CONTENTS 2 CHAPTER I CORPORATION INFORMATION 4 CHAPTER II HIGHLIGHTS OF ACCOUNTING DATA AND MAJOR FINANCIAL INDICATORS 7 CHAPTER III MANAGEMENT DISCUSSION AND ANALYSIS 51 CHAPTER IV CHANGES IN SHARE CAPITAL AND INFORMATION ON SHAREHOLDERS 60 CHAPTER V DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT, STAFF AND INSTITUTIONS 69 CHAPTER VI CORPORATE GOVERNANCE 73 CHAPTER VII SIGNIFICANT EVENTS 77 CHAPTER VIII ORGANIZATIONAL STRUCTURE 78 CHAPTER IX INTERIM FINANCIAL REPORT 171 DEFINITIONS * This interim report was prepared in both Chinese and English versions. Where there is discrepancy between the Chinese and English versions, the Chinese version shall prevail. CHAPTER I CORPORATE INFORMATION 1 BASIC INFORMATION Legal name in Chinese: 鄭州銀行股份有限公司1 (Abbreviation: 鄭州銀行) Legal name in English: Bank of Zhengzhou Co., Ltd.1 (Abbreviation: ZHENGZHOU BANK) Legal representative: Mr. WANG Tianyu Authorised representatives: Mr. WANG Tianyu, Mr. FU Chunqiao Board secretary: Mr. FU Chunqiao Joint company secretaries: Mr. FU Chunqiao, Ms. LEUNG Wing Han Sharon Stock exchange on which The Stock Exchange of Hong Kong Limited H Shares are listed: Stock abbreviation and Stock abbreviation: ZHENGZHOU BANK stock code: Stock code: 6196 Unified social credit code: 914100001699995779 Financial licence number: B1036H241010001 Registered address and 22 Shangwu Waihuan Road, Zhengdong New District, office address: Zhengzhou Henan Province, China Principal place of business 18/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong in Hong Kong: Contact address: 22 Shangwu Waihuan Road, Zhengdong New District, Zhengzhou Henan Province, China Tel: +86-0371-67009199 Fax: +86-0371-67009898 E-mail: [email protected] Website: www.zzbank.cn Auditor: KPMG PRC legal advisor: King & Wood Mallesons (Beijing) Hong Kong legal advisor: King & Wood Mallesons Compliance advisor: BOCOM International (Asia) Limited H Share Registrar: Computershare Hong Kong Investor Services Limited Trustee agency for China Securities Depository and Clearing Corporation Limited Domestic Shares: 1 The Bank 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 relevant banking/deposit-taking business in Hong Kong. 2 Bank of Zhengzhou Co., Ltd.* Interim Report 2016 CHAPTER I CORPORATE INFORMATION 2 COMPANY PROFILE The Bank of Zhengzhou is a regional joint stock commercial bank incorporated in November 1996 upon the approval by the People’s Bank of China, based on 48 city credit cooperatives in Zhengzhou City. The Bank was renamed as Zhengzhou Commercial Bank Co., Ltd. in February 2000 and Bank of Zhengzhou Co., Ltd. in 2009. The Bank holds a financial licence (number B1036H241010001) approved by China Banking Regulatory Commission and was authorised by the Administration for Industry and Commerce of Henan Province to obtain a corporate legal person business licence with creditability code 914100001699995779. As at June 30, 2016, Bank of Zhengzhou had total assets of RMB315.845 billion and established 8 branches and 126 front offices (including the operation division of the headquarters, operation divisions of the 8 branches and 117 sub-branches). It promoted the establishment of 4 county banks including Zhongmu Zhengyin County Bank Co., Ltd., Xinmi Zhengyin County Bank Co., Ltd., Yanling Zhengyin Country Bank Co., Ltd. and Fugou Zhengyin County Bank Co., Ltd as well as Henan Jiuding Financial Leasing Co., Ltd. Bank of Zhengzhou has long been focusing on the area of small and micro enterprises, serving the real economy and adhering to the development path with uniqueness and differentiation. Its operating and management ability continues to improve, its business develops steadily and soundly and its overall strength enhances steadily, receiving wide recognition from various sectors of the community. In the ranking of top 1,000 world banks by the UK magazine The Banker, the Bank ranked the 338th on Tier-1 capital, 102 places up year-on-year. The asset sacale ranked 327, 49 places up year-on-year. The Bank has been listed on top 500 world banks for the continuous three years. 3 MAJOR AWARDS IN THE FIRST HALF OF 2016 In January 2016, the Bank was awarded “Excellent Propriatary Institution Prize” by China Securities Depository and Clearing Co., Ltd in the listing of the China Bond Market. In April 2016, the Bank won the “Best City Commercial Bank Award” and “Most Influential Marketing Award” at the Local Currency Interbank Conference organized by National Interbank Funding Centre. In May 2016, the Bank received “the Best Financial Innovation Award” in an election “Financial Innovation Award in China” organized by the Chinese Banker magazine, Central Television and the Financial Research Institute of the Chinese Academy of Social Sciences in which our “Loans guaranteed by insurance”, “Golden Parasol” and “Ding Rong Yi” received “Top Ten Financial Product Innovation” award, “Top Ten Wealth Management Innovations” owned and “Top Ten Internet Finance Innovation” award respectively. Bank of Zhengzhou Co., Ltd.