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Industrial and Commercial Bank of China Limited Announces 2014 Interim Results

Industrial and Commercial Bank of China Limited (“ICBC” or “the Bank”, Stock Code: SH: 601398; HK: 1398) today announced its results for the first half of 2014. In accordance with the International Financial Reporting Standards, ICBC posted net profit of RMB 148.4 billion for the first half of 2014, up 7.2% over the same period of last year. Basic earnings per share reached RMB 0.42, up RMB 0.02 year on year. Net asset value per share rose RMB 0.23 from the end of last year to RMB 3.86.

As of the end of June 2014, calculated by the new capital rules, the Bank’s capital adequacy ratio reached 13.67%, up 0.55 of a percentage point from the end of last year, while its core tier 1 capital adequacy ratio and tier 1 capital adequacy ratio both reached 11.36%, up 0.79 of a percentage point compared to the end of last year, which is evidence of its further-enhanced capital strength. In The Banker’s 2014 Top 1000 World Banks ranked by tier 1 capital, ICBC stayed on the top rank among the world’s banks with its tier 1 capital increasing by almost 30% year on year, making it the fastest-growing bank among the Top 10 banks in terms of tier 1 capital.

In the first half of 2014, ICBC focused on the need to develop the real economy while endeavoring to continuously improve its financial services, promoted reforms and innovation and the transformation of its operations, further strengthened its risk prevention and control. The Bank maintained an overall trend of steady growth in its operations and development. On an overall basis, ICBC’s operational performance for the first half of 2014 could be illustrated in four points below:

First, the Bank adjusted and optimized its credit structure in support of economic restructuring, transformation and upgrading, further enhancing the vitality of its credit operation.

ICBC further integrated the management of its loan increment direction  and the adjustment of its existing loans to maintain steady and moderate growth in lending. As of the end of June 2014, the new RMB loans of ICBC’s domestic branches reached RMB 523.1 billion, increasing by 5.9% year on year. Cumulative loans reached RMB 4.48 trillion in the first half of 2014, up by RMB 130.3 billion year on year, demonstrating the further improvement of the efficiency in the utilization of the Bank’s credit resources. In terms of the direction of its loans, the Bank gave support to key construction projects, providing new domestic RMB project loans of RMB 215.5 billion, up RMB 75.9 billion in terms of increment year on year, of which over 95% was used to support the country’s key construction projects in progress. Second, new loans to advanced manufacturing, modern services, cultural industries and strategic emerging industries increased by RMB 302.6 billion, accounting for 76% of the Bank’s total corporate loan increment. The Bank ramped up its support for the credit needs of areas in the green economy, including ecological protection, clean energy, energy saving and environmental protection, etc., with all loans provided to companies and projects that meet environmental protection standards. Third, the Bank actively supported the development of SME (small and micro enterprises) and the Agriculture, Rural Areas and Farmers, and made more efforts to support household consumption and improve people’s livelihood through its financial services. As of the end of June, ICBC’s outstanding SME and personal loans exceeded RMB 4.3 trillion, accounting for nearly 50% of its domestic RMB loans. Meanwhile, ICBC’s outstanding agriculture-related loans amounted to RMB 1.9 trillion, accounting for 28% of its outstanding corporate loans. Fourth, the Bank continued to boost credit issuance to the Midwest and Northeastern regions, with loan balance to the two areas increasing by RMB 264.1 billion compared to the beginning of this year, representing an increase of 7.2%. In the meantime, ICBC also integrated diversified financing instruments including financial leasing, short-term financing bonds, medium-term notes, syndicated loans, etc., so as to reduce overall financing costs for enterprises while constantly improving the availability of financial services.

Second, the Bank speeded up the innovation of internet banking, leading to significant outcomes in the transformation of operations.

ICBC has been actively adapting itself to the new trends of big data, platform economy, cloud computing and mobile internet and endeavoring to make fundamental changes in operational management model and service mode led by the building of an IT-based bank. The Bank established a financial service and operation regime with O2O interaction, which combines payments, financing, financial transactions, business and information by using internet cogitation. The Bank has made a new breakthrough in internet banking innovation by gradually rolling out new internet banking service platforms and a new batch of products, as well as an O2O integrated service model. The Bank launched the “ICBC E-shopping” e-commerce platform integrating online shopping, payment and clearance, investment and wealth management, online financing, and consumption credits. Up to now, the platform has over 1600 contracted merchants and nearly 60,000 commodities, covering over 1500 brands in dozens of catagories related to basic necessities of life . “ICBC e-payment”, an instant payment product which features small amount and  high efficiency, saw client accounts reach 20 million and transaction volume grow by 7.5 times year on year. The cumulative loans of ICBC’s Easy Loan, a new credit loan product based on O2O direct consumption, reached RMB 121.3 billion. The balance of ICBC’s "Online revolving loan", an internet financing product tailored to small and micro enterprises, has increased by RMB 40 billion from the begining of this year to about RMB 300 billion. With this product, ICBC has disbursed RMB 1.4 trillion in loans to 65,000 small and micro enterprises, making "Online revolving loan" the biggest internet financing product in terms of loan amount. ICBC’s Internet banking and mobile banking continued to grow rapidly, with client accounts reaching 180 million and 135 million respectively. The number of E-banking transactions accounted for 82.3% of total transactions of the Bank. A total of 620 million bank cards have been issued and bank card-based consumption for the first half of 2014 amounted to RMB 3.5 trillion, an increase of 35% compared with the same period of last year. The number of credit cards issued reached 95.37 million, while credit card-based transactions exceeded RMB 885 billion.

