Slide 1: Investor Presentation FY2018
Investor Presentation FY2018 Your Success is our Business
Slide 2: Legal Disclaimer
Legal Disclaimer This presentation and the information contained herein as well as the materials distributed herewith ("Presentation") are the sole and exclusive property of China Banking Corporation (“China Bank”) and shall only be used for the purpose intended herein. None of the information conta
Slide 3: Presentation Outline
Presentation Outline Economic Environment Economic Environment Company Profile Key Investment Merits Corporate and Financial Highlights 2
Slide 4: Economic Environment
Economic Environment PH has performed strongly over the years Rapid credit growth warrants continued monitoring PH remains one of the fastest-growing economies in Asia Household debt to GDP remains low 3
Slide 5: Economic Environment: Capital formation share of GDP
Economic Environment Share of capital formation to GDP continues to increase 25,000 20,000 15,000 10,000 5,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -5,000 Household consumption Government consumption Capital formation Net Exports
Slide 6: Public investment remains low compared to Asian peers
Economic Environment Public investment remains low compared to Asian peers Infrastructure Investments as % of GDP 2010-2015 8.0 6.8 6.0 5.7 5.4 4.0 3.0 2.6 2.3 2.3 1.8 2.0 0.0 China Vietnam India Malaysia Indonesia Singapore Philippines Thailand 5
Slide 7: Significantly lower than ASEAN neighbors
Economic Environment Significantly lower than ASEAN neighbors Ph External Debt as % of GDP ASEAN External Debt as % of GDP (%) 100 69.1 80 49.4 60 34.8 32.1 40 26.3 23.5 20 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Malaysia Singapore Indonesia Thailand Vietnam Phil
Slide 8: Competitive Landscape
Competitive Landscape Private Banks – CHIB No. 5 in Assets, Loans and Deposits ASSETS LOANS (Net) DEPOSITS CAPITAL ROE Institution Rank Amt Mkt Rank Amt Mkt Rank Amt Mkt Rank Amt (Dec 2018) Mkt Share Jan-Dec Jan-Dec Branches Share Share Share (in P Bn) (in P Bn) (in P Bn) (in P Bn) (%) '18 '17 (%) (
Slide 9: Presentation Outline: Company Profile
Presentation Outline Economic Environment CompanyProfile Company Profile Key Investment Merits Corporate and Financial Highlights 8
Slide 10: Snapshot of China Bank
Snapshot of China Bank Long history as one of the oldest privately owned bank in the Philippines, established in 1920 Publicly-listed since 1927 in Manila Stock Exchange Strong presence in the entrepreneur, middle market and business segments Longest relationship with Chinese-Filipinos, serving this
Slide 11: Primary Business
Primary Business A. Deposits & Related Services B. Internet Banking and Mobile Banking Services (Retail & Corporate) Corporate Consumer Wealth Management Corporate, Commercial & SME Consumer loans Trust and asset lending (mortgages, vehicle, management personal, teacher loans) Cash management Credit
Slide 12: Bank Milestones
Bank Milestones Expand portfolio in SME, MME and Consumer segments further enhanced by recent strategic acquisitions Acquired Manila Bank with 75 branch licenses Acquired and renamed to 1920 1927 2007 2012 2013 2014 2015 2016 Increased stake in Listed in Manila JV to 40% Stock Exchange Bancassurance
Slide 13: Bank Strategy – Rapid Network Expansion since 2007
Bank Strategy – Rapid Network Expansion since 2007 As of December 2018 China China Bank % Share No. of Branches Bank Savings Total Total Metro Manila 251 79 330 53 Luzon 114 67 181 29 Visayas 56 10 66 11 Mindanao 37 6 43 7 Total 458 162 620 100 1000 966 888 CHIB CBS 805 800 740 PDB ATM 661 620 561 5
Slide 14: Comprehensive Financial Services Platform
Comprehensive Financial Services Platform China Bank’s Organizational Structure 1 2 3 Savings Bank & Other Relationship Banking Financial Markets Business Units Retail Banking Lending China Bank Business Segment Treasury Savings, Inc. (98.3%) - SME Branches Institutional China Bank Capital - Consume
Slide 15: Presentation Outline: Key Investment Merits
Presentation Outline Economic Environment Company Profile Key Investment Key Investment Merits Merits Corporate and Financial Highlights 14
Slide 16: Key Investment Merits
Key Investment Merits 1 Established strength in affluent Chinese-Filipino business segment 2 Strong balance sheet with sustainable growth 3 Diversified and well collateralized loan portfolio 4 Improving asset quality and loan loss coverage 5 Funding – strong brand franchise / retail base 6 Healthy c
Slide 17: Established Strength in Affluent Chinese-Filipino Business Segment
1 Established Strength in Affluent Chinese-Filipino Business Segment Predominantly focused on the SME/MME Loyal and highly valuable customer base segments Multi-generational relationships Agile and entrepreneurial mindset Sustainable and profitable niche client relationships 16
Slide 18: Established Strength in Affluent Chinese-Filipino Business Segment
1 Established Strength in Affluent Chinese-Filipino Business Segment FIRST CREDIT LINE IN 1949 AIDED DMCI IN CRITICAL TIMES “My relationship with the Bank has “China Bank is not like other banks.” always been special to me.” - DAVID M. CONSUNJI - HENRY SY SR. DMCI Founder of SM FRIENDS THROUGH GOOD
Slide 19: Established Strength in Affluent Chinese-Filipino Business Segment
1 Established Strength in Affluent Chinese-Filipino Business Segment THE MAKING OF A HARDWARE CONSUMER’S PARADISE Banking with China Bank since 1920.. “ . . .they always accommodate us.” - JOHNNY O. COBANKIAT ACE Hardware FROM HUMBLE BEGINNINGS “Malaki ang tulong na ibinigay sa amin ng China Bank.”
