China Banking Corp. · PSE:CBC
China Banking — H1 2018 Earnings Presentation
45 slides from China Banking's earnings presentation, 2018
Slide 1: Investor Presentation 1H 2018
Investor Presentation 1H 2018 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 WORLD ECONOMY PH ECONOMY PH BANKING Cyclical upswing underway Solid economic performance Resilient to external shocks US - GDP growth at 2.3%; GDP growth at 6.8% Asset base expanded 11% yoy Added 2 million jobs; Deposits up 12.6%; Inflation uptrend to 3.8% Three 25-bps policy ra
Slide 5: 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 (June 2018) Mkt Share Jan-Jun Jan-Jun Branches Share Share Share (in P Bn) (in P Bn) (in P Bn) (in P Bn) (%) '18 '17 (%)
Slide 6: Presentation Outline
Presentation Outline Economic Environment Company Profile Company Profile Key Investment Merits Corporate and Financial Highlights 5
Slide 7: Snapshot of China Bank
Snapshot of China Bank Long history as the oldest privately owned bank in the Philippines, established in 1920 Listed since the establishment of the Exchange by 1927 Strong presence in the entrepreneur, middle market and business segments Longest relationship with Chinese-Filipinos, serving this com
Slide 8: 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 9: Bank Milestones
Bank Milestones Expand portfolio in SME, MME and Consumer segments further enhanced by recent strategic acquisitions 1920 1927 2007 2012 2013 2014 2015 2016 Listed in Manila Stock Exchange Increased stake in China Bank JV to 40% Securities Corp Acquired Manila Bank with 75 branch licenses and rename
Slide 10: Bank Strategy – Continued Network Expansion
Bank Strategy – Continued Network Expansion As of June 2018 China No. of China Bank % Share Branches Bank Savings Total Total Metro 241 78 319 53% Manila Luzon 110 67 177 29% Visayas 56 9 65 11% Mindanao 37 6 43 7% Total 444 160 604 100% 950 888 931 850 805 CHIB CBS 740 750 PDB ATM 661 650 596 604 5
Slide 11: Comprehensive Financial Services Platform
Comprehensive Financial Services Platform China Bank’s organization anchored on three engines of growth: 1 2 3 Savings Bank & Other Relationship Banking Financial Markets Business Units Retail Banking Lending China Bank Business Segment Treasury Savings, Inc. - SME Institutional China Bank - Consume
Slide 12: Presentation Outline
Presentation Outline Economic Environment Company Profile Key Investment Key Investment Merits Merits Corporate and Financial Highlights 11
Slide 13: 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 14: Established Strength in Affluent Chinese-Filipino Business Segment
1 Established Strength in Affluent Chinese-Filipino Business Segment Loyal and highly valuable customer Predominantly focused on the base SME/MME segments Multi-generational relationships Agile and entrepreneurial mindset Sustainable and profitable niche client relationships 13
Slide 15: Strong Balance Sheet with Sustainable Growth
2 Strong Balance Sheet with Sustainable Growth Organic growth and strategic acquisitions Total Assets (PHP in B) 751 768 658 633 89 92 527 89 83 471 414 76 47 324 15 21 257 262 662 677 9 550 569 2 4 451 399 403 315 255 258 2010 2011 2012 2013 2014 2015 2016 2017 1H17 1H18 China Bank China Bank Savin
Slide 16: Strong Balance Sheet with Sustainable Growth
2 Strong Balance Sheet with Sustainable Growth Emphasis on core-recurring income Assets Mix (PHP in B) 751 768 633 658 20% 20% 527 16% 17% 471 414 13% 12% 324 61% 16% 61% 257 262 61% 60% 20% 59% 62% 29% 24% 53% 59% 46% 55% 28% 23% 19% 23% 19% 31% 26% 25% 21% 21% 2010 2011 2012 2013 2014 2015 2016 20
Slide 17: Strong Balance Sheet with Sustainable Growth
2 Strong Balance Sheet with Sustainable Growth Healthy liquidity 75.0% 72.7% 71.8% 70.5% 71.4% 70.7% 69.9% 70.0% 67.2% 64.5% 64.6% 64.3% 65.0% 62.3% 63.0% 63.1% 61.0% 60.0% 58.0% 55.3% 61.6% 61.1% 61.1% 58.8% 59.7% 55.0% 58.6% 55.4% 50.0% 53.3% 45.0% 40.0% 2011 2012 2013 2014 2015 2016 2017 1H18 Loa
Slide 18: Diversified and Well Collateralized Loan Portfolio
3 Diversified and Well Collateralized Loan Portfolio Loans growth faster in consumer segment Gross Loans (PHP in B) 8-yr CAGR Corporate Commercial Consumer 2010-1Q18 456 477 Consumer 394 26% 404 16% 16% 317 298 16% Commercial 15% 20% 24% 17% 228 15% 22% 21% 198 14% 154 13% 126 12% 43% 45% Corporate
