April 2012 Jian Ting Female 36 Secretary to BoD April 2009 – April 2012 Tang Lun Male 47 Assistant President April 2009 – April 2012 Yang Bing Male 36 Assistant President April 2009 – April 2012 Guo Yue Male 35 CFO April 2009 – April 2012
Ⅱ. Staff Information
Up to the end of the year of 2011, NCCB had 861 staff, with an average age of 32 among them: 357 were male accounting for 41.46% of the total, 504 were female accounting for 58.54%; 221 people had professional technical title accounting for 25.67%; 4 had PhD degree accounting for 0.46%; 47 had Master degree accounting for 5.46%; 540 employees had college education accounting for 62.72%; 218 had junior college education accounting for 25.32%; 40 had an educational background of secondary technical school accounting for 4.64%; 12 were with senior high school education accounting for 1.4%.
13 Chapter 8 Corporate Governance
Ⅰ. The Brief introduction of Corporate Structure
The Board of Directors fully implemented its function as a central decision-maker of the Bank and made efforts in its fast and healthy development. In 2011, the Board held 4 Board Meetings and convened 1 Shareholders’ General Meetings. The Board enhanced communication between shareholders, directors and senior management and improved working methods. All directors fulfilled their responsibilities in real earnest and proactively participated in deliberating proposals at meetings on the following topics: development strategy, business plan, corporate governance, risk management, reforms and innovation, shareholders’ rights protection and information disclosure. Under the leadership of the Board, the senior management strictly complied with the leadership of board meetings, earnestly worked in business developing and risk controlling and detail management, and fulfilled the tasks well.
In conclusion, in 2011 the Bank improved the meeting procedures and details of managing board and special committee, which kept every department operating effectively in compliance with related regulations.
Ⅱ The Shareholders’ Meeting
The Annual Shareholders’ General Meeting 2010 was convened on April 8, 2011 and approved Work Report of the Board of Directors 2010; Work Report of the Supervisory Board 2010; Financial Report of NCCB 2010; Financial Budget of NCCB 2011;Proposal of Profit Distribution of NCCB 2010; Proposal of Rewarding Directors, Supervisors, Senior Management and Staff of NCCB 2010; Proposal of changing the provisions ; Proposal of authorizing donation ;Report of increasing the registered capital and shares of NCCB 2010 ;Increasing Investment to Sichuan Yilong Huimin loan company ; Proposal of setting up Village Bank in shanghai ; Report on Performance Evaluation of Directors, Supervisors and Senior Management 2010; Reported the Affiliated Transaction Report of NCCB 2010; Work Report of Independent Directors of NCCB 2010. Ⅲ. The Meeting of Board of Directors The 11th Meeting of Third Board of Directors was convened on March 12, 2011 and the following proposals were approved: Work Report of the Board of Directors 2010; Work Report of the Senior management of NCCB 2010; Financial Report of NCCB 2010; Proposal of Profit Distribution of NCCB 2010; Proposal of Rewarding Directors, Supervisors, Senior Management and Staff of NCCB 2010; Proposal of qualification examination to Shareholders who joined Capital Increase Plan of NCCB 2010; Proposal of change the provisions ; Report on Performance Evaluation of Directors and Senior Management 2010; Proposal of setting up branches; Proposal of donation authorized ; Information Disclosure of NCCB 2010; Proposal of Convening the Annual Shareholders’ General Meeting of NCCB 2010 The Audit Report of NCCB 2010, Work Report of Independent Directors of NCCB 2010, Affiliated Transaction Report of NCCB and the notice of strengthening management and internal control from Sichuan Banking Regulatory Bureau were reported on this meeting.
14 The 12th Meeting of Third Board of Directors was convened on June 16, 2011 and the following proposals were approved: Proposal of Further standardizing the specialized committee structure of the Board of Directors; Interim measures for Medium-and long-term loan installments; Interim measures for fair value valuation of financial instruments The Report of completion of Capital Increase Plan, Work Report of NCCB in January-June 2011;Report of new regulatory standards implemented by CBRC were reported on this meeting. The 13th Meeting of Third Board of Directors was convened on October 20, 2011 and the following proposals were approved: Proposal of setting up village Banks in 5 years; Proposal of increasing operating expenses budget in 2011. The 14th Meeting of Third Board of Directors was convened on December 17, 2011 and the following proposals were approved: Business Plan of NCCB 2012; plan of achieving Supervisory Indicators in 2012-2016; Proposal of setting up Information Management Committee; Proposal of changing internal audit department manager; Work Report of NCCB in January-November 2011; Report of the implementation of< the standards of Statistical Data Quality about banking regulation>were reported on this meeting.
