2017 Annual Report 2017 HUA XIA BANK CO., LIMITED Annual Report HUA XIA BANK CO., LIMITED XIA BANK CO., HUA Address: Hua Xia Bank Mansion, 22 Jianguomennei Street, Dongcheng District, Beijing Postal code: 100005 Tel: 010-85238570 010-85239938 Fax: 010-85239605 Website: www.hxb.com.cn CONTENTS 3 Message from Chairman for the Annual Report 2017 5 Message from President for the Annual Report 2017 6 Important Notice 7 Section I Definitions 8 Section II Company Profile and Major Financial Indicators 13 Section III Business Overview 15 Section IV Discussion and Analysis of Operations 53 Section V Significant Events 63 Section VI Details of Changes in Ordinary Shares and Shareholders 68 Section VII Preference Shares 72 Section VIII Basic Information on Directors, Supervisors, Senior Management Members and Employees 85 Section IX Corporate Governance 90 Section X Financial Statements 91 Section XI List of Documents for Inspection 92 Written Confirmation of the Annual Report 2017 by Directors and Senior Management Members of Hua Xia Bank Co., Limited 94 Auditor’s Report 2017 Annual Report Hua Xia Bank Co., Limited Chairman of the Board: Li Minji 2 Message from Chairman for the Annual Report 2017 MESSAGE FROM CHAIRMAN FOR THE ANNUAL REPORT 2017 In 2017, Hua Xia Bank upheld the Party leadership and serves the coordinated development of the Beijing-Tianjin-Hebei earnestly studied the core messages conveyed at the 19th CPC region financially, and also a unique capital-based financial National Congress and the Xi Jinping Thought on Socialism institution that undertakes such major tasks as building Beijing with Chinese Characteristics for a New Era. On this basis, we into four centers, relieving it of functions non-essential to its role brought the leading role of our Party Committee into full play, and as the capital of China, making preparations for the upcoming focused our efforts on solving the acute problems confronting the Winter Olympics, and constructing Xiongan New Area. bank-wide development. As a result, our reform, development and Party building work achieved new progress and entered a new We will remain committed to improving profitability, chapter together. optimizing structure, reducing cost and increasing efficiency. By focusing our efforts on streamlining the asset-liability structure, 2017 was the first year of implementing our new four-year we will bring out more benefits from improved resource allocation, development program. Despite all sorts of challenges and make a good start from both ends of assets and liabilities, and pressures, our employees worked hard to overcame obstacles push forward the group-level asset-liability management with and secure concrete accomplishments with unprecedented the reasonably allocated resources. In the meantime, by refining enthusiasm. Thanks to their endeavors, we realized the targets the cost-income structure, we will increasing benefits through set by the Board of Directors on all fronts. Specifically, our generating more income and reducing cost. We will also seize deposits grew faster, asset-liability structure improved steadily, the strategic opportunities brought by the switch of drivers profitability performed as well as expected, and asset quality got for economic growth, the continuously growing consumption stabilized virtually. Besides, we pushed ahead with our strategy demand, and the transforming and upgrading consumption of developing into a financial service provider for SMEs, secured structure, to foster important engines that boost the income and robust business development, and created a sound corporate profit growth. While conducting meticulous cost management, image. To sum up, our work witnessed remarkable progress in all we will exercise tighter control over budget and input-output ratio respects. from such perspectives as operating cost control and adjustment of expenditure structure. Hereby, I would like to extend my great respect and sincere gratitude to the public, shareholders, senior management and We will stand firm with the market-based development entire staff on behalf of our Party Committee and the Board of roadmap and spare no effort to develop financial technologies. Directors. To this end, we will gather pace in refining our organizational structure so that the organizational reform can advance in a way In 2018, China starts to act on the guiding principles of needed by our effort toward market-based operations. At the the 19th CPC National Congress and Hua Xia Bank will see same time, we will develop financial technologies at a faster pace, its four-year development program carrying forward a new transform ourselves into digital bank as soon as possible, launch paragraph. In this context, we will boost our confidence and innovative products and services backed by financial technologies, take solid steps to propel our reform and development towards and do better in independent development and innovation with continuous new progress. technologies playing the leading role. By introducing the reform of With a firm grip of Xi Jinping Thought on Socialism with operating institution, we will explore a suitable development path Chinese Characteristics for a New Era, we will push forward with and operational pattern with innovative practices and experiments our Party building by taking a clear-cut stand. As a state-owned so that differences can be turned into features, thus boosting the joint-stock commercial bank, we must uphold the Party bank-wide business growth. leadership, and never cease to strengthen the Party building. The Spearheaded by the business philosophy that advocates efforts for leadership development, team recruitment and business lawful and compliant operations, we are dedicated to intensified growth will underpin our bank-wide reform and development drive internal control compliance management. While continuing to politically, ideologically, organizationally and intellectually. build the compliance culture, we push ahead with compliance We will take firm actions to advance the development education, focus our efforts on up-to-standard operations program and realize quality development. With respect to the and intensified management, carry out corporate governance four-year development program, we will attach equal importance and business operation according to laws and regulations in a to comprehensive promotion and breakthrough made in major compliant manner, and always refrain ourselves from overstepping areas, so that it can be executed firmly. To realize the coordinated the bottom lines marked out by regulators and markets. By development of scale, quality and benefit, we will make increasing advocating lawful operations and taking requirements for internal efforts to attract more customers, get funds from more low-cost control compliance management seriously, we will adopt concrete sources, keep a tighter reign on various risk, strictly control the actions to reinforce the internal control compliance management increase in non-performing assets, make sure such assets can as a response to the increasingly stringent regulation, in a bid to be disposed of as prescribed by applicable laws and regulations, create a secure, stable and orderly environment for our further enhance asset quality fundamentally, keep improving profitability, development. and become more capable of replenishing internal capital, withstanding risks, and pursuing sustainable development. We will resolutely return to the ultimate mission of delivering financial services. While taking serving the real economy and Chairman of the Board: Li Minji social development financially as our mission, we proactively weight more financial resources toward the major fields and weak links relating to the development of economy and society. At the same time, we work hard to develop into the lead bank that 3 2017 Annual Report Hua Xia Bank Co., Limited President: Zhang Jianhua 4 Message from President for the Annual Report 2017 MESSAGE FROM PRESIDENT FOR THE ANNUAL REPORT 2017 In 2017, Hua Xia Bank earnestly implemented the express for customers in the Beijing-Tianjin-Hebei region. requirements raised by the Party committees and governments of Customers who signed ETC contracts and Beijing-Tianjin-Hebei the state, Beijing and places where branches are located, acted coordination card holders grew rapidly in consequence. Besides, in strict compliance of regulatory policies, and resolutely executed we shored up efforts to contribute to the economic and social the decisions and deployments made by the Shareholders’ development of Beijing, cemented our partnerships with 16 General Meeting, the Board of Directors, the Board of Supervisors districts of the city and state-owned enterprises (SOEs) affiliated and the Party Committee of the Bank. In practice, we remained to the municipal government, created financial service agencies committed to serving the real economy and creating more value targeted at cultural and creative industries, got involved with the for customers and shareholders, and upheld the new development establishment of Beijing Municipal Technological and Innovative philosophy and the guiding principle of “striving for progress Foundation, and set up the mother fund for jointly operating while keeping stability”. We boosted our confidence and rose to investments and loans at Zhongguancun. By doing so, we offered tough challenges. In the process, every of our employees showed the financial services that integrated investment, financing and no hesitation no matter what