Saturday, December 14, 2019
 
Columnist
Martin Hennecke
 
BOC HONG KONG
HKEx Stock Code : 02388 
 
Corporate Profile
Principally engaged in the provision of banking and related financial services.

Business Review - For the year ended December 31, 2012

Personal Banking business delivered satisfactory performance in 2012 with solid growth in both loans and deposits. Net operating income before impairment allowances and profit before taxation reached HK$11,643 million and HK$5,513 million respectively.

We maintained our market leadership in new mortgage loans with 9.9% increase in residential mortgage loan balance. Our wealth management business posted solid performance with further increase in customer base. We enriched our products and services and provided more customised solutions to meet the different needs of our wealth management customers. Trading volume of the stock market in Hong Kong reduced substantially which dampened our brokerage business. Nevertheless, our other investment services performed strongly. Commission from funds distribution rose substantially by 60.2%, benefiting from the Group's strong performance in the distribution of RQFII funds and product diversification. Credit card business sustained its growth momentum in 2012. Fee income from the credit card business grew by 14.5%, driven by the increase of 10.9% in cardholder spending and 14.6% in merchant acquiring volume. Credit card advances rose by 19.5%. In the Bancassurance business, the Group strengthened its position as a prominent life insurance provider and maintained its lead in the RMB insurance market.

Corporate banking business continued to make good progress and delivered broad-based income growth. Net operating income before impairment allowances increased by 14.3% to HK$13,654 million while profit before taxation surged by 12.6% to HK$9,725 million.

Despite slower loan demand in the market, the corporate loan book grew 11.6% with encouraging growth in offshore RMB loans. The pricing of our corporate loan book improved on the back of our consistent strategy to balance growth and profitability. It strived to provide ¡§Total Solutions¡¨ with a full range of financial services, including innovative trade-related products and ¡§Integrated Branches for Commercial Business¡¨, to better serve the needs of major corporate and SME customers.

We also maintained our position as the top mandated arranger in Hong Kong-Macau syndicated loan market. In recognition of its long-standing support for SMEs in Hong Kong, the Group received for the fifth consecutive year the ¡§SME's Best Partner Award¡¨ presented by the Hong Kong General Chamber of Small and Medium Business Limited.

The Group made solid progress in developing its cash management business. The linkage of the Group's e-banking platform with those of BOC and its overseas branches has been completed. This has greatly stepped up the Group's cross-border cash management capabilities. Our custody business successfully secured mandates from a number of RQFII fund products. It also continued to expand its institutional client base and secured mandates to provide global custody services to various Qualified Domestic Institutional Investors.

Treasury segment recorded outstanding financial results in 2012. Net operating income before impairment allowances increased by 30.5% year-on-year to HK$9,625 million while profit before taxation increased by 28.7% to HK$8,382 million.

We continued to focus on prudently managing our banking book investments in view of the market complications and changes. Portfolio mix was further optimised. We increased our investments in government-related bonds, high quality bonds issued by Asia-Pacific financial institutions and corporations as well as RMB-denominated bonds.

On the product development front, we introduced various innovative products to help customers better manage their exchange rate risk and financing costs, which were well-received by customers. We also made good progress in expanding our offshore RMB business. As part of its ongoing efforts to facilitate the development of the offshore RMB bond market, the Group launched three new offshore RMB bond sub-indices and remained an active participant in the underwriting of offshore RMBdenominated bonds. Capitalising on our strong RMB franchise and close collaboration with BOC, we expanded our business relationships with banks and financial institutions in different geographical regions.

Our Mainland business delivered encouraging performance in a challenging banking environment. We recorded satisfactory growth in both deposits and loans which increased by 12.8% and 21.2% respectively. Net operating income increased by 17.9%.

The business platform of our NCB (China) was further strengthened in terms of product offering and distribution channels. A new series of products that were linked to interest rates, exchange rates, gold and commodity prices was introduced to cater to the increasing demand for wealth management services. Leveraging the ¡§Channel Sharing¡¨ model, which allows NCB (China)'s debit card holders to access services through BOC's branches and ATMs, it helped boost deposit growth and generate more retail banking business. During the year, eight new NCB (China) sub-branches were added.

Insurance business recorded robust profit growth and maintained its strong position in the RMB insurance market. Net operating income before impairment allowances increased by 106.1% year-on-year to HK$843 million. Profit before taxation grew substantially to HK$609 million from a low base of HK$33 million last year. The growth in profit was mainly attributable to the better investment performance as compared to an investment loss in 2011 amid the credit volatility in the financial market.