Ⅳ. The Meeting of Supervisory Board
The 7th Meeting of Third Supervisory Board of NCCB was convened on March 12, 2011, approved Work Report of the Supervisory Board 2010;Proposal of Report on Performance Evaluation of Supervisory Board 2010 and attended the 11th Meeting of Third Board of Directors as non-voters.
The 8th Meeting of Third Supervisory Board of NCCB was convened on June 16, 2011 and attended the 12th Meeting of Third Board of Directors as non-voters.
The 9th Meeting of Third Supervisory Board of NCCB was convened on December 17, 2011 and attended the 14th Meeting of Third Board of Directors as non-voters.
The 10th Meeting of Third Supervisory Board of NCCB was convened on December 31, 2011 and approved the proposal of correct measures on management regulations of the Supervisory Board and working plans in 2012.
Chapter 9 Report of Supervisory Board
Ⅰ. Fulfilling its supervisory obligation In 2011 the Supervisory Board fulfilled its obligation of supervising in real earnest. The Supervisory Board held 4 meetings and attended 3 Board Meetings in 2011.
Ⅱ. Strengthening supervision and inspection to the operation of the Bank ① Strengthening supervision of the formulation of the internal control system to perfect various internal control systems. Firstly, the Bank explored the thoughts and methods of Portfolio risk, Secondly, the Bank greatly improved its risk management systems’ construction. Thirdly, the Bank strengthened the risk management on the new businesses
15 and products. Fourthly, the Bank refined the risk management on market risk and liquidity risk. Fifthly, the Bank controlled affiliated party transaction strictly. Sixthly, the Bank identified the NPL. ② Strengthening supervision to financial management in the aspects of 1) account operational procedure, 2) financial analysis and prediction , 3) financial system renovation, 4) settlement management and organizing quarterly exam and check to branches. ③ Strengthening supervision to internal audit to 1) senior management and people leaving their position; 2) Operational systems such as capital payment, finance, credit business and IT project management, decoration project of business offices; 3)the branches including Chengdu, Guiyang and other management sub-branches; 4)daily supervision. Errors have been found and handled in time which abolished accounting risks and reduced financial loss.
Ⅲ. Strengthening supervision and inspection to senior management ① Supervising the Board of Directors and Senior Management Team: The supervisors attended the board meeting to submit the detail opinion on proposals and accountability advices to the Board of Directors and Senior Management Team.
②Supervising operational statement: the Supervisory Board read all the report sheets, reports and related statement of the bank and signed its opinions, ensuring to understand development status and operation performance of the Bank timely and concerned about risk control. ③ The Supervisory Board attended important operational meetings of the Bank and supervised the operation of new business. ④The Supervisory Board supervised behaviors and actions of senior management and made sure that there was no one who abused their powers.
Ⅳ.Evaluation on the work performance of the board of directors and management ① The work performance of the directors Since the form of the third board of directors at the April of 2009, with the philosophy of “taking job as career”, “liberate ideas, advocate hardworking, pursue success”, the Board has led the management team and staff of the Bank to emancipate our minds, innovative our ideas and actively promote the reform and development of NCCB. Meanwhile, the Board has done a strenuous but fruitful work in introducing capital and bringing wise ideas, promoting corporate governance reform, improving the internal control, creating a characteristic and excellent bank, trying rural finance task and making cross-regional developments. ② The work performance of senior management Under correct guide of the Board and Chairman, in 2011, the staff of the Bank cooperated with each other, worked very hard and finally fulfilled the business targets. Achievement of senior management included: 1) implementing the policy of business transformation; 2) realized the operational goals ; 3) implementing the policy of risk management; and 4) strengthening financial accounting and management. The total asset of the Bank was 75145 million Yuan, with a 58748 million Yuan increase compared to the end of 2008,
16 increased 358.29%; the total deposit (including interbank deposit) was 68826 million, 55653 million more than the end of 2008, 422.48% increased; the total loan was 15393 million, 8961 million more than the end of 2008, 139.32% increased; the owner’s equities reached to 3653 million, 2919 million more than 2008; the capital adequacy ratio was 16.65%, the average ROE(rate of return on common stockholders’ equity)was 40.20%, the average ROA(return on assets)was 1.75%; the provision coverage was 581.89%; realized the pre-tax profit before raising provisions was 1293 million. ③ The directors and senior management cooperated with the Supervisory Board and received the supervision and inspection voluntarily.