Slide 20: Strong Balance Sheet with Sustainable Growth: Total Assets
2 Strong Balance Sheet with Sustainable Growth Organic growth and acquisitions Total Assets (PHP in B) 866 751 97 89 633 527 83 471 76 414 47 15 21 324 769 257 262 9 662 234 550 209 2 4 5 0 451 176 5 399 403 5 315 229 255 258 204 171 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 China
Slide 21: Strong Balance Sheet with Sustainable Growth: Assets Mix
2 Strong Balance Sheet with Sustainable Growth Emphasis on core lending business, reduced reliance on securities/trading Assets Mix (PHP in B) 816 751 17% 633 16% 527 16% 471 14% 414 13% 60% 61% 324 16% 262 61% 257 234 21% 59% 209 62% 176 23% 53% 29% 31% 27% 24% 59% 46% 55% 50% 53% 47% 27% 23% 23% 2
Slide 22: Healthy liquidity
2 Strong Balance Sheet with Sustainable Growth Healthy liquidity 80% 73% 73% 71% 71% 71% 70% 70% 67% 66% 65% 65% 62% 63% 63% 61% 58% 60% 55% 62% 61% 61% 59% 60% 59% 55% 50% 53% 40% 2011 2012 2013 2014 2015 2016 2017 2018 Loans (Net) to Total Assets Loans (Net) to Customer Deposits Loans (Net) to Sta
Slide 23: Diversified Loan Portfolio: Gross Loans
3 Diversified Loan Portfolio More room to grow in consumer segment Gross Loans (PHP in B) Corporate Commercial Consumer 8-yr CAGR 2010-2018 513 Consumer 26% 456 17% 394 16% 16% Commercial 15% 317 20% 12% 298 15% 22% 228 14% 198 154 13% 43% 45% 126 12% Corporate 67% 12% 39% 64% 21% 41% 63% 11% 31% 28
Slide 24: Diversified Loan Portfolio: Consumer Loans
3 Diversified Loan Portfolio More room to grow in consumer segment Consumer Loans (PHP in B) Credit card 76 Personal + Civil Servants Loan 2% 7% 63 Auto 2% 5% 27% 52 2% Housing 5% 29% 41 1% 30% 5% 33 - 6% 28% 21 29% 16 64% - 3% 64% 30% 63% 10 1%- 34% 66% 7 65% 4% - 48% 67% 56% 66% 44% 48% 2010 2011
Slide 25: Diversified and Well-collateralized Loan Portfolio
3 Diversified and Well-collateralized Loan Portfolio Loans By Security 513 Unsecured Secured 456 394 317 57% 298 56% 228 55% 198 52% 58% 154 126 53% 53% 51% 43% 44 % 60% 45% 48% 42% 47% 47% 49% 40% 2010 2011 2012 2013 2014 2015 2016 2017 2018 24
Slide 26: Improving Asset Quality and Loan Loss Coverage
4 Improving Asset Quality and Loan Loss Coverage Post acquisition asset quality ratios better than industry… NPL Ratios LLR Coverage Plantersbank acquisition 350% 323%* Plantersbank 3% acquisition 300% 2.5% 3% 2.2% 250% 2.0% 1.9% 2% 200% 175% 153% 157% 153% 1.9% 1.9% 1.4% 2% 150% 1.2% 123% 167%* 1.6
Slide 27: Credit Cost – lower than the industry
4 Improving Asset Quality and Loan Loss Coverage Credit Cost – lower than the industry 1.01% 1.22% 1.06% 0.86% 1.67% 0.94% 1.43% 1.30% 0.92% 1.22% 0.69% 0.56% 0.67% 0.57% 0.51% 0.33% 0.44% 0.42% 0.38% 0.41% 0.29% 0.31% 0.24% 0.19% 0.24% 0.13% 0.17% 0.18% 0.11% 0.03% 2004 2005 2006 2007 2008 2009 201
Slide 28: Funding – Strong Brand Franchise / Retail Base
5 Funding – Strong Brand Franchise / Retail Base Strong branch franchise/retail funding base Deposits (PHP in B), core deposits 70% Peso Deposits (PHP in B) CASA High Cost FCDU 600 722 527 635 458 542 16% 372 17% 327 399 439 283 15% 354 35% 218 272 15% 33% 18% 38% 160 167 213 216 20% 37% 20% 37% 25%
Slide 29: Funding – Stable Margins
5 Funding – Strong Brand Franchise / Retail Base Stable Margins 7% 6.08% 6% 5.57% 4.73% 4.77% 5% 4.22% 4.31% 4.32% 4.20% 4.19% 3.97% 3.76% 4% 3.30% 3.37% 3.20% 3.11% 3.10% 2.90% 2.98% 3% 2.21% 2.06% 1.90% 1.73% 2% 1.30% 1.12% 1.02% 1.14% 0.98% 1% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 Asset
