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+China Merchants Bank
+Annual Report 2015
+Tel: 86755-83198888
+7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province, China
+Postcode: 518040
+1.1.4 Mailing Address:
+7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province, China
+1.1.3 Registered and Office Address:
+Securities Representative: Wu Jianbing
+(FCIS FCS(PE), FHKIOD, FTIHK)
+Joint Company Secretaries: Xu Shiqing, Seng Sze Ka Mee Natalia
+Secretary of the Board of Directors: Xu Shiqing
+Authorised Representatives: Tian Huiyu, Li Hao
+Fax: 86755-83195109
+1.1.2 Legal Representative: Li Jianhong
+1.1.1 Registered Company Name in Chinese: RESORA (Abbreviated
+Name in Chinese: 招商銀行)
+1.1 Company Profile
+Company Information
+Annual Report 2015
+I Company Information
+China Merchants Bank
+4
+The Company has disclosed herein the major risks involved in its operations and the
+proposed risk management measures. Please refer to Chapter V for the details in
+relation to risk management.
+Significant Risk Warning
+Model Code for Securities Transactions by
+Directors of Listed Issuers of Hong Kong
+Stock Exchange
+Registered Company Name in English: China Merchants Bank Co., Ltd.
+E-mail: cmb@cmbchina.com
+Website: www.cmbchina.com
+Customer service hotline: 95555
+1.1.10 Share Register and Transfer Office as to H Shares:
+Computershare Hong Kong Investor Services Ltd.
+China Securities Depository & Clearing Corporation Ltd., Shanghai Branch
+1.1.9 Depository for A Shares:
+Annual Report 2015
+I Company Information
+China Merchants Bank
+Legal Advisor as to Hong Kong Law: Herbert Smith Freehills
+1.1.8 Legal Advisor as to PRC Law: Jun He Law Offices
+Wang Lipeng, Wu Zhongming
+KPMG Certified Public Accountants
+Office Address: 8th Floor, Prince's Building,
+10 Charter Road, Central,
+Hong Kong
+Certified Public Accountants for Signature:
+KPMG Huazhen Certified Public Accountants
+Office Address: 8th Floor, Tower 2, Oriental Plaza,
+1 East Chang An Avenue, Beijing,
+China
+International Auditor:
+1.1.7 Domestic Auditor:
+Abbreviated Name of H Shares: CM BANK;
+Stock Code: 03968
+SEHK
+H Shares:
+Stock Code: 600036
+Abbreviated Name of A Shares: CMB;
+Shanghai Stock Exchange
+A Shares:
+1.1.6 Share Listing:
+21st Floor, Bank of America Tower, 12 Harcourt Road, Hong Kong
+1.1.5 Principal Place of Business in Hong Kong:
+Model Code:
+Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen's Road East, Wanchai,
+Hong Kong
+(Chapter 571 of the Laws of Hong Kong)
+SFO:
+3
+Definitions/Significant Risk Warning
+We have included in this report certain forward-looking statements with respect to the
+financial position, operating results and business development of the Group. We use
+words such as "will", "may", "expect", "try", "strive", "plan", "anticipate", "aim
+at", and similar expressions to identify forward-looking statements. These statements
+are based on current plans, estimates and projections. Although we believe that the
+expectations reflected in these forward-looking statements are reasonable, we give
+no assurance that these expectations will translate into reality or prove to be correct.
+Therefore they should not be deemed as the Group's commitments. Investors should
+not place undue reliance on such statements and should pay more attention to
+investment risks. You are cautioned that such forward-looking statements are related to
+future events or future financial position, business or other performance of the Group,
+and are subject to a number of uncertainties which may cause substantial differences in
+the actual results.
+Proposal of profit appropriation: As stated in the audited PRC financial statements of
+the Company for 2015, 10% of the profit after tax of RMB53.189 billion, equivalent
+to RMB5.319 billion, was transferred to the statutory surplus reserve, while 1.5% of
+the total amount of the increased risk assets in this reporting period, equivalent to
+RMB10.720 billion, was appropriated to the general reserve. Based on the total share
+capital of A Shares and H Shares on the record date for implementation of the profit
+appropriation, the Company proposed to declare a cash dividend of RMB6.90 (tax
+included) for every 10 shares to all shareholders of the Company, payable in RMB for
+holders of A Shares and in HKD for holders of H Shares. The retained profit will be
+carried forward to the next year. In 2015, the Company did not transfer any capital
+reserve into share capital. The above proposal of profit appropriation is subject to
+consideration and approval at the 2015 Annual General Meeting of the Company.
+Li Jianhong, Chairman of the Company, Tian Huiyu, President, Li Hao, First Executive
+Vice President and Chief Financial Officer, and Wang Tao, the person in charge of the
+Finance and Accounting Department, hereby make representations in respect of the
+truthfulness, accuracy and completeness of the financial statements in this annual
+report.
+Unless otherwise stated, all monetary sums stated in this annual report are expressed in
+RMB.
+KPMG Huazhen Certified Public Accountants and KPMG Certified Public Accountants
+(both being auditors of the Company) have separately reviewed the 2015 annual
+financial report prepared in accordance with the PRC Generally Accepted Accounting
+Principles and International Financial Reporting Standards, and issued standard auditing
+reports with unqualified opinions.
+The 45th meeting of the Ninth Session of the Board of Directors of the Company was
+held at the China Merchants Bank University, Shenzhen from 29 to 30 March 2016.
+The meeting was presided by Li Jianhong, Chairman of the Board. 13 out of 16 eligible
+directors attended the meeting in person. Tian Huiyu (Executive Director), Fu Gangfeng
+(Non-Executive Director) and Zhao Jun (Independent Non-Executive Director) failed to
+attend the meeting because of business appointments, and entrusted Li Hao (Executive
+Director), Hong Xiaoyuan (Non-Executive Director) and Leung Kam Chung, Antony
+(Independent Non-Executive Director) to exercise the voting right, respectively. A total
+of 16 valid votes were cast. 5 supervisors of the Company were present at the meeting.
+The convening of the meeting complied with the relevant provisions of the Company
+Law and the Articles of Association of the Company.
+The Board of Directors, the Board of Supervisors, directors, supervisors and senior
+management of the Company confirm that the contents in this annual report are true,
+accurate, and complete and have no false representations, misleading statements or
+material omissions, and they will individually and collectively accept legal responsibility
+for such contents.
+7.
+Definitions
+6.
+4.
+3.
+2.
+1.
+Important Notice
+Annual Report 2015
+Important Notice
+China Merchants Bank
+XII Financial Report
+159
+5.
+Company, Bank, CMB or
+China Merchants Bank:
+China Merchants Bank Co., Ltd.
+Group:
+China Merchants Bank Co., Ltd. and
+its subsidiaries
+KPMG Huazhen Certified Public
+Accountants (Special General Partnership)
+Accountants:
+KPMG Huazhen Certified Public
+China Merchants Securities Co., Ltd.
+CM Securities:
+CIGNA & CMB Life Insurance:
+CIGNA & CMB Life Insurance Co., Ltd.
+China Merchants Fund or CMFM:
+China Merchants Fund Management
+Co., Ltd.
+CMB International Capital or CMBIC:
+CMB International Capital Holdings
+Corporation Limited
+CMB Financial Leasing or CMBFL:
+CMB Financial Leasing Co., Ltd.
+Wing Lung Bank and its subsidiaries
+Wing Lung Group:
+Wing Lung Bank Limited
+Wing Lung Bank or WLB:
+The Rules Governing the Listing of
+Securities on the SEHK
+Hong Kong Listing Rules:
+The Stock Exchange of Hong Kong
+Limited
+Hong Kong Stock Exchange or
+SEHK:
+China Insurance Regulatory
+Commission or CIRC:
+China Insurance Regulatory
+Commission
+Commission or CSRC:
+China Securities Regulatory
+Commission
+China Securities Regulatory
+China Banking Regulatory
+Commission
+Commission or CBRC:
+China Banking Regulatory
+Securities and Futures Ordinance
+XI Documents Available for Inspection
+1.1.11 Websites and Newspapers designated by the Company for Information
+Mainland China:
+7
+Expand and strengthen our presence in domestic market, boost investments
+in economically developed regions, rationally expand our network into
+highly potential regions and steadily explore overseas markets by following
+customers' strategies.
+Rationally expand physical network, innovate and develop e-banking,
+accelerate the establishment of a powerful multi-channel distribution system
+with operating synergies.
+Establish and Improve professional, independent, vertical and comprehensive
+risk management system and continuously enhance our overall risk
+management level while focusing on improving our overall risk management
+capability.
+Strive to enhance our professional customer-centric management capability
+and our fast-response market-oriented management capability through
+system reform and process optimisation and with the support of IT
+technologies.
+Adhere to the "customer-centric" business philosophy, focus on exploring
+high-value customer groups while continuously expanding basic customer
+base in retail finance, corporate finance and financial institutions finance.
+Increasingly optimise customer structure and establish a highly professional
+customer service system.
+Focus on promoting services and forging an asset-light bank, make
+breakthroughs through product innovation and service upgrading, and put
+an emphasis on developing financial businesses such as wealth management
+and asset management. In addition, the Company endeavours to promote
+the rapid growth of its non-interest income, further pushes forward
+structural adjustments and business transformation, improves the capital
+utilisation rate and reduces capital consumption, while making reasonable
+efforts to develop its traditional businesses such as deposit taking and
+lending.
+Position its retail finance as "one body" and its corporate finance and
+financial institutions finance as "two wings". The Company will promote
+the "one body" to play a bigger role in driving the development of the
+"two wings", while procuring its corporate finance and financial institutions
+finance to render more support to the growth of its retail finance. Therefore,
+the Bank will promote the concerted development of "one body" and "two
+wings" and create its distinguished competitive edge.
+An innovative bank distinguished by leading
+profitability, sound business structure, first-class
+service, steady operation management and excellent
+brand image
+Striving to become the best commercial bank in China
+with international competitive edge
+8
+Creating a blue-chip for the stock market, building a
+bank that thrives for centuries
+Strategic positioning:
+Strategic objective:
+Development vision:
+1.3 Development Strategies, Investment
+Value and Core Competitiveness
+Annual Report 2015
+I Company Information
+China Merchants Bank
+Haikou
+Foshan Shenzhen
+Guangzhou Dongguan
+Development Strategies:
+China Merchants Bank
+Annual Report 2015
+I Company Information
+On 26 June 2015, at the press conference for the release of the "Social
+Responsibility Report for China Banking Industry in 2014" and the awarding
+ceremony for excellence in social responsibility works organised by China
+Banking Association, the Company was honoured the "Best Financial
+Institution in Social Responsibilities of the Year" and received the "Best
+Green Finance Award for Excellence in Social Responsibilities of the Year"
+for the fourth consecutive time; and won the "Award for Outstanding Public
+Charity Programme of the Year" with the campaign titled CMB Caring (
+) participated by volunteers across the Bank.
+In May 2015, in the awarding activity organised by The Asset magazine
+(a prestigious international financial magazine), the Company received
+the "Best Emerging Transaction Banking" award; and also won the "Best
+Treasury and Working Capital Management (SMEs) in China "award and the
+"Best Solution (Cross-border Cash Pool Project) in China" award.
+On 28 May 2015, in the awarding activity named "Golden Wealth
+Management" organised by Shanghai Securities News, the Company
+received the "Best Credit Card" award for its credit card products, and the
+"Most Innovative Mobile Internet Financial Products" award for its CMB
+Life App; and the "Best Trade Finance Bank" award for its trade finance
+business.
+In April and May 2015, the Company received five awards from The Asian
+Banker magazine (a prestigious international financial magazine), namely
+the "Best Cash Management Bank in China", the "Best Mobile Banking
+Technology Achievement Award", the "Best Supply Chain Finance in Asia
+Pacific Region", the "Best Wealth Management Business in China" and the
+"Best Intelligent Service Outlet Project in China".
+On 19 March 2015, in the awarding activity named "Excellence in Retail
+Financial Services in Asia Pacific for 2015" organised by The Asian Banker
+magazine (a prestigious international financial magazine), the Company
+was awarded the "Best Retail Bank in China" and the "Best Joint Stock
+Retail Bank in China" once again. The bank had won the "Best Retail Bank
+in China" award for the sixth time and "the Best Joint Stock Retail Bank
+in China" award for the eleventh time since its first participation in the
+awarding activity.
+On 12 February 2015, the Company received five awards, namely the "Best
+China Credit Fixed Income," the "Best China Credit Derivatives", the "Best
+China Credit Fixed Income Research", the "Best China Credit Sales "and
+the "Best China Credit Services" from Asia Money magazine (a prestigious
+international financial magazine), and became the only winning Chinese
+bank in the fixed income category.
+In 2015, the Company won a number of honors in the awarding activities organised
+by prestigious organisations both at home and abroad, including:
+1.4 Awards and Honors Received in 2015
+I Company Information
+China Merchants Bank
+Annual Report 2015
+Sound customer base and rapidly increasing high-value customers.
+Continuously growing brand influence.
+High quality services that have set the industry benchmark.
+The powerful IT team and IT capability as well as the leading IT platform
+have enabled us to keep abreast with Internet development, innovate
+products, services, channels and business model, constantly improve the
+efficiency and quality of customer services and reduce operating costs.
+The Company has been constantly improving its organisational management
+system, optimising its operation process and improving its management and
+operation efficiency. Guided by the goals of "professionalism, delayering and
+intensification", the Company has made initial achievements in the system
+reform of branches, effectively improving the seamless structural integration
+between our headquarters and branches.
+The comprehensive, modern and scientific risk management system, the
+capital management system, the operational management system, the
+information management system, the performance appraisal system and the
+human resource management system of the Company which have been put
+in place and the relevant capabilities acquired can guarantee the healthy
+development of and strong competitiveness in business operation in the
+long run.
+The comprehensive operation system has been basically established, and
+cross-segment product innovation and business coordination have been
+actively promoted, therefore the benefits of strategic synergy and financial
+synergy have been revealed.
+The "three-in-one" cross-border finance platform, comprising overseas
+institutions (Wing Lung Bank and overseas branches) undergoing relatively
+rapid global penetration and business expansion, offshore banking units and
+domestic branches, is producing new growth drivers and competitive edges.
+The financial institutions finance has formed new profit drivers through the
+dual-engines of macro asset management and financial market transactions.
+Various businesses such as bills business, asset management business,
+custody business and financial market business have all achieved healthy
+development.
+The Company has featured corporate finance business up to professional
+management standard. Our transaction banking business maintains obvious
+competitive advantages while our investment banking business is gaining
+competitive strength.
+The Company has a leading position in retail finance business with unique
+competitive advantage. Our retail finance has formed structural advantages
+in customers, products, channels and brand, etc., and is growing stronger
+and bigger.
+The Company has established a sound corporate governance mechanism
+and a scientific decision-making system, which are working effectively and in
+line with the development of the operation and management of commercial
+banks.
+The Company persistently follows the operation concept of "keeping
+balance between efficiency, quality and scale", and has built up a
+professional team, which boasts good execution and strong capabilities in
+business innovation and steady operation. In addition, it has established a
+sound corporate culture of "compliant operation, scientific management
+and steady development". The operation management of the Bank remains
+"reasonable, effective, healthy and stable".
+Investment Value and Core Competitiveness:
+Xiamen
+Disclosure:
+Fuzhou
+Quanzhou
+Ningbo
+1,963
+Changchun
+Harbin
+In 2015, confronting the decline in economic growth, the Company proactively adapted
+to changes in external environment, steadily pushed forward its strategic transformation
+and made concerted effort to maintain a moderate growth momentum. For further details,
+please refer to the sections headed "Chairman's Statement" and "President's Statement".
+Urumuchi
+Founded in 1987 with its head office in Shenzhen, China, the Company is a national
+commercial bank with significant scale and strength in China. The Company mainly
+focuses on the market in China. The Company's distribution network primarily covers
+China's more economically developed regions such as Yangtze River Delta, Pearl River Delta
+and Bohai Rim, and some large and medium cities in other regions. For details, please
+refer to the section headed "Distribution channels" and the section headed "Branches
+and representative offices". The Company currently has 1,963 domestic and overseas
+correspondent banks in 111 countries (including China) and regions. The Company was
+listed on the Shanghai Stock Exchange in April 2002 and on the SEHK in September 2006.
+The Company provides customers with various wholesale and retail banking products
+and services, and maintains treasury businesses for proprietary purpose and on behalf of
+customers. Many innovative products and services of the Company, such as "All-in-one
+Card", a multi-function debit card, "All-in-one Net", a comprehensive online banking
+service platform, the dual-currency credit card, the "Sunflower Wealth Management"
+services and private banking services, mobile Internet finance services such as Mobile
+Banking and CMB Life () App, global cash management, bills business, offshore
+finance and other transaction banking services, as well as asset management, asset custody
+and investment banking services, have been widely recognised by consumers in China.
+1.2 Corporate Overview
+I Company Information
+China Merchants Bank
+Annual Report 2015
+6
+5
+Shenyang
+LO
+Shekou Branch
+Initial registration place: Shenzhen Administration for Industry and Commerce,
+Initial registration date: 31 March 1987
+1.1.12 Other Information about the Company:
+Place of maintenance of annual reports: Office of the Board of Directors of the
+Company
+website of the Company (www.cmbchina.com)
+website of SEHK (www.hkex.com.hk),
+website of Shanghai Stock Exchange (www.sse.com.cn),
+website of the Company (www.cmbchina.com)
+"China Securities Journal", "Securities Times", "Shanghai
+Securities News"
+Hong Kong:
+Unified Social Credit Code: 9144030010001686XA
+Tangshan
+Hohhot
+Beijing
+Suzhou
+Hangzhou
+Wuhan
+Shanghai
+Hefei
+Wuxi
+Nanjing
+Nanning
+Kunming
+Guiyang
+Chongqing
+Chengdu
+Xi'an
+Zhengzhou
+Lanzhou
+and regions
+Qingdao
+Xining
+domestic and overseas correspondent banks in 111 countries
+Jinan
+Taiyuan
+Yinchuan
+Tianjin
+Shijiazhuang
+Dalian
+Changsha Nanchang Wenzhou
+On 28 June 2015, as valued by the Review Committee for China's 500 Most
+Valuable Brands, the Company's brand was valued at RMB68.813 billion, and
+was included in the ninth selection of China's 500 Most Valuable Brands.
+158
+157
+11
+I Company Information
+Il Summary of Accounting Data and Financial Indicators
+14
+III Chairman's Statement
+18
+4
+IV President's Statement
+V Report of the Board of Directors
+22
+5.1 Analysis of Overall Operation
+23
+5.2 Analysis of Income Statement
+32
+22
+Significant Risk Warning
+3
+Definitions
+X Report of the Board of Supervisors
+M 招商銀行
+CHINA MERCHANTS BANK
+CHINA MERCHANTS BANK CO., LTD.
+(a joint stock company incorporated in the
+People's Republic of China with limited liability)
+Stock Code 03968
+2015 Annual Report
+We are here
+Just for you
+China Merchants Bank
+Annual Report 2015
+Contents
+1
+Contents
+2
+Important Notice
+3
+5.3 Analysis of Balance Sheet
+42
+9
+48
+95
+5.14 Key Relationship with Stakeholders and Environmental Policies and
+Performance
+5.15 Management Contracts
+95
+95
+96 5.17 Compliance with the Relevant Laws and Regulations
+5.13 Social Responsibility
+97
+108
+VII Changes in Shares and Information on Shareholders
+116
+VIII Directors, Supervisors, Senior Management, Employees and Organisational
+Structure
+135
+5.4 Loan Quality Analysis
+VI Important Events
+95
+5.16 Permitted Indemnity Provision
+93
+5.12 Profit Appropriation
+51
+5.6 Results of Operating Segments
+53
+5.7 Others
+5.8 Business Development Strategies
+57
+53
+5.5 Analysis of Capital Adequacy Ratio
+67
+5.10 Business Operation
+IX Corporate Governance
+85
+5.11 Risk Management
+5.9 Changes of the External Environment and the Corresponding Measures
+The Company's liquidity risk management is conducted under a model that requires overall coordination by the Head
+Office with each of the branches acting in concert. The Asset and Liability Management Department of the Head
+Office as a treasurer of the Company is in charge of routine liquidity risk management. The treasurer is responsible
+for managing liquidity on a prudent basis in compliance with relevant regulatory requirements, and conducting
+centralised liquidity management through limit management, budget control, active liability as well as internal funds
+transfer pricing, etc.
+V Report of the Board of Directors
+5.11.5 Liquidity risk management
+Liquidity risk is the risk that the Company cannot satisfy its customers by repaying deposits that fall due, granting
+new loans or providing financing, or that the Company cannot satisfy these requirements at a normal cost.
+Under the principle of separating the formulation, implementation and monitoring functions of liquidity risk
+management policies, the Company has established a liquidity risk management governance structure, defined
+the roles, duties and reporting lines of the Board of Directors, the Board of Supervisors, the senior management,
+special committees and related departments in liquidity risk management, so as to enhance the effectiveness of
+liquidity risk management. The Company's cautious attitude towards liquidity risk is more appropriate for the current
+development stage of the Company. The current liquidity risk management policies and systems of the Company are
+basically in line with regulatory requirements and its own management requirements.
+The Company measures, monitors and identifies liquidity risk for short-term reserves and duration structure and
+emergency purpose. It monitors the limit indicators closely at fixed intervals. Stress tests are regularly used to find
+out whether the Company is able to meet liquidity requirements under extreme circumstances. In addition, the
+Company has put in place liquidity contingency plans and organised regular liquidity contingency drillings to guard
+against any liquidity crisis.
+China Merchants Bank
+Annual Report 2015
+1
+Liquidity coverage ratio is an external regulatory indicator - the legal person calibre
+91
+92
+22
+China Merchants Bank
+Annual Report 2015
+In the first half of 2015, market liquidity was comparably easing from an overall perspective, and only appeared
+to be tight periodically due to seasonal factors such as the Chinese New Year. Despite the continuing decrease
+of funds outstanding for foreign exchange, institutional participants in the market maintained a relatively
+optimistic anticipation for stable money supply in the near future owing to the reduction in deposit reserve ratio
+and interest rate cuts by the central bank as well as the lowered interest rate for reverse repurchase in the open
+market, therefore there was abundant liquidity in the interbank market, and the Company was only exposed to
+moderate-to-low level of liquidity risk. In the second half of the year, the central bank increased the use of monetary
+policies. While maintaining its strategy of deposit reserve ratio reduction and interest rate cuts implemented in the
+first half of the year, the central bank reformed the appraisal system of deposit reserve and established interest rate
+corridor to induce the market interest rate to lower levels in the medium and long term. The overall market liquidity
+was neutral and tended to be easing. As at the end of the year, affected by the maturity of MLF, deposit deviation
+assessment and seasonal factors, market liquidity experienced slight fluctuation. The Company has made appropriate
+liquidity arrangement in advance in order to safeguard the overall steady operation of the Bank. As at the end of
+December 2015, the Company's liquidity coverage ratio was 119.71%1, representing 49.71 percentage points higher
+than the minimum requirement of CBRC.
+During the reporting period, in order to prevent loss arising from systematic operational risk and material operational
+risk, the Company further implemented the risk assessment, monitoring and alert policy, improved risk management
+model and strengthened prevention and control of risks in respect of key operational risks, namely the "operational
+risks associated with emerging finance business, credit business, manual intervention, Internet finance business, IT
+support, outsourcing and staff". Firstly, focusing on the strategic businesses and major businesses of the Bank, we
+carried out a comprehensive risk assessment, conducted a thorough and in-depth analysis of the current business
+conditions from various perspectives including organisational structure, personnel, risk management, rule-making,
+system building and peer comparison, and put forward corresponding management suggestions. Secondly, we made
+in-depth analysis of typical cases, carried out special risk assessment and event-triggering assessment, and cultivated
+bank-wide actions to enhance early warning and prevention by measures such as issuing risk alert and arranging risk
+examination. Thirdly, we participated in evaluation of various new products and new businesses, and expressed our
+view with respect to operational risk management and full-process management and control, thus further improved
+the effectiveness of operational risk management. Fourthly, we strengthened control over manual intervention
+business, specified the management requirements for manual intervention business, organised a comprehensive
+review on manual intervention business so as to analyse existing problems and management difficulties, and put
+forward corresponding managerial suggestions.
+55,911
+of RMB)
+30.22
+V Report of the Board of Directors
+16,897
+30.22
+51,743
+15,636
+Operational risk refers to the risk of loss arising from inappropriate or failed internal procedures, people, IT systems,
+or external events.
+financial
+statements (%)
+90
+90
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+The primary exchange rate risk of banking book of the Company comes from the maturity mismatch
+between foreign currency positions of its non-RMB denominated assets and liabilities. Through rigorous
+management of exchange rate risk, the Company has kept the exchange rate risk of its banking book within
+the acceptable range.
+The Company mainly uses foreign exchange exposure analysis, scenario simulation analysis, stress test, and
+other methods to measure and analyse the exchange rate risk of banking book. The Company regularly
+measures and analyses changes in its foreign exchange exposure of banking book and monitors and
+reports exchange rate risk on a monthly basis under its limit framework. Based on the trend of exchange
+rate movements, the Company adjusts its foreign exchange exposure accordingly to mitigate the relevant
+exchange rate risk of its banking book. In 2015, the Company further optimised the measurement of its
+exchange rate risk under banking book which provides scientific reference standards for appropriately making
+management decisions. In addition, the Company further enhanced the monitoring of its exchange rate risk
+under banking book and the approval and management of risk limits, so as to keep its risk exposure at a
+reasonable level.
+of RMB)
+The Company has adopted various measures to tackle liquidity risk during the year, thereby ensuring a sound
+liquidity position across the Bank. Firstly, the Company implemented the FTP mechanism in a flexible manner as
+guidelines to the branches as regard to the term and amount of liabilities and maintain the balance between the
+source and use of funds. Secondly, the Company increased efforts to improve the maturity mismatch management
+of assets and liabilities of standalone business lines, such as our bills business. Thirdly, the Company flexibly
+conducted short-, medium- and long-term active liability-taking by adopting various measures including issuance of
+negotiable interbank certificates of deposits and certificates of large-amount deposits, carried out financing activities
+by following monetary policies and employing instruments introduced by the central bank, and took into account
+liquidity and cost of fund as well, with a view to secure the source of funds of the Company. Fourthly, the Company
+steadily promoted the securitisation of assets, and launched asset securitised products of RMB23.02 billion in 2015.
+Fifthly, the Company laid down investment and financing strategies based on its dynamic future cash flow gap
+forecast through adoption of forward-looking active risk management, in an attempt to reduce costs and improve
+profitability.
+China Merchants Bank
+Annual Report 2015
+Reputational risk refers to the risk that the Company might be negatively evaluated by relevant interested parties
+due to the Company's operations, management and other activities or external incidents.
+Year
+Number of
+bonus shares
+for every ten
+shares held
+(No. of shares)
+Cash dividend
+for every ten
+shares held
+(RMB, inclusive
+of tax)
+Number of
+shares issued
+on capitalisation
+of surplus
+reserve for
+every ten
+shares
+held (No. of
+shares)
+2013
+2014
+2015 Note
+5.12.2 Profit appropriation for the last three years:
+6.20
+6.90
+Total cash
+dividends
+(inclusive of
+tax, in millions
+Net profit
+attributable to
+shareholders in
+the consolidated
+financial
+statements for
+the year
+(in millions
+Proportion of
+cash bonus to
+net profit
+attributable to
+6.70
+As stated in the audited financial statements of the Company for 2015, 10% of the profit after tax of RMB53.189
+billion, equivalent to RMB5.319 billion, was allocated to the statutory surplus reserve, while 1.5% of the total
+balance of the incremental risk assets, equivalent to RMB10.720 billion, was appropriated to the general reserve.
+Based on the then total share capital of A Shares and H Shares on the record date for implementation of the profit
+appropriation, the Company proposes to declare a cash dividend of RMB6.90 (tax included) for every ten Shares to
+all shareholders of the Company, payable in Renminbi for holders of A Shares and in Hong Kong Dollars for holders
+of H Shares. The actual appropriation amount in HKD will be calculated based on the average RMB/HKD benchmark
+rates to be released by the PBOC for the week before the date of the general meeting (inclusive of the day of the
+general meeting). The retained profit will be carried forward to the next year. In 2015, the Company did not transfer
+any capital reserve into share capital. The above proposal of profit appropriation is subject to consideration and
+approval at the 2015 Annual General Meeting of the Company.
+5.12.1 The profit appropriation plan for 2015
+5.12 Profit Appropriation
+Reputational risk management is an important part of the corporate governance and the overall risk management
+system of the Company, covering all activities, operations and businesses undertaken by the Company and its
+subsidiaries. The Company established and formulated the reputational risk management system and relevant
+requirements and took initiatives to effectively prevent the reputational risk and respond to any reputational
+incidents, so as to reduce loss and negative impact to the greatest extent.
+During the reporting period, relying on its systematic reputational risk management, the Company strengthened
+its efforts in building a sound reputational risk management team, and established a more effective multi-media
+information disclosure mechanism to offer proper guidance to public opinion. The Company also improved
+reputational risk front-line management and early-warning mechanisms and accelerated its response to public
+sentiments so as to effectively prevent reputational loss. In addition, the Company conducted periodic analysis of
+data in relation to public sentiments to improve both services and products.
+5.11.7 Compliance risk management
+Compliance risk refers to the risk of being subject to legal sanctions, regulatory punishments, material financial
+losses, and reputational loss as a result of the failure to observe the laws, rules and standards. The Board of
+Directors of the Company is ultimately responsible for the compliance of the operating activities, and delegates
+the Risk and Capital Management Committee under the Board to supervise the compliance risk management. The
+Risk and Compliance Management Committee of the Head Office is the supreme governing body under the senior
+management of the Company to manage the compliance risk of the whole Company. The Company has established
+a comprehensive and effective compliance risk management system, optimised the organisational management
+structure which comprises the risk and compliance management committees, compliance supervisors, compliance
+officers and legal and compliance departments under the Head Office and its branches, and compliance supervisors
+at branch and sub-branch levels, improved the three lines of defense for compliance risk management and the
+double-line reporting mechanism, and achieved effective management and control of compliance risk by improving
+the operation mechanism of the compliance risk management and the risk management expertise and processes.
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+During the reporting period, the Company proactively adapted to the adjustments in regulatory polices and addressed
+the significant changes in financial situation and risk control. Focusing its efforts on strategic transformation, forging
+"Asset-light Banking" and responding to changes in business process and management system, the Company
+formulated and implemented the guiding opinion regarding risk management-oriented internal control and
+compliance work, assigned the compliance management targets and requirements to the whole bank, strengthened
+the understanding of polices and the circulation and delivery of new regulations, complied with regulatory policies
+and identified business opportunities; provided professional legal compliance service, supported value innovation and
+promoted the concerted development of "One Body with Two Wings". The Company consolidated its fundamentals
+of inherent internal control and compliance management, optimised system building and improved policies and
+systems in relation to internal control and compliance management so as to strictly prevent and effectively relieve the
+risks associated with internal control and compliance. The Company also proactively conducted compliance training
+activities with diversified contents using flexible methods including "learning regulations to keep bottom line" and
+cultural promotion activities for honest duty performance, steadily coordinated the chief executives and compliance
+officer of each branch and sub-branch to attend compliance courses, so as to continue to create good compliance
+environment. The Company promoted the overall management of supervision, examination and troubleshooting,
+and strengthened the management of conduct of employees and the misconduct points program, thus striving to
+formulate an integrated internal control and compliance management system.
+5.11.8 Anti-money laundering management
+The Company takes anti-money laundering as its social responsibility and legal obligation and attaches great
+importance to anti-money laundering. The Company has established a professional anti-money laundering team
+to carry out anti-money laundering compliance management, anti-money laundering name-list verification and
+the monitoring of large-amount transactions and suspicious transactions, and put in place a relatively complete
+anti-money laundering monitoring system.
+In 2015, the Company further enhanced its anti-money laundering rules in response to the changes in regulatory
+policies and the operational and management systems of the Company, initiated a comprehensive overhaul of its
+anti-money laundering management measures, and formulated the anti-money laundering policy of the Group and
+assessment guidelines in respect of money laundering risk. According to the changes of the monitoring procedures
+of anti-money laundering measures of the Company and the risk of money laundering, the Company further
+improved its anti-money laundering monitor system, adjusted suspicious transaction monitoring standard in a timely
+manner, and continued to promote the centralised monitoring and analysis work for suspicious transactions, so as to
+improve the effectiveness of anti-money laundering management.
+93
+=4
+94
+17,402
+V Report of the Board of Directors
+5.11.6 Reputational risk management
+57,696
+if the Company generated profits in the previous accounting year but the Board of Directors did
+not make any cash profit appropriation proposal after the end of the previous accounting year, the
+Company shall state the reasons for not distributing the profit and the usage of the profit retained in
+the periodic report and the independent directors shall give an independent opinion in such regard;
+Note: The proposal of profit appropriation for 2015 is subject to consideration and approval at the 2015 Annual General Meeting of the Company.
+6.2 Financial highlights
+The Company is engaged in banking and related financial services.
+6.1 Principal business activities
+Important Events
+Annual Report 2015
+VI Important Events
+Details are set out in Chapter II Summary of Accounting Data and Financial Indicators of this annual report.
+China Merchants Bank
+Chairman of the Board of Directors
+30 March 2016
+Li Jianhong
+By order of the Board of Directors
+During 2015, so far as the Board is aware, the Company has complied in all material respects with the relevant laws
+and regulations that have a significant impact on the operations of the Company.
+5.17 Compliance with the Relevant Laws and Regulations
+The Company has maintained appropriate insurance coverage for directors' and officers' liabilities in respect of legal
+actions against its directors and senior management arising out of corporate activities.
+98
+5.16 Permitted Indemnity Provision
+6.3 Reserve
+6.4 Fixed assets
+shareholders in
+As at the end of the reporting period, the operating income of the top 5 customers of the Company did not exceed
+30% of the total operating income of the Company. As far as the Company is aware, none of the directors, their
+close associates or any shareholders (who to the best knowledge of the directors own more than 5% of the issued
+shares of the Company) has any interests in the aforesaid top 5 customers.
+6.8 Principal customers
+Details about retirement and welfare provided by the Company to its employees are set out in Note 37 to the
+financial statements in this annual report.
+6.7 Retirement and welfare
+There is no provision for pre-emptive rights under the Articles of Association of the Company and the shareholders
+of the Company have not been granted any pre-emptive rights.
+For details of changes in the Company's reserves, please refer to its Statement of Changes in Equity.
+6.6 Pre-emptive rights
+6.5 Purchase, sale or repurchase of listed securities of
+the Company
+99
+99
+VI Important Events
+China Merchants Bank
+Annual Report 2015
+Changes in fixed assets of the Company as at 31 December 2015 are set out in Note 25 to the financial statements
+in this annual report.
+Neither the Company nor its subsidiaries had purchased, sold or repurchased any of the Company's listed securities
+during the reporting period.
+30.16
+No contracts concerning the management and administration of the whole or any substantial part of the business of
+the Company were entered into or existing during the year.
+97
+the Company may distribute dividends in cash, shares or a combination of cash and shares, and
+it shall distribute dividends mainly in cash. Subject to compliance with prevailing laws, regulations
+and the requirements of relevant regulatory authority on the capital adequacy ratio, as well as
+the requirements of general working capital, business development and the need for substantial
+investment, merger and acquisition plans of the Company, the cash dividend to be distributed by the
+Company each year in principle shall not be less than 30% of the net profit after taxation audited in
+accordance with PRC accounting standards for that year. The Company may pay interim cash dividend.
+Unless another resolution is passed at the shareholders' general meeting, the Board of Directors shall
+be authorised by the shareholder at a general meeting to approve the interim profit appropriation
+plan;
+(7)
+(6)
+(5)
+(4)
+(3)
+if the Board of Directors considers that the price of the shares of the Company does not match the
+size of share capital of the Company or where the Board of Directors considers necessary, the Board
+of Directors may propose a dividend appropriation plan and implement the same upon consideration
+and approval at a general meeting, provided that the abovementioned cash profit appropriation
+requirements are satisfied;
+(2)
+(1)
+As specified in the Articles of Association of China Merchants Bank Co., Ltd. (revised in 2014) (the "Articles
+of Association"), the profit appropriation policies of the Company are:
+1.
+5.12.3 The formulation and implementation of the Company's cash dividend policies
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+profit appropriation of the Company shall focus on reasonable returns on investment of the investors,
+and such policies shall maintain continuity and stability;
+5.15 Management Contracts
+the Company shall pay cash dividends and other amounts to holders of domestic shares and such
+sums shall be calculated, declared and paid in Renminbi. The Company shall pay cash dividends and
+other amounts to holders of H Shares and such sums shall be calculated and declared in Renminbi
+and paid in Hong Kong dollars. The foreign currencies required by the Company for payment of cash
+dividends and other sums to shareholders of overseas listed foreign shares shall be handled according
+to the relevant requirements of foreign exchange administration of the State;
+the Company shall disclose the implementation progress of the cash dividend policy and other
+relevant matters in its periodic reports in accordance with the applicable requirements.
+97
+V Report of the Board of Directors
+China Merchants Bank
+The account of the Company's key relationships with its key stakeholders and discussion on the Group's
+environmental policies and performance are included in the Social Responsibility Report of China Merchants Bank
+Co., Ltd. for 2015, and the discussion forms part of this Report. Names of directors and supervisors (including
+resigned directors and supervisors) are more particularly set out in Chapter VIII which also forms part of this Report.
+5.14 Key Relationship with Stakeholders and
+Environmental Policies and Performance
+Adhering to the principle of "Gain from society and contribute to society", the Company is always active in fulfilling
+its social responsibilities on poverty alleviation, green loans, charity activities and support to SMEs. The total amount
+of the charitable donations and other donations contributed by the Company and its employees for the reporting
+period was RMB36.4658 million, representing a social contribution value of RMB8.57 per share at the end of the
+period. For details of the Company's fulfilment of its social responsibilities, please refer to the "Corporate Social
+Responsibility Report of China Merchants Bank Co., Ltd. for 2015".
+where appropriation of the Company's fund by a shareholder, which is in violation of relevant rules,
+has been identified, the Company shall make deduction against the cash dividend to be paid to such
+shareholder, and such amount shall be used as the reimbursement of the funds appropriated; and
+5.13 Social Responsibility
+2.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+96
+96
+95
+During the reporting period, the profit appropriation plan of the Company for 2014 was implemented in
+strict accordance with the relevant provisions of the Articles of Association. It was considered and approved
+by the 30th meeting of the Ninth Session of the Board of Directors of the Company, and submitted for
+consideration and approval at the 2014 Annual General Meeting. The criteria and proportion of cash dividend
+were clear and specific, and the Board of Directors of the Company has implemented the profit appropriation
+plan. The profit appropriation plan of the Company for 2015 will also be implemented in strict accordance
+with the relevant provisions of the Articles of Association. It will be considered and approved by the 45th
+meeting of the Ninth Session of the Board of Directors of the Company, and submitted for consideration and
+approval at the 2015 Annual General Meeting. The independent directors of the Company have expressed
+their independent opinions on the profit appropriation plans for 2014 and 2015 that the profit appropriation
+plans of the Company and their implementation process have provided adequate protection for the legitimate
+rights and interests of minority investors.
+Annual Report 2015
+5.11.4 Operational risk management
+the consolidated
+The Company emphasises risk management of the guarantee business. It has formulated specific management
+measures and operation workflow according to the risk profile of this business. In addition, the Company has
+enhanced risk monitoring and safeguarded this business through management means such as on-site and off-site
+checks. During the reporting period, the Company's guarantee business was in normal operation and there were no
+non-compliant guarantees.
+After review, it was ascertained that the guarantee business of China Merchants Bank Co., Ltd. was approved by
+the PBOC and the CBRC, and it was carried out in the ordinary course of business of the Banks as a conventional
+business. As at 31 December 2015, the balance of the Company's guarantee business was RMB236.077 billion,
+accounting for 67.06% of the Company's net assets.
+In accordance with CSRC Approval [2003] No.56 of China Securities Regulatory Commission and the relevant
+provisions of Shanghai Stock Exchange, the independent non-executive directors of China Merchants Bank Co., Ltd.
+carried out a due diligence review of the Company's guarantees for 2015 on an open, fair and objective basis, and
+their opinions are as follows:
+Explanatory notes and independent opinions of the independent
+non-executive directors towards the Company's guarantees
+China Merchants Bank Co., Ltd.
+Guarantee business falls within the Company's ordinary course of business. During the reporting period, save for the
+financial guarantees entered into in our normal business scope approved by the PBOC and the CBRC, there was no
+other significant discloseable guarantee.
+During the reporting period, there was no significant entrustment in respect of fund and asset management.
+Significant guarantees
+Significant entrustments in respect of fund and asset management
+During the reporting period, none of the material contracts of the Company involving holding in custody, contracting
+or hiring or leasing of any assets of other companies by the Company or vice versa was entered into beyond the
+normal business scope of the Bank.
+Significant events in respect of holding in custody, contracting, hiring or
+leasing of assets
+6.18 Material contracts and their performance
+VI Important Events
+China Merchants Bank
+Annual Report 2015
+106
+105
+So far as the Company is aware, as at 31 December 2015, the Company was involved in the following litigation
+cases in the ordinary course of business: the number of pending litigation and arbitration cases in which the
+Company was involved totalled 19,314 with a total amount of principal and interest of approximately RMB52.497
+billion. Of which, there were a total of 176 pending litigation and arbitration cases against the Company as at 31
+December 2015, with a total amount of approximately RMB1,001.76 million. There were 24 pending cases with
+a principal amount exceeding RMB100,000,000, involving a total amount of approximately RMB5, 175 million.
+Although there was a rise in the number and amount of cases where the Company took legal actions to recourse
+against the debtors due to economic downturn, none of the above litigation and arbitration cases would have a
+significant adverse impact on the financial position or operating results of the Company.
+6.17Material litigations and arbitrations
+The Company's major transactions with related parties are set out in Note 56 to the financial statements. These
+transactions entered into with related parties were in the ordinary course of its business including lending,
+investment, deposit-taking, securities trading, agency services, custody and other trust services and off-balance sheet
+transactions. These transactions were entered into by the Company on normal commercial terms in the ordinary and
+usual course of business, and those which constituted connected transactions under the Hong Kong Listing Rules
+were in compliance with the applicable requirements of the Hong Kong Listing Rules.
+Furthermore, the Company has engaged KPMG Certified Public Accountants to review the continuing connected
+transactions of the Group in accordance with Hong Kong Standard on Assurance Engagements 3000 "Assurance
+Engagements Other Than Audits or Reviews of Historical Financial Information" and with reference to Practice Note
+740 "Auditor's Letter on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the
+Hong Kong Institute of Certified Public Accountants. The Board has confirmed the findings, conclusions and the
+unqualified letter issued by KPMG Certified Public Accountants in respect of the aforesaid transactions in accordance
+with Rule 14A.56 of the Hong Kong Listing Rules. A copy of the letter has been provided by the Company to SEHK.
+6.16.4 Major transactions with related parties
+(4) the transactions were conducted in accordance with the terms of relevant agreements.
+the transactions were entered into on normal commercial terms which were no more favourable than those
+available to independent third parties; and
+the terms of the transactions are fair and reasonable, and are in the interest of the Company and its
+shareholders as a whole;
+(3)
+(2)
+the transactions were conducted in the ordinary and usual course of business of the Company;
+(1)
+The independent non-executive directors of the Company had reviewed the above-mentioned non-exempt
+continuing connected transactions between the Company and each of CMFM Group, CM Securities Group and
+Anbang Insurance Group and confirmed that:
+6.16.3 Confirmation from the Independent Non-executive Directors and Auditors
+As at 31 December 2015, the amount of the continuing connected transactions between the Company and Anbang
+Insurance Group was RMB906.84 million.
+China Merchants Bank
+Annual Report 2015
+VI Important Events
+6.19 Significant event in respect of fund entrusting
+During the reporting period, there was no event in respect of fund entrusting beyond our normal business.
+Name
+Jin Qingjun
+Class of
+Position shares
+Supervisor A Share
+Long/short
+position
+No. of
+Capacity
+shares
+109
+The Company also prepared the annual report in Chinese version in accordance with the PRC Generally Accepted
+Accounting Principles and the preparation rules for annual reports, which is available on the websites of Shanghai
+Stock Exchange and the Company.
+The Company prepared the annual report in both English and Chinese versions in accordance with the International
+Financial Reporting Standards and the Hong Kong Listing Rules. These reports are available on the websites of Hong
+Kong Stock Exchange and the Company. In the event of any discrepancies in interpretation between the English and
+Chinese versions, the Chinese version shall prevail.
+6.26 Publication of annual report
+For the convening of its 2015 Annual General Meeting, the Company will make further announcement.
+6.25 Annual general meeting
+KPMG Huazhen Certified Public Accountants and KPMG Certified Public Accountants, our external auditors,
+have audited the financial statements of the Company prepared in accordance with the PRC Generally Accepted
+Accounting Principles and the International Financial Reporting Standards respectively, and each has issued an
+unqualified audit report respectively. The Audit Committee under the Board of Directors of the Company has
+reviewed the financial results and financial statements of the Company for the year ended 31 December 2015.
+6.24 Review of annual results
+The annual cap for the continuing connected transactions between the Company and Anbang Insurance Group
+for 2015 was RMB1.2 billion, in respect of which the relevant percentage ratios calculated in accordance with Rule
+14.07 of the Hong Kong Listing Rules was less than 5%. Therefore, these transactions would be subject only to the
+reporting, announcement and annual review requirements, and exempt from the independent shareholders' approval
+requirement under the Hong Kong Listing Rules.
+VI Important Events
+For details of changes in the accounting policies, please refer to note 2 to the financial statements for the year.
+6.23 Changes in accounting policies
+During the reporting period, the Company engaged Altus Capital Limited (office address at 21 Wing Wo Street,
+Central, Hong Kong) as our independent financial adviser to the independent board committee and independent
+shareholders of the Company in respect of the Employee Stock Ownership Scheme of the Company (details of which
+are set out in Section 8.8 of this report), for which the Company paid a total consultancy fee of HK$210,000.
+The financial statements of the Group for the year 2015 prepared under the PRC Generally Accepted Accounting
+Principles and the internal control of the Group as at the year end of 2015 were audited by KPMG Huazhen Certified
+Public Accountants, and the financial statements for the year 2015 prepared under International Financial Reporting
+Standards were audited by KPMG Certified Public Accountants. The total audit fees amounted to approximately
+RMB22.35 million (including fees for the audit on the financial statements of our overseas branches and subsidiaries),
+among which the audit fees for internal control was approximately RMB1.60 million. The auditor's responsibility
+statements made by KPMG Huazhen Certified Public Accountants and KPMG Certified Public Accountants about
+their responsibilities on the financial statements are set out in the Auditors' Reports in the Annual Reports of the
+Company's A Shares and H Shares, respectively. Apart from the audit services, the non-audit service fee for the year
+paid by the Group to KPMG Huazhen Certified Public Accountants and KPMG Certified Public Accountants was
+approximately RMB6.45 million.
+According to the resolutions passed at the 2014 Annual General Meeting, the Company appointed KPMG Huazhen
+Certified Public Accountants as the auditor for domestic business for the year 2015 and KPMG Certified Public
+Accountants as the auditor for overseas business for the year 2015. Those two Certified Public Accountants have
+been engaged as auditors of the Company since 2002.
+6.22 Appointment of accounting firms and financial
+advisors
+VI Important Events
+China Merchants Bank
+Annual Report 2015
+108
+107
+During the reporting period, neither the substantial shareholders of the Company nor their related parties had used
+any funds of the Company for non-operating purposes, and none of them had used the funds of the Company
+through (among others) any connected transactions not entered into on an arm's length basis. KPMG Huazhen
+Certified Public Accountants, being the auditor of the Company, has issued a special audit opinion in this regard.
+6.21 Use of funds by related parties
+For details about the implementation of the Company's H-Share Appreciation Rights Incentive Scheme, please refer
+to Chapter VIII.
+6.20Implementation of the H-Share appreciation rights.
+incentive scheme during the reporting period
+China Merchants Bank
+Annual Report 2015
+VI Important Events
+China Merchants Bank
+Annual Report 2015
+where there are no State prescribed prices or State guided prices, to follow the market fee rates for ordinary
+business transactions agreed between the parties on arm's length negotiations.
+All the connected transactions of the Company have been conducted on normal commercial principles, and on
+terms which are fair and reasonable and in the interest of the Company and its shareholders as a whole. Pursuant
+to Chapter 14A of the Hong Kong Listing Rules, the transactions between the Company and China Merchants
+Group Ltd. and its member companies, Anbang Insurance Group and its member companies constituted non-exempt
+continuing connected transactions within the meanings of Hong Kong Listing Rules, and shall comply with the
+requirements of non-exempt continuing connected transactions set by the Hong Kong Stock Exchange.
+6.16.1 Overview of connected transactions
+6.16Significant connected transactions
+VI Important Events
+China Merchants Bank
+Annual Report 2015
+As far as the Company is aware, as at the date of the report, the above shareholders had not violated the aforesaid
+undertakings.
+In the course of the rights issue of A shares and H shares in 2013, each of China Merchants Group Ltd. (hereinafter
+referred to as "China Merchants Group"), China Merchants Steam Navigation Company Ltd. and China Ocean
+Shipping (Group) Company had undertaken that they would not seek for related party transactions on terms more
+favorable than those given to other shareholders; they would repay the principal and interest of the loans granted by
+the Company on time; they would not interfere with the daily operations of the Company. Should they participate
+in the subscription of the rights shares, they would neither transfer nor entrust others to manage the allocated
+shares within five years from the delivery of such shares, nor would they seek for a repurchase by the Company of
+the allocated shares held by them. Upon expiration of the lock-up period of the allocated shares, they would not
+transfer their allocated shares until they obtain the approval from the regulatory authorities on the share transfer
+and the shareholder qualification of transferees; and upon obtaining the approval from the Board of Directors and
+shareholders' general meeting of the Company, they would continue to support the reasonable capital needs of the
+Company; they would not impose unreasonable performance indicators on the Company. For details, please refer to
+the A Share Rights Issue prospectus dated 22 August 2013 on the website of the Company (www.cmbchina.com).
+In order to promote the sustainable, steady and healthy development of the capital market, China Merchants Group
+and its subsidiaries have undertaken that during periods of exceptional volatility in the stock market(s), they would
+not dispose of their shareholdings in the Company and instead, they would increase their shareholdings in the
+Company at appropriate times. For further details, please refer to the announcement of the Company dated 10 July
+2015 published on our website.
+6.15 Undertakings made by the Company, directors,
+supervisors, senior management and other
+connected persons
+As at the end of the reporting period, given that the Change in Shareholding (as defined in section 7.4 of this
+report) has not been completed, the Company did not have any controlling shareholder or de facto controller.
+So far as the Company is aware, the Company had not failed in performing any valid court verdict and fulfilling any
+significant payment obligations that fell due during the reporting period.
+6.14 Explanation about the integrity profile of the
+Company, its controlling shareholder and de facto
+controllers
+VI Important Events
+China Merchants Bank
+Annual Report 2015
+102
+6.16.2 Non-exempt continuing connected transactions
+101
+So far as the Company is aware, during the reporting period, none of the Company, its directors, supervisors or
+senior management was subject to investigation by relevant authorities or to mandatory measures imposed by
+judicial organs or discipline inspection authorities. None of them had been referred or handed over to judicial
+authorities or prosecuted for criminal liability, under investigation or administrative sanction by the CSRC, nor
+had they been prohibited from engagement in the securities markets, determined as unqualified, or been publicly
+censured by any stock exchange. The Company has not been penalised by other regulatory bodies which have
+significant impact on the business of the Company.
+6.13 Disciplinary actions imposed on the Company,
+directors, supervisors, senior management,
+controlling shareholders, de facto controllers or
+offerors
+During the reporting period, the directors and supervisors of the Company have no material interests in contracts of
+significance to which the Company or any of its subsidiaries was a party. None of the directors and supervisors of
+the Company has entered into any service contract with the Company which is not determinable by the Company
+within one year without payment of compensation (excluding statutory compensation).
+6.12 Contractual rights and service contracts of directors
+and supervisors
+Save as disclosed herein, the Company is not aware that the directors, supervisors and senior management of the
+Company have any relations between each other with respect to financial, business, kinship or other material or
+connected relations.
+6.11 Financial, business and kinship relations among
+directors, supervisors and senior management
+VI Important Events
+China Merchants Bank
+Annual Report 2015
+As far as the Company is aware, none of the Directors of the Company has any interests in the businesses which
+compete or are likely to compete, either directly or indirectly, with those of the Company.
+6.10 Directors' interests in the businesses competing with
+those of the Company
+0.00032
+65,800
+Long position Beneficial owner
+issue (%)
+As at the end of the reporting period, given that the Change in Shareholding (as defined in section 7.4 of this
+report) has not been completed, the Company did not have any controlling shareholder or de facto controller.
+0.00026
+Pursuant to Chapter 14A of the Hong Kong Listing Rules, the non-exempt continuing connected transactions of the
+Company were those conducted by the Company with CMFM and its associates (hereinafter referred to as "CMFM
+Group"), CM Securities and its associates (hereinafter referred to as "CM Securities Group") and Anbang Insurance
+Group and its associates (hereinafter referred to as "Anbang Insurance Group"), respectively.
+CMFM Group
+where there are no State prescribed prices but there are applicable State guided prices, to follow the State
+guided prices; or
+(3)
+where there are State prescribed prices, to follow these prices; or
+(1)
+On 16 June 2015, the Company entered into a Service Cooperation Agreement with Anbang Insurance for a term
+commencing on 1 January 2015 and expiring on 31 December 2017. The Agreement was entered into on normal
+commercial terms after an arm's length negotiations. The service fees payable by Anbang Insurance Group to the
+Company should be determined in accordance with the following pricing policies:
+Anbang Property & Casualty Insurance Company Ltd. is one of the Company's substantial shareholders. As at the
+end of the reporting period, Anbang Insurance Group Co., Ltd. held 97.56% of the equity interest in Anbang
+Property & Casualty Insurance Company Ltd., and indirectly held 10.72% equity interest in the Company. According
+to the Hong Kong Listing Rules, transactions between the Company and its subsidiaries and Anbang Insurance
+Group constitute connected transactions of the Company.
+The insurance agency sales services between the Company and Anbang Insurance Group constitute continuing
+connected transactions of the Company under the Hong Kong Listing Rules.
+Anbang Insurance Group
+As at 31 December 2015, the amount of the continuing connected transactions between the Company and CM
+Securities Group was RMB462.99 million.
+The annual cap for the continuing connected transactions between the Company and CM Securities Group for
+2015 was RMB500 million, in respect of which the relevant percentage ratios calculated in accordance with Rule
+14.07 of the Hong Kong Listing Rules was less than 5%. Therefore, these transactions would only be subject to the
+reporting, announcement and annual review requirements, and exempt from the independent shareholders' approval
+requirement under the Hong Kong Listing Rules.
+where there are no State prescribed prices or State guided prices, to follow the market fee rates for ordinary
+business transactions agreed between the parties on arm's length negotiations.
+where there are no State prescribed prices, but there are applicable State guided prices, to follow the State
+guided prices; or
+(3)
+(2)
+On 26 August 2014, with the approval from the Board of Directors of the Company, the Company announced that
+the annual caps for the continuing connected transactions with CMFM Group for the year of 2015 and 2016 would
+be RMB3 billion. On 28 April 2015, with the approval from the Board of Directors of the Company, the Company
+announced that the annual caps for the continuing connected transactions with CM Securities Group for the year of
+2015, 2016 and 2017 would be RMB500 million. On 16 June 2015, with the approval of the Board of Directors of
+the Company, the Company announced that the annual caps for the continuing connected transactions with Anbang
+Insurance Group for the year of 2015, 2016 and 2017 would be RMB1.2 billion, respectively. Further details were
+disclosed in the Announcements on Continuing Connected Transactions issued by the Company on 26 August 2014,
+28 April 2015 and 16 June 2015, respectively.
+where there are State prescribed prices, to follow these prices; or
+On 28 April 2015, the Company entered into a Service Cooperation Agreement with CM Securities for a term
+commencing on 1 January 2015 and expiring on 31 December 2017. The Agreement was entered into on normal
+commercial terms after an arm's length negotiation. The service fees payable by CM Securities Group to the
+Company should be determined in accordance with the following pricing policies:
+As at the end of the reporting period, China Merchants Steam Navigation Company Ltd. was a substantial
+shareholder of the Company. As China Merchants Group held 100% equity interest in China Merchants Steam
+Navigation Company Ltd., it indirectly held 29.97% of equity interest in the Company (including those deemed to
+be held by it through affiliated companies). As China Merchants Group also holds 50.86% equity interest in CM
+Securities, pursuant to the Hong Kong Listing Rules, transactions between the Company and its subsidiaries with CM
+Securities Group constitute connected transactions of the Company.
+The third-party custody business, the wealth management agency services, collective investment products and other
+services between the Company and CM Securities Group constituted continuing connected transactions of the
+Company under the Hong Kong Listing Rules.
+CM Securities Group
+Annual Report 2015
+VI Important Events
+China Merchants Bank
+104
+103
+As at 31 December 2015, the amount of the continuing connected transactions between the Company and CMFM
+Group was RMB1,508.50 million.
+The annual cap for the continuing connected transactions between the Company and CMFM Group for 2015
+was RMB3 billion, in respect of which the relevant percentage ratios calculated in accordance with Rule 14.07
+of the Hong Kong Listing Rules was less than 5%. Therefore, these transactions would only be subject to the
+reporting, announcement and annual review requirements under the Hong Kong Listing Rules, and exempt from the
+independent shareholders' approval requirement.
+On 26 August 2014, the Company entered into a Service Cooperation Agreement with CMFM for a term
+commencing on 1 January 2015 and expiring on 31 December 2016. The Agreement was entered into on normal
+commercial principles after an arm's length negotiation. The service fees payable by CMFM Group will be calculated
+at the rates specified in the fund offering documents and/or the offering prospectuses and shall be settled to the
+Company under the Agreement.
+The Company and CM Securities held 55% and 45% of the equity interest in CMFM respectively. CMFM is a
+connected subsidiary of the Company under the Hong Kong Listing Rules.
+The fund distribution agency services between the Company and CMFM Group constituted continuing connected
+transactions of the Company under the Hong Kong Listing Rules.
+(1)
+Percentage
+of all the
+issued
+shares (%)
+(2)
+Percentage
+As at 31 December 2015, the interests and short positions of the directors, supervisors and chief executives of
+the Company in the shares, underlying shares and debentures of the Company and its associated corporations (as
+defined in the SFO), which are required to be notified to the Company and Hong Kong Stock Exchange pursuant
+to Divisions 7 and 8 of Part XV of the SFO, including interests and short positions which the directors, supervisors
+and chief executives of the Company are taken or deemed to have under such provisions of the SFO, or which
+are required to be and are recorded in the register required to be kept pursuant to Section 352 of the SFO or as
+otherwise required to be notified to the Company and Hong Kong Stock Exchange pursuant to the Model Code set
+out in Appendix 10 to the Hong Kong Listing Rules, were as follows:
+6.9 Interests and short positions of directors, supervisors
+and chief executives under Hong Kong laws and
+regulations
+VI Important Events
+China Merchants Bank
+Annual Report 2015
+100
+of the
+relevant
+class of
+shares in
+Executive Vice President
+2008.12-2016.5
+(Note 3)
+2 200
+No
+No
+Executive Vice President and
+Wang Qingbin
+332.22
+1956.12
+2011.6-2016.5
+1960.7
+General Manager of Beijing Branch
+DO
+No
+Liu Jianjun
+Male
+Male
+Male
+Executive Vice President
+332.22
+Huang Dan
+Female 1966.6
+Employee Supervisor
+2015.3-2016.5
+190.38
+No
+Tang Zhihong
+Male
+Zhu Qi
+1960.3
+2006.5-2016.5
+332.22
+No
+Ding Wei
+Male
+1957.5
+1965.8
+2008.5-2016.5
+Executive Vice President
+Executive Vice President
+Male
+332.22
+Executive Assistant President
+2012.6-2016.5
+284.76
+2013.5-2016.5
+Xu Shiqing
+Male
+1961.3
+Secretary of Board of Directors
+1958.5
+284.76
+Zhang Guanghua
+Male
+1957.3
+Former Vice Chairman
+2013.8-2015.7
+189.84
+2 2 2 2 2 2 2
+No
+(Note 4)
+2013.12-2016.5
+Male
+(Note 3)
+Xiong Liangjun
+No
+1963.2
+Secretary of the Party Discipline
+2014.7-present
+332.22
+Committee
+Wang Liang
+Lian Bolin
+Male
+Executive Vice President
+2015.1-2016.5
+332.22
+Zhao Ju
+Male
+1964.11
+Executive Vice President
+2015.2-2016.5
+1965.12
+224.71
+No
+Employee Supervisor
+Shareholder Supervisor
+13.04 A Shares not subject to
+trading moratorium
+Yes
+Fu Junyuan
+Male 1961.5
+Shareholder Supervisor
+2015.9-2016.5
+Yes
+Male 1955.9
+Liu Zhengxi
+Pan Ji
+Dong Xiande
+1963.7
+Male 1949.4
+Shareholder Supervisor
+2012.5-2016.5
+Yes
+External Supervisor
+2011.5-Note 1
+37.50 (Note 2)
+Male
+No
+Employee Supervisor
+No
+30.00
+Guo Xuemeng
+Zhao Jun
+Liu Yuan
+Zhu Genlin
+Male
+Female 1966.9
+Male 1962.9
+1962.1
+Independent Non-Executive Director
+2012.7-Note 1
+30.00
+No
+Independent Non-Executive Director
+27.50
+Chairman of Board of Supervisors,
+2014.8-2016.5
+379.68
+2 2 2 2 2 2 2
+No
+No
+No
+2015.1-2016.5
+2014.8-2016.5
+Male
+External Supervisor
+the reporting
+Name
+Gender Birth(Y/M)
+Title
+Term of office
+(share)
+(share)
+ten thousand)
+Company during
+period
+Male
+Male 1957.8
+1971.4
+External Supervisor
+2014.10-2016.5
+65,800
+65,800
+30.00
+No
+Jin Qingjun
+Xiong Kai
+1947.2
+parties of the
+remunerations
+2014.6-Note 1
+40.00 (Note 2)
+No
+China Merchants Bank
+Annual Report 2015
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure 119
+Date of
+Shareholding
+at the beginning
+of the period
+Shareholding
+from the related
+at the end of
+Aggregate
+pre-tax
+remunerations
+received from
+the Company
+during the
+reporting
+period (RMB
+Whether
+having received
+the period
+No
+No
+No
+Holdings Co., Ltd.
+Long
+Interest of controlled corporation
+2,426,079,282
+1
+3,349,932,935
+16.24
+13.28
+923,853,653
+Best Winner Investment Limited
+А
+Long
+Beneficial owner
+58,147,140 1
+0.28
+0.23
+Η
+Long
+A H
+Beneficial owner
+Beneficial owner
+A
+3.20
+China Merchants Steam Navigation Company Ltd. A
+Long
+Beneficial owner
+3,289,470,337
+Long
+Interest of controlled corporation
+58,147,140 1
+Long
+3,347,617,477
+13.27
+H
+Long
+Interest of controlled corporation
+806,680,423
+17.57
+3.20
+China Merchants Finance Investment
+16.23
+17.57
+328,776,923
+1947.9
+1.
+2.
+3.
+4.
+5.
+6.
+7.
+8.
+Notes:
+For details about the terms of office of Ms. Guo Xuemeng, Mr. Pan Ji and Mr. Dong Xiande, please refer to "Appointment and Resignation of
+Directors, Supervisors and Senior Management" in this Chapter.
+Mr. Zhu Qi received his remuneration from WLB, a subsidiary of the Company. Mr. Zhao Ju received his remuneration from China Merchants
+International Finance Company Limited, a subsidiary of the Company.
+Mr. Xu Shiqing was appointed as the Secretary of Board of Directors of the Company (whose qualification was approved by the PRC banking
+regulator(s) in February 2015) at the first meeting of the Ninth Session of the Board of Directors of the Company held in May 2013.
+The remuneration received from the Company by the directors, supervisors and senior management who were appointed or resigned during
+the reporting period is calculated on the length of their service in the Company during the reporting period.
+The aggregate pre-tax remunerations of the full-time Executive Directors, chairman of the Board of Supervisors and senior management of the
+Company are still being verified, and the information about the pre-tax remuneration of the other people will be disclosed separately upon
+confirmation of payment.
+None of the directors, supervisors and senior management listed in the above table holds share options or has been granted restricted shares
+of the Company.
+None of the Directors, Supervisors or Senior Management who hold office currently or have resigned during the reporting period has been
+punished by the securities regulator(s) over the past three years.
+Company Ltd.
+1.30
+The total pre-tax remuneration received by Mr. Pan Ji from the Company during the reporting period includes delayed payment of the
+allowances for external supervisors for the periods from October to December 2014 and from January to December 2015; The total pre-tax
+remuneration received by Mr. Dong Xiande from the Company during the reporting period includes delayed payment of the allowances for
+external supervisors for the periods from July to December 2014 and from January to October 2015.
+7.16
+Yes
+40.50
+Former Independent Non-Executive
+2013.11-2015.1
+No
+Director
+Xiao Yuhuai
+Male
+1954.6
+Former Independent Non-Executive
+No
+2014.3-2015.1
+Yu Yong
+An Luming
+Male
+Male 1962.7
+1960.4
+Former Employee Supervisor
+2013.5-2015.3
+Former Shareholder Supervisor
+2012.5-2015.8
+No
+Director
+No
+806,680,423 1
+Long
+Shenzhen Chu Yuan Investment and
+State-owned legal person
+944,013,171
+Development Company Ltd.
+3.74 A Shares not subject to
+trading moratorium
+290,877,512
+7
+China Merchants Finance Investment
+Holdings Co. Ltd.
+6
+State-owned legal person
+3.66 A Shares not subject to
+trading moratorium
+657,356,174
+8
+Guangzhou Maritime Transport (Group) State-owned legal person
+Company Ltd.
+696,450,214
+2.76 A Shares not subject to
+trading moratorium
+27,801,047
+9
+923,853,653
+China Securities Finance Corporation
+Limited
+510,952,663
+Development Company Ltd.
+No
+Former Executive Director
+2007.6-2015.7
+Xu Shanda
+Male
+Anbang Property & Casualty Insurance
+Domestic legal person
+2,704,596,216
+4.99 A Shares not subject to
+trading moratorium
+Company Ltd. - traditional products
+4
+China Ocean Shipping (Group) Company State-owned legal person
+1,574,729,111
+6.24 A Shares not subject to
+trading moratorium
+5
+Shenzhen Yan Qing Investment and
+State-owned legal person
+1,258,542,349
+10.72 A Shares not subject to
+trading moratorium
+Interest of controlled corporation
+Domestic legal person
+2.37 A Shares not subject to
+trading moratorium
+Name of Substantial Shareholder
+2011.11-2016.5
+shares
+position
+Capacity
+No. of shares
+Notes
+in issue (%)
+Percentage
+of all issued
+shares (%)
+A
+Long
+Interest of controlled corporation
+6,752,746,952
+1
+32.73
+26.78
+H
+China Merchants Group Ltd.
+598,434,742
+class of shares
+Percentage of
+the relevant
+454,267,958
+10
+China Communications Construction
+Company Limited
+State-owned legal person
+450,164,945
+1.78 A Shares not subject to
+trading moratorium
+Notes: (1)
+(2)
+Class of Long/short
+Shares held by HKSCC Nominees Ltd. are the total shares in the accounts of holders of H Shares of the Company trading on the
+transaction platform of HKSCC Nominees Ltd.
+(3)
+The above shareholders do not hold the shares of the Company through credit securities accounts.
+112
+China Merchants Bank
+Annual Report 2015
+VII Changes in Shares and Information on Shareholders
+7.3 Substantial shareholders' and other persons'
+interests and short positions in shares and
+underlying shares under Hong Kong laws and
+regulations
+As at 31 December 2015, as far as the Company is aware, the following persons (other than the directors, supervisors
+and chief executives (as defined in the Hong Kong Listing Rules) of the Company) had interests and short positions
+in the shares of the Company as recorded in the register required to be kept by the Company pursuant to Section
+336 of the SFO:
+Of the aforesaid top 10 shareholders, China Merchants Steam Navigation Company Ltd., Shenzhen Yan Qing Investment and
+Development Company Ltd., Shenzhen Chu Yuan Investment and Development Company Ltd. and China Merchants Finance
+Investment Holdings Co. Ltd. are subsidiaries of China Merchants Group Ltd. As at 31 December 2015, China Merchants Group Ltd.
+held an aggregate of 29.97% of the total issued shares of the Company through its subsidiaries and parties acting in concert with
+it. Guangzhou Maritime Transport (Group) Company Ltd. is a wholly-owned subsidiary of China Shipping (Group) Company through
+its subsidiaries and parties acting in concert with it. The former China Ocean Shipping (Group) Company and China Shipping (Group)
+Company were reorganised and merged into China COSCO Shipping Corporation Limited under the direction of the State Council.
+China COSCO Shipping Corporation Limited was established on 18 February 2016. Up to now, the relevant reorganisation is still in
+progress and the asset consolidation of the two companies has not been completed. Further announcement(s) will be made by the
+Company in accordance with the relevant requirements upon completion of such matters. The Company is not aware of any affiliated
+relationships among other shareholders.
+Independent Non-Executive Director
+through physically settled derivatives (off exchange)
+Pan Yingli
+Pagoda Tree Investment Company Limited
+shares (%)
+Percentage
+of all issued
+Percentage of
+the relevant
+in issue (%)
+Notes
+No. of shares
+Capacity
+H
+class of shares
+shares
+Name of Substantial Shareholder
+Class of
+VII Changes in Shares and Information on Shareholders
+Annual Report 2015
+China Merchants Bank
+0.18
+0.97
+Long/short
+position
+Long
+Interest of controlled corporation
+477,903,500
+10.41
+3
+477,903,500
+Interest of controlled corporation
+Long
+H
+Guoxin International Investment
+1.89
+10.41
+3
+477,903,500
+Interest of controlled corporation
+Long
+H
+Boyuan Investment Company Limited
+(中國華馨投資有限公司)
+1.89
+10.41
+3
+2.00
+10.98
+22
+44,962,101
+Beneficial owner
+Long
+A
+Anbang Property & Casualty Insurance
+10.72
+13.11
+2,704,596,216
+8.73
+10.68
+2,202,555,520
+1
+944,013,171
+Interest of controlled corporation
+Long
+1
+1,258,542,349
+Beneficial owner
+Long
+A
+Company Ltd. -traditional products
+1.89
+China Ocean Shipping (Group) Company
+Long
+Beneficial owner
+Short
+503,854,268
+139,743,375
+Custodian
+Long
+242,006,195
+Investment manager
+Long
+122,104,698
+Beneficial owner
+Long
+H
+JPMorgan Chase & Co.
+34
+6.24
+7.63
+1,574,729,111
+Beneficial owner
+A
+Corporation Limited
+Verise Holdings Company Limited
+H
+(4.2.3) BlackRock International Limited held 1,540,498 H shares (long position) in the Company.
+through physically settled derivatives (on exchange)
+28,188,277 H shares (long position) and 30,543,649 H shares (short position)
+2,728,000 H shares (long position) and 5,135,452 H shares (short position)
+2,597,000 H shares (short position)
+5,080,620 H shares (long position) and 6,686,000 H shares (short position)
+The entire interest and short position of JPMorgan Chase & Co. in the Company included a lending pool of 139,743,375 H shares. Besides,
+35,996,897 H shares (long position) and 44,962,101 H shares (short position) were held through derivatives as follows:
+(4)
+(3)
+VII Changes in Shares and Information on Shareholders
+China Merchants Bank
+Annual Report 2015
+114
+113
+China International Fund Management Co Ltd. held 6,570,000 H shares (long position) in the Company. China International Fund
+Management Co Ltd. was held as to 49% by JPMorgan Asset Management (UK) Limited, which was an indirect wholly-owned
+subsidiary of JPMorgan Chase & Co..
+(2.1)
+JPMorgan Chase & Co. was deemed to hold interests in a total of 503,854,268 H shares (long position) and 44,962,101 H Shares (short
+position) in the Company by virtue of its control over a number of corporations, which were directly or indirectly wholly-owned by JPMorgan
+Chase & Co. except for the following:
+China Merchants Industry Development (Shenzhen) Limited held 55,196,540 A shares (long position) in the Company. China
+Merchants Industry Development (Shenzhen) Limited was a wholly owned subsidiary of China Merchants China Direct Investments
+Limited. China Merchants Group Ltd. indirectly controls 27.59% interest in China Merchants China Direct Investments Limited through
+China Merchants Finance Holdings Company Limited, its wholly owned subsidiary. On 23 December 2015, China Merchants Finance
+Investment Holdings Co. Ltd., a wholly owned subsidiary of China Merchants Group Ltd. issued a letter of undertaking that: China
+Merchants Finance Investment Holdings Co. Ltd. undertook to acquire the shares in China Merchants Bank held by China Merchants
+Industry Development (Shenzhen) Limited through Block Trade or other means permitted by laws provided that the latter gives at
+least 10 days prior notice in writing. Therefore, China Merchants Group Ltd. is a related party that dominates the major decision-
+makings of China Merchants Industry Development (Shenzhen) Limited.
+China Merchants Zhi Yuan Zeng Chi Bao No.1 Collective Asset Management Plan (1†£ÂÂÌÏŒ) and China
+Merchants Zhi Yuan Zeng Chi Bao No.2 Collective Asset Management Plan (#⠀²¶¶¦¤À) held 223,523,762
+A shares (long position) in the Company. China Merchants Zhi Yuan Zeng Chi Bao No.1 Collective Asset Management Plan (
+1) and China Merchants Zhi Yuan Zeng Chi Bao No.2 Collective Asset Management Plan (2
+**¦¤à¥¤) are both under control by China Merchants Finance Investment Holdings Co., Ltd., referred to in (1.2) above.
+China Merchants Union (BVI) Limited held 477,903,500 H shares (long position) in the Company. China Merchants Union (BVI)
+Limited was held as to 50% by China Merchants Holdings (Hong Kong) Company Limited, which was held as to 10.55% and 89.45%
+by China Merchants Group Ltd. and China Merchants Steam Navigation Company Ltd., referred to in (1.1) above, respectively.
+(4.2.2) BlackRock Advisors (UK) Limited held 45,693,283 H shares (long position) in the Company.
+Shenzhen Chu Yuan Investment and Development Company Ltd. held 944,013,171 A shares (long position) in the Company.
+Shenzhen Chu Yuan Investment and Development Company Ltd. was owned as to 50% by each of China Merchants Finance
+Investment Holdings Co. Ltd., referred to in (1.2) above, and Shenzhen Yan Qing Investment and Development Company Ltd.,
+referred to in (1.3) above, respectively.
+(4.2.1) BlackRock (Netherlands) B.V. held 2,778,309 H shares (long position) in the Company.
+BlackRock Asset Management North Asia Limited (indirectly wholly-owned by BR Jersey International Holdings L.P.) held
+2,246,124 H shares (long position) in the Company.