Third, the Bank’s push to make its operations more globalized and diversified achieved remarkable outcomes and became a major profit driver.

The Bank steadily pushed the development of its internationalized operation with its overseas expansion focus shifted from tapping into new markets to supporting localized operations and the sustainable development of overseas institutions. As of the end of June, the assets of the Bank’s overseas institutions amounted to $232.5 billion, representing an increase of 11.1% compared to the beginning of the year. Net profit of the Bank’s overseas institutions rose by 41% year-on-year to $1.203 billion in the first half of the year, a growth rate that is much higher than that of the Bank’s domestic institutions. Overseas institutions have become an important profit generator. The non-performing loans (NPL) ratio of overseas institutions was 0.48%, demonstrating the Bank’s leading position in terms of asset quality among its international peers. Cross-border RMB business continued to see rapid and healthy development with the volume of cross-border RMB business in the first half of the year amounting to RMB 1.7 trillion, up over 70% on a year-on-year basis. The bank continued to enhance its overseas presence. ICBC Peru and ICBC New Zealand officially opened for business in the first half of the year, and the Bank also signed an agreement to buy 60% stake of Standard Bank Plc. Currently, ICBC had established 331 overseas institutions in 40 countries and regions and indirectly covered 18 African countries as a shareholder of Standard Bank, extending its service network to six continents - Asia, Africa, Latin America, Europe, North America and Australia. With a view to optimizing its overseas operation network, the Bank also established relationships with 1,767 correspondent banks in 146 countries and regions. The Bank’s four subsidiaries – ICBC Credit Suisse Asset Management, ICBC Leasing, ICBC International and ICBC-AXA – have integrated operations and contributed to a growing share of the Group’s earnings. As of the end of June, the four subsidiaries recorded total net profit of RMB 1.841 billion.

Fourth, ICBC’s asset quality remained stable, and its risk management further strengthened.

After being designated a Systemically Important Financial Institution, ICBC further strengthened its capital and risk management. It implemented the ”Recovery and Resolution Plan“ (RRP) in a comprehensive manner and made sound and continuous progress in establishing a comprehensive risk management system inclusive of credit risk, market risk, liquidity risk, and operational risk. With regard to the new normal in economic growth and structural transitions, ICBC put emphasis on credit risk prevention and control in key fields and key industries. The Bank was proactive in establishing an innovative risk management system and methods, and using big data to carry out data mining and analysis so as to engage in risk monitoring and early warning. At the same time, the Bank has generally maintained stability in asset quality through strict enforcement of responsibility for credit management and speeding up the handling of bad loans.

As of the end of June, ICBC had kept its NPL ratio below 1%, rising by 0.02 of a percentage point from the first quarter to 0.99%. ICBC continued to enhance the control of aggregate financing to local government financing platforms, properties and industries with excessive production capacity, and speeded up the adjustment of credit structure in those industries, thus maintaining high quality in its credit assets. As of the end of June, the balance of ICBC’s loans to local government financing platforms declined by RMB 40.1 billion compared to the beginning of the year. No new bad loans were recorded, and the NPL ratio improved by 0.02 of a percentage point to 0.13% from the beginning of the year, while loans totally covered and basically covered by cash flow added up to 98.5%. The Bank’s balance of loans for properties development decreased by RMB 4.4 billion and the NPL ratio of which declined by 0.05% to 0.67% compared with the beginning of the year, while supporting reasonable financing needs of property developers mainly through re-lending retrieved existing loans. Balance of individual mortgage loans increased by RMB 197.6 billion compared with the beginning of the year, while the NPL ratio stayed the same at 0.24%. Balance of loans to 5 industries with excessive production capacity such as the steel industry, which has dropped by RMB 7.2 billion since the beginning of the year, accounted for 1.29% of the balance of all loans, and its NPL ratio was 1.38%. In addition, ICBC has supported many enterprises in mergers and acquisitions as well as exporting excessive production capacity by leveraging its investment banking services and global service network, making a win-win progress for both the Bank itself and the enterprises.