Slide 30: Healthy Capital Position
6 Healthy Capital Position Capital Adequacy Ratio (CAR) CET 1 Ratio Industry Average CAR 24.0% 22.0% 20.0% 18.0% 15.8% 16.0% 13.1% 14.0% 12.0% 12.2% 10.0% P15 bn Stock P8 bn Stock rights rights Plantersbank 88 acquisition 84 Manila Bank Basel 2 acquisition 63 implementation 57 59 42 45 39 35 27 30 2
Slide 31: Very Good Credit Ratings
6 Very Good Credit Ratings Investment grade credit rating of Baa2 from May 2017 Same level as the Philippine sovereign rating and at par with the country’s top 3 biggest banks Affirmed in December 2018 Upgraded IDR in Sept 2016 to ‘BB+’ from “BB’ and its viability rating to ‘bb+’ from bb (st
Slide 32: Well Diversified Revenue Stream
7 Well Diversified Revenue Stream Reduced reliance on volatile trading gains (PHP in B) Net Interest Income Trading and Securities Other Fees 28.55 25.73 23% 21.79 22% 19.57 24% 18.85 2% 19% 23% 15.10 21% 4% 13.86 22% 13.32 25% 2% 23% 12.74 3% 21% 22% 21% 34% 21% 33% 42% 13% 74% 35% 76% 13% 12% 21%
Slide 33: Effective Cost Management
7 Effective Cost Management … branch expansion on last phase, focus on profitability Cost to Income – Philippine Banks Sep 2018 Cost to Income – China Bank (%) 74% 63.0% 62.2% 62.3% 62.0% 67% 61.3% 61% 62% 63% 59% 60% 59.2% 59.0% 57% 54% 58.0% 55.4% 57.2% 55.2% 56.0% 56.0% 53.5% 2010 2011 2012 2013
Slide 34: Growing Distribution Network
7 Growing Distribution Network 5th Largest Distribution Network in the Philippines Slowdown in branch expansion by 2019 (No. of Branches, ATMs) Dec 2018 (No. of Branches and ATMs) 1,113 PDB CBS 1,032 Branches ATMs CHB ATMs 966 1,600 5,000 888 4,500 805 1,400 1,309 740 4,000 1,200 661 1,071 620 653 6
Slide 35: Brand Refresh, Modern Branch Look and Feel
7 … Brand Refresh, Modern Branch Look and Feel 34
Slide 36: Supported by Robust Infrastructure
7 Supported by Robust Infrastructure Customer-centric technology initiatives… New Treasury system - Calypso EMV Compliant since January 2017 New Trust/Asset (One of 1st Phil banks) Management system Cash Management / Corporate Online Mobile Banking launched in 2018 Digital Banking transf
Slide 37: Sustained Delivery of Shareholder Returns
8 Sustained Delivery of Shareholder Returns Consistent dividends track record (In Dividend Yield – consistently above Mn) industry average Cash Dividends Cash Payout 2.4 41.9% 45% 9% 8.5% 36.5% 40% 8% 2.2 34% 33% 6.8% 35% 7% 31% 31% 31% 2.0 30% 29% 28% 30% 6% 26% 5.3% 1.8 4.8% 25% 5% 1.6 2.2 20% 4%
Slide 38: Strong Support from Shareholders and Synergies with the SM Group
9 Strong Support from Shareholders and Synergies with the SM Group Current Shareholdings Snapshot of SM Group Business Lines 27% 38% SMIC @ 19.9% 8% 27% Retail Banking Property 77% 20% 45% 50% SM Retail CHIB BDO SM Prime SM Group - Henry Sy Sr. First became Shareholder in 1979 HOTELS AND CONVENTIONS
Slide 39: Benefits of SM Group Synergy
9 Strong Support from Shareholders and Synergies with the SM Group Benefits of SM Group Synergy Priority rights to locate branches and ATMs in SM shopping malls CBS mini-branches in SM Group’s SaveMore, CityMall locations, ATMs at Alfamart Access to SM Group’s ecosystem of merchants, suppliers and c
Slide 40: Track Record of Excellence in Corporate Governance