+through cash settled derivatives (off exchange)
+Pagoda Tree Investment Company Limited was deemed to hold interests in a total of 477,903,500 H shares in the Company held by China
+Merchants Union (BVI) Limited by virtue of its wholly-owned subsidiary of Boyuan Investment Company Limited:
+(3.1)
+(3.2)
+(3.3)
+China Merchants Union (BVI) Limited held 477,903,500 H shares (long position) in the Company. Verise Holdings Company Limited
+was deemed to hold interests in a total of 477,903,500 H shares in the Company held by China Merchants Union (BVI) Limited by
+virtue of holding 50% interest in China Merchants Union (BVI) Limited.
+Verise Holdings Company Limited was wholly-owned by Guoxin International Investment Corporation Limited, which was deemed to
+hold the 477,903,500 H shares in the Company which Verise Holdings Company Limited was deemed to hold.
+Boyuan Investment Company Limited (referred to in (3)) was deemed to hold the 477,903,500 H shares in the Company which
+Guoxin International Investment Corporation Limited was deemed to hold by virtue of holding 90% interest in Guoxin International
+Investment Corporation Limited.
+(3.4) The 477,903,500 H shares referred to in (3) and (3.1) to (3.3) represent the same shares.
+BlackRock, Inc. was deemed to hold interests in a total of 269,818,362 H shares (long position) and 1,696,500 H Shares (short position) in the
+Company (of which, 128,500 H shares were held through cash settled derivatives (off exchange)) by virtue of its control over a number of
+corporations, which were all indirectly wholly-owned by BlackRock, Inc., except for the following:
+(4.1)
+BR Jersey International Holdings L.P. was indirectly held as to 86% by BlackRock, Inc. BR Jersey International Holdings L.P. held
+interests in the Company through the following companies:
+(4.1.1) BlackRock Japan Co., Ltd. (indirectly wholly-owned by BR Jersey International Holdings L.P.) held 5,342,500 H shares (long
+position) in the Company.
+(4.1.2)
+BlackRock Asset Management Canada Limited held 504,500 H shares (long position) in the Company. BlackRock Asset
+Management Canada Limited was indirectly owned as to 99.9% by BR Jersey International Holdings L.P..
+(4.1.3)
+BlackRock Investment Management (Australia) Limited (indirectly wholly-owned by BR Jersey International Holdings L.P.) held
+574,000 H shares (long position) in the Company.
+(4.2)
+(4.1.4)
+BlackRock Group Limited was held as to 90% by BR Jersey International Holdings L.P. (referred to in (4.1)). Black Rock Group Limited
+held equity interest in the Company through its direct or indirect wholly-owned companies as follows:
+Shenzhen Yan Qing Investment and
+Development Company Ltd.
+Shenzhen Yan Qing Investment and Development Company Ltd. held 1,258,542,349 A shares (long position) in the Company.
+Shenzhen Yan Qing Investment and Development Company Ltd. was owned as to 51% and 49% by China Merchants Finance
+Investment Holdings Co. Ltd., referred to in (1.2) above, and China Merchants Group Ltd. respectively.
+China Merchants Finance Investment Holdings Co., Ltd. held 923,853,653 A shares (long position) in the Company. China Merchants
+Finance Investment Holdings Co., Ltd. was owned as to 90% and 10% by China Merchants Group Ltd. and China Merchants Steam
+Navigation Company Ltd., referred to in (1.1) above, respectively.
+Interest of controlled corporation
+Beneficial owner
+Short
+Long
+H
+BlackRock, Inc.
+1.89
+10.41
+3
+477,903,500
+Beneficial owner
+Long
+H
+China Merchants Union (BVI) Limited
+1.89
+10.41
+3
+477,903,500
+Interest of controlled corporation
+Long
+269,818,362
+Best Winner Investment Limited held 58,147,140 A shares (long position) and 328,776,923 H Shares (long position) in the Company.
+Best Winner Investment Limited was an indirect wholly-owned subsidiary of China Merchants Steam Navigation Company Ltd..
+4
+1.07
+China Merchants Steam Navigation Company Ltd. held 3,289,470,337 A shares (long position) in the Company. China Merchants
+Steam Navigation Company Ltd. was a wholly-owned subsidiary of China Merchants Group Ltd..
+(1.8)
+(1.7)
+(1.6)
+(1.5)
+(1.4)
+(1.3)
+(1.2)
+(1.1)
+China Merchants Group Ltd. was deemed to hold interests in a total of 6,752,746,952 A shares (long position) and 806,680,423 H Shares (long
+position) in the Company by virtue of its control over the following corporations, which held direct interests in the Company:
+As far as the Company is aware, the number of the shares as shown in the table above represents the interests and short positions of each
+substantial shareholder as at 31 December 2015. These figures may not have been reported in the declaration forms submitted by them
+because their updated interests are not reportable under the SFO.
+(2)
+(1)
+Notes:
+*
+0.006
+0.04
+4
+1,696,500
+5.88
+2233
+(4.2.4) BlackRock Asset Management Ireland Limited held 29,046,784 H shares (long position) in the Company.
+(4.2.5) BLACKROCK (Luxembourg) S.A. held 539,792 H shares (long position) in the Company.
+Ma Zehua
+Male
+1953.1
+through cash settled derivatives (on exchange)
+2014.3-2016.5
+Vice Chairman
+2015.11-2016.5
+Yes
+Li Xiaopeng
+Male
+1959.5
+Non-Executive Director
+2014.11-2016.5
+Executive Director
+2013.8-2016.5
+474.60
+No
+Tian Huiyu
+Male 1965.12
+Yes
+President and Chief Executive Officer 2013.9-2016.5
+2014.8-2016.5
+2014.7-2016.5
+ten thousand)
+Whether
+having received
+remunerations
+from the related
+parties of the
+Company during
+the reporting
+period
+Date of
+Shareholding
+at the beginning
+of the period
+Name
+Gender Birth(Y/M)
+Title
+Term of office
+Chairman
+2014.8-2016.5
+Yes
+Li Jianhong
+Male
+1956.5
+Non-Executive Director
+Vice Chairman
+reporting
+period (RMB
+Li Yinquan
+Male 1955.4
+Female 1958.6
+Male
+Yes
+Su Min
+Female
+1968.2
+Non-Executive Director
+2014.9-2016.5
+Yes
+Leung Kam Chung,
+Antony
+Wong Kwai Lam
+Male 1952.1
+Independent Non-Executive Director
+2015.1-2016.5
+27.50
+Pan Chengwei
+Male
+1949.5
+Male 1946.2
+Independent Non-Executive Director
+Independent Non-Executive Director
+2011.7-2016.5
+30.00
+2012.7-2016.5
+30.00
+2007.6-2016.5
+Sun Yueying
+Li Hao
+Non-Executive Director
+Male
+Non-Executive Director
+2001.4-2016.5
+Yes
+Non-Executive Director
+2001.4-2016.5
+Yes
+1959.3
+Executive Director,
+First Executive Vice President and
+2007.6-2016.5
+379.68
+No
+Chief Financial Officer
+Fu Gangfeng
+Male 1966.12
+Non-Executive Director
+2010.8-2016.5
+Yes
+Hong Xiaoyuan
+1963.3
+Female 1955.6
+during the
+remunerations
+received from
+100%
+China Merchants Group Ltd.
+90%
+China Merchants Finance
+Investment Holdings Co., Ltd.
+China Merchants International
+50%
+Finance Company Limited
+100%
+China Merchants Union
+(BVI) Limited
+Best Winner Investment
+Limited
+1.89%
+1.53%
+Note:
+13.04%
+49%
+27.59%
+China Merchants China
+Direct Investments Limited
+51%
+(Hong Kong) Ltd.
+Shenzhen Yan Qing
+China Merchants Holdings
+89.45%
+(4.2.6) BlackRock Investment Management (UK) Limited held 10,693,693 H shares (long position) in the Company.
+(4.2.7) BlackRock Asset Management Deutschland AG held 229,231 H shares (long position) in the Company.
+(4.2.8) BlackRock Fund Managers Limited held 1,969,711 H shares (long position) in the Company.
+(4.2.9)
+BlackRock Life Limited held 88,000 H shares (long position) in the Company.
+(4.2.10) BlackRock Asset Management (Schweiz) AG held 22,000 H shares (long position) in the Company.
+Save as disclosed above, the Company is not aware of any other person (other than the directors, supervisors and chief executives (as defined in the
+Hong Kong Listing Rules) of the Company) who has any interests or short positions in the shares and underlying shares of the Company as at 31
+December 2015 as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.
+China Merchants Bank
+Annual Report 2015
+VII Changes in Shares and Information on Shareholders
+7.4 Information on the Company's largest shareholder
+and its parent company
+(1)
+(2)
+China Merchants Steam Navigation Company Ltd., the largest shareholder of the Company, was founded on
+22 February 1992 in Beijing with a registered capital of RMB5.9 billion (organisation code: 10001145-2). Its
+legal representative is Mr. Li Jianhong. It is a wholly owned subsidiary of China Merchants Group Ltd., and
+mainly engaged in passenger and cargo shipping businesses; dockyard, warehouse and vehicle transportation;
+sale, purchase and supply of various transportation equipments, spare parts and materials; ship and
+passenger/goods shipping agency, international maritime cargo, etc; as well as investment and management
+of transportation-related financial businesses including banking, securities and insurance.
+China Merchants Group Ltd. directly holds 100% equity interest in China Merchants Steam Navigation
+Company Ltd. and is the parent company of the Company's largest shareholder. Its legal representative is
+Mr. Li Jianhong. China Merchants Group Ltd. is one of the state-owned backbone enterprises under the
+direct control of State-owned Assets Supervision and Administration Commission of the State Council. Its
+predecessor, China Merchants Steam Navigation Company, was incorporated in 1872, when China was in its
+late Qing Dynasty and was undergoing the Westernisation Movement, and was one of the enterprises which
+played a significant role in promoting the modernisation of China's national industries and commerce at that
+time. Nowadays, it has developed into a conglomerate, with its businesses focusing on three core industries,
+namely traffic (harbour, highway, energy transport and logistics, ship maintenance and ocean engineering),
+financial (bank, securities, funds and insurance) and real estates (industrial zone development and real estate
+development).
+So far as the Company is aware, as at the end of the reporting period, the equity relationship between the
+Company, and its largest shareholder and parent company of its largest shareholder is illustrated as follows:
+100%
+10%
+10.55%
+China Merchants Steam Navigation
+Company Ltd.
+50%
+the Company
+Investment and
+100%
+During the reporting period, the Company did not issue new shares.
+Internal staff shares
+The Company had not issued internal staff shares during the reporting period.
+7.7 Issuance of bonds
+Issuance of medium-term notes in 2015
+According to the business development plan of the Company, the New York Branch of the Company issued medium-
+term notes in the amount of USD500 million in Hong Kong in May 2015, all of which are fixed-rate notes for a
+term of 3 years with a coupon rate of 2.485%. As at 31 December 2015, the proceeds raised from issuance of the
+medium-term notes were fully used to replenish the general working capital of the Company.
+117
+118
+China Merchants Bank
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure
+Annual Report 2015
+Directors, Supervisors, Senior Management,
+Employees and Organisational Structure
+8.1 Directors, Supervisors and Senior Management
+(share)
+Shareholding
+at the end of
+the period
+(share)
+Aggregate
+pre-tax
+7.6 Share issuance and listing
+Development Company Ltd.
+As at the end of the reporting period, Anbang Property & Casualty Insurance Company Ltd. held 10.72% of the
+Company's shares through the securities account for "Anbang Property & Casualty Insurance Company Ltd. -
+traditional products". Anbang Property & Casualty Insurance Company Ltd. was founded on 31 December 2011
+with a registered capital of RMB37.0 billion (organisation code: 59963808-5). Its legal representative is Zhang Feng.
+Anbang Property & Casualty Insurance Company Ltd. is held as to 97.56% by Anbang Insurance Group Co., Ltd..
+The business scope of Anbang Property & Casualty Insurance Company Ltd. includes: property damage insurance;
+liability insurance; credit insurance and guarantee insurance; short-term health insurance and accident insurance;
+reinsurance of the aforesaid businesses; the investment of insurance premiums as permitted under the national laws
+and regulations; other businesses as approved by China Insurance Regulatory Commission.
+VII Changes in Shares and Information on Shareholders
+China Merchants
+Industry Development
+(Shenzhen) Limited
+50%
+Shenzhen Chu Yuan
+Investment and
+Development Company Ltd.
+4.55%
+3.74%
+China Merchants Bank Co., Ltd.
+4.99%
+0.22%
+in the above chart, the 4.55% equity interest in the Company held by China Merchants Finance Investment Holdings Co.,
+Ltd. includes the 0.89% equity interest in the Company held by it through asset management plans.
+115
+116
+China Merchants Bank
+Annual Report 2015
+VII Changes in Shares and Information on Shareholders
+(3)
+So far as the Company is aware, as at 31 December 2015, China Merchants Group Ltd. indirectly held an
+aggregate of 29.97% of the total shares of the Company, consisting of 26.78% of A Shares and 3.20% of
+H Shares of the Company. (In this report, any discrepancies between the total shown and the sum of the
+amounts listed are due to rounding.)
+On 8 October 2015, China Merchants Steam Navigation Company Ltd., China Merchants Finance Investment
+Holdings Co., Ltd., Shenzhen Yan Qing Investment and Development Company Ltd., Shenzhen Chu Yuan
+Investment and Development Company Ltd. and Best Winner Investment Limited jointly published the
+Simplified Report on Changes in Shareholdings of China Merchants Bank. For details, please refer to the
+relevant announcements on the websites of Shanghai Stock Exchange, Hong Kong Stock Exchange and the
+Company.
+On 28 December 2015, SASAC of the State Council issued the "Notice Regarding the Restructuring of China
+Merchants Group Ltd. and Sinotrans & CSC Holdings Co., Ltd." (Guo Zi Fa Gai Ge (2015) No. 181) (<
+於招商局集團有限公司和中國外運長航集團有限公司重組的通知》(國資發改革[2015]181號)), pursuant to
+which, Sinotrans & CSC Holdings Co., Ltd. will be transferred to China Merchants Group at nil consideration,
+as approved by the State Council. On 24 February 2016, the Enterprise Property Right Registration Form (
+*) of Sinotrans & CSC Holdings Co., Ltd. was confirmed by the SASAC of the State Council,
+confirming that China Merchants Group Ltd. is registered as the capital contributor of Sinotrans & CSC
+Holdings Co., Ltd.; the 22,207,847 shares in China Merchants Bank (accounting for approximately 0.09%
+of the entire share capital of the Company) held by Sinotrans & CSC Holdings Co., Ltd. and Wuhan
+Changjiang Shipping Company (its subsidiary) are indirectly held by China Merchants Group (the "Change
+in Shareholding"). Upon completion of this Change in Shareholding, China Merchants Group Ltd. (including
+Sinotrans & CSC Holdings Co., Ltd. and Wuhan Changjiang Shipping Company) will have a de facto control
+of an aggregate of 7,581,635,222 shares in China Merchants Bank, accounting for approximately 30.06% of
+the entire share capital of the Company (hereinafter referred to as the "Acquisition"). The Acquisition would
+trigger an obligation to make a general offer and China Merchants Steam Navigation Company Ltd. (as the
+applicant) has applied to the CSRC for an exemption from the obligation to make a general offer. Matters
+related with the Change in Shareholding of major shareholders involved in the Acquisition are still subject
+to examination by the China Banking Regulatory Commission. The Executive of the Securities and Futures
+Commission of Hong Kong has granted a waiver in respect of the Acquisition to China Merchants Group Ltd.
+from the obligation to make a general offer for all the shares of China Merchants Bank under Rule 26 of The
+Codes on Takeovers and Mergers and Share Buy-backs as a result of the Change in Shareholding. Up to date,
+the examination and approval procedures necessary for this Change in Shareholding have not been completed
+yet. Upon completion of such examination and approval procedures, China Merchants Group will become
+a de facto controller of the Company and the Company will make further announcements in due course
+according to relevant requirements. For details, please refer to the "Indicative Announcement Regarding
+Important Notice from a Shareholder", "Indicative Announcement Regarding Disclosure of Acquisition Report
+(Summary) by Shareholder(s)" and the "Acquisition Report (Summary) of China Merchants Bank Co., Ltd."
+published by the Company on 29 February 2016 at the websites of Shanghai Stock Exchange, Hong Kong
+Stock Exchange and the Company.
+China Merchants Bank
+Annual Report 2015
+7.5 Information on other shareholders holding more
+than 10% shares of the Company
+Non-Executive Director
+2003.5-2016.5
+127,046,014
+100.00
+1. Ordinary shares in RMB (A Shares)
+20,628,944,429
+81.80
+20,628,944,429
+81.80
+2. Foreign shares listed domestically
+3. Foreign shares listed overseas (H Shares)
+4. Others
+4,590,901,172
+18.20
+4,590,901,172
+III.
+Total shares
+25,219,845,601
+100.00
+25,219,845,601
+100.00
+25,219,845,601
+Shares not subject to trading moratorium
+VII Changes in Shares and Information on Shareholders
+Annual Report 2015
+Changes in Shares and
+Information on Shareholders
+7.1 Changes in shares of the Company during the
+reporting period
+31 December 2014
+Quantity
+(share)
+25,219,845,601
+Percentage
+(%)
+31 December 2015
+Quantity(share)
+Quantity
+(share)
+Percentage
+(%)
+I.
+Shares subject to trading moratorium
+II.
+Changes in the
+reporting period
+100.00
+As at the end of the reporting period, the Company had a total of 266,723 shareholders, including 37,967 holders
+of H Shares and 228,756 holders of A Shares. None of their shareholdings is subject to trading moratorium.
+As at the close of the previous month (namely 29 February 2016) preceding the date for disclosure of the annual
+report, the Company had a total of 280,614 shareholders, including 37,910 holders of H Shares and 242,704
+holders of A Shares. None of their shareholdings is subject to trading moratorium.
+frozen
+(share)
+capital (%) Type of shares
+period (share)
+(share)
+(share)
+1
+pledged or
+HKSCC Nominees Ltd.(¹)
+18.00 H shares
+5,615,660
+2
+China Merchants Steam Navigation
+State-owned legal person
+3,289,470,337
+3
+4,538,723,917
+China Merchants Bank
+to trading
+moratorium
+of total share
+Based on the publicly available information and so far as the directors were aware, as at 31 December 2015, the
+Company had met the public float requirement of the Hong Kong Listing Rules.
+China Merchants Bank
+Annual Report 2015
+VII Changes in Shares and Information on Shareholders
+111
+7.2 Top ten shareholders and top ten shareholders
+whose shareholdings are not subject to trading
+moratorium
+Shares held
+Number of
+shares subject
+the reporting
+Shares
+Percentage
+Changes in
+Serial
+No.
+Name of shareholder
+Type of
+shareholder
+of the period
+at the end
+110
+18.20
+Name
+Mr. Wong Kwai Lam is an Independent Non-executive Director of the Company. He obtained a bachelor's
+degree from The Chinese University of Hong Kong and Ph. D from Leicester University, U.K.. He is concurrently an
+Honorary Fellow of The Chinese University of Hong Kong. He has been an Independent Non-executive Director of
+the Company since July 2011. He is the chairman of IncitAdv Consultants Ltd., a director of Opera Hong Kong,
+a member of the Strategic Investment Society of The Chinese University of Hong Kong, the vice chairman of the
+Board of Trustee and a member of the Strategic Investment Society of New Asia College of The Chinese University
+of Hong Kong, the manager of Prosperity Real Estate Investment Trust, an independent non-executive director of
+K. Wah International Holdings Limited (a company listed on Hong Kong Stock Exchange), and an independent non-
+executive director of Langham Hospitality Investments Limited (a company listed on Hong Kong Stock Exchange),
+LHIL Manager Limited and Hutchison Port Holdings Trust (a company listed on SGX-ST). He is concurrently a member
+of the board of directors of Chinese University of Hong Kong Medical Center Co., Ltd. (★‡ªÀ+ÒÁRA
+]) and a member of the Governance Committee of Prince of Wales Hospital located in Shatin, Hong Kong. He was
+the managing director of Merrill Lynch (Asia Pacific) Limited and the chairman of Asia Pacific Investment Banking.
+Mr. Wong was also a member of Advisory Committee under the Securities and Futures Commission in Hong Kong
+and its committee on Real Estate Investment Trusts, and a member of the China Committee to the Hong Kong Trade
+Development Council.
+Mr. Leung Kam Chung, Antony is an Independent Non-executive Director of the Company. He obtained a
+bachelor's degree in social sciences from the University of Hong Kong, and attended Harvard Business School's
+Program for Management Development and Advanced Management Program. He has been an Independent Non-
+executive Director of the Company since January 2015. He is concurrently the chief executive officer of Nan Fung
+Group, the chairman of charitable organizations, Heifer International - Hong Kong and "Food Angel", and the
+chairman of Harvard Business School Association of Hong Kong. Mr. Leung served as a member of Blackstone's
+Executive Committee, the Senior Managing Director and the Chairman of Greater China Region. He also acted as
+the chairman of Asia for JP Morgan Chase and worked for Citi in various positions, including the country corporate
+officer for Hong Kong SAR and China, the regional treasurer for North Asia, head of Investment Banking for North
+Asia, South West Asia and head of Private Banking for Asia. Past board membership of Mr. Leung included an
+independent director of Industrial and Commercial Bank of China Limited, China Mobile Hong Kong Company
+Limited and American International Assurance, the vice chairman of China National Bluestar Group, a member
+of the international advisory board of China Development Bank and European Advisory Group. The government
+services that Mr. Leung had engaged in included Financial Secretary, Non-Official Member of the Executive Council
+of Hong Kong SAR, Chairman of the Education Commission, Chairman of the University Grants Committee, Member
+of the Exchange Fund Advisory Committee, Member of the Preparatory Committee for the Hong Kong Special
+Administrative Region and Election Committee and Hong Kong Affairs Advisors to the Chinese Government, member
+of the board of Hong Kong Airport Authority and Director of the Hong Kong Futures Exchange.
+Ms. Su Min is a Non-executive Director of the Company. She obtained a bachelor's degree in finance from Shanghai
+University of Finance and Economics and a master's degree in business administration from China University of
+Technology. She is a senior accountant, certified public accountant and certified public valuer. She has been a
+Director of the Company since September 2014. Ms. Su is concurrently the general manager of China Merchants
+Finance Holdings Company Limited, the chairman of Shenzhen China Merchants Qihang Internet Investment
+Management Co., Ltd. (ÀÍGIERATÁRA) and a supervisor of China Merchants Capital
+Investments Co., Ltd.. Ms. Su successively served as the deputy director of Property Office of the State-owned
+Assets Supervision and Administration Commission of Anhui Province, the chief accountant of Anhui Energy Group
+Co., Ltd., Director of Huishang Bank, the chairman and general manager of Anhui Hefei Wanneng Microfinance
+Company, the deputy general manager and chief accountant of Anhui Energy Group Co., Ltd., the chief accountant
+and a member of the Communist Party of China Committee of China Shipping (Group) Company, the chairman of
+CS Finance Company, and a director of China Shipping Development Co., Ltd. (a company listed on Hong Kong
+Stock Exchange and Shanghai Stock Exchange) and China Shipping Container Lines Company Limited (a company
+listed on Hong Kong Stock Exchange and Shanghai Stock Exchange).
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure 125
+China Merchants Bank
+Annual Report 2015
+Mr. Hong Xiaoyuan is a Non-executive Director of the Company. He obtained a master's degree in economics from
+Peking University and a master's degree in science from Australian National University. He is a senior economist. He
+has been a Director of the Company since June 2007. He is concurrently the assistant general manager of China
+Merchants Group Ltd. and the chairman of China Merchants Finance Holdings Company Limited, the chairman of
+China Merchants Finance Investment Holdings Co., Ltd., China Merchants Holdings (U.K.) Co., Ltd., China Merchants
+China Direct Investments Limited (a company listed on Hong Kong Stock Exchange) and Shenzhen CMB Qianhai
+Financial Assets Exchange Centre Co., Ltd. (Ò¤£Ã¤Â¶¢ÈÌ9+Ù®Â) and the vice chairman of
+China Merchants Capital Investments Co., Ltd.,.
+Mr. Fu Gangfeng is a Non-executive Director of the Company. He obtained a bachelor's degree in finance and a
+master's degree in management engineering from Xi'an Highway College and is a senior accountant. He has been
+a Director of the Company since August 2010. He is the chief financial officer of China Merchants Group Ltd., an
+executive director of China Merchants Holdings (International) Co., Ltd. (a company listed on Hong Kong Stock
+Exchange) and the vice chairman of China Merchants Shekou Industrial Zone Holdings Co., Ltd. (À¯*I*
+PRESÁRA) (a company listed on Shenzhen Stock Exchange). He was the deputy director of the Shekou
+ZhongHua Certified Public Accountants, the director of the chief accountant office and deputy chief accountant of
+China Merchants Shekou Industrial Zone Co., Ltd., the chief financial officer of China Merchants Shekou Holdings
+Co. Ltd., the chief financial officer of China Merchants Shekou Industrial Zone Co., Ltd., and the general manager of
+the finance division of China Merchants Group Ltd..
+Mr. Li Hao is an Executive Director, First Executive Vice President and Chief Financial Officer of the Company. Mr.
+Li obtained a master's degree in business administration from the University of Southern California and is a senior
+accountant. He joined the Company in May 1997 as the Executive Assistant President of the Head Office. He was
+the general manager of the Shanghai Branch of the Company from April 2000 to March 2002. Mr. Li has been an
+Executive Vice President of the Company since December 2001, the Chief Financial Officer since March 2007, an
+Executive Director of the Company since June 2007, and the First Executive Vice President of the Company since
+May 2013. He is concurrently the chairman of CMFM and the vice chairman of Shenzhen CMB Qianhai Financial
+Asset Exchange Co., Ltd. (深圳市招銀前海金融資產交易中心有限公司).
+Ms. Sun Yueying is a Non-executive Director of the Company. She is a bachelor's degree holder and is a senior
+accountant. She has been a Director of the Company since April 2001. She has been the chief accountant of China
+COSCO Shipping Corporation Limited (+ĦRA), a non-executive director of China COSCO
+Holdings Company Ltd. (a company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange), the
+chairman of COSCO Finance Co., Ltd. and a director of China Merchants Securities Co., Ltd. (a company listed on
+Shanghai Stock Exchange). She was the chief accountant of China Ocean Shipping (Group) Company.
+Mr. Li Yinquan is a Non-executive Director of the Company. He obtained a master's degree in economics from the
+Graduate School of the People's Bank of China and a master's degree in finance from FINAFRICA, Italy. He is a senior
+economist. He has been a Director of the Company since April 2001. He is a deputy to the 12th session of the
+National People's Congress of Hong Kong Special Administrative Region. He is a director of China Merchants Group,
+the vice chairman and CEO of China Merchants Capital Investments Co., Ltd., the chairman of China Merchants
+Kunlun Equity Investment Fund Management Co., Ltd. and China Merchants China Investment Management Limited,
+a director of China Merchants China Direct Investments Limited (a company listed on Hong Kong Stock Exchange),
+and an independent non-executive director of Universal Medical Financial & Technical Advisory Services Company
+Limited. He was the chief financial officer and deputy general manager of China Merchants Group Ltd..
+Mr. Tian Huiyu is an Executive Director, President and Chief Executive Officer of the Company. He obtained his
+bachelor's degree in infrastructure finance and credit from Shanghai University of Finance and Economics and his
+master's degree in public administration from Columbia University. He is a senior economist. Mr. Tian was the vice
+president of Trust Investment Branch of China Cinda Asset Management Co., Ltd. from July 1998 to July 2003, and
+the vice president of Bank of Shanghai from July 2003 to December 2006. He served consecutively as the deputy
+general manager of Shanghai Branch of CCB, the head and general manager of Shenzhen Branch of CCB from
+December 2006 to March 2011. Mr. Tian acted as the business executive of retail banking at the head office and
+general manager of Beijing Branch of China Construction Bank Corporation ("CCB") (a company listed on Hong
+Kong Stock Exchange and Shanghai Stock Exchange) from March 2011 to May 2013. He joined the Company in
+May 2013 and was appointed as the President of the Company in September 2013. Mr. Tian is concurrently the vice
+chairman of CMB-China Unicom Consumption Finance Co., Ltd. (RA).
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure
+China Merchants Bank
+Annual Report 2015
+126
+124
+Mr. Ma Zehua is the Vice Chairman and Non-executive Director of the Company. He obtained a master's degree in
+international law from Shanghai Maritime Institute (now known as Shanghai Maritime University), and is a senior
+economist. He has been the Director of the Company since March 2014 and the Vice Chairman of the Company
+since August 2014. Mr. Ma is currently a deputy to the 12th session of the National People's Congress of the PRC
+and a member of the Foreign Affairs Committee. From 1990 to 2016, Mr. Ma served as the general manager of
+COSCO (UK) Ltd., the general manager of development department and head of overseas business division of
+COSCO Group, the assistant to president and general manager of development department of COSCO Group, the
+president of COSCO Americas, Inc., the deputy general manager of Guangzhou Ocean Shipping Company, the
+general manager of Qingdao Ocean Shipping Company, the vice president of COSCO Group, the vice president
+of China Shipping (Group) Company, a director, the president and the chairman of China Ocean Shipping (Group)
+Company.
+Mr. Li Jianhong is the Chairman and Non-executive Director of the Company. He obtained a master's degree in
+business administration from East London University, England and a master's degree in economy and management
+from Jilin University. He is a senior economist. Mr. Li has been a Director of the Company since July 2014 and the
+Chairman of the Company since August 2014. Currently, he serves as the Chairman of China Merchants Group
+Ltd. Mr. Li was the vice president of China Ocean Shipping (Group) Company, and the director and president of
+China Merchants Group Ltd.. He was also the chairman of the board of directors of China Merchants Holdings
+(International) Co., Ltd. (a company listed on Hong Kong Stock Exchange), the chairman of China International
+Marine Containers (Group) Limited (a company listed on Hong Kong Stock Exchange and the Shenzhen Stock
+Exchange), the chairman of China Merchants Capital Investments Co., Ltd., the chairman of China Merchants Energy
+Shipping Company Limited (a company listed on Shanghai Stock Exchange) and the chairman of China Merchants
+Huajian Highway Investment Company Limited.
+Directors
+Posts
+8.5 Biography of Directors, Supervisors and Senior
+Management and Information of Their Concurrent
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure 123
+China Merchants Bank
+Annual Report 2015
+From August 2015 up to now
+From January 2012 to June 2015
+From September 2006 up to now
+From November 2011 up to now
+From September 2011 up to now
+From September 2006 up to now
+From July 2014 up to now
+From July 2002 to March 2015
+From December 2000 to
+January 2016
+From July 2014 up to now
+From July 2013 to January 2016
+Term of office
+Mr. Li Xiaopeng is the Vice Chairman and Non-executive Director of the Company. He obtained his Ph.D. in finance
+from Wuhan University. He is a senior economist. He has been a Director of the Company since November 2014
+and the Vice Chairman of the Company since November 2015. Mr. Li is currently the general manager of China
+Merchants Group Ltd.. He is concurrently the chairman of the board of directors of China Merchants Holdings
+(International) Co., Ltd. (a company listed on Hong Kong Stock Exchange), the chairman of China Merchants
+Capital Investments Co., Ltd., the chairman of China Merchants United Development Company Limited, the
+chairman of China Merchants Investment and Development Co., Ltd. (Ã¥ŒĦRA¬), the vice chairman
+of China Tourism Association, the vice chairman of China Urban Financial Society and the vice chairman of China
+Rural Financial Society. He successively served as the deputy general manager of Henan Branch of Industrial and
+Commercial Bank of China Limited ("ICBC"), the general manager of the banking department of the head office
+of ICBC, the general manager of ICBC Sichuan Branch, the vice president of China Huarong Asset Management
+Corporation, the assistant to the president of ICBC and the general manager of ICBC Beijing Branch, the vice
+president of ICBC, the vice president and executive director of Industrial and Commercial Bank of China Limited,
+and the chairman of the board of supervisors of China Investment Corporation. He also served concurrently as the
+chairman of ICBC International Holdings Ltd., the chairman of ICBC Financial Leasing Co., Ltd., the chairman of ICBC
+Credit Suisse Asset Management Co., Ltd., the chairman of China Merchants Energy Shipping Company Limited (a
+company listed on Shanghai Stock Exchange) and the chairman of China Merchants Huajian Highway Investment
+Company Limited.
+Chief Financial Officer
+Director, Deputy Secretary of the
+CPC Committee
+China Merchants Bank
+Annual Report 2015
+Mr. Pan Chengwei is an Independent Non-executive Director of the Company. He graduated from Cadre
+Institute under the Ministry of Transport with an associate bachelor's degree and is an accountant. He has been
+an Independent Non-executive Director of the Company since July 2012. He is currently an independent non-
+executive director of Shenzhen Nanshan Power Co., Ltd., (a company listed on Shenzhen Stock Exchange) and the
+China International Marine Containers (Group) Co., Ltd. (a company listed on Hong Kong Stock Exchange and the
+Shenzhen Stock Exchange). He was the general manager of finance department of China Ocean Shipping (Group)
+Company (a company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange), the general manager
+of finance department of COSCO (Hong Kong) Group Limited, the general manager of COSCO (H.K.) Property
+Development Limited, the general manager of COSCO (H.K.) Industry & Trade Holdings Ltd., the chief representative
+of Shenzhen representative office of COSCO HK Group, the general manager of COSCO (Cayman) Fortune Holding
+Co., Ltd. and its Hong Kong branch, and the compliance manager of the Fuel Oil Futures Department of China
+Ocean Shipping (Group) Company.
+Mr. Wang Liang is an Executive Vice President of the Company. Mr. Wang obtained a master's degree in money and
+banking from Renmin University of China and is a senior economist. He successively served as the assistant general
+manager, the deputy general manager and the general manager of Beijing Branch of the Company. He has been
+the Executive Assistant President of the Company and the general manager of Beijing Branch since June 2012. He
+ceased to serve as the general manager of Beijing Branch in November 2013, and has served as an Executive Vice
+President of the Company since January 2015.
+Mr. Xiong Liangjun is the Secretary of the Party Discipline Committee of the Company. Mr. Xiong obtained a
+master's degree in money and banking from Zhongnan University of Finance and Economics and an EMBA degree
+from the Cheung Kong Graduate School of Business. He is a senior economist. He successively served as the Deputy
+Director-General of the CBRC Shenzhen Bureau, the Director-General of CBRC Guangxi Bureau and CBRC Shenzhen
+Bureau from September 2003 to July 2014. He has been the Secretary of the Party Discipline Committee of the
+Company since July 2014.
+Mr. Liu Jianjun is an Executive Vice President of the Company. Mr. Liu obtained a master's degree in national
+economics from Dongbei University of Finance and Economics and is a senior economist. He has successively
+served as the deputy general manager of Jinan Branch of the Company, the General Manager of the Retail Banking
+Department under the Head Office, a Senior Executive Vice President of the Retail Banking Department under the
+Head Office and the Business Executive since September 2000. He has been an Executive Vice President of the
+Company since December 2013. He is concurrently the chairman of CIGNA & CMB Life Insurance and a director of
+China UnionPay Co., Ltd..
+Mr. Wang Qingbin is an Executive Vice President of the Company. He obtained a master's degree in finance from
+Chinese Academy of Social Sciences and a senior economist. He joined the Company in May 2000 and successively
+served as the general manager of Jinan Branch and Shanghai Branch, and an Executive Assistant President of the
+Head Office. He has been an Executive Vice President of the Company since June 2011, and the general manager of
+Beijing Branch since November 2013.
+Mr. Ding Wei is an Executive Vice President of the Company. Mr. Ding obtained a master's degree in financial
+management from Hangzhou University and is an associate researcher. He joined the Company in December 1996.
+He successively served as the director of the General Office and the general manager of the Banking Department of
+Hangzhou Branch, the assistant general manager of Hangzhou Branch, the deputy general manager of Hangzhou
+Branch, the general manager of Nanchang Sub-branch, the general manager of Nanchang Branch, the General
+Manager of the Human Resources Department of the Head Office, and an Executive Assistant President of the Head
+Office. He has served as an Executive Vice President of the Company since May 2008. He is concurrently the Director
+of the Labor Union of the Head Office and a director of CMB International Capital Holdings Corporation Limited.
+Mr. Zhu Qi is an Executive Vice President of the Company. Mr. Zhu obtained a master's degree in statistics from
+Zhongnan University of Finance and Economics and is a senior economist. He joined the Company in August 2008,
+and has been an Executive Vice President of the Company since December 2008. He is concurrently an executive
+director and chief executive officer of Wing Lung Bank, an independent non-executive director of Great Eagle
+Holdings Limited (a company listed on Hong Kong Stock Exchange) and a director of the Hongkong Japan Business
+Co-operation Committee and a director of CMB International Capital Corporation Limited.
+Li Jianhong
+Ma Zehua
+Mr. Tian Huiyu, please refer to Mr. Tian Huiyu's biography under the paragraph headed "Directors" above.
+Mr. Li Hao, please refer to Mr. Li Hao's biography under the paragraph headed "Directors" above.
+Senior Management
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure 129
+China Merchants Bank
+Annual Report 2015
+Ms. Huang Dan has been an Employee Supervisor of the Company since March 2015. She obtained a bachelor's
+degree in computer software from Huazhong University of Science and Technology, and a master's degree in finance
+from Southwestern University of Finance and Economics. She is an engineer. Ms. Huang started her career in Tongji
+Medical University in July 1988, and then served in China Chang Jiang Energy Corp. (Group) in April 1993. She
+joined the Human Resources Department of the Head Office of China Merchants Bank in April 1994 and successively
+served as Assistant Manager, Deputy Manager, Manager and Senior Manager. She successively served as the
+Assistant General Manager and Deputy General Manager in the Human Resources Department of the Head Office of
+China Merchants Bank from April 2005 to December 2014. She has been the Deputy Director of the Labor Union of
+the Head Office of China Merchants Bank since December 2014.
+Mr. Jin Qingjun has been an External Supervisor of the Company since October 2014. He obtained a master's
+degree in law from the Graduate School of China University of Political Science and Law. He was a legal counsel
+in Hong Kong and the UK and also worked at Jang Shinn Law Office (+) as a legal counsel from
+August 1987 to October 1993. He was an executive partner at Shu Jin Law Firm () from October
+1993 to August 2002. Since September 2002, he has been the senior partner of King & Wood Mallesons, Beijing.
+He is concurrently a part-time professor at the School of Law, China University of Political Science and Law and the
+School of Law, Renmin University of China; a co-tutor for students of master's degree at the School of Law, Tsinghua
+University; an arbitrator of Shenzhen Court of International Arbitration, Shanghai International Arbitration Center
+and Arbitration Foundation of Southern Africa; a mediator of Shenzhen Securities and Futures Dispute Resolution
+Centre; and the PRC legal counsel of US Court of Appeals for the Washington D.C Circuit. Currently, he serves as an
+independent director of Guotai Junan Securities Co., Ltd. (a company listed on Shanghai Stock Exchange), Gemdale
+Corporation (a company listed on Shanghai Stock Exchange), Tianjin Changrong Print and Packing Equipment Co.,
+Ltd. (a company listed on Shenzhen Stock Exchange), Invesco Great Wall Fund Management Company Limited,
+New China Asset Management Co., Ltd., Times Property Holdings Limited (a company listed on Hong Kong Stock
+Exchange) and Xi'an Dagang Road Machinery Co., Ltd. (KOR) (a company listed on
+Shenzhen Stock Exchange), as well as a director of Konka Group Co., Ltd. (a company listed on Shenzhen Stock
+Exchange). In 2012, he was titled one of the Top 10 PRC Lawyers of the Year and PRC Securities Lawyer of the Year.
+Mr. Xiong Kai has been an Employee Supervisor of the Company since August 2014. He obtained a doctorate
+degree in legal theory from the Graduate School of Chinese Academy of Social Sciences. He worked at the Ministry
+of Public Security from July 1994 to April 2006 and held the positions of deputy section officer, section officer and
+deputy director. He served as the deputy director (researcher), director, deputy division director and division director
+at the CPC General Office from April 2006 to July 2014. He was the General Manager of the Inspection and Security
+Department at the Head Office of China Merchants Bank from July 2014 to August 2015. Mr. Xiong has been the
+Director of the General Office of the Head Office of China Merchants Bank since August 2015. He concurrently
+serves as the General Manager of the Asset Security Department of the Company.
+Mr. Dong Xiande has been an External Supervisor of the Company since June 2014. Mr. Dong graduated from
+Shanghai Harbour School (E) majoring in accounting and statistics and is a senior accountant. Mr.
+Dong was the deputy head of Treasury Department of Qinhuangdao Port Authority since August 1984, the head of
+Treasury Department of Qinhuangdao Port Authority since September 1985 (during which he concurrently served
+as the director of Settlement Centre of Qinhuangdao Port Authority from December 1997 to July 1998), the chief
+accountant of Qinhuangdao Port Authority from June 1998 to August 2002 (during which he concurrently served as
+the head of Treasury Department of Qinhuangdao Port Authority from June 1998 to March 1999), and the director
+and chief accountant of Qinhuangdao Port Group Co., Ltd. from August 2002 to February 2008 when he retired.
+Mr. Dong was a non-executive director of the fifth session of the Board of Directors of China Merchants Bank Co.,
+Ltd. from June 2002 to April 2004, and a shareholder supervisor of the seventh session of the Board of Supervisors
+of China Merchants Bank Co., Ltd. from June 2007 to June 2010.
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure
+Mr. Pan Ji has been an External Supervisor of the Company since May 2011. He graduated from Beijing Institute
+of Economics majoring in Labour Economics. He previously served as the supervisor (at director-general level) of the
+Board of Supervisors of the State-owned Assets Supervision and Administration Commission under the State Council.
+He used to serve as the deputy director of the Cadre Division Office and the deputy head of Planning & Recruitment
+Department of the Labour & Personnel Bureau, the vice director, office head, the chief of the Central Committee,
+the assistant inspector (at deputy director-general level) of the Recruitment Office of the Examination Recruitment
+Department of the Ministry of Personnel, the assistant to Commissioner and office head of the Investigating
+Commissioner Office under the State Council, the supervisor and office head of the Board of Supervisors of the
+Central Enterprises Work Committee, and the supervisor (at deputy director-general level) of the Board of Supervisors
+of the State-owned Assets Supervision and Administration Commission under the State Council.
+China Merchants Bank
+Annual Report 2015
+128
+Mr. Liu Zhengxi has been a Shareholder Supervisor of the Company since May 2012. He graduated from
+Hangzhou Institute of Commerce majoring in enterprise management. Mr. Liu served as a section officer, the deputy
+director of the Planning and Financial Division and the deputy director of the Labor Wage Division of Shandong
+Provincial Department of Labor and Social Security from 2000 to 2004, the deputy director and the director of
+the Distribution Department and the Head of the Capital Operation and Gains Management Department of State-
+owned Assets Supervision and Administration Commission of Shandong Province from 2004 to 2011, the vice
+president of Shandong State-owned Assets Investment Holding Co., Ltd. from March 2011 to August 2015 and
+the legal representative of Shandong Pharmaceutical Group Co., Ltd. () from May 2015 to
+December 2015. He has also been a director and deputy secretary of Party Committee of Shandong State-owned
+Assets Investment Holdings Co., Ltd. (ÈRAERAR]) since August 2015, and the chairman (legal
+representative), secretary of Party Committee and general manager of Shandong Pharmaceutical Group Co., Ltd. (
+¯) since December 2015.
+Mr. Fu Junyuan was a Non-executive Director of the Company from March 2000 to September 2015, and has been
+a Shareholder Supervisor of the Company since September 2015. He obtained a doctorate degree in management
+and is a senior accountant. He was the chief accountant of China Harbour Engineering (Group) Ltd. and the chief
+accountant of China Communications Construction (Group) Ltd. from October 1996 to September 2006. He has
+been an executive director and chief financial officer of China Communications Construction Ltd. (a company listed
+on Hong Kong Stock Exchange and Shanghai Stock Exchange). He has also been the chairman of CCCC Finance
+Company Limited and the vice chairman of Jiang Tai Insurance Broker Co., Ltd. since September 2006.
+Mr. Zhu Genlin was a Non-executive Director of the Company from April 2001 to May 2003, and has been a
+Shareholder Supervisor of the Company since May 2003. Mr. Zhu graduated from Shanghai University of Finance and
+Economics and obtained a master's degree in economics. He is a senior economist and associate researcher. He was
+the chief financial officer of Shanghai Automotive Industry Corporation (Group) from February 2002 to August 2010,
+the vice president of Shanghai Automotive Industry Corporation (Group) from August 2010 to January 2012 and
+the vice president of SAIC Motor Corporation Limited (a company listed on Shanghai Stock Exchange) from January
+2012 to June 2015. He is concurrently the deputy chairman of Automobile Branch of Shanghai Foreign Investment
+Association (上海市外商投資協會汽車分會).
+), head of the regulatory office III of the banking regulatory division II (¥=¬£¥=££) and head
+of the regulatory office VII of the banking regulatory division II (R탣¥=¬KŁ) of the People's Bank
+of China from February 1994 to July 2003. He served as the deputy head of the Banking Supervision Department
+|| (R) of the CBRC, director of CBRC Shanxi Bureau, director of CBRC Shenzhen Bureau, head
+of the banking related case audit bureau (**##≤BBE) of the CBRC and head of the banking related
+consumer protection bureau (Rí¯⠀⠀¤¤¤) of the CBRC from July 2003 to July 2014. He was appointed
+as a member of the CPC Committee at the Head Office of China Merchants Bank in July 2014. He is concurrently a
+visiting professor of Renmin University of China, the chairman of the professional committee under the supervisory
+committee of Chinese Association of Listed Companies and a member of Shenzhen Finance Development Decision-
+making Consultation Committee (深圳市金融發展決策諮詢委員會).
+Mr. Liu Yuan has been the Chairman of the Board of Supervisors of the Company since August 2014. He graduated
+from Renmin University of China with a bachelor's degree in global economy and is an economist. He served as
+the deputy section officer and section officer of the management office of foreign affairs bureau (¥Â¥¥£)
+of the People's Bank of China from August 1984 to October 1991. He was the secretary (division deputy level) and
+deputy chief of the monetary office of foreign exchange affairs division () of State Administration
+of Foreign Exchange from October 1991 to February 1994. He held the positions of secretary (deputy level) of the
+General Office (^), researcher of the regulatory office I of the banking division (RĀK
+Supervisors
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure 127
+China Merchants Bank
+Annual Report 2015
+Mr. Zhao Jun is an Independent Non-executive Director of the Company. He obtained a Bachelor's degree from the
+Department of Shipbuilding Engineering of Harbin Engineering University, a master's degree from the Department of
+Ocean Engineering of Shanghai Jiao Tong University, a doctorate degree in civil engineering from the University of
+Houston and a master's degree in financial management from the School of Management of Yale University. He has
+been an Independent Non-executive Director of the Company since January 2015. Mr. Zhao is currently the chairman
+of Fupu Fund Management Co., Ltd. (). He was a managing partner of DT Capital Partners,
+the managing director and the chief representative in China of ChinaVest, Ltd..
+Ms. Guo Xuemeng is an Independent Non-executive Director of the Company. She obtained a master's degree in
+accounting of economics department from Northern Jiaotong University (renamed as Beijing Jiaotong University in
+2003) and a doctorate degree in economics from Beijing Jiaotong University. She has been an Independent Non-
+executive Director of the Company since July 2012. She is concurrently a professor, a tutor of doctorate candidates
+of the School of Economics and Management as well as the vice dean of the Graduate School of Beijing Jiaotong
+University, the secretary-general of Transportation and Economics Committee of China Communication and
+Transportation Association, a direct member of Railway Accounting Association (¤ª††?ª¤§1), and
+an independent non-executive director of Gvitech Corporation (RŰNERSOR) and Luoyang North Glass
+Technology Co., Ltd.. From July 2001 to November 2012, she successively served as the deputy secretary of the
+CPC committee of the School of Economics and Management, the deputy director of the general office, the vice
+dean and deputy secretary of the CPC committee of the School of Economics and Management of Beijing Jiaotong
+University.
+Ms. Pan Yingli is an Independent Non-executive Director of the Company. She obtained a bachelor's degree in
+economics from East China Normal University, a master's degree in economics from Shanghai University of Finance
+and Economics and a doctorate degree in world economics from East China Normal University. She has been
+an Independent Non-executive Director of the Company since November 2011. She is concurrently a director of
+Research Center for Global Finance, Shanghai Jiao Tong University, a professor and a tutor of doctorate candidates
+in Finance at Antai College of Economics and Management of Shanghai Jiao Tong University, the vice president of
+Shanghai World Economy Association, the vice president of Shanghai Institute of International Financial Centers, and
+the chief expert of the Decision-making Consultation Research Base Studio of Shanghai Municipal Government (
+TÀI). She was an associate professor, a professor and a tutor of doctorate candidates in
+East China Normal University, and joined Shanghai Jiao Tong University in November 2005. From 1998 to 2007, she
+served as an invited expert of Shanghai Municipal Government on decision-making consultation.
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure
+Chief Financial Officer
+Assistant General Manager
+Executive Director &
+Chief Financial Officer
+Vice President
+Executive Director &
+Mr. Tang Zhihong is an Executive Vice President of the Company. Mr. Tang obtained a bachelor's degree in
+Chinese language and literature from Jilin University and is a senior economist. He joined the Company in May
+1995. He successively served as the deputy general manager of Shenyang Branch, the deputy head of the Shenzhen
+Administration Unit, the general manager of Lanzhou Branch, the general manager of Shanghai Branch, the head of
+the Shenzhen Administration Unit, and Executive Assistant President of the Head Office. He has been an Executive
+Vice President of the Company since May 2006.
+General Manager
+10.
+11.
+12.
+13.
+Mr. Ma Zehua, Vice Chairman of the Company, ceased to be the Chairman of China Ocean Shipping (Group)
+Company (COSCO Group).
+Mr. Li Xiaopeng, Vice Chairman of the Company, concurrently serves as Chairman of the Board of Directors
+of China Merchants Holdings (International) Co., Ltd., Chairman of China Merchants Capital Investments
+Co., Ltd., Chairman of China Merchants United Development Company Limited, Chairman of China
+Merchants Investment and Development Co., Ltd. (), Vice President of China Tourism
+Association, and ceased to concurrently serve as Chairman of China Merchants Energy Shipping Company
+Limited and China Merchants Huajian Highway Investment Company Limited.
+Mr. Tian Huiyu, Executive Director, President and Chief Executive Officer of the Company, concurrently serves
+as Vice Chairman of CMB-China Unicom Consumption Finance Co., Ltd.
+Mr. Li Yinquan, Non-executive Director of the Company, serves as Independent Non-executive Director of
+Universal Medical Financial & Technical Advisory Services Company Limited, and ceased to be the Deputy
+General Manager of China Merchants Group Ltd., the Chairman of China Merchants Finance Holdings
+Company Limited and Director of China Merchants Holdings (International) Co., Ltd..
+Ms. Sun Yueying, Non-executive Director of the Company, serves as Chief Accountant of China Cosco
+Shipping Corporation Limited (+£¥¥¥¥£!), the new entity resulting from combination of
+China Ocean Shipping (Group) Company with China Shipping (Group) Limited, and ceased to be the Chief
+Accountant of China Ocean Shipping (Group) Company.
+Mr. Li Hao, Executive Director and First Executive Vice President of the Company, concurrently serves as
+Chairman of CMFM and Vice Chairman of Shenzhen CMB Qianhai Financial Asset Exchange Co., Ltd. (
+招銀前海金融資產交易中心有限公司).
+Mr. Fu Gangfeng, Non-executive Director of the Company, serves as Executive Director of China Merchants
+Holdings (International) Company Limited; Mr. Fu Gangfeng serves as Vice Chairman of China Merchants
+Shekou Industrial Zone Holdings Co., Ltd. (¯¢¯¯*&£❀❀Ħ2), the surviving entity after
+combination with China Merchants Properties Limited () by way of merger.
+Mr. Hong Xiaoyuan, Non-executive Director of the Company, serves as Chairman of China Merchants Finance
+Holdings Company Limited, Chairman of Shenzhen CMB Qianhai Financial Asset Exchange Co., Ltd.
+H®ÌŒÂÂÂÌÌ‚+Ò¤®), Vice Chairman of China Merchants Capital Investments Co., Ltd., and
+ceased to be the Chairman of Bosera Asset Management Co., Ltd., General Manager of China Merchants
+Finance Holdings Company Limited and Director of China Merchants Securities Co., Ltd..
+Ms. Su Min, Non-executive Director of the Company, serves as General Manager of China Merchants Finance
+Holdings Company Limited, Chairman of Shenzhen Merchants Qihang Internet Investment Management Co.,
+Ltd. (NBA), Supervisor of China Merchants Capital Investments Co., Ltd.,
+and ceased to be the Chief Accountant and a member of the Communist Party of China Committee of China
+Shipping (Group) Company, Chairman of CS Finance Company, and director of China Shipping Development
+Co., Ltd. and China Shipping Container Lines Company Limited.
+9.
+Mr. Leung Kam Chung, Antony, Independent Non-executive Director of the Company, serves as the Chairman
+of charitable organizations, Heifer International - Hong Kong and "Food Angel", and ceased to be Senior
+Advisor and Member of the International Advisory Board of Blackstone.
+Ms. Guo Xuemeng, Independent Non-executive Director of the Company, serves as an Independent Non-
+executive Director of Luoyang North Glass Technology Co., Ltd., and ceased to be Independent Non-executive
+Director of Beijing Bode Communication Equipment Co., Ltd. (§ŒÌŒØSĦRA).
+122
+China Merchants Bank
+Annual Report 2015
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure
+14.
+15.
+16.
+17.
+Mr. Zhu Genlin, Shareholder Supervisor of the Company, ceased to be the vice president of SAIC Motor
+Corporation Limited and was appointed as vice president of SAEFI Automotive Branch.
+Mr. Jin Qingjun, External Supervisor of the Company, concurrently served as an independent director of Xi'an
+Dagang Road Machinery Co., Ltd. and Times Property Holdings Limited, as well as a director of Konka Group
+Co., Ltd..
+Mr. Xiong Kai, Employee Supervisor of the Company, ceased to be the general manager of the Inspection and
+Security Department of the Company and was appointed as director of General Office of the Company. He
+concurrently serves as General Manager of Asset Security Department of the Company.
+8.4 Current Positions Held by Directors and Supervisors
+in the Shareholders' Companies
+Deputy General Manager
+Chief Accountant
+Mr. Wong Kwai Lam, Independent Non-executive Director of the Company, serves as an Independent Non-
+executive Director of Hutchison Port Holdings Trust.
+8.
+Mr. Liu Zhengxi, Shareholder Supervisor of the Company, ceased to be the vice president of Shandong State-
+owned Assets Investment Holdings Co., Ltd. and was redesignated as a director and deputy secretary of the
+CPC committee of Shandong State-owned Assets Investment Holdings Co., Ltd., and concurrently serves as
+Chairman (legal representative), secretary of the CPC committee and general manager of Shandong Province
+Pharmaceutical Group (AĦJARÃĀ).
+6.
+Title
+7.
+Construction Co., Ltd.
+SAIC Motor Corporation Limited
+China Communications
+China Merchants Group Ltd.
+China Merchants Group Ltd.
+China Communications
+China Merchants Group Ltd.
+China Merchants Group Ltd.
+China Ocean Shipping (Group)
+Company
+Name of Company
+China Merchants Group Ltd.
+China Ocean Shipping (Group)
+Company
+Liu Zhengxi
+Fu Junyuan
+Zhu Genlin
+Fu Junyuan
+Fu Gangfeng
+Hong Xiaoyuan
+Li Xiaopeng
+Li Yinquan
+Sun Yueying
+120
+China Merchants Bank
+Annual Report 2015
+Construction Co., Ltd.
+Shandong State-owned Assets
+Investment Holdings Co. Ltd.
+Chairman
+Chairman
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure
+3.
+2.
+1. Mr. Li Jianhong, Chairman of the Company, ceased to be the Chairman of the Board of Directors of China
+Merchants Holdings (International) Co., Ltd., the Chairman of China International Marine Containers (Group)
+Limited and the Chairman of China Merchants Capital Investments Co., Ltd..
+8.3 Changes of Information of Directors and Supervisors
+during the Reporting Period
+5.
+China Merchants Bank
+Annual Report 2015
+8.2 Appointment and Resignation of Directors,
+Supervisors and Senior Management
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure 121
+According to the resolutions passed at the 2014 Second Extraordinary General Meeting of the Company, Mr. Leung
+Kam Chung, Antony and Mr. Zhao Jun were elected as Independent Non-executive Directors of the Ninth Session of
+the Board of Directors of the Company. Their qualifications for serving as Directors were approved by the banking
+regulator(s) in the PRC in January 2015. According to the resolution passed at the 2015 First Extraordinary General
+Meeting of the Company, Mr. Zhang Feng was nominated as a Non-executive Director of the Company, but his
+appointment qualification is still subject to approval by the banking regulator(s) in the PRC. Mr. Li Xiaopeng was
+elected as the Vice Chairman of the Company at the 35th meeting of the Ninth Session of the Board of Directors of
+the Company. His appointment qualification has been approved by the PRC banking regulator(s) in November 2015.
+Mr. Zhang Guanghua submitted a letter of resignation to the Company on 14 July 2015 due to work reasons, and
+ceased to be Vice Chairman and Executive Director of the Company. Mr. Xu Shanda and Mr. Xiao Yuhuai ceased to
+be Independent Non-executive Director of the Company with effect from January 2015. Mr. Fu Junyuan submitted
+a letter of resignation to the Company on 26 August 2015 due to work reasons, and ceased to be Non-Executive
+Director of the Company. Ms. Guo Xuemeng submitted a letter of resignation to the Company on 12 November
+2015 due to work reasons and her resignation will take effect only after a new Independent Non-Executive Director
+has been elected at the general meeting of the Company to fill her vacancy and whose qualification for serving as
+the independent non-executive director has been approved by the PRC banking regulatory authorities.
+4.
+According to the resolutions passed at the 2015 First Extraordinary General Meeting of the Company and the
+voting results of the employee representatives meeting of the Company, Mr. Fu Junyuan and Ms. Huang Dan
+were elected as Shareholder Supervisor and Employee Supervisor of the Ninth Session of the Board of Supervisors
+of the Company, respectively. Mr. Yu Yong, a Former Employee Supervisor, ceased to be Employee Supervisor of
+the Company with effect from March 2015 and Mr. An Luming, a Former Shareholder Supervisor, ceased to be
+Shareholder Supervisor of the Company with effect from August 2015. There were no changes to other members of
+the Board of Supervisors. Mr. Dong Xiande resigned as External Supervisor of the Company in September 2015 and
+Mr. Pan Ji resigned as External Supervisor of the Company in November 2015. Their resignations will take effect only
+after new External Supervisors have been appointed at the general meeting of the Company to fill their vacancies.
+According to the resolutions passed at the 26th meeting of the Ninth Session of the Board of Directors of the
+Company, Mr. Wang Liang and Mr. Zhao Ju were appointed as Executive Vice Presidents of the Company. Their
+qualifications for serving as Executive Vice Presidents have been approved by the CBRC, Shenzhen Office in
+December 2014 and February 2015, respectively.
+For details of the above-mentioned matters, please refer to the relevant announcements published by the Company
+in China Securities Journal, Shanghai Securities News and Securities Times, and on the websites of Shanghai Stock
+Exchange, Hong Kong Stock Exchange and the Company.
+4 Xinning Road, Chengxi District, Xining
+66
+166
+12 Harcourt Road, Central, Hong Kong
+Outside Mainland China Hong Kong Branch
+12,860
+242
+9
+810000
+90,170
+1
+71,508
+14,965
+307
+12
+750000
+Yinchuan Branch
+Yunyan District,Guiyang
+20,200
+408
+22,107
+474
+26,905
+USA Representative Office
+665
+Xining Branch
+217 Xinhua Street East, Xingqing District,
+Yinchuan
+2
+New York Branch
+Singapore Branch
+5,208,037
+1,209
+76,192
+1,717
+29
+389
+18
+1
+2
+2
+2
+3,407
+40
+48,253
+106
+1
+Total
+Other assignments
+L-2180
+5th floor, 4rue Jean Monnet, Luxembourg
+333, Section 1, Jilong Road, Xinyi District, Taipei
+048616
+1002
+535 Madison Avenue 18th Floor, New York, U.S.A
+One Raffles Place, Tower 2, #32-61, Singapore
+39 Cornhill EC3V 3ND, London, UK
+London Representative Office
+Taipei Representative Office
+Luxembourg Branch
+509 Madison Avenue, Suite 306,
+NewYork, U.S.A
+3888
+88 Xingguang Road, New North District,
+Chongqing
+550001
+730030
+9 Qingyang Road, Chengguan District, Lanzhou
+China Merchants Bank Mansion,
+Urumchi Branch
+Lanzhou Branch
+Xi'an Branch
+Chongqing Branch
+55,864
+1,486
+49
+610000
+No. 1, the 3rd section of Renmin Road South,
+Wuhou District, Chengdu
+Chengdu Branch
+Staff (RMB million)
+1 Gaoxin No.2 Road, Xi'an
+code branches
+Name of branches
+Regions
+Western China
+Volume of
+assets
+No. of
+No. of
+Postal
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure 135
+China Merchants Bank
+Annual Report 2015
+1 Shimao Road North, Haikou
+18,071
+243
+136
+Business address
+18
+710001
+264
+284 Zhonghua Road North,
+Guiyang Branch
+19
+530022
+92-1 Minzu Avenue, Nanning
+18
+010040
+9 Chilechuan Avenue, Saihan District, Huhhot
+43
+650051
+48 Dongfeng Road East, Kunming
+Kunming Branch
+Hohhot Branch
+Nanning Branch
+401121
+2 Huanghe Road, Urumchi
+685
+18
+830000
+74,425
+1,490
+45
+64,080
+1,735
+60
+29,360
+846
+28
+26,592
+China Merchants Bank
+Annual Report 2015
+9.2 Overview of Corporate Governance
+8.11 The Company's Organisational Structure:
+Risk and Compliance Management Committee)
+Assets and Liabilities Management Committee
+Supervisory Committee
+Nomination Committee
+Audit Department
+Division
+Shenyang Audit
+Nanjing Audit
+Division
+Shenzhen Audit
+Division
+Shanghai Audit
+Division
+Executive Office of
+President
+Related Party Transaction Control Committee
+Office of Board of
+Supervisors
+Office of the Board of
+Directors
+Audit Committee
+Risk and Capital Management Committee
+Remuneration and Appraisal
+Committee
+Board of Supervisors
+Board of Directors
+Nomination Committee
+Shareholders' General Meeting
+Strategy Committee
+9.1 Corporate Governance Structure:
+Corporate Governance
+IX Corporate Governance
+IT Management Committee
+Beijing Audit
+Division
+Xi'an Audit
+Division
+Business Continuity and Emergency Committee)
+139
+In institution development and actual operation, the Board of Directors places great emphasis on the "Unity of Form
+and Spirit". With respect to the development of organisational structure, the Board of Directors facilitates scientific
+and reasonable decision-making through the establishment of a diversified director structure, and improves the
+decision-making ability and operational efficiency through promoting the effective operation of special committees.
+With respect to the operation, the Board of Directors focuses on key issues, directions, and strategies. The Board of
+Directors continues to strengthen the scientific concept of development to seek balance, health and sustainability;
+ensures the Company's healthy, sustainable and sound development through effective management of its strategy,
+risks, capital, remuneration, audit and related party transactions, etc., thus providing a solid basis for the Company
+to enhance its operation and management capabilities.
+The Board of Directors is the core of our corporate governance. The Company implements a system under which the
+President assumes full responsibility under the leadership of the Board of Directors, which in turn is an independent
+policy-making body of the Company, responsible for the execution of resolutions passed by the general meetings;
+devising the Company's major principles, policies and development plans; deciding on the Company's operating
+plans, investment proposals and the establishment of internal management organs; preparing annual financial
+budgets, final accounts and profit appropriation plans; and appointing members of senior management. The
+Company's management team has discretionary powers in terms of operation, and the Board of Directors would not
+intervene in any specific matters in the Company's daily operation and management.
+9.4 Board of Directors
+During the reporting period, the Company convened 2 shareholders' general meetings in Shenzhen, namely, the
+2014 Annual General Meeting, the First Class Meeting of the Shareholders of A Shares for 2015 and the First Class
+Meeting of the Shareholders of H Shares for 2015 held on 19 June 2015 and the 2015 First Extraordinary General
+Meeting, the Second Class Meeting of the Shareholders of A Shares for 2015 and the Second Class Meeting of
+the Shareholders of H Shares for 2015 held on 25 September 2015. For details of the resolutions, please refer to
+the documents on shareholders' general meetings published on the websites of Shanghai Stock Exchange and the
+Company as well as the circulars regarding the shareholders' general meetings published on the website of Hong
+Kong Stock Exchange. The notifying, gathering, convening and voting procedures of the meetings complied with
+relevant requirements of the Company Law, the Articles of Association of the Company and the Hong Kong Listing
+Rules. Relevant resolutions were published on the websites of Shanghai Stock Exchange, Hong Kong Stock Exchange
+and the Company and on China Securities Journal, Shanghai Securities News and Securities Times. For more
+information on the attendance of directors at shareholders' general meetings, please refer to the section headed
+"Attendance of Directors at Relevant Meetings" of this report.
+9.3 Information about General Meetings
+During the reporting period, the Company received recognitions from the capital markets and regulatory authorities
+in respect of corporate governance, information disclosure as well as investor relations management, and won a
+number of awards, including the "Top Ten Excellent Board of Directors of Companies Listed on the Main Board
+in 2015" selected by 21st Century Media; ranking first in the "Top Ten of Investors' Most Respected 100 Listed
+Companies in China" selected by the Association of Chinese Listed Companies; the "Silver Award for Composition
+of Annual Reports in Greater China" in the ARC International Annual Report Competition known as Annual
+Report Oscar; and the "Silver Award for Outstanding Annual Reports of Banks" selected by League of American
+Communications Professionals LLC (LACP) in 2014.
+IX Corporate Governance
+China Merchants Bank
+Annual Report 2015
+Having conducted thorough self-inspection, the Company was not aware of any non-compliance of its corporate
+governance practice during the reporting period with the requirements set out in CSRC's regulatory documents
+governing the corporate governance of listed companies.
+For details of information disclosure and management of investor relations of the Company, please refer to the
+section headed "Communications with shareholders" of this report.
+Through their presence at meetings of the Board of Directors and the special committees of the Board of Directors
+and the Shareholders' General Meetings, the Board of Supervisors supervised the convening, reviewing and voting
+procedures of the meetings of the Board of Directors and its special committees and the Shareholders' General
+Meetings, as well as the performance of duties by the Directors, and made sure they were compliant with the rules.
+China Merchants Bank
+Annual Report 2015
+The Board of Directors continued to perform their duties of scientific decision-making and strategic management,
+continuously strengthened risk management and capital management, made scientific decisions after review and
+deliberation of important issues including results and distribution of profits, formulation and implementation of
+business strategies, changes of directors and senior management, risk and capital management, remuneration and
+appraisal, financial supervision and internal control, structural adjustment, material external investments and material
+related party transactions so as to guarantee compliant operation and steady development of the Company. During
+the year, the special committees of the Board of Directors diligently performed their duties and made full advantage
+of their expertise and research capability. The matters under their review covered most of the resolutions proposed to
+the Board of Directors, thus enhancing the efficiency and scientific decision-making ability of the Board of Directors,
+and promoted the healthy development of the businesses of the Company.
+In 2015, the domestic economy entered the new normal in which the economic slowdown was mingled with
+profound changes in industrial structure and growth momentum. The economic downturn, interest rate liberalisation,
+financial disintermediation and the Internet finance confronted the banking sector with unprecedented difficulties
+and challenges. The Board of Directors, the Board of Supervisors and the special committees earnestly implemented
+the national policies and regulatory requirements, performed their duties with diligence, made decisions scientifically
+and operated effectively according to laws and regulations, successfully completed analysis and review of important
+issues of the operation and management of the Company, and guaranteed compliant operation and sustainable and
+steady development of the Company. Particulars of their achievements are set out as follows:
+9
+IX Corporate Governance
+China Merchants Bank
+Annual Report 2015
+138
+137
+Division
+Fuzhou Audit
+Division
+Chengdu Audit
+Wuhan Audit
+Division
+Internet Finance Committee
+During the year, the Company convened a total of 65 important meetings at which 268 proposals were reviewed
+and 51 reports were delivered. Among the 65 meetings there were 2 shareholders' general meetings (31 proposals
+were reviewed), 14 meetings of the Board of Directors (79 proposals were reviewed and 11 reports were delivered),
+11 meetings of the Board of Supervisors (43 proposals were reviewed and 5 reports were delivered), 34 meetings
+of the special committees of the Board of Directors (110 proposals were reviewed and 30 reports were delivered),
+2 meetings of the special committees of the Board of Supervisors (3 proposals were reviewed), 1 meeting of
+non-executive directors (1 report was delivered) and 1 meeting of independent non-executive directors (2 proposals
+were reviewed and 4 reports were delivered). Seven activities including research, field study and training were
+organised by the Board of Directors, and 5 by the Board of Supervisors.
+Banking Department
+Audit Department
+Representative Offices (Beijing, Shanghai,
+Taipei, United States of America, London)
+Transaction Banking Department
+Small Enterprises Finance Department
+Financial Institutions Department
+Institutional Customers Department
+Strategic Customers Department
+Sub-branches
+Branches
+Head Office
+Banking and Financial Markets
+General Office of Investment
+Finance
+General Office of Corporate
+Procurement Management Department
+General Office of Retail Finance
+Project Management Department
+Process and Information Management Office
+Financial Accounting Department
+Assets and Liabilities Management Department
+Strategic Development Department
+Human Resources Department
+Training Center
+the Protection of Customer Interests
+Supervision and Management Center for
+General Office
+Office of Board of Supervisors
+Office of the Board of Directors
+China Merchants Bank
+Investment Management Department
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure
+Investment Banking Department
+Asset Management Department
+Administration Department
+Labor Union of the Head Office
+Data Center
+Testing Center
+Research and Development Center
+Operation Center
+Special Assets Operating Center
+Market Risk Management Department
+Operational Risk Management Department
+Legal Compliance Department
+Inspection and Security Department
+Information Technology Department
+Financial Market Department
+Operation Management Department
+Credit Approval Department
+Risk Management Department
+Direct Banking Center
+Bills Center
+Credit Card Center
+Basic Retail Customers Department
+(Pension Finance Department)
+Retail Credit Business Department
+Private Banking Department
+Wealth Management Department
+Retail Network Banking Department
+Bills Business Department
+Asset Custody Department
+Asset Security Department
+570100
+Offshore Finance Center
+Haikou Branch
+1 Hanzhong Road, Nanjing
+210005
+78
+2,705
+143,826
+23 Hangda Road, Hangzhou
+Nanjing Branch
+Hangzhou Branch
+310007
+2,503
+142,565
+Ningbo Branch
+342 Min'an East Road, Ningbo
+315042
+32
+63
+1,145
+Pudong New District, Shanghai
+Zone Branch
+12,311
+310,273
+Yangtze River Delta
+Shanghai Branch
+1088 Lujiazui Ring Road, Pudong New District,
+Shanghai
+200120
+Waigaoqiao Bonded Area,
+107
+209,507
+Waigaoqiao Building, 6 Jilong Road,
+200131
+1
+35
+2,835
+4,382
+66,621
+Suzhou Branch
+36 Wansheng Street, Industrial Park, Suzhou
+111 Gongnong Road, Nantong
+226007
+13
+412
+112
+19,486
+Nantong Branch
+134
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure
+Postal
+No. of
+No. of
+Volume of
+assets
+Regions
+Bohai Rim
+China Merchants Bank
+Annual Report 2015
+Wuqiao Avenue, Lucheng District, Wenzhou
+31,486
+495
+215028
+36
+1,156
+112,288
+Wuxi Branch
+9 Xueqian Road, Wuxi
+214001
+15
+682
+30,733
+Wenzhou Branch
+1-3/F, Block 2, 4, 5, Hongshengjin Garden,
+325000
+12
+495
+1
+Name of branches
+201201
+1,880,899
+8.8 Employee Stock Ownership Scheme and H Share
+Appreciation Rights Incentive Scheme
+To further improve the Company's legal entity governance structure, stabilize management and key personnel
+team, establish a sound mid and long-term incentive mechanism combining incentives and restraints, and promote
+the long-term, sustained and healthy development of the Company, 2015 First Phase Employee Stock Ownership
+Scheme of the Company (Draft) (by way of subscribing A Shares in Private Placement) and the relevant resolutions
+were considered and approved at the 2014 Annual General Meeting, the First Class Meeting of the Shareholders of
+A Shares for 2015 and the First Class Meeting of the Shareholders of H Shares for 2015 of the Company, and the
+"resolution regarding Termination of the H Share Appreciation Rights Scheme" was also approved at the aforesaid
+general meeting, pursuant to which it was resolved that, upon obtaining the approval for the Employee Stock
+Ownership Scheme at the General Meeting, the H-Share Appreciation Rights yet to be granted shall be suspended
+immediately; subject to the approvals and implementation of the Employee Stock Ownership Scheme, the H-Share
+Appreciation Rights Scheme shall be terminated officially and automatically and the grant of the share appreciation
+rights yet to be granted shall also be terminated, and the implementation of the related specific matters will be
+arranged for by the Board. Currently, the implementation of the Employee Stock Ownership Scheme is still subject
+to approval from the relevant regulatory authorities. For details of the abovementioned matters, please refer to
+the relevant announcements dated 10 April 2015, 22 April 2015 and 19 June 2015 published on the websites of
+Shanghai Stock Exchange, Hong Kong Stock Exchange and the Company.
+132
+China Merchants Bank
+Annual Report 2015
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure
+8.9 Information about Employees
+According to the "Policies on Evaluation of Performance of Directors by the Board of Supervisors (Provisional)",
+the Board of Supervisors evaluates the annual duty performance of the directors through monitoring their duty
+performance in the ordinary course, reviewing their annual duty performance record (including but not limited
+to, attendance of meetings, participation of researches, provision of recommendations and the term of office in
+the Company), the "Annual Duty Performance Self-Evaluation Questionnaire" completed by each director and
+work summaries, and then reports the same to the general meeting and regulatory authorities. The Board of
+Directors evaluates the performance of the senior management through the "Policies on Remunerations of Senior
+Management of China Merchants Bank Co., Ltd." (released in 2015) and the "Assessment Standards of H-Share
+Appreciation Rights Incentive Scheme for the Senior Management".
+As at 31 December 2015, the Company had 76,192 employees (including dispatched employees). In addition, the
+Company is responsible for payment of costs for 439 retired employees. The composition of our employees in service
+is set out as follows:
+Logistical support
+1.00%
+R&D staff
+Operational staff
+1.82%
+21.44%
+General management
+(1) Professional Structure
+12.96%
+The Company offers remuneration to independent directors and external supervisors according to the "Resolution in
+respect of Adjustment to Remuneration of Independent Directors and External Supervisors"; offers remuneration to
+executive directors and other senior executives according to the "Policies on Remunerations of Senior Management
+of China Merchants Bank Co., Ltd." (released in 2015); and offers remuneration to employee supervisors in
+accordance with the policies on remuneration of employees of the Company. Directors and supervisors nominated by
+shareholders of the Company do not receive any remuneration from the Company.