Ⅴ.General evaluation The Supervisory Board believed what the Bank has done in past three years was complied with laws and regulations, directors and senior management fulfilled their responsibilities with real earnest and the Bank did protect the rights of shareholders and deposit customers.
Chapter 10 Significant Events
1. Major events regarding lawsuits, arbitration or criminal cases in the report period
By the end of 2011, all the unfinished cases entailed amount 33.73 million. Big cases refer to:
NO. The accused Principal (million Yuan)
1 Sichuan Ruifeichi Trade Co.,Ltd,Sichuan Huaermei 5.8 Decorative Material Co.,Ltd
2 Sichuan Tianyuan Science and Technology 5 Investment Co., Ltd
3 Nanchong Jitai property Company 1.783
Total 12.58
There were no acquisitions, merger during the report period.，Assets selling refer to:
17 Unit: Yuan
No. Address Paper value Audition price Floor 9,Qingxi bridgehead 1 59,386.71 128,000.00 Zhoukou Town Floor 9,Qngxi bridgehead 2 59,386.71 132,000.00 Zhoukou Town Floor 7,Jianshe Middle Road 3 83,260.50 200,000.00 Zhoukou Town No 5,Floor 1,Real estate market 4 Building , Yangjia Lane Shunqing 461,800.77 910,000.00 District No 2 ,Floor 2,Unit 4 Building 4, 5 No136 Changsheng Lane, Shunqing 650,000.00 District Appendix 1, No 32, Floor 1, 6 Changsheng Lane, Shunqing 1,013,337.28 165,000.00 District Appendix 6, No 32, Floor 1, 7 Changsheng Lane, Shunqing 340,000.00 District No13 ,Floor 1, Building 3, No33 8 Jiefang Road, Shunqing District No14 ,Floor 1, Building 3, No33 9 Jiefang Road, Shunqing District No15 ,Floor 1, Building 3, No33 10 Jiefang Road, Shunqing District No16 ,Floor 1, Building 3, No33 11 Jiefang Road, Shunqing District No17 ,Floor 1, Building 3, No33 12 Jiefang Road, Shunqing District No18 ,Floor 1, Building 3, No33 13 Jiefang Road, Shunqing District 2,500,222.39 2,605,000.00 No19 ,Floor 1, Building 3, No33 14 Jiefang Road, Shunqing District No20 ,Floor 1, Building 3, No33 15 Jiefang Road, Shunqing District No21 ,Floor 1, Building 3, No33 16 Jiefang Road, Shunqing District No22 ,Floor 1, Building 3, No33 17 Jiefang Road, Shunqing District No23 ,Floor 1, Building 3, No33 18 Jiefang Road, Shunqing District No24 ,Floor 1, Building 3, No33 19 Jiefang Road, Shunqing District 18 No25 ,Floor 1, Building 3, No33 20 Jiefang Road, Shunqing District No13 ,Floor 1, Building 4, No33 21 Jiefang Road, Shunqing District No14 ,Floor 1, Building 4, No33 22 Jiefang Road, Shunqing District No15 ,Floor 1, Building 4, No33 23 Jiefang Road, Shunqing District No16 ,Floor 1, Building 4, No33 24 Jiefang Road, Shunqing District No17 ,Floor 1, Building 4, No33 25 Jiefang Road, Shunqing District No18 ,Floor 1, Building 4, No33 26 Jiefang Road, Shunqing District No19 ,Floor 1, Building 4, No33 27 Jiefang Road, Shunqing District No20 ,Floor 1, Building 4, No33 28 Jiefang Road, Shunqing District No21 ,Floor 1, Building 4, No33 29 Jiefang Road, Shunqing District No22 ,Floor 1, Building 4, No33 30 Jiefang Road, Shunqing District No23 ,Floor 1, Building 4, No33 31 Jiefang Road, Shunqing District No24 ,Floor 1, Building 4, No33 32 Jiefang Road, Shunqing District No25 ,Floor 1, Building 4, No33 33 Jiefang Road, Shunqing District Total 4,177,394.36 5,130,000.00
3. There were no great managing events such as capital trusteeship, guarantee, acceptance and trusteeship during the reporting period.
