China Construction Bank Corporation (“CCB” or the “Bank”) reported its 2011 first quarter operating results on 28 April which revealed that the Bank continued to uphold its principle of proactive and prudent operation. Net profit grew by 34.23% over the year-ago period and its non-performing loan ratio dropped to 1.09%, as the Bank continued to develop all lines of business sustainably.
Sustained increase in profitability As at 31 March 2011, CCB realised RMB61.25 billion in profit before tax (unless otherwise stated, the data herein are calculated in accordance with International Financial Reporting Standards on a consolidated basis and are reckoned in RMB), up 34.11% from the same period last year. Due to a rapid growth in net interest income, net fee and commission income and a year-on-year decrease in provisions for impairment losses on assets, net profit was up 34.23% from the prior-year period to RMB47.233 billion. Net profit attributable to shareholders increased 34.19% from the year-ago period to RMB47.185 billion. The Bank’s annualised return on average assets and annualised return on average equity stood respectively at 1.71% and 26.19%, remaining among the best in the industry. In the period, net interest income was RMB71.63 billion, representing a growth of 25.27% year-on-year. The combined effects of the central bank’s interest hikes, a stronger loan pricing power, the re-pricing of personal mortgage loans and the upward movement of market interest rates resulted in the rise of the Bank’s net interest spread and net interest margin by 0.28 and 0.30 percentage points over the year-ago quarter to 2.58% and 2.69% respectively.
Continued improvement in credit structure As at 31 March 2011, CCB’s total assets stood at RMB11.312516 trillion, an increase of 4.65% from the end of last year. Total loans and advances to customers came to RMB5.910098 trillion, a 4.25% increase from previous year end. The Bank’s total liabilities of RMB10.563439 trillion represented an increase of 4.49% from last year end. At 62.48%, its loan-to-deposit ratio was maintained at a reasonable level. In the first quarter, CCB implemented the country’s macroeconomic policies, followed market disciplines and further optimised its credit structure. At a time when there was steady growth in its areas of strength such as infrastructure loans and personal mortgage loans, the Bank’s new loans to small and medium-sized enterprises grew to RMB103.4 billion. New agriculture-related loans increased to RMB51.6 billion. In the period, commercial mortgage loans for indemnificatory housing for low-to-medium income households and provident fund loans issued to 17,700 households totalled RMB2.7 billion. In the “People-oriented” scheme for supporting the development of various livelihood areas, the amount of new loans reached RMB9.4 billion. Meanwhile, strict controls were enforced to manage the growth of credit extension to loan customers from local government financing vehicles and for real estate loans. Work on clearing up and rationalising existing loans to these platforms was continued to dispose of and diffuse risks in time. Close management of project funds was implemented for the real estate sector and priority support was given to prime customers who exhibit good financial strength and high development potential and who reside in areas where housing prices are stable. Both the amount and growth rate of the incremental real estate loans were maintained at a relatively low level. Loans to industries with excess capacity such as steel and cement showed a relative decrease.
Income structure getting more reasonable In the first quarter of 2011, CCB’s net fee and commission income grew by 37.29% compared to the prior year period to RMB23.154 billion. In particular, rapid growth was realised in key products and services including settlement, wealth management, e-banking as well as credit cards and factoring. In the period, the contribution of emerging businesses to the Bank’s overall income continued to rise. The ratio of e-banking transactions to counter transactions reached 178%, while the volume of internet banking transactions increased 66% year-on-year while transaction amount increased 28%. The Bank’s investment banking business also reported brisk growth. Its debt financing instruments ranked first in the market in terms of cumulative underwriting volume and short-term financing bill underwriting volume while the volume of financial management products issued increased by 128% year-on-year. In the credit card business, the amount of consumption transaction saw a 39% increase over the prior-year quarter while 1.05 million new cards were issued in the period. CCB continued to maintain stringent cost management which resulted in a decline in its cost-to-income ratio by 1.25 percentage points year-on-year.
Continual improvement in asset quality In this first quarter, CCB witnessed concurrent declines in the balance of non-performing loans and its non-performing loan ratio. Its balance of non-performing loans decreased by RMB157 million from the year-ago period to RMB64.555 billion, while its non-performing loan ratio was down by 0.05 percentage points to a mere 1.09%. Allowances to non-performing loans ratio came to 228.80%, which is 7.66 percentage points higher than the previous year end. The Bank’s capital adequacy ratio and core capital adequacy ratio in the period were 12.45% and 10.33% respectively.
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