+Mr. Li Jianhong, Chairman of the Company, also acts as the Chairman of China Merchants Group Ltd.. China
+Merchants Group Ltd. is one of the state-owned backbone enterprises under the direct control of State-owned
+Assets Supervision and Administration Commission of the State Council. It is a state-owned large-sized business
+group with business operations headquartered in Hong Kong. Therefore, Mr. Li Jianhong's daily office place is
+located in Hong Kong.
+1-3/F Complex Building C, Haian Yihao,
+130
+China Merchants Bank
+Annual Report 2015
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure
+Mr. Zhao Ju is an Executive Vice President of the Company. Mr. Zhao obtained an EMBA from Guanghua School
+of Management of Peking University. He is an economist. He was appointed as the director and managing director
+of the Investment Banking Department of UBS Securities Company Limited (Beijing) in December 2009, and as a
+joint chairman of the China Division and vice chairman of the Asia Division of UBS Investment Bank in July 2012. He
+joined the Company in November 2014, and has been an Executive Vice President of the Company since February
+2015. He concurrently serves as a director of CMB International Capital Holdings Corporation Limited and a director
+of CMB International Capital Corporation Limited.
+Mr. Lian Bolin is an Executive Assistant President of the Company. Mr. Lian obtained a bachelor's degree in finance
+from Anhui Institute of Finance and Trade and is a senior economist. He joined the Company in January 2002 and
+successively served as the deputy general manager of Hefei Branch, the deputy general manager of Shanghai Branch,
+the general manager of Jinan Branch and the general manager of Shanghai Branch of the Company. He has been
+an Executive Assistant President of the Company and the general manager of Shanghai Branch since June 2012. He
+ceased to serve as the general manager of Shanghai Branch in September 2014. He is concurrently the chairman of
+CMB Financial Leasing.
+8.7 Evaluation and incentive system for directors,
+supervisors and senior management
+Mr. Xu Shiqing is the Secretary of the Board of Directors, and one of the joint company secretaries of the
+Company. He was a doctor of philosophy in Business Administration of the Southern California University and a
+senior economist. Mr. Xu joined the Company in 1993. He held various positions such as the executive assistant of
+the General Office of the Head Office, the assistant general manager of International Business Department of the
+Head Office, the deputy general manager of International Business Department, the deputy general manager of
+Offshore Business Department of the Head Office, the assistant general manager of the Fuzhou Branch, the deputy
+general manager of the Planning and Treasury Department of the Head Office, the person-in-charge of Custodian
+Department of the Head Office, the general manager of Planning and Financial Department and Treasury Department
+of the Head Office, the general manager of Planning and Financial Department of the Head Office, the general
+manager of Strategic Development Department and Overseas Development Department of the Head Office, and the
+general manager of Hong Kong Branch.
+Mr. Xu Shiqing, please refer to his biography above.
+Ms. Seng Sze Ka Mee, Natalia has been one of the joint company secretaries of the Company since August
+2006. Ms. Seng is the Chief Executive Officer - China and Hong Kong of Tricor Group and an Executive Director of
+Tricor Services Limited (hereinafter referred to as "Tricor"), and also a Practice Leader of Tricor's Corporate Services
+and China Consultancy Services. Ms. Seng is a Chartered Secretary, a Past President (2007-2009) and a retired
+Council Member (1996-2012) and a Fellow of The Hong Kong Institute of Chartered Secretaries ("HKICS"); she
+is concurrently a Fellow and a retired Council Member (2010-2014) of The Institute of Chartered Secretaries and
+Administrators in the United Kingdom, and a Fellow of both The Hong Kong Institute of Directors and The Taxation
+Institute of Hong Kong. Ms. Seng was appointed by the government as a member of the Standing Committee on
+Company Law Reform and the Corruption Prevention Advisory Committee of Independent Commission Against
+Corruption for a term of two years from February 2016 to January 2018. Ms. Seng has become a member of the
+Advisory Panel to the Rewrite of the Company Ordinance as a representative of HKICS. Ms. Seng was appointed
+by government as a lay member to the Council of the Hong Kong Institute of Certified Public Accountants from
+December 2013 to November 2015, and has been an appointed member of the Inland Revenue Department Users'
+Committee since 2009. Ms. Seng holds a master's degree in Business Administration (Executive) from City University
+of Hong Kong. Apart from the Company, she has also been providing secretarial services to other listed companies
+with support of her professional team.
+China Merchants Bank
+Annual Report 2015
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure 131
+8.6 Explanation on the office location of Chairman of
+the Company
+Joint Company Secretaries
+Retail staff
+41.05%
+(2) Educational Structure
+Technical secondary school
+degrees or below
+1.45%
+Regions
+Head Office
+Name of branches
+Business address
+code
+No. of
+branches
+No. of
+Postal
+assets
+(RMB million)
+Head Office
+Credit Card Center
+7088 Shennan Boulevard, Shenzhen
+518040
+1
+5,777
+Staff
+Volume of
+The following table sets forth the branches and representative offices as at 31 December 2015:
+In 2015, the Company continued to push forward expansion of its branch network. During the reporting period,
+five second-level branches were approved to start business, namely: Tianjin Pilot Free Trade Zone Branch, Jingdezhen
+Branch, Shihezi Branch, Fujian Pilot Free Trade Zone Fuzhou Branch and Liuan Branch; Nanyang Branch, Jilin Branch
+and Fujian Pilot Free Trade Zone Xiamen Branch (second-level) got approval to prepare for establishment; Nantong
+Branch got approval to upgrade to first-level branch, Panjin Sub-branch got approval to upgrade to second-level
+branch, Guangzhou Nansha Sub-branch got approval to upgrade and rename to Guangdong Pilot Free Trade Zone
+Nansha Branch. Outside Mainland China, Luxembourg Branch got approval to start business.
+Junior college degrees
+15.77%
+Bachelor's degrees
+68.09%
+Corporate staff
+21.73%
+Master's degrees
+14.69%
+China Merchants Bank
+Annual Report 2015
+VIII Directors, Supervisors, Senior Management, Employees and Organisational Structure 133
+Core technical team and key technical personnel
+During the reporting period, there was no change in the personnel including the Company's core technical team and
+key technical staff (other than the directors, supervisors or senior management personnel) who may have significant
+influence on the Company's core competitiveness.
+Staff Remuneration Policy
+The Company's remuneration policy is in line with its operation targets, cultural concept and values. It aims to
+refine and improve its incentive and restrictive mechanisms, realise its corporate goals, enhance its organisational
+performance and minimize its operating risk. The remuneration policy adheres to the principles of remuneration
+management featuring "strategic orientation, performance enhancement, risk control, internal fairness and market
+adaptation" and reflects the remuneration concept of "fixing remuneration based on positions and workload".
+Staff Training Program
+The Company has formulated multi-level staff training programs covering all its staff. The contents of training
+focus mainly on knowledge of its business and products, professional ethics and security, management skills and
+leadership. During the reporting period, the Company fully completed all its training programs.
+8.10 Branches and Representative Offices
+686 Lai'an Road, Pudong New District, Shanghai
+Business address
+Shanghai Pilot Free Trade
+branches
+37
+1,251
+55,562
+3 Zhongyang Avenue, Daoli District, Harbin
+150001
+37
+116001
+975
+Changchun Branch
+9999 Renmin Avenue, Nanguan District,
+Changchun
+130022
+25
+578
+29,991
+57,928
+17 Renmin Road, Zhongshan District, Dalian
+Dalian Branch
+Harbin Branch
+56,776
+523129
+528200
+23
+32
+918
+40,450
+33
+1,102
+59,943
+North-eastern China
+Shenyang Branch
+12 Shiyiwei Road, Heping District, Shenyang
+110003
+49
+1,592
+Central China
+200 Hongfu Road, Nancheng District, Dongguan
+12 Denghu Road East, Guicheng Street,
+Nanhai District, Foshan
+Wuhan Branch
+430022
+39,864
+169 Funan Road, Hefei
+Zhengzhou Branch
+96 Nongye Road East, Zhengzhou
+code
+35
+1,078
+1,124
+Taiyuan Branch
+1 Xinjian Road South, Taiyuan
+030001
+25
+821
+32,663
+54,669
+42
+230061
+China Merchants Bank Mansion,
+62
+2,242
+107,588
+Nanchang Branch
+468 Dieshan Road, Donghu District, Nanchang
+330003
+47
+1,279
+80,542
+Changsha Branch
+Hefei Branch
+766 Wuyi Avenue, Changsha
+410005
+54
+1,431
+48,702
+518 Jianshe Avenue, Wuhan
+Dongguan Branch
+Foshan Branch
+450018
+450
+Yujia Building, 255 Guangdong Road and
+300204
+41
+1,610
+97,268
+9 Qianjin Road, Hexi District, Tianjin
+Tianjin Branch
+Jinan Branch
+250012
+56
+1,764
+81,473
+Shijiazhuang Branch
+172 Zhonghua Street South, Shijiazhuang
+7 Gongqingtuan Road, Jinan
+66,024
+1,943
+63
+Staff (RMB million)
+25,722
+Beijing Representative Office
+Beijing Branch
+35 Jinrong Avenue, Xicheng District, Beijing
+156 Fuxingmen Nei Dajie, Beijing
+100005
+9
+1
+100031
+112
+4,740
+241,753
+Qingdao Branch
+65 Hai'er Road, Laoshan District, Qingdao
+266103
+050000
+14
+1
+18,017
+60 Guping Road, Fuzhou
+350003
+39
+1,087
+62,002
+Xiamen Branch
+264,923
+Quanzhou Branch
+361001
+30
+362000
+47,581
+16
+298
+No. 6 Complex Building, Hongtai Industrial Park,
+309 Hudong Road, Siming District, Xiamen
+Huangxing Building, No. 301, the middle section
+of Fengze Street, Quanzhou
+4,560
+907
+518001
+44 Beixin Road West, Lubei District, Tangshan
+106
+1
+134
+3,373
+Pearl River Delta and
+West Side of
+Taiwan Strait
+Guangzhou Branch
+063000
+Shenzhen Branch
+Fuzhou Branch
+105,542
+2,542
+66
+Tangshan Branch
+5 Huasui Road, Tianhe District, Guangzhou
+2 Shennan Road Central, Shenzhen
+510620
+China Merchants Bank
+Annual Report 2015
+study the standards and procedures for selection of directors and senior management, and make
+recommendations to the Board of Directors;
+(3)
+conduct extensive searches for qualified candidates for directors and senior management;
+(2)
+conduct preliminary examination on the candidates for directors and senior management and make
+recommendations to the Board of Directors; and
+(5)
+any other task delegated by the Board of Directors.
+review the structure, size and composition of the Board of Directors (including their expertise, knowledge
+and experience) at least once a year and make recommendations on any change to the Board of Directors
+to implement the strategies of the Bank according to the Bank's business operations, asset scale and
+shareholding structure of the Bank;
+In 2015, the Nomination Committee considered and passed the Resolution on Nomination of Mr. Zhang Feng as a
+Non-executive Director.
+145
+146
+(4)
+study the appraisal standards for directors and senior management, and conduct appraisals and make
+recommendations based on the actual conditions of the Bank;
+9.5.3 Remuneration and Appraisal Committee
+The Remuneration and Appraisal Committee is composed of a majority of the independent non-executive directors
+with one serving as the chairman. The members of the Nomination Committee currently include Wong Kwai Lam
+(Chairman), Leung Kam Chung, Antony, Pan Yingli (all being independent non-executive directors) and Li Yinquan
+(a non-executive director). It is responsible mainly for formulating the appraisal standards for directors and senior
+management of the Bank and conducting appraisals on them, as well as formulating and reviewing the remuneration
+policies and plans for directors and senior management of the Company. It is accountable to the Board of Directors.
+Main authorities and duties:
+(1)
+(2)
+study and review the remuneration policies and proposals in respect of directors and senior management
+of the Bank, make recommendations to the Board of Directors and supervise the implementation of such
+proposals;
+(3)
+review the regulations and policies in respect of remuneration of the Bank; and
+(4)
+any other task delegated by the Board of Directors.
+In 2015, the Remuneration and Appraisal Committee considered and passed the Resolution on 2015 First Phase
+Employee Stock Ownership Scheme, the Report on 2014 Final Accounts of Staff Costs of China Merchants Bank, the
+Resolution on Amendments to Policies on Remunerations of Senior Management of China Merchants Bank Co., Ltd.,
+the Resolution on Approving the Performance Appraisal of H Share Appreciation Rights of China Merchants Bank
+in 2015 and the Resolution on Adjusting the Price of H Share Appreciation Rights, and listened to the verification
+report on total staff costs, as well as the remuneration and performance-linked bonus for senior management in
+2014 issued by KPMG.
+9.5.4 Risk and Capital Management Committee
+The members of the Risk and Capital Management Committee currently are Hong Xiaoyuan (Chairman), Sun
+Yueying, Su Min (all being non-executive directors), Li Hao (an executive director) and Leung Kam Chung, Antony
+and Zhao Jun (both being independent non-executive directors). It is mainly responsible for control, management,
+supervision and assessment of risks of the Bank.
+Main authorities and duties:
+IX Corporate Governance
+(1)
+formulate the operational goals and medium-to-long term development strategies of the Bank, and make an
+overall assessment on strategic risks;
+The majority of the Nomination Committee are independent non-executive directors, the chairman as well. The
+current members of the Nomination Committee include Leung Kam Chung, Antony (Chairman), Pan Chengwei,
+Pan Yingli (all being independent non-executive directors), Li Jianhong (a non-executive director) and Tian Huiyu
+(an executive director). It is mainly responsible for selecting candidates for directors and senior management of the
+Company, determining the standards and procedures for such selection and making relevant proposals.
+2.
+(1)
+3.
+4.
+5.
+The independent non-executive directors reviewed the work plan for preparing the annual report and the
+unaudited financial statements of the Company.
+Prior to the annual audit conducted by the accounting firm in charge of the annual audit, the independent
+non-executive directors discussed with the certified public accountants in respect of the audit team, audit
+schedule, audit plan, key concerns, communication mechanism and quality control.
+After receiving the initial audit opinions from the auditors, the independent non-executive directors discussed
+with the auditors in respect of major matters and prepared their written opinions.
+The independent non-executive directors reviewed the procedures for convening Board meetings in the year,
+the decision-making procedures for matters on the agenda and the adequacy of information for making
+reasonable and accurate judgment.
+9.5 Special Committees of the Board of Directors
+There are six special committees under the Board of Directors of the Company, namely the Strategy Committee, the
+Nomination Committee, the Remuneration and Appraisal Committee, the Risk and Capital Management Committee,
+the Audit Committee and the Related Party Transaction Control Committee.
+In 2015, all special committees under the Board of Directors of the Company carried out their duties in an
+independent, compliant and effective manner. During the year, these committees held a total of 34 meetings
+to study and review 110 significant issues, including operating results and profit appropriation, strategies
+implementation, change of directors and senior management, risk and capital management, remuneration and
+appraisal, financial supervision and internal control, significant external investments, significant related party
+transactions, and reported their audit opinions and advices to the Board of Directors by submitting meeting minutes
+and holding on-site meetings, hence effectively assisting the Board of Directors to make scientific decisions.
+The composition and duties of the six special committees as well as their work in 2015 are summarized as follows:
+9.5.1 Strategy Committee
+Main authorities and duties:
+The Strategy Committee consists of equity holding directors and directors from senior management. The current
+members of the Strategy Committee are Li Jianhong (Chairman), Ma Zehua, Li Xiaopeng, Su Min (all being
+non-executive directors) and Tian Huiyu (an executive director). It is mainly responsible for studying the medium-to-
+long term development strategies and significant investment decisions of the Bank and making relevant proposals
+herewith.
+(1)
+(2)
+consider material investment and financing plans and make proposals to the Board of Directors;
+(3)
+supervise and review the implementation of the annual operational and investment plans;
+China Merchants Bank
+Annual Report 2015
+IX Corporate Governance
+(4)
+evaluate and monitor the implementation of Board resolutions; and
+(5)
+make recommendations and proposals on important issues for discussion and determination by the Board of
+Directors.
+In 2015, the Strategy Committee considered the Financial Budget Report for the year 2015, the Proposal of the
+Profit Appropriation for the year 2014, the Resolution on the General Mandate to Issue Shares and/or Share
+Options, the Resolution on Authorising Management to Consider and Approve Equity Investment, the Resolution on
+Establishment of Sydney Branch and China Merchants Bank (Luxembourg) Co., Ltd. (í (4) ĦR27),
+the Assessment Report on Strategies Implementation of China Merchants Bank in 2014 and the Resolution or Report
+on Implementation of the Operating Plan of China Merchants Bank in the first half of 2015.
+9.5.2 Nomination Committee
+Main authorities and duties:
+(2)
+examine the accounting policies, financial reporting procedures and financial position of the Bank; and
+any other task delegated by the Board of Directors.
+supervise the status of risk control by the senior management of the Bank in relation to credit risk, market
+risk, operational risk, liquidity risk, strategic risk, compliance risk, reputation risk, country risk and other risks;
+According to "Work Procedures on Annual Reports for Audit Committee of the Board of Directors" adopted by
+the Company, the Audit Committee of the Board of Directors of the Company performed the following duties in
+preparing and reviewing the report for 2015:
+1.
+2.
+3.
+Before the auditors commenced their annual audit, the Audit Committee considered and discussed the
+audit plan of the accounting firm for 2015, including the composition of the auditing team, schedule and
+programme of audit, the priorities of audit work, communication mechanism and quality control. They also
+reviewed the plan for preparing the annual report and the unaudited financial statements of the Company.
+In the course of annual audit and after the issue of a preliminary audit opinion by the accounting firm in
+charge of annual audit, the Audit Committee reviewed the management's report on the operations of the
+Company for 2015. The Audit Committee exchanged opinions on significant matters and the audit progress
+with the accounting firm in charge of annual audit, and reviewed the financial statements of the Company.
+The Audit Committee then formed written opinions for the above issues.
+Before the annual meeting of the Board of Directors was held, the Audit Committee voted on and prepared
+a resolution on the Company's Annual Report for 2015 which was submitted to the Board of Directors for
+consideration and approval. Moreover, the Audit Committee reviewed and issued a conclusion report on the
+audit work performed by the external auditors in respect of the Company's financial statements for the year
+2015 to the Board of Directors.
+China Merchants Bank
+Annual Report 2015
+IX Corporate Governance
+9.5.6 Related Party Transaction Control Committee
+The majority of members and the chairman of Related Party Transaction Control Committee are independent non-
+executive directors. The current members of the Related Party Transaction Control Committee are Pan Chengwei
+(Chairman), Guo Xuemeng, Zhao Jun (all being independent non-executive directors), Fu Gangfeng (a non-executive
+director) and Li Hao (an executive director). It is mainly responsible for inspection, supervision and review of related
+party transactions of the Company.
+Main authorities and duties:
+(1)
+In 2015, the Audit Committee considered and approved a number of proposals on the regular reports of the
+Company, the internal control assessment report, the annual audit plan and audit conclusions of the accounting
+firm, appointment of the accounting firm and performance assessment results concluded by the Audit Department in
+2014, and listened to the reports on audit work summary, quarterly internal audit work and working plans for 2014
+issued by KPMG.
+(2)
+identify connected persons of the Company according to relevant laws and regulations;
+inspect, supervise and review major related party transactions and continuing related party transactions, and
+to control the risks associated with related party transactions;
+review the administrative measures on related party transactions of the Bank, and to monitor the
+establishment and improvement of the related party transactions management system of the Bank; and
+(4) review the announcements on related party transactions of the Bank.
+In 2015, the Related Party Transaction Control Committee considered and passed the resolutions regarding various
+issues including the report on the management of related party transactions of the Company for 2014, the special
+audit report on the related party transactions of the Company for 2014, stock ownership scheme in respect of
+related party transactions, and the major related party transaction projects with China Shipping (Group) Limited and
+its subsidiaries and Anbang Property & Casualty Insurance Company Ltd., and the upper limit on the continuing
+related party transactions for 2015 to 2017 with Anbang Insurance Group and CM Securities.
+9.6 Corporate Governance Functions
+During the reporting period, the Board of Directors has performed the following duties on corporate governance:
+formulating and inspecting the policies and practices on corporate governance of the Company and making
+certain amendments as it deems necessary, to ensure the validity of those policies and practices;
+inspecting and supervising the trainings and continuing professional development of directors and senior
+management;
+inspecting and supervising the policies and practices of the Company for compliance with laws and regulatory
+requirements;
+formulating, reviewing and supervising the Code of Conduct and the Compliance Handbook applicable to
+directors and employees; and
+reviewing the compliance of the Company with the Code of Corporate Governance and the disclosures in the
+Report of Corporate Governance.
+149
+IX Corporate Governance
+(3)
+(8)
+(7)
+review and supervise the mechanism for the Bank's employees to whistle blow any misconduct in respect
+of financial reports, internal control or otherwise, so as to ensure that the Bank always handles the whistle
+blowing issues in a fair and independent manner and takes appropriate actions;
+make regular assessment on the risk policies, management status, risk-withstanding ability and capital status
+of the Bank;
+perform relevant duties under the advanced capital measurement method pursuant to the authorisation given
+by the Board of Directors;
+China Merchants Bank
+Annual Report 2015
+IX Corporate Governance
+(4)
+submit proposals on perfecting the management of risks and capital of the Bank;
+(5)
+(6)
+arrange and instruct risk prevention works in accordance with the authorisation of the Board of Directors;
+and
+any other task delegated by the Board of Directors.
+In 2015, the Risk and Capital Management Committee considered and passed the Quarterly Reports on
+Comprehensive Risk of Previous Year and Current Year, the Quarterly Report on Weakness and Risks Revealed during
+the Audit Process in Previous and Current Years, the Report on Risk Appetite Execution in the First Half of the Year,
+the Report on Write-offs of Doubtful Debts and Accountability Verification and Punishment, the Audit Report on
+Internal Credit Risk Assessment System, the Report for Case Prevention, the Assessment Report on Internal Capital
+Adequacy, the Report on Outsource Management, the Report on Business Continuity, the Report on the Work
+Summary of Consolidation Management and Implementation of Verification Policies, the Major Resolutions on Profit
+Appropriation, Write-off of Large-amount Doubtful Loans, Capital Increase and Restructuring of CMBIC, Capital
+Increase to CIGNA & CMB Life, Revising Certain Risk Preference Indicators and Risk Management and Appraisal
+Indicators, Amending the Scope of Outsource Services and Extension of the Validity Period for the Issuance of
+Financial Bonds; listened to the Report on Macro-Economic Stress Tests on Credit Risk and the Report on Risk Pre-
+warning System of China Merchants Bank; and formulated or revised a number of systems and measures in respect
+of risk and capital management, including the "Measures for Credit Risk Portfolio Management of China Merchants
+Bank", the "Measures for Identification, Appraisal and Management of Significant Risks of China Merchants Bank",
+the "Measures for Consolidation Management of China Merchants Bank", the "Measures for Equity Investment and
+Management of China Merchants Bank", the "Regulations on Capital Management of China Merchants Bank", the
+"Anti-money Laundering Policy of China Merchants Bank", the "Measures for Management of Leverage Ratios of
+China Merchants Bank", the "Compliance Policies of the Group", the "Regulations on Compliance Management
+of China Merchants Bank (3rd Edition)", the "Administrative Measures for Information Disclosure of Capital
+Adequacy of China Merchants Bank (3rd Edition)", the "Overall Policy on Stress Tests of China Merchants Bank",
+the "Administrative Measures for Appraisal Procedures of Internal Capital Adequacy of China Merchants Bank”,
+the "Policies on Measurement Model Verification of China Merchants Bank", the "Administrative Measures for
+Development of Internal Rating for Non-retail Risk Exposure and Quantitative Risk Parameters in Respect of Internal
+Credit Risk Rating System of China Merchants Bank (3rd Edition)" and the "Administrative Measures for Retail Risk
+Exposure Pool and Quantitative Risk Parameters in Respect of Internal Credit Risk Rating System of China Merchants
+Bank".
+9.5.5 Audit Committee
+The majority of members and the chairman of the Audit Committee are independent non-executive directors.
+The current members of the Audit Committee are Guo Xuemeng (Chairman), Wong Kwai Lam, Pan Chengwei (all
+being independent non-executive directors), Fu Gangfeng and Sun Yueying (both being non-executive directors).
+It was verified that no member of the Audit Committee has ever served as a partner of the current auditors of the
+Company. The Audit Committee is mainly responsible for communication, supervision and verification of internal and
+external auditing issues of the Bank.
+147
+148
+China Merchants Bank
+IX Corporate Governance
+Annual Report 2015
+Main authorities and duties:
+(1)
+propose the appointment or replacement of external auditors;
+(2)
+monitor the internal audit system of the Bank and its implementation, and evaluate the work procedures and
+work effectiveness of its internal audit department;
+(3)
+coordinate the communication between internal auditors and external auditors;
+(4)
+(6)
+audit the financial information of the Bank and disclosure of such information, and is responsible for the
+annual audit work of the Bank, including issue of a conclusive report on whether the information contained
+in the audited financial statements is true, accurate, complete and updated, and submit the same to the
+Board of Directors for consideration;
+examine the internal control system of the Bank, and make recommendations for improvement in the internal
+control of the Bank;
+(3)
+China Merchants Bank
+Annual Report 2015
+5/6
+143
+5/6
+13/14
+Li Yinquan
+3/3
+13/14
+Li Xiaopeng
+3/3
+Sun Yueying
+12/14
+1/1
+3/3
+14/14
+Li Jianhong
+Non-executive directors
+Actual times of attendance/Required times of attendance
+General
+Meeting
+Ma Zehua
+14/14
+8/8
+9/9
+8/8
+3/3
+14/14
+Su Min
+8/8
+2/2
+2/2
+14/14
+Hong Xiaoyuan
+7/7
+9/9
+14/14
+Fu Gangfeng
+4/4
+3/3
+10/12
+Fu Junyuan (resigned)
+Control
+Committee
+Committee Committee
+Committee Committee
+Audit
+The independent non-executive directors of the Company have presented their professional advice on the resolutions
+reviewed by the Board of Directors, including offering independent written opinions on significant matters regarding
+the profit appropriation preliminary plan, major related party transactions, external guarantees, the appointment
+and removal of directors and senior management and the remuneration for senior management. In addition, for
+the six special committees under the Board, the independent non-executive directors of the Company made full
+advantage of their professional edge, provided professional and independent advice regarding corporate governance
+and operation management of the Company, and thereby ensured the scientific decision-making of the Board of
+Directors.
+During the reporting period, all directors of the Company cautiously, earnestly and diligently exercised their rights
+as a director granted by the Company and by domestic and overseas regulatory authorities, devoted sufficient
+time and attention to the business of the Company, ensured that the business practices of the Company were fully
+compliant with the requirements of the laws and administrative regulations and economic policies of the country,
+gave all shareholders fair treatment, readily reviewed the business operation and management of the Company, and
+fulfilled the responsibilities stipulated under the laws and administrative regulations, departmental regulations and
+the Articles of Association of the Company. All directors of the Company were aware of their joint and individual
+responsibilities towards shareholders. During the year, their attendance of meetings was satisfactory, with the
+attendance rates of each director at 92% or above.
+9.4.3 Responsibilities of directors
+IX Corporate Governance
+China Merchants Bank
+Annual Report 2015
+The procedures for appointment, re-election and removal of directors of the Company are set out in the Articles
+of Association of the Company. The Nomination Committee of the Company carefully considers the qualifications
+and experience of every candidate for director and recommends suitable candidates to the Board of Directors. Upon
+passing the candidate nomination proposal, the Board of Directors proposes election of related candidates at a
+general meeting and proposes the relevant resolution at a general meeting for consideration and approval. Except
+the independent non-executive directors, who will be treated individually due to the restriction of their terms of
+office, other new directors shall, upon expiry of the current session of the Board of Directors (the term of office for
+each session is three years), be subject to re-election at the general meeting together with other members of the
+Board.
+The term of office for independent non-executive directors of the Company shall be the same as that for other
+directors of the Company. The term of office for an independent non-executive director of the Company shall
+comply with the relevant laws and requirements of the governing authority.
+A director may be removed by an ordinary resolution at a general meeting before the expiry of his/her term of office
+in accordance with relevant laws and administrative regulations (however, any claim made in accordance with any
+contract will not be affected).
+In accordance with the Articles of Association of the Company, the directors of the Company shall be elected or
+replaced by shareholders at general meetings, and the term of office for a director shall be three years. The term
+of office for a director of the Company shall commence from the date on which the approval from the banking
+regulatory authority of the State Council is obtained. A director is eligible for re-election upon the expiry of his/her
+current term of office. The director's term of office shall not be terminated without any justification at a general
+meeting before expiry of his/her term.
+9.4.2 Appointment, re-election and removal of directors
+The list of directors of the Company is set out in Chapter VIII of this report. To comply with the Hong Kong Listing
+Rules, the independent non-executive directors have been clearly identified in all corporate communications of the
+Company which disclose their names.
+The Company values the diversity of the members of the Board of Directors. The Company has had in place policies
+requiring that the Nomination Committee of the Company shall review the structure, number of directors and
+composition (including their skills, knowledge and experience) of the Board of Directors at least once a year and
+put forward proposals in respect of any intended changes to the Board of Directors in line with the strategies of the
+Company.
+As at 31 December 2015, the Board of Directors of the Company had 16 members, including eight non-executive
+directors, two executive directors, and six independent non-executive directors. All eight non-executive directors
+come from large state-owned enterprises where they hold key positions such as the chairman of the board of
+directors, general manager or deputy general manager and chief financial officer. They have extensive experience
+in management, finance and accounting fields. All two executive directors have extensive experience in financial
+management. Among the six independent non-executive directors, two are renowned experts in finance and
+accounting, two are renowned experts in finance, management and capital market, and two are financial experts
+and investment bankers with international vision, and they all have extensive knowledge of the development of
+domestic and overseas banking industry, with two independent non-executive directors from Hong Kong who are
+proficient in international accounting standards and the requirements of Hong Kong capital market. Currently, the
+Board of Directors of the Company has four female directors who, together with other directors of the Company,
+offer professional opinions to the Company in their respective fields. Such diversified composition of the Board of
+Directors of the Company has brought about a wide spectrum of vision and highly professional experience, and also
+has maintained strong independence which enables the Board of Directors to make independent judgments and
+scientific decisions effectively when studying and considering important issues.
+9.4.1 Composition of the Board of Directors
+IX Corporate Governance
+China Merchants Bank
+Annual Report 2015
+140
+The Board of Directors of the Company reviewed its work during the reporting period, for which it also consulted
+the senior management for their opinions and took consideration of those opinions of the Board of Supervisors. The
+Board of Directors believes that it has effectively performed its duties and safeguarded the interests of the Company
+and shareholders during the reporting period. The Company is of the opinion that all the directors have devoted
+sufficient time to perform their duties.
+སམྦུཀྑུསྦུསཛྫསྶསྶས
+The Company also pays high attention to the continuous training of directors, so as to ensure that they have a
+proper understanding of the operations and businesses of the Company, and that they are fully aware of their
+responsibilities under the laws and the regulatory requirements of the CBRC, the CSRC, Shanghai Stock Exchange,
+Hong Kong Stock Exchange and the Articles of Association of the Company. The Company has renewed the
+"insurance for liabilities of directors and senior management" for all its directors.
+9.4.4 Chairman of the Board and the President
+Shareholders'
+Transaction
+Capital
+Management
+Remuneration
+Nomination and Appraisal
+Strategy
+Committee
+Board of
+Directors(1)
+Related Party
+Risk and
+Special committees under the Board of Directors
+Directors
+The following table sets forth the records of attendance of each director at the meetings convened by the Board of
+Directors and by special committees under the Board of Directors and at the shareholders' general meetings held in
+2015.
+9.4.5 Attendance of Directors at Relevant Meetings
+IX Corporate Governance
+China Merchants Bank
+Annual Report 2015
+144
+141
+The positions of the chairman of the Board of Directors and the president of the Company have been taken up by
+different persons and their duties have been clearly defined in accordance with the requirements of the Hong Kong
+Listing Rules. Mr. Li Jianhong serves as the Chairman of the Board of Directors and is responsible for leading the
+Board of Directors, chairing board meetings, ensuring that all directors are updated regarding issues arising at board
+meetings, managing the operations of the Board of Directors, and ensuring that all major and relevant issues are
+discussed by the Board of Directors in a constructive and timely manner. To enable the Board of Directors to discuss
+all important and relevant matters timely, the Chairman and senior management worked together to ensure that
+the directors duly receive appropriate, complete and reliable information for their consideration and review. Mr.
+Tian Huiyu serves as the President, responsible for the business operations and implementation of the strategic and
+business plans of the Company.
+During the reporting period, the Company initiated annual appraisal of the performance of directors performed by
+the Board of Supervisors, and annual report and cross-appraisal performed by independent non-executive directors.
+The appraisal results have been reported to the general meeting.
+1/2
+142
+0/2
+1/2
+7/7
+7/7
+====
+2/2
+8/8
+14/14
+Zhaojun
+9/9
+14/14
+Guo Xuemeng
+2/2
+5/6
+1/1
+12/14
+Pan Yingli
+7/7
+2/2
+9/9
+ន ន ន ន ន ន
+2/2
+0/2
+The independent non-executive directors listened to reports on the performance of the Company in 2015
+made by the management and Chief Financial Officer. The independent non-executive directors believed that
+the reports made by the management of the Company had fully and objectively reflected the operations of
+the Company in 2015 as well as the progress of significant matters. They recognised and were satisfied with
+the work performed by the management team and the results achieved in 2015.
+1.
+According to the "Rules Governing Independent Directors' Work on Annual Reports" of the Company, the
+independent non-executive directors of the Company performed the following duties in preparing and reviewing the
+annual report for the year:
+During the reporting period, the independent non-executive directors expressed their independent opinions on
+material issues including change of directors, appointment and remuneration of the senior management, profit
+appropriation and related party transactions of the Company. They made no objection to the resolutions of the
+Board of Directors and others.
+The Board of Directors of the Company currently has six independent non-executive directors, which meets the
+requirement that at least one third of the total directors of the Company shall be independent directors. The
+qualification, number and proportion of independent non-executive directors are in compliance with relevant
+requirements of the CBRC, the CSRC, Shanghai Stock Exchange and the Hong Kong Listing Rules. All six independent
+non-executive directors of the Company are not involved in the circumstances set out in Rule 3.13 of Hong Kong
+Listing Rules which would cause doubt on their independence. The Company has received from the independent
+non-executive directors their respective annual confirmation of independence which was made in accordance with
+Rule 3.13 of Hong Kong Listing Rules. Therefore, the Company is of the opinion that all independent non-executive
+directors have complied with the requirement of independence set out in Hong Kong Listing Rules. The majority of
+the members of the Nomination Committee, the Remuneration and Appraisal Committee, the Audit Committee and
+the Related Party Transaction Control Committee under the Board of Directors of the Company are Independent
+Non-executive directors, and all of such committees are chaired by an independent non-executive director. During
+the reporting period, the six independent non-executive directors maintained communication with the Company
+through personal attendance at the meetings, on-site visits, research and investigations and conferences. They
+effectively performed their roles as independent non-executive directors by diligently attending meetings held by the
+Board of Directors and the special committees, actively expressing their opinions and attending to the interests and
+requests of small and medium shareholders.
+9.4.7 Performance of duties by independent non-executive directors
+The Company has also established guidelines for relevant employees in respect of their dealings in securities of the
+Company, which are no less exacting than the Model Code. The Company is not aware of any violation against the
+mentioned guidelines by relevant employees.
+The Company has adopted the Model Code set out in Appendix 10 to the Hong Kong Listing Rules as the code of
+conduct for directors and supervisors of the Company in respect of their dealings in the Company's securities. Having
+made enquiry of all the directors and supervisors, the Company confirmed that they had complied with the aforesaid
+Model Code throughout the year ended 31 December 2015.
+9.4.6 Securities transactions of directors, supervisors and relevant employees
+IX Corporate Governance
+China Merchants Bank
+Annual Report 2015
+Actual number of attendance does not include attendance by proxy. The above directors who did not attend the meetings in
+person had appointed other directors to attend such meetings on their behalf.
+2.
+1 During the reporting period, the Board of Directors held a total of 14 meetings, of which six were on-site and telephone
+meetings and eight were meetings convened and voted by correspondence.
+Notes:
+2/2
+2/2
+1/1
+2/2
+4/4
+==
+2/2
+7/7
+1/1
+5/3
+2/2
+1/1
+2/2
+2/2
+13/14
+Li Hao
+1/1
+8/8
+Zhang Guanghua (resigned)
+1/1
+3/3
+14/14
+Tian Huiyu
+Executive directors
+1/2
+2/2
+2/2
+1/1
+Independent
+2/2
+non-executive directors
+13/14
+0/2
+Leung Kam Chung, Antony
+Pan Chengwei
+1/1
+9/9
+14/14
+13/14
+1/1
+Wong Kwai Lam
+1/1
+8/8
+6/6
+9.13 Major Amendments to the Articles of Association of
+the Company
+Annual Report 2015
+IX Corporate Governance
+China Merchants Bank
+Shareholders are entitled to review the information about the Company (including the Articles of Association, the
+status of share capital, the minutes of shareholders' general meeting, resolutions of board meetings, resolutions
+of meetings of the Board of Supervisors, financial and accounting reports, etc.) in accordance with the provisions
+of the Articles of Association after submitting written documents certifying the class and quantity of shares of the
+Company held by them and the Company verifies the identity of such shareholders.
+Making inquiries to the Board of Directors
+Shareholder individually or jointly holding more than 1% of the issued shares of the Company may nominate
+candidate(s) for independent director(s) for election at the shareholders' general meeting.
+Convening of extraordinary board meeting
+If the Company convenes a shareholders' general meeting, shareholders individually or jointly holding more than 3%
+of the total issued voting shares of the Company may submit interim proposals in writing to the Company 10 days
+before the convening of the shareholders' general meeting and submit the same to the convenor. The convenor shall
+issue a supplemental notice to the shareholders' general meeting and announce the contents of the interim proposal
+within two days after receiving the proposal.
+Making proposals at the shareholders' general meeting
+Two or more shareholders holding more than 10% of the voting shares at the proposed general meeting may sign
+one or several same written requests requisitioning the Board of Directors to convene an extraordinary general
+meeting or class meeting and stating the subjects to be considered at the meeting. The number of shares held
+referred to above shall be calculated on the date the shareholders submit their written request. The Board of
+Directors shall give written replies as to whether it agrees or disagrees to the convening of the extraordinary
+general meeting or class meeting within 10 days after receiving the request according to the provisions of laws,
+administrative regulations and the Articles of Association of the Company.
+An extraordinary general meeting shall be convened by the Board of Directors within two months upon request in
+writing by shareholders individually or jointly holding more than 10% of the Company's voting shares.
+9.12Shareholders' Rights
+Convening of extraordinary general meeting
+An extraordinary Board meeting may be held if it is requisitioned by shareholders representing more than one-tenth
+(10%) of the voting rights. The Chairman shall convene and preside over the extraordinary Board meeting within ten
+(10) days upon receiving such proposal.
+If the Board of Directors agrees to convene an extraordinary general meeting or class meeting, it shall issue a notice
+on convening the shareholders' general meetings or class meeting within 5 days after passing the board resolution.
+Any change to the original proposal as stated in the notice shall be approved by the relevant shareholders.
+30 March 2016
+During the reporting period, the Company did not make any amendment to the Articles of Association.
+Having perfectly completed all its tasks for the year, the investor relations management team of the Company forged
+ahead with implementing the transformation strategies of "Asset-light Banking" and "One Body with Two Wings".
+They organised a series of interactions and communications in respect of different themes on the capital market,
+and communicated the suggestions and opinions on the capital market to the management in a timely manner,
+better reflecting the role of investor relations management in facilitating communications between the management
+and the capital market. In 2015, in the context of continuous business transformation in the banking sector, the
+Company maintained its leading position in market valuation among its peers, showing certain effect of its market
+value management.
+During the reporting period, with good corporate governance, clear and leading development strategies and
+outstanding operating results, as well as the effective guidance and communication associated with the capital
+market, the Company stood out from 2,800 listed companies, and ranked first in "Top Ten of Investors' Most
+Respected 100 Listed Companies in China" selected by the Association of Chinese Listed Companies, receiving high
+recognition and good rating from the capital market.
+China Merchants Bank
+IX Corporate Governance
+Annual Report 2015
+Information Disclosure
+The information disclosure of the Company is based on its sound corporate governance, well-developed internal
+control and perfect information disclosure system, and can ensure investors' access to information in a timely,
+accurate and equal manner by leveraging on good corporate governance and internal control.
+Annual Report 2015
+During the reporting period, the Company has disclosed material information in a true, accurate, complete, timely
+and fair manner in strict accordance with the requirements of relevant laws and regulations governing information
+disclosure. It has issued more than 380 disclosure documents in aggregate on Shanghai Stock Exchange and Hong
+Kong Stock Exchange, including periodic reports, interim announcements, and corporate governance documents,
+circulars to shareholders, proxy forms and reply slips in a total size of more than 2.40 million words. Apart
+from fulfilling its statutory obligation of information disclosure, the Company continued to be more initiative in
+information disclosure in its periodic reports, placing special emphasis on hot issues that concern investors and
+information particularly related to the banking sector in light of the macroeconomic and financial environment,
+further improving initiative and transparency in information disclosure in periodic reports. No material error was
+reported regarding information disclosure during the reporting period.
+In addition, during the reporting period, the Company revised the "Guidelines for Information Disclosure and Insider
+Information Management Relating to Substantial Shareholders" in accordance with new regulatory requirements and
+actual situation of work, so as to ensure that the shareholders will play an active role in performing their information
+disclosure obligations in a timely manner.
+During the reporting period, the Company's Annual Report 2014 won Silver Award for Written Text in the
+International ARC Annual Report Competition known as Annual Report Oscar, and Silver Award for Banking Annual
+Report in League of American Communications Professionals LLC (LACP), one of the world's leading annual report
+competitions.
+In 2016, following the core idea of "improve quality and control risks", the Company will continue to improve the
+disclosure quality of periodic reports and ad hoc announcements so as to satisfy investors' requirements. Meanwhile,
+the Company will further optimize and improve our workflows and take effective measures to prevent the risks
+associated with information disclosure.
+155
+156
+China Merchants Bank
+IX Corporate Governance
+During the reporting period, the Company further strengthened management of information disclosure and
+insider trading, and reinforced employees' compliance consciousness and increased their vigilance towards insider
+information leakage and insider trading by organizing special trainings and examinations, which was useful in
+minimizing compliance risk and reputational risk arising from information leakage.
+9.14Statement Made by the Directors about Their
+Responsibility on the Financial Statements
+During the reporting period, the Board of Supervisors has proactively and effectively carried out supervision on the
+financial activities, internal control, risk management, lawful operation as well as the duty performance of the Board
+of Directors and the senior management of the Company pursuant to the Company Law, the Articles of Association
+of the Company and the supervisory duties delegated by relevant supervisory authorities.
+9.15 Compliance with the Corporate Governance Code
+During the reporting period, the business activities of the Company complied with the Company Law, the
+Commercial Banking Law and the Articles of Association, the internal control system was improved, and the decision
+making procedures were lawful and valid. None of the directors and senior management of the Company was found
+to have violated the relevant laws, regulations or the Articles of Association or had done anything detrimental to the
+interests of the Company and shareholders.
+Authenticity of financial statements
+KPMG Huazhen Certified Public Accountants and KPMG Certified Public Accountants have audited the financial
+reports for 2015 in accordance with the PRC Generally Accepted Accounting Principles and the International
+Financial Reporting Standards respectively and have each produced a standard unqualified audit report, stating that
+the financial reports give a true, objective and accurate view of the financial position and operating results of the
+Company.
+Purchase and sale of assets
+During the reporting period, the Company has no new significant acquisition or disposal of assets.
+Related party transactions
+Lawful operation
+During the reporting period, the Board of Supervisors was not aware of any related party transactions which were
+not conducted on an arm's length basis or were detrimental to the interests of the Company and its shareholders.
+The Board of Supervisors lodged no objections to the reports and proposals submitted by the Board of Directors to
+the general meeting in 2015, and concluded that the Board of Directors had duly implemented relevant resolutions
+passed at the general meeting(s).
+Internal control
+The Board of Supervisors had reviewed the "Report on Assessment of Internal Control of China Merchants Bank
+Co., Ltd. for 2015", and concurred with the Board of Directors' representations regarding the completeness,
+reasonableness, effectiveness and implementation of the internal control system of the Company.
+By Order of the Board of Supervisors
+Liu Yuan
+Chairman of the Board of Supervisors
+Implementation of resolutions passed at the general
+meeting(s)
+In 2015, adhering to the basic investor-oriented principle of improving investor experience and increasing efficiency,
+the Company maintained continuous and positive communication with various investors and analysts in the
+capital markets with an innovative, professional, open and positive attitude. We delivered the strategies, results
+of operation, business highlights and investment value of the Company to investors across the world in various
+forms in a timely, comprehensive and objective manner. During the reporting period, the Company held two results
+announcement and analyst meetings, one press conference and one global roadshow for annual results and one
+domestic roadshow for the interim results. The Company made arrangement for reception of 100 visits made by 248
+domestic and foreign institutional investors and investment banks, brokerage analysts; attended investor conferences
+held by 32 major domestic and foreign investment banks and brokerages, and conducted effective communication
+with a total of 654 institutional investors; answered 270 calls from investors, handled 502 online messages from
+investors. These measures have effectively satisfied the needs of domestic and foreign investors and analysts to
+communicate with the Company.
+Independent opinions on relevant matters from the Board of Supervisors:
+Report of the Board of
+Supervisors
+During the reporting period, save as disclosed below, the Company has applied the principles of the Corporate
+Governance Code set out in Appendix 14 of the Hong Kong Listing Rules, and has complied with all the code
+provisions and recommended practices (if applicable). In respect of code provision E.1.2 of the Corporate
+Governance Code, the Chairman of the Board (also the Chairman of the Strategy Committee) was unable to attend
+the 2014 Annual General Meeting of the Company, the 2015 First Class Meeting of the Shareholders of A Shares
+and the 2015 First Class Meeting of Shareholders of H Shares held on 19 June 2015 due to business engagement.
+157
+158
+China Merchants Bank
+Annual Report 2015
+IX Corporate Governance
+9.16Internal Control
+In accordance with the laws and regulations such as the "Basic Principles for Internal Control of Enterprises" and the
+relevant guidelines, the "Internal Control Guidelines for Commercial Banks" as well as the requirements of Shanghai
+Stock Exchange and Hong Kong Stock Exchange, the Company formulated the objectives and principles of internal
+control, and established an internal control system consisting of all necessary elements, to exert control over the
+whole process of operation management of the Company, and continued to enhance the integrity, rationality and
+effectiveness of our internal control system in practice.
+During the reporting period, the Company organised evaluation campaigns regarding internal control during the
+year 2015 across all departments of the Head Office, its branches and sub-branches. As reviewed by the Board of
+Directors of the Company, no significant defects in terms of completeness, reasonableness and effectiveness were
+found in the Company's internal control system. For more details, please refer to the "2015 Report on Assessment
+of Internal Control of China Merchants Bank Co., Ltd.", and the "Auditors' Report on Internal Control" issued by
+KPMG Huazhen Certified Public Accountants with standard unqualified opinions.
+9.17Internal Audit
+The Company has established a sound internal audit mechanism. Firstly, the Company has formulated an
+independent and vertical internal audit management system. The Head Office has an audit department which
+consists of 9 audit divisions. The audit department at the Head Office carries out the examination, supervision and
+appraisal functions independently, and reports to the Board of Directors and its audit committee. The person in
+charge of the audit department at the Head Office shall be appointed by the Board of Directors. The annual audit
+plan shall be approved by the Board of Directors and the audit results shall be reported to the Board of Directors.
+Secondly, the Company formulated a set of systems comprising of general rules, operational rules and practice based
+on the "Internal Audit Constitution of China Merchants Bank" and established an inspection model that gives equal
+emphasis on onsite and offsite checks.
+The Audit Department of the Company shall supervise, inspect and assess the effectiveness of the management
+activities, risk profile and internal control of the whole Bank (including domestic and overseas branches, business
+management departments, affiliates), follow up the rectification of audit findings, and provide independent audit
+advices and the recommendations on operation management to the Board of Directors, promote the rectification
+and implementation of audit findings and strengthen the examination and application of rectifications.
+In 2015, the Company further expanded its audit coverage, put more efforts on risk audit, established an audit-
+themed talk system, took more follow-up actions on audit issues and improved the effectiveness of rectifying
+problems identified during the audit process, thereby promoting the Company's internal control and risk
+management level and effectively assuring the sustainable and healthy development of all business lines of the Bank.
+China Merchants Bank
+X Report of the Board of Supervisors
+Annual Report 2015
+The senior management of the Company provided the Board of Directors with adequate explanation and sufficient
+information to enable the Board of Directors to make informed assessment on the financial and other information
+submitted to it for approval. The directors of the Company acknowledged their responsibility for preparing the
+financial statements for the year ended 31 December 2015 to present a true view of the operating results of the
+Company. So far as the directors are aware, there are no material uncertainties related to events or conditions that
+might have a significant adverse effect on the Company's ability of sustainable operation.
+Investor Relations
+During the reporting period, the Board of Supervisors set a more practicable goal and conducted its investigations/
+surveys on certain major issues more effectively in terms of frequency, width and depth, which included the reform
+of systems and mechanism across the Bank, the implementation of the "One Body with Two Wings" strategy and
+the building of an asset-light bank, internal control and compliance and risk prevention. The Board of Supervisors
+organised five investigations/ surveys on a collectively basis during the year, of which four were conducted
+domestically and one was conducted overseas with a total of 18 branches and affiliated entities involved. The Board
+of Supervisors, based on those investigations/ surveys, put forward a number of targeted and practical proposals
+regarding implementation of system reform, reinforcement of risk prevention, improvement of refined management,
+enhancement of employee care and consolidation of team building. Based on the actual situation, the Board of
+Supervisors classified the investigation/survey results so as to effectively pass them in the form of investigation/
+survey reports and work briefs to the Board of Directors, senior management, each department and branch, and
+reported the same to the CBRC, thus increasing the scope of application of such investigation/ survey results and
+fully exerting its supervisory duty.
+In 2015, the Company had no material internal malignant cases or external malignant cases or incidents involving
+theft, robbery or material safety issues.
+Tian Huiyu
+Executive directors
+Su Min
+Hong Xiaoyuan
+Fu Gangfeng
+Fu Junyuan (resigned)
+Sun Yueying
+Li Yinquan
+Li Xiaopeng
+Ma Zehua
+Li Jianhong
+Non-executive directors
+Name of Directors
+According to the training records for 2015 kept by the Company for Directors, the status of relevant trainings is as
+follows:
+The Company also provided its directors with the latest information and relevant trainings on the Hong Kong Listing
+Rules and other applicable regulatory requirements to ensure that they follow and better understand good corporate
+governance, and took a number of approaches such as the provision of special reports and reference information to
+improve and update their knowledge and skills.
+Zhang Guanghua (resigned)
+IX Corporate Governance
+Li Hao
+China Merchants Bank
+Annual Report 2015
+Leung Kam Chung, Antony
+Wong Kwai Lam
+Pan Chengwei
+Pan Yingli
+Guo Xuemeng
+Zhao Jun
+Provision of Information and Scope of Trainings
+Corporate
+Governance
+Policies and
+Regulations
+Business/
+Management
+√
+V
+153
+154
+Independent non-executive directors
+9.11 Communications with Shareholders
+China Merchants Bank
+Annual Report 2015
+During the reporting period, the Company's Board of Directors and Board of Supervisors organised 12 investigations/
+surveys and training activities. The Chairman of the Board of Supervisors conducted investigations/surveys on 11
+operating entities of the Company, leading to continuous improvement in the performance and effectiveness of
+decision-making and supervision of Directors and Supervisors.
+China Merchants Bank
+Annual Report 2015
+The Board of Supervisors discharges its supervisory duties primarily by: holding regular meetings, attending
+shareholders' general meetings, board meetings and special committee meetings, attending various meetings
+on operation and management held by the senior management; reviewing various documents submitted by the
+Company, reviewing work reports and specific reports of the senior management, conducting exchanges and
+discussions, carrying out special investigations and surveys at domestic and overseas branches (on a collective or
+separate basis) of the Company, performing off-site investigation and having talks with directors and the senior
+management over their performance of duties, etc. By doing so, the Board of Supervisors comprehensively monitors
+the operation and management, risk management and internal control of the Company as well as duty performance
+of the directors and the senior management, and provides constructive and specific advice and recommendation on
+operating management and supervisory opinions.
+A Nomination Committee and a Supervisory Committee are established under the Board of Supervisors.
+9.7.2 How the Board of Supervisors performs its supervisory duties
+The Board of Supervisors of the Company consists of 9 members, including 3 shareholder supervisors, 3 employee
+supervisors and 3 external supervisors. The number of employee supervisors and external supervisors each accounts
+for not less than one-third of the members of the Board of Supervisors. The 3 shareholder supervisors are from
+large state-owned enterprises where they serve as key responsible persons and have extensive experience in
+business management and professional knowledge in finance and accounting; the 3 employee supervisors have
+long participated in banking operation and administration, and thus accumulated rich professional experience in
+finance; and the 3 external supervisors have been engaged in corporate governance and financial management of
+large state-owned enterprises and legal affairs, and have thus accumulated extensive experience in those fields. The
+composition of the Board of Supervisors of the Company has adequate expertise and independence which ensures
+the effective supervision by the Board of Supervisors.
+9.7.1 Composition of the Board of Supervisors
+The Board of Supervisors is a supervisory body of the Bank and is accountable to the general meetings, and oversees
+the strategic planning, financial activities, internal control, risk management of the Company and its compliance with
+relevant laws and regulations as well as corporate governance, the duty performance of the Board of Directors and
+the senior management with an aim to protect the legitimate rights and interests of the Company, its shareholders,
+employees, creditors and other stakeholders.
+9.7 Board of Supervisors
+IX Corporate Governance
+China Merchants Bank
+Annual Report 2015
+150
+IX Corporate Governance
+9.9 Company Secretary under Hong Kong Listing Rules
+Mr. Xu Shiqing, Secretary of the Board of Directors of the Company, and Ms. Seng Sze Ka Mee, Natalia of Tricor
+Services Limited, an external services provider, are both the joint company secretaries of the Company under Hong
+Kong Listing Rules. Mr. Xu Shiqing is the major contact person of the Company on internal issues.
+During the reporting period, Mr. Xu Shiqing and Ms. Seng Sze Ka Mee, Natalia both attended relevant professional
+trainings of not less than 15 hours in compliance with the requirements of Rule 3.29 of Hong Kong Listing Rules.
+9.10 Misconduct Reporting and Monitoring
+IX Corporate Governance
+During the reporting period, the Company organised Directors and Supervisors who were newly appointed to
+participate in job-focused training sessions provided by relevant regulatory authorities and authorised institutions
+as well as banking management training. The purpose of which is to enable them to obtain proper understanding
+of the operation and businesses of the Company and its duties under relevant laws, regulations and rules. 7
+investigations/surveys/visits by Directors were organised which involved visiting the Head Office departments, various
+branches and sub-branches and subsidiaries to get familiar with business operations of the Head Office, branches
+and subsidiaries, the implementation of the transformation strategies of "Asset-light Banking" and "One Body with
+Two Wings", risk management, as well as problems and challenges encountered.
+9.7.3 Duty performance of the Board of Supervisors during the reporting period
+In 2015, the Company convened 2 shareholders' general meetings and 6 on-site board meetings. Supervisors
+attended the general meetings and were present at all the on-site board meetings, and supervised compliance with
+the relevant laws and regulations, voting procedures of the general meetings and board meetings, the directors'
+attendance, statements made and voting at the general meetings and board meetings, respectively.
+9.8 Trainings and Investigations/Surveys Conducted by
+Directors and Supervisors During the Reporting
+Period
+In 2015, the Supervisory Committee under the Board of Supervisors convened 1 meeting where the audit opinions
+on resignation of Mr. Han Mingzhi, Chairman of the Board of Supervisors of the Company were reviewed and
+considered. In addition, the members of the Supervisory Committee under the Board of Supervisors were also
+present at various on-site meetings convened by the Risk and Capital Management Committee and Audit Committee
+of the Board of Directors. They also reviewed the consideration and discussion on the financial decisions, risk
+management, internal management and capital management of the Company, and supervised the duty performance
+of the directors and offered comments and suggestions on some issues.
+The members of the Supervisory Committee of the Ninth Session of the Board of Supervisors were Jin Qingjun
+(chairman), Fu Junyuan, Liu Zhengxi and Xiong Kai. The major duties of the Supervisory Committee are to
+formulate the supervisory plans for performance of supervisory duties by the Board of Supervisors; to formulate the
+supervisory plans for financial activities of the Bank and conduct relevant examinations; to supervise the adoption
+by the Board of Directors of prudent business philosophy and value standards and formulate suitable development
+strategies in line with the actual situations of the Bank; to conduct supervision and assessment on the important
+financial decisions of the Board of Directors and the senior management members and their implementations, the
+establishment and improvement of the internal control governance structure and the overall risk management
+governance structure and the division of duties of relevant parties and the performance of their duties; to formulate
+the specific plans for reviewing the operation decisions, internal control and risk management of the Company under
+the authorization of the Board of Supervisors when necessary; to formulate the plans for conducting resignation
+audit on directors, president and other senior management members when necessary.
+The Supervisory Committee under the Board of Supervisors
+Annual Report 2015
+IX Corporate Governance
+China Merchants Bank
+152
+151
+In 2015, the Nomination Committee under the Board of Supervisors convened 1 meeting where proposals regarding
+the evaluation report on duty performance of the directors in 2014 and the evaluation report on duty performance
+of the supervisors in 2014 were reviewed and considered.
+The members of the Nomination Committee of the Ninth Session of the Board of Supervisors were Pan Ji (chairman),
+Zhu Genlin, Dong Xiande and Huang Dan. The major duties of the Nomination Committee are as follows: to
+make proposals to the Board of Supervisors on the size and composition of the Board of Supervisors; to study the
+standards and procedures for the election of supervisors and propose the same to the Board of Supervisors; to
+conduct extensive searches for qualified candidates for supervisors; to undertake preliminary examination on the
+qualifications of the candidates for supervisors nominated by shareholders and provide relevant recommendations; to
+supervise the procedures for election of directors; to evaluate the duty performance of the members of the Board of
+Directors, Board of Supervisors and senior management, and submit reports to the Board of Supervisors; to supervise
+whether the remuneration management system and policies of the whole Bank and the remuneration package for its
+senior management members are scientific and reasonable.
+The Nomination Committee under the Board of Supervisors
+The Nomination Committee and the Supervisory Committee are established under the Board of Supervisors, each
+consisting of four supervisors. The chairman of the Nomination Committee and the Supervisory Committee is served
+by an external supervisor respectively.
+During the reporting period, the Board of Supervisors of the Company had no objection to the matters supervised.
+9.7.4 Operation of the special committees under the Board of Supervisors
+During the reporting period, all 3 external supervisors were able to perform their supervisory duties independently.
+The external supervisors discharged their supervisory duties by attending meetings of the Board of Supervisors,
+convening special committee meetings of the Board of Supervisors, participating in meetings of the Board of
+Directors or any of its special committee, participating in the Board of Supervisors' investigations and surveys
+conducted (on a collective or separate basis) at branch level, proactively familiarizing themselves with the operations
+and management of the Company, and giving opinions and suggestions on significant matters. During the
+adjournment of the Board of Directors and Board of Supervisors, the external supervisors were able to review various
+documents and reports of the Company and exchange opinions with the Board of Directors and senior management
+in a timely manner, thereby playing an active role in performing their supervisory duties.
+During the reporting period, the Board of Supervisors convened 11 meetings, of which 5 were on-site meetings
+and 6 were meetings convened and voted by correspondence. 43 proposals regarding strategic planning, business
+operations, financial activities, internal control, risk management, corporate governance and evaluation of the duty
+performance of the directors and supervisors were considered, and a number of special reports involving strategic
+management, internal capital adequacy assessment, internal audit, write-offs of doubtful debts and the prevention
+and control of crimes were reviewed at these meetings.
+159
+169
+The notes on pages 171 to 302 form part of these financial statements.
+322 58,018
+(b) Other comprehensive income for the year
+13
+404
+(53)
+966
+5,603
+2 5,605
+Total comprehensive income for the year
+4,286
+404
+57,643
+966 63,299
+324 63,623
+(c) Changes by the shareholder's equity
+57,696
+57,696
+(a) Net profit for the year
+296 46,698
+(Expressed in millions of Renminbi unless otherwise stated)
+2015
+Total equity attributable to equity shareholders of the Bank
+Investment
+Proposed
+At 1 January 2015
+Changes in equity for the year
+Share Capital revaluation Hedging Surplus
+Note capital reserve reserve reserve reserve
+25,220 67,523 1,902 (163) 28,690
+4,286 404 5,319
+(i) Non-controlling shareholders' contribution
+profit Exchange
+Regulatory
+general Retained
+reserve profits appropriations reserve Subtotal interests Total
+53,979 121,665
+(1,309) 314,404 656 315,060
+Non-
+controlling
+10,700
+24,222
+505
+966 46,402
+16,897
+to non-wholly owned subsidiaries
+57
+83
+(343) 360,806
+952 361,758
+2014
+Total equity attributable to equity shareholders of the Bank
+Share Capital
+Investment
+revaluation Hedging Surplus
+Note
+17,402
+capital reserve
+25,220 67,523
+Changes in equity for the year
+reserve reserve reserve
+(5,547) (951) 23,502
+7,449 788 5,188
+Regulatory
+Proposed
+general Retained
+profit Exchange
+reserve profits appropriations
+Non-
+controlling
+reserve Subtotal
+interests Total
+At 1 January 2014
+For the year ended 31 December 2015
+64,679 145,887
+6,188
+(ii) Decrease in non-controlling interests
+.......(83) (83)
+(d) Profit appropriations
+(i) Appropriations to statutory surplus reserve
+(ii) Appropriations to regulatory general reserve
+(iii) Dividends paid for the year 2014
+(iv) Proposed dividends for the year 2015
+At 31 December 2015
+44
+44
+45
+241 34,009
+5,319
+10,700 (10,700)
+(16,897)
+(16,897)
+(28) (16,925)
+(17,402)
+17,402
+25,220 67,523
+(5,319)
+Consolidated Statement of Changes in Equity
+Annual Report 2015
+XII Financial Statements
+Equity
+Share capital
+40
+25,220
+Capital reserve
+41
+67,523
+2014
+25,220
+67,523
+42
+6,188
+1,902
+Hedging reserve
+43
+241
+(163)
+Investment revaluation reserve
+Surplus reserve
+2015
+XII Financial Statements
+Tax payable
+38
+12,820
+11,656
+Deferred tax liabilities
+29
+Other liabilities
+Note
+39
+771
+39,678
+Total liabilities
+The notes on pages 171 to 302 form part of these financial statements.
+5,113,220
+4,416,769
+China Merchants Bank
+Annual Report 2015
+867
+64,345
+46,347 95,471
+44
+28,690
+952
+656
+Total equity
+361,758
+315,060
+Total equity and liabilities
+5,474,978
+57
+4,731,829
+Li Jianhong
+Director
+Tian Huiyu
+Director
+The notes on pages 171 to 302 form part of these financial statements.
+Company Chop
+167
+168
+China Merchants Bank
+Approved and authorised for issue by the Board of Directors on 30 March 2016.
+34,009
+Non-controlling interests
+360,806
+Regulatory general reserve
+45
+64,679
+53,979
+Retained profits
+145,887
+121,665
+314,404
+Proposed profit appropriations
+17,402
+16,897
+Exchange reserve
+47
+(343)
+(1,309)
+Total equity attributable to equity shareholders of the Bank
+46(b)
+15,636
+(1,736) 265,465
+491 265,956
+Loans and advances to customers
+(347,286)
+(331,091)
+Other assets
+(26,683)
+(32,283)
+Deposits from customers
+(59,267)
+267,260
+Deposits and placements from banks and
+other financial institutions
+216,945
+66,561
+Balances and placements with banks and
+other financial institutions with original
+maturity over 3 months
+529,162
+125,226
+38,689
+Changes in:
+- Net gain on debt securities and equity investments
+(9,008)
+(48,175)
+(4,177)
+(37,749)
+- Interest expense on issued debt securities
+7,150
+3,921
+Balances with central bank
+- Share of profits of associates
+(2)
+- Share of profits of joint ventures
+(134)
+(156)
+- Net gains on disposal of properties and equipment
+(4)
+(3)
+(2)
+413
+24,909
+42,600
+Gains received from investments
+51,407
+39,675
+Payment for the purchase of properties and equipments
+and other assets
+(9,079)
+(8,125)
+Proceeds from the disposal of properties and equipments
+579,100
+and other assets
+1,297
+Loans repaid by joint ventures
+2
+2
+Net cash used in investing activities
+(371,603)
+(175,979)
+167
+Borrowing from central bank
+451,491
+(787,928)
+20,000
+Other liabilities
+18,923
+3,693
+Cash generated from operating activities
+423,231
+291,923
+Proceeds from the disposal of investments
+Income tax paid
+(19,750)
+Net cash generated from operating activities
+400,420
+272,173
+Investing activities
+Payment for the purchase of investments
+(865,591)
+(22,811)
+6,068
+436
+- Amortisation of other assets
+(i) Non-controlling shareholders' contribution
+to non-wholly owned subsidiaries
+57
+(ii) Decrease in non-controlling interests
+84
+84
+(38)
+(c) Changes by the shareholder's equity
+(38)
+(i) Appropriations to statutory surplus reserve
+(ii) Appropriations to regulatory general reserve
+(iii) Dividends paid for the year 2013
+44
+44
+5,188
+45
+(d) Profit appropriations
+(5,188)
+7,632 (7,632)
+139 64,714
+427
+7,632 26,194
+1,261
+427 48,939
+165 49,104
+(a) Net profit for the year
+55,911
+(b) Other comprehensive income for the year
+64,575
+13
+55,911
+427 8,664
+138 56,049
+1 8,665
+Total comprehensive income for the year
+7,449
+788
+55,911
+7,449 788
+- Interest income on investments
+(15,636)
+(20) (15,656)
+Profit before tax
+Adjustments for:
+75,079
+73,431
+- Impairment losses on loans and advances
+57,507
+31,254
+Cash flows from operating activities
+- Impairment losses on investments and other assets
+427
+- Unwind of discount
+(1,137)
+(655)
+- Depreciation of properties and equipments and
+investment properties
+4,086
+3,535
+1,759
+(15,636)
+2014
+(Expressed in millions of Renminbi unless otherwise stated)
+(iv) Proposed dividends for the year 2014
+(16,897)
+16,897
+At 31 December 2014
+25,220 67,523
+1,902
+(163) 28,690 53,979 121,665
+2015
+16,897
+656 315,060
+The notes on pages 171 to 302 form part of these financial statements.
+China Merchants Bank
+XII Financial Statements
+Annual Report 2015
+Consolidated Cash Flow Statement
+For the year ended 31 December 2015
+(1,309) 314,404
+6,524
+4,286
+Salaries and welfare payable
+162
+(See Annex)
+12.3 Supplemental information about the unaudited financial statements
+12.2 Financial statements and notes thereto
+Audit Report
+12.1
+Financial Reports
+164
+Annual Report 2015
+XII Financial Reports
+China Merchants Bank
+The Articles of Association of China Merchants Bank Co., Ltd..
+11.6
+Annual Reports disclosed on the Hong Kong Stock Exchange;
+11.5
+11.4 Original copy of all the documents and announcements of the Company which were publicly disclosed during
+the reporting period in the designated newspapers of China Securities Regulatory Commission;
+161
+Original copy of audit reports containing seals of the accounting firm, signatures and seals of certified public
+accountants;
+303
+China Merchants Bank
+China Merchants Bank
+Annual Report 2015
+We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
+opinion.
+An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
+consolidated financial statements. The procedures selected depend on the auditor's judgment, including the
+assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
+error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation
+of the consolidated financial statements that give a true and fair view in order to design audit procedures that
+are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
+Bank's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
+reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the
+consolidated financial statements.
+We conducted our audit in accordance with International Standards on Auditing. Those standards require that we
+comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
+consolidated financial statements are free from material misstatement.
+Our responsibility is to express an opinion on these consolidated financial statements based on our audit. This report
+is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept
+liability to any other person for the contents of this report.
+Auditor's responsibility
+The directors of the Bank are responsible for the preparation of consolidated financial statements that give a true
+and fair view in accordance with International Financial Reporting Standards issued by the International Accounting
+Standards Board and the disclosure requirements of the Hong Kong Companies Ordinance and for such internal
+control as the directors determine is necessary to enable the preparation of consolidated financial statements that
+are free from material misstatement, whether due to fraud or error.
+162
+Directors' responsibility for the consolidated
+financial statements
+Independent auditor's report to the shareholders of China Merchants Bank Co., Ltd
+(a joint stock company incorporated in the People's Republic of China with limited liability)
+KPMG
+HKSZA1600017
+Independent Auditor's Report
+37(a)
+Annual Report 2015
+XII Financial Statements
+We have audited the consolidated financial statements of China Merchants Bank Co., Ltd ("the Bank") and its
+subsidiaries (together "the Group") set out on pages 164 to 302, which comprise the consolidated statement of
+financial position as at 31 December 2015, the consolidated statement of profit or loss, the consolidated statement
+of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the
+consolidated cash flow statement for the year then ended and a summary of significant accounting policies and
+other explanatory information.
+XII Financial Statements
+11.3
+Original copy of the Annual Report containing signatures of the directors and senior management of the
+Company;
+Note
+2015
+58,018
+2014
+56,049
+966
+427
+Available-for-sale financial assets:
+Other comprehensive income for the year
+after tax and reclassification adjustments
+Items that will be reclassified to profit or loss
+Exchange difference on translation of financial
+statements of overseas subsidiaries
+net movement in fair value reserve
+7,415
+Cash flow hedge: net movement in hedging reserve
+Equity-accounted investees - share of
+404
+788
+other comprehensive income
+64
+35
+4,224
+11.2 Accounting statements signed and executed by Legal Representatives, Presidents, Chief Financial Officer and
+the person in charge of the Finance and Accounting Department;
+Profit for the year
+Non-controlling interests
+11.1
+Documents Available for Inspection
+XI Documents Available for Inspection
+China Merchants Bank
+Annual Report 2015
+160
+Basic and diluted (RMB)
+The notes on pages 171 to 302 form part of these financial statements.
+For the year ended 31 December 2015
+(Expressed in millions of Renminbi unless otherwise stated)
+57,696
+322
+138
+14
+2.29
+2.22
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+55,911
+5,658
+HKSZA1600017
+In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group
+as at 31 December 2015 and of the Group's financial performance and cash flows for the year then ended in
+accordance with International Financial Reporting Standards and have been properly prepared in compliance with
+the disclosure requirements of the Hong Kong Companies Ordinance.
+Impairment losses
+104,954
+134,209
+Operating profit before impairment losses
+(332)
+(287)
+Charge for insurance claims
+11
+(61,081)
+7
+Operating expenses
+166,367
+202,166
+Operating income
+9,671
+12,018
+(67,670)
+6
+(59,266)
+Share of profits of associates
+Equity shareholders of the Bank
+Attributable to:
+Profit for the year
+56,049
+58,018
+73,431
+(17,382)
+(17,061)
+(31,681)
+12
+75,079
+Profit before taxation
+156
+134
+Share of profits of joint ventures
+2
+2
+Income tax
+Opinion
+Other net income
+53,419
+2015
+Note
+(Expressed in millions of Renminbi unless otherwise stated)
+For the year ended 31 December 2015
+Consolidated Statement of Profit or Loss
+Annual Report 2015
+XII Financial Statements
+2014
+(Restated)
+China Merchants Bank
+163
+30 March 2016
+Central, Hong Kong
+10 Chater Road
+8th Floor, Prince's Building
+Certified Public Accountants
+KPMG
+164
+39,494
+Interest income
+Net interest income
+Net fee and commission income
+(3,847)
+(4,379)
+Fee and commission expense
+43,341
+57,798
+5
+Interest expense
+Fee and commission income
+136,729
+(110,834)
+(97,993)
+4
+228,036
+234,722
+34
+117,202
+8,665
+Consolidated Statement of Profit or Loss and Other Comprehensive Income
+to profit or loss
+Property and equipment
+Investment properties
+Intangible assets
+Goodwill
+21(d)
+716,064
+408,752
+23
+2,732
+1,465
+24
+54
+19
+25
+31,835
+27,445
+26
+1,708
+1,684
+27
+3,595
+Interest in associates
+3,292
+Interest in joint ventures
+259,434
+124,085
+343,924
+2,739,444
+344,980
+2,448,754
+24,934
+23,560
+Financial assets at fair value through profit or loss
+21(a)
+59,081
+40,190
+Derivative financial assets
+54(f)
+10,176
+9,315
+Available-for-sale financial assets
+21(b)
+299,559
+278,526
+Held-to-maturity investments
+21(c)
+353,137
+Debt securities classified as receivables
+28
+9,954
+9,953
+66,988
+Deposits from customers
+34
+3,571,698
+3,304,438
+Interest payable
+35
+39,073
+45,349
+Financial liabilities at fair value through profit or loss
+21(e)
+20,227
+13,369
+Derivative financial liabilities
+54(f)
+7,575
+10,246
+Debt securities issued
+36
+251,507
+106,155
+185,652
+33
+Amounts sold under repurchase agreements
+94,603
+Deferred tax assets
+29
+16,020
+10,291
+Other assets
+30
+12,848
+14,091
+5,474,978
+4,731,829
+185,693
+Total assets
+Borrowing from central bank
+62,600
+20,000
+Deposits from banks and other financial institutions
+31
+711,561
+697,448
+Placements from banks and other financial institutions
+32
+178,771
+Liabilities
+Items that will not be reclassified subsequently
+55,986
+639,992
+Consolidated Statement of Financial Position
+Annual Report 2015
+XII Financial Statements
+China Merchants Bank
+166
+165
+139
+324
+64,575
+63,299
+The notes on pages 171 to 302 form part of these financial statements.
