Boc Hong Kong (holdings) Limited · HKEX:2388

Boc Hong Kong (holdings) — FY2018 Earnings Presentation

35 slides from Boc Hong Kong (holdings)'s earnings presentation, Mar 29, 2019

1. Slide 1: Annual Results

   Annual Results 29 March 2019 1

2. Slide 2: Disclaimer and New Reporting Basis in this Presentation

   Disclaimer and New Reporting Basis in this Presentation Disclaimer This presentation and subsequent discussions may contain forward‐looking statements that involve risks and uncertainties. These statements are generally indicated by the use of forward‐looking terminology such as believe, expect, ant

3. Slide 3: Management Team

   Management Team  Mr GAO Yingxin Vice Chairman & Chief Executive  Mdm WANG Qi Deputy Chief Executive  Mr YUAN Shu Deputy Chief Executive  Mr ZHONG Xiangqun Chief Operating Officer  Mr WANG Bing Deputy Chief Executive  Mdm SUI Yang Chief Financial Officer  Mrs Ann KUNG Deputy Chief Executive 

4. Slide 4: Agenda

   Agenda 2018 Strategy Review 2018 Financial Performance 2019 Outlook and Business Focus Appendix 4

5. Slide 5: Strategy Review

   BOC HONG KONG (HOLDINGS) LIMITED ©) oh oh Be Ht ($2 AR) ABR trategy Review S

6. Slide 6: Pursuing Quality Development with Solid Financial Performance

   Pursuing Quality Development with Solid Financial Performance Profit Attributable to Equity Holders Return on Equity Dividend Per Share HK$m HK$ ➚ 12.0%* ➚ 73bps* ➚ HK$0.07 32,000 32,000 12.83% 12.83% 12.10% 1.468 28,574 1.398 0.095 1.303 2017 2018 2017 2018 2017 2018 *Continuing operations Ordinary

7. Slide 7: Sustaining Leadership through Deepened Local Market Commitment

   Sustaining Leadership through Deepened Local Market Commitment  No. of private banking customers: +27.3% Personal Banking 27%  No. of mid‐to‐high‐end customers: +17.5% Corporate Banking 16% 18%  No. of small enterprises with Business Integrated Accounts: +15.7% Financial Markets  Residential mor

8. Slide 8: Sustaining Leadership through Deepened Local Market Commitment

   Sustaining Leadership through Deepened Local Market Commitment  Syndicated loans: top mandated arranger for 14th consecutive year Personal Banking 14  IPO receiving bank business: ranked No. 1 for 8th consecutive year Corporate Banking 8  Cross‐border cash pooling business: retained leadership in

9. Slide 9: Sustaining Leadership through Deepened Local Market Commitment

   Sustaining Leadership through Deepened Local Market Commitment  Market share in offshore RMB clearing business: 75% Personal Banking 75%  Sole clearing bank in Hong Kong to support H‐share full convertibility Corporate Banking 90%  Market share in the supply of foreign currency banknotes in Hong

10. Slide 10: Sustaining Leadership through Deepened Local Market Commitment

    Sustaining Leadership through Deepened Local Market Commitment  Credit Card: Maintained leading position in UnionPay card business in Hong Kong Personal Banking  Total assets under custody: HK$1,098.4bn Corporate Banking 12%  BOCI‐Prudential Trustee’s average MPF AUM: +11.6% Financial Markets 8%

11. Slide 11: Building Competitive Edges through Proactive Efforts in GBA Development

    Building Competitive Edges through Proactive Efforts in GBA Development Supporting Hong Kong residents to open bank accounts of BOC mainland branches in Hong Kong Services Offering mutual service access to customers in the Greater Bay Area under wealth management brand mutual recognition programme B

12. Slide 12: Making Solid Progress in Regional Expansion with Notable Synergy Improvement

    Making Solid Progress in Regional Expansion with Notable Synergy Improvement Chief Executive Net operating income before Advances to customers impairment allowances of BOCHK HK$bn HK$bn ➚ 27.6% 2.287 ➚ 20.0% 39.2 Senior Management Deputy Chief Executive (Deputy Chief Executive, Chief Officer) (South