During the year, BOC Life was granted the approval to invest directly in the Mainland's interbank bond market, thus facilitating the expansion of RMB assets and the further development of its RMB insurance products. BOC Life received the honour of the ¡§Hong Kong Offshore RMB Centre ¡V 1st RMB Business Outstanding Awards ¡V The Outstanding Insurance Business¡¨ organised by some local media.

Business Outlook - For the year ended December 31, 2012

Looking into 2013, the overall operating environment looks mixed. We started the year with improved sentiment in global markets which brings along optimism to the outlook. However, some key fundamental issues in major economies are still unresolved which may continue to affect the stability of global markets. We, therefore, need to stay alert. Mainland China's economic performance, the US's fiscal cliff and the European debt crisis will remain the three major factors affecting the macroeconomic and market environment. There are still uncertainties over the pace of recovery for major economies and the growth could be fragile. Against this backdrop, the growth outlook for Hong Kong's economy would be modest.

For the local banking industry, banks may continue to face challenges coming from a fragile macro environment, persistently low interest rates and increasingly fierce competition. In addition, starting from 1 January 2013, the first phase of Basel III implementation has come into operation in Hong Kong. The new regulatory environment will require banks to operate on a higher capital base and efficiency. To adapt to the new capital requirement, banks may need to adjust their business strategies accordingly.

Despite the still challenging environment, the Group remains focused on driving its business development and capturing new opportunities, especially in the offshore RMB business. In January, leveraging the opportunities from the ¡§Cross-boundary RMB Loan Trial Scheme in Qianhai¡¨, the Group swiftly launched its cross-border RMB loan business and signed agreements with five enterprises registered in Qianhai to provide them with cross-border RMB direct loans. BOCHK has also been designated as a market maker for the USD/CNH (offshore RMB) futures by the Chicago Mercantile Exchange Group, being the sole bank among the first group of market makers. Our asset management arm continues to expand its business through strategic partnerships with overseas financial institutions to develop RMB-related investment products. Capitalising on our strong RMB franchise, we will continue to create new growth drivers by expanding our business scope, customer base and geographical coverage. We will also continue to work closely with BOC, our parent bank, to promote the global RMB service capabilities of BOC Group.

In view of the evolving market trends, the Group will continue to broaden and strengthen its business capabilities to better serve the diverse needs of customers. The investments we made over the past years proved to be very effective in supporting the development of our major business segments. Capitalising on our enhanced platforms, we successfully deepened customer relationships and attracted new customers. Our strategy will remain customer-centric. Through product and service innovation as well as channel optimisation, we aim to substantially enhance the overall customer experience. We will continue to focus on our customer segmentation strategy to provide more customised services to targeted customers.

Maintaining a strong financial position will continue to be one of the management's key priorities, especially amid current market conditions. As shown in our 2012 results, all our key financial ratios were at solid levels with strong capital and liquidity profile. With Basel III implementation to be effective this year, the Group is well prepared to meet the new capital standards while continuing our growth plans. We will continue to adopt our proactive approach in managing our assets and liabilities. While striving for income and profit growth, we will exercise rigorous risk management to safeguard our asset quality. We will also remain focused on disciplined cost control and attaining greater efficiency when growing our business.

2012 was the tenth anniversary of the Company's public listing in Hong Kong. I am pleased to see the healthy development and continuous reinforcement of our franchise over the past 10 years. For the success we achieved, I would like to express my deep appreciation to our customers and shareholders for their unwavering support and trust which enables us to realise our potential. I am also grateful to our Board of Directors for their wisdom and council. Of equal importance is the contribution of all my colleagues through their hard work and devotion.

Due to the need of the state financial work, Mr. XIAO Gang has resigned as Chairman and Non-executive Director of the Company and the Bank with effect from 17 March 2013. On behalf of the Group, I would like to take this opportunity to express our sincere gratitude and highest respect to him for his strong leadership and outstanding contributions during his tenure. We wish him every success in his new endeavour.

To support the Group's long-term development, we fully understand the importance of promoting sustainable development of the economy, society and environment where we operate. As a leading banking group in Hong Kong, we are committed to making positive contribution to the community's development and promoting CSR in every facet of our business.

Source: BOC Hong Kong (02388) Annual Results Announcement
Chairman Tian Guoli Issued Capital (shares) 10,573M
Par Value HKD 5 Market Capitalisation (HKD) 263,791M
 
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