+Non-controlling interests
+Attributable to:
+Equity shareholders of the Bank
+At 31 December 2015
+Total comprehensive income for the year
+63,623
+1
+2
+8,664
+5,603
+Non-controlling interests
+Equity shareholders of the Bank
+Attributable to:
+8,665
+5,605
+13
+Other comprehensive income for the year, net of tax
+(53)
+Remeasurement of defined benefit liability
+64,714
+63,779
+Earnings per share
+14,793
+Note
+2015
+2014
+Assets
+Cash
+Precious metals
+Balances with central bank
+14,381
+16,099
+15,222
+(Expressed in millions of Renminbi unless otherwise stated)
+15
+16
+Placements with banks and other financial institutions
+Amounts held under resale agreements
+17
+18
+Loans and advances to customers
+19
+Interest receivable
+567% 20
+569,961
+Balances with banks and other financial institutions
+Annual Report 2015
+Financing activities
+XII Financial Statements
+200
+170
+Note
+153,702
+China Merchants Bank
+2015
+Net increase in cash and cash equivalents
+Cash and cash equivalents as at 1 January
+Effect of foreign exchange rate changes
+Cash and cash equivalents as at 31 December
+Cash flows from operating activities include:
+Interest received
+21,879
+15,395
+Proceeds from the issue of medium term notes
+3,046
+5,076
+Proceeds from the issue of negotiable interbank
+certificates of deposits
+290,867
+24,155
+Proceeds from the issue of certificates of deposits
+23,105
+29,377
+Proceeds from non-controlling shareholders
+83
+84
+Proceeds from the issue of debt securities
+2014
+Repayment of certificates of deposit
+(28,812)
+(3,000)
+(31,790)
+Repayment of redemption of non-controlling equity
+(83)
+(38)
+Dividends paid
+(16,925)
+(15,656)
+Interest paid on issued debt securities
+(3,096)
+(1,724)
+Net cash generated from financing activities
+124,885
+(143,500)
+Repayment of negotiable interbank certificates of deposits
+China Merchants Bank
+Annual Report 2015
+10,670
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+2 Significant accounting policies (continued)
+(i)
+Financial instruments
+(i)
+Initial recognition and classification
+All financial assets and financial liabilities are recognised in the consolidated statement of financial position when
+and only when, the Group becomes a party to the contractual provisions of the instruments. Financial assets are
+derecognised on the date when the contractual rights to substantially all the risks and rewards of ownership or the
+cash flows expire are transferred.
+Except for loans and non-standard debt investments that are recognised using settlement date accounting, purchase
+or sale of other financial assets is recognised using trade date accounting. From these date, any gains and losses
+arising from changes in fair value of the financial assets or financial liabilities measured at fair value are recorded.
+Financial liabilities are derecognised on the date when the obligations specified in the contracts are discharged,
+cancelled or expired.
+At initial recognition, all financial assets and liabilities are measured at fair value. In the case of financial assets
+or financial liabilities not at fair value through profit or loss, transaction costs that are directly attributable to the
+acquisition or issue of the financial asset or financial liability unless the fair value of that instrument is evidenced by
+comparison with other observable current market transactions in the same instrument (i.e. without modification or
+repackaging) or based on a valuation technique whose variables include observable market data. Transaction costs of
+financial assets and liabilities at fair value through profit or loss are expensed immediately.
+The Group classifies its financial instruments into different categories at inception, depending on the purpose for
+which the assets were acquired or the liabilities were incurred. The categories are:
+Financial assets and financial liabilities at fair value through profit or loss, include those financial assets and
+financial liabilities held principally for the purpose of short term profit taking and those financial assets and
+liabilities that are designated by the Group upon recognition as at fair value through profit or loss.
+All derivatives not qualified for hedging purposes are included in this category and are carried as assets when
+their fair value is positive and as liabilities when their fair value is negative.
+Financial instruments are designated as financial assets and financial liabilities at fair value through profit or
+loss upon initial recognition when:
+the assets or liabilities are managed, evaluated and reported internally on a fair value basis;
+the designation eliminates or significantly reduces an accounting mismatch which would otherwise
+arise;
+the asset or liability contains an embedded derivative that significantly modifies the cash flows that
+would otherwise be required under the contract; or
+Both the period and method of amortisation are reviewed annually.
+the separation of the embedded derivative from the financial instrument is not prohibited.
+Intangible assets are not amortised while their useful lives are assessed to be indefinite. The Group does not have
+intangible assets with useful lives assessed to be indefinite as at 31 December 2015.
+Intangible assets are stated at cost less accumulated amortisation (only intangible assets with finite useful lives) and
+impairment losses (see Note 2(n)(ii)). Amortisation of intangible assets with finite useful lives is charged to profit or
+loss on a straight-line basis over the assets' estimated useful lives.
+Interests in the associates are accounted for using the equity method. They are initially recognised at cost, which
+includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the
+Group's share of the profit or loss and other comprehensive income of the associates until the date on which
+significant influence or joint control ceases.
+Investment in associates is accounted for in the consolidated financial statements under the equity method. Under
+the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group's share of the
+acquisition-date fair value of the investee's identifiable net assets over the cost of the investment (if any). Thereafter,
+the investment is adjusted for the post acquisition change in the Group's share of the associates' net assets. Any
+acquisition-date excess over cost, the consolidated statement of profit or loss includes the Group's share of the
+post-acquisition, post-tax results of the associates for the year, including any impairment loss on goodwill relating to
+the investment in the associates recognised for the year (see Notes 2(g) and 2(n)(ii)).
+When the Group's share of losses exceeds its interest in the associates, the Group's interest is reduced to nil and
+recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive
+obligations or made payments on behalf of the associates. For these purposes, the Group's interest in the associates
+is the carrying amount of the investment under equity method together with the Group's interests that in substance
+form part of the Group's net investment in the associates.
+Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the
+extent of the Group's interest in the associates, except where unrealised losses provide evidence of an impairment of
+the asset transferred, in which case they are recognised immediately in profit or loss.
+When the Group ceases to have significant influence over an associate entity, it is accounted for as a disposal of the
+entire interest in that investee, with a resulting gain or loss being recognised in the consolidated statement of profit
+or loss. Any interest retained in that former investee at the date when significant influence is lost is recognised at
+fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see Note 2(i)).
+175
+176
+XII Financial Statements
+2 Significant accounting policies (continued)
+(g) Goodwill
+Goodwill represents the excess of
+(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in
+the acquiree and the fair value of the Group's previously held equity interest in the acquiree; over
+(ii)
+the net fair value of the acquiree's identifiable assets and liabilities measured as at the acquisition date.
+When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain
+purchase.
+Goodwill is stated at cost less accumulated impairment. Goodwill arising on a business combination is allocated
+to each CGU, or groups of CGUs, that is expected to benefit from the synergies of the combination and is tested
+annually for impairment (see Note 2(n)(ii)).
+On disposal of a CGU during the year, any attributable amount of purchased goodwill is included in the calculation
+of the profit or loss on disposal.
+(h) Intangible assets (other than goodwill)
+Land use rights are stated at cost, amortised on a straight-line basis over the respective lease periods.
+Held-to-maturity investments
+Held-to-maturity investments are non-derivative financial assets with fixed maturity and fixed or determinable
+payments that the Group has the positive intent and ability to hold to maturity.
+177
+2 Significant accounting policies (continued)
+(i) Financial instruments (continued)
+(iii)
+Hedge accounting
+The Group designates certain derivatives as hedges of highly probable future cash flows attributable to a recognised
+asset or liability, or a forecast transaction ("cash flow hedge"). Hedge accounting is applied to derivatives designated
+as hedging instruments in cash flow hedge provided certain criteria are met.
+It is the Group's policy to document, at the inception of a hedging relationship, the relationship between the
+hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the
+hedge. Such policies also require documentation of the assessment, both at hedge inception and on an ongoing
+basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in
+cash flows of hedged items attributable to the hedged risks.
+Cash flow hedge
+The effective portions of changes in the fair value of derivatives that are designated and qualified as cash flow
+hedge are recognised in other comprehensive income and accumulated separately in equity. Any gain or loss relating
+to an ineffective portion is recognised immediately in the consolidated statement of profit or loss within "trading
+profits" of "other net income".
+For cash flow hedge of a recognised asset or liability, the associated cumulative gain or loss is reclassified from equity
+to the consolidated statement of profit or loss in the same periods during which the hedged cash flow affect profit
+and loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge
+accounting, any cumulative gain or loss at that time remains in equity until the forecast transaction is ultimately
+recognised in the consolidated statements of profit or loss. When a forecast transaction is no longer expected to
+occur, the cumulative gain or loss that was recognised in other comprehensive income is immediately reclassified to
+the consolidated statement of profit or loss.
+Hedge effectiveness testing
+In order to qualify for hedge accounting, the Group carries out prospective effectiveness testing to demonstrate that
+it expects the hedge to be highly effective at the inception of the hedge and throughout its life. Actual effectiveness
+(retrospective effectiveness) is also demonstrated on an ongoing basis.
+The documentation of each hedging relationship sets out how the effectiveness of the hedge is assessed. The
+method the Group adopts for assessing hedge effectiveness will depend on its risk management strategy.
+For prospective effectiveness, the hedging instrument is expected to be highly effective in achieving offsetting
+changes in cash flows attributable to the hedged risk during the period for which the hedge is designated. For
+actual effectiveness, the change in cash flows must offset each other in the range of 80 per cent to 125 per cent for
+the hedge to be deemed highly effective.
+Derivatives that do not qualify for hedge accounting
+All gains and losses from changes in the fair value of derivatives that are managed in conjunction with financial
+instruments designated at fair value and do not qualify for hedge accounting are recognised immediately in the
+consolidated statement of profit or loss. These gains and losses are recognised in "trading profits" of "other net
+income".
+179
+118,073
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
+between market participants at the measurement date in the principal or, in its absence, the most advantageous
+market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.
+When available, the Group measures the fair value of an instrument using the quoted price in an active market for
+that instrument. A market is regarded as active if transactions of the assets or liabilities take place with sufficient
+frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active
+market, then the Group uses valuation techniques to maximise the use of relevant observable inputs and minimise
+the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market
+participants would account in pricing a transaction.
+Fair value measurement principles
+178
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+2 Significant accounting policies (continued)
+(i)
+Financial instruments (continued)
+(i)
+Initial recognition and classification (continued)
+material transactions between the entity and its investee.
+Loans and receivables
+Available-for-sale financial assets
+Available-for-sale financial assets are financial assets that are designated as available-for-sale or are not
+classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity
+investments.
+Other financial liabilities
+Other financial liabilities, other than that at fair value through profit or loss, are measured at amortised cost
+using the effective interest method.
+Subsequent to initial recognition, financial assets and financial liabilities are measured at fair value, without
+any deduction for transaction costs that may occur on sale or other disposal except for loans and receivables,
+held-to-maturity investments and financial liabilities not at fair value through profit or loss, which are measured at
+amortised cost using the effective interest method.
+Financial assets at fair value through profit or loss are measured at fair value and changes therein, including any
+interest or dividend income, are recognised in profit or loss.
+Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses
+and foreign currency differences on debt instruments, are recognised in OCI and accumulated in the fair value
+reserve. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.
+For financial assets and liabilities measured at amortised cost, a gain or loss is recognised in the consolidated
+statement of profit or loss when the financial asset or liability is derecognised, impaired and amortised.
+(ii)
+Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
+quoted in an active market, other than those that the Group intends to sell immediately or in the near term,
+and those that are designated as available-for-sale financial assets upon initial recognition.
+349,949
+participation in policy-making processes;
+When judge whether there is a significant influence, the Group usually considers the following cases:
+2 Significant accounting policies
+(a) Statement of compliance and basis of preparation
+These financial statements have been prepared in accordance with International Financial Reporting Standards
+("IFRSS") and its interpretations promulgated by the International Accounting Standards Board ("IASB"), and the
+disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the
+applicable disclosure provisions of the Rules Governing the Listing of Securities on the HKEX.
+171
+172
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+2 Significant accounting policies (continued)
+(b) Changes in accounting policies
+Except for the changes below, the Group has consistently applied the accounting policies as set out in Note 2 to
+both periods presented in these consolidated financial statements.
+The Group has adopted the following Annual Improvements to IFRSS with an initial effective date of 1 January 2015.
+•
+Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)
+•
+Annual Improvements to IFRSS 2010-2012
+•
+Annual Improvements to IFRSS 2011-2013
+The principal activities of the Bank and its subsidiaries ("the Group") are the provision of corporate and personal
+banking services, conducting treasury business, the provision of asset management and other financial services.
+Amendments to IAS 19, Employee benefits: Defined benefit plans: Employee contributions
+(b) Principal activities
+On 22 September 2006, the Bank's H-Shares were listed on the Main Board of the Stock Exchange of Hong Kong
+Limited (the "HKEX").
+3,449
+49(a)
+635,843
+471,471
+189,783
+188,752
+Interest paid
+99,409
+112,124
+The notes on pages 171 to 302 form part of these financial statements.
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+Notes to the Financial Statements
+(Expressed in millions of Renminbi unless otherwise stated)
+1 Organisation and principal activities
+(a) Organisation
+China Merchants Bank Co., Ltd. ("the Bank") is a commercial bank incorporated in Shenzhen, the People's Republic
+of China (the "PRC"). With the approval of the China Securities Regulatory Commission (the "CSRC") of the PRC,
+the A-Shares of the Bank were listed on Shanghai Stock Exchange on 9 April 2002.
+As at 31 December 2015, apart from the Head Office, the Bank had 47 branches in the Mainland China, Hong Kong,
+New York, Singapore and Luxembourg. In addition, the Bank has four representative offices in Beijing, London, New
+York and Taipei.
+The amendments introduce a relief to reduce the complexity of accounting for certain contributions from employees
+or third parties under defined benefit plans. When the contributions are eligible for the practical expedient provided
+by the amendments, a company is allowed to recognise the contributions as a reduction of the service cost in
+the period in which the related service is rendered, instead of including them in calculating the defined benefit
+obligation. The amendments do not have an impact on these financial statements as the defined benefit plans
+operated by the Group are wholly funded by contributions from the Group and do not involve contributions from
+employees or third parties.
+Amendments to IAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements
+The Group has early adopted the Amendments to IAS 27 "Separate Financial Statements Equity Method in
+Separate Financial Statements" as at 1 January 2015 with an effective date of 1 January 2016. The amendments
+allow an entity to apply the equity method to account for its investments in subsidiaries, joint ventures and
+associates in its separate financial statements. The amendments shall be adopted retrospectively. The adoption of
+the amendments can eliminate the differences in the subsequent measurement in joint ventures and associates of
+the Group in its separate financial statements prepared in accordance with the IFRSS and the China Accounting
+Standards issued by the Ministry of Finance of the PRC, and the adoption does not have material impact on the
+Group's consolidated financial statements.
+(c)
+Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions
+about the relevant activities require the unanimous consent of the parties sharing control.
+When judge whether there is a joint control, the Group usually considers the following cases:
+whether any party within the joint arrangement cannot control the relevant activities of the joint ventures;
+whether the decisions about the joint ventures' relevant activities require the unanimous consent of the
+parties sharing control.
+The consolidated statement of profit or loss includes the Group's share of the results of joint ventures for the
+year and the consolidated statement of financial position includes the Group's share of the net assets of the joint
+ventures.
+Interests in the joint ventures are accounted for using the equity method. They are initially recognised at cost,
+which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the
+Group's share of the profit or loss and other comprehensive income of the joint ventures, until the date on which
+significant influence or joint control ceases.
+Investment in joint ventures is accounted for in the consolidated financial statements under the equity method.
+Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group's share
+of the acquisition-date fair value of the investee's identifiable net assets over the cost of the investment (if any).
+Thereafter, the investment is adjusted for the post acquisition change in the Group's share of the joint ventures' net
+assets. Any acquisition-date excess over cost, the consolidated statement of profit or loss includes the Group's share
+of the post-acquisition, post-tax results of the joint ventures for the year, including any impairment loss on goodwill
+relating to the investment in the joint ventures recognised for the year (see Notes 2(g) and 2(n)(ii)).
+When the Group's share of losses exceeds its interest in the joint ventures, the Group's interest is reduced to nil and
+recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive
+obligations or made payments on behalf of the joint ventures. For these purposes, the Group's interest in the joint
+ventures is the carrying amount of the investment under equity method together with the Group's interests that in
+substance form part of the Group's net investment in the joint ventures.
+Unrealised profits and losses resulting from transactions between the Group and its joint ventures are eliminated
+to the extent of the Group's interest in the joint ventures, except where unrealised losses provide evidence of an
+impairment of the asset transferred, in which case they are recognised immediately in profit or loss.
+When the Group ceases to have joint control over a joint venture, it is accounted for as a disposal of the entire
+interest in that investee, with a resulting gain or loss being recognised in the consolidated statement of profit or
+loss. Any interest retained in that former investee at the date when joint control is lost is recognised at fair value
+and this amount is regarded as the fair value on initial recognition of a financial asset (see Note 2(i)) or, when
+appropriate, the cost on initial recognition of an investment in an associate (see Note 2(f)).
+In the Bank's statement of financial position (see Note 60), investments in joint ventures are stated at cost less
+impairment losses.
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+2 Significant accounting policies (continued)
+(f) Associates
+Associate is an entity in which the Group has significant influence, but not control, or joint control, over its
+management, including participation in the financial and operating policy decisions.
+Significant influence is the power to participate in the financial and operating policy decisions of the investee but is
+not control or joint control of those policies.
+A joint venture is an arrangement in which the Group has joint control, where by the Group has rights to the net
+assets of the arrangement, rather than rights to its assets and obligation for its liabilities.
+Joint ventures
+(e)
+2 Significant accounting policies (continued)
+Basis of measurement
+Unless stated otherwise, the financial statements are presented in Renminbi ("RMB"), which is the Group's functional
+and presentation currency, rounded to the nearest million, unless otherwise stated.
+The financial statements are prepared using the historical cost basis except that financial assets and liabilities at fair
+value through profit or loss including derivatives, and available-for-sale financial assets are stated at their fair value.
+The preparation of the financial statements in conformity with IFRSS requires management to make judgements,
+estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities,
+income and expenses. The estimates and associated assumptions are based on historical experience and various
+other factors that are believed to be reasonable under the circumstances, the results of which form the basis of
+making the judgements about carrying values of assets and liabilities that are not readily apparent from other
+sources. Actual results may differ from these estimates.
+The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
+recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of
+the revision and future periods if the revision affects both current and future periods.
+Judgements made by management in the application of IFRSS that have significant effect on the financial statements
+and estimates with a significant risk of material adjustment in the future period are discussed in Note 55.
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+2 Significant accounting policies (continued)
+representation on the Board of Directors or equivalent governing body of the investee;
+(d) Subsidiaries and non-controlling interests
+An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control
+commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised
+profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements.
+Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only
+to the extent that there is no evidence of impairment.
+Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Bank, and
+in respect of which the Group has not agreed any additional terms with the holders of those interests which would
+result in the group as a whole having a contractual obligation in respect of those interests that meets the definition
+of a financial liability. For each business combination, the Group can elect to measure any non-controlling interests
+either at fair value or at their proportionate share of the subsidiary's identifiable net assets. Non-controlling interests
+are presented in the consolidated statement of financial position and consolidated statement of changes in equity
+within equity, separately from equity attributable to the shareholders of the Bank. Non-controlling interests in the
+results of the Group are presented on the face of the consolidated statement of profit or loss and the consolidated
+statement of profit or loss and other comprehensive income as an allocation of the net profit or loss and total
+comprehensive income for the year between non-controlling interests and the equity shareholders of the Bank.
+Changes in the Group's interests in a subsidiary that do not result in a loss of control are accounted for as equity
+transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within
+consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain
+or loss is recognised.
+When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary,
+with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at
+the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial
+recognition of a financial asset (see Note 2(i)) or, when appropriate, the cost on initial recognition of an investment
+in a joint venture (see Note 2(e)) or, an associate (see Note 2(f)).
+In the Bank's statement of financial position (see Note 60), its investments in subsidiaries are stated at cost less
+allowances for impairment losses.
+173
+174
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights, to
+variable returns from its involvement with the entity and has the ability to affect those returns through its power
+over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other
+parties) are considered.
+471,471
+189
+China Merchants Bank
+Annual Report 2015
+(k) Repossessed assets
+2 Significant accounting policies (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Profits or losses on disposal of property, equipment and investment property are determined as the difference
+between the net disposal proceeds and the carrying amount of the property, equipment, investment property and
+are accounted for in the consolidated statement of profit or loss as they arise.
+Subsequent expenditure relating to a property, equipment and investment property is capitalised only when it is
+probable that future economic benefits associated with the property and equipment will flow to the Group. All other
+expenditure is recognised in the consolidated statement of profit or loss as an expense as incurred.
+The carrying amount of property, equipment and investment property is reviewed periodically in order to assess
+whether the recoverable amount has declined below the carrying amount. When such a decline has occurred,
+the carrying amount is reduced to the recoverable amount. The amount of impairment loss is recognised in the
+consolidated statement of profit or loss. The recoverable amount of an asset is the greater of its fair value less
+disposal expense and present value of future expected cash flow. In assessing value in use, the estimated future cash
+flows are discounted to their present values.
+Construction in progress represents property under construction and is stated at cost less impairment losses. Cost
+comprises the direct and indirect cost of construction. Construction in progress is transferred to an appropriate class
+of property and other asset when the asset is ready for its intended use. No depreciation is provided for construction
+in progress.
+the estimated useful lives
+3 years
+3-5
+3-5 
+years
+Leasehold improvements (self-owned property)
+Leasehold improvements (leasing property)
+$
+Motor vehicles and others
+3 years
+20 years
+20 years
+Computer equipment
+Investment properties
+Buildings
+(I)
+(i)
+Repossessed assets are measured at fair value at the date of exchange. They are not depreciated or amortised.
+Impairment losses on initial classification and on subsequent remeasurement are recognised in the consolidated
+statement of profit or loss.
+Financial assets
+(i)
+(n) Impairment
+2 Significant accounting policies (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+184
+183
+The difference between the purchase and resale consideration or sale and repurchase consideration is amortised over
+the period of the transaction using the effective interest method and is included in interest income or expense, as
+appropriate.
+Amounts for purchase of financial assets under resale agreements are accounted for under "amounts held under
+resale agreements". Amounts from sale of financial assets under repurchase agreements are accounted for under
+"amounts sold under repurchase agreements".
+Depreciation is calculated to write off the cost of property, equipment and investment property over their following
+estimated useful lives, after taking into account an estimated residual value on a straight-line basis:
+(m) Resale and repurchase agreements
+Assets leased out under operating leases
+Rental payments under operating leases are recognised as costs or expenses on a straight-line basis over
+the lease term. Contingent rentals are charged to profit or loss in the accounting period in which they are
+incurred.
+Operating lease
+(iii) Operating leases
+Where the Group is a lessor under finance leases, an amount representing the net investment in the lease is included
+in the statement of financial position as "loans and advances to customers". Unrecognised finance income under
+finance leases are amortised using an effective interest rate method over the lease term. Finance income implicit
+in the lease payment is recognised as "interest income" over the period of the leases in proportion to the funds
+invested. Impairment losses are accounted for in accordance with the accounting policy as set out in Note 2(n)(i).
+Finance leases
+(ii)
+Lease is classified into finance and operating lease. A finance lease is a lease that transfers substantially all the risks
+and rewards incidental to ownership of an asset. Title may or may not eventually be transferred. An operating lease
+is a lease other than a finance lease.
+Classification
+Finance and operating lease
+Property, equipment and investment property leased out under operating leases are depreciated in accordance
+with the depreciation policies described in Note 2(j) and if impaired, impairment losses are provided for in
+accordance with the accounting policy described in Note 2(n)(ii). Income derived from operating leases is
+recognised in the statement of profit or loss using the straight-line method over the lease term. If initial
+direct costs incurred in respect of the assets leased out are material, the costs are initially capitalised
+and subsequently amortised in profit or loss over the lease term on the same basis as the lease income.
+Otherwise, the costs are charged to profit or loss immediately. Contingent lease income is charged to profit
+or loss in the accounting period in which they are incurred.
+Property, equipment and investment property, are stated at cost or deemed cost less accumulated depreciations and
+impairment losses. These also include land held under operating leases and buildings thereon, where the fair value
+of the leasehold interest in the land and buildings cannot be measured separately at the inception of the lease and
+the building is not clearly held under an operating lease.
+(j) Property, equipment, investment property and depreciation
+2 Significant accounting policies (continued)
+(vi) Embedded derivatives
+Derivative financial instruments are stated at fair value, with gains and losses arising recognised in the consolidated
+statement of profit or loss other than cash flow hedge, for cash flow hedge, the gains and losses arising from the
+effective hedging part recognised in other comprehensive income.
+The Group's derivative financial instruments mainly include spot, forward, foreign currency swaps, interest rate
+swaps and option contracts undertaken in response to customers' needs or for the Group's own asset and liability
+management purposes. To hedge against risks arising from derivative transactions undertaken for customers, the
+Group enters into similar derivative contracts with other banks.
+Derivative financial instruments
+Loans and advances directly granted by the Group to customers, participation in syndicated loans and finance leases
+receivables are accounted for as loans and advances to customers.
+Loans and advances to customers
+Equity investments are accounted for as financial assets at fair value through profit or loss or available-for-sale
+financial assets. Debt investments are classified as financial assets at fair value through profit or loss, held-to-maturity
+investments, debt securities classified as receivables, and available-for-sale financial assets in accordance with the
+Group's holding intention at acquisition.
+Investments
+Banks represent other banks approved by the People's Bank of China ("PBOC") and other authorities. Other
+financial institutions represent finance companies, investment trust companies and leasing companies which
+are registered with and under the supervision of the China Banking Regulatory Commission (the "CBRC") and
+insurance companies, securities firms, and investment fund companies, etc. which are registered with and under the
+supervision of other regulatory authorities. Placements with banks and other financial institutions are accounted for
+as loans and receivables.
+Placements with banks and other financial institutions
+Derivatives may be embedded in another contractual arrangement (a host contract). The Group accounts for an
+embedded derivative separately from the host contract when:
+Cash equivalents comprise balances with banks and the central bank, and short-term, highly liquid investments
+that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in
+value, having been within three months of maturity at acquisition.
+(v)
+Specific items
+(iv)
+Financial instruments (continued)
+(i)
+2 Significant accounting policies (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+180
+Premium income represents gross insurance premium written less reinsurance ceded, as adjusted for unearned
+premium. Gross premiums written are recognised at date of risk inception.
+Cash equivalents
+Financial assets are assessed at the end of each reporting period to determine whether there is any objective
+evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial
+assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a
+result of one or more events that occurred after the initial recognition of the asset and that event (or events) has
+an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably
+estimated. Objective evidences include:
+the host contract is not itself carried at fair value through profit or loss;
+the economic characteristics and risks of the embedded derivative are not closely related to the economic
+characteristics and risks of the host contract.
+XII Financial Statements
+182
+181
+Perpetual bonds issued that should be classified as equity instruments are recognised in equity based on the actual
+amount received. Any distribution of dividends or interests during the instruments' duration is treated as profit
+appropriation. When the perpetual bonds are redeemed according to the contractual terms, the redemption price is
+charged to equity.
+At initial recognition, the Group classifies the perpetual bonds issued or their components as financial assets,
+financial liabilities or equity instruments based on their contractual terms and their economic substance after
+considering the definition of financial assets, financial liabilities and equity instruments.
+Perpetual bonds
+The consideration received from the issuance of equity instruments net of transaction costs is recognised in
+shareholders' equity. Consideration and transaction costs paid by the Group for repurchasing self-issued equity
+instruments are deducted from shareholders' equity.
+(ix)
+(viii) Equity instrument
+when the Group neither transfers nor retains substantially all the risks and rewards of ownership of the
+financial assets, the Group would determine whether it has retained control of the financial assets. If the
+Group has not retained control, it shall derecognise the financial assets and recognise separately as assets
+or liabilities any rights and obligations created or retained in the transfer. If the Group has retained control,
+it shall continue to recognise the financial assets to the extent of its continuing involvement in the financial
+assets.
+the terms of the embedded derivative would meet the definition of a derivative if they were contained in a
+separate contract; and
+when the Group retains substantially all the risks and rewards of ownership of the financial assets, the Group
+shall continue to recognise the financial assets; and
+When applying the policies on securitised financial assets, the Group has considered both the degree of transfer
+of risks and rewards on the transferred financial assets and the degree of control exercised by the Group over the
+transferred financial assets:
+The Group securitises various credit assets, which generally results in the sale of these assets to special purpose
+entities, which, in turn issue securities to investors. Interests in the securitised financial assets may be retained in the
+form of senior or junior tranches, or other residual interests (retained interests). Retained interests are stated at fair
+value on the statement of financial position of the Group. Gains or losses on securitisation depend on the carrying
+amount of the transferred financial assets, allocated between the financial assets derecognised and the retained
+interests based on their relative fair value at the date of the transfer. Gains or losses on securitisation are recorded in
+"other net income".
+Securitisations
+(vii)
+Financial instruments (continued)
+(i)
+2 Significant accounting policies (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Separated embedded derivatives are measured at fair value, with all changes in fair value recognised in profit or
+loss unless they form part of a qualifying cash flow or net investment hedging relationship. Separated embedded
+derivatives are presented in the statement of financial position together with the host contract.
+when the Group transfers substantially all the risks and rewards of ownership of the financial assets, the
+Group shall derecognise the financial assets;
+significant financial difficulty of the issuer or borrower;
+In the recovery of impaired loans and receivables, the Group may take possession of assets held as collateral through
+court proceedings or voluntary delivery of possession by the borrowers. When it is intended to achieve an orderly
+realisation of the impaired assets and the Group is no longer seeking repayment from the borrowers, repossessed
+assets are reported in "other assets".
+it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
+(i)
+(p) Financial guarantee issued, provisions and contingent liabilities
+2 Significant accounting policies (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+188
+187
+If the bond is converted into shares, the carrying value of the liability component and any interest payable at
+the time of conversion, are transferred to "share capital" based on the numbers of shares issued at par and the
+differences are recognised as share premium in capital reserve.
+At initial recognition the liability component of the convertible bonds issued is calculated as the present value of
+the future interest and principal payments, discounted at the market rate of interest applicable at the time of initial
+recognition to similar debt securities that do not have a conversion option. The liability component is subsequently
+carried at amortised cost until it is converted or redeemed. Any excess of proceeds over the amount initially
+recognised as the liability component is in substance an option and is recognised as the equity component in the
+capital reserve.
+(o) Convertible bonds issued
+Financial guarantees issued
+Once recognised, the impairment losses will never be reversed.
+An impairment loss is recognised in the consolidated statement of profit or loss whenever the carrying
+amount of an asset, or the cash-generating unit to which it belongs exceeds its recoverable amount.
+Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying
+amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the
+carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the
+carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use,
+if determinable.
+Recognition of impairment losses
+The recoverable amount of an asset is the greater of its fair value net disposal expense and the present value
+of future cash flow. In assessing value in use, the estimated future cash flows are discounted to their present
+value using a pre-tax discount rate that reflects current market assessments of time value of money and the
+risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from
+other assets, the recoverable amount is determined for the smallest group of assets that generates cash
+inflows independently (i.e. a cash-generating unit).
+Calculation of recoverable amount
+Other assets (continued)
+(ii)
+(n) Impairment (continued)
+2 Significant accounting policies (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Reversal of impairment losses
+If any such indication exists, the asset's recoverable amount is estimated. In addition, for goodwill, intangible assets
+that are not yet available for use and intangible assets that have indefinite useful lives, the recoverable amount is
+estimated by the Group at the end of the reporting period whether or not there is any indication of impairment.
+a breach of contract, such as a default or delinquency in interest or principal payments;
+Where the Group issues a financial guarantee to customers, the fair value of the guarantee (being the guarantee
+fees received) is initially recognised as deferred income within "other liabilities".
+Premium income
+Where the investments are unlisted, interim dividend income is recognised when declared by the Board of
+Directors of the investees. Final dividend income is recognised only when the amount proposed by the Board
+of Directors of the investees is approved by shareholders at general meetings.
+Dividend income from listed investments is recognised when the underlying investment is declared
+ex-dividend.
+(iv)
+Dividend income
+(iii)
+Fee and commission income is recognised in the consolidated statement of profit or loss when the corresponding
+service is provided.
+Fee and commission income
+(ii)
+Interest income and expenses from all financial assets and liabilities that are classified as financial assets at fair value
+through profit or loss are considered to be incidental and are therefore presented together with all other changes in
+fair value arising from the portfolio. Net income from financial instruments designated at fair value through profit
+or loss and net trading income comprises all gains and losses from changes in fair value (net of accrued coupon) of
+such financial assets and financial liabilities, together with interest income and expense, foreign exchange differences
+and dividend income attributable to those financial instruments.
+Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to
+reimburse the beneficiary of the guarantee (the holder) for a loss the holder incurs because a specified debtor fails
+to make payment when due in accordance with the terms of a debt instrument.
+When a financial asset or a group of financial assets are impaired, interest income is recognised on the impaired
+financial assets using the rate of interest used to discount future cash flows for the purpose of measuring the related
+impairment loss.
+Interest income
+(i)
+(q) Income recognition
+2 Significant accounting policies (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated
+reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is
+remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or
+more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits
+is remote.
+Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive
+obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to
+settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are
+stated at the present value of the expenditures expected to settle the obligation.
+Other provisions and contingent liabilities
+The deferred income is amortised in the consolidated statement of profit or loss over the term of the guarantee as
+income from financial guarantees issued. In addition, provisions are recognised in accordance with Note 2(n)(ii) and
+when (a) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and
+(b) the amount of that claim on the Group is expected to exceed the amount currently carried in other liabilities in
+respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.
+Interest income is recognised in the consolidated statement of profit or loss on an accruals basis, taking into account
+the effective interest rate of the instrument or an applicable floating rate. Interest income includes the amortisation
+of any discount or premium or other differences between the initial carrying amount of any interest bearing
+instrument and its amount at maturity calculated on an effective interest rate basis.
+Internal and external sources of information are reviewed at the end of the reporting period to identify indications
+that other assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no
+longer exists or may have decreased.
+(ii)
+Impairment losses recognised in the consolidated statement of profit or loss for an investment in an equity
+instrument classified as available-for-sale are not reversed through the consolidated statement of profit or loss. Any
+subsequent increase in the fair value of these assets is recognised directly in equity.
+Incurred but not yet identified impairment
+for homogeneous groups of loans and receivables, held-to-maturity investments that are not
+individually significant with similar credit risk characteristics.
+no objective evidence of impairment exists for an individually assessed loans and receivables, held-to-
+maturity investments; and
+Impairment allowances are calculated on a collective basis for the following:
+Collectively assessed
+Impairment losses on loans and receivables, held-to-maturity investments (continued)
+Financial assets (continued)
+(i)
+(n) Impairment (continued)
+XII Financial Statements
+If no objective evidence of impairment exists for an individually assessed loans and receivables, held-to-
+maturity investments on an individual basis, whether significant or not, the loans and receivables, held-to-
+maturity investments are grouped in a pool of loans with similar credit risk characteristics for the purpose of
+calculating a collective impairment allowance. This allowance covers loans and receivables, held-to-maturity
+investments that are impaired at the end of the reporting period but will not be individually identified as
+such until some time in the future. As soon as information is available that specifically identifies objective
+evidence of impairment on individual loans and receivables, held-to-maturity investments in the pool of loans
+and receivables, held-to-maturity investments, those loans and receivables, held-to-maturity investments are
+removed from the pool. Loans and receivables, held-to-maturity investments that are individually assessed for
+impairment and for which an impairment loss is or continues to be recognised are not included in a collective
+assessment for impairment. The collective assessment allowance is determined after taking into account:
+China Merchants Bank
+Annual Report 2015
+Impairment allowance of an individually impaired significant loans and receivables, held-to-maturity
+investments is measured as the difference between the loans and receivables, held-to-maturity investments'
+carrying amount and the present value of estimated future cash flows discounted at the loans and
+receivables, held-to-maturity investments' applicable effective interest rate. The carrying amount of the loans
+and receivables, held-to-maturity investments is reduced through the allowance for impairment losses.
+Impairment allowances are made on individually impaired significant loans and receivables, held-to-maturity
+investments when there is objective evidence of impairment that will impact the estimated future cash flows
+of the loans and receivables, held-to-maturity investments. Individually impaired loans and advances are
+graded as substandard or below.
+Loans and receivables, held-to-maturity investments which are considered individually significant are assessed
+individually for impairment.
+Individually assessed
+The Group uses two methods of assessing impairment losses on loans and receivables, held-to-maturity investments:
+those assessed individually and those assessed on a collective basis.
+Impairment losses on loans and receivables, held-to-maturity investments
+a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
+Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised
+in respect of loans and receivables and held-to-maturity investments, which are measured at amortised cost, whose
+recovery is considered doubtful but not remote. In this case, the impairment losses are recorded using an allowance
+account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off
+against loans and receivables or held-to-maturity investments directly and any amounts held in the allowance
+account relating to that borrower/investment are reversed. Subsequent recoveries of amounts previously charged
+to the allowance account are reversed against the allowance account. Other changes in the allowance account and
+subsequent recoveries of amounts previously written off directly are recognised in consolidated statement of profit
+or loss.
+disappearance of an active market for financial assets because of financial difficulties; or
+significant changes in the technological, market, economic or legal environment that have an adverse effect
+on the borrower;
+Other assets
+The calculation of the present value of the estimated future cash flows of a collateralised loans and
+receivables, held-to-maturity investments reflects the cash flows that may result from foreclosure less costs
+for obtaining and selling the collateral, whether or not foreclosure is probable.
+the structure and risk characteristics of the Group's loan portfolio (indicating the borrower's ability to
+repay all loans) and the expected loss of the individual components of the loans and receivables, held-
+to-maturity investments portfolio based primarily on the historical loss experience;
+2 Significant accounting policies (continued)
+the emergence period between a loss occurring and that loss being identified and evidenced by the
+establishment of an allowance against the loss on an individual loans and receivables, held-to-maturity
+investments; and
+If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the
+increases can be objectively related to an event occurring after the impairment loss was recognised in the
+consolidated statement of profit or loss, the impairment loss is reversed, with the amount of the reversal being
+recognised in the consolidated statement of profit or loss.
+The amount of the cumulative loss that is recognised in the consolidated statement of profit or loss is the
+difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value,
+less any impairment loss on that asset previously recognised in consolidated statement of profit or loss. For an
+available-for-sale asset that is not carried at fair value as its fair value cannot be reliably measured, such as an
+unquoted equity instrument, the amount of any impairment loss is measured as the difference between the carrying
+amount of the financial asset and the present value of estimated future cash flows discounted at the current market
+rate of return for a similar financial asset.
+When a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive
+income and there is objective evidence that an available-for-sale financial asset is impaired, the cumulative loss
+that had been recognised directly in other comprehensive income is removed from other comprehensive income
+and is recognised in the consolidated statement of profit or loss even though the financial asset has not been
+derecognised.
+Impairment losses on available-for-sale financial assets
+Loans and advances with renegotiated terms are loans that have been restructured due to deterioration in the
+borrower's financial position and where the Group has made concessions that it would not otherwise consider.
+Renegotiated loans and advances are subject to ongoing monitoring to determine whether they remained as
+impaired or overdue.
+When the Group determines that loans and receivables, held-to-maturity investments has no reasonable prospect of
+recovery after the Group has completed all the necessary legal or other proceedings, the loans and receivables, held-
+to-maturity investments is written off against its allowance for impairment losses. Amount recovered from loans and
+receivables, held-to-maturity investments that has been written off will be reversed through the impairment losses
+account in the consolidated statement of profit or loss.
+(ii)
+Financial assets (continued)
+(i)
+Impairment (continued)
+(n)
+Impairment losses on loans and receivables, held-to-maturity investments (continued)
+2 Significant accounting policies (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+186
+185
+If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively
+to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed.
+The reversal shall not result in a carrying amount of the loans and receivables, held-to-maturity investments that
+exceeds the amortised cost at the date the impairment is reversed had the impairment not been recognised. The
+amount of the reversal is recognised in the consolidated statement of profit or loss.
+Impairment losses are recognised in the consolidated statement of profit or loss.
+Portfolios of homogeneous loans and receivables, held-to-maturity investments are collectively assessed using
+roll rate or historical loss rate methodologies. Overdue period represents the major observable objective
+evidence for impairment.
+Homogeneous groups of loans and receivables, held-to-maturity investments
+management's judgement as to whether the current economic and credit conditions are such that
+the actual level of inherent losses is likely to be greater or less than that suggested by historical
+experience.
+10,218
+5,583
+8,350
+Profit before tax
+75,079
+47,122
+68,425
+59,558
+Net profit attributable to
+31,681
+73,431
+59,266
+202,302
+40,889
+48,356
+54,144
+61,081
+67,670
+Operating expenses
+96,666
+113,818
+166,525
+133,118
+the Bank's shareholders
+Impairment losses on assets
+57,696
+1.67
+51,743
+the Bank's shareholders
+Net operating income
+Year-end net assets attributable to
+2.10
+2.30
+2.22
+2.29
+Diluted earnings
+1.67
+2.10
+2.30
+55,911
+2.22
+Basic earnings
+0.42
+0.63
+0.62
+0.67
+0.69
+Dividend
+Per share
+(RMB)
+36,129
+45,268
+2.29
+Results for the year
+Total assets
+2012
+6.66
+6.61
+Equity to total assets
+percentage point
+Increased by 0.17
+11.74
+11.91
+percentage point
+Increased by 0.33
+9.60
+9.93
+Decreased by 0.05
+Capital adequacy ratio
+Capital adequacy indicators under the weighted
+approach (1)
+(-)/+
+2014
+2015
+Changes
+31 December
+31 December
+(%)
+Decreased by 2.87
+percentage points
+30.42
+14.31
+Tier 1 capital adequacy ratio
+percentage point
+Asset quality indicators
+Non-performing loan ratio.
+2013
+2014
+2015
+(in millions of RMB)
+2.3 Five-year Financial Summary
+13
+Il Summary of Accounting Data and Financial Indicators
+China Merchants Bank
+Annual Report 2015
+The Group has re-classified the income from credit card repayment by instalments from fee income to interest income since 2015. The
+relevant financial indicators on net interest income and net non-interest income have been restated.
+(4)
+(3) Allowance ratio of loans = allowances for impairment losses/total loans and advances to customers;
+(2) Allowance coverage ratio of non-performing loans = allowances for impairment losses/balance of non-performing loans;
+Notes: (1) As at 31 December 2015, calculated in accordance with the advanced measurement approach set out in the "Capital Rules for
+Commercial Banks (Provisional)" issued by the CBRC in June 2012, the Group's capital adequacy ratio and Tier 1 capital adequacy ratio
+were 12.57% and 10.83%, respectively, up by 0.66 percentage point and 0.90 percentage point respectively as compared with those
+calculated in accordance with the weighted approach.
+Increased by 0.41
+percentage point
+2.59
+3.00
+Allowance ratio of loans (3)
+percentage points
+percentage point
+Decreased by 54.47
+233.42
+178.95
+Allowance coverage ratio of non-performing loans(2)
+Increased by 0.57
+1.11
+1.68
+2011
+12.47
+IV President's Statement
+9.28
+A successful bank should have the capability to survive periodic economic fluctuations.
+From 2015 onwards, China's real economy has gradually entered into an adjustment
+period characterised by "reducing overcapacity, destocking, deleveraging, cutting
+down costs and improving weaknesses", domestic banks were then exposed to great
+challenges in their risk management capability. In response to this challenge, the
+Board persistently improved the risk preference indicator system, further enhanced the
+monitoring and control of risk management, and fully implemented the dynamic and
+well-balanced operation concept of "keeping balance between efficiency, quality and
+scale". All members of the Board diligently fulfilled their duties to thoroughly study
+the Bank's important resolutions and actively offer advice for further development
+of the Bank. Moreover, they also conducted special studies on the risk management
+status of certain branches based on actual conditions, traced and analysed the changes
+in conditions, thoroughly studied the risk management and operation status and
+effectively put forward risk management and control proposals. In addition, they further
+improved the vertical audit management system and focused on the rectification of
+problems identified during the process of audits and the enforcement of accountability
+for such problems, thereby further enhancing the rectification of problems and the
+effectiveness of the management systems.
+In 2015, the Bank realised a net profit attributable to shareholders of the Bank of
+RMB57.696 billion, representing a year-on-year increase of 3.19%. Return on average
+equity (ROAE) and return on average asset (ROAA) attributable to shareholders of the
+Bank were 17.09% and 1.13%, respectively. After complete relaxation of the ceiling
+for deposit interest rates, the Bank's net interest margin recorded an increase rather
+than a decrease as compared with that of the previous year, demonstrating its strong
+profitability. Meanwhile, the proportion of net non-interest income continued to
+increase, thanks to the Bank's initial achievements in business transformation. The cost-
+to-income ratio decreased continually, and operating efficiency further improved.
+The deepening of economic transformation and financial reform brought about
+profound changes to the operation environment of the PRC banking industry in the
+past year. The increasing pace of reform in interest rates and exchange rates, the
+further development of financial disintermediation, the drastic volatility in the capital
+market, and the persistence of the overcapacity problem, all put commercial banks'
+profit growth under pressure and led to a higher risk of deterioration in asset quality.
+The Bank proactively adapted to the "new normal", vigorously grasped emerging
+opportunities, overcame challenges, and demonstrated its sound and stable operating
+style.
+Chairman's Statement
+Annual Report 2015
+III Chairman's Statement
+China Merchants Bank
+14
+Note: (1) Net loans and advances to customers represent gross loans and advances to customers less allowances for loan impairment losses.
+11.53
+11.41
+Li Jianhong
+11.14
+11.91
+the weighted approach
+Capital adequacy ratio under
+8.22
+8.34
+9.27
+9.60
+9.93
+the weighted approach
+Tier 1 capital adequacy ratio under
+0.56
+11.74
+0.61
+Chairman
+China Merchants Bank
+President
+Tian Huiyu
+In 2015, under the counter-cyclical pressure, the Bank adhered to differentiate itself
+in the tough operating environment by capitalising on the "One Body with Two
+Wings" strategy. We continued to boost our retail finance business, making the "one
+body" a firm cornerstone for the Bank to survive the tough operating environment.
+The proportion of profit before tax of retail banking reached 46.34%, up by 6.70
+percentage points year-on-year. The bank maintained its lead in a number of areas
+including private banking, wealth management and credit cards businesses. We
+grasped opportunities to penetrate into emerging businesses, making the "two wings"
+the powerful "dual-engine" for the Bank to surf through high waves. Playing a leading
+role in transaction banking among its peers, the Bank saw a significant increase in the
+number of core customers in supply chains and the amount of settlement deposits. The
+market share of cross-border settlement and sales of foreign exchange was 4.48%,
+ranking first among small and medium-sized banks nationwide. Our investment banking
+and asset management businesses have become a dual-driver for further growth and
+grasped a number of market opportunities arising out of mergers and acquisitions
+and restructuring, capital market, government-guided funds and emerging financing
+business. The business of the privatisation of overseas-listed Chinese enterprises has
+become an industry benchmark, with bond underwriting business ranking first among
+the domestic small- and medium-sized banks. We ranked second among our peers in
+terms of the volume of asset management. The volume of asset custody amounted to
+RMB7.16 trillion. We outperformed our peers in several key indicators of bills business.
+Profits form financial markets business doubled for two consecutive years.
+In 2015, the Bank steadfastly pursued its strategic transformation, making its
+preliminary achievements in "Asset-light Banking". Our assets have become more
+"light". We made initial success in structural adjustments despite various challenges
+and difficulties. We significantly scaled down risk assets in areas including the
+overcapacity industries, while increasing our allocations in low-risk and quality retail
+assets such as credit-card and home mortgages. Balance of our retail loans accounted
+for nearly half of our total loans, and the proportion of our corporate loans to
+customers with high credit rating increased by 6.1 percentage points, thus further
+optimising our asset structure. Our liabilities have become more "light". Persistently
+following the operating principle where "assets determine liabilities", we vigorously
+optimised the mechanism for pricing of deposits and differentiated authorisation, and
+significantly reduced the proportion of high-cost structured deposits. As a result, we
+saw a rise in the proportion of demand deposits and an increase of 11 basis points in
+net interest margin, effectively offsetting the adverse impact of several interest rate
+cuts during the year. Our income has become more "light". The proportion of our net
+non-interest income increased to 32.41%, and the cost-income ratio fell to a historical
+low of 27.55%.
+As at the end of 2015, total assets of the Group amounted to RMB5,474.978 billion,
+up by 15.71% from the beginning of the year; total deposits from customers amounted
+to RMB3,571.698 billion, up by 8.09% from the beginning of the year; and total
+loans and advances to customers amounted to RMB2,824.286 billion, up by 12.35%
+from the beginning of the year. Net profit attributable to the shareholders of the Bank
+amounted to RMB57.696 billion, up by 3.19% year-on-year. The return on average
+net equity (after tax) attributable to the shareholders of the Bank was 17.09%, down
+by 2.19 percentage points year-on-year. Under the advanced approach, the capital
+adequacy ratio was 12.57%, up by 0.19% as compared with that at the beginning of
+the year. The non-performing loan ratio was 1.68%, the allowance coverage ratio of
+non-performing loans was 178.95% and the allowance ratio of loans was 3.00%.
+In 2015, the Bank unswervingly implemented various requirements of the regulatory
+authorities and the Board of Directors, fully promoted the building of an asset-light
+bank and the implementation of the "One Body with Two Wings" strategy, further
+highlighted its features and enhanced brand image, thus reinforcing its position as a
+forerunner in business transformation.
+President's Statement
+Annual Report 2015
+27.55
+China Merchants Bank
+18
+16
+17
+China Merchants Bank Co., Ltd.
+In 2015, the Bank actively fulfilled its social responsibilities by firmly committing to
+social welfare activities. The Bank enhanced financial support to various sectors related
+to people's livelihood with focus on developing green financial products, promoting
+green operations and contributing to economic restructuring, transformation and
+upgrading for the purpose of realising sustainable value creation and value sharing.
+During the year, the Bank established an online public welfare platform, through which
+a number of sustainable public welfare programs were initiated in collaborations with
+One Foundation and China Children and Teenagers' Fund to advocate the idea of
+"Everybody Goes for Charity"(^\\). "More Pleasure from Monthly Donations
+(A)", a small-amount monthly donation program initiated by the Bank that
+brings many public welfare institutions and clients together, has seen continuous rollout
+and a stable increase in the number of sign-up clients committed to monthly donations.
+The banking industry is expected to confront with severe challenges and tough tests, as
+China is now gearing up its reform of the supply front, with structural adjustments as
+the development trend and logics for a period of time in the future. A series of adverse
+and unfavorable factors, such as decline in the asset demand, narrowing of interest
+spread, increase in non-performing assets and competition from new financing media,
+will continue to pose threat to the Bank. As the Bank has been recognised for its high-
+quality client portfolio and sound risk preference, investors thus have an expectation
+that it could deliver good performance even when risks are on the rise.
+Shouldering the strong expectations from its investors, and exposed to the complicated
+economic situation and tough business environment, the Bank will continue to
+accelerate its transformation and seize opportunities in 2016 to capture more market
+shares through business innovation and increase efficiency through risk management so
+as to lay a sound foundation for achieving the goal of becoming the best commercial
+bank in China and continuing to create values for its investors and the society.
+In the past year, changes occurred in the shareholdings of major shareholders of
+the Bank. Looking back at its history, despite previous changes in the structure and
+shareholdings of its shareholders, the Bank has always adhered to the market-driven
+operation mechanism and the regulated corporate governance model. These formed
+the essence and foundation for our growth and success. In future, the market-driven
+operation mechanism and the management model of the Bank will not be weakened,
+but rather, they will be enhanced and innovated from time to time, making the market-
+driven operation mechanism a competitive advantage of the Bank.
+III Chairman's Statement
+China Merchants Bank
+Annual Report 2015
+Our innovation-driven development is also reflected in the market-oriented mechanism
+innovation. During the year, the Board advocated and promoted the Employee Stock
+Ownership Scheme of the Bank to bring together the long-term interests of its
+management, employees and shareholders, and continuously improved the incentive
+and constraint mechanism, demonstrating its corporate culture of respect, caring and
+sharing.
+As for innovation-driven development, it first comes to the innovation of our business
+models and service modes. In 2015, the Bank, adhering to the customer-centric service
+concept of "We are here, just for you", vigorously promoted the deployment and
+innovation of Internet finance by utilising mobile Internet concept and focusing on
+diverse cross-industry cooperation, and diligently studied and explored new business
+models in payment and settlement, consumer finance, mobile banking, direct banking
+and credit verification service. As for improving customer experience, the Bank
+proactively made innovations based on the perspectives of Internet, mobile handsets
+and scenarios and launched various new functions including "visual counters" and
+"cash withdrawal via face-scanning ()", thus offering more convenient and
+efficient services to its customers.
+A forward-looking strategic deployment is essential for overcoming tough economic
+cycles. In 2015, the Bank ranked 28th among the global top 1,000 banks by The Banker
+magazine, demonstrating that it has grown into a bank with strong market reputation
+and influence. Therefore, it is vital for the Bank to identify its core strengths and major
+challenges, work out its way into the future and make beforehand deployments. Since
+2015, the Bank has formulated its new five-year plan according to the requirements
+of the Board of Directors as its overall deployments in line with the state's "13th Five-
+year Plan". With a goal to become the "Best Commercial Bank in China", the Bank
+has made "Retail Banking, Keeping Ahead" a core essence of its strategic objectives
+and "Innovation-driven Development" a tool to realise the new five-year plan. Shared
+by the Board of Directors, the management and employees throughout the Bank, the
+above plan has stemmed from the Bank's long historical experience and will spearhead
+the Bank's future development.
+To overcome periodic economic fluctuations successfully requires a bank to keep
+its strategic determination, regardless of difficulties and temptations. A successful
+experience of the Bank drawn from previous practices is to make retail banking
+business as its strategic direction and stick to it persistently. In 2015, the Bank's retail
+loan balances and profit before tax both accounted for half of its results under each
+sector, further consolidating its competitive advantage in retail finance. In addition,
+corporate finance and financial institutions finance had made breakthroughs in their
+key business areas with ever-increasing customer bases. And the Bank had further
+developed a more clearly defined "One Body with Two Wings" strategy and "Asset-light
+Banking" direction.
+III Chairman's Statement
+Annual Report 2015
+Chairman
+10.53
+0.83
+1.68
+2,739,444
+Net loans and advances to customers (1)
+5,474,978
+2,220,060
+2,532,444
+3,571,698 3,304,438 2,775,276
+Deposits from customers
+2,629,961
+3,207,698
+3,750,443
+5,113,220 4,416,769
+4,731,829
+2,448,754
+Total liabilities
+21,577
+200,401
+265,956
+25,220
+25,220
+315,060
+361,758
+Total shareholders' equity
+25,220
+Share capital
+Year end
+(in millions of RMB)
+7.65
+21,577
+165,010
+1.11
+4,016,399 3,408,099
+2,148,330
+1,863,325
+Non-performing loan ratio
+36.00
+35.85
+34.23
+30.42
+27.55
+Cost-to-income ratio
+24.17
+24.78
+22.22
+19.28
+2,794,971
+17.09
+Return on average equity (after tax)
+1.39
+1.46
+1.39
+1.28
+1.13
+attributable to the Bank's shareholders
+Return on average assets (after tax)
+Key financial ratios
+(%)
+1,604,371
+attributable to the Bank's shareholders
+Cost-to-income ratio (excluding business tax and surcharges)
+Return on average assets (after tax) attributable to
+the Bank's shareholders
+Increased by 2.79
+57,696
+55,911
+3.19
+Per Share
+(RMB)
+Basic earnings attributable to the Bank's shareholders
+Diluted earnings attributable to the Bank's shareholders
+Year-end net assets attributable to the Bank's shareholders
+Volume Indicators
+2015
+2014
+Changes
++/(-)%
+2.29
+2.22
+Net profit attributable to the Bank's shareholders
+3.15
+2.22
+3.15
+14.31
+12.47
+14.76
+31 December
+(in millions of RMB)
+Total assets
+of which: total loans and advances to customers
+Total liabilities
+2015
+31 December
+2014
+2.29
+73,431
+75,079
+Profit before tax
+percentage points
+10
+China Merchants Bank
+Annual Report 2015
+I Company Information
+On 1 July 2015, the Company's ranking continued to rise in the list of global
+top 1,000 banks for 2015 published by The Banker magazine (a prestigious
+international financial magazine). It ranked 28th, up by 8 places from the
+previous year with its tier 1 capital of USD49.351 billion and sixth among all
+Chinese banks, only after the big-5 state-owned banks.
+On 8 July 2015, the Company leapt to 29th in Fortune China Top 500
+Chinese Companies for 2015, up by 4 places from the previous year with
+its operating revenue of RMB165.863 billion, and ranked sixth among all
+Chinese banks, only after the big-5 state-owned banks.
+On 22 July 2015, the Company leapt to the 235th place in Fortune Global
+Top 500 Companies, up by 115 places from the previous year with its
+operating revenue of USD45.61 billion, being one of the fastest rising
+companies.
+In November 2015, the Company was honored the "Best Cross-Border
+Trade Settlement Award" for its outstanding performance in corporate
+finance in the special survey of corporate finance towards all the CFOs in
+China conducted by the "CFO" magazine of the Ministry of Industry and
+Information Technology.
+On 26 November 2015, at the Tenth Annual Conference for 21st Century
+Asian Finance held by 21st Century Business Herald, the Company won the
+"Best Retail Bank in Asia for 2015" award.
+In November 2015, the Company stood out from the 2,800 listed
+companies, and ranked first in the "Top Ten of Investors' Most Respected
+100 Listed Companies in China" selected by the Association of Chinese
+Listed Companies.
+In December 2015, the Company was ranked among the "Top Ten Excellent
+Board of Directors of Companies Listed on the Main Board in 2015" selected
+by 21st Century Media.
+China Merchants Bank
+Il Summary of Accounting Data and Financial Indicators
+Annual Report 2015
+Summary of Accounting Data
+and Financial Indicators
+2.1 Key Accounting Data and Financial Indicators
+Operating Results
+Changes
+(in millions of RMB)
+2015
+2014
++/(-)%
+Net operating income (Note)
+202,302
+166,525
+21.48
+Changes
++/(-)%
+2.24
+4,731,829
+Decreased by 0.15
+Return on average equity (after tax) attributable to
+17.09
+19.28
+percentage point
+Decreased by 2.19
+the Bank's shareholders
+percentage points
+Net interest spread
+2.59
+Increased by 0.14
+percentage point
+Net interest margin
+1.28
+2.75
+Increased by 0.11
+percentage point
+As percentage of net operating income
+- Net interest income
+67.59
+70.38
+Decreased by 2.79
+percentage points
+- Net non-interest income
+32.41
+5,474,978
+29.62
+2.64
+1.13
+2.45
+2,513,919
+15.71
+2,824,286
+Profitability indicators
+12.35
+5,113,220
+4,416,769
+15.77
+of which: total deposits from customers
+3,571,698
+8.09
+Total equity attributable to the Bank's shareholders
+360,806
+314,404
+14.76
+3,304,438
+Net operating income is the sum of net interest income, net fee and commission income, other net income as well as the gains on investment
+in associates and joint ventures.
+Note:
+Changes
+2014
+(restated)
+2015
+(%)
+2.2 Financial Ratios
+(-)/+
+China Merchants Bank
+Annual Report 2015
+12
+11
+Il Summary of Accounting Data and Financial Indicators
+275
+275
+Zhao Jun
+300
+300
+300
+300
+Pan Yingli
+300
+300
+Liu Yuan
+Guo Xuemeng (iv)
+3,360
+375
+3,797
+Zhu Genlin
+Fu Junyuan (iii & iv)
+Liu Zhengxi
+Pan Ji (iv)
+Dong Xiande (iv)
+Jin Qingjun
+Xiong Kai
+Huang Dan
+375
+Pan Chengwei
+400
+437
+275
+Li Jianhong
+Liang Jinsong
+400
+Non-executive directors
+Ma Zehua
+Li Xiaopeng
+Li Yinquan
+Sun Yueying
+Su Min
+2015
+195
+Directors' fees
+RMB'000
+Salaries,
+allowances
+and benefits
+in kind
+RMB'000
+Discretionary
+Retirement
+scheme
+bonuses contributions
+RMB'000
+RMB'000
+275
+Total
+(i)
+| |
+- 4,200 - 546
+3,360
+437
+4,746
+3,797
+|||
+Fu Gangfeng
+Hong Xiaoyuan
+Independent non-executive
+directors and supervisors
+Wong Kwai Lam
+300
+300
+RMB'000
+300
+China Merchants Bank
+Annual Report 2015
+1,989
+(i)
+1,680
+358 - 47
+2,825
+16,632
+| || | ||
+218
+1,898
+405
+2,162
+21,619
+The total remuneration before tax for the full-time directors, supervisors and executive officers of the Group is not yet finalised. Details of their
+remaining compensation will be disclosed separately when their total remuneration is confirmed.
+As at 31 December 2015, the Group has offered 7 phases of H share appreciation rights scheme to its senior management ("the Scheme"). In
+2015, none of the granted share appreciation rights was exercised. Details of the Scheme are set out in Note 37(a)(iii).
+On 25 September 2015, the Bank's 1st 2015 extraordinary general meeting of shareholders considered and approved the Resolution on
+election of Fu Junyuan as a shareholders supervisor.
+During the reporting period, An Luming resigned as the Bank's shareholders supervisor due to the change of job assignment.
+During the reporting period, Fu Junyuan resigned as the Bank's non-executive director due to the change of job assignment.
+During the reporting period, Fu Yuning retired as the Bank's non-executive director due to the change of job assignment.
+During the reporting period, Wang Daxiong retired as the Bank's non-executive director due to the change of job assignment.
+During the reporting period, Xiong Xianliang retired as the Bank's non-executive director due to the change of job assignment.
+During the reporting period, Yi Xiqun retired as the Bank's independent non-executive director upon expiry of his term of office.
+During the reporting period, Xu Shanda retired as the Bank's independent non-executive director due to the change of job assignment.
+During the reporting period, Xiao Yuhuai retired as the Bank's independent non-executive director due to the change of job assignment.
+During the reporting period, Han Mingzhi retired as the Bank's supervisor due to the change of job assignment.
+During the reporting period, Zhang Guanghua resigned as the Bank's vice chairman and executive director due to the change of job
+assignment.
+During the reporting period, Yu Yong resigned as the Bank's supervisor due to the change of job assignment.
+During the reporting period, Guo Xuemeng resigned as the Bank's independent non-executive director due to the change of job assignment.
+To satisfy the requirement that independent non-executive directors should constitute one third (inclusive) of the board of directors, a new
+independent non-executive director will be elected in the shareholders' meeting to fill the vacancy caused by the resignation of Guo Xuemeng,
+the election becomes effective after the Banking supervision institution of China approves the qualification of the new independent non-
+executive director. In the meantime, Guo Xuemeng continues her duty as independent non-executive director in compliance with the relative
+rules, regulations and corporate constitutions.
+During the reporting period, Pan Ji resigned as the Bank's external supervisor due to the change of job assignment. To satisfy the requirement
+that external supervisors should constitute over one third (inclusive) of the board of supervisors, his resignation will be effective after the
+election of a new external supervisor by the shareholders' meeting to fill the vacancy. In the meantime, Pan Ji continues his duty as external
+director.
+During the reporting period, Dong Xiande resigned as the Bank's external supervisor due to the change of job assignment. To satisfy the
+requirement that external supervisors should constitute over one third (inclusive) of the board of supervisors, his resignation will be effective
+after the election of a new external supervisor by the shareholders' meeting to fill the vacancy. In the meantime, Dong Xiande continues his
+duty as external director.
+In 2014, Xu Shanda resigned as the Bank's independent non-executive director due to the change of job assignment, his resignation was
+effective in 2015.
+In 2014, Xiao Yuhuai resigned as the Bank's independent non-executive director due to the change of job assignment, his resignation was
+effective in 2015.
+Li Hao
+XII Financial Statements
+8
+Total
+RMB'000
+bonuses contributions
+RMB'000
+RMB'000
+Retirement
+scheme
+Discretionary
+258
+2,247
+1,685
+219
+1,904
+196
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+8
+Directors' and Supervisors' emoluments (continued)
+The emoluments of the Directors and Supervisors during the year are as follows: (continued)
+Former Executive,
+non-executive directors
+300
+and supervisors
+Xu Shanda (iv)
+Xiao Yuhuai (iv)
+Yu Yong (iv)
+An Luming (iv)
+Notes:
+(i)
+(ii)
+(iii)
+(iv)
+Directors' fees
+RMB'000
+Salaries,
+allowances
+and benefits
+in kind
+RMB'000
+2015
+Zhang Guanghua (iv)
+Tian Huiyu
+Others
+The emoluments of the Directors and Supervisors during the year are as follows:
+Insurance income
+4,238
+4,519
+Gain on disposal of bills
+476
+534
+Rental income
+21
+4
+Distributions from investment in funds
+(145)
+611
+Net gains/(loss) from available-for-sale financial assets
+(359)
+(118)
+at fair value through profit or loss
+Net losses from financial instruments designated
+1,618
+3,073
+- Bonds, derivatives and other trading activities
+2,467
+2,398
+- Foreign exchange
+Trading profits from
+2014
+(Restated)
+2015
+6 Other net income
+Net trading gains from precious metals
+Others
+XII Financial Statements
+498
+188
+Directors' and Supervisors' emoluments (continued)
+4,086
+Property, equipment and investment properties depreciation
+10,425
+11,929
+Business tax and surcharges
+29,179
+31,394
+4,785
+5,067
+4,426
+4,779
+- Social insurance and corporate supplemental insurance
+Others
+19,968
+21,548
+- Salaries and bonuses (Note (i))
+-
+3,535
+2014
+2015
+Staff costs
+7 Operating expenses
+9,671
+12,018
+341
+311
+539
+475
+China Merchants Bank
+Annual Report 2015
+194
+43,341
+26,549
+Deposits and placements from banks and other financial institutions
+142
+1,056
+Borrowing from central bank
+64,102
+60,448
+Deposits from customers
+2014
+2015
+Rental expenses
+3,842
+3,349
+Other general and administrative expenses (Note (ii))
+16,419
+14,593
+67,670
+61,081
+Notes:
+(i)
+(ii)
+Performance bonus is included in the above salaries and bonuses, the details of which are disclosed in Note 37(c).
+Auditors' remuneration amounted to RMB22 million for the year ended 31 December 2015 (2014: RMB17 million), included in other general
+and administrative expenses.
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+8
+Directors' and Supervisors' emoluments
+41,032
+Amounts sold under repurchase agreements
+2,790
+1,637
+57,798
+7,279
+7,897
+13,033
+18,644
+Commissions on trust and fiduciary activities
+4,204
+4,215
+Commissions from credit commitment and lending business
+7,017
+13,681
+Agency services fees
+4,116
+Executive directors
+3,799
+7,692
+9,562
+Bank cards fees
+2014
+(Restated)
+2015
+Fee and commission income
+110,834
+97,993
+not at fair value through profit or loss
+Interest expense on financial liabilities that are
+3,921
+7,150
+Debt securities issued
+Remittance and settlement fees
+The emoluments of the Directors and Supervisors during the year are as follows: (continued)
+During the reporting period, Peng Zhijian retired as the Bank's supervisor due to the change of job assignment.
+During the reporting period, Shi Rongyao retired as the Bank's supervisor due to the change of job assignment.
+During the reporting period, Guan Qizhi retired as the Bank's supervisor due to the change of job assignment.
+On 9 March 2015, Yu Yong retired as the Bank's supervisor due to the change of job assignment.
+Tian Huiyu
+LO
+Interest expense
+4
+Note: For the year ended 31 December 2015, included in the above is interest income of RMB1,137 million accrued on impaired loans (2014:
+RMB655 million) and nil for impaired debt securities investments (2014: Nil).
+228,036
+234,722
+Executive directors
+Interest income on financial assets that are
+37,749
+48,175
+Investments
+20,461
+12,102
+Amounts held under resale agreements
+10,579
+5,962
+Balances and placements with banks and other financial institutions
+8,318
+8,598
+Balances with central bank
+5,131
+4,866
+63,630
+78,076
+82,168
+76,943
+- Discounted bills
+5
+- Retail loans
+(iii)
+Directors' and Supervisors' emoluments (continued)
+Guan Qizhi (iii)
+1,304
+169
+1,473
+1,860
+18,176
+5,936
+2,362
+28,334
+Notes:
+(i)
+(ii)
+On 29 September 2015, the Board of Directors approved the discretionary bonuses of the Bank's directors, supervisors and executive officers
+for 2014. Disclosures in 2014 (Note 8, 9 & 56(h)) had been adjusted correspondingly.
+On 30 June 2014, the Bank's 2013 general meeting of shareholders considered and approved the Resolution on election of Li Jianhong as a
+non-executive director.
+On 20 October 2014, the Bank's 2nd 2014 extraordinary general meeting of shareholders considered and approved the Resolution on election
+of Li Xiaopeng as a non-executive director.
+On 30 June 2014, the Bank's 2013 general meeting of shareholders considered and approved the Resolution on election of Su Min as a
+non-executive director.
+On 20 October 2014, the Bank's 2nd 2014 extraordinary general meeting of shareholders considered and approved the Resolution on election
+of Liang Jinsong as an independent non-executive director.
+On 20 October 2014, the Bank's 2nd 2014 extraordinary general meeting of shareholders considered and approved the Resolution on election
+of Zhao Jun as an independent non-executive director.
+From 28 August 2014 to 29 August 2014, the Bank's 14th meeting of the 9th Supervisory Committee considered and approved the Resolution
+on election of Liu Yuan as a chairman of the Supervisors of the Bank, and elected Liu Yuan as the chairman of the 9th Supervisory Committee
+of the Bank.
+On 30 June 2014, the Bank's 2013 general meeting of shareholders considered and approved the Resolution on election of Dong Xiande as an
+external supervisor.
+On 20 October 2014, the Bank's 2nd 2014 extraordinary general meeting of shareholders considered and approved the Resolution on election
+of Jin Qingjun as an external supervisor.
+On 26 August 2014, the Bank's workers' congress considered and elected Liu Yuan and Xiong Kai as employee supervisors of the 9th
+Supervisory Committee of the Bank.
+On 10 March 2015, the Bank's workers' congress considered and elected Huang Dan as employee supervisor of the 9th Supervisory Committee
+of the Bank.
+80
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+199
+Notes: (continued)
+- Corporate loans
+Loans and advances to customers
+2014
+(Restated)
+Salaries, bonuses and other benefits are accrued in the period in which the associated services are rendered by
+employees.
+Salaries and staff welfare
+(i)
+(u) Employee benefits
+Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial
+position when the Group has a legally enforceable right to set off the recognised amounts and the transactions are
+intended to be settled on a net basis.
+(t) Offsetting
+On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign
+operation is reclassified from equity to the consolidated statement of profit or loss when the profit or loss on
+disposal is recognised.
+(s) Foreign currencies translations (continued)
+2 Significant accounting policies (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are translated
+into RMB at the foreign exchange rates ruling at that date. Non-monetary assets and liabilities, and share capital
+which are measured at historical cost in a foreign currency are translated into RMB at the foreign exchange rates
+ruling at the date of the transaction, whilst those stated at fair value are translated into RMB at the foreign
+exchange rate ruling at the date of valuation. Income and expenses denominated in foreign currencies are translated
+at the exchange rates ruling at the dates of the transactions. When the gain or loss on a non-monetary item,
+including available-for-sale equity instrument, is recognised directly in equity, any exchange component of that gain
+or loss is recognised directly in equity, all other foreign exchange differences arising on settlement and translation of
+monetary and non-monetary assets and liabilities are recognised in the consolidated statement of profit or loss.
+The assets and liabilities of operations outside Mainland China are translated into RMB at the spot exchange rates
+ruling at the end of the reporting period. The equity items, excluding "Retained profits", are translated to RMB at
+the spot exchange rates or the rates that approximate the spot exchange rates on the transaction dates. The income
+and expenses of foreign operation are translated to RMB at the spot exchange rates or the rates that approximate
+the spot exchange rates on the transaction dates. Foreign exchange differences arising from translation are
+recognised as "exchange reserve" in other comprehensive income.
+different taxable entities, which, in each future period in which significant amounts of deferred tax
+liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and
+settle the current tax liabilities on a net basis or realise and settle simultaneously.
+Foreign currencies translations
+the same taxable entity; or
+in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation
+authority on either:
+in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realise
+the asset and settle the liability simultaneously; or
+Current tax balances and deferred tax balances, and movements therein, are presented separately from each other
+and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against
+deferred tax liabilities if the Group has the legally enforceable right to set off current tax assets against current tax
+liabilities and the following additional conditions are met:
+A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
+against which the asset can be utilised. Deferred tax assets are reduced by the extent that it is no longer probable
+that the related tax benefit will be realised.
+Deferred tax is provided using the statement of financial position liability method, for temporary differences between
+the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation
+purposes. Deferred tax assets also arise from unused tax losses and unused tax credits. The amount of deferred
+tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and
+liabilities, using tax rates enacted or substantially enacted at the end of the reporting period. Deferred tax assets and
+liabilities are not discounted.
+Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially
+enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.
+Current income tax and movements in deferred tax balances are recognised in the consolidated statement of profit
+or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in
+equity.
+(s)
+(r) Taxation
+2 Significant accounting policies (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+190
+(ii)
+Post employment benefits
+The Group participates in a number of defined contribution retirement benefit schemes managed by different
+provincial governments or independent insurance companies. Obligation for contributions to these schemes are
+jointly borne by the Group and the staff, and contributions paid by the Group are recognised as an expense in the
+consolidated statement of profit or loss as incurred.
+The Group's net obligation in respect of defined benefit plans is calculated separately for each plan by estimating
+the amount of future benefit that employees have earned in the current and prior periods, discounting that amount
+and deducting the fair value of any plan assets.
+2015
+193
+Interest income
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+3
+Dividends or profit distributions are recognised as a liability in the year in which they are approved and declared.
+(y) Dividends or profit distributions
+The Group acts in a fiduciary capacity in entrusted loan and entrusted investment business. Assets held by the Group
+and the related undertakings to return such assets to customers are excluded from the consolidated statement of
+financial position as the risks and rewards of the assets reside with the customers.
+(x) Fiduciary activities
+Individually material operating segments are not aggregated for financial reporting purposes unless the segments
+have similar economic characteristics and are similar in respect of the nature of products and services, the nature
+of production processes, the type or class of customers, the methods used to distribute the products or provide the
+services, and the nature of the regulatory environment. Operating segments which are not individually material may
+be aggregated if they meet most of these criteria.
+Operating segments, and the amounts of each segment item reported in the financial statements, are identified
+from the financial information provided regularly to the Group's most senior executive management for the purposes
+of allocating resources to, and assessing the performance of, the Group's various lines of business and geographical
+locations.
+(w) Segmental reporting
+2,416
+For the purposes of these financial statements, parties are considered to be related to the Group if the Group
+has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making
+financial and operating decisions, or vice versa, or where the Group and the party are subject to common control
+or common significant influence. Related parties may be individuals (being members of key management personnel,
+significant shareholders and/or their close family members) or other entities and include entities which are under
+the significant influence of related parties of the Group where those parties are individuals, and post-employment
+benefit plans which are for the benefit of employees of the Group or of any entity that is a related party of the
+Group.
+During the vesting period, the equity incentives that is expected to vest is reviewed. Any adjustment to the
+cumulative fair value recognised in prior years is charged or credited to the consolidated statement of profit or loss
+for the year of the review. On vesting date, the amount recognised as an expense is adjusted to reflect the actual
+amount of equity incentives that vest.
+The Group offers equity incentives to its employee, namely H share Appreciation Rights Scheme for the Senior
+Management ("the Scheme"). The Scheme is accounted for as cash settled plan. The fair value of the equity
+incentives is measured at grant date using Black-Scholes model, taking into account the terms and condition upon
+which the equity incentives were granted. Where the employees have to meet vesting conditions before becoming
+unconditionally entitled to the equity incentives, the total estimated fair value of the equity incentives is spread over
+the vesting period, taking into account the probability that the equity incentives will vest.
