(A joint stock limited company incorporated in the People's Republic of China with limited liability) Stock Code: 1216 2018 INTERIM REPORT Content Corporate Information 2 Summary of Accounting Data and Financial Indicators 4 Management Discussion and Analysis 7 Changes in Share Capital and Information on Shareholders 72 Directors, Supervisors, Senior Management, and Employees 78 Corporate Governance 85 Important Events 88 Organizational Structure 92 Review Report to the Board of Directors 93 Consolidated Statement of Profit or Loss and Other Comprehensive Income 94 Consolidated Statement of Financial Position 96 Consolidated Statement of Changes in Equity 98 Consolidated Cash Flow Statement 100 Notes to the Unaudited Interim Financial Report 103 Unaudited Supplementary Financial Information 207 Definition of Terms 211 Corporate Information Legal Name of the Company Legal Representative 中原銀行股份有限公司* Mr. DOU Rongxing (abbreviated as 中原銀行) Authorized Representatives English Name of the Company Mr. JIA Tingyu ZHONGYUAN BANK CO., LTD.* Mr. ZHANG Ke (abbreviated as ZYBANK) Joint Company Secretaries Registered Office Mr. ZHANG Ke Zhongke Golden Tower, Ms. LEUNG Wing Han Sharon No. 23 Shangwu Waihuan Road, Zhengdong New District CBD, Unified Social Credit Code Zhengzhou, Henan Province, PRC 9141000031741675X6 Headquarters in China Financial Licence Institution Number Zhongke Golden Tower, B0615H241010001 No. 23 Shangwu Waihuan Road, Zhengdong New District CBD, Zhengzhou, Henan Province, PRC Auditors Principal Business Place in Hong Kong PRC Auditor 40/F, Sunlight Tower, KPMG Huazhen LLP No. 248 Queen’s Road East, 8/F, KPMG Tower, Wanchai, Hong Kong Oriental Plaza, 1 East Chang’an Avenue, Board of Directors Beijing, PRC Executive Directors: International Auditor Mr. DOU Rongxing (Chairperson) KPMG Mr. WANG Jiong 8/F, Prince’s Building, Mr. LI Yulin 10 Chater Road, Central, Mr. WEI Jie Hong Kong Non-Executive Directors: Legal Advisors Mr. LI Qiaocheng Mr. LI Xipeng Legal Advisor as to PRC Laws Mr. MI Hongjun King & Wood Mallesons 20/F, East Tower, Independent non-Executive Directors: World Financial Center, Ms. PANG Hong 1 Dongsanhuan Zhonglu, Mr. LI Hongchang Chaoyang District, Mr. JIA Tingyu Beijing, PRC Mr. CHAN Ngai Sang Kenny * Zhongyuan Bank Co., Ltd. is not an authorized institution within the meaning of the Hong Kong Banking Ordinance (Chapter 155 of the Laws of Hong Kong), not subject to the supervision of the Hong Kong Monetary Authority, and not authorized to carry on banking/ deposit-taking business in Hong Kong. 2 ZHONGYUAN BANK CO., LTD. 2018 INTERIM REPORT Corporate Information Legal Advisor as to Hong Kong Laws Paul Hastings 21-22/F, Bank of China Tower, 1 Garden Road, Hong Kong Compliance Advisor Central China International Capital Limited Room 3108, Two Exchange Square, 8 Connaught Place, Central, Hong Kong H Share Registrar Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong Trustee Agency for Domestic Shares China Securities Depository and Clearing Corporation Limited 23rd Floor, Tower B, Investment Square, No. 27 Financial Street, Xicheng District, Beijing Stock Code 1216 Investor’s Enquiry Website Address http://www.zybank.com.cn Contact Telephone No. (86) 371-85517898 Fax (86) 371-85517892 Email [email protected] ZHONGYUAN BANK CO., LTD. 3 2018 INTERIM REPORT Summary of Accounting Data and Financial Indicators For the six months Change over the ended June 30 corresponding period of 2018 2017 last year (in millions of RMB, except percentages) Rate of Operating results change (%) Net interest income 6,406.9 5,613.6 14.1 Net fee and commission income 643.1 276.1 132.9 Operating income 7,581.9 5,875.8 29.0 Operating expenses (2,875.7) (2,359.2) 21.9 Impairment losses on assets (2,288.6) (1,278.5) 79.0 Profit before tax 2,417.6 2,238.1 8.0 Net profit 1,888.3 1,747.6 8.1 Net profit attributable to equity shareholders of the Bank 1,851.5 1,718.5 7.7 Rate of Expressed in per share (in RMB) change (%) Net assets per share attributable to equity shareholders of the Bank 2.21 2.18 1.4 Earnings per share 0.09 0.10 (10.0) Profitability indicators (%) Change Return on average total assets(1) 0.71 0.78 (0.07) Return on average equity(2) 8.27 9.63 (1.36) Net interest spread(3) 2.48 2.63 (0.15) Net interest margin(4) 2.62 2.80 (0.18) Net fee and commission income to operating income 8.48 4.70 3.78 Cost-to-income ratio(5) 37.05 39.29 (2.24) 4 ZHONGYUAN BANK CO., LTD. 2018 INTERIM REPORT Summary of Accounting Data and Financial Indicators As of As of Change June 30, December 31, over the end 2018 2017 of last year (in millions of RMB, except percentages) Capital adequacy ratio indicators (%)(6) Change Calculated based on the Administrative Measures for the Capital of Commercial Banks Core