13. Slide 13: Enhance Innovation Capacity with Effective Technology Innovation

    Enhance Innovation Capacity with Effective Technology Innovation Reshape development concepts based on customer‐centric principle Big Data A Blockchain Embarking on organisational reform and innovation mechanism optimisation Tech innovation Finger vein B Employ technological innovation to promote cu

14. Slide 14: Pursuing Strict Compliance Standards and Stronger Bank Culture

    Pursuing Strict Compliance Standards and Stronger Bank Culture Cultural Development Goal Core Values Implementation Initiatives Responsibility Be proactive, cooperative and win‐win Cultural Change Customer trust Strive for long‐term sustainable development Integrity with a customer‐centric philosoph

15. Slide 15: Financial Performance

    2018 Financial Performance 15

16. Slide 16: Commendable Operating Performance

    Commendable Operating Performance Continued Growth in Profit Solid Growth in Assets and Liabilities Attributable to Equity Holders ➚ 11.4% ➚ 11.1% ➚ 12.0% 2,952.9 HK$m HK$b 2,668.0 2,651.1 2,402.5 32,000 28,574 2017 2018 Total assets Total liabilities 2017 2018 Steady Rise in ROA and ROE Sufficient

17. Slide 17: Steady Growth in Customer Deposits

    Steady Growth in Customer Deposits Customer Deposits Grew by 6.6% Further Gains in Market Share in HK Optimised Deposit Structure HK$m HK$m ➚ 6.6% 1,777,874 1,895,556 927,089 ➚ 4.5% 968,751 14.21% +0.13ppt 850,785 ➚ 8.9% 926,805 2017 2018 2017 2018 Personal Corporate 17

18. Slide 18: Solid Growth in Customer Loans

    Solid Growth in Customer Loans Customer Loans Increased by 10.5% Enlarged Loan Market Share in HK Balanced Customer Loan Portfolio HK$m HK$m ➚ 10.5% 492,712, +12.8% 1,266,705 1,146,426 349,008, +8.3% 12.64% +0.67ppt 359,548, +16.3% 65,437, ‐16.3% 2017 2018 2018 2017 18

19. Slide 19: Stable Margin Improvement

    Stable Margin Improvement Rapid Growth in Net Interest Income Expansion in Average Interest‐earning Assets Continued Enhancement of NIM* and Loans to Deposits Spread ➚ 9.6% 2,434,966 2,222,258 HK$m ➚ 13.1% HK$m 414,900 1.91% 442,157 1.84% 39,394 1.76% 1.76% 783,128 34,818 669,950 1.69% 1.71% 1.61% 1

20. Slide 20: Steady Growth in Fee Income of Traditional Business

    Steady Growth in Fee Income of Traditional Business Net Fee and Commission Income Analysis Composition of Fee and Commission Income Fee Income from Investment & Insurance Business 2,000 1,805 300,000 HK$m HK$m HK$m ➘ 2.5% 250,000 1,500 1,317 11,601 11,307 7,656 / 49% 1,126 200,000 ➚ 10.1% 996 7,656

21. Slide 21: Effective Cost Efficiency Control

    Effective Cost Efficiency Control Analysis of Expense Drivers Cost to Income Ratio at a Low Level Quarterly Trend of Operating Expenses HK$m HK$m ➘ 0.4ppt 356 15,180 4,368 112 3,582 3,812 138 3,418 726 28.3% 27.9% 13,848 2017 Staff Premises & Depreciation Others 2018 2017 2018 1Q18 2Q18 3Q18 4Q18 co

22. Slide 22: Solid Performance in Risk Indicators

    Solid Performance in Risk Indicators Sound Asset Quality with Sufficient Provision Stable Credit Cost Adequate Liquidity 160.2% 146.4% 134.3% 141.4% 227.1% 197.5% 122.24% 124.41% 118.98% 118.82% 0.18% 0.19% 0.10% 0.10% 2017 2018 2017 2018 1Q18 2Q18 3Q18 4Q18 NSFR LCR 22