+Share-based payment
+(iii)
+(u) Employee benefits (continued)
+2 Significant accounting policies (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+192
+191
+When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to
+past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gains
+and losses on the settlement of a defined benefit plan when the settlement occurs.
+Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan
+assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately
+in other comprehensive income. The Group determines the net interest expense (income) on the net defined benefit
+liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the
+beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes
+in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net
+interest expense and other expenses related to defined benefit plans are recognised in personnel expenses in the
+consolidated statement of profit or loss.
+The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit
+credit method. When the calculation results in a potential asset for the Group, the recognised asset is limited to the
+present value of economic benefits available in the form of any future refunds form the plan or reductions in future
+contributions to the plan. To calculate the present value of economic benefits, considerations in future contributions
+to the plan. To calculate the present value of economic benefits consideration is given to any applicable minimum
+funding requirements.
+(v) Related parties
+278
+not at fair value through profit or loss
+Yu Yong (iii)
+Discretionary
+bonuses
+RMB'000
+Retirement
+scheme
+contributions
+Total
+RMB'000
+RMB'000
+(i)
+4,200
+1,767
+546
+6,513
+3,360
+1,414
+437
+5,211
+3,360
+1,414
+437
+5,211
+||||
+300
+300
+| | | |
+300
+300
+300
+300
+197
+2014
+An Luming
+Zhu Genlin
+Zhang Guanghua
+Li Hao
+Non-executive directors
+Li Jianhong (ii)
+Ma Zehua
+Li Xiaopeng (ii)
+Li Yinquan
+Sun Yueying
+Su Min (ii)
+Fu Junyuan
+Fu Gangfeng
+Hong Xiaoyuan
+Independent non-executive
+300
+Directors' fees
+| | |
+||||
+Salaries,
+allowances
+and benefits
+in kind
+RMB'000
+directors and supervisors
+2,138
+300
+Liang Jinsong (ii)
+Pan Chengwei
+Pan Yingli
+Guo Xuemeng
+Zhao Jun (ii)
+Liu Yuan (ii)
+RMB'000
+1,313
+Wong Kwai Lam
+170
+Retirement
+Discretionary
+scheme
+in kind
+RMB'000
+bonuses
+contributions
+Total
+RMB'000
+RMB'000
+RMB'000
+(i)
+| | | |
+75
+जै
+Xu Shanda (iii)
+Xiao Yuhuai (iii)
+2,100
+825
+273
+3,198
+Peng Zhijian (iii)
+150
+150
+Shi Rongyao (iii)
+516
+150
+150
+and benefits
+Salaries,
+allowances
+Han Mingzhi (iii)
+75
+225
+60
+2014
+60
+401
+52
+453
+Pan Ji
+225
+Dong Xiande (ii)
+Jin Qingjun (ii)
+Xiong Kai (ii)
+Huang Dan (ii)
+198
+Liu Zhengxi
+XII Financial Statements
+Directors' fees
+RMB'000
+Yi Xiqun (iii)
+Xiong Xianliang (iii)
+China Merchants Bank
+Annual Report 2015
+Wang Daxiong (iii)
+Fu Yuning (iii)
+and supervisors
+1,999
+Former Executive,
+The emoluments of the Directors and Supervisors during the year are as follows: (continued)
+Directors' and Supervisors' emoluments (continued)
+8
+non-executive directors
+the Group outstanding at year end
+Aggregate amount of relevant loans made by
+Loans to directors, supervisors and executive officers of the Group are as follows:
+10 Loans to directors, supervisors and executive officers
+XII Financial Statements
+RMB
+China Merchants Bank
+Annual Report 2015
+131 |│|
+(Note 8)
+2014
+3,000,001 -3,500,000
+2015
+6,500,001 – 7,000,000
+5,000,001 - 5,500,000
+4,500,001 - 5,000,000
+3,500,001 -4,000,000
+11221-
+5,500,001 -6,000,000
+Amounts due from banks and other
+2015
+- Held-to-maturity investments (Note 21(c))
+The number of the five highest paid individuals whose emoluments fell within the following bands is set out below:
+40
+35
+- Available-for-sale financial assets (Note 21(b))
+57
+257
+financial institutions (Note 16(a), Note 17(c), Note 18(d))
+Investments
+11 Impairment losses
+31,254
+Loans and advances to customers (Note 19(c))
+2014
+2015
+48
+79
+42
+64
+2014
+57,507
+26,053
+2,000,001 -2,500,000
+3,000,000 3,500,000
+3,500,001 - 4,000,000
+4,000,001 -4,500,000
+1,785
+19,629
+23
+20
+6,500,000 7,000,000
+4,500,001 - 5,000,000
+5,000,001 -5,500,000
+1,000,001 - 1,500,000
+1,500,001-2,000,000
+500,001 – 1,000,000
+Nil - 500,000
+RMB
+2014
+2015
+The number of the Directors and Supervisors whose emoluments are within the following bands is set out below:
+Directors' and Supervisors' emoluments (continued)
+8
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+200
+20
+1
+1
+1
+-
+7,069
+16,800
+17,844
+(Note 8)
+2014
+RMB'000
+2015
+RMB'000
+Contributions to defined contribution retirement schemes
+Discretionary bonuses (Note 8(i))
+2,184
+Salaries and other emoluments
+9 Individuals with highest emoluments
+During the year ended 31 December 2015, no emoluments were paid by the Group to any of the persons who are
+directors or supervisors as an inducement to join or upon joining the Group or as compensation for loss of office.
+During the year ended 31 December 2015, there was no arrangement under which a director or a supervisor waived
+or agreed to waive any remuneration.
+27
+25
+1
+2
+1
+2
+Of the five individuals with the highest emoluments for the year ended 31 December 2015, 3 (2014: 3) are Directors
+or Supervisors whose emoluments are included in Note 8 above. The aggregate of the emoluments in respect of the
+five individuals during the year is as follows:
+(9)
+Maximum aggregate amount of relevant loans made
+by the Group outstanding during the year
+Debt securities classified as receivables (Note 21(d))
+343,924
+1,180
+4,640
+45,492
+11,381
+63,484
+10,693
+97,219
+106,729
+416
+137,189
+210,481
+344,980
+2014
+At 31 December
+Charge for the year
+(d) Movements of allowances for impairment losses
+Debtor beneficiary rights
+Asset management schemes
+Trust beneficiary rights
+Bills
+Loans and advances to customers
+Bonds
+(c) Analysed by assets types
+344,980
+343,924
+2015
+2015
+2014
+200
+(14,624)
+2,513,919
+2,824,286
+75,007
+971,327
+89,815
+1,226,701
+1,467,585
+2014
+2015
+1,507,770
+Operation in Mainland China
+Analysed by industry sector and category:
+(i)
+(b) Analysis of loans and advances to customers
+Net loans and advances to customers
+- Collectively assessed
+- Individually assessed
+Less: Impairment allowances
+Gross loans and advances to customers
+Retail loans and advances
+Discounted bills
+Corporate loans and advances
+(a) Loans and advances to customers
+19 Loans and advances to customers
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+208
+207
+200
+36,099
+(9,577)
+3,560
+43,575
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+46
+51
+36
+5
+10
+46
+2014
+2015
+124,085
+185,693
+18 Amounts held under resale agreements
+6,839
+30,226
+48,449
+87,020
+133,415
+2014
+2015
+124,085
+185,693
+(46)
+(51)
+33,808
+72,219
+3,829
+(a) Analysed by nature of counterparties
+2015
+2014
+Between one month and one year (inclusive)
+Over one year
+-
+191,746
+296,789
+- Within one month (inclusive)
+2014
+2015
+344,980
+343,924
+(200)
+344,980
+344,124
+25
+Maturing
+(b) Analysed by residual maturity
+- Banks
+Less: Impairment allowances
+Amounts held under resale agreements outside Mainland
+Banks
+344,955
+344,124
+139,873
+215,321
+205,082
+128,803
+Other financial institutions
+Banks
+Amounts held under resale agreements in Mainland
+117,135
+(70,218)
+(55,588)
+(84,842)
+36,031
+37,168
+29,410
+46,585
+Others
+Micro-finance loans
+Credit cards
+Residential mortgage
+Corporate loans and advances
+Others
+Information technology
+Recreational activities
+14,860
+Manufacturing
+Wholesale and retail
+Property development
+Financial concerns
+2014
+2015
+Operation outside Mainland China
+(i) Analysed by industry sector and category: (continued)
+(b) Analysis of loans and advances to customers (continued)
+19 Loans and advances to customers (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+2,340,361
+Transport and transport equipment
+42,097
+13,876
+7,925
+209
+As at 31 December 2015, over 90% of the Group's loans and advances to customers were conducted in People's Republic of China (unchanged
+pan the positions as at 31 December 2014).
+Note:
+173,558
+170,539
+Gross loans and advances to customers
+14,627
+16,625
+Retail loans and advances
+4,717
+6,397
+1,889
+1,804
+267
+259
+7,754
+8,165
+158,931
+153,914
+22,551
+22,305
+2,221
+2,025
+431
+3,627
+18,265
+13,468
+2,653,747
+Gross loans and advances to customers
+956,700
+1,210,076
+49,343
+80,788
+Leasing and commercial services
+98,350
+96,387
+Construction
+98,514
+109,942
+gas and water
+Production and supply of electric power, heating power,
+140,548
+145,473
+Transportation, storage and postal services
+143,952
+175,912
+Property development
+259,298
+236,513
+Wholesale and retail
+342,005
+318,679
+Manufacturing
+2014
+2015
+2,448,754
+2,739,444
+(65,165)
+Mining
+90,323
+52,178
+Water, environment and public utilities management
+Retail loans and advances
+78,731
+96,828
+Others
+336,924
+308,973
+Micro-finance loans
+219,621
+312,985
+Credit cards
+321,424
+491,290
+Residential mortgage
+75,007
+89,815
+Discounted bills
+1,308,654
+1,353,856
+Corporate loans and advances
+65,045
+76,477
+Others
+20,092
+28,076
+Telecommunications, software and IT services
+30,328
+33,431
+61,179
+_
+113,525
+47,067
+· Net movement in hedging reserve
+Exchange differences
+-
+Cash flow hedge:
+7,415
+(2,440)
+9,855
+4,224
+(1,413)
+5,637
+- Net movement in fair value reserve
+Available-for-sale financial assets:
+amount
+539
+Net-of-tax
+benefit/
+(expense)
+amount
+Before-tax
+Tax
+2014
+2015
+(a) Tax effects relating to each component of other comprehensive income
+13 Other comprehensive income
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Taxation for overseas operations is charged at the applicable rates of tax prevailing in relevant countries.
+(iii)
+Net-of-tax Before-tax Tax benefit/
+amount
+amount (expense)
+(135)
+404
+1,051
+Available-for-sale financial assets:
+2014
+2015
+(b) Movement in the fair value reserve relating to components of other
+comprehensive income
+8,665
+(2,703)
+11,368
+5,605
+(53)
+11
+(1,537)
+7,142
+Other comprehensive income
+(64)
+scheme redesigned through reserve
+Remeasurement of defined benefit
+35
+35
+64
+64
+other comprehensive income
+Equity-accounted investees-share of
+427
+427
+966
+966
+788
+(263)
+The applicable income tax rate in Hong Kong is 16.5% during 2015 (2014: 16.5%).
+Changes in fair value recognised during the period
+(ii)
+(i)
+(7,207)
+22,328
+24,268
+120
+133
+738
+21,470
+23,415
+720
+2014
+2015
+Total
+Deferred taxation
+(4,946)
+Subtotal
+- Hong Kong
+- Mainland China
+Current income tax expense
+(a) Income tax in the consolidated statement of profit or loss represents:
+12 Income tax
+31,681
+59,266
+335
+500
+Others
+4
+947
+- Overseas
+17,061
+17,382
+201
+Notes:
+17,382
+17,061
+Income tax expense
+(136)
+(177)
+Effects of different applicable rates of tax prevailing in other areas
+(1,623)
+(2,365)
+- Effects of non-taxable income
+783
+833
+- Effects of non-deductible expenses
+Tax effects of the following items:
+18,358
+18,770
+73,431
+75,079
+2014
+2015
+Tax at the PRC statutory income tax rate of 25% (2014: 25%)
+Profit before taxation
+(b) A reconciliation of income tax expense in the consolidated statement of profit
+or loss and that calculated at the applicable tax rate is as follows:
+12 Income tax (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+202
+The applicable income tax rate for the Bank's operations in Mainland China is 25% during 2015 (2014: 25%).
+4,645
+7,270
+Reclassification adjustments for amounts transferred to profit or loss:
+- On disposal
+52
+53
+74
+2014
+2015
+55,986
+63,779
+(74)
+(126)
+(3)
+(3)
+(71)
+21
+(123)
+63,905
+18,979
+32,583
+8
+13
+18,971
+32,570
+37,081
+31,322
+422
+36,659
+30,387
+935
+56,060
+126
+74
+205
+57,358
+66,458
+2014
+2015
+As at 31 December
+As at 1 January
+Charge for the year
+(c) Movements of allowances for impairment losses
+- Over one year
+- Between one month and one year (inclusive)
+-
+- Within one month (inclusive)
+Maturing
+(b) Analysed by residual maturity
+Banks
+Less: Impairment allowances
+- Banks
+-
+Placements outside Mainland
+Other financial institutions
+- Banks
+Placements in Mainland
+(a) Analysed by nature of counterparties
+institutions
+17 Placements with banks and other financial
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+206
+2014
+2015
+As at 31 December
+As at 1 January
+Charge for the year
+15 Balances with central bank
+Note: Movements of the share capital are included in Note 40 of the consolidated financial statements.
+equity shareholders of the Bank (in RMB)
+Basic and diluted earnings per share attributable to
+(in million) (note)
+Net profit attributable to equity shareholders of the Bank
+Weighted average number of shares in issue
+The calculation of basic earnings per share for the year 2015 and 2014 is based on the net profit attributable to
+equity shareholders of the Bank and the weighted average number of shares in issue. There is no difference between
+basic and diluted earnings per share as there are no potentially dilutive shares outstanding during the year 2015 and
+2014.
+14 Earnings per share
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+204
+203
+788
+404
+Net movement in the hedging reserve during the period recognised
+in other comprehensive income
+222
+9
+- Realised losses
+566
+395
+Effective portion of changes in fair value of hedging instruments
+Reclassification adjustment for amounts transferred to profit or loss
+Cash flow hedge:
+7,415
+4,224
+Net movement in the fair value reserve during the period recognised
+in other comprehensive income
+145
+(421)
+Statutory deposit reserve (Note (i))
+Surplus deposit reserve (Note (ii))
+Fiscal deposits
+32,965
+Notes:
+2015
+57,696
+(a) Movements of allowances for impairment losses
+- Other financial institutions
+- Banks
+Less: Impairment allowances
+Other financial institutions
+- Banks
+Balances outside Mainland
+Other financial institutions
+Banks
+Balances in Mainland
+16 Balances with banks and other financial institutions
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Surplus deposit reserve maintained with the PBOC and central banks outside the Mainland China are mainly for clearing purposes.
+Statutory deposit reserve funds are deposited with the PBOC and other central banks outside the Mainland China as required and are not
+available for the Group's daily operations. The statutory deposit reserve funds of the Bank are calculated at 15.0% and 5.0% for eligible RMB
+deposits and foreign currency deposits respectively as at 31 December 2015 (2014: 17.5% and 5.0% for eligible RMB deposits and foreign
+currency deposits respectively). Eligible deposits include deposits from government authorities and other organizations, fiscal deposits (other
+than budgets), retail deposits, corporate deposits, and net credit balances of entrusted business.
+(ii)
+639,992
+503,089
+135,145
+1,758
+1,472
+569,961
+464,686
+103,803
+2014
+2015
+2.22
+2.29
+25,220
+25,220
+2014
+55,911
+(i)
+At 1 January
+assessed
+2015
+The fair value of collaterals was estimated by management based on the latest available external valuations adjusted by taking into account
+the current realisation experience as well as market situation.
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+19 Loans and advances to customers (continued)
+(e) Finance leases receivables
+The table below provides an analysis of finance lease receivables for leases of certain property and equipment in
+which the Group is the lessor:
+1,091
+2014
+Total
+minimum
+lease
+receivables
+Unearned
+finance
+income
+Present
+value of
+minimum
+lease
+receivables
+Present
+Total
+minimum
+lease
+receivables
+Unearned
+value of
+minimum
+finance
+lease
+income
+receivables
+individually.
+collectively: that is portfolios of homogeneous loans and advances; or
+Impaired loans and advances include loans and advances for which objective evidence of impairment has been identified and include
+impairment losses are assessed in following ways:
+These loans and advances include those for which no objective evidence of impairment has been identified on individual basis.
+(9,576)
+(65,077)
+(50,855)
+(4,733)
+(9,577)
+(65,165)
+Net loans and advances to
+- Financial institutions
+- Non-financial institution
+customers
+72,096
+72,096
+Within 1 year (inclusive)
+2,363,076
+10,907
+2,376,658
+2,435,172
+2,675
+10,907
+2,448,754
+Notes:
+(i)
+(ii)
+(iii)
+2,675
+(4,733)
+38,512
+34,386
+(169)
+(1,692)
+(92)
+- Collectively assessed
+Net investment in finance
+lease receivables
+103,774
+(1,626)
+95,882
+As at 31 December 2015, the Group's net investments in finance leases, included in "loans and advances" were nil
+(2014: Nil).
+20 Interest receivable
+2015
+2014
+Debt securities
+13,075
+11,668
+Loans and advances to customers
+8,765
+7,691
+Others
+3,094
+- Individually assessed
+Less: Impairment allowances
+97,600
+(12,167)
+35,411
+(4,678)
+30,733
+Over 1 year but within
+5 years (inclusive)
+65,430
+(6,177)
+59,253
+63,895
+(6,773)
+(4,126)
+57,122
+13,044
+(1,048)
+11,996
+10,461
+(716)
+9,745
+116,986
+(11,351)
+105,635
+109,767
+Over 5 years
+(50,768)
+customers
+- Non-financial institution
+(14,624)
+(84,842)
+Net loans and advances to
+- Financial institutions
+85,431
+7
+85,438
+- Non-financial institution
+customers
+2,629,047
+2,714,478
+5,264
+5,264
+19,695
+19,702
+2,654,006
+2,739,444
+211
+212
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+19 Loans and advances to customers (continued)
+(d) Loans and advances to customers and allowances for impairment losses (continued)
+2014
+Impaired loans and advances
+(7,806)
+(62,412)
+(84,528)
+(14,620)
+13,070
+34,315
+2,738,534
+1.73
+8,479
+2,776,890
+13,070
+34,326
+2,824,286
+1.68
+Loans and
+8,486
+Impairment allowances for
+loans and advances to
+- Financial institutions
+(310)
+(4)
+(314)
+- Non-financial institution
+customers
+(62,102)
+(7,806)
+Less:
+collectively
+advances
+for which
+impairment
+losses are
+72,183
+1
+72,184
+0.00
+2,413,844
+7,408
+2,486,027
+7,408
+20,483
+20,484
+2,441,735
+- Non-financial institution
+customers
+1.14
+2,513,919
+1.11
+5,743
+Less:
+Impairment allowances for loans
+and advances to
+- Financial institutions
+(87)
+(1)
+(88)
+5,743
+4,201
+- Financial institutions
+(note (iii))
+for which
+impairment
+losses are
+collectively
+for which
+impairment
+losses are
+individually
+Gross
+impaired
+loans and
+advances as
+a % of gross
+assessed
+Gross loans and advances to
+assessed
+Total
+loans and
+advances
+Fair value of
+collaterals
+held against
+individually
+assessed
+impaired
+loans and
+advances
+(note (i))
+(note (ii))
+(note (ii))
+assessed
+24,934
+23,560
+213
+- Sovereigns
+17,847
+5,651
+- Banks and other financial institutions
+21,784
+18,018
+- Corporates
+19,450
+16,521
+59,081
+40,190
+215
+216
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+21 Investments (continued)
+(b) Available-for-sale financial assets
+Listed
+In Mainland
+- PRC government bonds
+2015
+Issued by:
+2014
+(Restated)
+2015
+7,168
+299
+3,970
+66
+63
+Outside Mainland
+- Bonds issued by commercial banks and other financial institutions
+Other debt securities
+420
+735
+2,536
+1,257
+7,200
+2014
+(Restated)
+6,324
+Outside Mainland
+Bands issued by commercial banks and other financial institutions
+Other debt securities
+(iii) Analysed by issuing authority
+235
+31
+837
+813
+1,072
+844
+8,272
+Unlisted
+94,381
+77,265
+- Bonds issued by PBOC
+1,258
+- Investments in funds
+62
+20
+263,959
+258,967
+Less: Impairment allowances
+(239)
+(169)
+263,720
+1,273
+258,798
+In Mainland
+- Bonds issued by PBOC
+94
+- Bonds issued by policy banks
+302
+- Bonds issued by commercial banks and other financial institutions
+12,602
+3,393
+- Other debt securities
+1,214
+Unlisted
+3,874
+- Equity investments
+8,246
+99
+- Bonds issued by policy banks
+66,726
+90,921
+- Bonds issued by commercial banks and other financial institutions
+37,742
+20,454
+- Other debt securities
+49,238
+61,294
+3,945
+- Equity investments
+- Investments in funds
+20
+243
+Outside Mainland
+- PRC government bonds
+48
+- Bonds issued by commercial banks and other financial institutions
+5,912
+3,468
+Other debt securities
+311
+2,691,149
+304
+- Bonds issued by policy banks
+716,064
+408,752
+1,438,017
+996,217
+Financial assets at fair value through profit or loss
+Financial assets held for trading
+Financial assets designated at fair value through profit or loss
+(i)
+Financial assets held for trading
+Listed
+In Mainland
+Note
+2015
+2014
+(i)
+50,809
+33,022
+(!!)
+8,272
+7,168
+59,081
+21(d)
+Debt securities classified as receivables
+259,434
+353,137
+214
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+21 Investments
+(a)
+Note
+2015
+2014
+Financial assets at fair value through profit or loss
+21(a)
+40,190
+59,081
+Derivative financial assets
+54(f)
+10,176
+9,315
+Available-for-sale financial assets
+21(b)
+299,559
+278,526
+Held-to-maturity investments
+21(c)
+40,190
+2015
+2014
+(Restated)
+- PRC government bonds
+33,010
+Unlisted
+Outside Mainland
+- Investments in funds
+5
+5
+Long position in precious metal contracts
+1,027
+12
+50,809
+49,777
+33,022
+XII Financial Statements
+21 Investments (continued)
+(a) Financial assets at fair value through profit or loss (continued)
+(ii) Financial assets designated at fair value through profit or loss
+Listed
+In Mainland
+2015
+2014
+(Restated)
+PRC government bonds
+China Merchants Bank
+Annual Report 2015
+- Other debt securities
+712
+1,100
+1,580
+17,543
+5,351
+- Bonds issued by policy banks
+9,622
+6,165
+- Bonds issued by commercial banks and other financial institutions
+4,513
+5,358
+- Other debt securities
+13,472
+740
+12,744
+4
+- Investments in funds
+1
+Outside Mainland
+- Bonds issued by commercial banks and other financial institutions
+-
+Other debt securities
+- Equity investments
+1,347
+2,535
+- Equity investments
+2,376
+- Non-financial institution
+customers
+0.01
+- Bonds issued by commercial banks and other financial institutions
+Outside Mainland
+376
+- Other debt securities
+In Mainland
+Unlisted
+256,074
+352,615
+16
+(71)
+Less: Impairment allowances
+256,145
+352,710
+803
+729
+Other debt securities
+-
+588
+(95)
+-
+• Other debt securities
+130
+180,402
+113,350
+171,115
+2014
+2015
+259,434
+353,137
+3,360
+522
+Fair value of listed debt securities
+- Corporates
+- Banks and other financial institutions
+-
+- Sovereigns
+Issued by:
+Less: Impairment allowances
+3,360
+522
+3,360
+1,542
+- Bonds issued by commercial banks and other financial institutions
+491
+488
+217
+611
+667
+11
+23
+(14)
+(2)
+At 31 December
+Exchange difference
+Write-offs
+(3)
+43
+35
+574
+611
+Releases for the year
+Charge for the year
+At 1 January
+2014
+7
+142,583
+China Merchants Bank
+Annual Report 2015
+21 Investments (continued)
+PRC government bonds
+-
+Outside Mainland
+2,816
+865
+8,822
+12,656
+- Bonds issued by commercial banks and other financial institutions
+- Other debt securities
+133,197
+165,890
+Bonds issued by policy banks
+109,428
+170,540
+- PRC government bonds
+2014
+(Restated)
+2015
+In Mainland
+Listed
+(c) Held-to-maturity investments
+XII Financial Statements
+1,620
+3,501
+353,137
+Charge for the year
+At 1 January
+Movements of allowances for impairment losses
+- Corporates
+Banks and other financial institutions
+-
+- Sovereigns
+Issued by:
+408,752
+(68)
+408,820
+717,081
+(1,017)
+716,064
+Less: Impairment allowances
+62
+65
+Bonds issued by commercial banks and other financial institutions
+Outside Mainland
+85,901
+313,473
+Exchange difference
+- Fund asset management schemes and others
+At 31 December
+2014
+219
+68
+1
+4
+63
+1,017
+2
+947
+68
+2014
+2015
+408,752
+716,064
+21,335
+20,389
+386,823
+694,928
+594
+747
+2015
+2015
+111,393
+- Broker asset management schemes
+71
+95
+2
+4
+(9)
+20
+78
+71
+2014
+2015
+At 31 December
+Release for the year
+Exchange difference
+Charge for the year
+At 1 January
+Movements of allowances for impairment losses
+For the year ended 31 December 2015, the Group did not dispose debt securities classified as held-to-maturity prior
+to their maturity (2014: Nil).
+261,326
+372,158
+259,434
+China Merchants Bank
+245,053
+XII Financial Statements
+21 Investments (continued)
+112,038
+78,067
+- Trust beneficiary rights
+56,330
+48,198
+- Insurance asset management schemes
+21,335
+20,389
+21,167
+11,089
+- Bonds issued by commercial banks and other financial institutions
+Other debt securities
+594
+747
+- PRC government bonds
+2014
+2015
+In Mainland
+Unlisted
+(d) Debt securities classified as receivables
+Annual Report 2015
+Movements of allowances for impairment losses
+218
+299,559
+32,895
+Release for the year (Note 11)
+(22)
+(1)
+(1,618)
+(1,641)
+Write-offs
+(4,456)
+(10,461)
+(14,917)
+Unwinding of discount
+(1)
+(654)
+(655)
+Recoveries of loans and advances
+previously written off
+231
+420
+651
+14,876
+Exchange difference
+5,732
+Charge for the year (Note 11)
+7,806
+14,624
+84,842
+2014
+Impairment
+allowances
+for loans and
+Impairment allowances for
+impaired loans and advances
+advances
+which are
+collectively
+Which are
+collectively
+Which are
+individually
+assessed
+835
+assessed
+Total
+At 1 January
+38,534
+3,228
+7,002
+48,764
+278,526
+62,412
+56
+68
+losses are
+individually
+a % of gross
+loans and
+assessed
+assessed
+assessed
+Total
+advances
+Gross
+impaired
+loans and
+advances as
+Fair value of
+collaterals
+held against
+individually
+assessed
+impaired
+loans and
+advances
+(note (i))
+(note (ii))
+(note (ii))
+(note (iii))
+85,741
+11
+85,752
+impairment
+12
+for which
+impairment
+losses are
+At 31 December
+50,855
+4,733
+9,577
+65,165
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+19 Loans and advances to customers (continued)
+(d) Loans and advances to customers and allowances for impairment losses
+Gross loans and advances to
+-
+- Financial institutions
+2015
+Loans and
+advances
+for which
+impairment
+losses are
+collectively
+Impaired loans and advances
+for which
+collectively
+226
+12,287
+176
+20,170
+36,267
+25
+207
+- Investments in funds
+122
+231
+- Equity investments
+6,213
+8,030
+- Other debt securities
+6,875
+9,979
+- Bonds issued by commercial banks and other financial institutions
+2,096
+Bonds issued by policy banks
+Outside Mainland
+29
+723
+Less: Impairment allowances
+- Investments in funds
+50
+35,839
+69,269
+60,902
+125,911
+135,896
+83,346
+102,761
+Corporates
+Banks and other financial institutions
+- Sovereigns
+Issued by:
+2014
+2015
+(b) Available-for-sale financial assets (continued)
+21 Investments (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+278,526
+299,559
+19,728
+(442)
+210
+(428)
+XII Financial Statements
+(813)
+(1)
+(1,165)
+(1,979)
+Write-offs
+(9,154)
+(29,229)
+(38,383)
+Unwinding of discount
+Recoveries of loans and advances
+previously written off
+(1,137)
+(1,137)
+625
+839
+1,464
+Exchange difference
+At 31 December
+China Merchants Bank
+Annual Report 2015
+Release for the year (Note 11)
+59,486
+- Equity investments
+11,603
+35,689
+(c) Movements of allowances for impairment losses
+Impairment
+allowances
+for loans and
+advances
+which are
+collectively
+2015
+Impairment allowances for
+impaired loans and advances
+Which are
+collectively
+Which are
+individually
+assessed
+19 Loans and advances to customers (continued)
+assessed
+Total
+At 1 January
+50,855
+4,733
+9,577
+65,165
+Charge for the year (Note 11)
+12,194
+assessed
+Financial liabilities designated at
+Volatility
+Binomial lattice Model
+Risk-adjusted discount rate
+instruments
+Unlisted derivative financial
+Discounted cash flow
+4
+fair value through profit or loss
+- Certificates of deposit issued
+China Merchants Bank
+Annual Report 2015
+Discounted cash flow
+Risk-adjusted discount rate
+XII Financial Statements
+21 Investments (continued)
+(f) Financial instruments at fair value (continued)
+(iii) Valuation techniques used and the qualitative and quantitative information of key parameters for
+recurring fair value measurements categorised within Level 3 (continued)
+(1) Valuation of financial instruments with significant unobservable inputs
+138
+The following table shows a reconciliation from the beginning balances to the ending balances for fair value
+measurements in Level 3 of the fair value hierarchy:
+2,302
+fund investments
+equity investments
+Discounted cash flow
+Basis of determining the market price for recurring fair value measurements categorised within Level 1
+Bloomberg's quoted prices are used for financial instruments with quoted prices in an active market.
+Fair value of RMB denominated bonds whose value is available on China bond pricing system on the valuation date
+is measured using the latest valuation results published by China bond pricing system.
+Fair value of foreign currency bonds without quoted prices in an active market, is measured by using the
+comprehensive valuations issued by Bloomberg.
+Fair value of foreign exchange forwards contracts in derivative financial assets is measured by discounting the
+differences between the contract prices and market prices of the foreign exchange forwards contracts. The discount
+rates used are the applicable RMB denominated swap yield curve as at the end of the reporting period.
+Fair value of foreign exchange options is measured using the Black-Scholes model, applying applicable foreign
+exchange spot rates, foreign exchange yield curves and exchange rate volatilities. The above market data used are
+quoted price in an active market, provided by Bloomberg, Reuters and other market information providers.
+Fair value of interest rate swaps in derivative financial assets is measured by discounting the expected receivable or
+payable amounts under the assumption that these swaps had been terminated at the end of reporting date. The
+discount rates used are the related RMB denominated swap yield curve as at the end of reporting period.
+(iii) Valuation techniques used and the qualitative and quantitative information of key parameters for
+recurring fair value measurements categorised within Level 3
+Quantitative information of Level 3 fair value measurement is as blow:
+Fair value as at
+31 December 2015
+Unlisted available-for-sale
+Unlisted available-for-sale
+equity investments
+Unlisted available-for-sale
+346
+Valuation techniques
+Market comparison
+approach
+Unobservable input
+Liquidity discount
+758
+Risk-adjusted discount rate
+Valuation techniques used and the qualitative and quantitative information of key parameters for
+recurring fair value measurement categorised within Level 2
+9,315
+Assets
+21 Investments (continued)
+(f) Financial instruments at fair value (continued)
+Assets
+Level 1
+Level 2
+2014
+Level 3
+Total
+Financial assets held for trading
+- Debt securities
+3,988
+28,310
+- Equity investments
+712
+Annual Report 2015
+-
+12
+4,700
+28,322
+32,298
+712
+12
+33,022
+Financial assets designated at fair value
+through profit or loss
+- Debt securities
+1,454
+5,589
+Derivative financial assets
+9,300
+125
+15
+- Long position in precious metal contracts
+(ii)
+XII Financial Statements
+27,802
+- Debt securities issued
+Others
+Derivative financial liabilities
+3,330
+18
+18
+∞
+3,330
+3,330
+18
+3,348
+| | | |
+2,087
+2,087
+China Merchants Bank
+1,683
+3,985
+8,455
+8,455
+2,352
+2,352
+14,577
+2,302
+16,879
+-
+7,575
+7,575
+18
+25,482
+2,302
+2,302
+(i)
+(f) Financial instruments at fair value (continued)
+21 Investments (continued)
+30
+30
+- Short position in equity securities
+977
+- Precious metal relevant financial liabilities
+Financial liabilities held for trading
+Liabilities
+328,031
+893
+292,668
+34,470
+278,526
+753
+249,457
+977
+28,316
+25
+29
+263
+- Investments in funds
+276,094
+2,115
+728
+71
+1,316
+- Equity investments
+249,357
+26,737
+Debt securities
+-
+Available-for-sale financial assets
+317
+Financial liabilities designated at fair value
+through profit or loss
+-
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+224
+223
+During the year there were no significant transfers of financial instruments between Level 1 and Level 2 of the fair
+value hierarchy.
+23,615
+2,610
+20,975
+30
+10,246
+10,246
+Derivative financial liabilities
+12,362
+2,610
+9,752
+2,214
+2,214
+Precious metal contracts with other banks
+977
+30
+1,007
+- Certificates of deposit issued
+- Debt securities issued
+Others
+- Certificates of deposit issued
+| | | |
+2,029
+410
+2,610
+3,020
+5,099
+5,099
+2,029
+7,168
+- Precious metal contracts with other banks
+Financial liabilities designated at fair value
+- Precious metal contracts with other banks
+Others
+Outside Mainland
+- Certificates of deposit issued
+- Debt securities issued
+2,087
+2,029
+2,352
+2,214
+3,985
+3,020
+8,455
+5,099
+16,879
+12,362
+In Mainland
+As at the end of reporting period, the difference between the fair value of the Group's financial liabilities designated
+at fair value through profit or loss and the contractual payables at maturity is not material. The amounts of changes
+in the fair value of these financial liabilities that are attributable to changes in credit risk are considered not
+significant during the year presented and cumulatively as at 31 December 2015 and 2014.
+XII Financial Statements
+21 Investments (continued)
+(f) Financial instruments at fair value
+A number of the Group's accounting policies and disclosures require the measurement of fair values, for both
+financial and non-financial assets and liabilities.
+The Group has established a control framework to govern the measurement of fair values. This includes a valuation
+team that has responsibility for overseeing all significant fair value measurements including three levels of fair values,
+and reports directly to the person in charge of accounting affairs.
+The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party
+information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team
+assesses the evidence obtained from the third parties to support the conclusion that such valuation meets the
+requirements of IFRSS, including the level in the fair value hierarchy in which such valuation should be classified.
+Significant valuation issues are reported to the Audit Committee of the Board.
+When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible.
+Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation
+techniques as follows.
+The following table presents the fair value information and the fair value hierarchy, at the end of the current
+reporting period, of the Group's assets and liabilities which are measured at fair value at each balance sheet date
+on a recurring basis. The level in which fair value measurement is categorised is determined by the level of the fair
+value hierarchy of the lowest input that is significant to the entire fair value measurement. The levels are defined as
+follows:
+•
+Level 1 inputs: unadjusted quoted prices in active markets that are observable at the measurement date for
+identical assets or liabilities;
+Level 2 inputs: other than quoted prices included in level 1 inputs that are either directly or indirectly
+observable for underlying assets or liabilities inputs;
+Level 3 inputs: inputs that are unobservable for assets or liabilities.
+The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period in
+which they occur.
+The Group's assets and liabilities measured at fair value are measured on a recurring basis. The Group does not have
+assets nor liabilities measured at fair value on a non-recurring basis.
+China Merchants Bank
+Annual Report 2015
+221
+2014
+(ii) Financial liabilities designated at fair value through profit or loss
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+21 Investments (continued)
+(e) Financial liabilities at fair value through profit or loss
+Note
+2015
+2014
+Financial liabilities held for trading
+(i)
+3,348
+1,007
+Financial liabilities designated at fair value
+through profit or loss
+(ii)
+16,879
+2015
+12,362
+13,369
+(i)
+Financial liabilities held for trading
+Listed
+2015
+2014
+- Equity securities at fair value
+Precious metal relevant financial liabilities
+18
+30
+3,330
+977
+3,348
+1,007
+20,227
+222
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+10,172
+4
+10,176
+Available-for-sale financial assets
+Debt securities
+- Equity investments
+- Investments in funds
+33,538
+262,205
+295,743
+1,638
+80
+66
+790
+-
+1,104
+138
+994
+35,242
+263,075
+1,242
+299,559
+45,484
+322,086
+1,246
+368,816
+Liabilities
+Financial liabilities held for trading
+- Precious metal relevant financial liabilities
+-
+- Short position in equity securities
+2,822
+Derivative financial assets
+8,272
+4,803
+21 Investments (continued)
+(f) Financial instruments at fair value (continued)
+The table below analyses financial instruments, measured at fair value at the end of the reporting period, by the
+level in the fair value hierarchy:
+Assets
+Financial assets held for trading
+2015
+Level 1
+Level 2
+Level 3
+Total
+_
+- Debt securities
+6,028
+- Long position in precious metal contracts
+43,004
+1,027
+49,032
+1,027
+- Equity investments
+3,469
+- Debt securities
+through profit or loss
+Financial assets designated at fair value
+50,809
+44,036
+through profit or loss
+6,773
+5
+1
+744
+--
+744
+- Investments in funds
+6
+At 1 January 2015
+Share of net assets
+Derivative
+220
+Unlisted shares, at cost
+2014
+2015
+23 Interest in joint ventures
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Loans to joint ventures
+In 2012, the Bank acquired 21.6% equity interests in China Merchants Fund Management Co., Ltd ("CMFM"), its former associate, from ING
+Asset Management B.V. at a consideration of EUR63,567,567.57. Following the settlement of the above consideration in cash, the Bank's
+shareholdings in CMFM increased from 33.4% to 55.0% in 2013. As a result, the Bank obtained the control over CMFM, which became the
+Bank's subsidiary on 28 November 2013.
+CMB Financial Leasing Company Limited ("CMBFLC") is a wholly-owned subsidiary of the Bank approved by the CBRC through its Yin Jian Fu
+[2008] No. 110 and commenced its operation in April 2008. In 2014, the Bank made an additional capital contribution of RMB2,000 million in
+CMBFLC. The capital of CMBFLC increased to RMB6,000 million and the Bank's shareholding percentage remains unchanged.
+The Board of Directors have considered and passed "The Resolution regarding the Capital Increase and Restructuring of CMBICHC" on 28
+July 2015 which agreed that the Bank made capital contribution of USD400 million (or its equivalent) to its primary subsidiary, CMBICHC. The
+capital contribution didn't complete until 31 December 2015, and completed on 20 January 2016.
+CMB International Capital Holdings Corporation Limited ("CMBICHC"), formerly known as Jiangnan Finance Company Limited and CMB
+International Capital Corporation Limited, is the Bank's wholly-owned subsidiary approved by the PBOC through its Yin Fu [1998] No. 405.
+In 2014, the Bank made an additional capital contribution of HKD750 million in CMBICHC. The capital of CMBICHC increased to HKD1,000
+million, and the Bank's shareholding percentage remains unchanged.
+(iv)
+(iii)
+(ii)
+(i)
+Wing Lung Bank Limited ("WLB") is a wholly owned subsidiary of the Bank acquired in 2008 by way of agreement. The acquisition was
+completed on 15 January 2009. WLB had withdrawn from listing on the HKEX as of 16 January 2009.
+Notes:
+Share of profits for the year
+2,727
+Particulars of
+Place of
+incorporation
+and operation
+structure
+Name of joint ventures
+business
+Form of
+Details of the Group's interest in major joint ventures are as follows:
+Share of other comprehensive income for the year
+35
+156
+134
+1,465
+2,732
+7
+5
+1,458
+64
+Group's
+Li Hao
+management
+Holdings Corporation
+Tian Huiyu
+Limited
+100% Financial
+HKD1,000
+Hong Kong
+CMB International Capital
+Limited (note (i))
+Legal
+representative
+held by Principal
+the Bank activities
+paid up capital
+(in millions)
+the issued and
+% of
+ownership
+Particulars of
+Place of
+incorporation
+and operation
+Name of company
+Economic
+nature
+Limited
+company
+advisory
+services
+CMB Finance Lease Company
+Limited (note (ii))
+55% Asset
+RMB210
+Shenzhen
+China Merchants Fund
+Management Co., Ltd (note (iv))
+Tian Huiyu
+Limited
+company
+100% Banking
+company
+HKD1,161
+Wing Lung Bank Limited
+(note (iii))
+company
+Lian Bolin
+Limited
+100% Finance lease
+RMB6,000
+Shanghai
+Hong Kong
+The following list contains only particulars of subsidiaries which principally affected the results, assets or liabilities of
+the Group. Unless otherwise stated, the class of all shares held is ordinary. All of these companies are subsidiaries as
+defined under Note 2(d) and have been included in the scope of the consolidated financial statements of the Group.
+issued and
+Principal
+Shenzhen Lianzhao Information
+Technology Co., Ltd.
+enterprise
+Investment
+5.16%
+RMB484,160
+Shenzhen
+Partnership
+Merchants Union Consumer
+Shenzhen Synergetic Hesheng
+Merge& Acquisition Fund
+51.00%
+RMB10,000
+Shenzhen
+Limited company
+Shenzhen Zhaoyin Synergetic
+Fund Management Co.,Ltd.
+Electronic document
+processing
+50.00%
+Fund management
+HKD6,000
+Finance Company Limited
+(note (iv))
+Shenzhen
+229
+services
+and advisory
+exchange platform
+Financial assets
+49.00%
+RMB100,000
+Limited company
+Limited company Shenzhen
+Consumer finance
+50.00%
+RMB2,000,000
+Limited company Shenzhen
+Computer network
+service
+50.00%
+RMB40,000
+CMB Qianhai Financial Assets
+Exchange Co., Ltd.
+effective
+Hong Kong
+i-Tech Solutions Limited
+administration and
+Provision of trustee,
+13.33%
+HKD150,000
+Hong Kong
+Limited company
+Bank Consortium Holding
+Limited (note (ii))
+custodian services
+for retirement
+schemes
+business
+50.00%
+activity
+interest
+paid up capital
+(in thousands)
+RMB1,450,000
+Shenzhen
+Limited company
+CIGNA &CMB Life Insurance
+Company Limited (note(i))
+Life insurance
+Limited company
+Joint Electronic Teller Services
+Limited (note (iii))
+Hong Kong
+Reinsurance business
+21.00%
+HKD200,000
+Hong Kong
+Limited company
+BC Reinsurance Limited
+Life insurance
+business
+Limited company
+16.67%
+Hong Kong
+Limited company
+Hong Kong Life Insurance
+Limited
+network services
+Provision of ATM
+2.88%
+HKD10,024
+HKD420,000
+22 Investments in subsidiaries
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Assets
+(1) Valuation of financial instruments with significant unobservable inputs (continued)
+(iii) Valuation techniques used and the qualitative and quantitative information of key parameters for
+recurring fair value measurements categorised within Level 3 (continued)
+(f) Financial instruments at fair value (continued)
+21 Investments (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Derivative
+financial
+226
+121
+2,302
+(430)
+Total unrealised gains and losses included in the consolidated statement
+of profit or loss for liabilities held at the end of the reporting period
+At 31 December 2015
+Disposals and settlement on maturity
+Issues
+225
+In profit or loss
+Financial assets
+designated
+at fair value
+through
+profit or
+loss-debt
+(4)
+- In other comprehensive income
+(36)
+(36)
+- In profit or loss
+858
+702
+Available-
+125
+Profit or loss
+At 1 January 2014
+Total
+assets
+securities
+assets
+for-sale
+financial
+31
+(4)
+Financial liabilities
+designated at fair
+value through profit
+or loss-certificates
+of deposit issued
+2,610
+122
+20
+- In profit or loss
+893
+753
+Total
+assets
+for-sale
+financial
+Available-
+- In other comprehensive income
+Purchases
+(3)
+15
+securities
+assets
+loss-debt
+financial
+assets
+designated
+at fair value
+through
+profit or
+Financial
+125
+17
+Disposals and settlement on maturity
+At 31 December 2015
+20
+(3)
+At 1 January 2015
+Liabilities
+included in the consolidated
+statement of profit or loss for
+assets held at the end of the
+reporting period
+Total unrealised gains and losses
+1,246
+1,242
+34
+(255)
+(125)
+(8)
+570
+570
+21
+21
+17
+(122)
+Purchases
+91
+91
+(230)
+230
+(13)
+(111)
+13
+111
+(Unfavourable)
+2014
+comprehensive income
+Favourable
+2015
+(4)
+(3)
+- Certificates of deposit issued
+Financial liabilities designated at fair value through profit or loss
+- Investments in funds
+– Equity investments
+Effect on profit or loss or other
+Available-for-sale financial assets
+Effect on profit or loss or other
+comprehensive income
+(Unfavourable)
+228
+227
+During the year ended 31 December 2015, the Group has not changed the valuation technique of the above
+financial assets which are measured at fair value on an on-going basis.
+Changes in valuation technique and the reasons for making the changes
+During the year ended 31 December 2015, there were no transfers between levels for financial instruments
+which are measured at fair value on an on-going basis. The group recognises the transfers between levels at
+the end of the reporting period during which the changes have occurred.
+Transfers between levels for financial instruments which are measured at fair value on an on-going
+basis, the reasons for these transfers and the policy for determining when transfers between levels
+are deemed
+(261)
+Favourable
+261
+2
+(73)
+73
+(1)
+(13)
+1
+13
+(2)
+Derivative financial assets
+- Debt securities
+Financial assets designated at fair value through profit or loss
+or loss-certificates
+of deposit issued
+Financial liabilities
+designated at fair
+value through profit
+At 1 January 2014
+Liabilities
+assets held at the end of the
+reporting period
+statement of profit or loss for
+included in the consolidated
+5,296
+Total unrealised gains and losses
+753
+125
+15
+At 31 December 2014
+(16)
+(16)
+Disposals and settlement on maturity
+893
+In profit or loss
+Issues
+Disposals and settlement on maturity
+Financial liabilities designated at fair value through profit or loss
+· Certificates of deposit issued
+Investments in funds
+- Equity investments
+Available-for-sale financial assets
+(2) The sensitivity of the fair value measurement on changes in unobservable inputs for Level 3 financial
+instruments measured at fair value on an on-going basis (continued)
+(iii) Valuation techniques used and the qualitative and quantitative information of key parameters for
+recurring fair value measurements categorised within Level 3 (continued)
+(f) Financial instruments at fair value (continued)
+21 Investments (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+39
+2,610
+1,056
+(3,787)
+45
+of profit or loss for liabilities held at the end of the reporting period
+Total unrealised gains and losses included in the consolidated statement
+At 31 December 2014
+Profit or loss
+239
+66,988
+Motor
+819
+2,692
+2,598
+343
+Additions
+40,235
+5,533
+1,408
+6,185
+5,989
+4,241
+16,879
+1,021
+At 1 January 2014
+Total
+and others
+and vessels
+equipment improvements
+in progress
+vehicles
+Aircrafts
+Leasehold
+Computer
+Construction
+Land and
+buildings
+27,445
+Cost:
+7,473
+Reclassification and transfers
+(18)
+43,981
+5,985
+1,872
+4,914
+7,238
+6,806
+17,166
+At 31 December 2014
+143
+33
+6
+29
+1
+74
+Exchange difference
+(4,308)
+(548)
+(2,125)
+(1,490)
+(33)
+(112)
+Disposals/write-offs
+438
+(54)
+464
+29
+18
+1,886
+1,645
+2,598
+2,291
+Disposals/write-offs
+(39)
+1
+(1)
+1
+(40)
+Reclassification and transfers
+3,959
+836
+220
+720
+1,081
+1,102
+Depreciation
+16,536
+4,099
+227
+2,316
+4,947
+4,947
+At 1 January 2015
+Accumulated depreciation:
+51,651
+6,279
+5,752
+5,608
+8,254
+(15)
+Accumulated depreciation:
+(130)
+(448)
+6,806
+12,219
+At 1 January 2015
+31,835
+1,788
+5,255
+2,652
+2,360
+4,134
+15,646
+At 31 December 2015
+Net book value:
+19,816
+4,491
+497
+2,956
+5,894
+5,978
+At 31 December 2015
+36
+3
+50
+4
+(5)
+(16)
+Exchange difference
+(676)
+(83)
+At 1 January 2014
+4,106
+Depreciation
+234
+233
+As at 31 December 2015, the Group has no significant unused property and equipment (2014: nil).
+(d)
+As at 31 December 2015, the process of obtaining the registration license for the Group's properties with an
+aggregate net carrying value of RMB270 million (2014: RMB560 million) was still in progress.
+(c)
+As at 31 December 2015, the Board of Directors considered that there is no impairment loss on property and
+equipment (2014: nil).
+(b)
+12,219
+15,646
+19
+18
+Freehold
+Held overseas
+1,994
+1,854
+925
+855
+1,069
+999
+10,206
+13,774
+9,832
+374
+335
+13,439
+2014
+2015
+China Merchants Bank
+Annual Report 2015
+- Long-term leases (over 50 years)
+Medium-term leases (10-50 years)
+XII Financial Statements
+Cost:
+119
+127
+678
+793
+2,477
+2,694
+30
+77
+68
+2,379
+2,477
+140
+2014
+2015
+(b)
+Analysed by remaining terms of leases
+(a)
+At 1 January
+Net book value:
+At 31 December
+At 31 December
+Exchange difference
+Transfers
+Depreciation
+At 1 January
+Accumulated depreciation:
+At 31 December
+Exchange difference
+At 1 January
+Transfers
+26 Investment properties
+4,134
+Held in Hong Kong
+Held in Mainland China
+(468)
+(2,108)
+(402)
+(1)
+(23)
+29
+(12)
+3,416
+774
+74
+716
+1,016
+16,036
+3,790
+153
+3,670
+4,317
+4,947
+At 31 December 2014
+33
+Exchange difference
+||||
+(33)
+Disposals/write-offs
+5
+Reclassification and transfers
+836
+(3,011)
+- Long-term leases (over 50 years)
+Medium-term leases (10 - 50 years)
+28
+26
+The net book value of land and buildings at the end of the reporting period is analysed by the remaining terms of
+the leases as follows:
+(a) Analysed by remaining terms of leases
+25 Property and equipment (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+24,199
+1,743
+1,255
+2,515
+1,672
+4,241
+12,773
+At 1 January 2014
+27,445
+1,886
+1,645
+2,598
+2,291
+6,806
+12,219
+At 31 December 2014
+Net book value:
+16,536
+4,099
+227
+2,316
+96
+9
+21,624
+At 31 December 2015
+272
+2,105
+2015
+100 per cent
+Income tax
+and
+amortisation
+equivalents
+income
+income
+or loss
+Equity Revenue
+Liabilities
+Assets
+and cash
+Profit comprehensive comprehensive
+Cash Depreciation
+Total
+Other
+MUCFC:
+(ii)
+34
+10
+68
+220
+228
+144
+34
+110
+2,597
+Group's effective interest
+1,204
+1,053
+1,915
+2014
+408
+65
+37
+28
+209
+199
+Group's effective interest
+100 per cent
+2015
+income
+comprehensive
+comprehensive
+income
+Profit or loss
+Total
+Other
+Summarised financial information of the joint ventures that are not individually material to the Group (others):
+1
+40
+(42)
+2
+80
+(84)
+(42)
+66
+958
+(84)
+131
+190
+95
+100 per cent
+6,020
+Group's effective interest
+2015
+Income tax
+amortisation
+equivalents
+and
+Cash Depreciation
+and cash
+Total
+comprehensive
+income
+comprehensive
+income
+Profit
+or loss
+Assets Liabilities Equity Revenue
+Other
+CIGNA & CMB Life Insurance Company Limited:
+(i)
+Summarised financial information of the joint ventures which are individually material to the Group is as below:
+The Bank's subsidiary, WLB, and China United Network Communications Limited ("CUNC"), which is a subsidiary of China Unicom Limited,
+jointly set up Merchants Union Consumer Finance Company Limited ("MUCFC"). CBRC has approved the operation of MUCFC on 3 March
+2015. WLB and CUNC hold 50.00% equity interests of MUCFC and share the risks, profits and losses based on the above proportion of their
+shareholdings.
+The Bank's subsidiary, WLB, is one of the five founders of the entity and jointly controls the entity. WLB holds 20.00% of the entity's common
+share and is entitled to 2.88% of the paid dividends.
+The Bank's subsidiary, WLB, holds 14.29% of the entity's common share and is entitled to 13.33% of the paid dividends.
+The Group holds 50.00% equity interests of CIGNA & CMB Life Insurance Company Limited ("CIGNA & CMB Life"), and Life Insurance
+Company of North America ("INA") holds 50.00% equity interests of CIGNA & CMB Life. CIGNA & CMB Life is the only joint venture on the
+Bank's level. The Bank and INA share the joint venture's profits, risks and losses based on the above proportion of their shareholdings. The
+Bank's investment in CIGNA & CMB Life shall be accounted as an investment in a joint venture.
+(iv)
+(iii)
+(ii)
+(i)
+Notes:
+23 Interest in joint ventures (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+230
+100 per cent
+7,224
+18,164
+2,756 8,062
+456
+288
+69
+219
+5,194
+12,039 2,409
+14,448
+100 per cent
+2014
+42
+11
+85
+23
+885
+185
+176
+27
+149
+4,031
+1,378
+7,704
+9,082
+Group's effective interest
+370
+351
+54
+297
+15,408
+41
+206
+30
+7,238
+6,806
+17,166
+At 1 January 2015
+Cost:
+Total
+and others
+and vessels
+equipment improvements
+vehicles
+Aircrafts
+Leasehold
+Motor
+in progress
+Computer
+Construction
+Land and
+buildings
+25 Property and equipment
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+232
+7 2
+2
+7
+51
+2
+7 -
+4,914
+5
+1,872
+43,981
+5
+115
+11
+4
+137
+Exchange difference
+(857)
+(452)
+(108)
+(259)
+(38)
+Disposals/write-offs
+(114)
+8
+30
+1
+(4,444)
+4,291
+Reclassification and transfers
+8,369
+733
+3,765
+761
+1,270
+1,772
+68
+Additions
+5,985
+Group's effective interest
+income
+Profit or loss
+Limited company
+Professional Liability Underwriting
+Services Limited
+Place of
+incorporation
+and operation
+Form of business
+structure
+Name of associate
+The following list contains the information as of 31 December 2015 of associates, which are unlisted corporate
+entities and principally affected the results or assets of the Group:
+2
+2
+19
+54
+2
+2
+17
+52
+2014
+2015
+231
+Share of profits for the year
+Goodwill
+Share of net assets
+24 Interest in associates
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+31
+212
+69
+1
+Hong Kong
+income
+Particulars of
+issued and
+paid up capital
+(in thousands)
+HKD3,000
+effective
+interest
+comprehensive
+comprehensive
+Total
+Other
+Group's effective interest
+100 per cent
+2014
+Group's effective interest
+100 per cent
+2015
+Summarised financial information of the associates that are not individually material to the Group:
+Investment Center
+Investment
+49.00%
+HKD86,500
+Limited partnership Shanghai
+Shanghai Rosefinch Jiawu
+Fund Management
+25.00%
+RMB30,000
+Beijing
+Limited company
+Beijing Zhongguancun Gazelle
+Investment Fund Management
+Limited
+underwriting
+Insurance
+27.00%
+Principal activity
+Group's
+(14)
+4,947
+10
+4,946
+25
+(299)
+5,174
+7,294
+(223)
+1,621
+1,887
+4,009
+Exchange difference
+comprehensive income
+Recognised in other
+Recognised in profit or loss
+At 1 January 2014
+Total
+Others
+payable
+welfare
+Salary and
+Investment
+revaluation
+reserve
+other assets
+on loans and
+advances to
+customers and
+allowances
+Impairment
+15,153
+(1,124)
+2,418
+(2,440)
+(1,966)
+(263)
+1
+463
+Guarantee deposits
+455
+691
+Repossessed assets (Note (a))
+913
+1,091
+Prepaid lease payments
+3,883
+4,919
+Amounts pending for settlement
+2014
+2015
+(a)
+30 Other assets
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+238
+237
+9,520
+(433)
+1,322
+(553)
+9,184
+At 31 December 2014
+(17)
+(18)
+(2,703)
+926
+15,825
+(40)
+(802)
+(5,022)
+(848)
+(5,304)
+Others
+(3)
+(13)
+(61)
+(252)
+Investment revaluation reserve
+34
+212
+42
+249
+advances to customers and other assets
+Impairment allowances on loans and
+Deferred tax liabilities
+10,291
+41,246
+16,020
+64,185
+Total
+369
+1,512
+(276)
+(1,087)
+Others
+Total
+(37)
+(5,307)
+(4,823)
+3
+(1,537)
+(124)
+(1,413)
+7,207
+(527)
+1,096
+6,638
+9,520
+(433)
+1,322
+(553)
+9,184
+Total
+Others
+payable
+Salary and
+welfare
+Investment
+revaluation
+reserve
+Impairment
+allowances
+on loans and
+advances to
+customers and
+other assets
+At 31 December 2015
+Exchange difference
+comprehensive Income
+Recognised in other
+Recognised in profit or loss
+At 1 January 2015
+(b) Movements of deferred tax
+(771)
+(867)
+1,322
+Recoverable from reinsurers
+225
+173,439
+2014
+2015
+Securities
+(b) Analysed by assets type
+Banks
+Outside Mainland
+Other financial institutions
+- Banks
+In Mainland
+(a) Analysed by nature of counterparties
+33 Amounts sold under repurchase agreements
+94,603
+178,771
+16,686
+12,200
+77,917
+166,571
+1,100
+77,917
+165,471
+2014
+2015
+- Banks
+Outside Mainland
+- Other financial institutions
+- Banks
+56,279
+In Mainland
+9,060
+182,499
+185,652
+913
+Loans and advances
+30,908
+102,330
+Discounted bills
+35,167
+83,322
+1,588
+1,159
+Other debt securities
+3,823
+1,994
+- Bonds issued by commercial banks and other financial institutions
+16,428
+67,336
+- Bonds issued by policy banks
+13,328
+12,833
+PRC government bonds
+2014
+2015
+66,988
+185,652
+5,283
+3,153
+61,705
+5,426
+229
+institutions
+XII Financial Statements
+628
+746
+1,044
+2014
+2015
+Notes:
+Net repossessed assets
+Less: Impairment allowances
+Total
+Others
+Residential properties
+Repossessed assets
+Total
+14,091
+12,848
+7,159
+5,141
+Others
+70
+27
+Defined benefit plan (Note 37(b))
+135
+129
+Premium receivables
+325
+158
+Prepayment for lease improvement and other miscellaneous items
+652
+32 Placements from banks and other financial
+1,672
+(981)
+China Merchants Bank
+Annual Report 2015
+697,448
+711,561
+108,135
+7,526
+589,313
+704,035
+386,030
+527,101
+203,283
+176,934
+2014
+2015
+Banks
+-
+Outside Mainland
+Other financial institutions
+- Banks
+In Mainland
+31 Deposits from banks and other financial institutions
+The Group plans to dispose the repossessed assets by auction, bid and transfer.
+(ii)
+In 2015, the Group has disposed repossessed assets with total cost of RMB73 million (2014: RMB444 million).
+(i)
+455
+691
+(943)
+1,398
+5,290
+71
+9,669
+245
+1,271
+207
+At 1 January 2015
+At 31 December 2015
+Net book value:
+2,159
+283
+1,633
+243
+At 31 December 2015
+8
+6
+2
+Exchange difference
+1
+Transfers
+Additions
+At 1 January 2015
+Amortisation:
+At 31 December 2015
+5,754
+48
+43
+1,102
+2
+3,135
+1,723
+1,517
+35
+32
+6
+6
+652
+432
+220
+Additions
+Transfers
+4,322
+1,034
+1,991
+1,297
+At 1 January 2014
+Cost/valuation:
+Total
+Core deposit
+Software
+Land use right
+3,292
+814
+1,153
+1,325
+3,595
+819
+1,502
+1,274
+-
+1
+427
+360
+Exchange difference
+3
+-
+Within 1 year (inclusive)
+Investment properties of the Group mainly represent the leasing properties of WLB and the portion of the Bank's
+headquarters in Shenzhen that has been leased out under operating leases or is available for lease. As at 31
+December 2015, fair value of these properties was RMB4,784 million (2014: RMB4,216 million). The Group's total
+future minimum lease payments under non-cancellable operating leases are receivables as follows:
+1,684
+1,708
+1,088
+1,158
+1,088
+1,059
+99
+596
+550
+596
+550
+2014
+2015
+- Medium-term leases (10 - 50 years)
+- Long leases (over 50 years)
+Held in Hong Kong
+-Medium-term leases (10 - 50 years)
+Held in Mainland China
+The net book value of investment properties at the end of the reporting period is analysed by the remaining terms
+of the leases as follows:
+1,701
+1,684
+1,684
+1,708
+793
+986
+1 year to 5 years (inclusive)
+(24)
+Over 5 years
+2014
+(24)
+715
+709
+6
+5,015
+1,059
+2,424
+1,532
+Total
+Core deposit
+Software
+Land use right
+Exchange difference
+Transfers
+At 1 January 2015
+Additions
+Cost/valuation:
+27 Intangible assets
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+471
+412
+21
+14
+257
+206
+2,418
+192
+2015
+At 31 December 2014
+193
+At 1 January 2014
+2014
+2015
+Net amount
+Deferred tax assets
+Deferred tax liabilities
+29 Deferred tax assets, deferred tax liabilities
+In assessing impairment of goodwill, the Group assumed the terminal growth in line with long-term forecast gross
+domestic product for the main operating areas of WLB and CMFM. A pre-tax discount rate of 12% and 15% (2014:
+12% and 12%) was used.
+The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use cash
+flow projections based on financial forecasts approved by management covering a 5-year period. Cash flows beyond
+the 5-year period are extrapolated using a steady growth rate. The growth rate does not exceed the long-term
+average growth rate for the business in which the CGU operates.
+Goodwill is allocated to the Group's CGU, WLB which was acquired on 30 September 2008 and CMFM which was
+acquired on 28 November 2013.
+Impairment test for CGU containing goodwill
+On 1 April 2015, CMBICHC acquired a 100% equity interests in Shenzhen Rongbo Information and Technology Corporation Limited
+("Rongbo"). On the acquisition date, the fair value of Rongbo's identifiable net assets was RMB2.60 million. A sum of RMB1 million being
+the excess of merger cost over the fair value of the identifiable net assets was recognised as goodwill. Rongbo's principal activities include
+development and sale of computer software and hardware, sale of communication equipment and office automation equipments, advisory
+service of computer technology and information.
+On 28 November 2013, the Bank acquired a 55.00% equity interests in CMFM. On the acquisition date, the fair value of CMFM's identifiable
+net assets was RMB752 million of which the Bank accounted for RMB414 million. A sum of RMB355 million being the excess of merger cost
+over the fair value of the identifiable net assets was recognised as goodwill. Please find the details about CMFM in Note 22.
+On 30 September 2008, the Bank acquired a 53.12% equity interests in WLB. On the acquisition date, the fair value of WLB's identifiable net
+assets was RMB12,898 million, of which the Bank accounted for RMB6,851 million. A sum of RMB10,177 million being the excess of merger
+cost over the fair value of the identifiable net assets was recognised as goodwill. Please find the details about WLB in Note 22.
+(iii)
+(ii)
+(i)
+Notes:
+9,954
+(579)
+10,533
+1
+355
+355
+1
+9,598
+(579)
+10,177
+31 December
+loss
+16,020
+(867)
+Net value at
+10,291
+15,153
+Amortisation:
+Salary and welfare payable
+(550)
+(2,203)
+(1,905)
+(7,614)
+Investment revaluation reserve
+9,150
+36,647
+15,783
+63,217
+advances to customers and other assets
+Impairment allowances for loans and
+Deferred tax
+difference
+Deferred tax
+(taxable)
+temporary
+Deductible/
+(taxable)
+temporary
+difference
+2014
+2015
+Deferred tax assets
+The components of deferred tax assets/liabilities are as follows:
+(a) Analysed by nature of deferred tax assets and liabilities
+29 Deferred tax assets, deferred tax liabilities (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+9,520
+(771)
+Impairment
+Deductible/
+Release in
+the year
+207
+At 31 December 2014
+6
+5
+1
+Exchange difference
+1
+-
+1
+Transfers
+390
+41
+314
+35
+1,326
+199
+956
+5,015
+1,059
+2,424
+1,532
+35
+25
+1
+9
+As at
+31 December
+Additions
+1,271
+245
+171
+Net book value:
+1
+1,723
+10,532
+Total
+1
+10,177
+355
+CMFM (Note (ii))
+CMBICHC (Note (iii))
+in the year
+1 January
+Addition
+As at
+XII Financial Statements
+28 Goodwill
+China Merchants Bank
+Annual Report 2015
+WLB (Note (i))
+235
+236
+1,325
+1,153
+814
+At 31 December 2014
+At 1 January 2014
+3,292
+1,126
+1,035
+835
+2,996
+XII Financial Statements
+The PBOC and National Development and Reform Commission approved the Bank's issuance of RMB1,000 million financial bonds on 13
+February 2014 (Yin Han [2014] No.35 entitled "The Approval of the issuance of Renminbi debt securities in Hong Kong by China Merchants
+Bank") and on 11 March 2014 (Fa Gai Wai Zi [2014] No.412 entitled "The Approval of issuance of Renminbi debt securities in Hong Kong by
+China Merchants Bank"). The Bank issued RMB1,000 million financial bonds on 10 April 2014 in Hong Kong.
+The CBRC and PBOC approved the Bank's issuance of RMB20,000 million long-term debt securities on 12 December 2011 (Yin Jian Fu [2011]
+No.557 entitled "The Approval of the issuance of long-term debt securities by China Merchants Bank") and on 16 January 2012 (Yin Shi
+Chang Xu Zhun Yu Zi [2012] No.2 entitled "Decision on Administrative Approval from the People's Bank of China"). The Bank issued RMB6,500
+million fixed rate debt and RMB 13,500 million floating rate debt on 14 March 2012 on the Mainland China Interbank Bond Market.
+36 Debt securities issued (continued)
+(ii)
+(i)
+China Merchants Bank
+Annual Report 2015
+Notes:
+20,982
+13,495
+*
+20,990
+8
+998
+2
+(b) Long-term debt securities (continued)
+996
+RMB1,000
+R represents the 1-year fixed deposit rate ("Rate") promulgated by the PBOC. The Rate on 14 March 2012 was 3.50%.
+As at the end of the reporting period, long-term debt securities issued by CMBFLC were as follows:
+Issue in or premium
+the year amortisation
+Discount Repayment
+(in million)
+(%)
+4
+(RMB in
+(RMB in
+balance
+the year
+Ending
+for
+Annual
+balance
+rate
+issuance
+Term to maturity
+Debt type
+Beginning
+million)
+Nominal
+interest
+Date of
+value
+13,491
+Discount
+Issue in or premium
+R*+0.95
+4.10
+for
+Repayment
+Beginning
+Nominal
+interest
+Date of
+Annual
+As at the end of the reporting period, long-term debt securities issued by the Bank were as follows:
+(b) Long-term debt securities
+T represents the 5 years US Treasury rate.
+2,549
+119
+2,430
+not called by
+the Bank)
+the notes are
+6 year
+onwards, if
+million)
+first 5 years);
+T*+2.80 (from
+Debt type
+RMB13,500
+Term to maturity
+rate
+6,497
+2
+6,495
+RMB6,500
+4.15
+Mar 14, 2012
+Mar 14, 2012
+Apr 10, 2014
+60 months
+60 months
+36 months
+12 CMB 01 (note (i))
+12 CMB 02 (note (i))
+14 CMB 03 (note (ii))
+million)
+million)
+(in million)
+(%)
+(RMB in
+(RMB in
+Ending
+balance
+the year
+the year amortisation
+balance
+value
+issuance
+Fixed rate bond (note (iii))
+Fixed rate bond (note (iii))
+Fixed rate bond (note (iii))
+Fixed rate bond (note (iii))
+Fixed rate bond (note (iv))
+(in million)
+Jun 26, 2013
+3,094
+USD500
+3.25
+Aug 11,2014
+60 months
+Fixed rate notes (Note (v))
+million)
+million)
+(%)
+(RMB in
+(RMB in
+balance
+the year
+Ending
+for
+Issue in or premium
+the year amortisation
+balance
+value
+rate
+151
+Beginning
+3,245
+(v)
+1,291
+Short-term employee benefits (i)
+balance
+in the year
+in the year
+balance
+Ending
+transfers
+Change
+Beginning
+Payment/
+2015
+(a) Salaries and welfare payable
+37 Staff welfare scheme
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+244
+243
+On 11 Aug 2014, CMBIL issued USD 500 million with annual interest rate of 3.25% guaranteed notes due 2019 on the HKEX.
+Notes:
+36 months
+Nominal
+Date of
+issuance
+4.98
+Jul 24, 2013
+60 months
+1,000
+1,000
+RMB1,000
+4.87
+Jul 24, 2013
+36 months
+1,000
+1,000
+RMB1,000
+5.08
+Jun 26, 2013
+60 months
+1,000
+1,000
+RMB1,000
+4.99
+RMB1,000
+interest
+1,000
+36 months
+Term to maturity
+Debt type
+Repayment
+Discount
+Annual
+As at the end of the reporting period, long-term debt securities issued by CMB International Leasing Management
+Limited ("CMBIL"), CMBICHC's subsidiary, were as follows:
+As approved by CBRC Shanghai office under its Reply on the Issuance of Financial Bonds by CMBFLC under ref. Hu Yin Jian Fu [2015] No.551
+and PBOC under its Decision on the Grant of Administrative Permission under ref. Yin Shi Chang Xu Zhun Yu Zi [2015] No.276, CMBFLC issued
+the first tranche of 2015 of RMB200 million financial bonds on 7 Dec 2015.
+As approved by CBRC under its Official Reply on the Issuance of Financial Bonds by CMBFLC under ref. Yin Jian Fu [2012] No.758 and PBOC
+under its Decision on the Grant of Administrative Permission under ref. Yin Shi Chang Xu Zhun Yu Zi [2013] No.33, CMBFLC issued the first
+tranche of 2013 of RMB2,000 million financial bonds on 26 June 2013 and the second tranche of 2013 of RMB2,000 million financial bonds
+on 24 July 2013. As at 31 December 2015, the Bank held RMB440 million financial bonds issued by CMBFLC.
+(iv)
+(iii)
+Notes:
+4,200
+200
+4,000
+200
+200
+RMB200
+3.75
+Dec 7, 2015
+1,000
+60
+Post-employment benefits
+USD200
+Subordinated notes issued
+2014
+2015
+Note
+45,349
+39,073
+43,997
+37,675
+1,352
+1,398
+2014
+2015
+36 Debt securities issued
+Customer deposit and others
+Issued debt securities
+35 Interest payable
+364,086
+415,714
+51,006
+36(a)
+57,867
+32,519
+Long-term debt securities issued
+Nominal
+Discount Repayment
+Annual
+interest
+Date of
+As at the end of the reporting period, subordinated notes issued by the Bank were as follows:
+(a) Subordinated notes issued
+36 Debt securities issued (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+6,254
+251,507
+21,291
+14,748
+24,832
+176,245
+Negotiable interbank certificates of deposit
+Certificates of deposit issued
+27,636
+27,995
+36(b)
+32,396
+Beginning
+42,739
+Others
+-Demand deposits
+Retail customers
+2,211,411
+2,361,531
+1,237,765
+1,194,064
+973,646
+1,167,467
+2014
+2015
+-Time deposits
+-
+- Demand deposits
+Corporate customers
+34 Deposits from customers
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+240
+5,865
+-
+60,172
+-Time deposits
+644,836
+Deposit for letters of guarantee
+54,705
+56,499
+48,199
+49,188
+167,437
+191,988
+Guarantee for issuing letters of credit
+Guarantee for loans
+Guarantee for acceptance bills
+2014
+2015
+Customer deposits include marginal deposits for guarantees as follows:
+3,304,438
+3,571,698
+1,093,027
+1,210,167
+448,191
+375,105
+835,062
+Debt type
+Term to maturity issuance
+rate
+issuance
+Term to maturity
+Debt type
+Beginning
+Nominal
+interest
+Date of
+Discount Repayment
+Annual
+As at the end of the reporting period, subordinated note issued by WLB was as follows:
+(a) Subordinated notes issued (continued)
+36 Debt securities issued (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+242
+241
+The CBRC and PBOC approved the Bank's issuance of RMB11,300 million tier-2 capital bonds on 29 October 2013 (Yin Jian Fu [2013] No.557
+entitled "The Approval of the issuance subordinated bonds by China Merchants Bank") and on 15 April 2014 (Yin Shi Chang Xu Zhun Yu Zi
+[2014] No.22 entitled "Decision on Administrative Approval from the People's Bank of China"). The Bank issued RMB11,300 million tier-2
+capital bonds on 18 April 2014 on Mainland China Interbank Bond Market.
+The CBRC and PBOC approved the Bank's issuance of RMB11,700 million subordinated notes on 29 November 2012 (Yin Jian Fu [2012] No.703
+entitled "The Approval of the issuance subordinated bonds by China Merchants Bank") and on 20 December 2012 (Yin Shi Chang Xu Zhun Yu
+Zi [2012] No.91 entitled "Decision on Administrative Approval from the People's Bank of China"). The Bank issued RMB11,700 million fixed
+rate notes on 28 December 2012 to institutional investors on Mainland China Interbank Bond Market.
+The Bank exercised its redemption right on 4 September 2013 and redeemed a total of RMB23,000 million subordinated bonds, including two
+types of bonds valued at RMB19,000 million and RMB4,000 million respectively.
+rate
+The CBRC and PBOC approved the Bank's issuance of RMB30,000 million subordinated notes on 12 August 2008 (Yin Jian Fu [2008] No.304
+entitled "The Approval of the issuance of subordinated bonds by China Merchants Bank" and Yin Shi Chang Xu Zhun Yu Zi [2008] No.25
+entitled "Decision on Administrative Approval from the People's Bank of China"). The Bank issued RMB26,000 million fixed rate notes and
+RMB4,000 million floating rate notes on 4 September 2008 to institutional investors on Mainland China Interbank Bond Market.