10 Track Record of Excellence in Corporate Governance 2nd ASEAN Corporate Governance Awards Top 11 to 30 among the top 50 PLCs in ASEAN PSE Bell Awards for Corporate Governance Top 5 Bell Awardee for 6 consecutive years (2012-2017 ) Top 5 Finalist (2017 ) 8th Asian Excellence Awards 2018
Slide 41: Governance – Adapting ESG Framework
10 Governance – Adapting ESG Framework 2017 Annual and Sustainability Report certified by GRI Amsterdam 40
Slide 42: Board of Directors
11 Board of Directors • Honorary Chairman and Advisor to the Board • Chairman of the Board since May 5, 2011 since 1997 • Vice Chairman from 1989 to 2011 • Founder: SM Group • China Bank Board Director since May 21, 1986, • Chairman Emeritus: SM Investments Corp., • Director and ExCom Chairman of SM
Slide 43: Board of Directors
11 Board of Directors • China Bank Director since 1993 • China Bank Director since 2001 • Director: SM Prime Holdings, Inc., • Former President of SM Investments Corp. Supervalue, Inc., Super Shopping • Director: SM Synergy Properties Holdings Corp., Market, Inc., National University and Sybase Equi
Slide 44: Management Team – Experienced, Successors in Place
11 Management Team – Experienced, Successors in Place Hans T. Sy Chairman of the Board Gilbert U. Dee Vice Chairman since 1989 Vice Chairman of the Board Director since 1986 William C. Whang Director and President since Nov. 1, 2017 Romeo D. Uyan, EVP and COO Chairman ExCom of China Bank Savings, In
Slide 45: Management Team – Experienced, Successors in Place
11 Management Team – Experienced, Successors in Place Ryan Martin L. Tapia Marisol M. Teodoro President - China Bank Capital Corp. President and CEO - China Bank Securities Corp. Director: China Bank Securities Corp. Jose L. Osmeña, FVP Deputy Group Head of Retail Banking Business Ananias S. Corneli
Slide 46: Presentation Outline: Corporate and Financial Highlights
Presentation Outline Economic Environment Company Profile Key Investment Merits Corporate and Corporate and Financial Financial Highlights Highlights 45
Slide 47: Financial Highlights: Income Statement
Financial Highlights Income Statement FY FY Variance (In Million Pesos) 2018 2017 Amt % Net Interest Income 22,926 19,626 3,300 16.8% Non-Interest Income 5,658 6,102 (444) -7.3% Total Operating Income 28,584 25,728 2,856 11.1% Total Operating Expenses 18,197 16,716 1,481 8.9% Income before Income Ta
Slide 48: Financial Highlights: Balance Sheet
Financial Highlights Balance Sheet FY FY Varianc e (In M illion Pes os ) 2018 2017 Am t % Total As s ets 866,072 751,448 114,624 15.3% Loans & Rec eiv ables (Net) 505,805 448,971 56,834 12.7% Total Depos its 722,123 635,093 87,030 13.7% Low Cos t Depos its 400,779 343,010 57,769 16.8% Tim e Depos it
Slide 49: Awards and Recognition
Awards and Recognition Top Corporate Issue Pagtugon Award Best Investor Best Corporate Best Bank for Debt Best Debt Capital Manager / Arranger for Universal and Relations Bank Governance Bank – Capital Markets Market (DCM) House Investment House Commercial Philippines Philippines Philippines Philipp
Slide 50: Legal Disclaimer
Legal Disclaimer This presentation and the information contained herein as well as the materials distributed herewith ("Presentation") are the sole and exclusive property of China Banking Corporation (“China Bank”) and shall only be used for the purpose intended herein. None of the information conta