23. Slide 23: Outlook and Business Focus

    2019 Outlook and Business Focus 23

24. Slide 24: Operating Environment Outlook in 2019

    Operating Environment Outlook in 2019 24

25. Slide 25: Strategic Priorities for 2019

    Strategic Priorities for 2019 Strategic Goal To build a Top‐class, Full‐service and Internationalised Regional Bank 1 Focusing efforts in three key markets Hong Kong, the Greater Bay Area and Southeast Asia 2 Building capabilities in three strategic areas Technology‐led development capability, compr

26. Slide 26: Q&A Session

    tp She re (12 AR) A PR A) BOC HONG KONG (HOLDINGS) LIMITED —— Q&A Session ——

27. Slide 27: tp She re (12 AR) A PR A)

    tp She re (12 AR) A PR A) BOC HONG KONG (HOLDINGS) LIMITED

28. Slide 28: Income Statement and Balance Sheet Summary

    Income Statement and Balance Sheet Summary Income statement summary (HK$m) 2018 2017 Change Net interest income 39,394 34,818 13.1% Net fee and commission income 11,307 11,601 ‐2.5% Other non‐interest income 3,710 2,587 43.4% Net operating income before impairment allowances 54,411 49,006 11.0% Oper

29. Slide 29: Average Balances and Average Interest Rates

    Average Balances and Average Interest Rates 2018 2017 Average balance Average yield Average balance Average yield Assets HK$m % HK$m % Balances and placements with banks and other financial 414,900 1.90% 442,157 2.17% institutions Debt securities investments and other debt instruments 783,128 2.39%

30. Slide 30: Fee and Commission Income

    Fee and Commission Income HK$m 2018 2017 Change Investment and Insurance 5,244 4,936 6.2% Securities brokerage 2,769 2,625 5.5% Funds distribution 929 985 ‐5.7% Insurance 1,546 1,326 16.6% Traditional business ‐ non‐credit related 7,656 6,956 10.1% Credit cards 3,441 3,202 7.5% Bills commissions 738

31. Slide 31: Operating Expenses

    Operating Expenses HK$m 2018 2017 Change Staff costs 8,627 7,901 9.2% Premises & equipment expenses 1,859 1,721 8.0% Depreciation 2,063 1,951 5.7% Others 2,631 2,275 15.6% Total operating expenses 15,180 13,848 9.6% Full‐time staff headcount 14,046 13,212 6.3% 31

32. Slide 32: Customer Deposits

    Customer Deposits HK$m 2018 2017 Change Demand deposits and current accounts 207,797 203,837 1.9% Saving deposits 852,339 913,192 ‐6.7% Time, call and notice deposits 833,221 658,061 26.6% Structured deposits 2,199 2,784 ‐21.0% Total deposits from customers 1,895,556 1,777,874 6.6% 32

33. Slide 33: Gross Advances to Customers

    Gross Advances to Customers HK$m 2018 2017 Change Loans for use in Hong Kong ‐ corporate 492,712 436,754 12.8% Property development 126,328 99,987 26.3% Property investment 50,223 53,581 ‐6.3% Financial concerns 21,239 13,461 57.8% Stockbrokers 1,171 1,027 14.0% Wholesale and retail trade 38,147 34,

34. Slide 34: Gross Advances and Other Accounts by Internal Credit Grade and Stage Classification

    Gross Advances and Other Accounts by Internal Credit Grade and Stage Classification 2018 2017 HK$m Stage 1 Stage 2 Stage 3 Total Advances to customers Pass 1,254,236 5,019 ‐ 1,259,255 1,140,711 Special mention 1,934 3,133 ‐ 5,067 3,636 Substandard or below ‐ ‐ 2,383 2,383 2,079 1,256,170 8,152 2,383

35. Slide 35: Non-bank Mainland Exposures

    Non‐bank Mainland Exposures HK$m On‐balance sheet exposure Off‐balance Total Total loans and O/W: for use in Debt securities sheet exposure exposure Subtotal advances Chinese Mainland and others Central government, central government‐owned entities and their 242,022 61,518 50,660 292,682 37,793 330,

BOC Hong Kong (Holdings) — FY2018 Earnings Presentation on 6ix