+value
+Issue in or premium
+the year amortisation
+3.50 (for the
+1,258
+59
+1,199
+HKD1,500
+5.70
+Dec 28, 2009
+Nov 6, 2012
+144 months
+120 months
+Fixed rate bond
+Fixed to floating
+rate notes
+million)
+million)
+(in million)
+(%)
+(RMB in
+(RMB in
+balance
+the year
+Ending
+for
+balance
+(iii)
+(ii)
+(i)
+1
+6,994
+RMB7,000
+5.90 (for the
+Sep 4, 2008
+Fixed rate bond (Notes (i)) 180 months
+million)
+million)
+(in million)
+(%)
+(RMB in
+(RMB in
+balance
+the year
+Ending
+for
+Issue in or premium
+the year amortisation
+balance
+value
+6,995
+first ten
+years);
+8.90 (from 11
+Notes:
+29,970
+4
+29,966
+11,287
+1
+11,286
+RMB11,300
+6.40
+1,231
+11,688
+11,686
+RMB11,700
+5.20
+Dec 28, 2012
+Apr 18, 2014
+Fixed rate bond (Notes (ii)) 180 months
+Fixed rate bond (Notes (iii)) 120 months
+by the Bank)
+are not called
+if the notes
+year onwards,
+2
+24,004
+106,155
+5.27%
+9.70
+15.43
+8.80
+14.58
+Outstanding at the end of the year
+(1.69)
+15.64
+(0.90)
+14.61
+Forfeited during the year
+2.28
+Exercisable at the end of the year
+14.84
+9.11
+16.40
+9.70
+15.43
+Outstanding as at the beginning of the year
+Number of
+options
+(in million)
+(HKD)
+exercise price
+Weighted
+average
+Number of
+options
+(in million)
+(HKD)
+Granted during the year
+15.23
+3.91
+16.29
+Share price (in HKD)
+4.63
+4.81
+5.09
+4.61
+4.25
+10.26
+1.82
+Fair value at measurement
+date (in RMB)
+Phase VI Phase VII
+Phase V
+2015
+Phase IV
+Phase I Phase II Phase III
+The fair value of services received in return for share options granted are measured by reference to the fair value
+of share options granted. The estimate of the fair value of the share option granted is measured based on the
+Black-Scholes model. The contractual life of the option is used as an input into this model.
+Fair value of share options and assumptions
+(3)
+Other long-term employee benefits (continued)
+(iii)
+(a) Salaries and welfare payable (continued)
+37 Staff welfare scheme (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Pursuant to the requirements set out in the Scheme, if any dividends were distributed, capital reserve was converted
+into shares, share split or dilution, an adjustment to the exercise price is applied.
+The options outstanding at 31 December 2015 had an weighted average exercise price of HKD14.58 (2014:
+HKD15.43) and a weighted average remaining contractual life of 5.67 years (2014: 6.76 years).
+3.49
+Weighted
+average
+exercise price
+18.30
+2014
+The number and weighted average exercise prices of share options are as follows:
+All share appreciation rights shall be settled in cash. The terms and conditions of the scheme are listed below:
+(1)
+Other long-term employee benefits (continued)
+(iii)
+(a) Salaries and welfare payable (continued)
+37 Staff welfare scheme (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+248
+247
+As at 31 December 2015, the Group has offered 7 phases of H share Appreciation Rights Scheme to its senior
+management ("the Scheme"). The options of the Scheme vest after 2 years or 3 years from the grant date and are
+then exercisable within a period of 8 years or 7 years. Each of the share appreciation right is lined to one H-share.
+(2)
+28
+13
+15
+13
+28
+balance
+in the year
+Ending
+Payment/
+transfers
+Change
+in the year
+Beginning
+balance
+2014
+15
+Number of
+unexercised
+options
+at the end of
+2015
+10 years
+3 years after the grant date
+2.070
+Options granted on 7 July 2014
+10 years
+3 years after the grant date
+1.259
+Options granted on 22 May 2013
+10 years
+3 years after the grant date
+1.259
+Options granted on 4 May 2012
+10 years
+3 years after the grant date
+1.228
+10 years
+2 years after the grant date
+10 years
+10 years
+2 years after the grant date
+2 years after the grant date
+0.922
+0.954
+1.110
+Options granted on 30 October 2007
+Options granted on 7 November 2008
+Options granted on 16 November 2009
+Options granted on 18 February 2011
+Contract period
+of options
+Exercise conditions
+(in millions)
+2015
+10
+18.30
+18.30
+26%
+26%
+26%
+26%
+Expected volatility
+14.84
+14.78
+14.21
+16.40
+17.54
+6.31
+26%
+24.85
+19.46
+19.46
+19.46
+19.46
+19.46
+19.46
+19.46
+Share price (in HKD)
+3.74
+3.90
+4.22
+Exercise price (in HKD)
+26%
+Option life (year)
+2.83
+(23,615)
+249
+Share options were granted under a service condition. This condition has not been taken into account in the grant
+date fair value measurement of the services received. There were no market conditions associated with the share
+option grants.
+The expected volatility is based on the historical volatility (calculated based on the weighted average remaining life
+of the share options), adjusted for any expected changes to future volatility based on publicly available information.
+Expected dividends are based on historical dividends. Changes in the subjective input assumptions could materially
+affect the fair value estimate.
+2.58%
+2.58%
+2.58%
+2.58%
+2.58%
+2.58%
+2.58%
+Risk-free interest rate
+5.27%
+5.27%
+5.27%
+5.27%
+5.27%
+5.27%
+Expected dividends rate
+9.58
+8.42
+7.33
+6.17
+4.83
+3.83
+3.60
+18.30
+3.25
+1.16
+5.14
+3.85
+2.85
+1.83
+Option life (year)
+43%
+43%
+43%
+43%
+43%
+43%
+6.35
+43%
+13.99
+13.93
+13.36
+15.56
+16.69
+5.46
+24.00
+Exercise price (in HKD)
+18.30
+18.30
+18.30
+Expected volatility
+7.39
+8.52
+Expected dividends rate
+date (in RMB)
+Fair value at measurement
+Phase VII
+Phase VI
+Phase V
+Phase IV
+Phase III
+Phase II
+Phase I
+2014
+1.41%
+1.41%
+1.41%
+1.41%
+1.41%
+1.41%
+1.41%
+Risk-free interest rate
+6.25%
+6.25%
+6.25%
+6.25%
+6.25%
+6.25%
+6.25%
+10.22
+28
+26%
+38
+Housing reserve
+4
+(52)
+53
+3
+- Maternity insurance
+3
+(33)
+35
+1
+- Injury insurance
+242
+80
+1,611
+14
+39
+(2,398)
+2,400
+37
+4,576
+(16,887)
+17,248
+4,215
+Medical insurance
+(1,545)
+1,546
+(1,640)
+148
+3,576
+36
+- Medical insurance
+Social insurance
+Welfare expense
+Salary and bonus
+balance
+in the year
+Ending
+transfers
+Change
+year
+in the
+balance
+Beginning
+Payment/
+2014
+6,254
+(23,615)
+24,004
+5,865
+1,404
+(1,060)
+1,111
+1,353
+expenses
+Labour union and employee education
+Social insurance
+15,069
+82
+Welfare expense
+Ending
+balance
+Post-employment benefits
+Short-term employee benefits (i)
+balance
+in the year
+in the year
+balance
+Ending
+Change
+Beginning
+Payment/
+2014
+- defined contribution plans (ii)
+Other long-term employee benefits (iii)
+6,524
+27,094
+6,068
+38
+10
+28
+232
+(3,023)
+3,080
+175
+- defined contribution plans (ii)
+Other long-term employee benefits (iii)
+38
+(26,638)
+5,057
+19,093
+(18,285)
+in the year
+in the year
+balance
+transfers
+Change
+Beginning
+Payment/
+2015
+(i) Short-term employee benefits
+(a) Salaries and welfare payable (continued)
+37 Staff welfare scheme (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+6,068
+(21,048)
+21,997
+5,119
+28
+15
+13
+175
+(2,763)
+2,889
+49
+5,865
+Salary and bonus
+(14,430)
+(81)
+transfers
+37
+91
+4
+122
+(1,471)
+1,580
+13
+47
+(1,203)
+1,218
+32
+balance
+(89)
+in the year
+balance
+Ending
+Payment/
+transfers
+Change
+Beginning
+2014
+232
+(3,023)
+3,080
+175
+12
+in the year
+6
+49
+2,889
+10
+4,215
+28
+balance
+in the year
+Ending
+transfers
+Change
+in the year
+balance
+Beginning
+Payment/
+Cash settled share-based transactions
+Cash settled share-based transactions
+Other long-term employee benefits
+(iii)
+(a) Salaries and welfare payable (continued)
+37 Staff welfare scheme (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+For its employees outside Mainland China, the Group participates in defined contribution retirement schemes at
+funding rates determined in accordance with the local practise and regulations.
+In addition to the above statutory pension schemes, the Group has established a supplementary defined contribution
+plan for its employees (annuity insurance) in accordance with relevant annuity policies for corporate entities in the
+PRC. During the year 2015, the Group's annual contributions to this plan are determined based on 8.33% of the
+staff salaries and bonuses (2014: 8.33%).
+In accordance with the regulations in the PRC, the Group participates in statutory pension schemes organised by the
+municipal and provincial governments for its employees (endowment insurance). During the year 2015, the Group's
+contributions to the schemes are determined by local governments and vary at a range of 12% to 35% (2014: 10%
+to 35%) of the staff salaries.
+Defined contribution pension schemes
+175
+(2,763)
+(88)
+94
+2015
+141
+1,353
+(669)
+857
+1,165
+expenses
+Labour union and employee education
+242
+(1,414)
+1,548
+108
+Housing reserve
+3
+(43)
+44
+2
+- Maternity insurance
+1
+29
+1
+- Injury insurance
+14
+169
+(1,619)
+6
+1,464
+5,057
+19,093
+(29)
+5,865
+1,601
+(18,285)
+122
+1,385
+47
+(1,353)
+(1,582)
+in the year
+in the year
+transfers
+Change
+79
+Beginning
+balance
+Payment/
+2015
+Ending
+balance
+Supplementary pension
+Unemployment insurance
+245
+China Merchants Bank
+Annual Report 2015
+246
+37 Staff welfare scheme (continued)
+(a) Salaries and welfare payable (continued)
+XII Financial Statements
+(ii) Post-employment benefits-defined contribution plan
+Basic retirement security
+Supplementary pension
+Unemployment insurance
+Basic retirement security
+2015
+Exchange difference
+Actual benefits paid
+2014
+Expected return on the Plan assets other than interest losses
+Interest income
+Fair value of the Plan assets at 1 January
+Fair value of the Plan assets at 31 December
+The movements in the fair value of the Plan assets during the year are as follows:
+37 Staff welfare scheme (continued)
+Post-employment benefits – defined benefit plan (continued)
+(b)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+252
+251
+316
+340
+9
+Actual obligation at 31 December
+7
+386
+386
+6
+236
+Total
+Cash
+Bonds
+18
+Equities
+%
+Amount
+%
+Amount
+2014
+2015
+The major categories of the the Plan assets are as follows:
+367
+10
+13
+(22)
+(29)
+(10)
+(9)
+8
+400
+29
+2015
+(29)
+Current service cost
+There was no plan amendment, curtailment or settlement impact for the years ended 31 December 2015 and 2014.
+The amounts recognised in the consolidated statement of profit or loss are as follows:
+A portion of the above asset is expected to be recovered after more than one year. However, it is not practicable
+to segregate this amount from the amounts receivable in the next twelve months, as future contributions will
+also relate to future services rendered and future changes in actuarial assumptions and market conditions. No
+contribution to the Plan is expected to be paid in 2016.
+70
+(316)
+386
+2014
+27
+(340)
+367
+2015
+Present value of the funded defined benefit obligation
+Net asset recognised in the statement of financial position
+Fair value of the Plan assets
+The amounts recognised in the statement of financial position as at 31 December 2015 are analysed as follows:
+The latest actuarial valuation of the Plan was performed in accordance with IAS 19 issued by the IASB as at 31
+December 2015 by Willis Towers Watson Limited, a professional actuarial firm. The present values of the defined
+benefit obligation and current service cost of the Plan are calculated based on the projected unit credit method. At
+the valuation date, the Plan had a funding level of 108% (2014: 122%).
+The Group's subsidiary WLB operates a defined benefit plan ("the Plan") for the staff, which includes a defined
+benefit scheme and a defined benefit pension section. The contributions of the Plan are determined based on
+periodic valuations by qualified actuaries of the assets and liabilities of the Plan. The Plan provides benefits based on
+members' final salary. The costs are solely funded by WLB.
+Post-employment benefits - defined benefit plan
+64.3
+(b)
+37 Staff welfare scheme (continued)
+XII Financial Statements
+Net interest income
+(22)
+Net expense for the year included in retirement benefit costs
+(12)
+6
+5
+11
+12
+294
+316
+2014
+2015
+Actuarial losses due to financial assumption changes
+Actuarial gain due to demographic assumption changes
+Actuarial losses due to liability experience
+Actual benefits paid
+Interest cost
+Current service cost
+Present value of obligation at 1 January
+The movements in the defined benefit obligation during the year are as follows:
+The actual losses on the Plan assets for the year ended 31 December 2015 was RMB4 million (2014: actual losses
+was RMB1 million).
+(9)
+(11)
+2
+1
+(11)
+2014
+249
+Insurance liabilities
+63
+39,678
+64,345
+25,783
+40,875
+116
+15
+1,369
+1,295
+1,709
+Note:
+1,866
+8,000
+7,001
+12,294
+2014
+2015
+Cheques and remittances returned
+Others
+Payment and collection account
+Salary risk allowances (note)
+Clearing and settlement accounts
+3,700
+Salary risk allowances are specific funds withheld from the employees' (excluding senior management of the Bank) annual remunerations of
+which the payments are delayed for the purpose of risk management. The allocation of the funds is based on performance assessment and
+risk management results, taking into account the short term and long term benefit. In the event of a decline in the asset quality, a sharp
+deterioration of risk profiles and profitability, the occurrence legal case, or a significant regulatory violation identified by any regulatory
+authorities, the relevant employees will be restricted from the allocation of these allowances.
+40 Share capital
+By type of share:
+The capital reserve primarily represents share premium by the Bank. The capital reserve can be used to issue shares
+with the shareholders' approval.
+41 Capital reserve
+China Merchants Bank
+Annual Report 2015
+25,220
+Amount
+No. of shares
+(in million)
+25,220
+Capital
+At 1 January 2015 and at 31 December 2015
+All H-Shares are ordinary shares and rank pari passu with the A-Shares. There is no restriction condition on these
+shares.
+25,220
+25,220
+4,591
+4,591
+20,629
+20,629
+2014
+2015
+Registered capital
+- H-Shares
+- A-Shares
+Listed shares
+39 Other liabilities
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+11,656
+2015
+Staff salary and incentive scheme
+(c)
+Pension increase rate for the defined benefit pension plan
+Long-term average rate of salary increase for the Plan
+- Defined benefit pension scheme
+- Defined benefit scheme
+Discount rate
+The principal actuarial assumptions adopted in the valuation are as follows:
+No deposit with the Bank was included in the amount of the Plan assets (2014: Nil).
+100
+386
+100
+367
+19.2
+74
+18.5
+68
+16.3
+63
+17.2
+2014
+64.5
+%
+1.4
+12,820
+528
+347
+Others
+2,745
+2,633
+Business tax and surcharges payable
+8,383
+9,840
+Corporate income tax
+2014
+2015
+38 Tax payable
+The performance bonus was accrued at a fixed percentage based on the net profit for the year as approved by the
+Board of Directors and accounted as operating expenses.
+3.0
+3.0
+5.0
+5.0
+0.9
+0.6
+1.7
+%
+In 2015, no member of senior management had exercised any share appreciation rights (2014: Nil).
+Total
+9,695
+Tian Hui Yu
+862
+210
+184
+184
+153
+131
+Wang Qing Bin
+1,211
+300
+210
+184
+184
+163
+159
+127
+Ding Wei
+1,243
+210
+184
+184
+300
+Liu Jian Jun
+210
+No. of shares
+granted
+Phase I
+2014
+8,801
+2,070
+1,259
+1,259
+1,228
+1,109
+954
+922
+150
+150
+Xu Shi Qing
+150
+150
+Lian Bo Lin
+150
+150
+Wang Liang
+210
+184
+184
+163
+159
+318
+318
+Ma Wei Hua
+(in thousand) (in thousand) (in thousand) (in thousand) (in thousand) (in thousand) (in thousand) (in thousand) (in thousand)
+No. of shares No. of shares Total no. of
+granted exercised
+shares
+Phase IV Phase V Phase VI
+No. of shares No. of shares No. of shares No. of shares No. of shares No. of shares
+granted granted granted granted granted granted
+Phase III
+Phase II
+Phase I
+2015
+The number of share appreciation rights granted to members of senior management:
+(4)
+Other long-term employee benefits (continued)
+(iii)
+(a) Salaries and welfare payable (continued)
+37 Staff welfare scheme (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+250
+149,938
+At 1 January 2015 and 31 December 2015
+326
+Phase II
+No. of shares
+307
+307
+159
+Tang Zhi Hong
+1,321
+240
+200
+200
+200
+163
+159
+159
+Li Hao
+1,321
+240
+200
+200
+200
+163
+159
+159
+Zhang Guang Hua
+1,883
+307
+Note:
+Phase III
+No. of shares
+Phase V
+184
+184
+153
+131
+Wang Qing Bin
+894
+210
+184
+184
+210
+153
+Tang Xiao Qing
+1,211
+210
+184
+184
+184
+163
+159
+127
+163
+862
+Tian Hui Yu
+300
+2,280
+1,443
+1,443
+1,381
+1,272
+954
+922
+150
+150
+150
+150
+Total
+Xu Shi Qing
+Lian Bo Lin
+150
+150
+210
+210
+Wang Liang
+Liu Jian Jun
+300
+Ding Wei
+1,243
+210
+184
+307
+307
+307
+326
+318
+318
+Ma Wei Hua
+(in thousand) (in thousand) (in thousand)
+shares
+Total no. of
+No. of shares
+exercised
+granted
+granted
+(in thousand)
+granted
+(in thousand)
+granted
+(in thousand)
+granted
+(in thousand)
+granted
+(in thousand)
+(in thousand)
+Phase VII
+No. of shares
+Phase VI
+No. of shares
+No. of shares
+1,883
+Phase IV
+No. of shares
+Zhang Guang Hua
+159
+184
+184
+163
+159
+159
+Tang Zhi Hong
+1,321
+240
+200
+200
+200
+163
+159
+159
+Li Hao
+1,321
+240
+200
+200
+200
+163
+159
+2015
+67,523
+Balance with banks and other financial institutions
+253
+136
+158
+Reportable segment profit/
+(loss) before tax
+12,508
+30,798 34,792
+29,105
+22,983
+16,199
+4,796
+(2,671)
+75,079 73,431
+Capital expenditure (Note)
+1,691
+2,908
+2,911
+3,951
+252
+326
+4,230
+940
+9,084
+8,125
+Reportable segment assets 1,398,748 1,380,976 1,265,735 1,022,060 1,246,526
+886,272 1,527,731 1,411,906 5,438,740 4,701,214
+Reportable segment liabilities 2,244,895 2,169,013 1,147,024 1,028,265 989,926 702,617
+Interest in associates and
+678,269
+158
+136
+and joint ventures
+Share of profit of associates
+Charge for insurance claims
+(287)
+(332)
+(287)
+(332)
+(22,112)
+(23,457) (38,058)
+(31,868)
+(3,303)
+(2,629)
+(4,484) (3,459) (67,957)
+(61,413)
+Reportable segment profit/
+483,362 5,060,114 4,383,257
+(loss) before impairment
+52,379 53,964 51,128
+36,716
+23,145
+16,224
+7,557
+Impairment losses
+(39,871)
+(23,166) (16,336)
+(7,611)
+(162)
+(25)
+(2,897)
+(1,950) 134,209 104,954
+(879) (59,266) (31,681)
+losses
+(57,546)
+joint ventures
+1,484
+Intangible assets
+Deferred tax assets
+Other unallocated assets
+Consolidated total assets
+5,438,740
+9,954
+4,701,214
+9,953
+819
+1,059
+15,538
+9,880
+9,927
+9,723
+5,474,978
+4,731,829
+Liabilities
+Total liabilities for reportable segments
+5,060,114
+4,383,257
+Tax payable
+11,874
+10,854
+Other unallocated liabilities
+41,232
+22,658
+Consolidated total liabilities
+5,113,220
+Goodwill
+Total assets for reportable segments
+Assets
+2014
+2,786
+1,484
+Note:
+Capital expenditure represents total amount incurred for acquiring long-term segment assets.
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+50 Operating segments (continued)
+(b) Reconciliations of reportable segments revenue, profit or loss, assets, liabilities
+and other material items
+2015
+2014
+Revenue
+Total revenue for reportable segments
+202,166
+2,786
+166,367
+Consolidated revenue
+202,166
+166,367
+Profit
+Total profit or loss for reportable segments
+75,079
+73,431
+Other profit
+Consolidated profit before income tax
+75,079
+73,431
+2014
+67,523
+2015
+Other revenue
+4,416,769
+(63,584)
+(3,619)
+For the purpose of operating segment analysis, external net interest income/expense represents the net interest
+income earned or expense incurred on banking services provided to external parties. Internal net interest income/
+expense represents the assumed profit or loss by the internal funds transfer pricing mechanism which has taken into
+account the structure and market returns of the assets and liabilities portfolio. Cost allocation is based on direct
+costs attributable to each reporting segment and apportion to the relevant factors.
+Segment results, assets and liabilities
+Corporate financial
+Retail
+business
+financial business
+Interbank
+financial business
+Other business
+Total
+2015
+2014
+2015
+2014
+2015
+2014
+2015
+2014
+2015
+(Restated)
+2014
+(Restated)
+External net interest income
+41,675
+42,793
+67,527
+51,279
+8,513
+7,144
+Other business covers investment properties, businesses in subsidiaries, associates and joint ventures, and
+other relevant businesses. None of these segments meets any of the quantitative thresholds so far for
+determining reportable segments.
+Other Business
+(a)
+50 Operating segments (continued)
+56,014
+47,336
+Placements with banks and other financial institutions
+Amounts held under resale agreements
+147,714
+68,983
+296,458
+190,039
+Debt securities investments
+17,473
+15,175
+635,843
+471,471
+(b) Significant non-cash transactions
+19,014
+There are no other significant non-cash transactions during the year.
+The Group's principal activities are commercial lending and deposits taking. The funding of existing retail and
+corporate loans are mainly from customer deposits.
+The Group manages its businesses by divisions, which are organised by a mixture of both business lines and
+geography.
+The Group makes business decisions, reporting and performance assessment by segment: corporate finance, retail
+finance, interbank finance and other business. In 2015, the profits and/or losses from treasury functions were
+proportionally allocated to corporate finance, retail finance and interbank finance segments from other business. The
+Group's business reporting segments are as follows:
+Corporate finance business
+The provision of financial services to corporations and governmental institutions includes lending and deposit
+taking activities, clearing and cash management services, trade finance and offshore businesses, investment
+banking and other services.
+Retail finance business
+The provision of financial services to retail customers includes lending and deposit taking activities, bank card
+business, wealth management services, private banking and other services.
+Interbank finance business
+This segment covers interbank transactions such as interbank lending and repurchasing activities, asset
+custody activities and financial market businesses.
+257
+258
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+50 Operating segments
+(2,718)
+15,986
+Internal net interest
+2,466
+1,102
+12,018
+9,671
+Operating income
+74,491
+77,421 89,186
+68,584
+26,448
+18,853
+12,041
+1,509 202,166
+166,367
+Operating expenses
+- Depreciation
+(1,222) (1,265) (2,104) (1,719)
+(182)
+(142)
+(578)
+(409)
+(4,086)
+(3,535)
+- Others
+(20,890)
+(22,192) (35,954) (30,149)
+(3,121)
+(2,487)
+3,953
+6,010
+993
+920
+income/(expense)
+16,581
+18,063
+(5,121)
+(453)
+2,953
+2,084
+(14,413) (19,694)
+Net interest income/(expense)
+58,256
+60,856 62,406
+50,826
+11,466
+136,729 117,202
+9,228 4,601
+136,729
+117,202
+Net fee and commission income
+13,613
+12,942 25,860 16,765
+8,972
+5,672
+4,974
+4,115
+53,419 39,494
+Other net income
+2,622
+3,623
+(3,708)
+259
+Phase VII
+Other comprehensive income
+Proposed dividends for the year 2015
+17,402
+Balance at 31 December 2015
+60 25,220 76,681
+5,769
+241 34,009
+63,928 128,791
+17,402
+352,041
+Investment
+Regulatory
+Proposed
+Note
+Balance at 1 January 2014 (restated)
+25,220 76,681
+Share Capital revaluation Hedging Surplus
+capital reserve reserve reserve reserve
+(951) 23,502
+(5,649)
+Changes in equity for 2014:
+7,322
+788 5,188
+Net profit for the year
+(16,897)
+general Retained
+reserve profits
+45,762 86,697
+7,446 22,346
+51,877
+(16,897)
+10,720 (10,720)
+10,720
+Net profit for the year
+53,189
+53,189
+Other comprehensive income
+for the year
+for the year
+4,096
+404
+(2) 4,498
+Total comprehensive income
+4,096
+404
+53,189
+(2) 57,687
+Profit appropriations
+Appropriations to statutory
+surplus reserve
+Appropriations to regulatory
+general reserve
+|---- 5,319
+(5,319)
+Dividends paid for the year 2014
+(2) 40,790
+profit Exchange
+reserve Total
+5,188
+(5,188)
+7,446
+(7,446)
+(15,636)
+(15,636)
+(16,897)
+16,897
+60 25,220 76,681
+1,673 (163) 28,690
+53,208 109,043
+16,897
+2 311,251
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+49 Notes to consolidated cash flow statements
+(a) Analysis of the balances of cash and cash equivalents (with original maturity
+within 3 months):
+2015
+2014
+Cash and balances with central bank
+118,184
+(restated)
+appropriations
+Balance at 31 December 2014
+Dividends paid for the year 2013
+15,636
+(4) 266,894
+1,261
+6 44,357
+-
+51,877
+for the year
+for the year
+7,322
+788
+6 8,116
+Total comprehensive income
+7,322
+788
+51,877
+6 59,993
+Profit appropriations
+Appropriations to statutory
+surplus reserve
+Appropriations to regulatory
+general reserve
+Proposed dividends for the year 2014
+505
+(17,402)
+2 311,251
+The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging
+instruments used in cash flow hedges pending subsequent recognition of the hedged cash flow in accordance with
+the accounting policy adopted for cash flow hedge in Note 2(i)(iii).
+44 Surplus reserve
+Statutory surplus reserve is calculated according to the requirements of the Accounting Standards for Business
+Enterprises and other relevant regulations issued by the Ministry of Finance ("MOF") and is provided at 10% of the
+audited profit after tax. Surplus reserve can be used to offset accumulated losses or capitalised as paid-up capital
+with the approval of shareholders.
+At 1 January
+Statutory surplus reserve
+At 31 December
+2015
+2014
+28,690
+5,319
+23,502
+5,188
+34,009
+28,690
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+45 Regulatory general reserve
+Pursuant to relevant MOF notices, the Bank and the Group's financial services subsidiaries in Mainland China are
+required to set aside a general reserve according to a certain percentage of the ending balance of gross risk-bearing
+assets through profit after tax to cover potential losses against their assets. Effective from 1 July 2012, the minimum
+general reserve balance should increase to 1.5% of the ending balance of gross risk-bearing assets with a transition
+period of five years. The Bank and the Group's financial services subsidiaries in Mainland China have complied with
+the above requirements as of 31 December 2015.
+At 1 January
+Statutory general reserve
+At 31 December
+46 Profit appropriations
+43 Hedging reserve
+(a) Dividends approved/declared by shareholders
+1,902
+10,720 19,748
+254
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+42 Investment revaluation reserve
+Investment revaluation reserve has been accounted for in accordance with the accounting policies adopted for the
+measurement of the available-for-sale financial assets at fair value, net of deferred tax.
+The movements of investment revaluation reserve:
+Beginning Balance
+Share of investment revaluation reserve of joint ventures
+2015
+2014
+1,902
+64
+(5,547)
+35
+Realised (gain)/loss on disposal of available-for-sale
+financial assets, net of deferred tax
+(421)
+145
+Changes in fair value of available-for-sale financial assets,
+net of deferred tax
+4,643
+7,269
+6,188
+2015
+Ending Balance
+53,979
+33,421
+16,897
+29,531
+2015 profit appropriation is proposed in accordance with the resolution passed at the meeting of the Board of
+Directors held on 30 March 2016 and will be submitted to the 2015 annual general meeting for approval.
+47 Exchange reserve
+The exchange reserve comprises all foreign exchange differences arising from the translation of the financial
+statements of operations outside Mainland China.
+255
+256
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+17,402
+The reconciliation between the opening and closing balances of each component of the Group's consolidated
+equity is set out in the consolidated statement of changes in equity. Details of the changes in the Bank's individual
+components are as belows (note: the Statement of Changes in Equity for the year ended 31 Dec. 2014 and the
+balance of equity as at 1 Jan. 2015 are restated since the bank has adopted "IAS No.27 - Equity Method in Separate
+Financial Statement" in advance.):
+Regulatory
+Share
+Note capital
+Balance at 1 January 2015 (restated) 60 25,220
+Changes in equity for 2015:
+Capital revaluation Hedging Surplus
+reserve reserve reserve reserve
+76,681 1,673 (163) 28,690
+4,096 404 5,319
+general Retained
+Proposed
+profit Exchange
+reserve profits appropriations reserve Total
+53,208 109,043
+16,897
+2014
+Investment
+Total
+48 Capital, reserves and dividends.
+Dividends
+46,347
+- cash dividend: RMB6.90 per every 10 shares (2014: RMB6.70 per
+every 10 shares)
+10,700
+7,632
+64,679
+53,979
+2015
+Dividends in 2014, approved and to be declared RMB6.70
+per every 10 shares
+16,897
+Dividends in 2013, approved and to be declared RMB6.20
+per every 10 shares
+(b) Proposed profit appropriations
+2014
+15,636
+2015
+2014
+Statutory surplus reserve
+5,319
+5,188
+Regulatory general reserve
+10,700
+7,446
+572
+1,965
+4,380
+251
+4,631
+2014
+2015
+Contracted for
+(b) Capital commitments
+Authorised but not contracted for
+Authorised capital commitments were as follows:
+2,537
+For purchase of property and equipment:
+(c) Operating lease commitments
+Total future minimum lease payments under non-cancellable operating leases of properties are payable as follows:
+China Merchants Bank
+Annual Report 2015
+1 year to 5 years (inclusive)
+Non-current assets
+Total liabilities
+Total assets
+2015
+Geographical information
+(c) Geographical segments (continued)
+50 Operating segments (continued)
+XII Financial Statements
+"Subsidiaries" refers to subsidiaries wholly owned or controlled by the Group, including WLB, CMBICHC,
+CMBFLC and CMFM.
+"Western region" refers to branches in Sichuan province, Chongqing municipality, Guizhou province, Yunnan
+province, Shaanxi province, Gansu province, Ningxia Hui Autonomous region, Xinjiang Uyghur autonomous
+region, Guangxi Zhuang autonomous region, Inner Mongolia autonomous region, Qinghai province and Tibet
+autonomous region;
+52 Contingent liabilities and commitments (continued)
+"Overseas" refers to overseas branches in Hong Kong, New York, Singapore, Luxembourg and representative
+offices in London, New York and Taipei; and
+Within 1 year (inclusive)
+XII Financial Statements
+2015
+The Group calculated the credit risk weighted amount of its contingent liabilities and commitment in accordance
+with the requirements of the Administrative Measures on Capital of Commercial Banks (Trial) issued by the CBRC.
+The amount within the scope approved by the CBRC in April 2014 is calculated using the internal rating-based
+approach, and the risk-weighted approach is used to calculate those not eligible to the internal rating-based
+approach.
+- with an original maturity within 1 year (inclusive)
+"Pearl River Delta and West Coast region" refers to branches in Guangdong province and Fujian province;
+"Northeast region" refers to branches in Liaoning province, Heilongjiang province and Jilin province;
+"Central region" refers to branches in Henan province, Anhui province, Hunan province, Hubei province,
+Jiangxi province, Shanxi province and Hainan province;
+- with an original maturity over 1 year
+Credit card commitments
+Others
+2014
+235,692
+249,322
+188,469
+279,857
+363,035
+399,489
+China Merchants Bank
+Annual Report 2015
+5,979
+33,029
+23,694
+338,012
+5,884
+1,170,100
+266,094
+2,610
+1,225,128
+Irrevocable loan commitments only include credit limits granted to offshore customers by overseas branches, and
+onshore and offshore syndicated loans.
+Apart from the irrevocable loan commitments, the Group had loan commitments of RMB1,496,021 million at 31
+December 2015 (2014: RMB1,725,348 million) which are unconditionally cancellable by the Group or automatically
+cancellable due to deterioration in the creditworthiness of the borrower as stipulated in respective lending
+agreements. The Group will not assume any risks on the unused credit limits for these loan customers. As a result,
+such balances are not included in the above contingent liabilities and commitments.
+These commitments and contingent liabilities have off-balance sheet credit risk. Before the commitments are fulfilled
+or expired, management assesses and makes allowances for any probable losses accordingly. As the facilities may
+expire without being drawn upon, the total of the contractual amounts is not representative of expected future cash
+outflows.
+Credit risk weighted amounts of contingent liabilities and commitments
+2015
+349,816
+2014
+398,937
+4,062
+"Bohai Rim region" refers to branches in Beijing municipality, Tianjin municipality, Shandong province and
+Hebei province;
+2014
+"Headquarter" refers to the Group headquarter, special purpose vehicles at the branch level which are
+directly under the headquarter, associates and joint ventures, including the headquarter and credit card
+centres, etc;
+2015
+26,729
+2014
+23,497
+The Group expects that the amount of redemption before the maturity date of these government bonds through the
+Group will not be material.
+263
+264
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+53 Transactions on behalf of customers
+(a) Entrusted lending business
+The Group's entrusted lending business refers to activities where principals such as government departments,
+business entities and individuals provide capital for loan advances by the Group to their specified targets on their
+behalf in accordance with specific terms and conditions, with the help of the Group in monitoring loan usage and
+seeking loan recovery. The entrusted lending business does not expose the Group to any credit risk. As instructed by
+these principals, the Group holds and manages underlying assets and liabilities only in the capacity of an agent, and
+charges handling fees for related services.
+Entrusted lending are not assets of the Group and are not recognised in the statement of financial position. Income
+received and receivable for providing these services are recognised in the statement of profit or loss as fee and
+commission income.
+At the end of the reporting period, the entrusted assets and liabilities were as follows:
+Redemption obligations
+Entrusted loans
+2014
+243,797
+(320,110)
+(243,797)
+Entrusted funds
+(b) Wealth management services
+The Group's wealth management services to customers mainly represent sales of wealth management products to
+corporate and personal banking customers. The funds obtained from wealth management services are invested in
+investment products, including government bonds, PBOC bills, notes issued by policy banks, short-dated corporate
+notes and entrusted loans. The Group initiated the launch of wealth management products. The investment risk
+associated with these products is borne by the customers who invest in these products. The Group does not
+consolidate these wealth management products. The Group earns commission which represents the charges on
+customers in relation to the provision of custody, sales and management services.
+The wealth management products and funds obtained are not assets and liabilities of the Group and are not
+recognised in the statement of financial position. The funds obtained from wealth management services that have
+not yet been invested are recorded under other liabilities.
+At the end of the reporting period, funds received from customers under wealth management services were as
+follows:
+Funds received from customers under wealth management services
+2015
+1,820,694
+Irrevocable loan commitments
+2015
+320,110
+The redemption obligations below represent the nominal value of government bonds underwritten and sold by the
+Group, but not yet matured at the end of the reporting period:
+As an underwriting agent of PRC government bonds, the Group has the responsibility to buy back those bonds sold
+by it should the holders decide to early redeem the bonds held. The redemption price for the bonds at any time
+before their maturity date is based on the coupon value plus any interest unpaid and accrued up to the redemption
+date. Accrued interest payables to the bond holders are calculated in accordance with relevant rules of the Minister
+of Finance and the PBOC. The redemption price may be different from the fair value of similar instruments traded at
+the redemption date.
+(e) Redemption obligations
+To support the Bank's operations and management's assessments, the Geographical segments are defined as follows:
+In presenting information on the basis of geographical segments, operating income is allocated based on the
+location of the branches that generate the revenue. Segment assets and non-current assets are allocated based on
+the geographical location of the underlying assets.
+The Group operates principally in the PRC with branches located in major provinces, autonomous regions and
+municipalities directly under the central government. The Group also has branches operation in Hong Kong, New
+York, Singapore and Luxembourg, subsidiaries operating in Hong Kong and Shanghai and representative offices in
+London, New York and Taipei.
+(c) Geographical segments
+50 Operating segments (continued)
+Annual Report 2015
+XII Financial Statements
+China Merchants Bank
+260
+8,667
+540,986
+441,823
+14,671
+Over 5 years
+2015
+2014
+2,613
+2,293
+8,117
+7,991
+2,293
+2,674
+13,023
+12,958
+The Group leases certain properties under operating leases. The leases typically run for an initial period of 1 to 5
+years, and may include an option to renew the lease when all terms are renegotiated. None of the lease include
+contingent rental.
+(d) Outstanding litigations
+At 31 December 2015, the Group was a defendant in certain outstanding litigations with gross claims of RMB1,100
+million (2014: RMB595 million) arising from its banking activities. The Board of Directors consider that no material
+losses would be incurred by the Group as a result of these outstanding litigations and therefore no provision has
+been made in the financial statements.
+"Yangtze River Delta region" refers to branches in Shanghai municipality, Zhejiang province and Jiangsu
+province;
+Bills of acceptances
+762,902 590,741 761,795 586,447
+511,402 425,612 503,469 414,438
+Irrevocable guarantees
+25,521
+Pearl River Delta and West
+Coast region
+Northeast region
+607,634
+201,537
+527,907
+173,827 199,294
+597,665 515,926
+1,819
+1,862
+13,218 15,988
+30,122
+28,664
+25,823
+170,945
+1,473
+2,990
+3,865
+7,910
+8,078
+Central region
+Western region
+Overseas
+Subsidiaries
+Total
+385,401 333,656 382,889 328,146
+421,469 378,606 422,455 370,196
+142,219 126,892 140,900 121,176
+336,928 311,443 296,496 279,541
+5,474,978 4,731,829 5,113,220 4,416,769
+2,736
+2,798
+1,420
+3,683
+14,922
+2,522
+2014
+2015
+2014
+2015
+2014
+2015
+2014
+2015
+2014
+Headquarter
+2,105,486 1,863,145 1,808,257 1,629,954
+24,225
+11,163
+23,340
+1,998
+58,343
+25,146
+Yangtze River Delta region
+Bohai Rim region
+2014
+831,473
+2,914
+2,657
+3,572 10,514
+31,057
+30,436
+2,529
+31,968
+Irrevocable letters of credit
+7,510
+16,917
+Other assets
+2015
+2014
+185,652
+66,988
+13,367
+3,022
+67,980
+29,050
+2,752
+3,853
+102,330
+- Trading assets
+31,821
+67,746
+The transactions under repurchase agreements are conducted under terms that are usual and customary to standard
+lending and securities borrowing and lending activities.
+261
+262
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+52 Contingent liabilities and commitments
+(a) Credit commitments
+At any given time the Group has outstanding commitments to extend credit. These commitments take the form of
+approved loans and credit card limits.
+The Group provides financial guarantees and letters of credit to guarantee the performance of customers to third
+parties. Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group
+expects most acceptances to be settled simultaneously with the reimbursement from the customers.
+The contractual amounts of commitments and contingent liabilities are set out in the following table by category.
+The amounts reflected in the table for commitments assume that amounts are fully advanced. The amount reflected
+in the table for guarantees and letters of credit represents the maximum potential loss that would be recognised at
+the end of the reporting period if counterparties failed completely to perform as contracted.
+Contractual amount
+186,429
+16,788
+- Held-to-maturity investments
+Assets pledged
+2,832
+2,827
+431
+11,212
+19,487
+20,205
+91
+68
+1,791
+2,077
+2,230
+2,517
+- Available-for-sale financial assets
+11,312
+6,263
+5,345
+10,406
+8,883
+49,878
+43,858
+75,079
+73,431
+202,166 166,367
+51 Assets pledged as security
+The following assets have been pledged as collateral for liabilities under repurchase arrangements:
+Amounts sold under repurchase agreements
+6,311
+China Merchants Bank
+Annual Report 2015
+A- to A+
+54 Risk management
+Total
+2015
+668
+(601)
+67
+2014
+662
+(619)
+Unrated
+43
+7,574
+578,515
+463,607
+159,815
+154,334
+738,397
+The IMF announced RMB join the SDR in December 2015, followed by the PBOC's announcement of RMB exchange
+rate index, which will accelerate the process of RMB exchange rate unpeg to USD, and gradually reference to a
+basket of currencies, the RMB exchange rate formation mechanism will be more transparent, and will be more
+conducive in enhancing the liquidity and stability of RMB in the future. Along with the Fed rate hike and difference
+in Sino US economic development trend, USD increased significantly at the end of the fourth quarter, capital outflow
+boosted the appreciation of USD against RMB. Under the current easing of conditions, without PBOC's intervention,
+the exchange rate of RMB against USD, HKD, JPY and other currencies may continue to remain low.
+15,763
+617,984
+Lower than A-
+AA to AA+ (Note)
+2,411,949
+2,739,444
+2,448,754
+Loans and advances that were overdue or impaired had the terms been renegotiated amounted to RMB4,531 million
+as at 31 December 2015 (2014: RMB996 million).
+China Merchants Bank
+XII Financial Statements
+Annual Report 2015
+Revenue
+54 Risk management (continued)
+(iii)
+Credit quality of debt investments
+At the end of the reporting period, the analysis of the credit quality of debt investments by designated external
+credit assessment institution, Standard & Poors, is as follows:
+Individually assessed and impaired gross amount of debt investments
+Impairment allowances
+Subtotal
+Neither overdue nor impaired
+AAA
+(a) Credit risk (continued)
+2,683,636
+Note: Bonds issued by the PRC Government, PBOC and PRC Policy Banks held by the Group amounted to RMB532,353 million (2014: RMB428,082
+million (credit quality: AA-)) are included.
+Collateral and other credit enhancements
+The Group has established a market risk structure and system of the trading book, which including exchange
+rate risk, to quantify the exchange rate risk of the trading book for unified management. The structure,
+process and method of exchange rate risk of trading book are consistent with the interest rate risk of trading
+book.
+For management purpose, the Group adopts quantitative indicators such as exposure indicator, market
+value at risk indicator (VaR, including interest rate, foreign exchange rate, commodity risk factors), exchange
+rate scenario stress test loss index, exchange rate sensitivity index, cumulative loss index, the management
+method includes conducting business entitlement, setting quota limits, daily monitoring and continuous
+reporting, etc.
+Since 11 August 2015, with accelerating devaluation and increasing volatility of RMB, the Group reduced
+its foreign exchange exposure and risk limit threshold, strengthened its tracking of the movements in the
+currency market, improved risk monitoring level, so as to effectively control the Group's foreign exchange risk
+exposure in the trading book. Due to the prudent trading strategies and strict risk management methods,
+trading book of foreign exchange businesses maintained stable, the risk indicators performed well.
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+269
+54 Risk management (continued)
+Trading book
+(b) Market risk (continued)
+Foreign exchange risk (continued)
+7,095
+(2) Banking book
+The Group's foreign exchange risk under the banking book is overall managed by the Head Office. The Asset
+and Liability Management Department, as the treasurer of the Bank is in charge of the banking book foreign
+exchange risk management. The treasurer is responsible to manage the foreign exchange risk under the
+banking book using a prudent approach and compliant with the regulatory requirements, and managing the
+foreign exchange risk through management of limits, controlled adjustments and budget.
+The banking book foreign exchange risk of the Group arises from the mismatch in the non-RMB assets and
+liabilities. The Group stringently monitors its foreign exchange risk exposures to manage its foreign exchange
+risk within an acceptable level.
+The Group has adopted foreign exchange exposure analysis, scenario simulation analysis and stress testing
+for the measurement and analysis of foreign exchange risk. The Group regularly measures and analyses the
+foreign exchange risk exposure fluctuations, monitors and reports foreign exchange risk on a monthly basis
+under the limit framework, adjusts the foreign exchange exposures based on the trend of foreign exchange
+rate movements to mitigate the banking book foreign exchange risk.
+In the first half of 2015, the Group has further optimized the foreign exchange risk measuring method of
+the banking book, which offers a logical reference for the management decision making. The Group has
+continuously strengthened its foreign exchange risk monitoring in the banking book and authorization limits
+management, to ensure the risk exposure is in a reasonable range.
+(i)
+XII Financial Statements
+(1)
+Foreign exchange risk
+An estimate of the fair value of collateral and other credit enhancements held against financial assets that are
+overdue but not impaired is as follows:
+Estimate of the fair value of collateral and
+other credit enhancements held against
+- Loans and advances to customers
+2015
+2014
+115,400
+Foreign exchange risk arises from the holding of foreign currency assets, liabilities and equity items, and the foreign
+currency and foreign currency derivative positions which may expose the Group to potential losses in the event
+of unfavourable foreign exchange rate movement. The functional currency of the Group is RMB. The financial
+assets and liabilities of the Group are denominated in RMB, and the other currencies are mainly USD and HKD. The
+Group has established its foreign exchange risk management and governance framework based on segregation
+of duty principle, which segregates the responsibilities of the establishment, execution and supervision of foreign
+exchange risk. This framework specified the roles, responsibilities and reporting lines of the Board of Directors,
+Supervisors, senior management, designated committees and relevant departments of the Bank in the management
+of foreign exchange risk. The Group takes a prudent strategy in the management of foreign exchange risk, and
+would not voluntarily take foreign exchange risk, which suits the current development of the Group. The current
+foreign exchange risk management policies and procedures of the Group fulfil the regulatory requirements and the
+requirements of the Group in the management of foreign exchange risk.
+88,929
+268
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+54 Risk management (continued)
+(b) Market risk
+Market risk is the risk that the fair value or future cash flows of the Group's financial instruments will fluctuate and
+which may result in loss to the Group, because of changes in foreign exchange rate, interest rate, commodity price,
+stock price and other observable market factors. Interest rate and foreign exchange rate are the two major market
+risk factors relevant to the Group. The Group is exposed to market risk through the financial instruments under the
+trading book and banking book. The financial instruments under the trading book are held for trading purposes
+or for the purposes of hedging the risks arsing from the trading book position, and these financial instruments
+are traded in active market. The financial instruments under the banking book are assets and liabilities held by
+the Group for stable and determinable return, or for the purposes of hedging the risks arising from the banking
+book position. The financial instruments under the banking book include both the Group's on-balance sheet and
+off-balance sheet exposure, and have relative stable market value.
+(i)
+267
+(48,215)
+(iv)
+2,460,164
+Credit risk (continued)
+(i)
+Maximum exposure
+The Group's maximum exposure to credit risk without taking account of any collateral held or other credit
+enhancements is the total amount of the carrying amount of the relevant financial assets (including derivatives) as
+disclosed on the balance sheet and the carrying amount of the off balance sheet items disclosed in Note 52(a). At
+31 December 2015, the maximum exposure to credit risk of the Group's relevant on balance sheet items and off
+balance sheet items is RMB8,043,986 million (2014: RMB7,597,633 million).
+(ii)
+The credit quality of loans and advances to customers can be analysed as follows:
+2015
+(a)
+5,543
+For which impairment allowances are individually assessed
+Gross amount
+34,326
+20,484
+Less: Impairment allowances
+(14,624)
+(9,577)
+Impaired loans and advances to customers
+Carrying amount
+(58,812)
+Annual Report 2015
+(a) Credit risk
+Credit risk represents the potential loss that may arise from the failure of a counterparty or a debtor to meet its
+obligation or commitment to the Group. Credit risk increases when all counterparties are concentrated in a single
+industry or a geographical region, as different counterparties in the same region or industry may be affected by the
+same economic development, which may eventually affect their repayment abilities.
+The Group has designed its organisation framework, credit policies and processes with an objective to identify,
+evaluate and manage its credit risk effectively. The Risk and Capital Management Committee, set up and appointed
+by the Board of Directors is responsible for supervising and evaluating the set-up, organisational structure, work
+process and effectiveness of various risk management functions.
+With respect to daily operations, the Risk Management Department, as directed by the Risk and Capital Management
+Committee, participates in, coordinates and monitors the work of other risk management functions, including each
+business unit and the Legal and Compliance Department. The Group manages credit risk throughout the entire credit
+process including pre-lending evaluations, credit approval and post-lending monitoring.
+With respect to the credit risk management of corporate financial business, the Group formulated credit policy
+guideline, and enhanced credit acceptance and exit policies for corporate and institutional clients, and implements
+limit control measures to improve the quality of credit exposure.
+With respect to the credit risk management of retail financial business, the Group relies on credit assessment of
+applicants as the basis for loan approval. Customer relationship managers are required to assess the income level,
+credit history, and repayment ability of the applicant. The Group monitors post-lending conditions by focusing on
+borrowers' repayment ability, the status of collateral and any changes to collateral value. Once a loan becomes
+overdue, the Group starts the collection process according to standard retail loans collection procedures.
+To mitigate risks, the Group requests customers to provide collateral and guarantees when necessary. Certain
+guidelines have been set for the acceptability of specific types of collateral or credit risk offset. Collateral structures
+and legal covenants are reviewed regularly to ensure that they can still cover the given risks and be consistent with
+market practices.
+54 Risk management (continued)
+In respect of loan classification, the Group adopts a risk based loan classification methodology. Currently, the Group
+categorises its loans on a ten-grade loan classification basis in order to refine internal risk classification management
+(normal (grades 1-5), special mention (grades 1-2), substandard, doubtful and loss). The loans and advances for
+which objective evidence of impairment exists based on a loss event or several events and which bear significant
+impairment losses are classified as impaired loans and advances. The allowances for impairment losses for the
+impaired loans and advances are assessed collectively or individually as appropriate.
+Concentration of credit risk: when certain number of customers are in the same business, located in the same
+geographical region or their industries share similar economic characteristics, their ability to meet their obligations
+may be affected by the same economic changes. The level of concentration of credit risk reflects the sensitivity of
+the Group's operating result to a specific industry or geographical region. To prevent concentration of credit risk, the
+Group has formulated the quota limit management policy to monitor and analyse the loan portfolio.
+Analyses of loans and advances by industry and loan portfolio are stated in Note 19.
+The Group's credit risk management policy for derivative financial assets is the same as that for other transactions.
+In order to mitigate the credit risk arising from financial derivatives, the Group has signed hedging agreements with
+certain counterparties.
+265
+266
+China Merchants Bank
+XII Financial Statements
+The risks involved in contingent liabilities and commitments are essentially the same as the credit risk involved in
+loans and advances to customers. These transactions are, therefore, subject to the same credit application, post-
+lending monitoring and collateral requirements as for customers applying for loans.
+19,702
+Profit before tax
+For which impairment allowances are collectively assessed
+(2,640)
+(3,600)
+25,863
+34,442
+6
+282
+254
+30,842
+2,217
+Total carrying amount
+Carrying amount
+- collectively assessed
+Gross amount
+Neither overdue nor impaired
+Carrying amount
+10,907
+31,689
+23,223
+Less: Impairment allowances
+Less: Impairment allowances
+- collectively assessed
+Gross amount
+2,742,448
+13,070
+7,408
+(7,806)
+(4,733)
+Carrying amount
+5,264
+Less: Impairment allowances
+Overdue but not impaired
+25,105
+752
+- within 3 months (inclusive)
+- 3 months to 6 months (inclusive)
+- 6 months to 1 year (inclusive)
+2,675
+Gross amount
+- Over 1 year
+(3,541) 361,928
+1,425
+15,153
+Net off-balance sheet
+76,905
+Credit commitments (Note)
+725,713
+24,916
+24,088 851,622
+12,709
+11,832
+position:
+9,263
+251,507
+123,459
+58,090 5,113,050
+Net on-balance sheet
+position
+146,276
+27,012
+3,733
+133
+7,205
+1,604
+421
+-
+(6,156)
+27,802 (25,916)
+(14,504)
+(5,163)
+6,043
+3,131
+122,682
+29,708
+377,497
+Derivatives:
+position
+- forward sold
+in million
+RMB
+USD
+HKD
+Others
+Total
+USD
+HKD
+Cash and balances
+with central bank
+621,938
+18,874
+13,327
+646 654,785
+3,044
+16,669
+Amounts due from
+banks and other
+financial
+institutions
+458,014
+Original currency
+2014
+Assets
+Foreign exchange risk (continued)
+347,450 495,820
+(417,201) (482,020)
+61,572
+(52,239)
+93,045 997,887
+(56,359) (1,007,819)
+76,282
+73,414
+(74,159)
+(62,286)
+- net currency option
+(15,074)
+8
+- forward purchased
+(69,751) (1,274)
+(194) (15,260)
+36,492 (25,192)
+(2,319)
+10
+(196)
+11,138
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+54 Risk management (continued)
+(b) Market risk (continued)
+(i)
+9,341
+Equivalent in RMB million
+Trading book
+4,886
+271
+Credit commitments generally expire before they are drawn, therefore the above net position (net of pledged deposits) does not represent the
+future cash out flows.
+Note:
+123,824
+9
+24
+(1,450)
+(516)
+(10,647)
+(674)
+750
+98,997
+7
+151
+(8,993)
+(101,401)
+position
+- net currency option
+69,352 222,927
+(70,826) (99,112)
+942,182
+(952,313)
+50,907
+(49,483)
+2,357
+(102,492)
+Net off-balance sheet
+position:
+Credit commitments (Note)
+829,782 110,738
+272
+(39,226)
+909,241
+17,861 (49,063)
+Derivatives:
+- forward purchased
+- forward sold
+283,065 429,980 178,230
+(384,466) (439,124) (79,240)
+7,947
+2,437 315,048
+China Merchants Bank
+Annual Report 2015
+54 Risk management (continued)
+(1)
+Interest rate risk arises from adverse change in interest rates and maturity profiles which may result in loss to the
+income and market value of financial instruments and positions held by the Group.
+Interest rate risk
+(ii)
+(b) Market risk (continued)
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Based on the assumptions above, actual changes in the Group's net foreign exchange gains and losses resulting from
+increases or decreases in foreign exchange rates may be different from the results of this sensitivity analysis.
+the foreign exchange exposures calculated include spot foreign exchange exposures, forward foreign
+exchange exposures and options.
+(iii)
+the exchange rates against RMB for all foreign currencies is the change in the same direction simultaneously;
+and
+(ii)
+the foreign exchange rate sensitivity is the foreign exchange gains and losses recognised as a result of a
+standard 100 basis point fluctuation in the foreign currency exchange against RMB;
+(i)
+The above sensitivity analysis is based on a static foreign currency exposure profile of assets and liabilities. In view of
+the nature of the RMB exchange rate regime, the analysis is based on the following assumptions:
+(37)
+(b) Market risk (continued)
+(i)
+Foreign exchange risk (continued)
+Under the existing managed floating exchange rate regime, the Group uses sensitivity analysis to measure the
+potential effect of changes in foreign currency exchange rates on the Group's net foreign exchange gains and losses.
+The following table set forth the results of the Group's foreign exchange risk sensitivity analysis on the assets and
+liabilities as at 31 December 2015 and 31 December 2014.
+Increase/(decrease) in annualised net profit
+2015
+XII Financial Statements
+Change in foreign currency
+exchange rate (in basis points)
+2014
+Change in foreign currency
+exchange rate (in basis points)
+100
+(94)
+(100)
+100
+37
+(100)
+94
+(81,942)
+14,619
+379,934
+Amounts due to banks and
+Liabilities
+151,398
+52,154
+175,569
+9,428
+562
+22,079
+5,514
+996,217
+107,010
+3,705
+572
+31,596 4,731,817
+121,043
+17,652
+7,538
+34,184
+3,487
+323,354
+4,255,824
+940,676
+95,413
+Other assets
+10,060 525,051
+8,402
+6,111
+Loans and advances
+to customers
+2,139,783
+other financial institutions
+214,718
+16,613 2,448,754
+34,632
+97,111
+Investments
+(including
+derivatives)
+77,640
+799,722
+Deposits from customers
+74,400
+210,658
+14,356
+84
+6,592
+4,532
+202,985
+23,615
+106,155
+411 103,522
+29,159 4,416,769
+617
+3,823
+15,962
+3,892
+308,735
+17,956
+8,245
+628
+49,797
+5,669
+253,890
+Net on-balance sheet
+position
+2,575
+52,091
+3,875,890
+Other liabilities
+3,064
+174,441
+1,853
+26,811
+879,039
+3,304,438
+12,000
+3,832
+94,687
+33,977
+Financial liabilities at fair
+value through profit or
+loss (including derivatives)
+5,352
+Debt securities issued
+83,601
+218,188
+4,756,709
+2,892,528
+119,943
+Asset-liability gap
+Total liabilities
+Other liabilities
+profit or loss (including derivatives)
+Debt securities issued
+Financial liabilities at fair value through
+Deposits from customers
+Amounts due to banks and other
+financial institutions
+Liabilities
+176,313
+306,716
+566,911
+119,779
+119,779
+5,474,978 3,221,549 1,203,489
+Total assets
+Other assets
+15,003
+296,912
+9,102
+2,009
+702
+535,143 45,374 10,168
+1,647,629 905,992 176,721
+493,957 252,123 380,022
+1,438,017
+Investments (including derivatives)
+1,138,584 871,075 254,003
+3,571,698 2,596,345
+603,585
+9,202
+357,570
+4,304
+China Merchants Bank
+Annual Report 2015
+276
+275
+32,473
+275,982
+172,095
+231,240
+361,758 (350,032)
+143,840
+30,734
+394,816
+2,739,444
+972,249
+123,411
+26
+24,232
+8,015
+388
+6,551
+21,425
+68
+6,228
+108,411
+22
+6,620
+97,439
+102
+27,802
+251,507
+123,629
+8,110
+6,088
+5,113,220 3,571,581
+XII Financial Statements
+Loans and advances to customers (Note)
+Amounts due from banks and other
+financial institutions
+(iii)
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+274
+273
+In 2015, the downward of market interest rate, and significantly decreased yield curve for all kinds of bonds
+resulting in the "bull market" in the RMB bonds market. The Group conducted comprehensive researches
+on and timely tracked the macro economy, monetary policy and market situation, and deployed trading
+strategies correspondingly. All risk indicators under the trading book performed well.
+For management purpose, the Group adopts quantitative indicators such as exposure indicator, market value
+at risk indicator (VaR, including interest rate, foreign exchange rate, commodity risk factors), exchange rate
+scenario stress test loss index, exchange rate sensitivity index, cumulative loss index, the management method
+includes conducting business entitlement, setting quota limits, daily monitoring and continuous reporting,
+etc. The VaR includes general market value at risk and pressures market value at risk which calculated by
+using historical simulation.
+In 2015, the Group continued to enhance the trading book market risk management framework based on
+existing practice. The Group has optimised the procedures, processes and tools for the measurement and
+monitoring of market risk, and enhanced application of management tools in management of market risk.
+The Group has established market risk limits management framework, covering the interest rate risk, foreign
+exchange rate risk and commodity price risk under the trading book. Within this framework, the highest
+level indicators, which are also the trading book market risk preference quantitative indicators of the Group,
+adopt VaR and portfolio stress testing methodologies and directly link to the Bank's net capital. In addition,
+according to the product type, trading strategy and characteristics of risk of sub-portfolio, the highest level
+indicators are allocated to lower level indicators, and to each front office departments. These indicators are
+monitored and reported on a daily basis.
+there are no other changes to the portfolio.
+Actual changes in the Group's net interest income resulting from increase or decrease in interest rates may differ
+from the results of this sensitivity analysis.
+277
+278
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+54 Risk management (continued)
+(c) Liquidity risk
+Liquidity risk arises when the Group fails to satisfy customers' demand for drawing down on maturing liabilities, new
+loans and reasonable finances, or when it fails to meet their needs at a normal cost.
+In line with its liquidity risk management policies, the Group sets out and implements the principle of supervisory
+duty segregation. It also puts in place a governing framework under which the roles, responsibilities and reporting
+lines of the Board of Directors, Supervisors, senior management, designated committees and relevant departments to
+ensure the effectiveness of the liquidity risk management. The Group is prudent in managing the risk, which better
+suits its current development stage. Basically, the Group's existing liquidity risk management polices and systems
+meet regulatory requirements and its own management needs.
+The Group's liquidity risk management is coordinated by Head Office with branches acting in concert. The Asset
+and Liability Management Department acts as the treasurer of the Group is in charge of routine liquidity risk
+management. The treasurer is responsible for managing liquidity on a prudent basis under regulatory requirement,
+and conducting centralised liquidity management through quota management, budget control, initiative debt
+management as well as internal fund transfer pricing.
+The Group measures, monitors and identifies liquidity risk by short-term reserves as well as duration structures
+and contingencies. It closely monitors various limit indicators at regular intervals, performs regular stress testing to
+judge whether it can address liquidity needs under extreme circumstances. In addition, the Group draws up liquidity
+contingency plans and conducts liquidity contingency drills to prepare for liquidity crises.
+In the first half of 2015, the overall market liquidity was more relaxed, only appeared as periodic tightened phase
+due to seasonal factors during the Spring Festival. Despite foreign exchange exposure continued to decline, under
+the guidance of the PBOC cutting interest rates in a timely manner and reducing the open market reverse repurchase
+rate, the market outlook was expected by institutions to be stabilized on the funding side and the inter-bank
+funding maintained at relaxed level. The Group's liquidity risk remained in a medium-low level. During the second
+half
+year,
+the PBOC monetary policy continued to put in more weights, in the continuation of lowering interest rates
+and RMB deposit reserve ratio (RRR), the PBOC reformed the deposit reserve appraisal system, and established the
+interest rate corridor, lead down the market medium-term and long-term interest rate. The overall market liquidity
+remained neutral and relaxed. During the year end, affected by MLF maturity, deposit deviation assessment and
+seasonal factors influences, market liquidity slightly fluctuated, the Group made liquidity arrangements in advance to
+ensure a smooth overall operation of the Group.
+(b) Market risk (continued)
+(ii)
+Interest rate risk (continued)
+(2)
+39,522
+544,820
+584,342
+Cash and balances with central bank
+Assets
+Non-
+interest
+bearing
+Over
+5 years
+1 year
+to 5 years
+Over
+Over
+3 months
+to 1 year
+3 months
+or less
+(include
+overdue)
+593,396
+Total
+The following table indicates the expected next repricing dates (or maturity dates whichever are earlier) for assets
+and liabilities at the end of the reporting period.
+Interest rate risk (continued)
+(ii)
+(b) Market risk (continued)
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+In 2015, there were five interest rate cuts by the PBOC, one-year benchmark deposit rate was cut by 125
+basis points in total; one-year benchmark lending rate was also cut by 125 basis points, at the same time the
+PBOC has fully liberalized the deposit interest rate ceiling. To mitigate the negative impact of the interest rate
+cuts and deposit interest rate celling, the Group adopted active countermeasures, including coordinating the
+interest rate risk management and FTP management, continue to adjust the duration of the loans; improving
+the deposit differential pricing mechanism, pricing sensitivity and pertinence, based on the interest rate
+sensitivity analysis and customer pricing behaviour analysis; reasonably control structured deposit and other
+related high cost deposits, maintaining a comparative advantage on the cost of liabilities. In future, the
+Group will continue to take on several measures to improve the fine management capacity of banking book
+interest rate risks, in systems, processes and evaluations aspects, to achieve steady growth in net interest
+income and economic value.
+The Group has primarily adopted scenario simulation analysis, re-pricing gap analysis, duration analysis and
+stress testing for the measurement and analysis of interest rate risk under the banking book. Through assets
+and liabilities analysis meetings and reporting framework, the Group analyses the route causes of interest
+rate risk under the banking book, proposes management advices and implements management measures.
+In 2015, the Group paid close attention to changes in the external interest rate environment, predicted
+movements in interest rates in rolling basis; strengthened NII fluctuations monitoring analysis; deepened NII
+schedule and budget gap analysis. On the foundation of the macro prediction and refinement of internal
+management mentioned above, the Group took the initiative to put forward an prospective program
+of optimizing assets and liabilities; to ensure that the overall interest rate risk levels remained within
+management objectives, and to safeguard the stable operation of the NII.
+The Group has established the governance and management framework according to the interest rate risk
+management policy for the banking book, which specified the roles, responsibilities and reporting lines of
+the Board of Directors, senior management, designated committees and relevant departments to ensure the
+effectiveness of interest rate risk management. Interest risk of the banking book of the Group is managed
+concentratively by the Asset and Liability Management Department.
+Banking book
+2015
+The Group had adopted various measures to deal with the liquidity risk profile for this year, to ensure the smooth
+operation of the bank's liquidity: (1) utilized FTP regulating mechanism to guide branches to absorb the duration
+and total amount of liabilities, to balance the source of funding and usage of funding. (2) strengthened the asset
+and liability management of the bill business and other related business, improved the maturity mismatch situation.
+(3) carried out short-term and long-term initiative liabilities in a flexible manner, including the issuance of interbank
+deposits, certificates of deposit, as well as the use of central bank monetary policy tools for financing, coordination
+of liquidity and cost of liability, ensuring the Group's source of funding. (4) steadily progressed in assets backed
+securitization. The total amount of assets backed securities issued in 2015 was RMB23,020 million, including
+RMB7,200 million for mortgages and RMB15,820 million for credit card receivables for vehicle. (5) through proactive
+risk management, the Group deployed investment and financing strategy based on the fundamental of dynamic
+forecasting of future cash flows, to reduce cost and increase revenue.
+54 Risk management (continued)
+(ii)
+191,120
+379,351
+(499,620)
+315,060
+Asset-liability gap
+121,496
+32,868
+102,427
+94
+31,165
+10,275
+165
+6,213
+15,817
+917
+378,973
+914,524
+4,416,769 2,968,908
+Total liabilities
+927
+38,380
+61
+6,035
+20,793
+23
+106,155
+103,522
+Other liabilities
+Debt securities issued
+23,615
+profit or loss (including derivatives)
+220,838
+23,371
+Note:
+For loans and advances to customers, the "3 months or less" category includes overdue amounts as at 31 December 2015 and 31 December
+2014, net of allowances for impairment losses. Overdue amounts represent loans of which the whole or part of the principals or interest was
+overdue.
+10,425
+864
+there is a parallel shift in the yield curve and in interest rates; and
+(ii)
+all assets and liabilities that reprice or are due within one year reprice or are due at the beginning of the
+respective periods;
+(i)
+This sensitivity analysis is based on a static interest rate risk profile of assets and liabilities. The analysis measures
+only the impact of changes in the interest rates within a year, as reflected by the repricing of the Group's assets and
+liabilities within a year, on annualised interest income. The analysis is based on the following assumptions:
+995
+(995)
+1,042
+(25)
+25
+Financial liabilities at fair value through
+(25)
+(Decrease)/increase in annualised net interest income
+2014
+Change in interest rates
+(in basis points)
+Change in interest rates
+(in basis points)
+2015
+The Group uses sensitivity analysis to measure the potential effect of changes in interest rates on the Group's net
+interest income. The following table sets forth the results of the Group's interest rate sensitivity analysis on the
+assets and liabilities as at 31 December 2015 and 31 December 2014.
+Interest rate risk (continued)
+(ii)
+(b) Market risk (continued)
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+25
+(1,042)
+(b) Market risk (continued)
+6,726
+2,068
+2,817
+41,218
+86,569
+394,447
+525,051
+22,267
+632,518
+654,785
+Cash and balances with central bank
+Amounts due from banks and other
+financial institutions
+Assets
+Non-
+interest
+bearing
+5 years
+to 5 years
+to 1 year
+Over
+1 year
+3 months
+Over
+Over
+3 months
+or less
+(include
+overdue)
+Total
+2014
+Interest rate risk (continued)
+Loans and advances to customers (Note)
+2,448,754
+1,294,461
+962,393
+20,526
+663,147 193,298
+2,278,910 681,858
+3,304,438
+Deposits from customers
+879,039
+financial institutions
+Amounts due to banks and other
+Liabilities
+144,867
+253,706
+570,093
+335,500
+4,731,829 2,469,288 1,293,875
+107,022
+107,022
+Other assets
+12,761
+212,029
+378,652
+147,862 244,913
+996,217
+Investments (including derivatives)
+41,677
+150,223
+Total assets
+China Merchants Bank
+Annual Report 2015
+1,444
+54 Risk management (continued)
+(b) Market risk (continued)
+(i)
+Foreign exchange risk (continued)
+Assets and liabilities by original currency are shown as follows:
+2015
+Equivalent in RMB million
+RMB
+USD
+HKD
+Original currency
+in million
+Others
+Total
+USD
+HKD
+Assets
+Cash and balances with
+central bank
+509,747
+44,537
+28,345
+1,713
+584,342
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+270
+32,519
+251,507
+Other liabilities
+63,634
+22,662
+7,666
+13,531
+11,503
+Total liabilities
+2,454,963
+701,242 514,913
+6,852
+963,975
+2,518
+39,448
+2,115
+123,629
+9,789 5,113,220
+(Short)/long position
+(2,292,664)
+295,914 43,033
+286,809
+612,947 823,705
+592,014 361,758
+279
+428,890
+27,257
+33,796
+and other financial
+institutions
+28,437
+161,429
+Liabilities
+Amounts due to banks and
+other financial institutions 1,051,084
+Deposits from customers
+3,135,623
+78,385
+254,346
+4,640
+114,031
+4,475 1,138,584
+67,698 3,571,698
+12,060
+5,532
+39,131
+135,962
+Financial liabilities at
+fair value through
+profit or loss
+(including derivatives)
+215,920 (168,451)
+Debt securities issued
+235,039
+XII Financial Statements
+Other liabilities
+7,686
+1,189
+6,756
+(20,880)
+465,757
+109,509
+7,011
+11,119
+593,396
+16,848
+8,359
+Loans and advances to
+customers
+2,473,949
+158,776
+Amounts due from banks
+87,923
+24,428 104,832
+Investments (including
+derivatives)
+1,582,388
+(135,718)
+Other assets
+102,365
+7,728
+5,134,206
+184,832
+(11,533) 1,440,803
+454 116,993
+20,549 5,474,978
+18,796 2,739,444
+95,056
+5,666
+6,446
+135,391
+31,016
+593,396
+Loans and advances to customers
+(Note (ii))
+19,954
+124,077
+The Group has set up its market risk governance framework for trading book, covering interest rate risk,
+foreign exchange risk and commodity price risk. The Group's market risk governance framework for trading
+book specifies the roles, responsibilities and reporting pipeline of the Board of Directors, senior management,
+designated committees and relevant departments to ensure the effectiveness of the trading book market risk
+management. The market risk management department under the Bank's entire risk management office is
+responsible for execution of the management of interest rate risk under the trading book.
+421,499 972,196
+609,807
+553,893
+38,018 2,739,444
+Investments (Note (iii))
+- Financial assets at fair value
+through profit or loss
+(including derivatives)
+7,975
+5,992
+12,926
+27,836
+3,791
+10,737
+69,257
+- Available-for-sale financial assets
+12,234
+11,847
+711
+10,480
+45,004
+61,785
+Analysis of the Group's assets and liabilities by residual maturity is as follows:
+(c) Liquidity risk (continued)
+65,659
+2015
+After
+After
+After
+Repayable
+Within
+on demand 1 month
+1 month
+but within
+3 months
+49,199
+but within
+1 year
+After
+5 years
+5 years Indefinite
+Cash and balances with central bank
+(Note (i))
+118,184
+466,158
+584,342
+Amounts due from banks and
+other financial institutions
+12,173
+463,243
+3 months 1 year but
+within
+163,821
+Total
+through profit or loss
+863,153
+601,803
+5,474,978
+Amounts due to banks and
+378,326 339,324
+2,009,673 306,603
+146,406 247,988
+294,047 603,543
+22,805
+3,735
+357,544
+288
+1,138,584
+1,041,837
+3,571,698
+(including derivatives)
+3,330
+1,637
+1,135
+3,857
+9,781
+388
+27,802
+7,674
+59,912
+Debt securities issued
+Financial liabilities at fair value
+119,779
+other financial Institutions
+Deposits from customers (Note (iv))
+12
+1,327
+2,364
+15,016
+106,212
+228,206
+83,618
+353,137
+- Debt securities classified as
+receivables
+- Held-to-maturity investments
+Other assets
+Total assets
+383,659
+299,559
+1,065
+2,052
+716,064
+11,988
+162,299
+16,286
+3
+121,629
+145,463
+49,024
+5,435 10,980
+557,946 1,250,784
+4,641
+997,156
+2,546
+353,137
+investments
+-Held-to-maturity
+2,549
+81,673
+199,827
+761
+12,878
+12,823
+362,387
+299,559
+financial assets
+- Available-for-sale
+502,642
+52,637
+2,255
+5 years
+18,881
+6,167,555
+5,361,937
+5,094
+1,163
+9,390
+16,485
+16,914
+Other assets
+3,869
+49,586
+727,709
+716,064
+receivables
+classified as
+- Debt securities
+13
+346,591
+131,033
+383,829
+31,642
+11,544
+6,289
+62,507
+465,863
+597,368
+593,396
+financial institutions
+banks and other
+Amounts due from
+466,158
+118,184
+584,342
+584,342
+central bank
+Cash and balances with
+assets
+Non-derivative financial
+161,061 1,006,180
+Indefinite
+45,870
+13,543
+10,856
+Loans and advances to
+8,262
+65,591
+59,081
+profit or loss
+fair value through
+- Financial assets at
+Investments
+39,920
+855,004
+788,968
+1,034,042
+439,169
+131,985
+21,943
+3,311,031
+2,739,444
+customers
+728
+797
+575,095
+1,537
+126,064
+997,935
+522,836
+706,565
+5,221,561 2,454,990
+5,067,218
+2,066
+1,010
+4,648
+3,919
+19,267
+54,350
+86,797
+85,202
+Other liabilities
+33,336
+43,477
+97,416
+497,980
+66,230
+39,171
+Gross loan commitments
+Carrying
+After
+1 year
+3 months
+1 month
+After
+After
+After
+2014
+Non-derivative financial
+(c) Liquidity risk (continued)
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+282
+281
+377,020 377,020
+2,084
+146,600
+1,715
+31,286
+388
+1,152,224 379,034 341,555
+3,690,568 2,018,276
+3,571,698
+Deposits from customers
+1,138,584
+other financial institutions
+Amounts due to banks and
+liabilities
+Non-derivative financial
+513,189
+1,309,981
+1,288,761
+1,313,288
+3,016
+33
+371
+44
+21,586
+148,542
+18
+254,747
+3,855
+9,781
+3,865
+1,188
+1,657
+3,330
+20,227
+271,745
+251,507
+Debt securities issued
+20,227
+profit or loss
+fair value through
+Financial liabilities at
+582
+415,583
+637,988
+305,339
+312,800
+24,491
+1 year
+but within
+5 years
+15,147
+1 month
+but within
+3 months
+78,302
+3,163
+792
+- Held-to-maturity investments
+278,526
+2,166
+35,863
+183,495
+38,749
+10,711
+7,542
+- Available-for-sale financial assets
+49,505
+9,761
+1,476
+15,872
+7,540
+162,019
+11,041
+11
+- Debt securities classified as
+107,022
+73,136
+324
+901
+9,142
+5,868
+5,735
+11,916
+Other assets
+408,752
+5
+27,837
+152,995
+152,693
+41,529
+33,693
+receivables
+259,434
+Total assets
+3,815
+through profit or loss
+5 years
+After
+1 year but
+within
+5 years
+3 months
+but within
+1 year
+1 month
+but within
+3 months
+1 month
+Within
+Repayable
+on demand
+After
+After
+2014
+After
+Cash and balances with central bank
+(c) Liquidity risk (continued)
+54 Risk management (continued)
+XII Financial Statements
+amount
+Indefinite
+(including derivatives)
+Total
+149,938
+- Financial assets at fair value
+Investments (Note (iii))
+23,215 2,448,754
+427,737
+518,480
+118,394 388,499 970,897
+1,532
+Loans and advances to customers
+(Note (ii))
+542 525,051
+43,562
+69,849
+75,539
+327,078
+8,481
+other financial institutions
+Amounts due from banks and
+504,847 654,785
+(Note (i))
+3 months
+but within
+1 year
+171,867
+536,350
+565,606
+(152,158) (191,884) 365,900
+(1,492,997)
+(Short)/long position
+12,572 4,416,769
+35,774
+428,001
+898,117
+728,234
+649,207
+1,664,864
+Total liabilities
+103,522
+2,297
+1,193
+8,005
+13,100
+619,482
+12,450
+601,111 315,060
+(i)
+1 month
+Within
+Repayable
+Total on demand
+Carrying
+amount
+After
+After
+After
+2015
+The following table provides an analysis of the contractual undiscounted cash flow of the non-derivative financial
+assets, liabilities and gross loan commitments of the Group as at the end of the reporting period. The Group's
+expected cash flow on these instruments may vary significantly from this analysis.
