l l t A R Annu Repo 2019 HUA XIA BANK CO., LIMITED 2019 ANNUAL REPOrt This report is printed on environmentally friendly paper is printed on environmentally This report Address: Hua Xia Bank Mansion, 22 Jianguomennei Street, Dongcheng District, Beijing Postal code: 100005 District, Beijing Postal Address: Hua Xia Bank Mansion, 22 Jianguomennei Street, Dongcheng 010-85239605 Fax: 010-85239938 010-85238570 Tel: www.hxb.com.cn Website: 2019 Annual Report CONTENTS 3 Message from Chairman 7 Message from President 8 Important Notice 9 Section I Definitions 10 Section II Company Profile 22 Section III Financial Highlights 27 Section IV Discussion and Analysis of Operations 74 Section V Significant Events 84 Section VI Details of Changes in Ordinary Shares and Shareholders 90 Section VII Preference Shares 94 Section VIII Directors, Supervisors, Senior Management Members, Other Employees and Branches 106 Section IX Corporate Governance 112 Section X Financial Statements 113 Section XI List of Documents for Inspection 114 Written Confirmation of the Annual Report 2019 by Directors, Supervisors and Senior Management Members of Hua Xia Bank Co., Limited 117 Auditor’s Report Chairman: Li Minji 2 2019 Annual Report MESSAGE FROM CHAIRMAN The year 2019 marked the 70th anniversary of the several consecutive years. We set up a steering institution founding of the People’s Republic of China, and saw the dedicated to poverty alleviation, put into practice the success of Hua Xia Bank’s fourth Party congress and requirements for precision poverty alleviation work relating defining of the development course. Guided by Xi Jinping to finance, strengthened financial services for poverty Thought on Socialism with Chinese Characteristics for a alleviation, elderly care, community, education, medical New Era, we thoroughly implemented the guiding principles care and other fields, and went all out to provide financial of the 19th National Party Congress, the second, third and support to poverty alleviation. fourth Plenary Sessions of the 19th CPC Central Committee, and the Central Economic Work Conference, and In 2019, we kept strategic focus and intensified our conscientiously carried out the decisions and plans made resolve for implementation. Only by keeping our strategic by the Beijing Municipal Government and CPC Beijing focus, can we get through the cyclical challenges. The Municipal Committee. Meanwhile, we followed the general year 2019 marked a critical year for us to implement the principle of seeking progress amid stability, adopted a new 2017-2020 Development Program of Hua Xia Bank (the vision for development, and maintained the nature of the “Development Program”). We braved waves and continued Bank as a national joint-stock commercial bank and a bank our efforts to develop into a colossal, competitive, for Beijing. We strengthened the implementation of the outstanding modern financial group with stable operations. development program, stepped up reform and innovation, We used financial technology (FinTech) to drive our intensified efforts to solve key problems, positively coped business development, made remarkable progress, and hit with the downward pressure on the economy, worked hard a record high in the number of newly built systems and that to improve the quality of idle assets, and achieved all of demands put into practice. We deepened transformation operational and development goals of the year. We ranked for retail business, and improved the retail finance service 56th and 67th in terms of tier-1 capital and total assets, system, of which the business percentage was gradually nine and three places higher than the previous year, on the rise. We kept improving the arrangements for respectively, rated by The Banker magazine of the United integrated business, enriching means of comprehensive Kingdom, and jumped 24 spots to the 265th position on services, and further expanded the channels and fields Forbes Global 2000. for cooperation with our counterparts in the sector. Hong Kong Branch obtained the license for establishment. We In 2019, we forged ahead, achieved progress amid continued our efforts to develop into a lead bank that stability, writing a brilliant chapter in our history. served the coordinated development of the Beijing-Tianjin- Hebei Region financially, and obtained approval for the In 2019, we provided services for the real economy establishment of Tongzhou and Xiongan Branches. Through and took on our social responsibility. Serving the real these efforts, we have basically set up a layout for regional economy is on top of the three financial priorities outlets, and improved our financial service capabilities. defined by the CPC Central Committee. It is not only a We strengthened our positioning as a financial service responsibility that a state-owned financial enterprise shall provider for small and medium-sized enterprises (SMEs), undertake, but also of fundamental significance for a served more private enterprises and micro and small-sized commercial bank to remain true to its founding mission enterprises while lowering the charge for them, widened