Slide 19: Diversified and Well Collateralized Loan Portfolio
3 Diversified and Well Collateralized Loan Portfolio Loans continue to grow fast in consumer segment (CHIB & CBS) Consumer Loans (PHP in B) Housing Auto Personal Credit card 68 63 2% 56 5% 2% 52 5% 2% 31% 2% 6% 41 5% 29% 28% 33 1% 28% 5% - 6% 28% 21 29% 16 62% - 3% 64% 30% 65% 64% 10 - 1% 34% 66% 7
Slide 20: Diversified and Well Collateralized Loan Portfolio
3 Diversified and Well Collateralized Loan Portfolio Loans By Security Unsecured Secured 477 456 394 317 298 57% 56% 55% 228 198 52% 58% 154 53% 126 53% 51% 43% 60% 45% 44 % 48% 42% 47% 47% 40% 49% 2010 2011 2012 2013 2014 2015 2016 2017 1H2018 19
Slide 21: Improving Asset Quality and Loan Loss Coverage
4 Improving Asset Quality and Loan Loss Coverage Asset Quality Ratios post PDB integration continue to improve… NPL Ratios LLR Coverage 3% 300% 282% 2.7%2.6% 2.5% 3% 2.4% 2.2% 250% 2.0% 2% 1.9%1.9%1.8% 200% 181% 1.8% 175% 1.9% 1.9% 153%157% 153%159%156% 1.8%1.8% 1.4% 1.4% 135% 142% 149% 2% 1.3% 150%
Slide 22: Improving Asset Quality and Loan Loss Coverage
4 Improving Asset Quality and Loan Loss Coverage Credit Cost – lower than the industry 0.94% 0.92% 0.86% 0.69% 0.56% 0.67% 0.57% 0.51% 0.33% 0.44% 0.42% 0.38% 0.39% 0.35% 0.34% 0.28% 0.41% 0.39% 0.34% 0.31% 0.16% 0.29% 0.24% 0.24% 0.08% 0.19% 0.17% 0.17% 0.16% 0.19% 0.18% 0.11% 0.13% 0.13% 0.16% 0.0
Slide 23: 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 527 531 653 458 468 635 542 17% 554 19% 372 439 15% 327 399 15% 28% 283 354 18% 15% 38% 33% 37% 218 272 20% 160 167 213 216
Slide 24: Funding – Strong Brand Franchise / Retail Base
5 Funding – Strong Brand Franchise / Retail Base Stable Margins 7% 6.08% 6% 5.57% 5% 4.73% 4.49% 4.22% 4.31% 4.32% 4.20% 4.19% 3.97% 4% 3.76% 3.30% 3.37% 3.20% 3.11% 3.16% 2.90% 2.98% 3% 2.21% 2.06% 1.90% 2% 1.30% 1.43% 1.12% 1.02% 1.14% 0.98% 1% 0% 2010 2011 2012 2013 2014 2015 2016 2017 1H18 Asset
Slide 25: Healthy Capital Position
6 Healthy Capital Position Capital Adequacy Ratio (CAR) CET 1 Ratio Industry Average CAR 23.1% 24.0% 22.0% 22.1% 19.0% 18.9% 20.0% 18.5% 17.7% 17.3% 18.0% 15.9% 16.3% 16.0% 16.0% 16.3% 16.0% 16.2% 15.7% 15.8% 15.4% 15.1% 14.9% 15.0% 15.0% 16.0% 14.2% 13.5% 15.4% 15.5% 13.5% 13.3% 15.1% 12.8% 15.2% 1
Slide 26: Well Diversified Income Stream
7 Well Diversified Income Stream Operating Income Mix (PHP in B) Net Interest Income Trading and Securities Other Fees 25.73 21.79 22% 24% 19.57 18.85 19% 2% 23% 23% 13.15 15.10 22% 25% 21% 4% 13.32 13.86 2% 12.30 12.74 21% 3% 22% 21% 42% 34% 17% 16% 35% 21% 33% 13% 23% 25% 13% 12% 21% 76% 2% 75% 77
Slide 27: Effective Cost Management
7 Effective Cost Management … even with cost drag of branch expansion Cost to Income – Philippine Banks June 2018 Cost to Income – China Bank (%) 80.5% 75.8% 73.2% 65.6% 59.2% 59.0% 62.2% 62.3% 61.3% 62.0% 63.6% 64.0% 65.2% 65.6% 53.5% 55.2% 57.2% 57.2% 55.4% 55.4% 56.0% 56.0% 62.0% 2010 2011 2012 2
Slide 28: Growing Distribution Network
7 Growing Distribution Network 5th Largest Distribution Network in the Philippines Network Expansion Plan (No. of Branches, ATMs as of Mar 2018 ) (No. of Branches and ATMs) 1,113 PDB CBS 1,032 4,106 Branches ATMs 993 CHB ATMs 1,400 4,200 931 888 2,387 1,207 3,700 805 1,200 3,105 740 3,200 661 1,000
Slide 29: … Brand Refresh, Modern Branch Look and Feel…
7 … Brand Refresh, Modern Branch Look and Feel… 28
Slide 30: Supported by Robust Infrastructure
7 Supported by Robust Infrastructure Customer-centric technology initiatives… July 2016 – Upgrade Retail Internet China Bank Online New Treasury system -- EMV Compliant since January Calypso 2017 Replace Trust/Asset Mobile Banking Initiative Management system Cash Management / Corporate
Slide 31: Sustained Delivery of Shareholder Returns
8 Sustained Delivery of Shareholder Returns Consistent dividends track record Dividend Yield – consistently (In Mn) above industry average Cash Dividends Cash Payout 2.4 41.9% 45% 9.00% 8.53% 40% 8.00% 2.2 36.5% 34% 33% 6.79% 31% 31% 31% 35% 7.00% 2.0 29% 30% 28% 30% 6.00% 26% 5.28% 1.8 25% 5.00% 4.