+(c) Liquidity risk (continued)
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+(iv) The deposits from customers that are repayable on demand included time deposits matured and awaiting for customers' instructions.
+(iii) The residual maturities of financial assets at fair value through profit or loss included in investments do not represent the Group's intention to hold
+them to maturity.
+(ii) For loans and advances to customers, the amount with an indefinite maturity represents loans of which the whole or part of the principals or
+interest was overdue for more than one month, and is stated net of appropriate allowances for impairment losses.
+For balances with central bank, the amount with an indefinite maturity represents statutory deposit reserve and fiscal balances maintained with the
+PBOC.
+Notes:
+497,049
+25,641
+Other liabilities
+681,507
+447,982
+196,234
+1,618,482
+Deposits from customers (Note (iv))
+494
+26,765
+193,695
+234,423
+419,093
+4,569
+other financial Institutions
+Amounts due to banks and
+613,683 4,731,829
+655,256
+993,607
+1,264,017
+357,289
+40,836
+2,944
+Financial liabilities at fair value
+106,155
+30,784
+28,610
+9,145
+31,757
+5,859
+Debt securities issued
+23,615
+10,275
+359
+7,332
+670
+1,622
+2,380
+977
+(including derivatives)
+through profit or loss
+879,039
+3,304,438
+Total
+712,440
+Within
+22,509
+5,883
+16,626
+Options purchased
+(1,270)
+1,393
+218,782
+3,332
+77,173
+138,277
+Foreign exchange swaps
+(4,142)
+5,362
+727,310
+46,906
+395,102
+285,302
+Forwards
+(793)
+874
+20,019
+20,019
+Spot
+Currency derivatives
+(240)
+204
+300,238
+752
+29,995
+1,233
+Options written
+21,331
+6,921
+1,039
+36
+117
+804
+82
+29
+29
+Equity options written
+15
+142
+ཚ།
+36
+24
+29
+107,663
+53
+1
+868
+93
+775
+Credit default swaps
+Other derivatives
+(9,570)
+8,862
+1,016,872
+50,238
+485,079
+481,555
+(3,365)
+28,252
+Equity options purchased
+16
+161,828
+Interest rate derivatives
+372
+(32)
+38
+15,525
+395
+13,226
+867
+1,037
+Interest rate swaps
+Interest rate derivatives
+through profit or loss
+designated at fair value
+financial instruments
+conjunction with
+Derivatives managed in
+(14)
+49
+336
+29,510
+18,010
+9,800
+1,700
+Interest rate swaps
+Interest rate derivatives
+Cash flow hedge derivatives
+(2)
+5
+217
+I
+Currency derivatives
+Foreign exchange swaps
+1,325
+1,409
+Liabilities
+Assets
+Total
+More than
+5 years
+Between
+1 year and
+5 years
+Between
+3 months
+and 1 year
+3 months
+Within
+Fair value
+Notional amounts with remaining life of
+2014
+Derivatives held for trading
+(f) Use of derivatives (continued)
+54 Risk management (continued)
+Interest rate swaps
+XII Financial Statements
+(7,575)
+10,176
+Total
+(92)
+47
+21,122
+395
+16,089
+2,276
+2,362
+(60)
+9
+5,597
+2,863
+China Merchants Bank
+Annual Report 2015
+(2)
+Cash flow hedge derivatives
+Interest rate derivatives
+264,612
+Fair
+value
+Carrying
+amount
+259,434
+12
+Level 3
+Level 2
+371,353
+1,332
+372,697
+Held-to-maturity investments 353,137
+Level 1
+Fair
+value
+Carrying
+amount
+2014
+2015
+The fair value measurements for Level 1 are based on quoted price of foreign currency bonds in active market
+released by Bloomberg. For Level 2, the latest valuation results released by China bond pricing system are used to
+measure fair value of bonds denominated in RMB. The Level 2 category also includes foreign currency bonds without
+active quoted price, which are measured by Bloomberg comprehensive valuation. The Level 3 adopts expected cash
+flow valuation technique to measure fair value.
+The carrying value, fair value and fair value hierarchy of held-to-maturity investments not measured or disclosed at
+fair value are listed as below:
+(i) Financial assets (continued)
+(g) Fair value information (continued)
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+Held-to-maturity investments are stated at amortised costs less impairment, and the fair value of listed debt
+securities classified as held-to-maturity investments are disclosed in Note 21(c).
+Loans and advances are stated at amortised costs less allowances for impairment loss (Note 19). Loans and advances
+are mostly priced at floating rates close to the PBOC rates and repriced at market rates annually at least, and
+impairment allowance is made to reduce the carrying amount of impaired loans to estimate the recoverable amount.
+Accordingly, the carrying value of loans and advances are close to the fair value.
+Except for loans and advances and held-to-maturity investments, most of the financial assets will mature within 1
+year or have been already stated at fair value, and their carrying value approximate their fair value.
+The Group's financial assets mainly include cash, balances with central banks, balances and placements with banks
+and other financial institutions, amounts held under resale agreements, loans and advances to customers and
+investments.
+Financial assets
+(i)
+(g) Fair value information
+The credit risk weighted amounts in respect of derivatives are calculated in accordance with the Administrative Measures on Capital of
+Commercial Banks (Trial) issued by CBRC, covering default risk weighted assets of counterparties and credit valuation adjustment risk weighted
+assets. The amount within the scope approved by CBRC in April 2014 was calculated using the internal rating-based approach, and the
+risk-weighted approach is adopted to calculate those not eligible to the internal rating-based approach.
+(ii)
+Financial liabilities
+Financial liabilities mainly include deposits from customers, amounts due to banks and other financial institutions,
+and debts securities issued by the Group. The carrying value of financial liabilities approximate their fair value at the
+end of the reporting period of the year presented, except the financial liabilities set out below:
+2015
+China Merchants Bank
+Annual Report 2015
+289
+In determining the carrying amounts of some assets and liabilities, the Group makes assumptions for the effects
+of uncertain future events on the assets and liabilities at the end of the reporting period. These estimates involve
+assumptions about cash flows and the discount rates used. The Group's estimates and assumptions are based on
+historical experience and expectations of future events and are reviewed periodically. In addition to the assumptions
+and estimations of future events, judgements are also made during the process of applying the Group's accounting
+policies.
+55 Significant accounting estimates and judgements
+60,146
+60,032
+62,826
+62,826
+60,514
+27,248
+28,146
+28,146
+27,995
+32,898
+15,168
+32,396
+34,680
+32,519
+Subordinated notes issued
+Long-term debt securities
+issued
+value
+amount
+Level 3
+Level 2
+Level 1
+value
+Fair
+Carrying
+Fair
+Carrying
+amount
+2014
+34,680
+10,518
+9,049
+5,830
+13,227
+858
+124
+17
+3,629
+3,286
+343
+Foreign exchange swaps
+Currency derivatives
+(29)
+73
+10,957
+377
+9,941
+377
+515
+Interest rate swaps
+Interest rate derivatives
+through profit or loss
+designated at fair value
+financial instruments
+conjunction with
+Derivatives managed in
+(360)
+143
+49,350
+29,510
+13,540
+6,300
+Interest rate swaps
+124
+I
+14,586
+གྲུབ
+2
+3
+3,003
+4,205
+214
+442
+Note:
+Total
+Credit valuation adjustment risk weighted assets
+Other derivatives
+Currency derivatives
+Interest rate derivatives
+Credit risk weighted assets of counterparties
+2014
+90
+2015
+Credit risk weighted amount
+(i)
+Use of derivatives (continued)
+(f)
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+288
+287
+(10,246)
+9,315
+Total
+(74)
+(45)
+The credit risk weighted amounts in respect of these derivatives are as follows. These amounts have taken the
+effects of bilateral netting arrangements into account.
+Repayable
+on demand
+(1)
+151
+1,326,826
+555,500
+506,320
+169,871
+5,310,931
+4,632,805
+5,736
+70
+276
+490
+350
+1,650
+8,741
+17,313
+17,313
+Other assets
+5
+33,937
+157,185
+154,585
+42,134
+33,909
+421,755
+408,752
+as receivables
+- Debt securities classified
+11
+255,724
+98,688
+1,204,875
+1,009,669
+537,870
+Non-derivative financial
+106,155
+Debt securities issued
+388
+7,332
+676
+1,659
+2,393
+977
+13,425
+13,369
+profit or loss
+fair value through
+Financial liabilities at
+546
+3,167
+17,684
+398,580
+202,376
+28,945
+203,853
+242,362
+422,184
+5,787
+1,633,583
+903,677
+3,413,620
+3,304,438
+Deposits from customers
+879,039
+institutions
+and other financial
+Amounts due to banks
+liabilities
+463,474
+110,672
+4,393
+378,053
+customers
+Loans and advances to
+542
+44,008
+71,531
+77,311
+329,040
+9,660
+532,092
+525,051
+institutions
+banks and other financial
+Amounts due from
+504,847
+149,938
+654,785
+654,785
+central bank
+Cash and balances with
+assets
+Indefinite
+5 years
+5 years
+After
+but within
+but within
+1 year
+3 months
+1 month
+but within
+2,448,754
+2,915,660
+1,532
+128,084
+259,434
+investments
+- Held-to-maturity
+2,188
+55,094
+227,113
+42,673
+11,784
+8,066
+346,918
+278,526
+financial assets
+- Available-for-sale
+722
+1,553
+2,077
+7,920
+11,312
+4,018
+44,355
+40,190
+profit or loss
+fair value through
+- Financial assets at
+Investments
+23,819
+662,767
+659,299
+1,031,943
+408,216
+18,306
+5,942
+31,895
+10,896
+(17)
+30
+35,908
+35,908
+Spot
+Currency derivatives
+(492)
+465
+1,150,588
+409
+75,345
+817,880
+256,954
+Interest rate swaps
+Interest rate derivatives
+97
+120
+56
+Equity options written
+64
+Equity options purchased
+97
+Credit default swaps
+Other derivatives
+Liabilities
+Assets
+Total
+More than
+5 years
+Between
+1 year and
+5 years
+Forwards
+249,564
+460,622
+19,885
+56
+64
+97
+(876)
+(6,975)
+9,323
+1,136,249
+23,876
+632,339
+480,034
+54,638
+588
+20,185
+33,865
+Options written
+Between
+3 months
+and 1 year
+634
+716
+18,238
+27,528
+Options purchased
+(1,682)
+3,123
+269,150
+2,687
+133,294
+133,169
+Foreign exchange swaps
+(4,400)
+5,536
+730,071
+46,482
+Within
+3 months
+Fair value
+Notional amounts with remaining life of
+(e) Capital management
+In face of challenges from internal and external operations and management, the Group will, based on its risk
+preference, continue to upgrade its risk management skills, strengthen operational risk monitoring and controls, as
+well as endeavour to prevent and reduce operational risk losses.
+During the reporting period, the Group continued to enhance its operational risk management by further improving
+operational risk management framework and methodologies, strengthening operational risk appraisal and
+assessment mechanisms, stepping up the identification, evaluation and monitoring of operational risk in key areas,
+and subjecting operational risk to its economic capital management. Various key risk indicators were compliant with
+the Group's risk preference requirements.
+Operational risk arises from the direct and indirect loss due to technique, procedure, infrastructure and staff
+deficiency, as well as other risks which have effect on operation, which includes legal risk. But the strategic risk and
+reputation risk are not included.
+(d) Operational risk
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+293,850
+293,850
+Gross loan commitments
+1,866
+36,232
+471,147
+The objectives of the Group's capital management are to:
+931,203
+654,424
+1,866
+1,072
+5,410
+3,338
+1,218
+21,529
+23,741
+58,174
+4,499,568 1,664,088
+4,361,175
+58,174
+Other liabilities
+31,059
+30,880
+740,608
+(1)
+Keep capital adequacy ratios at reasonable levels, satisfy capital-specific regulatory provisions and policy
+requirements on an ongoing basis, and maintain a solid capital base in support of its business expansion and
+strategic planning implementation for comprehensive and coordinated and sustainable growth;
+Put in place an economic capital-centred banking value management system by fully applying various
+risk-specific quantitative deliverables, enhance decision-making processes and management application
+regimes, strengthen capital restraint and capital incentive mechanisms, reinforce capabilities to facilitate client
+pricing and decision-making, and increase capital deployment efficiency; and
+2015
+Derivatives held for trading
+Use of derivatives (continued)
+(f)
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+286
+285
+The following tables provide an analysis of the notional amounts and the corresponding fair value of derivatives of
+the Group by residual maturity at the end of the reporting period. The notional amounts of the derivatives indicate
+the outstanding transaction volume at the end of the reporting period, not representing amounts at risk.
+In cash flow hedge, the Group uses interest rate swaps as hedging instruments to hedge the cash flows arising from
+the interest risk of RMB loans and interbank assets portfolios.
+The Group will choose appropriate hedging strategies and tools in light of the risk profile of interest/exchange rates
+of its assets and liabilities, as well as its analyses and judgement regarding future interest/exchange rate movements.
+The Group is exposed to risk when assets or liabilities denominated in foreign currencies. Such risk can be offset
+through the use of forward foreign exchange contracts or foreign exchange option contracts.
+The Group enters into interest rate, currency and other financial derivative transactions for treasury business and its
+assets and liabilities management purpose. The Group's derivative financial instruments can be divided into trading
+derivative financial instruments, cash flow hedge financial instruments and derivative financial instruments managed
+in conjunction with financial instruments designated at fair value through profit or loss.
+Derivatives include forward, swap and option transactions undertaken by the Group in the foreign exchange and
+interest rate markets. All of the Group's derivative financial instruments are traded over the counter market.
+Comply with capital regulatory requirements, perform procedures to assess internal capital adequacy, openly
+disclose information related to capital management, fully cover all risks and ensure safe operation of the
+entire group;
+(f) Use of derivatives
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+The Group adopts the scenario simulation and stress testing methods to forecast, plans and manages its capital
+adequacy ratio with considerations of factors such as strategic development planning, business expansion status,
+and risk movement trends.
+The Group's capital management focuses on the capital adequacy ratio management. The capital adequacy
+ratio reflects the Group's capability of sound operations and risk resisting. The Group's capital adequacy ratio
+management's objective is to carefully determine capital adequacy ratio, as legally required by regulators, according
+to actual risk profiles and with reference to capital adequacy ratio levels of globally leading market peers and the
+Group's operating conditions.
+Since 1 January 2013, the Group has calculated its capital adequacy ratio in accordance with the CBRC's
+Administrative Measures on the Capital of Commercial Banks (Trial) and other relevant regulations. On 18 April
+2014, the CBRC approved the Bank to adopt the advanced capital management approach. Within the scope of
+approval of the CBRC, the Bank could calculate corporation and financial institutions risk exposure using the primary
+internal rating-based approach, retail risk exposure using the internal rating-based approach, market risk using
+the internal model approach, and operational risk using the standardised approach. At the same time, the CBRC
+implemented a transition period for commercial banks approved to use the advanced approach to calculate capital.
+During the transition period, the commercial banks should use both the advanced approach and other approaches to
+calculate capital adequacy ratios, and comply with minimum capital requirements. During the period, the Group has
+complied with the capital requirement set by the regulators.
+The Group's capital adequacy ratio calculation covers the Bank and its subsidiaries. The Bank's capital adequacy ratio
+calculation covers the Bank's all branches. As at 31 December 2015, the Group's subsidiaries that were within the
+scope of consolidated statements in respect of the capital adequacy ratio included: WLB, CMBICHC, CMBFLC and
+CMFM.
+The Group manages its capital structure and adjust it based on the economic condition and the risk characteristics
+of its operations. To maintain or adjust its capital structure, the Group may modify its profit distribution policy, issue
+or repurchase shares, other tier-1 capital instruments, eligible tier-2 capital instruments, and convertible debentures.
+The Group's management regularly monitors capital adequacy ratio under an approach regulated by CBRC. The
+Group and the Bank file required information to CBRC half-yearly and quarterly.
+(e) Capital management (continued)
+54 Risk management (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+284
+283
+Reasonably use all kinds of capital instruments, continue to upgrade capital strengths, improve capital
+structures, raise capital quality, lower capital costs, and create the best returns to shareholders.
+54 Risk management (continued)
+27,636
+280
+0.42
+14,276
+5,251
+19,527
+25
+46
+26
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+The following table sets out the average balances of assets and liabilities, interest income/interest expense and
+annualised average yield/cost ratio of the Group for the periods indicated. The average balances of interest-earning
+assets and interest-bearing liabilities are the average of daily balances.
+July to September 2015
+October to December 2015
+Changes in net interest income
+Annualised
+Average
+Interest
+average
+Average
+Interest
+29
+39,494
+53,419
+Net fee and commission income
+(3,847)
+(4,379)
+Annualised
+Fee and commission expense
+914
+(12,841)
+12,247
+Placements with banks and other financial institutions
+(3,801)
+(9,175)
+(12,976)
+Changes in interest income
+26,523
+(19,837)
+6,686
+Liabilities
+Deposits from customers
+5,516
+(25,088)
+(9,170)
+2,519
+(15,849)
+(3,654)
+(13,330)
+Issued debts
+3,294
+(65)
+3,229
+Borrowings from the central bank
+918
+(4)
+Changes in interest expense
+Placements from banks and other financial institutions
+7,279
+7,897
+Others
+(3,847)
+(4,379)
+43,341
+57,798
+2014 (restated)
+2015
+5.2.7 Net fee and commission income
+Net fee and commission income
+Other net non-interest income
+Total net non-interest income
+Less: Fee and commission expense
+Fee and commission income
+(in millions of RMB)
+53,419
+The following table sets forth, for the periods indicated, the principal components of net non-interest income of the
+Group.
+5.2.6 Net non-interest income
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+In 2015, the interest expense on issued debts of the Group amounted to RMB7.150 billion, representing an increase
+of 82.35% as compared with the previous year, which was primarily attributable to the increase in the volume of
+issued debts.
+Interest expense on issued debts
+In 2015, the interest expense on placements from banks and other financial institutions of the Group amounted to
+RMB29.339 billion, representing a decrease of 31.24% as compared with the previous year, which was primarily
+attributable to the decrease in the interest rate of inter-bank borrowing.
+Interest expense on placements from banks and other financial institutions
+2.10
+64,102
+1.62
+16,535
+In 2015, the Group recorded a net non-interest income of RMB65.573 billion, representing an increase of
+RMB16.250 billion or 32.95% as compared with the previous year. Specifically, the net non-interest income from
+retail banking business amounted to RMB26.780 billion, representing an increase of 50.81% over the previous year
+and accounting for 40.84% of the Group's net non-interest income; the net non-interest income from corporate
+banking business amounted to RMB16.235 billion, representing a decrease of 1.99% over the previous year and
+accounting for 24.76% of the Group's net non-interest income. The net non-interest income of financial institutions
+business amounted to RMB14.982 billion, representing an increase of 55.66% over the previous year and accounting
+for 22.85% of the Group's net non-interest income. The net non-interest income from other businesses amounted
+to RMB7.576 billion, representing an increase of 40.95% over the previous year and accounting for 11.55% of the
+Group's net non-interest income.
+39,494
+12,154
+9,829
+13,033
+18,644
+Commissions from custody and other trustee businesses
+4,204
+4,215
+Commissions from credit commitment and loan business
+7,017
+13,681
+Agency service fees
+4,116
+3,799
+Settlement and clearing fees
+7,692
+9,562
+Bank card fees
+43,341
+57,798
+Fee and commission income
+2014 (restated)
+2015
+(in millions of RMB)
+The following table sets forth, for the periods indicated, the principal components of net fee and commission
+income of the Group.
+In 2015, net fee and commission income of the Group amounted to RMB53.419 billion, increased by 35.26% as
+compared with that of the previous year, which was primarily attributable to the increase in agency service fees,
+commissions from custody and other trustee businesses.
+49,323
+65,573
+280
+(338)
+618
+Balances with the central bank
+Total
+4,968,597
+234,722
+4.72
+4,440,702
+228,036
+5.14
+(in millions of RMB, except for percentages)
+Average Interest
+balance expense
+Average
+cost ratio
+(%)
+Average
+5.14
+Average
+balance
+cost ratio
+expense
+(%)
+Interest-bearing liabilities
+Deposits from customers
+3,350,298
+60,448
+1.80 3,056,634
+64,102
+2.10
+Placements from banks and other financial
+Interest
+31,040
+603,612
+3.62
+Loans and advances
+2,691,458
+159,885
+5.94
+2,400,646
+150,929
+6.29
+Investments
+1,174,151
+48,175
+4.10
+873,418
+37,749
+4.32
+Balances with the central bank
+604,403
+8,598
+1.42
+563,026
+8,318
+1.48
+Placements with banks and
+other financial institutions
+498,585
+18,064
+institutions
+1.30 1,022,973
+1.80 3,056,634
+1,050,196
+2.79
+Net interest spread
+2.59
+2.45
+Net interest margin
+2.75
+/
+2.64
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+In 2015, affected by the interest rate cuts, the average yield of the interest-earning assets was 4.72%, while the
+average cost ratio of interest-bearing liabilities was 2.13%, down by 42 basis points and 56 basis points respectively
+as compared with the previous year. However, benefiting from the constant optimisation of the liabilities structure,
+the cost ratio of interest-bearing liabilities declined remarkably. In 2015, the net interest margin and net interest
+spread of the Group were 2.75% and 2.59%, respectively, up by 11 basis points and 14 basis points respectively as
+compared with 2014.
+The following table sets forth, for the periods indicated, the breakdown of changes in interest income and interest
+expense due to changes in volume and interest rate of the Group. Changes in volume are measured by changes in
+average balances (daily average balances), while changes in interest rate are measured by changes in average interest
+rate; changes in interest income and expense caused by changes in volume and interest rate together are accounted
+for as the amount of changes in interest income and expense caused by changes in volume.
+/
+(in millions of RMB)
+Volume
+Interest rate
+Net increase/
+(decrease)
+Assets
+Loans and advances
+Investments
+17,358
+(8,402)
+12,348
+(1,922)
+8,956
+10,426
+2015 compared with 2014
+Increase/(decrease) due to
+117,202
+/
+136,729
+960,520
+42,669
+4.44
+Issued debts
+171,336
+7,150
+4.17
+92,385
+3,921
+4.24
+Borrowings from the central bank
+30,612
+In 2015, the interest income from investments of the Group increased to RMB48.175 billion, up by 27.62% as
+compared with the previous year, and the average yield of investments was 4.10%, down by 0.22 percentage point
+as compared with the previous year.
+3.45
+4,000
+142
+3.55
+Total
+4,602,442
+97,993
+2.13
+4,113,539
+110,834
+2.69
+Net interest income
+29,339
+Interest-earning assets
+14,445
+60,448
+Total deposits from customers
+4.62
+232,183
+2,095
+3.58
+Borrowings from the central bank
+27,804
+238
+3.40
+44,677
+380
+3.37
+1,796
+Total
+23,483
+1.94
+4,688,513
+22,255
+1.88
+Net interest income
+35,055
+35,570
+Net interest spread
+2.56
+2.62
+4,806,177
+2.70
+154,120
+2.50
+Interest
+average
+balance
+expense
+cost (%)
+balance
+expense
+cost (%)
+(in millions of RMB, except for percentages)
+Interest-bearing liabilities
+Deposits from customers
+Issued debts
+3,473,271
+1.70
+3,400,699
+13,413
+1.56
+Placements from banks and other financial
+institutions
+1,150,982
+6,590
+2.27
+1,010,954
+6,367
+14,859
+2.77
+Net interest margin
+In the fourth quarter of 2015, the net interest spread of the Group was 2.62%, up by 6 basis points as compared
+with the third quarter of 2015. The annualised average yield of the interest-earning assets was 4.50%, unchanged
+as compared with the third quarter of 2015 while the annualised average cost ratio of interest-bearing liabilities was
+1.88%, down by 6 basis points as compared with the third quarter of 2015.
+5.67
+Retail loans
+1,087,562
+78,076
+7.18
+860,497
+63,630
+7.39
+Discounted bills
+120,304
+4,866
+82,168
+4.04
+5,131
+5.59
+Loans and advances
+2,691,458
+159,885
+5.94
+2,400,646
+150,929
+6.29
+In 2015, from the perspective of the terms of loans and advances of the Company, the average balance of
+short-term loans was RMB1,317.558 billion, with the interest income amounting to RMB87.863 billion, and the
+average yield reaching 6.67%; the average balance of medium to long-term loans was RMB1,140.707 billion, with
+the interest income amounting to RMB64.167 billion, and the average yield reaching 5.63%. The average yield of
+short-term loans was higher than that of medium to long-term loans. It was mainly attributable to the relatively
+higher yield of credit card overdrafts and micro enterprise loans among short-term loans.
+Interest income from investments
+91,772
+1,448,378
+5.19
+76,943
+In the fourth quarter of 2015, the net interest margin of the Group was 2.77%, up by 7 basis points as compared
+with the third quarter of 2015.
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+5.2.4 Interest income
+In 2015, the Group recorded an interest income of RMB234.722 billion, representing an increase of 2.93% as
+compared with that of the previous year, mainly due to the increase in the volume of interest-earning assets. Interest
+income from loans and advances continued to be the biggest component of the interest income of the Group.
+Interest income from loans and advances
+In 2015, the interest income from loans and advances of the Group was RMB159.885 billion, representing an
+increase of 5.93% as compared with the previous year.
+The following table sets forth, for the periods indicated, the average balances, interest income and average yield of
+different types of loans and advances of the Group.
+2015
+2014 (restated)
+Average
+Interest
+Average
+Average
+Interest
+Average
+(in millions of RMB, excluding percentages)
+balance
+income
+yield (%)
+balance
+income
+yield (%)
+Corporate loans
+1,483,592
+Average
+average
+Interest
+Average
+0.72
+6,186
+864,524
+0.68
+6,965
+1,027,006
+Demand
+Deposits from corporate customers
+(%)
+expense
+balance
+Time
+(%)
+Average
+cost ratio
+Interest
+Average
+Average
+cost ratio
+Interest
+Average
+balance
+(in millions of RMB, excluding percentages)
+2014
+2015
+The following table sets forth, for the periods indicated, the average balances, interest expense and average cost
+ratio for deposits from corporate and retail customers of the Group.
+In 2015, the Group's interest expense on deposits from customers was RMB60.448 billion, down by 5.70% as
+compared with the previous year, which was primarily attributable to the optimisation of the structure of deposits
+from customers, resulting in a decrease of 0.30 percentage point in the average cost ratio as compared with the
+previous year.
+expense
+1,211,447
+39,038
+3.22
+Subtotal
+3.16
+13,736
+434,934
+2.87
+11,474
+400,385
+Time
+0.48
+2,799
+588,039
+2,971
+711,460
+Demand
+Deposits from retail customers
+2.34
+47,567
+2,033,661
+2.06
+46,003
+2,238,453
+Subtotal
+3.54
+41,381
+1,169,137
+Interest expense on deposits from customers
+1,111,845
+3,350,298
+In 2015, the interest expense of the Group was RMB97.993 billion, down by 11.59% as compared with the previous
+year, which was primarily attributable to the decrease in the cost ratio of interest-bearing liabilities.
+V Report of the Board of Directors
+2,218
+1.37
+578,060
+2,047
+1.40
+Placements with banks and other financial
+institutions
+514,153
+3,278
+2.53
+433,144
+640,596
+4,721
+Total
+5,157,623
+58,538
+4.50
+5,092,787
+57,825
+4.50
+July to September 2015
+October to December 2015
+Annualised
+Annualised
+4.32
+Balances with the central bank
+3.80
+12,074
+China Merchants Bank
+Annual Report 2015
+28
+27
+In 2015, the interest income from placements with banks and other financial institutions of the Group was
+RMB18.064 billion, down by 41.80% as compared with the previous year, and the average yield for placements with
+banks and other financial institutions was 3.62%, down by 1.52 percentage points as compared with the previous
+year, which was primarily attributable to the decrease in the volume of financial assets held under resale agreements
+and the yield of inter-bank lending.
+average
+(in millions of RMB, except for percentages)
+balance
+income
+yield (%)
+balance
+income
+yield (%)
+Interest-earning assets
+Loans and advances
+2,709,322
+40,190
+5.89
+2,821,656
+38,983
+5.48
+Investments
+1,293,552
+12,852
+3.94
+1,259,927
+5.2.5 Interest expense
+Average
+yield (%)
+1,056
+Average
+balance
+73,431
+Other net income
+Net fee and commission income
+Net interest income
+Changes in 2015
+Profit before tax for 2014
+(in millions of RMB)
+Changes in profit before tax
+The following table sets out the impact of changes in major income/loss items of the Group on its profit before tax
+for 2015.
+In 2015, the Group realised a profit before tax of RMB75.079 billion, representing an increase of 2.24% as
+compared with 2014. The effective income tax rate was 22.72%, representing a decrease of 0.95 percentage point
+as compared with 2014.
+55,911
+57,696
+56,049
+58,018
+(17,382)
+(17,061)
+73,431
+75,079
+156
+(31,681)
+(59,266)
+134
+19,527
+13,925
+2,347
+(6,589)
+2013
+(restated)
+2015
+Net interest income
+%
+2014
+The following table sets out the composition of the net operating income of the Group in the corresponding period
+of the past five years.
+In 2015, the net operating income of the Group was RMB202.302 billion, representing an increase of 21.48% as
+compared with 2014. The net interest income accounted for 67.59% of the total net operating income, representing
+a decrease of 2.79 percentage points as compared with 2014; the net non-interest income accounted for 32.41% of
+the total net operating income, representing an increase of 2.79 percentage points as compared with 2014.
+5.2.2 Operating income
+V Report of the Board of Directors
+2
+China Merchants Bank
+Annual Report 2015
+14
+75,079
+Profit before tax for 2015
+(22)
+Gains on investment in associates and joint ventures
+(27,585)
+Impairment losses on assets
+Provision for insurance claims
+Operating expenses
+45
+24
+2012
+2
+(287)
+The non-performing loans increased while the allowance coverage ratio remained stable. As at the end of 2015, the
+Group had a balance of non-performing loans of RMB47.410 billion, representing an increase of RMB19.493 billion
+as compared with the beginning of the year. The non-performing loan ratio was 1.68%, up by 0.57 percentage
+point as compared with the beginning of the year. The non-performing loan allowance coverage ratio was 178.95%,
+representing a decrease of 54.47 percentage points as compared with the beginning of the year.
+The balance sheet expanded steadily. As at the end of 2015, the Group's total assets amounted to RMB5,474.978
+billion, representing an increase of 15.71% as compared with the beginning of the year. The total loans and
+advances to customers amounted to RMB2,824.286 billion, representing an increase of 12.35% as compared with
+the beginning of the year. Total liabilities of the Group amounted to RMB5,113.220 billion, representing an increase
+of 15.77% as compared with the beginning of the year. Total deposits from customers amounted to RMB3,571.698
+billion, representing an increase of 8.09% as compared with the beginning of the year.
+Slight increase in earnings. In 2015, the Group realised a net interest income of RMB136.729 billion, representing
+a year-on-year increase of 16.66%; the net non-interest income was RMB65.573 billion, representing a year-on-
+year increase of 32.95%; however, affected by significant increase in impairment losses on assets, the net profit
+attributable to the shareholders of the Bank amounted to RMB57.696 billion, representing a year-on-year increase of
+3.19%. The return on average asset (ROAA) and return on average equity (ROAE) attributable to the shareholders of
+the Bank were 1.13% and 17.09%, respectively, down by 0.15 percentage point and 2.19 percentage points from
+the previous year, respectively.
+In 2015, the domestic economy has entered the "New Normal", characterised by complicated macroeconomic
+conditions, great downward pressure and frequent occurrence of risks. Under the background of economic
+slowdown, interest rate liberalisation and faster opening up of the financial industry, the Group continued to
+implement its transformation strategies of "Asset-light Banking" and "One Body with Two Wings", forged forward
+with structural adjustments and maintained a sound development momentum, which are reflected in the following
+aspects:
+5.1 Analysis of Overall Operation
+Report of the Board of Directors
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+22
+Chairman of the Board of Supervisors
+Liu Yuan
+?
+President
+China Merchants Bank Co., Ltd.
+2016 is the starting year of the "13th Five-year Plan". Facing the complicated operating
+environment at home and abroad, we will continuously implement the transformation
+strategies of "Asset-light Banking" and "One Body with Two Wings", respond flexibly
+to the changing environment and grasp market opportunities arising from economic
+restructuring, and persistently stick to organic growth which places equal emphasis
+on strategic transformation and development results. We will adhere to our operation
+strategies and strive to first work out a path of characterised business transformation
+of Chinese commercial banks in the next three to five years.
+In 2015, the performance of a number of our strategic emerging businesses known
+as light assets business ran in parrel with large-sized state-owned banks despite our
+smaller volume of assets, thereby differentiating us from our peers in terms of the
+"Asset-light Banking". We so far have received positive market response and trust
+from investors. In 2015, the Bank was a frontrunner among listed banks in terms of
+cumulative increase in share price and the price/book ratio of its A shares, and ranked
+first in the "Top Ten of investors' Most Respected 100 Listed Companies in China".
+Our achievements in 2015 were attributable to the hard work of our staff and the
+unwavering support from our customers, investors and the community. On behalf of
+the Bank, I would like to extend my sincere gratitude to all who care about and support
+the development of the Bank.
+In 2015, in response to changes in customer and market demands, the Bank geared
+up the reform of operation systems and processes, and began the second-phase
+reform across the Bank based on the experience of the system reform of the first
+batch of 11 pilot branches, thus further optimised the organisational structure. In
+addition, we gradually promoted the streamlining of the "customer-centric" end-to-
+end operation processes, constantly developed and optimised the models and tools
+for risk management, thus putting risk monitoring and pre-warning management in
+place, optimised the unified risk exposure management mechanism, promoted post-
+disbursement management, and improved provision management, all contributing
+to protection and control of asset quality in a multi-dimensional way. We carried out
+inspections and audits throughout our business operation, thus effectively improved
+our compliance management. We vigorously promoted the reform of human resources,
+proactively implemented measures for management of assets and debts, and established
+the decision-making mechanism for investment banking and asset management.
+In 2015, the Bank established the Internet finance development strategy of "building
+service platforms, connecting to external traffic and conducting traffic operation (
+¥À ·
+· )”. Our open mobile finance platform has served a sizable
+number of users, the APPS of Mobile Banking and CMB Life () were both
+upgraded to the next generation, and the registered members and transaction volume
+of Small Business E Home continued to surge. "Zhao Ying Tong ()", a financial
+transaction platform for financial institutions, became the first-mover in seizing market
+opportunities, and CMB-China Unicom Consumption Finance Co., Ltd. (¾Ð
+A) officially opened for business. Our cooperation with third-party platforms was
+also initiated during the year. At present, we have established comprehensive strategic
+partnership with various Internet companies and telecommunication operators including
+Didi Taxi (), China Mobile and China Unicom. Riding on the trend of online
+payment, we have established "All-in-one Net", an online light account cross-bank
+payment platform, and "All-in-one Mobile (-)", an offline payment platform. In
+addition, we proactively embraced various cutting-edge technologies to launch the new
+payment function of "cash withdrawal via face-scanning ()" and Apple Pay,
+vigorously improved Internet users' experience of online payment, and timely launched
+the "Free Online Transfer" service to implement inclusive finance, which received warm
+applause from the public.
+IV President's Statement
+China Merchants Bank
+Annual Report 2015
+20
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+23
+5.2 Analysis of Income Statement
+9,671
+(61,081)
+(67,670)
+12,018
+39,494
+53,419
+117,202
+2014
+(restated)
+2015
+136,729
+Net profit attributable to the Bank's shareholders
+Net profit
+(332)
+Income tax
+Impairment losses on assets
+Gains on investment in joint ventures
+Gains on investment in associates
+Provision for insurance claims
+Operating expenses
+Other net income
+Net fee and commission income
+Net interest income
+(in millions of RMB)
+5.2.1 Financial highlights
+Profit before tax
+Interest
+income
+Interest income from placements with banks and other financial institutions
+26.40
+4.83
+Gains on investment in associates and
+joint ventures
+0.07
+0.09
+0.07
+0.06
+Total
+100.00
+100.00
+4.96
+100.00
+100.00
+5.2.3 Net interest income
+In 2015, the Group's net interest income amounted to RMB136.729 billion, representing an increase of 16.66% as
+compared with 2014.
+The following table sets out the average balances of assets and liabilities, interest income/interest expense, and
+average yield/cost ratio of the Group for the period indicated. The average balances of interest-earning assets and
+interest-bearing liabilities are the average of the daily balances.
+2015
+2014 (restated)
+(in millions of RMB, except for percentages)
+Average
+balance
+Interest
+Income
+Average
+yield (%)
+100.00
+3.71
+0.05
+5.94
+5.81
+2011
+70.38
+74.30
+77.65
+78.94
+67.59
+23.72
+21.92
+17.34
+16.17
+Net fee and commission income
+Other net income
+2014
+13
+20
+6
+9
+6,000
+10,287
+3,520
+200
+1,700
+915
+2015
+6,000
+71
+5,588
+296
+China Merchants Bank
+Annual Report 2015
+28,102
+- Placements with banks and other financial institutions
+2,439
+- Balances with banks and other financial institutions
+2014
+2015
+On-balance sheet
+(g) Subsidiaries
+56 Material related-party transactions (continued)
+Net fee and commission income
+XII Financial Statements
+295
+Interest expense
+Interest income
+- Irrevocable guarantees
+The change of proportion of the Bank held by the largest shareholder and the portion of the subsidiaries
+held by the Bank
+RMB210,000,000
+CMFM
+RMB210,000,000
+HKD1,160,950,575
+HKD1,160,950,575
+The Bank held by
+the largest shareholder
+RMB6,000,000,000
+HKD1,000,000,000
+HKD1,000,000,000
+RMB4,300,000,000
+RMB5,900,000,000
+RMB11,550,000,000
+RMB13,750,000,000
+RMB6,000,000,000
+2015
+The subsidiaries held by the Bank
+RMB
+3,162,424,323
+At 1 January 2015
+Change
+%
+RMB
+%
+HKD
+CMSNCL
+%
+%
+CMFM
+WLB
+CMBFLC
+CMBICHC
+HKD
+%
+RMB
+29,826
+WLB
+CMBICHC
+company
+102
+Interest expense
+36
+4
+Net fee and commission income
+Management
+454
+(f)
+Other shareholders holding more than 5% shares
+On-balance sheet:
+- Investments
+- Deposits from customers
+Off-balance sheet:
+349
+CMBFLC
+Co., Ltd (CMFM)
+(i)
+CMSNCL
+CMG
+2014
+Name of related party
+The change of the registered capital of each company
+Unfulfilled administrative procedures of the acquisition: (a) The concentration of operators caused by the acquisition
+requires review and reply from the Ministry of Commerce, and a reply of "not prohibited" should be obtained. (b)
+Matters related to the change of major shareholders' holding proportion caused by the acquisition are subject to the
+review of CBRC. (c) CMG should apply to the China Securities Regulatory Commission for an exemption from the
+obligation to make a general offer.
+Notes:
+On 28 December 2015, the State-owned Assets Supervision and Administration Commission of the State Council
+(the "SASAC of the State Council") issued an approval letter approving that Sinotrans & CSC Holdings Co., Ltd.
+("Sinotrans & CSC") be allocated into CMG at nil consideration. On 24 February 2016, the Enterprise Property Right
+Registration form of Sinotrans & CSC was confirmed by the SASAC of the State Council, confirmed that CMG is
+registered as the promoter of Sinotrans & CSC. The shares of the Bank held by Sinotrans & CSC and its subsidiary
+Wuhan Changjiang Shipping Company ("Wuhan Changjiang Shipping") are indirectly held by CMG (the "Change in
+Shareholding"), which lead to an aggregate of over 30.00% of the total share capital of the Bank are hold by CMG,
+with the completion of changes in equity, CMG (including Sinotrans and Wuhan Changjiang Shipping) can control
+the actual shares of the a total of 30.06%. In accordance with the "Administrative Rules on Acquisition of Listed
+Company", investor can actually control over 30% of the voting rights of the listed entity, will have the control of
+the listed entity.
+(a) Material connected person information (continued)
+56 Material related-party transactions (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+(ii) As the largest shareholder, CMSNCL who is the subsidiary of CMG, holds 13.04% of the Bank as at 31 December 2015 (2014: 12.54%).
+CMG holds 29.97% of the Bank (2014: 20.00%) through its subsidiaries.
+(iii)
+- Loans and advances to customers
+-
+310
+291
+292
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+56 Material related-party transactions
+(a) Material connected person information
+The Bank's largest shareholder and its parent company and the Bank's subsidiaries.
+Registered Issued and fully
+Company name location
+China Merchants Beijing
+Group (CMG)
+paid capital
+The Group uses judgement to assess whether the Group has a present legal or constructive obligation as a result of
+past events at each financial reporting date, and judgement is used to determine if it is probable that an outflow of
+resources embodying economic benefits will be required to settle the obligation, and to determine a reliable estimate
+of the amount of the obligation.
+Proportion Proportion of
+of the Bank the Company
+held by
+held by
+the Company
+the Bank Business
+29.97%
+(Note (i)&(iii))
+Transportation, shipping
+agency, warehousing
+and storage, leasing,
+manufacturing building
+and facility, repair and
+contracting, sales
+operating management
+service
+the
+relationship
+Legal
+with the Bank Legal form representative
+The largest
+shareholder's
+Limited
+company
+RMB13,750 million
+Li Jianhong
+(h) Provisions
+The estimation of the ultimate liability arising from claims made under insurance contracts is one of the Group's
+critical accounting estimates. Estimates and judgements are continually evaluated and based on historical experience
+and other factors, including expectations of loss events that have been incurred but not reported ("IBNR") to the
+Group as of the end of the reporting period. The estimation of IBNR claims is generally subject to a greater degree
+of uncertainty than the estimation of the cost of settling claims already notified to the Group, where information
+about the claim events is available. IBNR claims may not be apparent to the insured until many years after the event
+that gives rise to the claim has happened.
+China Merchants Bank
+Annual Report 2015
+290
+(continued)
+(a) Impairment losses on loans and receivables
+Loan portfolios are assessed periodically to assess whether impairment losses exist and the amounts of impairment
+losses if they do. Objective evidence for impairment includes observable data indicating that there is a significant
+decrease in the estimated future cash flows from an individual loans and receivables. Objective evidence for
+impairment is described in accounting policy 2(n)(i). The impairment loss for a loans and receivables that is
+individually evaluated for impairment is the decrease in the estimated future cash flow of that loans and receivables.
+When loans and receivables are collectively evaluated for impairment, the estimate is based on historical loss
+experience for assets with credit risk characteristics similar to the loans and receivables. Historical loss experience is
+adjusted on the basis of the relevant observable data that reflect current economic conditions. Management reviews
+the methodology and assumptions used in estimating future cash flows regularly to reduce any difference between
+loss estimates and actual loss experience.
+(b) Impairment of available-for-sale financial assets
+For available-for-sale financial assets, a significant or prolonged decline in fair value below cost is considered to
+be objective evidence of impairment. Judgement is required when determining whether a decline in fair value has
+been significant or prolonged. In making this judgement, the Group considers historical data on market volatility
+and historical price of the specific financial assets as well as other factors, such as sector performance and financial
+information regarding the investee.
+(c)
+Fair value of financial instruments
+For a number of financial instruments, no quoted prices in an active market exist. The fair value for these financial
+instruments are established by using valuation techniques. These techniques include using recent arm's length
+market transactions, reference to the current fair value of similar instruments and discounted cash flow analysis and
+option pricing models. The Group has established a process to ensure that valuation techniques are constructed
+by qualified personnel and are validated and reviewed by personnel independent of the area that constructed the
+valuation techniques. Valuation techniques are certified before being implemented for valuation and are calibrated to
+ensure that outputs reflect actual market conditions. Valuation models established by the Group make the maximum
+use of market inputs and rely as little as possible on the Group's specific data. However, it should be noted that
+some inputs, such as credit and counterparty risk and risk correlations, require management estimates. Management
+estimates and assumptions are reviewed periodically and are adjusted if necessary.
+Estimation of the ultimate cost of certain liability claims can be a complex process. There are several sources of
+uncertainty that need to be considered in the estimating of the liability that the Group will ultimately pay for such
+claims. In particular, the claims arising from the employees' compensation and other liability policies can be longer
+in tail and difficult to estimate. The Group has appointed an independent actuary to estimate the claim liabilities
+using established actuarial methodologies. The methodologies are statistical in nature and can be affected by various
+factors. The more significant factors that can affect the reliability of the liability estimation include jurisprudence
+that can broaden the intent and scope coverage of the protections offered in the insurance contracts issued by
+the Group, the extent to which actual claim results differ from historical experience and the time lag between the
+occurrence of the event and the report of such claim to the Group.
+(d) Held-to-maturity investments
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+55 Significant accounting estimates and judgements
+(continued)
+(e) Income taxes
+Determining income tax provisions involves judgement on the future tax treatment of certain transactions. The
+Group carefully evaluates tax implications of transactions and tax provisions are set up accordingly. The tax treatment
+of such transactions is reconsidered periodically to take into account all changes in tax legislations. Deferred tax
+assets are recognised for tax losses not yet used and temporary deductible differences. As those deferred tax assets
+can only be recognised to the extent that it is probable that future taxable profit will be available against which the
+unused tax credits can be utilised, management's judgement is required to assess the probability of future taxable
+profits. Management's assessment is constantly reviewed and additional deferred tax assets are recognised if it
+becomes probable that future taxable profits will allow the deferred tax asset to be recovered.
+(f)
+Defined benefit plan
+Actuarial assumptions are made in valuing future pension obligations as set out in Note 37(b). There is uncertainty
+that these assumptions will hold true in the future. They are reviewed periodically and are updated where necessary.
+(g) Ultimate liability arising from claims made under insurance contracts
+Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as
+held-to-maturity investments if the Group has the intention and ability to hold them until maturity. In evaluating
+whether the requirements to classify a financial asset as held-to-maturity investments are met, management makes
+significant judgements. Failure in correctly assessing the Group's intention and ability to hold specific investments
+until maturity may result in reclassification of the whole portfolio as available-for-sale financial assets.
+325
+parent
+company
+RMB5,900 million
+Wing Lung Bank
+Limited (WLB)
+Hong Kong HKD1,161 million
+100% Banking
+Subsidiary
+Limited
+company
+Tian Huiyu
+China Merchants Shenzhen RMB210 million
+Fund
+55% Asset Management
+Subsidiary
+Limited
+company
+Li Hao
+- Deposits from customers
+164
+93
+- Placements from banks and other financial institutions
+18,688
+13,497
+- Deposits from banks and other financial institutions
+440
+440
+- Investments
+12.54 1,000,000,000 100.00
+127,046,014 0.50
+China Merchants Beijing
+Leasing Company
+Limited (CMBFLC)
+Limited
+Steam Navigation
+13.04%
+(Note (ii))
+Company Limited
+(CMSNCL)
+- Transportation, building
+and repair, procurement,
+supply chain management
+The largest
+shareholder
+Joint stock
+limited
+company
+Li Jianhong
+and distribution, shipping
+agency services
+CMB International Hong Kong HKD1,000 million
+Lian Bolin
+100% Financial advisory services Subsidiary
+Tian Huiyu
+company
+Capital Holdings
+Corporation
+Limited
+(CMBICHC)
+CMB Financial
+Shanghai RMB6,000 million
+100% Finance lease
+Subsidiary
+Limited
+6,000,000,000
+100.00 1,160,950,575
+100.00
+46,236
+(Note 8)
+2014
+RMB'000
+2015
+RMB'000
+Contributions to defined contribution retirement schemes
+Share-based payment
+Discretionary bonuses (Note 8(i))
+Salaries and other emoluments
+Key management personnel are those persons having authority and responsibility for planning, directing and
+controlling the activities of the Group, directly or indirectly, including directors, supervisors and executive officers.
+(h) Key management personnel
+Any significant balances and transactions between the Bank and its subsidiaries have been offset in the consolidated
+financial statements.
+(2)
+(4)
+868
+1,494
+354
+426
+661
+31
+112
+117
+3,269
+Other net income
+Net fee and commission
+Interest expense
+Interest income
+- Bills of acceptances
+42,534
+- Irrevocable guarantees
+14,751
+15,169
+Wealth management products
+The following table sets out an analysis of the carrying amounts of interests held by the Group as at 31 December
+2015 and 31 December 2014 in the structured entities sponsored by third party institutions and an analysis of the
+line items in the statement of financial position as at 31 December 2015 and 31 December 2014 in which assets are
+recognised relating to the Group's interests in structured entities sponsored by third parties:
+The Group holds an interest in some structured entities sponsored by third party institutions through investments in
+the notes issued by these structured entities. Such structured entities include wealth management products, asset
+management schemes, trust beneficiary rights, assets backed securities and investments in funds, and the Group
+does not consolidate these structured entities. The nature and purpose of these structured entities are to generate
+fees from managing assets on behalf of investors and are financed through the issue of notes to investors.
+(a) Interest in the structured entities sponsored by third party institutions
+59 Interests in unconsolidated structured entities
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+298
+297
+The Group's book value of securitised credit assets on transfer day is RMB47,565 million for the year ended 31
+December 2015. The asset value of senior tranches of securitisation of credit assets is RMB898 million at Group
+level. The asset value of subordinated tranches of securitisation of credit assets is RMB194 million at Group level.
+The Group sells the credit assets to special purpose trust, and then the special purpose trust issues the assets backed
+securities to investors.
+Securitisation of credit assets
+The Group enters into transactions in the normal course of business by which it transfers recognised financial assets
+to third parties or to special purpose trusts. In some cases where these transfers may give rise to full or partial
+derecognition of the financial assets concerned. In other cases where the transferred assets do not qualify for
+derecognition as the Group has retained substantially all the risks and rewards of these assets, the Group continued
+to recognize the transferred assets.
+58 Transfer of financial assets
+Non-controlling interests represent the interests that the Group does not hold in the non-wholly owned subsidiaries.
+There is no subsidiary of the Group which has material non-controlling interests during the reporting period.
+57 Non-controlling interests
+Apart from the obligation for defined contributions to the annuity scheme and normal banking transactions, no
+other transactions were conducted between the Group and the annuity scheme for the years ended 31 December
+2015 and 31 December 2014.
+Annuity scheme
+(i)
+56 Material related-party transactions (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+The above share-based payments represent the estimated fair value of the share appreciation rights granted (Note
+37(a)(iii)) to senior management under the Bank's H share Appreciation Rights Scheme. The fair value is measured by
+using the Black-Scholes model and according to the accounting policy set out in Note 2(u)(iii); and the amounts have
+been charged to the consolidated statement of profit or loss and other comprehensive income. As the share options
+may expire without being exercised, the directors consider the amounts disclosed are not representative of actual
+cash flows received or to be received by senior management.
+77,881
+61,267
+5,427
+5,475
+9,556
+Asset management schemes
+Trust beneficiary rights
+Asset backed securities
+Off-balance sheet
+1,657
+Interest income
+Interest expense
+6,110
+8,390
+1,425
+2,149
+30,929
+10,454
+1,076
+1,320
+220
+200
+737
+546
+Net fee and commission income
+204
+144
+Other net income
+1
+(e) Associates and joint ventures other than those under Note 56(c) above
+2015
+2014
+On-balance sheet:
+-
+– Loans and advances to customers
+5
+7
+- Irrevocable guarantees
+1,374
+Off-balance sheet:
+- Investments
+-
+- Irrevocable letters of credit
+- Bills of acceptances
+93
+1,186
+58
+47
+Interest income
+Interest expense
+496
+318
+1,151
+487
+Net fee and commission income
+580
+175
+Other net income
+37
+6
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+56 Material related-party transactions (continued)
+(d) Companies controlled by directors and supervisors other than those under Note
+56(c) above
+2015
+2014
+On-balance sheet:
+- Loans and advances to customers
+- Deposits from customers
+Deposits from customers
+Investment in funds
+Asset management schemes
+Off-balance sheet:
+- Irrevocable guarantees
+2015
+2014
+5,124
+4,395
+12,346
+5,282
+119,679
+40,038
+1,849
+1,237
+299
+During the year of 2015, the amount of fee and commission income received from such category of
+non-principal-guaranteed wealth management products by the Group is RMB7,728 million (2014: RMB5,373 million).
+The total amount of non-principal-guaranteed wealth management products issued by the Group after 1 January
+2015 with a maturity date before 31 December 2015 was RMB2,622,189 million (2014: RMB2,420,525 million).
+As at 31 December 2015, the balance of reverse repurchase transactions and money market placement between
+the Group and its non-principal-guaranteed wealth management products, which are sponsored by the Group, is
+RMB208,150 million (2014: RMB117,333 million) and RMB5,723 million (2014: RMB11,470 million) respectively. The
+above transactions were made in accordance with normal business terms and conditions.
+As at 31 December 2015, the amount of the unconsolidated non-principal-guaranteed wealth management
+products, which are sponsored by the Group, is RMB1,820,694 million (2014: RMB831,473 million).
+The unconsolidated structured entities sponsored by the Group include non-principal- guaranteed wealth
+management products. The nature and purpose of these structured entities are to generate fees from managing
+assets on behalf of investors. These structured entities are financed through the issue of investment products to
+investors. Interest held by the Group includes fees charged on management services provided.
+59 Interests in unconsolidated structured entities (continued)
+(b) Interest in the unconsolidated structured entities sponsored by the Group
+442
+China Merchants Bank
+Annual Report 2015
+The maximum exposures held by the Group in the subordinated tranches of assets backed securities and investments
+in funds are the fair value of the assets at the reporting date. The maximum exposures in the wealth management
+products, asset management schemes, trust beneficiary rights, senior tranches of assets backed securities are the
+amortised cost of the assets held by the Group at the reporting date in accordance with the line items of these
+assets recognised in the statement of financial positions.
+478,457
+478,457
+365,662
+1,367
+317
+317
+- Deposits from customers
+3,502
+- Investments
+On-balance sheet:
+115,500,000
+55.00
+At 31 December 2015
+3,289,470,337 13.04 1,000,000,000 100.00
+6,000,000,000
+100.00 1,160,950,575 100.00
+115,500,000
+55.00
+293
+294
+China Merchants Bank
+XII Financial Statements
+Annual Report 2015
+56 Material related-party transactions (continued)
+(b) Transaction terms and conditions
+In each year, the Group entered into transactions with related parties in the ordinary course of its banking business
+including lending, investment, deposit, securities trading, agency services, trust services, and off-balance sheet
+transactions. The opinion of the directors is that the Group's material related-party transactions were all entered into
+normal commercial terms. The banking transactions were priced at the market rates at each time of transaction.
+Interest rates on loans and deposits are required to be set in accordance with the following benchmark rates set by
+the PBOC:
+Short-term loans
+Medium to long-term loans
+Demand deposits
+Time deposits
+2015
+4.35% p.a.
+4.75% to 4.90% p.a.
+0.35% p.a.
+1.10% to 2.75% p.a.
+2014
+5.60% p.a.
+6.00% to 6.15% p.a.
+0.35% p.a.
+2.35% to 4.00% p.a.
+There were no individually assessed allowances for impairment losses made against loans and advances granted to
+related parties during the year.
+Shareholders and their related companies
+(c)
+The Bank's largest shareholder CMSNCL and its related companies hold 29.97% (2014: 20.00%) shares of the Bank
+as at 31 December 2015 (among them 13.04% shares is held by CMSNCL (2014: 12.54%)). The Group's transactions
+and balances with CMSNCL and its related companies are disclosed as follows:
+- Loans and advances to customers
+Wealth management products
+3,502
+2,135
+317
+2,452
+992
+992
+3,765
+22,074
+5,563
+5,563
+88,760
+88,760
+300
+617,805
+300
+617,805
+300
+606,424
+78,067
+118
+2,672
+2,773
+10,693
+11,381
+exposure
+Total
+Maximum
+for-sale Held-to- securities
+financial maturity classified as
+assets investments receivables
+agreements
+Debt
+Available-
+Amounts
+held under
+resale
+Carrying amount
+2015
+Investment in funds
+Asset backed securities
+Trust beneficiary rights
+992
+1,367
+2,672 684,909
+713,420
+108,976
+175,522
+175,522
+112,038
+292,976
+292,976
+247,484
+45,492
+63,484
+6,140
+6,140
+6,140
+exposure
+Total
+receivables
+investments
+Maximum
+maturity classified as
+securities
+Held-to-
+Debt
+Available-
+for-sale
+financial
+assets
+agreements
+resale
+held under
+Amounts
+Carrying amount
+2014
+713,420
+XII Financial Statements
+55 Significant accounting estimates and judgements
+XII Financial Statements
+59
+Tie-1 capital adequacy ratio
+Capital adequacy ratio
+Components of capital base
+Core tier-1 capital:
+2015
+2014
+10.83%
+Core tier-1 capital adequacy ratio
+10.44%
+10.44%
+12.57%
+12.38%
+Qualifying portion of share capital
+25,220
+25,220
+Qualifying portion of capital reserve
+73,889
+10.83%
+In accordance with the advanced capital management approach approved by CBRC in April 2014, the Group
+calculated core tier-1 capital adequacy ratio, tier-1 capital adequacy ratio and capital adequacy ratio as follows:
+The Group's capital adequacy ratio was prepared solely in accordance with the CBRC's Administrative Measures on
+the Capital of Commercial Banks (Trial) issued in 2012 and effective on 1 January 2013. The bases used herein may
+differ from those adopted in Hong Kong or other countries.
+(A) Capital adequacy ratio
+Up to the date of issue of the financial statements, the IASB has issued the following amendments, new standards
+and interpretations which are not yet effective for the year ended 31 December 2015 and which have not been
+adopted in these financial statements.
+IFRS 9, Financial instruments
+IFRS 15, Revenue from Contracts with Customers
+Effective for accounting periods
+beginning on or after
+1 January 2018
+1 January 2017
+So far the Group has concluded that the adoption of other standards is unlikely to have a significant impact on its
+operating results and financial position, except for IFRS 9 "Financial instruments". Since the Group is in the process
+of making an assessment on overall impact of IFRS 9, the Group cannot quantify the impact on its operating results
+and financial position.
+62 Non-adjusting events after the reporting period
+Save as otherwise disclosed in Note 22, Note 46(b) and Note 56(a), the Group has no significant post reporting date
+event subsequent to the end of the reporting period as at the date of approval to the financial statements.
+63 Comparative figures
+During the financial year, the Bank has reclassified the credit card holder instalment income from commission
+revenue to interest revenue, and has adjusted the corresponding contemporary comparison figures.
+In 2015, CBRC reclassified the National Development Bank from commercial banks and other financial institutions to
+policy banks, the corresponding investments are reclassified, comparative figures in Note 21 has been adjusted.
+Equity listed in the Bank's statement of financial position (Note 60) is restated for the early adoption of the
+Amendments to IAS 27 "Separate Financial Statements - Equity Method in Separate Financial Statements" (Note
+2(b)).
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+Unaudited Supplementary Financial Information
+(Expressed in millions of Renminbi unless otherwise stated)
+69,227
+Surplus reserves
+33,981
+28,664
+10
+5
+Net tier-1 capital
+347,444
+301,982
+Tier-2 capital:
+Qualifying portion of tier-2 capital instruments and their premium
+30,000
+30,000
+Surplus provision for loans impairment
+24,006
+24,190
+Qualifying portion of non-controlling interests
+1,959
+2,162
+Total tier-2 capital
+55,965
+Other tier-1 capital (Note (ii))
+301,977
+347,434
+Net core tier-1 capital
+Regulatory general reserve
+64,680
+53,979
+Retained profits
+162,405
+137,910
+Qualifying portion of non-controlling interests
+329
+61 Possible impact of amendments, new standards and
+interpretations issued but not yet effective for the
+year ended 31 December 2015
+288
+(304)
+(1,308)
+Total core tier-1 capital
+360,200
+313,980
+Regulatory deductions from core tier-1 capital
+12,766
+12,003
+Others (note (i))
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+302
+12,929
+Derivative financial liabilities
+7,084
+9,266
+Debt securities issued
+235,854
+84,559
+Salaries and welfare payable
+5,363
+5,367
+Tax payable
+Other liabilities
+Total liabilities
+12,100
+11,105
+53,441
+27,843
+19,786
+4,855,996
+Financial liabilities at fair value through profit or loss
+37,559
+2015
+2014
+(Restated)
+Liabilities
+Borrowing from central bank
+62,600
+20,000
+Deposits from banks and other financial institutions
+Placements from banks and other financial institutions
+Amounts sold under repurchase agreements
+702,862
+700,042
+112,659
+40,059
+185,285
+66,075
+Deposits from customers
+3,421,403
+3,158,746
+Interest payable
+43,873
+4,179,864
+Equity
+Share capital
+17,402
+16,897
+Exchange reserve
+2
+Total equity
+Total equity and liabilities
+352,041
+311,251
+5,208,037
+4,491,115
+Approved and authorized for issue by the Board of Directors on 30 March 2016.
+Li Jianhong
+Tian Huiyu
+Company Chop
+Director
+Director
+301
+109,043
+128,791
+Proposed profit appropriations
+Retained profits
+Capital reserve
+Investment revaluation reserve
+Hedging reserve
+Surplus reserve
+48(a)
+25,220
+25,220
+76,681
+56,352
+76,681
+1,673
+241
+(163)
+34,009
+28,690
+Regulatory general reserve
+63,928
+53,208
+5,769
+Regulatory deductions from core tier-2 capital
+Net tier-2 capital
+Net capital
+1,448,892
+920,230
+Liabilities and obligations arising from unsecured funding
+Secured funding
+1,548
+1,548
+25,408
+Additional requirements, of which:
+Cash outflows arising from derivative contracts and other
+transactions arising from related collateral requirements
+Cash outflows arising from secured debt instruments funding
+23,219
+22,975
+108
+108
+Committed credit facilities and committed liquidity facilities
+Other contractual lending obligations
+430,248
+24,691
+42,267
+42,267
+Non-business relations deposits (including all the counterparties)
+Other contingent funding obligations
+257,764
+Business relations deposits(excluding correspondent banks operations)
+In accordance with CBRC's Administrative Measures on Liquidity Coverage Ratio of Commercial Banks effective on
+31 December 2015, the Group's liquidity coverage ratio and relevant components as at 31 December 2015 were
+as follows. The basis used herein may differ from those adopted in Hong Kong or other countries. For the quarter
+ended 31 December 2015, the Group's liquidity coverage ratio was as follows:
+Quarter ended 31 December 2015
+High quality liquid assets
+Total high quality liquid assets (HQLA)
+Cash outflows
+Unweighted
+amount
+(Average value)
+Weighted
+amount
+(Average value)
+655,927
+Retail deposits and small business funding, of which:
+Stable deposits
+1,616
+81
+Less stable deposits
+1,370,543
+137,054
+Unsecured wholesale funding, of which:
+1,037,960
+912,536
+18,453
+Total cash outflows
+(i)
+LCR is calculated based on the arithmetic mean of the item as at the end of each month for the latest quarter during the reporting period.
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+(D) Currency concentrations other than RMB
+Non-structural position
+USD
+2015
+HKD
+Others
+Total
+(in millions of RMB)
+Spot assets
+376,968
+175,507
+Spot liabilities
+(165,555)
+Note:
+113.61%
+578,360
+LCR (%) (i)
+1,450,579
+Cash inflows
+Secured lending transactions (including reverse
+repurchase agreements and securities borrowed)
+274,089
+274,089
+Cash inflows from fully honoured payments
+1,151,766
+(C) Liquidity Coverage Ratio
+530,114
+Total cash inflows
+112,525
+68,016
+872,219
+Adjusted value
+TOTAL HQLA
+655,927
+TOTAL NET CASH OUTFLOWS
+Other cash inflows
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+306
+commercial entities that are consolidated for accounting purposes
+but outside the scope of regulatory consolidation
+Adjustments for fiduciary assets
+Adjustments for derivative financial instruments
+Adjustment for securities financing transactions
+Adjustment for off-balance sheet items
+Other adjustments
+2015
+5,474,978
+(2,717)
+10,813
+13,508
+791,776
+(12,766)
+Balance of adjusted on-balance sheet and off-balance sheet assets
+6,275,592
+China Merchants Bank
+Annual Report 2015
+Adjustments for investments in banking, financial, insurance or
+Total consolidated assets as per published financial statements
+Summary comparison of accounting assets and leverage ratio exposure measure:
+In accordance with the CBRC's Administrative Measures on Leverage Ratio of Commercial Banks (Revision) issued in
+2015 and effective on 1 April 2015, the Group's leverage ratio and relevant components as at 31 December 2015
+were as follows. The basis used herein may differ from those adopted in Hong Kong or other countries.
+Total risk-weighted assets
+55,965
+56,352
+403,409
+358,334
+3,208,152
+2,893,732
+Note (i): Others represent exchange reserve of foreign currency financial statements under CBRC's Administrative Measures on the Capital of Commercial
+Banks (Trial).
+XII Financial Statements
+Note (ii): The Group's other tier-1 capital is qualifying portion of non-controlling interests.
+304
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+(A) Capital adequacy ratio (continued)
+In 2015, in accordance with the advanced capital management approach approved by CBRC in April 2014, the Bank
+calculated core tier-1 capital adequacy ratio is 10.38%, tier-1 capital adequacy ratio is 10.38%, capital adequacy
+ratio is 12.15%, net capital is RMB360,460 million and total risk-weighted assets is RMB2,966,543 million.
+In 2015, by the method of calculating credit risk using the risk-weighted approach, market risk using the
+standardised approach and operational risk using the basic indicator approach, the Group's core tier-1 capital
+adequacy ratio is 9.93%, tier-1 capital adequacy ratio is 9.93%, capital adequacy ratio is 11.91%, net capital is
+RMB416,834 million and total risk-weighted assets is RMB3,499,231 million.
+In 2015, by the method of calculating credit risk using the risk-weighted approach, market risk using the
+standardised approach and operational risk using the basic indicator approach, the Bank's core tier-1 capital
+adequacy ratio is 9.44%, tier-1 capital adequacy ratio is 9.44%, capital adequacy ratio is 11.46%, net capital is
+RMB373,866 million and total risk-weighted assets is RMB3,261,357 million.
+(B) Leverage Ratio
+303
+Note
+(B) Leverage Ratio (continued)
+2015
+13,508
+Agent transaction exposures
+Total securities financing transaction exposures
+223,989
+Off-balance sheet exposure at gross notional amount
+1,302,755
+Less: Adjustments for conversion to credit equivalent amounts
+(510,979)
+Balance of adjusted off-balance sheet assets
+791,776
+Net tier 1 capital
+347,444
+Balance of adjusted on-balance sheet and off-balance sheet assets
+6,275,592
+Leverage ratio
+5.54%
+305
+Counterparty credit risk exposure for SFT assets
+Less: Netted amounts of cash payables and cash receivables of gross SFT assets
+210,481
+Gross SFT assets (with no recognition of netting), after adjusting for
+sale accounting transactions
+On-balance sheet items (excluding derivatives and securities financing
+transactions (SFT))
+5,251,604
+Less: Asset amounts deducted in determining Basel III Tier 1 capital
+(12,765)
+Balance of adjusted on-balance sheet assets (excluding derivatives and SFTs)
+5,238,839
+Replacement cost associated with all derivatives transactions
+(net of eligible cash variation margin)
+Leverage ratio, net tier-1 capital, on-balance sheet and off-balance sheet exposures and other information:
+9,780
+Add-on amounts for potential future exposure associated with all derivatives transactions
+Gross-up for derivatives collateral provided where deducted from the
+balance sheet assets
+Less: Deductions of receivables assets for cash variation margin
+provided in derivatives transactions
+Less: Exempted central counterparty leg of client-cleared trade exposures
+Effective notional amount of written credit derivatives
+Less: Adjusted effective notional deductions for written credit derivatives
+Total derivative exposures
+46
+20,989
+11,163
+60 The Bank's statement of financial position (continued)
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+loans and
+% of gross
+2015
+Operation in Mainland China
+(F) Further analysis on loans and advances to customers
+analysed by industry sector
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+421,888
+232,576
+103,233
+86,079
+12,872
+3,131
+1,438
+8,303
+19,459
+213
+advances
+16,275
+2014
+loans and
+259,298
+59
+236,513
+Wholesale and retail
+41
+342,005
+43
+318,679
+Manufacturing
+other security
+Amount
+other security
+Amount
+collateral or
+collateral or
+covered by
+advances
+covered by
+% of gross
+2,971
+154,328
+60,718
+163,906
+49,203
+26,743
+1,267
+21,193
+15,335
+2,510
+12,825
+198,950
+119,656
+32,795
+46,499
+252,299
+129,176
+33,014
+90,109
+153,731
+37,444
+269,218
+470,568
+2014
+74,570
+19,040
+175,766
+63,951
+81,319
+30,496
+213,791
+165,281
+51
+4,201
+Total
+Others
+entities
+institutions
+sector
+other financial
+Public
+Banks and
+44,309
+110,789
+Property development
+76
+92
+308,973
+Micro-finance loans
+219,621
+312,985
+Credit cards
+321,424
+100
+491,290
+Residential mortgage
+75,007
+100
+89,815
+Discounted bills
+1,308,654
+49
+1,353,856
+336,924
+Corporate loans and advances
+Others
+89
+73
+89
+100
+100
+47
+41
+25
+32
+ཁམས བ 8༅ &$ཁ ཥ
+2,340,361
+61
+2,653,747
+Gross loans and advances to customers
+956,700
+71
+1,210,076
+Retail loans and advances
+96,828
+65,045
+46
+76,477
+98,350
+38
+96,387
+Construction
+49
+98,514
+46
+109,942
+heating power, gas and water
+Production and supply of electric power,
+37
+140,548
+38
+145,473
+Transportation, storage and postal services
+80
+143,952
+Leasing and commercial services
+80,788
+41
+49,343
+Others
+20,092
+38
+28,076
+Telecommunications, software and IT services
+30,328
+32
+33,431
+175,912
+management
+44
+40
+7724
+61,179
+43
+52,178
+Mining
+43
+Water, environment and public utilities
+3,163
+39,779
+Total
+13,783
+14,290
+16,099
+15,176
+543,228
+630,661
+Balances with banks and other financial institutions
+55,927
+47,015
+Placements with banks and other financial institutions
+202,534
+137,848
+Amounts held under resale agreements
+342,928
+343,955
+Loans and advances to customers
+2,506,618
+Balances with central bank
+2,222,388
+Precious metals
+2014
+(Restated)
+(56,359)
+(52,239)
+(482,020)
+Forward written
+650,437
+93,045
+61,572
+495,820
+Forward purchased
+589,403
+(372,930)
+36,928
+(74,897)
+(132,478)
+300
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+60 The Bank's statement of financial position
+2015
+Assets
+Cash
+Interest receivable
+23,648
+22,411
+408,504
+40,664
+39,664
+1,391
+1,223
+24,091
+23,510
+535
+581
+2,596
+2,279
+15,626
+9,962
+9,388
+8,434
+5,208,037
+4,491,115
+715,864
+Total assets
+Other assets
+Deferred tax assets
+Financial assets at fair value through profit or loss
+54,960
+37,218
+Derivative financial assets
+9,607
+8,346
+Available-for-sale financial assets
+276,846
+(590,618)
+262,942
+351,704
+254,708
+Debt securities classified as receivables
+Investments in subsidiaries
+Interest in joint ventures
+Property and equipment
+Investment properties
+Intangible assets
+Held-to-maturity investments
+Net option position
+(15,074)
+8
+XII Financial Statements
+China Merchants Bank
+Annual Report 2015
+308
+307
+Investments in subsidiaries.
+Capital and statutory reserves of overseas branches; and
+Investment properties, property and equipment, net of depreciation charges;
+The net option position is calculated using the delta equivalent approach required by the Hong Kong Monetary
+Authority (the "HKMA"). The net structural position of the Group includes the structural positions of the Bank's
+branches substantially involved in foreign exchange. Structural assets and liabilities include:
+32,737
+2
+32,713
+22
+87,861
+2,753
+33,366
+51,742
+Net structural position
+(E) International claims
+The Group is principally engaged in business operations within Mainland China, and regards all claims on third
+parties outside Mainland China and claims in foreign currencies on third parties within the Mainland China as
+international claims.
+International claims include loans and advances, balances and placements with banks and other financial institutions,
+holdings of trade bills, certificates of deposit and securities investment.
+International claims have been disclosed by different countries or geographical areas. A country or geographical
+area is reported where it constitutes 10% or more of the aggregate amount of international claims, after taking
+into account any risk transfers. Risk is transferred only when the claims are guaranteed by a party in country which
+is different from that of the counterparty or if the claims are on an overseas branch of a bank whose head office is
+located in another country.