4 There were no punishment records from CBRC or judicial department of the Bank and its directors, management members.
Chapter 11 Financial Report
INDEPENDENT AUDITORS’ REPORT
19 TO the Shareholders of Nanchong Commercial Bank Co., Ltd:
ACPA (2012) JR NO.030026
We have audited the accompanying financial statements of Nanchong Commercial Bank Co., Ltd (“ the bank”) and its subsidiaries, which comprise the consolidated statement of financial position and the statement of financial position as at 31 December 2011, and the consolidated statement of comprehensive income and the statement of comprehensive income, consolidated statement of changes in equity and statement of changes in equity , consolidated statement of cash flows and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Management’s responsibility for the financial statements
The management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
20 financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of the Bank and its subsidiaries as of 31 December 2011, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
Ascenda CPA Registered in P. R. China: Li Bin
Certified Public Accountants, Ltd. CPA Registered in P. R. China: Shi Yijian
Beijing · P. R. China March 11, 2012
21 Consolidated Statement of Comprehensive Income
By: Nanchong Commercial Bank Co.,Ltd For the year ended 31 December 2011 RMB '000
Items 2011 2010
Interest income 2,976,115 1,366,759
Interest expense (1,522,690) (381,993)
Net interest income 1,453,425 984,766
Fee and commission income 354,738 127,813
Fee and commission expense (53,928) (5,821)
Net fee and commission income 300,810 121,992
Net loss arising from financial instruments designated at fair value through profit and 29 (3,080) loss
Net gain/(loss) arising from foreign exchange 521 146
Other operating income 2,263 836
Non-interest income/(expense) 303,623 119,894
Operating income 1,757,048 1,104,660
Operating expenses (556,010) (374,055)
Operating profit before impairment losses 1,201,038 730,605
Impairment losses (131,197) (93,026)
Net gain/(loss) in investments 252,009 50,910
Non-operating income 11,440 11,920
Non-operating expenses (2,740) (610)
Profit before income tax 1,330,550 699,799
Income tax (272,518) (127,415)
22 Net profit for the year 1,058,032 572,384
Other comprehensive income for the year Net gain/(loss) arising from available-for-sale financial assets designated at fair 20,381 (15,893) value through profit and loss Income tax relating to components of other comprehensive income (5,095) 3,973
Total 0ther comprehensive income for the year 15,286 (11,920)
Total comprehensive income for the year 1,073,318 560,464
Profit attributable to
Owners of the Company 1,042,838 567,091
Non-controlling interests 15,194 5,293
Total comprehensive income attributable to
Owners of the Company 1,058,124 555,171
Non-controlling interests 15,194 5,293
Earnings per share
Basic 1.25 0.95
Diluted 1.25 0.95
23 Consolidated Statement of Financial Position
By: Nanchong Commercial Bank Co.,Ltd For the year ended 31 December 2011 RMB '000
Assets 2011-12-31 2010-12-31
Assets Cash and balances with central banks 9,118,116 6,506,494 Cash and balances with banks and other financial institutions 28,244,429 5,139,490 Loans to other banks and financial institutions 50,000 25,000 Trading assets 269,559 144,752 Advances to customers and other accounts 26,539,899 21,357,857 Available-for-sale financial assets 844,073 2,455,926 Held-to-maturity investments 8,364,188 7,187,202 Investment properties 9,736 10,639 Fixed assets 130,478 85,747 Intangible assets 34,018 34,754 Deferred income tax assets 56,508 34,450 Other assets 2,093,548 131,015 Total assets 75,754,552 43,113,326
Liabilities 2011-12-31 2010-12-31
Borrowings from central banks 50,000 Deposits from banks and other financial institutions 24,410,217 9,722,063 Placements from banks and other financial institutions 132,319 Deposits from customers 44,911,946 27,940,176 Current income tax liabilities 102,285 58,937 Deferred income tax liabilities 14,761 10,942 Other liabilities 2,425,206 3,888,145 Total liabilities 72,046,734 41,620,263
24 Equity 2011-12-31 2010-12-31
Share capital 1,001,210 600,000 Capital surplus 809,701 7,974 Other reserves 611,939 303,703 Retained Profit 1,250,066 560,178 Equity attributable to owners of the Compan 3,672,916 1,471,855 Non-controlling interests 34,902 21,208 Total equity 3,707,818 1,493,063 Total liabilities and equity 75,754,552 43,113,326