tier-one capital adequacy ratio 10.74 12.15 (1.41) Tier-one capital adequacy ratio 10.75 12.16 (1.41) Capital adequacy ratio 11.59 13.15 (1.56) Total equity to total assets 8.28 8.83 (0.55) Asset quality indicators Change Non-performing loan ratio(7) 1.88 1.83 0.05 Allowance coverage ratio(8) 180.83 197.50 (16.67) Allowance to gross loan ratio(9) 3.40 3.62 (0.22) Other indicators (%) Change Loan-to-deposit ratio 64.59 64.85 (0.26) Rate of Scale indicators change (%) Total assets 545,036.3 521,989.8 4.4 Of which: net loans to customers 211,565.5 191,708.8 10.4 Total liabilities 499,922.2 475,899.2 5.0 Of which: deposits from customers 338,859.4 306,708.3 10.5 Share capital 20,075.0 20,075.0 – Equity attributable to shareholders of the Bank 44,265.6 45,268.9 (2.2) Non-controlling interests 848.5 821.7 3.3 Total equity 45,114.1 46,090.6 (2.1) ZHONGYUAN BANK CO., LTD. 5 2018 INTERIM REPORT Summary of Accounting Data and Financial Indicators Notes: (1) Represents net profit for the period as a percentage of average balance of total assets at the beginning and the end of the period. (2) Calculated based on the ‘‘Rules on the Preparation and Submission of Information Disclosed by Companies that Offer Securities to the Public No. 9 – Calculation and Disclosure of Return on Net Assets and Earnings Per Share’’ (Revision 2010) issued by China Securities Regulatory Commission. Represents net profit attributable to shareholders of the Bank for the period as a percentage of weighted average balance attributable to shareholders of the Bank for the period. (3) Calculated as the difference between the average yield on total interest-earning assets and the average cost of total interest-bearing liabilities, and based on daily average interest- earning assets and interest-bearing liabilities. (4) Calculated by dividing net interest income by the daily average balance of total interest- earning assets. (5) Calculated by dividing operating expenses after deduction of business tax and surcharges by operating income. (6) The Administrative Measures for the Capital of Commercial Banks was issued by China Banking and Insurance Regulatory Commission on June 7, 2012 and came into effect on January 1, 2013 by replacing the Administrative Measures for Capital Adequacy Ratio of Commercial Banks. (7) Calculated by dividing total non-performing loans and advances by gross loans and advances to customers. (8) Calculated by dividing allowance for impairment losses on loans and advances to customers by total non-performing loans. (9) Calculated by dividing allowance for impairment losses on loans and advances to customers by gross loans and advances to customers. 6 ZHONGYUAN BANK CO., LTD. 2018 INTERIM REPORT Management Discussion and Analysis 1. Past Economy and Financial Environment and Future Prospects During the Reporting Period, the world economy continued its upward trend since last year, and the positive signs of economic recovery were still clouded by many changes, but different economic entities had showed differentiations. Under the incentives of a series of policies such as tax cut policy, the United States maintained its moderate economic growth with core economic indicators continuing to remain positive, and have boosted strong business and consumers’ confidence. The growth of European economy had slowed down, but each data maintained in a good status. As affected by factors such as the appreciation of the U.S. dollar, weakened economic growth momentum of emerging economies, uprising economic risks, and the significant depreciation of currencies in countries such as Argentina and Turkey, the economic upheaval was intensified. Since March 2018, the trade war has become an important risk factor for international trade and global economic growth, which caused an adverse impact on world economic growth. During the Reporting Period, the PRC economy functioned well and was characterized by a steady growth, further advancement of structural adjustment, a switch from old to new driving forces, steadily improvement of the quality and efficiency, and good progress in high quality development of the economy. In the first half of 2018, the GDP was RMB41,896.1 billion, representing an increase of 6.8% and has been remained at the mid-high range of 6.7% to 6.9% for the 12 consecutive quarters. The national per capita consumption expenditure was RMB9,609, representing an increase of 8.8% as compared with the same period of last year. The fixed assets investment (excluding farmers) was RMB29,731.6 billion, representing an increase of 6.0% as compared with the same period of last year. The total import and export volume of goods was RMB14,122.7 billion, representing an increase of 7.9% as compared with the same period of last year.