Slide 32: Strong Support from Shareholders and Synergies with the SM Group
Strong Support from Shareholders and Synergies with the 9 SM Group Current Shareholdings Snapshot of SM Group Business Lines 26% 39% SMIC @ 19.9% 8% Financial 27% Retail Services Property SM Group - Henry Sy Sr. First became Shareholder in 1979 Foreign Shareholders Dee Group Others Source: Company f
Slide 33: Benefits of SM Group Synergy
Strong Support from Shareholders and Synergies with the 9 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 34: Board of Directors
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 • He is also the Chairman of listed companies of • China Bank Board Director since May 21, 1986, SM Investments Corporation, BDO Unibank, • Director
Slide 35: Board of Directors
Board of Directors • Director since 1993 • Director since 2001 • Director of SM Prime Holdings, Inc. • Former President of SM Investments Corp. • Director of Supervalue, Inc., Super • Director of SM Synergy Properties Holdings Corp., Shopping Market, Inc., National Sybase Equity Investments Corp., a
Slide 36: Management Team – Experienced, Successors in Place
Management Team – Experienced, Successors in Place Hans T. Sy Gilbert U. Dee Chairman of the Board Vice Chairman of the Board Vice Chair since 1989 Director since 1986 William C. Whang Romeo D. Uyan Director and President since Nov. 1, 2017 EVP and Chief Operating Officer (COO) Chairman of China Ban
Slide 37: Management Team – Experienced, Successors in Place
Management Team – Experienced, Successors in Place Benedict L. Chan Lilian Yu First Vice President and First vice President and Head of Treasurer and Head of Treasury Group Institutional Banking Group Advisor to the Board of China Bank Capital Lilibeth R. Carino Renato K. De Borja First Vice Preside
Slide 38: Management Team – Experienced, Successors in Place
Management Team – Experienced, Successors in Place Jose L. Osmeña Ananias S. Cornelio III First Vice President and First Vice President and Deputy Group Head of Retail Chief Risk Officer Branch Banking Delia Marquez Mary Ann Lim First Vice President and Vice President , Trust Officer and Head of Hea
Slide 39: Presentation Outline
Presentation Outline Economic Environment Company Profile Key Investment Merits Corporate and Corporate and Financial Financial Highlights Highlights 38
Slide 40: Financial Highlights – Income Statement
Financial Highlights Income Statement I n Php Millions 1H 1H Change 2018 2017 Amount % Net Interest Income 11,058 9,230 1,829 19.8 Non-interest Income 2,086 3,067 (981) (32.0) Total Operating Income 13,145 12,297 848 6.9 Total Operating Expenses 8,594 7,814 779 10.0 Income before Income Tax 4,551 4,
Slide 41: Financial Highlights – Balance Sheet
Financial Highlights Balance Sheet I n Php Millions 1H 1H Change 2018 2017 Amount % Total Assets 768,437 657,509 110,929 16.9 Loans and Receivables (net) 469,448 396,669 72,779 18.3 Total Deposits 653,443 554,039 99,403 17.9 Low Cost Deposits 374,588 284,656 89,932 31.6 Time Deposits 278,854 269,384
Slide 42: Credit Ratings
Credit Ratings Investment grade credit rating of Baa2 Same level as the Philippine sovereign rating and at par with the country’s top 3 biggest banks Upgraded IDR in Sept 2016 to ‘BB+’ from “BB’ and its viability rating to ‘bb+’ from bb (stable outlook) Affirmed just recently (Feb 2018) Up
Slide 43: Awards and Recognition
Awards and Recognition China Bank is among the country's top-scoring listed companies in the ASEAN Corporate Governance Scorecard (ACGS) for 2017—the only bank among the Philippine companies with scores of 100 points and above. Bell Award for Corporate Governance for the 5th Straight Year from T
Slide 44: 2018 Awards and Recognition
2018 Awards and Recognition Best Investor Relations Best Investor Best Corporate Best Investor Best Bank for Debt Professional - Relations Company – Governance Bank Relations Bank – Capital Markets Philippines – Philippines (Philippines) Philippines SVP Alexander C. China Bank Escucha 2015, 2016, 20
Slide 45: More than your banker, the right partner.
More than your banker, the right partner. Investor Relations: Investor Relations (IR) Team: 28/F, BDO Equitable Tower, 8751 Paseo de Roxas, Makati City Alexander C. Escucha Philippines, 1226 Senior Vice President acescucha@chinabank.ph Phone: (632) 885-5601 Fax: (632) 892-0238 Aerol Paul B. Banal, S