* Interim Report 2016 3 CHAPTER II HIGHLIGHTS OF ACCOUNTING DATA AND MAJOR FINANCIAL INDICATORS The financial information of the Bank set forth in this interim report is prepared on a combined basis in accordance with International Financial Reporting Standards (“IFRS”). Unless otherwise stated, such information is the data of the Bank and its subsidiaries (collectively the “Group”) denominated in RMB. In respect of the financial statements of the Bank prepared under the PRC GAAP (China Accounting Standards) and those under IFRS, there is no difference between the net profit attributable to shareholders for the Reporting Period ended June 30, 2016 and net profit attributable to shareholders as at the end of the Reporting Period. For the six months ended June 30, 2016 2015 2016 vs. 2015 (Expressed in millions of Renminbi, unless otherwise stated) Operating Results Rate of Change (%) Net interest income 3,940 3,285 19.94 Net fee and commission income 592 332 78.31 Operating income 4,702 3,852 22.07 Operating expenses (1,104) (920) 20.00 Impairment losses on assets (839) (672) 24.85 Profit before taxation 2,780 2,284 21.72 Net profit 2,131 1,751 21.70 Net profit attributable to equity shareholders of the Bank 2,122 1,751 21.19 Calculated on a per share basis (RMB) Rate of Change (%) Net assets per share attributable to equity shareholders of the Bank 3.65 3.46 5.49 Earnings per share 0.40 0.44 (9.09) Profitability Indicators (%) Change Return on average total assets(1) 1.47 1.63 (0.16) Return on average equity(2) 22.84 29.36 (6.52) Net interest spread(3) 2.59 2.95 (0.36) Net interest margin(4) 2.77 3.17 (0.40) Net fee and commission income to operating income 12.59 8.63 3.96 Cost-to-income ratio(5) 19.75 18.43 1.32 4 Bank of Zhengzhou Co., Ltd.* Interim Report 2016 CHAPTER II HIGHLIGHTS OF ACCOUNTING DATA AND MAJOR FINANCIAL INDICATORS As at End of first half of As at June 30, December 31, 2016 vs. end 2016 2015 of 2015 (Expressed in millions of Renminbi, unless otherwise stated) Capital adequacy ratio indicators(6) (%) Change Calculated based on Capital Administrative Measures Core Tier-one capital adequacy ratio 9.68 10.09 (0.41) Tier-one capital adequacy ratio 9.69 10.09 (0.40) Capital adequacy ratio 11.45 12.20 (0.75) Total equity to total assets 6.31 6.71 (0.40) Asset quality indicators (%) Change Non-performing loan ratio(7) 1.30 1.10 0.20 Allowance to non-performing loans(8) 209.89 258.55 (48.66) Allowance to total loans(9) 2.73 2.85 (0.12) Other indicator (%) Loan-to-deposit ratio 53.31 55.73 (2.42) Scale indicators Rate of Change (%) Total assets 315,845 265,623 18.91 Of which: Net loans and advances to customers 101,148 91,604 10.42 Total liabilities 295,913 247,799 19.42 Of which: deposits from customers 195,062 169,195 15.29 Share capital 5,322 5,142 3.50 Equity attributable to equity shareholders of the Bank 19,403 17,795 9.04 Non-controlling interests 529 29 1,724.14 Total equity 19,932 17,824 11.83 Bank of Zhengzhou Co., Ltd.* Interim Report 2016 5 CHAPTER II HIGHLIGHTS OF ACCOUNTING DATA AND MAJOR FINANCIAL INDICATORS Notes: (1) Calculated by dividing net profit for the period by average balance of total assets at the beginning and the end of the period. (2) Calculated by dividing net profit attributable to equity shareholders of the Bank for the period by average balance of total equity attributable to equity shareholders of the Bank at the beginning and the end of 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. Calculated based on daily average of the interest-earning assets and the interest-bearing liabilities. (4) Calculated by dividing net interest income by the daily average balance of total interest-earning assets. (5) Calculated by dividing total operating expenses (excluding business tax and surcharges) by operating income. (6) The China Banking Regulatory Commission published the Capital Administrative Measures on June 7, 2012, which became effective on January 1, 2013 and replaced the Capital Adequacy Measures. (7) Calculated by dividing total non-performing loans by gross loans and advances to customers. (8) Calculated by dividing allowance for impairment losses on loans to customers by total non-performing loans. (9) Calculated by dividing allowance for impairment losses on loans to customers by gross loans and advances to customers. 6 Bank of Zhengzhou Co., Ltd.* Interim Report 2016 CHAPTER III MANAGEMENT DISCUSSION AND ANALYSIS 1 PAST ECONOMY AND ENVIRONMENT AND FUTURE PROSPECTS In the first half of 2016, faced with complicated challenges from home and abroad and mounting pressure from the economic downturn, the PRC government moderately expanded the overall demand and accelerated the progress of structural reforms on the supply side, to promote the business startups and creativity for the public, and maintain a general stable national economy while making progress.