and achieve steady development. In 2019, Hua Xia Bank, the scope and raised quality of services provided in key centering on the goal of building a moderately prosperous areas and weak links. We intensified our effort to build society in all respects, made every effort to keep stable the up a Beautiful Hua Xia through Green Finance, launched employment, the financial sector, foreign trade, foreign and the World Bank’s largest energy storage project, put into domestic investments, and expectations, and supported practice ESG principle, and was among the first to sign the national strategies for regional development. Our total The Principles for Responsible Banking of the UN. loans increased by 16.06%, and the balance of loans in three key regions, i.e., Beijing-Tianjin-Hebei region, the In 2019, we stepped up structural adjustment and Yangtze River Delta, and Guangdong-Hong Kong-Macao expanded development space. Only by going steadily, Greater Bay Area, was up 22.74%. Centering on the can we go afar. And we also aim to go safe and sound. structural reform of the supply end for finance, we focused We abided by the objective laws for commercial bank on major national projects, replacing old growth drivers development, took strong measures for structural with new ones, and optimizing resource allocation, and adjustment, and strengthened the foundation of gave priority to supporting strategic emerging industries, development. In terms of the credit structure, we focused strengthening areas of weakness for infrastructure, and on industrial adjustment and mainstream economy, and improving livelihood. We provided services for private stayed on track with the industrial development, revised enterprises and micro and small-sized enterprises (MSEs) our credit policies, imposed stricter corporate evaluation in an efficient manner, and strengthened allocation of standards, analyzed potential risks, and helped enterprises internal resources and special capital support. We satisfied in need. We intensified efforts to balance the high-risk all the needs for loans from qualified private enterprises non-performing loans and made the credit structure more and MSEs. We saw an increase of 18.27% in the balance reasonable. For the deposit structure, we kept increasing of loans for MSEs with the indicators that “the year-on-year the percentage of basic deposit and low-cost deposit, took growth rate of MSE loans with single credit of not more the holistic approach to elastic evaluation of basic deposit than RMB10 million shall not be lower than the average and rigid management of high-cost deposit, and saw the year-on-year growth rate of loans, and the number of loans fastest growth in general deposit in the recent six years. shall not be lower than that in the same period of last In terms of client structure, we gave priority to enlarge year”, and fulfilled the regulatory indicators for MSEs for the base of the “3-3-1-1” strategic customers and high- 3 quality retail customers. The cooperation coverage ratio Looking back, we have moved ahead amidst ups and for “3-3-1-1” customers on our white list increased by 2.13 downs. However, we became more determined. Following percentage points compared to the previous year, and the Party’s leadership, increasing support to the real premier wealth management, high-net-worth and private economy, firmly holding the line of defense, and adhering banking customers, by 26.35%, 27.68% and 19.60%, to the strategic guidance, reform and innovation provided respectively. us with hard-core strength to brave the waves and forge ahead, and inexhaustible power to foster a colossal, In 2019, we removed the capital constraints and competitive, outstanding modern financial group with stable strengthened the foundation of development. To remove the operations. We believe, as long as we incorporate Hua Xia capital constraints is a must for improving the capability of Bank’s spirit of unity and dedication in the new era into our serving the real economy and reinforce the foundation. In hard work, stay focused, unleash our vitality and bring into 2019, we made replenishing the core tier-1 capital a key full play our synergy, we will definitely achieve our goals. to tackle the bottlenecks in development, met challenges head on, worked with resolve and tenacity, and tried In 2020, we will make breakthroughs in innovation, every possible means to solve related problems. With the press ahead with continuous efforts and live each day to support from Beijing Municipal Government, CPC Beijing the fullest. Municipal Committee, State-owned Assets Supervision and Administration Commission of Beijing Municipal Success only comes through hard work. Impacted Government, regulatory authorities, our shareholders by COVID-19, the global economy expectations hit the and investors, we, following our success in replenishing historical low in 2020, and external factors influencing bank core tier-1 capital amounting to RMB29.2 billion through development are uncertain, making it difficult to solve our targeted additional issuance in 2018, achieved a RMB40 own problems.