25 Consolidated Statement of Changes in Equity
By: Nanchong Commercial Bank Co.,Ltd For the year ended 31 December 2011 RMB '000
Other reserves Share Share Regulatory Investment Retained Non-controlling Total Items Regulatory Investment capital premium Surplus reserve general revaluation Total Profit interests equity reserve reserve
As at 1st 300,000 7,974 72,814 123,396 7,695 203,905 434,939 16,365 963,183 January, 2010
Dividends (30,000) (450) (30,450)
Net Profit /(loss) 567,091 5,293 572,384 for the year Other comprehensive (11,920) (11,920) (11,920) income for the year
26 Net gain on available-for-sale (11,920) (11,920) (11,920) financial assets Total comprehensive (11,920) (11,920) 567,091 5,293 560,464 income for the year
Transferred to 56,215 55,503 111,718 (111,718) reserves Other (134) (134) Internal carry-over of 300,000 (300,000) sharehoulders' equity
As at 31st 600,000 7,974 129,029 178,899 (4,225) 303,703 560,178 21,208 1,493,063 December, 2010
Dividends (60,000) (1,500) (61,500)
Net Profit /(loss) 1,042,838 15,194 1,058,032 for the year Other 15,286 15,286 15,286 comprehensive
27 income for the year Net gain on available-for-sale 15,286 15,286 15,286 financial assets Total comprehensive 15,286 15,286 1,042,838 15,194 1,073,318 income for the year
Transferred to 102,879 190,071 292,950 (292,950) reserves Other 0 Internal carry-over of 0 sharehoulders' equity Issue of ordinary 401,210 801,727 shares
As at 31st 1,001,210 809,701 231,908 368,970 11,061 611,939 1,250,066 34,902 3,707,818 December, 2011
28 Consolidated Cash Flow Statement
By: Nanchong Commercial Bank Co.,Ltd RMB '000
Items 2011 2010
Cash flows from operating activities: Net profit before taxation: 1,330,550 699,799 Adjustments for: Impairment of loans and advances to customers 131,197 95,438 Write-back of due from banks and financial institutions Reversal of impairment of other receivables Impairment of investment securities (2,412) Depreciation of property and equipment 14,403 12,489 Reversal of revaluation deficit of property and equipment Amortization of prepaid staff subsidies Amortization of land use rights 710 2,013 Amortization of other assets 16,464 3,865 Gains less losses arising from de-recognition of investment securities (236,815) (50,910) Gains on disposal of fixed assets (208) (69) Amortization of investment property 903 903 Accrued interest expense on term debt Fee on debt issue Net increase in mandatory reserve deposits (1,923,111) (958,608) Net increase in due from other banks and financial institutions (3,518,991) (150,231) Net increase in financial assets held for trading 1,029,078 (7,320,560) Net increase in loans and advances to customers (2,922,714) (2,927,424) Net increase in other assets (2,483,357) (116,937) Net increase in due to other banks and financial institutions 14,829,472 6,827,281 Net (decrease)/increase in financial liabilities held for trading (1,321,493) (200,000) Net increase in due to customers 16,971,770 10,672,907 Net increase in other liabilities 932,043 94,185 Net increase in business tax payable 33,282 7,150 Income tax paid (253,653) (126,128)
29 Net cash from operating activities 22,629,530 6,562,751
Cash flows from investing activities Acquisition of subsidiary, net of cash acquired (165,000) (8,940) Purchase of investment securities (22,022,927) (11,751,740) Disposal or redemption of investment securities 19,769,184 8,518,180 Acquisition of intangible assets Purchase of land use rights Purchase of property and equipment (65,502) (44,583) Disposal of property and equipment 208 528 Net cash from/(used in) investing activities (2,484,037) (3,286,555)
Cash flows from financing activities Issue of shares 178,303 1,024,634.00 Debts issued Fee on debt issue Interest paid on debt Dividends paid (48,659) (26,533) Minority interest-capital contribution Dividends paid to minority interest (1,500) (450) Net cash (used in)/from financing activities 128,144 997,651
Effect of exchange rate changes on cash and cash equivalents 521 146
Net increase in cash and cash equivalents 20,274,158 4,273,993 Cash and cash equivalents at 1st January 8,990,353 4,716,360 Cash and cash equivalents at 31st December 29,264,511 8,990,353 Supplementary Information Interest received 2,214,093 977,893 Interest paid 436,401 248,753
30