+Others
+entities
+institutions
+sector
+other financial
+Public
+Banks and
+2015
+Net long position
+North and South America
+- of which attributed to Hong Kong
+Asia Pacific excluding Mainland China
+Foreign currencies transactions in Mainland China
+North and South America
+Europe
+- of which attributed to Hong Kong
+Asia Pacific excluding Mainland China
+Foreign currencies transactions in Mainland China
+Europe
+309
+(516)
+7
+(in millions of RMB)
+Total
+Others
+HKD
+USD
+2014
+19,832
+19,295
+537
+Net structural position
+261,032
+(1,477)
+52,370
+210,139
+Net long position
+(15,260)
+(194)
+Non-structural position
+Spot assets
+360,138
+146,351
+151
+Net option position
+(567,847)
+(49,483)
+(79,240)
+(439,124)
+Forward written
+659,117
+(674)
+50,907
+429,980
+Forward purchased
+536,915
+(539,808)
+(28,423)
+(211,982)
+(299,403)
+Spot liabilities
+30,426
+178,230
+78,731
+94
+1.59%
+Total
+835
+1,505
+Subsidiaries
+2,207
+8,196
+Western region
+3,851
+9,041
+Central region
+1,717
+2,963
+Northeast region
+3,656
+5,841
+Pearl River Delta and West Coast region
+2,459
+3,471
+Bohai Rim region
+8,262
+9,430
+Yangtze River Delta region
+2,237
+4,525
+Headquarters
+2014
+2015
+44,972
+25,224
+(ii)
+By overdue period
+1.01%
+0.23%
+0.45%
+Total
+- over 12 months
+0.37%
+0.65%
+- between 6 and 12 months (inclusive)
+0.41%
+0.49%
+- between 3 and 6 months (inclusive)
+As a percentage of total gross loans and advances:
+25,224
+By geographical segments
+44,972
+5,682
+12,725
+- over 12 months
+9,247
+18,449
+- between 6 and 12 months (inclusive)
+10,295
+13,798
+- between 3 and 6 months (inclusive)
+2014
+2015
+been overdue with respect to either principal or
+interest for periods of:
+Gross loans and advances to customers which have
+Total
+(i)
+(G) Overdue loans and advances to customers
+XII Financial Statements
+14,639
+Manufacturing
+Wholesale and retail
+written off
+during the year
+and advances
+the year
+allowance
+allowance
+and advances
+and advances
+during
+Impaired loans
+statement of
+profit or loss
+assessed
+impairment
+9,627
+Collectively
+Impaired loans
+Overdue loans
+consolidated
+losses charged to
+Impairment
+2014
+1,563
+5,166
+6,886
+4,292
+10,490
+Credit card
+7,406
+Individually
+assessed
+impairment
+China Merchants Bank
+Annual Report 2015
+4,753
+9,633
+China Merchants Bank
+Annual Report 2015
+312
+311
+977
+2,110
+3,227
+2,064
+6,574
+Credit card
+2,884
+4,796
+8,458
+3,612
+Value of collaterals held against overdue loans and advances
+9,610
+276
+476
+3,273
+870
+3,015
+Residential mortgage
+3,427
+6,663
+8,231
+2,761
+6,547
+10,686
+5,550
+Micro-finance loans
+XII Financial Statements
+(G) Overdue loans and advances to customers (continued)
+(iii) Collateral information
+2015
+% of total loans
+and advances
+2014
+% of total loans
+and advances
+0.16%
+996
+0.04%
+2,506
+0.09%
+534
+0.02%
+2,025
+0.07%
+less than 90 days
+462
+The amount of the Group's rescheduled loans and advances to financial institutions as at 31 December 2015 was 1
+million (2014: 1 million).
+(1) Non-bank Mainland China exposures
+The Bank is a commercial bank incorporated in the Mainland with its banking business primarily conducted in the
+Mainland. As of 31 December 2015 and 31 December 2014, most of the Bank's exposures arose from businesses
+with Mainland non-bank institutions or individuals. Analyses of various types of exposure by counterparty have been
+disclosed in the notes to the financial report.
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+(J) Corporate governance
+Board committees
+The Board of Directors has established six committees including the Strategy Committee, Audit committee, Related
+Party Transactions Control Committee, Risk and Capital Management Committee, Remuneration and Appraisal
+Committee and Nomination Committee.
+(i)
+(ii)
+Strategy Committee
+Main authorities and duties of the Strategy Committee are:
+to formulate the operational goals and medium-to-long term development strategies of the Bank, and
+make an overall assessment on strategic risks;
+0.02%
+to consider material investment and financing plans and make proposals to the Board of Directors;
+Rescheduled loans and advances overdue
+- rescheduled loans and advances
+Provision of overdue loans and advances for
+which impairment losses are individually assessed
+2015
+2014
+16,817
+8,647
+28,155
+16,577
+18,790
+9,384
+13,217
+8,336
+The amount of the Group's overdue loans and advances to financial institutions as at 31 December 2015 was RMB11
+million (2014: RMB1 million).
+overdue more than 90 days
+Note:
+Loans and advances with a specific repayment date are classified as overdue when the principal or interest is overdue.
+For loans and advances repayable by regular installments, if part of the installments is overdue, the whole amount of these loans would be
+classified as overdue.
+Loans and advances repayable on demand are classified as overdue when a demand for repayment has been served on the borrower but
+repayment has not been made in accordance with the instructions. If the loans and advances repayable on demand are outside the approved
+limit that was advised to the borrower, they were also considered as overdue.
+The collaterals of the Group included cash deposit, shares, land use right, property, motor vehicles and other equipment, etc. The fair value
+of collaterals was estimated by management based on the latest available external valuations adjusted by taking into account the current
+realisation experience as well as market situation. Where collateral values are greater than gross advances, only the amount of collateral up to
+the gross advance had been included in the "secured portion of overdue loans and advances" as set out in the above tables.
+313
+314
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+(H) Rescheduled loans and advances to customers
+Rescheduled loans and advances to
+customers
+4,531
+Less:
+The above analysis represents loans and advances overdue for more than 90 days as required and defined by the HKMA.
+7,079
+to supervise and review the implementation of the annual operational and investment plans;
+to make recommendations and proposals on important issues for discussion and determination by the
+Board of Directors.
+to submit proposals on perfecting the management of risks and capital of the Bank;
+to arrange and instruct risk prevention works in accordance with the authorisation of the Board of
+Directors; and
+any other task delegated by the Board of Directors.
+Remuneration and Appraisal Committee
+Main authorities and duties of the Remuneration and Appraisal Committee are:
+to study the appraisal standards for directors and senior management, and conduct appraisals and
+make recommendations based on the actual conditions of the Bank;
+to study and review the remuneration policies and proposals in respect of directors and senior
+management of the Bank, make recommendations to the Board of Directors and supervise the
+implementation of such proposals;
+to review the regulations and policies in respect of remuneration of the Bank; and
+any other task delegated by the Board of Directors.
+Nomination Committee
+Main authorities and duties of the Nomination Committee are:
+to review the structure, size and composition of the Board of Directors (including their expertise,
+knowledge and experience) at least once a year and make recommendations on any change to
+the Board of Directors to implement the strategies of the Bank according to the Bank's business
+operations, asset scale and shareholding structure of the Bank;
+to study the standards and procedures for selection of directors and senior management, and make
+recommendations to the Board of Directors;
+to perform relevant duties under the advanced capital measurement method pursuant to the
+authorisation given by the Board of Directors;
+to conduct extensive searches for qualified candidates for directors and senior management;
+any other task delegated by the Board of Directors.
+http
+Add
+://www.cmbchina.com
+: China Merchants Bank Tower, No 7088,
+Shennan Boulevard, Shenzhen, China
+: (0755) 83198888
+Tel
+Fax
+: (0755) 83195555
+Postcode
+518040
+Secured portion of overdue loans and advances
+to conduct preliminary examination on the candidates for directors and senior management and make
+recommendations to the Board of Directors; and
+to evaluate and monitor the implementation of Board resolutions; and
+to make regular assessment on the risk policies, management status, risk-withstanding ability and
+capital status of the Bank;
+Main authorities and duties of the Risk and Capital Management Committee are:
+Audit Committee
+Main authorities and duties of the Audit Committee are:
+to propose the appointment or replacement of external auditors;
+to monitor the internal audit system of the Bank and its implementation, and evaluate the work
+procedures and work effectiveness of its internal audit department;
+to coordinate the communication between internal auditors and external auditors;
+to audit the financial information of the Bank and disclosure of such information, and is responsible
+for the annual audit work of the Bank, including issue of a conclusive report on whether the
+information contained in the audited financial statements is true, accurate, complete and updated,
+and submit the same to the Board of Directors for consideration;
+to examine the internal control system of the Bank, and make recommendations for improvement in
+the internal control of the Bank;
+to review and supervise the mechanism for the Bank's employees to whistle blow any misconduct
+in respect of financial reports, internal control or otherwise, so as to ensure that the Bank always
+handles the whistle blowing issues in a fair and independent manner and takes appropriate actions;
+to examine the accounting policies, financial reporting procedures and financial position of the Bank;
+and
+any other task delegated by the Board of Directors.
+(iii)
+Related Party Transactions Control Committee
+Main authorities and duties of the Related Party Transactions Control Committee are:
+to supervise the status of risk control by the senior management of the Bank in relation to credit risk,
+market risk, operational risk, liquidity risk, strategic risk, compliance risk, reputation risk, country risk
+and other risks;
+to identify connected persons of the Company according to relevant laws and regulations;
+to review the administrative measures on related party transactions of the Bank, and to monitor the
+establishment and improvement of the related party transactions management system of the Bank;
+and
+to review the announcements on related party transactions of the Bank.
+315
+316
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+(J) Corporate governance (continued)
+Board committees (continued)
+(iv)
+Risk and Capital Management Committee
+(v)
+(vi)
+to inspect, supervise and review major related party transactions and continuing related party
+transactions, and to control the risks associated with related party transactions;
+8,502
+11,055
+9,974
+86
+Transport and transport equipment
+13,876
+66
+7,925
+61
+Manufacturing
+13,468
+46
+18,265
+44
+Recreational activities
+3,627
+41
+431
+96
+Information technology
+70
+158,931
+60
+153,914
+Corporate loans and advances
+68
+42,097
+22,551
+22,305
+Others
+83
+2,221
+28
+2,025
+70
+Residential mortgage
+95
+Wholesale and retail
+310
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+(F) Further analysis on loans and advances to customers
+analysed by industry sector (continued)
+Operation outside Mainland China
+2015
+2014
+% of gross
+loans and
+advances
+% of gross
+loans and
+advances
+covered by
+covered by
+collateral or
+collateral or
+Amount
+67
+36,031
+53
+37,168
+Property development
+68
+14,860
+29,410
+54
+46,585
+Financial concerns
+other security
+Amount
+other security
+4,744
+8,165
+Unsecured portion of overdue loans and advances
+7,754
+Individually
+assessed
+impairment
+Collectively
+assessed
+impairment
+statement of
+profit or loss
+Impaired loans
+and advances
+during
+written off
+allowance
+allowance
+the year during the year
+Manufacturing
+Wholesale and retail
+24,338
+15,237
+4,551
+15,541
+20,689
+Micro-finance loans
+129
+2,599
+5,769
+2,258
+4,423
+Impaired loans
+and advances
+100
+11,211
+5,990
+6,556
+10,279
+14,615
+15,862
+9,381
+and advances
+Residential mortgage
+to consolidated
+267
+Micro-finance loans
+1,804
+97
+1,889
+99
+Others
+6,397
+52
+4,717
+53
+Retail loans and advances
+16,625
+80
+14,627
+83
+Gross loans and advances to customers
+170,539
+62
+173,558
+62
+259
+Credit cards
+100
+The overdue amounts, impaired amounts, individual and collective assessment allowances, impairment losses charged
+to profit and loss and impaired loans and advances written off amounts during the year made on the following
+industry sectors which constitute not less than 10% of total loans and advances to customers are:
+71
+China Merchants Bank
+Annual Report 2015
+XII Financial Statements
+Impairment
+losses charged
+2015
+(F) Further analysis on loans and advances to customers
+analysed by industry sector (continued)
+Overdue loans
+Note: including other bonds, equity investments and fund investments and paper precious metal.
+33,022
+50,809
+3,874
+Available-for-sale financial assets
+As at 31 December 2015, the net value of available-for-sale financial assets of the Group was RMB299.559
+billion, representing an increase of 7.55% as compared with that at the end of the previous year. This category of
+investments was made mainly to improve operation performance.
+In 2015, in order to stabilise economic growth and lower financing cost for real economy, the central bank made
+several cuts to the deposit reserve ratios and the benchmark lending interest rates, and adjusted market liquidity
+by using such monetary policy tools as MLF and PSL since the beginning of the year, leading to improvement in the
+inter-bank market liquidity as compared with 2014. In response to the market trends, the Group took opportunities
+to increase its investments primarily in interest-bearing bonds and bonds with high credit ratings, and moderately
+extended bond duration, thus optimising the structure of assets and liabilities.
+The following table sets forth the components of the portfolio of the available-for-sale financial assets of the Group.
+(in millions of RMB)
+31 December
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+7,168
+Financial assets designated at fair value through profit or loss
+655
+766
+3,439
+2,133
+Total financial assets designated at fair value through profit or loss
+8,272
+2015
+299
+304
+Bonds issued by policy banks
+Bonds issued by the PRC government
+2014
+(restated)
+31 December
+31 December
+2015
+(in millions of RMB)
+The following table sets forth the components of the portfolio of financial assets designated at fair value through
+profit or loss of the Group.
+Bonds issued by commercial banks and other financial institutions
+Other bonds
+31 December
+2014
+(restated)
+Bonds issued by the People's Bank of China (the "PBOC")
+94,429
+Annual Report 2015
+Held-to-maturity investments
+As at 31 December 2015, the net amount of held-to-maturity investments of the Group amounted to RMB353.137
+billion, representing an increase of 36.12% as compared with the end of the previous year. Held-to-maturity
+investments are held on a long-term basis for the strategic allocation of assets and liabilities of the Group.
+Given the generally bullish bond market in the whole year, the Group reasonably extended the duration of
+investment portfolios based on the requirements of interest rate risk management of bank account and liquidity
+risk management, and moderately increased its investment in medium to long term bonds bearing fixed interest
+rates when the yields of bonds were at a higher level in the first half of the year. The purchase focused on bonds
+issued by the PRC government, policy banks and local governments, leading to a faster growth of such category of
+investments.
+The following table sets forth the components of held-to-maturity investments of the Group.
+(in millions of RMB)
+31 December
+2015
+31 December
+2014
+(restated)
+Bonds issued by the PRC government
+171,028
+109,919
+Bonds issued by policy banks
+165,890
+133,197
+Bonds issued by commercial banks and other financial institutions
+Other bonds
+14,214
+9,410
+2,100
+6,979
+Total held-to-maturity investments
+353,232
+259,505
+Less: Impairment allowances
+(95)
+V Report of the Board of Directors
+Bonds issued by the PRC government
+China Merchants Bank
+35
+77,265
+Total financial assets held for trading
+94
+99
+Bonds issued by policy banks
+68,822
+91,223
+Bonds issued by commercial banks and other financial institutions
+66,235
+34,190
+Other bonds
+66,728
+73,828
+Equity investments
+2,906
+2,215
+Fund investments
+1,012
+317
+Total available-for-sale financial assets
+Less: Impairment allowances
+Net available-for-sale financial assets
+300,226
+(667)
+299,559
+279,137
+(611)
+278,526
+36
+15,048
+As at 31 December 2015, the net value of financial assets held for trading of the Group was RMB50.809 billion,
+representing an increase of 53.86% as compared with that at the end of the previous year. Such investments
+were made mainly to seize the opportunities of transactions in the bond market. In 2015, China's macro-economy
+growth and inflation continued to hit new lows, and the acceleration of IPOs and the replacement of local debts
+posed impact on short-term liquidity and medium and long-term asset allocation demands, respectively. Under this
+situation, the central bank lowered the deposit reserve ratios and the lending benchmark interest rates appropriately
+to replenish market liquidity, and completed the full process of interest rate liberalisation. The interbank market
+interest rates continued the downward trend shown in 2014, in which the interest rates of medium- and long-term
+bonds continued to decline and the interest spreads of highly-rated credits kept narrowing. Based on its intensified
+market research, the Group adopted the aggressive trading strategy in line with market situations. The Group
+proactively conducted spread transactions of bonds and interest rate swaps while moderately expanded trading
+exposure, thereby achieving relatively better trading revenue.
+6,458
+3.53
+50,809
+Percentage of
+the total (%)
+Amount
+Percentage of
+the total (%)
+Amount
+Financial assets held for trading
+(in millions of RMB, excluding percentages)
+31 December 2014
+31 December 2015
+The following table sets forth the components of the investment portfolio of the Group according to accounting
+classification.
+Investments of the Group are composed of listed and unlisted financial instruments denominated in Renminbi and
+foreign currencies, including financial assets designated at fair value through profit or loss, derivative financial assets,
+available-for-sale financial assets, held-to-maturity investments and investment receivables.
+Investments
+5.3.1.2 Investments
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+4
+34
+33
+33,022
+As at 31 December 2015, retail loans amounted to RMB1,226.701 billion, representing an increase of 26.29% as
+compared with the end of the previous year. Retail loans accounted for 43.43% of total loans and advances, up
+by 4.79 percentage points as compared with the end of the previous year. During the reporting period, the Group
+further reinforced its retail customer base of micro enterprises. In order to meet market demands and put credit risk
+under control, the Group moderately increased the amount of retail loans, which were primarily residential mortgage
+loans and credit card loans with some retail consumption loans, thus further optimising loan structure.
+3.31
+8,272
+Investment receivables
+26.04
+259,434
+24.56
+353,137
+Held-to-maturity investments
+27.96
+278,526
+20.83
+299,559
+Available-for-sale financial assets
+0.94
+9,315
+0.71
+10,176
+Derivative financial assets
+0.72
+7,168
+0.57
+Financial assets designated at fair value through
+profit or loss
+Retail loans
+As at 31 December 2015, discounted bills amounted to RMB89.815 billion, representing an increase of 19.74% as
+compared with the end of the previous year. As for the development of its discounted bills business, based on the
+loan granting schedule, the Group made flexible adjustments to the scale of bills financing, and increased the overall
+return on bill assets by taking a number of measures such as optimisation of structure, centralisation of operation,
+acceleration of circulation and profit through volume.
+Discounted bills
+1,438,017
+100.00
+996,217
+100.00
+Financial assets held for trading
+The following table sets forth the components of the portfolio of financial assets held for trading of the Group.
+(in millions of RMB)
+31 December
+2015
+31 December
+2014
+(restated)
+Bonds issued by the PRC government
+17,543
+5,351
+Bonds issued by policy banks
+9,622
+6,165
+Bonds issued by commercial banks and other financial institutions
+Others (Note)
+5,860
+Total investments
+41.03
+408,752
+49.80
+As at the end of 2015, the Group's total corporate loans amounted to RMB1,507.770 billion, representing an
+increase of 2.74 % as compared with the end of the previous year. Total corporate loans accounted for 53.39% of
+total loans and advances to customers, representing a decrease of 4.99 percentage points as compared with the end
+of the previous year. In 2015, the corporate loans of the Group were granted mainly to support the development
+of the real economy by satisfying the diversified financing needs of customers. The Group increased loans granted
+to strategic customers and quality credit projects on the premise of effective control over credit risks, and further
+optimised the corporate loan structure while maintaining a control over total loan volume and conducting structural
+adjustment.
+2,513,919
+100.00
+2,824,286
+38.64
+2.98
+58.38
+Percentage of
+the total (%)
+Amount
+1,467,585
+75,007
+971,327
+17,784
+53.39
+3.18
+43.43
+1,507,770
+Percentage of
+the total (%)
+Amount
+31 December 2014
+31 December 2015
+Corporate loans
+Total loans and advances to customers
+Retail loans
+716,064
+89,815
+1,226,701
+100.00
+50.04
+Corporate loans
+61,081
+67,670
+14,593
+16,419
+3,349
+3,842
+3,535
+4,086
+10,425
+11,929
+29,179
+31,394
+2014 (restated)
+2015
+Rental expenses
+Other general and administrative expenses
+Business tax and surcharges
+Staff costs
+(in millions of RMB)
+The following table sets forth, for the periods indicated, the principal components of the operating expenses of the
+Group.
+In 2015, the Group's operating and administrative expense amounted to RMB67.670 billion, representing an
+increase of 10.79% as compared with 2014. The cost-to-income ratio was 27.55%, representing a decrease of
+2.87 percentage points as compared with the previous year. By taking various measures such as improvement
+of budgeting method for expenses, optimisation of resources allocation and enhancement of daily expense
+management, the Group further enhanced expense management, effectively improved cost efficiency and better
+utilised operating expenses for business development. As such, the expense management and control achieved
+fruitful results, leading to a slower increase in operating expenses compared with that of operating income. Staff
+costs increased by 7.59% as compared with that of 2014 due to the increase in headcount. Other general and
+administrative expenses increased by 12.51% as compared with that of 2014, and depreciation charges and rental
+expenses increased by 15.59% and 14.72% respectively as compared with those of 2014. The Company has always
+attached great importance to investments in research and development. In 2015, our research and development
+expenses amounted to RMB4.133 billion, representing an increase of 6.69% as compared with that of 2014.
+Total operating expenses
+5.2.9 Operating expense
+5.2.10 Impairment losses on assets
+(in millions of RMB)
+31
+Impairment losses on loans was the largest component of impairment losses on assets. In 2015, impairment losses
+on loans was RMB57.507 billion, representing an increase of 84.00% as compared with the previous year, which
+was mainly due to increased provision for deteriorated assets and additional provision for the heightened credit risks
+associated with overcapacity industries amidst economic downturn. For details of the provision for impairment losses
+on loans, please refer to the section headed "Loan quality analysis" in this chapter.
+59,266
+500
+257
+1,002
+57,507
+31,681
+335
+57
+35
+31,254
+2014 (restated)
+2015
+Total impairment losses on assets
+Other assets
+-
+- Amounts due from banks and other financial institutions
+- Investments
+- Loans and advances
+Allowances for asset impairment charged/(reversed) on
+In 2015, impairment losses on assets of the Group were RMB59.266 billion, representing an increase of 87.07% as
+compared with that of 2014. The following table sets forth, for the periods indicated, the principal components of
+impairment losses on the assets of the Group.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+9,671
+Net gains/(losses) on financial instruments designated at
+1,618
+3,073
+- Securities, derivatives and other trading activities
+2,467
+2,398
+2014 (restated)
+2015
+- Foreign exchange
+Net trading profit/(loss)
+(in millions of RMB)
+The following table sets forth, for the periods indicated, the principal components of other net income of the Group.
+In 2015, other net income of the Group was RMB12.018 billion, representing a year-on-year increase of 24.27%,
+which was mainly attributable to the increase in gains from changes in the fair value of financial instruments held
+for trading and the disposal of available-for-sale financial assets.
+5.2.8 Other net income
+Other fee and commission income increased by RMB618 million or 8.49% as compared with the previous year.
+Commission income from custody and other trustee businesses increased by RMB5.611 billion or 43.05% as
+compared with the previous year, which was primarily attributable to the rapid growth in the income from wealth
+management businesses such as the entrusted wealth management products which amounted to RMB8.913 billion,
+representing an increase of 42.75% as compared with the previous year.
+Commission income from credit commitment and loan business increased by RMB11 million or 0.26% as compared
+with the previous year.
+Agency service fees increased by RMB6.664 billion or 94.97% as compared with the previous year, which was
+primarily attributable to the rapid increase in the fees from agency distribution of funds and insurance policies.
+Settlement and clearing fees decreased by RMB317 million or 7.70% as compared with the previous year, which was
+primarily attributable to the decrease in the settlement income of letter of credit.
+Bank card fees increased by RMB1.870 billion or 24.31% as compared with the previous year, which was primarily
+attributable to the increase in the POS income.
+V Report of the Board of Directors
+fair value through profit or loss
+(118)
+(359)
+Net gains/(losses) on investment in available-for-sale financial assets
+12,018
+Other net income in total
+341
+311
+Others
+539
+188
+Net gains on trading of precious metal
+475
+498
+32
+Insurance operating income
+4,519
+Bills spread income
+476
+534
+Rental income
+21
+4
+Gains on investment in funds
+(145)
+611
+4,238
+Discounted bills
+China Merchants Bank
+Annual Report 2015
+5.3 Analysis of Balance Sheet
+3,595
+0.04
+1,684
+0.03
+1,708
+0.58
+27,445
+0.58
+31,835
+0.03
+1,484
+0.05
+2,786
+0.50
+23,560
+0.46
+24,934
+9.91
+469,065
+9.67
+529,617
+0.07
+1.18
+3,292
+16,020
+(in millions of RMB, excluding percentages)
+The following table sets forth, as at the dates indicated, the loans and advances to customers of the Group by
+product type.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+As at 31 December 2015, total loans and advances of the Group amounted to RMB2,824.286 billion, representing
+an increase of 12.35% as compared with the end of the previous year; total loans and advances accounted for
+51.59% of the total assets, representing a decrease of 1.54 percentage points as compared with the end of the
+previous year.
+5.3.1.1 Loans and advances
+100.00
+4,731,829
+100.00
+5,474,978
+0.30
+14,091
+0.23
+12,848
+0.21
+9,953
+0.18
+9,954
+0.22
+10,291
+0.29
+0.07
+55,986
+1.16
+63,779
+Total assets
+Other assets
+Goodwill
+Deferred tax assets
+Intangible assets
+Investment properties
+Fixed assets
+Investment in associates and joint ventures
+Interest receivable
+under resale agreements
+Inter-bank lending and financial assets purchased
+Balances with banks and other financial institutions
+Cash, precious metal and balances with the central bank
+Investments
+Net loans and advances to customers
+Provision for impairment losses on loans
+Total loans and advances to customers
+(in millions of RMB, excluding percentages)
+The following table sets forth, as at the dates indicated, the components of the total assets of the Group.
+As at 31 December 2015, the total assets of the Group amounted to RMB5,474.978 billion, representing an increase
+of 15.71% as compared with the end of 2014, which was mainly attributable to the increase in loans and advances
+to customers and investment receivables of the Group.
+5.3.1 Assets
+31 December 2015
+31 December 2014
+Amount
+Percentage of
+the total (%)
+14.16
+670,007
+10.97
+600,441
+21.05
+996,217
+26.27
+1,438,017
+51.75
+2,448,754
+V Report of the Board of Directors
+(71)
+(1.38)
+(65,165)
+(1.55)
+(84,842)
+53.13
+2,513,919
+51.59
+2,824,286
+Percentage of
+the total (%)
+Amount
+2,739,444
+Net held-to-maturity investments
+3,970
+259,434
+Equity investment
+5,500
+155,000
+3.75 110,000,000
+155,000
+China UnionPay Co., Ltd.
+Equity investment
+120,600
+345,708
+EPS Company (Hong Kong) Ltd.
+10.00 180,000,000
+Taizhou Bank Co., Ltd.
+(招聯消費金融有限公司)
+Consumption Finance Co., Ltd.
+Equity investment
+(5,000)
+995,000
+50.00 1,000,000,000
+1,000,000
+Investment in CMB-China Unicom
+306,671
+Co., Ltd.
+HK$8,400
+2
+Hong Kong Life Insurance Ltd.
+HK$792
+HK$(23) Equity investment
+HK$71,149 HK$21,474
+HK$8,502
+20,000
+20.00
+HK$2,000
+Joint Electronic Teller Services Ltd.
+13.33 20,000,000
+2.10
+HK$20,000
+Corporation Ltd.
+Equity investment
+149,700
+3.77 99,800,000
+189,620
+Yantai City Commercial Bank
+Equity investment
+HK$1,950
+HK$8,400
+Bank Consortium Holdings Ltd.
+HK$70,000
+Equity investment
+148,543
+100.00 1,000,000,000
+855,545
+CMB International Capital Holdings
+Corporation Limited
+Equity investment
+3,214,831
+2,404,037
+30,313,858
+of shares
+('000)
+855,545
+('000)
+period
+period (¹)
+reporting
+reporting
+Change in
+owners'
+equity
+for the
+for the
+Carrying
+value
+at end of
+period ('000)
+(shares)
+231,028,792
+100.00
+Origination
+351,658
+290,306
+upon
+establishment
+by promotion
+1,391,417
+50.00 725,000,000
+646,443
+CIGNA & CMB Life Insurance
+716,899 Equity investment
+383,184
+882,274
+55.00 115,500,000
+708,193
+217,146 Ownership
+China Merchants Fund Management
+Co., Ltd
+establishment
+upon
+1,723,195 Ownership
+1,549,897
+6,000,000
+N/A
+100.00
+6,000,000
+CMB Financial Leasing Co., Ltd.
+by promotion
+16.67
+70,000,000
+HK$130,062
+839
+1,195,623
+Interest rate derivatives
+Liabilities
+Fair value
+Assets
+Liabilities
+Assets
+(in millions of RMB)
+amount
+Currency derivatives
+Fair value
+Nominal
+Nominal
+31 December 2014
+31 December 2015
+The major categories and amount of derivative financial instruments held by the Group as at 31 December 2015, are
+shown in the following table. For details, please refer to Note 54(f) to the financial report "Risk Management - Use
+of derivatives".
+Derivative financial instruments
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+Profits/(losses) for the reporting period indicate the impact on the net profit of the Group for the reporting period attributable to the
+Bank's shareholders.
+amount
+1
+Other derivatives
+9,332
+5
+39
+In compliance with the PRC enterprise accounting principles, at the end of 2015, the Group conducted an
+impairment test on the goodwill arising from the acquisition of WLB and China Merchants Fund and determined
+that provision for impairment was not necessary. As at 31 December 2015, the Group had a balance of provision for
+impairment losses on goodwill of RMB579 million and the carrying value of goodwill was RMB9.954 billion.
+5.3.1.3 Goodwill
+In the second half of 2015, the RMB derivatives market developed rapidly along with the progress of reform in the
+interest rate and exchange rate regime. The Group actively seized opportunities arising from interest rate fluctuations
+in the inter-bank market to aggressively increase the proprietary trading in interest rate derivatives such as interest
+rate swaps, significantly increasing its share in the interest rate derivatives trading market and generating greater
+income from such trading activities. In the context of the suspension of RMB appreciation trend and the substantially
+increased RMB exchange rate fluctuations since August 2015, the Group actively seized market opportunities
+brought about by the fluctuation of RMB foreign exchange swap transactions and option transactions to aggressively
+increase the proprietary trading in derivatives, significantly expanding its share in the foreign exchange derivatives
+trading market, and eventually generating considerable income from such trading activities.
+(10,246)
+9,315
+1,382,085
+(7,575)
+10,176
+1,141,846
+217
+2,337,686
+(2)
+(629)
+(9,615)
+8,879
+16
+1,039
+(2)
+1,020,501
+420
+360,545
+(538)
+(7,035)
+Total
+Note:
+Equity investment
+Equity investment
+50.00
+HK$3,000
+I-Tech Solutions Limited
+HK$(78) Equity investment
+HK$1,222
+HK$3,875
+810,000
+27.00
+HK$810
+3,000,000
+Professional Liability Underwriting
+Services Ltd.
+HK$15,344
+HK$5,025
+HK$82,851
+42,000,000
+21.00
+HK$21,000
+BC Reinsurance Ltd.
+Equity investment
+HK$30,007 Equity investment
+HK$6,389
+Equity investment
+HK$2,922
+HK$45
+Hong Kong Precious Metals
+Exchange Ltd.
+Equity investment
+N/A
+3.00
+HK$570
+China Insurance Brokers Co., Ltd.
+MOP6,000
+60,000
+6.00
+MOP6,000
+Luen Fung Hang Life Ltd.
+HK$11,254
+100,000
+7.83
+HK$4,023
+AR Consultant Service Ltd.
+Equity investment
+Equity investment
+HK$136
+136,000
+0.35
+HK$136
+32,081,937
+Wing Lung Bank Ltd.
+at end of
+period
+percentage
+(%)
+261,326
+256,074
+372,158
+Market/fair
+value
+value
+value
+Carrying
+Market/fair
+31 December 2014
+Shareholdings
+352,615
+Carrying
+31 December 2015
+Securities investments
+Held-to-maturity listed investments
+(in millions of RMB)
+The following table sets forth, as at the dates indicated, the carrying value and market value of the held-to-maturity
+listed investments in our investment portfolio of the Group.
+All bond investments classified as financial assets designated at fair value through profit or loss and available-for-sale
+investments were stated at market value or fair value. Due to the lack of a mature trading market for the investment
+receivables in the Group's investment portfolio, the Group did not make any assessment on their market value or fair
+value.
+Carrying value and market value
+V Report of the Board of Directors
+value
+China Merchants Bank
+Annual Report 2015
+Initial
+at end of
+USD
+Industrial and Commercial Bank of China
+USY39656AA40
+period ('000)
+period (%)
+('000)
+(shares)
+('000)
+Currency
+at end of
+Name
+the reporting
+at end of
+period
+period
+investment
+Profits/
+(losses) for
+securities
+Investments
+Percentage
+of total
+Carrying
+value
+Stock code
+408,752
+716,064
+Net investment receivables
+78,067
+- Trust beneficiary rights
+Credit
+Investment in non-standard debt securities
+21,335
+20,389
+594
+21,229
+11,154
+Bonds issued by commercial banks and other financial institutions
+Other bonds
+111,636
+747
+Investment in standard debt securities
+(in millions of RMB)
+2014
+2015
+31 December
+31 December
+The following table sets forth the composition of the Group's investment receivables.
+Investment receivables are unlisted PRC certificated bonds and other investment in debt securities held by the Group,
+which are not publicly quoted in China or overseas. As at 31 December 2015, the Group's net investment receivables
+amounted to RMB716.064 billion, representing an increase of 75.18% as compared with the end of the previous
+year, which was mainly due to an increase in the investment in non-standard debt securities. Please refer to Section
+5.9.1 of this report for details of the investment in non-standard debt securities of the Company.
+Investment receivables
+Bonds issued by the PRC government
+- Broker asset management schemes
+101,702
+86,836
+(68)
+(1,017)
+Less: Provision for impairment losses
+408,820
+717,081
+Total investment receivables
+45,451
+254,858
+- Fund asset management schemes and others
+24,557
+143,351
+- Broker asset management schemes
+402
+- Trust beneficiary rights
+56,330
+48,198
+- Insurance asset management schemes
+Non-credit
+40,450
+58,615
+- Fund asset management schemes and others
+50,000
+353,137
+N/A
+23.85
+202,912
+2,500
+USD
+Other securities investments at the end of the period
+HK$
+Other securities investments at the end of the period
+1.62
+27,940
+319,500
+24,726
+N/A
+HK$
+00941.HK
+1.68
+3,741
+38,400
+USD
+Master Card
+MA
+1.83
+31,600
+China Mobile Ltd.
+10,000,000
+220,548
+21,478
+Shareholding
+Initial
+investment
+('000)
+Name of companies
+Shareholdings
+(losses)
+Profits/
+Companies in which the Company holds controlling interests and other Investee companies
+Shareholdings in non-listed financial companies
+China Merchants Bank
+Annual Report 2015
+Annual Report 2015
+12.82
+V Report of the Board of Directors
+38
+37
+As at 31 December 2015, the foreign currency bonds invested by the Company were categorised by their issuers
+as follows: 46.17% of the foreign currency bonds were issued by the PRC government and Chinese companies;
+13.48% by overseas governments and institutions; 15.22% by overseas financial institutions and 25.13% by
+overseas non-financial companies. The Company has made a provision for impairment losses of USD92 million for its
+investments in foreign currency bonds, and the floating valuation gains of the investment in foreign currency bonds
+was USD470,000.
+As at 31 December 2015, the Group had a balance of investments in foreign currency bonds of USD7.454 billion,
+among which USD4.242 billion was held by the Company and USD3.212 billion was held by Wing Lung Group.
+Analysis on investments in foreign currency bonds
+Notes: 1. The above table shows the top 10 securities held by the Group as at the end of the period in the descending order of their carrying value;
+2. Other securities investments refer to those other than the top 10 securities.
+0.91
+2,013
+N/A
+China Merchants Bank
+32,323
+HK$
+Agricultural Bank of China Ltd.
+N/A
+25,000
+USD
+China Construction Bank Corporation
+XS1328130197
+11.56
+199,097
+1,003,512
+4,830
+25,189
+HK$
+720
+15.62
+34,720
+N/A
+34,000
+USD
+Bank of Communications
+XS1257592037
+00388.HK
+1,332
+Hong Kong Exchanges and Clearing Ltd.
+11.33
+189
+WLGF II
+01288.HK
+3.05
+52,530
+15,182,000
+46,932
+HK$
+Bank of China Ltd.
+03988.HK
+7.06
+15,682
+217,444
+2,049
+USD
+Visa Inc
+V
+8.67
+126,583
+127,000
+127,000
+RMB
+Wing Lung Growth Fund
+53,015
+30
+Depreciation of fixed assets and investment properties
+148,473
+11,050
+Doubtful
+0.69
+17,343
+1.11
+31,233
+Substandard
+1.86
+46,634
+97.03
+of the
+total (%)
+Amount
+2,439,368
+95.71
+2.61
+73,794
+Special mention
+Percentage
+31 December 2014
+15.11%
+Ranking
+1
+1
+2
+1
+Effective from 2015, the People's Bank of China has no longer separately published the aggregate sum of national small- and medium-sized
+banks in preparing the "Statements of Incomes and Expenditures Relating to Lendings by Financial Institutions", and the denominator used for
+calculation of the market share in this report will be extended to all small-and-medium-sized banks (including national and regional banks). As
+a result of the changes in the denominator, the market share of the Company narrowed as compared with the previous year. With effect from
+2015, the People's Bank of China has implemented a new statistical system for deposits and loans, therefore, the deposits in this report include
+placements from non-deposit-taking financial institutions and placements from overseas financial institutions, and the loans include placements
+with non-deposit-taking financial institutions, indicating an expansion in the denominators as compared with previous years.
+0.39
+5.4 Loan Quality Analysis
+5.4.1 Distribution of loans by 5-tier loan classification
+The following table sets forth the 5-tier loan classification of the Group as at the dates indicated.
+(in millions of RMB, excluding percentages)
+Normal
+Amount
+2,703,082
+31 December 2015
+Percentage
+of the
+total (%)
+During the reporting period, the Group saw a steady growth in the volume of credit assets and an increase in
+non-performing assets. The allowance coverage ratio remained steady. As at 31 December 2015, total loans and
+advances to customers of the Group were RMB2,824.286 billion, representing an increase of 12.35% as compared
+with the end of the previous year; the non-performing loan ratio was 1.68%, up by 0.57 percentage point from the
+end of the previous year; whereas the non-performing loan allowance coverage ratio was 178.95%, representing a
+decrease of 54.47 percentage points as compared with the end of the previous year; the loan allowance ratio was
+3.00%, representing an increase of 0.41 percentage point as compared with the end of the previous year.
+6.59%
+7,580
+Loss
+balance
+(In millions of RMB, excluding percentages)
+Non-
+performing
+performing
+of the
+5.91
+Non-
+31 December 2014
+Percentage
+Non-
+performing
+performing
+of the
+Loan
+Non-
+Percentage
+31 December 2015
+Under the 5-tier loan classification system, non-performing loans of the Group are divided into substandard loans,
+doubtful loans and loss loans. Affected by the slowdown in economy, the non-performing loans and special mention
+loans of the Group had increased. As at the end of the reporting period, the total non-performing loans of the
+Group amounted to RMB47.410 billion, representing an increase of 69.82% as compared with the end of the
+previous year. Specifically, the increase of non-performing loans was mainly due to the contribution of substandard
+loans. During the reporting period, the proportion of substandard loans increased by 0.42 percentage point to
+1.11%. As at the end of the reporting period, the special mention loans amounted to RMB73.794 billion, accounting
+for 2.61% of the total loans, representing an increase of 0.75 percentage point over the end of the previous year.
+5.4.2 Distribution of loans and non-performing loans by product type
+V Report of the Board of Directors
+5,127
+0.18
+2,994
+0.12
+Total loans and advances to customers
+Total non-performing loans
+2,824,286
+0.30
+100.00
+100.00
+47,410
+1.68
+27,917
+1.11
+China Merchants Bank
+Annual Report 2015
+2,513,919
+6.28%
+6.79%
+Market share (%)
+403,409
+358,334
+12.58
+4. Risk-weighted assets (without taking into
+consideration the minimum requirements
+during the grace period)
+3,009,265
+2,748,687
+Of which:
+Credit risk weighted assets
+2,657,383
+2,471,180
+Market risk weighted assets
+Operational risk weighted assets
+36,972
+22,610
+314,910
+254,897
+10.87
+up by 0.39 percentage point
+up by 0.39 percentage point
+up by 0.19 percentage point
+2,893,732
+10.44%
+10.44%
+12.38%
+12.57%
+10.83%
+10.83%
+3,208,152
+3. Net capital
+7. Tier 1 capital adequacy ratio
+consideration the minimum requirements
+during the grace period)
+5. Risk-weighted assets (having taken into
+23.54
+63.52
+7.53
+9.48
+6. Core Tier 1 capital adequacy ratio
+15.05
+301,982
+347,444
+China Merchants Bank
+Annual Report 2015
+48
+41
+42
+42
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+V Report of the Board of Directors
+According to the "Statements of Incomes and Expenditures relating to Lendings by Financial Institutions" published
+by the PBOC in December 2015, the market share and ranking of the Bank among the small- and medium-sized
+Chinese banks (including national and regional banks) in terms of total deposits and loans as at the end of the
+reporting period are as follows:
+Items
+Total deposits expressed in RMB
+Total domestic savings deposits expressed in RMB
+Total loans expressed in RMB
+Total domestic personal consumption loans in RMB
+Note:
+5.3.4 Market share of deposit and lending businesses
+total (%)
+5.5 Analysis of Capital Adequacy Ratio
+At the end of
+the reporting
+period
+2. Net Tier 1 capital
+15.05
+301,977
+347,434
+1. Net core Tier 1 capital
+the advanced approach (1)
+As at 31 December 2015, the capital adequacy ratio and the Tier 1 capital adequacy ratio of the Group under the
+advanced approach were 12.57% and 10.83%, respectively, representing an increase of 0.66 percentage point and
+0.90 percentage point respectively as compared with those under the weighted approach.
+Capital adequacy ratios under
+(in millions of RMB, except for percentages)
+year (%)
+Increase/decrease at
+the end of the reporting
+period as compared with
+the end of the previous
+At the end of
+the previous
+year
+31 December
+2014
+2015
+31 December
+The Group
+8. Capital adequacy ratio
+loans
+balance
+47,410
+100.00
+2,824,286
+Total loans and advances
+1.08
+899
+3.32
+83,448
+1.72
+1,779
+3.65
+103,225
+Others(4)
+0.94
+2,069
+8.75
+219,888
+Residential mortgage loans
+499,455
+17.69
+2,258
+0.45
+329,178
+1.68
+13.09
+0.26
+Credit card loans
+313,244
+11.09
+4,296
+1.37
+871
+1.07
+2,513,919
+27,917
+Foreign exchange rate movements
+Balance at the end of the period
+2015
+2014
+65,165
+48,764
+59,486
+32,895
+(1,979)
+(1,641)
+(1,137)
+(655)
+1,464
+(38,383)
+651
+(14,917)
+226
+84,842
+68
+65,165
+1.11
+Notes:
+(1) Represents the percentage of non-performing loans to the total loans of a certain category.
+(2)
+Consists primarily of other corporate loans such as financial leasing, M&A loans and corporate mortgage loans.
+(3)
+100.00
+The Company will transfer its overdue discounted bills to corporate loans for accounting purposes.
+The "Others" category under new calibre consists primarily of general consumption loans, commercial housing loans, automobile loans,
+house decoration loans, education loans and other personal loans secured by monetary assets.
+In 2015, the Group steadily developed its retail loan business, adjusted the loan structure, increased credit card loans
+and residential mortgage loans and moderately slowed down the granting of micro enterprise loans. As a result,
+the percentage of retail loans increased by 4.79 percentage points to 43.43%. As the repayment ability of certain
+individual borrowers deteriorated due to economic downturn, the non-performing retail loan ratio was 1.07%, up
+by 0.30 percentage point as compared with the end of the previous year.
+Since the Group further optimised its corporate loan portfolio and promoted the development of strategic businesses
+such as M&A loans, cross-border loans and supply chain loans, the proportion of corporate loans for the reporting
+period decreased by 4.99 percentage points as compared with the end of the previous year. Due to the combined
+adverse impact of the four distinctive periods of the Chinese economy, namely "dealing simultaneously with the
+slowdown in economic growth, making difficult structural adjustments, absorbing the effects of the previous
+economic stimulus policies, and exploring new policies", the non-performing corporate loan ratio of the Group
+increased accordingly. As at the end of the reporting period, the non-performing corporate loan ratio of the Group
+was 2.28%, up by 0.89 percentage point as compared with the end of the previous year, among which, the increase
+of non-performing loans included in "Others" category was mainly due to the deterioration in repayment ability of
+certain major customers.
+43
+47
+Note: Represents the interest income accrued on impaired loans as a result of subsequent increases in their present value due to the passage of time.
+The Group continued to adopt a stable and prudent policy in respect of making provisions. As at the end of the
+reporting period, the balance of allowances for impairment losses on loans amounted to RMB84.842 billion,
+representing an increase of RMB19.677 billion as compared with that at the end of the previous year. The
+non-performing loan allowance coverage ratio was 178.95%, representing a decrease of 54.47 percentage points as
+compared with the end of the previous year; the loan allowance ratio was 3.00%, representing an increase of 0.41
+percentage point as compared with the end of the previous year.
+(4)
+3,612
+13.48
+338,813
+Trade finance
+0.38
+1,324
+13.94
+350,416
+1.03
+3,810
+13.12
+370,599
+Fixed asset loans
+1.65
+12,574
+30.35
+762,925
+2.50
+19,220
+27.23
+total (%)
+loans
+loan ratio(1)
+Corporate loans
+1,507,770
+53.39
+219,706
+34,333
+1,467,585
+58.38
+20,466
+1.39
+Working capital loans
+768,942
+2.28
+7.78
+3,406
+1.55
+Retail loans
+1,226,701
+43.43
+13,077
+1.07
+971,327
+2.98
+38.64
+0.77
+Micro enterprise loans
+310,777
+11.00
+4,744
+1.53
+7,451
+loan ratio (¹)
+75,007
+89,815
+231,298
+9.20
+2,106
+0.91
+Others(2)
+148,523
+3.18
+5.26
+5.32
+122,946
+4.89
+4,462
+3.63
+Discounted bills (3)
+7,897
+Information on leverage ratio (3)
+9. Adjusted balance of on- and off-balance
+sheet assets
+32.69
+1,167,467
+Demand
+Deposits from corporate customers
+Percentage
+of the
+total (%)
+Amount
+of the
+total (%)
+Amount
+Percentage
+31 December 2014
+31 December 2015
+(in millions of RMB, excluding percentages)
+The following table sets forth, as at the dates indicated, the deposits from customers of the Group by product type
+and customer type.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+As at 31 December 2015, total deposits from customers of the Group amounted to RMB3,571.698 billion,
+representing an increase of 8.09% as compared with the end of 2014. Deposits from customers accounted for
+69.85% of the total liabilities of the Group, being the major funding source of the Group.
+Deposits from customers
+106,155
+2.40
+867
+0.02
+771
+0.02
+973,646
+64,345
+39,678
+0.90
+5,113,220
+100.00
+4,416,769
+100.00
+1.26
+4.92
+29.46
+1,194,064
+5.3.3 Shareholders' equity
+As at 31 December 2015, the percentage of demand deposits to total deposits from customers of the Group was
+56.07%, representing an increase of 7.09 percentage points as compared with the end of 2014. Among the figures,
+the corporate demand deposits accounted for 49.44% of the corporate deposits, representing an increase of 5.41
+percentage points as compared with that at the end of 2014, and the retail demand deposits accounted for 69.00%
+of the retail deposits, representing an increase of 10.00 percentage points as compared with that at the end of
+2014.
+100.00
+3,304,438
+100.00
+3,571,698
+33.08
+1,093,027
+33.88
+1,210,167
+13.56
+448,191
+10.50
+375,105
+19.52
+644,836
+23.38
+33.43
+1,237,765
+37.46
+2,361,531
+66.12
+2,211,411
+Time
+66.92
+Deposits from retail customers
+Demand
+Time
+Subtotal
+Total deposits from customers
+835,062
+Subtotal
+251,507
+Total liabilities
+Other liabilities
+178,771
+institutions
+Placements from banks and other financial
+0.45
+20,000
+1.22
+62,600
+Borrowings from the central bank
+15.79
+697,448
+13.92
+711,561
+Deposits from banks and other financial institutions
+74.82
+Percentage
+of the
+total (%)
+Amount
+3,304,438
+69.85
+40
+40
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+5.3.2 Liabilities
+As at 31 December 2015, the total liabilities of the Group amounted to RMB5,113.220 billion, representing an
+increase of 15.77% as compared with the end of 2014, which was primarily due to the steady growth in deposits
+from customers, placements from banks and other financial institutions, proceeds from disposal of financial assets
+under repurchase agreements and bonds payable.
+3.50
+The following table sets forth, as at the dates indicated, the components of the total liabilities of the Group.
+31 December 2014
+(in millions of RMB, excluding percentages)
+Deposits from customers
+Amount
+Percentage
+of the
+total (%)
+3,571,698
+31 December 2015
+94,603
+2.14
+Financial liabilities designated at fair value through
+profit or loss
+6,068
+0.14
+Taxes payable
+12,820
+0.25
+11,656
+0.13
+0.26
+39,073
+0.76
+45,349
+1.03
+Bonds payable
+Deferred income tax liabilities
+Interest payable
+31 December
+6,524
+1.52
+20,227
+0.39
+13,369
+0.30
+Derivative financial liabilities
+7,575
+Accrued payroll
+0.15
+0.23
+Proceeds from disposal of financial assets
+repurchased
+185,652
+3.63
+66,988
+10,246
+31 December
+(in millions of RMB)
+Share capital
+3. Net capital
+360,460
+320,740
+12.38
+4. Risk-weighted assets (without taking into
+consideration the minimum requirements
+during the grace period)
+2,765,712
+Of which:
+Credit risk weighted assets
+Market risk weighted assets
+Operational risk weighted assets
+2,436,307
+2,546,291
+2,285,300
+31,699
+297,706
+19,123
+241,868
+8.62
+6.61
+As at 31 December 2015, the capital adequacy ratio and the Tier 1 capital adequacy ratio of the Group under the
+weighted approach were 11.91% and 9.93% respectively, representing an increase of 0.17 percentage point and
+0.33 percentage point, respectively as compared with those at the beginning of the year.
+up by 0.38 percentage point
+up by 0.38 percentage point
+up by 0.22 percentage point
+10.37
+2,687,891
+10.00%
+10.00%
+11.93%
+12.15%
+10.38%
+14.52
+2,966,543
+10.38%
+7. Tier 1 capital adequacy ratio
+6. Core Tier 1 capital adequacy ratio
+consideration the minimum requirements
+during the grace period)
+5. Risk-weighted assets (having taken into
+23.09
+65.76
+8. Capital adequacy ratio
+268,845
+307,888
+2. Net Tier 1 capital
+49
+49
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+(3) Since the leverage ratios were calculated in accordance with the "Regulations on Leverage Management of Commercial Banks (Revised)"
+issued by China Banking Regulatory Commission on 12 February 2015 with effect from 2015, the Group's leverage level as at the end
+of the third quarter, first half and the first quarter of 2015 were 5.55%, 5.26% and 5.51%, respectively. However, the leverage ratios
+and the on- and off- balance sheet balances for 2014 were calculated in accordance with the "Regulations on Leverage Management of
+Commercial Banks" issued by China Banking Regulatory Commission on 1 June 2011.
+The "minimum requirements during the grace period" means that, during the parallel run period that the advanced capital measurement
+approaches were implemented, a commercial bank shall use the capital floor adjustment co-efficients to adjust the result of its risk
+weighted assets multiplying the sum of its minimum capital amount and reserve capital amount, total amount of capital deductions and
+the provision for excessive loan loss which can be included into capital, so as to obtain the required capital amount subject to the capital
+floor requirements. The capital floor adjustment co-efficients shall be 95%, 90% and 80% respectively in the first year, the second year,
+and the third and subsequent years during the parallel run period.
+As at 31 December 2015, the capital adequacy ratio and the Tier 1 capital adequacy ratio of the Group under the
+advanced approach were 12.15% and 10.38%, respectively, representing an increase of 0.69 percentage point and
+0.94 percentage point respectively as compared with those under the weighted approach.
+(2)
+up by 0.58 percentage point
+(Note 3)
+4.96%
+(Note 3)
+6,275,592
+5.54%
+10. Leverage ratio
+Notes: (1) The "advanced approach" refers to the advanced measurement approach set out in the "Capital Rules for Commercial Banks (Provisional)"
+issued by the CBRC on 7 June 2012. Same as below. Under the advanced approach, the core Tier 1 capital adequacy ratio and the Tier 1
+capital adequacy ratio of the Group and the Company remain consistent at present. In accordance with the requirements of the advanced
+approach, the scope of entities for calculating the capital adequacy ratio of the Group shall include China Merchants Bank Co., Ltd. and
+its subsidiaries. The scope of entities for calculating the capital adequacy ratio of the Company shall include all the domestic and overseas
+branches and sub-branches of China Merchants Bank Co., Ltd. As at 31 December 2015, the subsidiaries qualified for calculating the
+capital adequacy ratio of the Group include Wing Lung Bank, CMBIC, CMBFL and CMFM.
+(in millions of RMB, except for percentages)
+At the end of
+the previous
+year
+14.52
+268,845
+307,888
+1. Net core Tier 1 capital
+approach
+Capital adequacy ratios under the advanced
+At the end of
+the reporting
+period
+The Company
+(in millions of RMB, except for percentages)
+the end of the reporting
+period as compared with
+the end of the previous
+Increase/decrease at
+31 December
+2014
+2015
+31 December
+year (%)
+Transfers in/out
+At the end of
+the reporting
+period
+2015
+314,404
+360,806
+Total equity attributable to the shareholders of the Bank
+Minority shareholders' equity
+(1,309)
+(343)
+Difference arising from converting financial statements denominated
+in foreign currency
+16,897
+17,402
+Proposed profit appropriations
+121,665
+145,887
+Retained profits
+53,979
+64,679
+Regulatory general reserve
+28,690
+34,009
+Capital reserve
+Hedging reserve
+2015
+2014
+25,220
+25,220
+952
+67,523
+Investment revaluation reserve
+6,188
+1,902
+241
+(163)
+Surplus reserve
+67,523
+656
+Total shareholders' equity
+361,758
+347,434
+7. Capital adequacy ratio
+6. Tier 1 capital adequacy ratio
+5. Core Tier 1 capital adequacy ratio
+4. Risk-weighted assets
+3. Net capital
+301,977
+2. Net Tier 1 capital
+approach (1)
+Capital adequacy ratios under the weighted
+The Group
+the end of the reporting
+period as compared with
+the end of the previous
+year (%)
+Increase/decrease at
+At the end of
+the previous
+year
+31 December
+2014
+1. Net core Tier 1 capital
+31 December
+15.05
+301,982
+315,060
+Note: (1) The "weighted approach" refers to the weighted approach for credit risk, the standardised approach for market risk and the basic
+indicator approach for operational risk in accordance with the relevant provisions of the "Capital Rules for Commercial Banks (Provisional)"
+issued by the CBRC on 7 June 2012. Same as below.
+up by 0.33 percentage point
+up by 0.33 percentage point
+up by 0.17 percentage point
+9.60%
+9.60%
+11.74%
+11.91%
+9.93%
+347,444
+9.93%
+3,146,571
+3,499,231
+12.80
+369,532
+416,834
+15.05
+11.21
+Write-offs
+Loan
+Unwinding of discount on impaired loans (Note)
+128,884
+5.13
+1,823
+1.41
+Central China
+292,361
+10.35
+9,956
+3.41
+263,511
+10.48
+4,331
+1.64
+Western China
+345,113
+12.22
+8,862
+2.57
+322,046
+12.81
+2,409
+0.75
+Overseas
+57,773
+2.05
+69,523
+2.77
+2.14
+Subsidiaries
+3,012
+140,913
+19.12
+10,733
+1.99
+479,535
+19.07
+9,895
+2.06
+Bohai Rim
+368,137
+13.03
+4,274
+1.16
+344,987
+13.72
+2,675
+0.78
+Pearl River Delta and West Side
+of Taiwan Strait
+463,440
+16.41
+5,071
+1.09
+385,848
+15.35
+3,675
+0.95
+North-east China
+4.99
+235,297
+8.33
+712
+Others(2)
+132,034
+4.67
+1,037
+0.79
+104,240
+4.15
+750
+0.72
+Discounted bills
+89,815
+3.18
+75,007
+2.98
+Retail loans
+1,226,701
+43.43
+13,077
+1.07
+971,327
+38.64
+7,451
+0.77
+Total loans and advances
+to customers
+2,824,286
+100.00
+0.25
+55
+0.89
+22,313
+0.30
+228,674
+9.10
+186
+451
+0.20
+Total loans and advances to
+0.22
+52,152
+2.07
+110
+0.21
+Water conservancy, environment
+539,925
+and public utilities
+1.19
+125
+0.37
+30,421
+1.21
+150
+0.49
+Information transmission,
+software and IT service
+30,101
+1.07
+134
+0.45
+33,531
+47,410
+Yangtze River Delta
+2,658
+Non-
+Loan
+of the
+performing
+Non-
+performing
+Percentage
+Non-
+Non-
+Loan
+of the
+performing
+performing
+(In millions of RMB, excluding percentages)
+balance
+total (%)
+loans
+loan ratio (1)
+balance
+total (%)
+loans
+loan ratio(1)
+Corporate loans
+1,507,770
+53.39
+34,333
+2.28
+1,467,585
+Percentage
+58.38
+31 December 2014
+5.4.3 Distribution of loans and non-performing loans by industry
+6.73
+3,923
+2.06
+58,308
+Mining
+4.02
+101,064
+0.07
+78
+3.98
+112,337
+power, heat, gas and water
+Production and supply of electric
+0.39
+396
+4.07
+102,314
+0.76
+772
+3.59
+101,270
+Construction
+0.50
+741
+44
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+31 December 2015
+20,466
+1.39
+Manufacturing
+0.87
+1,629
+2.51
+Leasing and commercial services
+84,240
+2.98
+performing
+Loan
+of the
+performing
+Non-
+performing
+(in millions of RMB, excluding percentages)
+balance
+total (%)
+loans
+loan ratio (1)
+balance
+total (%)
+loans
+loan ratio(1)
+Head Office
+381,327
+13.50
+4,790
+1.26
+290,911
+11.57
+1,387
+5.64
+159,349
+postal services
+332,147
+11.77
+15,238
+4.59
+360,270
+Recovery of loans and advances previously written off
+14.33
+9,628
+2.67
+Wholesale and retail
+251,373
+8.90
+10,279
+0.91
+4.09
+11.99
+6,547
+2.17
+Property development
+213,080
+7.54
+1,174
+0.55
+179,983
+7.16
+460
+0.26
+Transportation, storage and
+301,395
+64,960
+1.68
+100.00
+Transportation, storage and postal services
+3,934
+0.98
+0.14
+Information transmission, software and IT services
+3,570
+0.89
+0.13
+J
+Total
+Transportation, storage and postal services
+3,502
+0.87
+0.12
+48,681
+12.07
+1.72
+As at the end of the reporting period, the loan balance of the Group's largest single borrower amounted to
+RMB8.400 billion, representing 2.08% of the Group's net capital. The loan balance of the top ten single borrowers
+totalled RMB48.681 billion, representing 12.07% of the Group's net capital and 1.72% of the Group's total loan
+balance, respectively.
+5.4.7 Distribution of loans by overdue term
+31 December 2015
+31 December 2014
+Percentage
+Loan
+of the
+(in millions of RMB, excluding percentages)
+amount
+total (%)
+H
+Loan
+amount
+0.14
+3,940
+Transportation, storage and postal services
+Wholesale and retail
+2015
+(%)
+loans (%)
+8,400
+2.08
+0.30
+6,585
+1.63
+0.23
+Transportation, storage and postal services
+5,534
+1.37
+0.20
+Financial industry
+4,644
+1.15
+0.16
+Transportation, storage and postal services
+4,572
+1.13
+0.16
+Production and supply of electric power, gas and water
+4,000
+0.99
+0.14
+Transportation, storage and postal services
+0.98
+Percentage
+of the
+total (%)
+Overdue within 3 months
+35,396
+31 December 2014
+Percentage
+Loan
+(in millions of RMB, excluding percentages)
+amount
+Restructured loans (Note)
+4,531
+of the
+total (%)
+0.16
+Loan
+amount
+996
+Percentage
+of the
+total (%)
+0.04
+Of which: restructured loans overdue for
+more than 90 days
+2,506
+0.09
+534
+0.02
+Note: Represents the restructured non-performing loans.
+The Group imposed strict and prudent control over loan restructuring. As at the end of the reporting period, the
+percentage of the Group's restructured loans to total loans was 0.16%, an increase of 0.12 percentage point as
+compared with that at the end of the previous year.
+5.4.9 Repossessed assets and allowances for impairment losses
+As at the end of the reporting period, the balance of repossessed assets of the Group amounted to RMB1.672
+billion. After deduction of allowances for impairment losses of RMB981 million, the net repossessed assets amounted
+to RMB691 million.
+5.4.10 Changes in the allowances for impairment losses on loans
+The Group adopted two methods to assess impairment losses on loans at the balance sheet date: individual
+assessment and portfolio assessment. Loans which were considered individually significant were assessed individually
+for impairment. If there was any objective evidence indicating that a loan was impaired, the impairment losses
+would be recognised through profit or loss for the current period, as measured by the difference between the
+carrying amount of the loan and its discounted value of estimated future cash flows recoverable. Loans that were
+not considered individually significant and loans that were individually assessed but not indicated impaired based
+on objective evidence were grouped into the loan portfolio with similar credit risk characteristics for the purpose
+of impairment testing. Based on the testing results, the allowances for impairment losses were determined on a
+portfolio basis.
+The following table sets forth the changes in the allowances for impairment losses on loans of the Group.
+(in millions of RMB)
+Balance at the beginning of the period
+Charge for the period
+Release for the period
+31 December 2015
+V Report of the Board of Directors
+5.4.8 Restructured loans
+China Merchants Bank
+Annual Report 2015
+1.25
+27,480
+1.09
+Overdue from 3 months up to 1 year
+32,247
+1.14
+19,542
+0.78
+Overdue from 1 year up to 3 years
+11,847
+0.42
+4,751
+0.19
+(in millions of RMB)
+Overdue more than 3 years
+0.03
+931
+0.04
+Total overdue loans
+80,368
+Total loans and advances to customers
+2,824,286
+2.84
+100.00
+52,704
+2.10
+2,513,919
+100.00
+As at the end of the reporting period, overdue loans of the Group amounted to RMB80.368 billion, up by
+RMB27.664 billion from the end of the previous year and accounting for 2.84% of its total loans, representing
+an increase of 0.74 percentage point as compared with the end of the previous year. Among the overdue loans,
+collateralised and pledged loans accounted for 46.17%, guaranteed loans accounted for 33.36%, while credit loans
+accounted for 20.47% (the majority of which were overdue loans of credit cards). The Group adopted prudent
+classification criteria for overdue loans, and the ratio of its non-performing loans to the loans overdue for more than
+90 days was 1.05.
+878
+2,513,919
+ABCDEFG:
+Percentage
+31 December 2015
+31 December 2014
+Percentage
+Non-
+Percentage
+Non-
+Loan
+(In millions of RMB, excluding percentages)
+balance
+of the
+total (%)
+performing
+loans
+Non-
+performing
+Loan
+5.4.5 Distribution of loans and non-performing loans by type of guarantees
+of the
+performing
+loan ratio (¹)
+balance
+total (%)
+loans
+loan ratio(1)
+Credit loans
+671,321
+23.77
+7,999
+1.19
+of total
+Non-
+performing
+21.68
+In 2015, the Group implemented differentiated supervisory management by category for regional branches. For
+the risk concentrated regions, the Group selectively raised the loan approval standard and dynamically adjusted the
+credit granting rights, so as to prevent the occurrence of regional systematic risk. As at the end of the reporting
+period, the percentage of the balance of loans extended to the Pearl River Delta and West Side of Taiwan Strait and
+the loans of the Head Office recorded a relatively large increase. During the reporting period, 62% of the increment
+in non-performing loans of the Group was related primarily to Western China and Central China.
+1.11
+27,917
+1.11
+Notes:
+(1) Represents the percentage of non-performing loans in a certain category to the total loans of that category.
+(2) Consists primarily of finance, agriculture, forestry, animal husbandry, fishery, accommodation and catering, health care, social works, etc.
+In 2015, the Group facilitated the development of real economy, constantly optimised its risk asset portfolio, and
+prioritised on consumption industries less impacted by economic cycles, strategic emerging industries of the State
+and local major infrastructure projects. The differentiated risk prevention and control strategy was formulated for
+key areas such as overcapacity industries, real estate, local government financing platforms and trade financing. The
+Group also optimised the allocation of credit resources so as to maintain an overall balance among risk, revenue and
+cost. During the reporting period, 84% of the increment in non-performing corporate loans was related primarily
+to three industries, i.e. manufacturing, wholesale and retail, and mining. Total loans associated with the above
+industries reduced thanks to the continuous optimisation of asset structure.
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+Percentage
+5.4.4 Distribution of loans and non-performing loans by region
+31 December 2014
+Percentage
+31 December 2015
+Note: (1) Represents the percentage of non-performing loans in a certain category to the total loans of that category.
+Non-
+Non-
+Loan
+of the
+performing
+customers
+2,824,286
+100.00
+47,410
+1.68
+2,513,919
+100.00
+27,917
+Non-
+3,000
+544,936
+Guaranteed loans
+0.55
+Total loans and advances to
+customers
+2,824,286
+100.00
+47,410
+1.68
+2,513,919
+100.00
+27,917
+1.11
+Note: (1) Represents the percentage of non-performing loans in a certain category to the total loans of that category.
+75,007
+As at the end of the reporting period, the percentage of collateralised loans increased by 1.80 percentage points
+as compared with the end of the previous year, while the percentage of credit loans increased by 2.09 percentage
+points as compared with the end of the previous year which was mainly due to the increase of credit card loans.
+55
+46
+46
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+5.4.6 Loans to the top ten single borrowers
+Top ten
+borrowers
+Industry
+Percentage
+of net capital
+Balance as at
+31 December
+(under the
+advanced
+approach)
+45
+3.18
+2.98
+Discounted bills
+444,698
+15.75
+19,587
+4.40
+450,713
+17.93
+11,077
+2.46
+Collateralised loans
+1,241,633
+43.96
+16,250
+1.31
+89,815
+42.16
+1,059,962
+1.19
+0.31
+1,189
+15.25
+383,301
+0.95
+3,574
+12,651
+2.58
+376,819
+Pledged loans
+13.34
+311,443
+In response to changes in external macroeconomic environment, the Company proactively strengthened the control
+of its credit risk associated with real estate enterprises, local government financing platforms, overcapacity industries
+and other key areas.
+279,541
+6
+5,345
+7
+5.8.1 Strategic direction and positioning
+Total
+China Merchants Bank
+Annual Report 2015
+In 2015, the retail finance of the Company exerted its advantage in retail customer resources to enhance
+the referral of corporate customers. During the reporting period, our Diamond-class customers made a
+referral of 853 corporate customers, and the small- and micro-enterprise customers opened 8,891 active
+corporate accounts. The Company further tapped on its strategic customers for further cooperation and
+provided exclusive comprehensive retail finance services to strategic customers and their employees so as to
+improve customer loyalty. The Company fully capitalised on the advantages of its retail channel in the sales
+of insurance, funds and trusts to provide complementary services to other financial institutions, thereby
+effectively promoting the development of its custody business and the growth in institutional deposits.
+The Company's development strategy of "One Body with Two Wings" puts more emphasis on mutual
+promotion and overall optimum of the Company's business segments while further highlighting the strategic
+position of our retail finance business.
+Satisfactory achievements were made in the operation strategy where "one body' is a driver for 'two
+wings', while 'two wings' are supplements for 'one body'"
+During the reporting period, the Company recorded operating income from financial institutions finance of
+RMB26.448 billion, representing an increase of 40.29% as compared to the previous year; operating income
+from corporate finance of RMB74.491 billion, representing a decrease of 3.78% as compared to the previous
+year. For the reasons for such decrease, please refer to the section headed "Corporate finance".
+Rapid growth in income from financial institutions finance and slight decrease in income from
+corporate finance
+In 2015, the value contribution of retail finance grew steadily. Profit before tax reached RMB34.792 billion,
+representing an increase of 19.54% as compared to the previous year, and its proportion to the Company's
+pre-tax profit increased continuously to 50.47%, 7.73 percentage points higher than that for the previous
+year. The net operating income from retail finance grew rapidly to RMB89.186 billion, representing an
+increase of 30.04% as compared to the previous year; and accounted for 46.44% of the Company's net
+operating income, representing an increase of 2.93 percentage points as compared to the previous year. The
+risk adjusted return on capital (RAROC) before tax of the retail finance under the weighted approach was
+80.4%, representing an increase of 26.4 percentage points as compared to the previous year.
+The value contribution of retail finance continued to grow
+V Report of the Board of Directors
+3.
+1.
+Analysis on achievements in implementing the "One Body with Two Wings" strategy
+During the reporting period, the Company continued to establish the "light" operation platform to develop
+its mobile phone-based retail business, thereby effectively raising the e-bank channel replacement ratio. As at
+the end of the reporting period, the overall counter replacement ratio in respect of retail e-banking channels
+reached 97.32%, representing an increase of 1.94 percentage points over the previous year. Visual electronic
+counters played a remarkable role in replacement of processing non-cash transactions at outlets, with the
+replacement ratio of non-cash transactions reaching 20.48%. The overall counter replacement ratio in
+respect of corporate e-banking channels reached 59.04%; whereas 95.50% of transaction settlements were
+completed via online corporate finance services, representing an increase of 2.54 and 2.18 percentage points
+respectively over the previous year.
+The e-banking channel replacement ratio improved continuously
+6.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+56
+2.
+55
+During the reporting period, both corporate finance and financial institutions finance of the Company grew
+rapidly, laying a solid foundation for the development of our retail finance. In 2015, our corporate finance
+boosted the expansion of retail customer base by vigorously promoting retail finance services including
+payroll service, corporate card service and pension. With the coordinated support of retail finance business
+by corporate finance business, the Company handled an amount of over RMB1,000 billion under its payroll
+service, issued 122,200 cards under its corporate card service and managed pension assets of over RMB130.0
+billion. Meanwhile, the asset management business of our financial institutions finance offered wealth
+management products based on market changes to promote the development of our retail finance, aiming at
+catering to the differentiated investment needs and risk preferences of retail customers. During the reporting
+period, the Company offered 3,527 wealth management products with a total amount of RMB7,235.603
+billion to retail customers, and the balance amounted to RMB907.384 billion as at the end of the period.
+5.9.1 The Impact of Changes in Operating Environment and Key Business Concerns
+As at 31 December 2015, the non-performing loan ratio of the Company was 1.80%, representing an increase of
+0.60 percentage point as compared with the end of the previous year, while the proportion of special mention loans
+to the total was 2.65%, up by 0.71 percentage point from the end of the previous year. The allowance coverage
+ratio of our non-performing loans was 177.09%, representing a decrease of 52.90 percentage points as compared
+with the end of the previous year. The credit cost ratio was 2.35%, an increase of 0.92 percentage point as
+compared with the end of the previous year. The risk exposure was generally controllable.
+Assets quality of key areas
+3.
+In face of the accelerated interest rate liberalisation, the Company will continue to promote all related work in
+response to interest rate liberalisation. Firstly, the Company will establish a product pricing management mechanism
+which takes the market yield curve as the basis for pricing, and internal fund transfer pricing (FTP) as the tool, and
+covers all the deposits and loans denominated in domestic currency and foreign currencies. Secondly, the Company
+will independently research and develop the product pricing management system covering all on- and off-balance
+sheet asset and liability businesses, comprehensively and accurately estimate the cost and return of each item
+and implement the "customer-centric" differentiated pricing strategy. Thirdly, the Company will strengthen the
+management of interest rate risk in an active and forward-looking manner, constantly optimise the asset-liability
+structure and continuously improve its interest rate risk with strong asset sensitivity. Fourthly, the Company will
+enhance the management and operational capabilities of the treasurer and strengthen the management of market
+financing and active liability taking.
+Looking forward to 2016, given that the negative impact of the five interest rate cuts announced in 2015 will be
+fully reflected in the re-pricing of the Company's assets and liabilities. Coupled with the combined effects of the
+increase in the cost of debts which may result from changes in the debt structure due to interest rate liberalisation
+and the declining financing needs from the real economy, it is expected that the Company's overall net interest
+margin will show a steady decline trend. On the other hand, certain potential factors would have positive effect on
+the net interest margin: firstly, as the monetary policies are currently loosening at a steady pace, the percentage
+of demand deposits to total deposits may continue to rise from historical highs in 2015, which will help lower
+the cost of liabilities; secondly, given the increased volatility in the foreign currency market, the Company expects
+a slower pace in interest rate cuts and a greater possibility in deposit reserve ratio cuts. The latter will free up
+statutory deposits to generate investment income, which in turn will increase the returns on assets. In response to
+the changes in the external situation, the Company will further optimise its loan portfolio, properly allocate the
+credit resources of the Bank and strengthen innovation on investment and financing businesses, striving to improve
+the return on assets. Meanwhile, the Company will consistently implement the operating principle of maintaining
+a reasonable asset-to-liability ratio and exercise reasonable control over the cost of debts, aiming to maintain the
+relative advantage of the net interest margin and profitability of the Company.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+In particular: firstly, the percentage of demand deposits of low cost savings and the demand deposits and placements
+from banks and financial institutions to total deposits rose quickly in substitution of high-cost debts under the
+current monetary policies, thus lowering the cost of debts at a rapid pace; secondly, the Company tightened control
+over the cost of structured deposits and medium- and long-term debts with interest rates higher than that quoted
+in the open market in the context of continuous interest cuts; thirdly, the proportion of income from credit card
+repayment by instalments increased rapidly, leading to higher profitability of overall retail loans. However, on the
+other hand the central bank's interest rate cuts had negative impacts on the net interest margin.
+5.9 Changes of the External Environment and the
+Corresponding Measures.
+In 2015, the net interest margin of the Company was 2.81%, up by 11 basis points as compared with the previous
+year. The increase against the backdrop of interest rate cuts was primarily due to the fact that the Company
+proactively improved interest rate risk management, constantly optimised the asset and liability structure, proactively
+increased the percentage of fixed-rate loans before and during the interest rate cut cycle and controlled the cost
+of debts despite interest rate cuts in the market by leveraging on the Bank's advantage in retail finance, which not
+only offset the negative impact of interest rate cuts on interest spread, but also enabled the Company to widen its
+interest spread.
+2.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+58
+57
+In 2015, the domestic economy generally continued its slowdown trend with decelerating social investments due
+to overcapacity and destocking pressure. The industrial growth rate generally stayed low while the consumption
+growth rate has been stable since the second half of the year. Due to weak demands at home and abroad, imports
+and exports remained sluggish. The product price index remained low. From the perspective of monetary finance,
+in order to relieve the intensifying downward pressure on the domestic economy, the central bank, on the premise
+of adopting the prudent monetary policies, took various measures including deposit reserve ratio cuts and interest
+rate cuts and employed various monetary policies to ensure a moderately loose liquidity position in the market and
+a lower social financing cost. As a result, growth in social financing, credit facilities and money supply generally
+remained stable. On the other hand, the government increased its fiscal efforts, supported the swap of local debts,
+innovatively adopted the PPP model and promoted the policy bank to issue long-term special financial bonds, so as
+to boost steady economic growth. The exchange rate of RMB against USD experienced large drops after the foreign
+exchange regime was reformed in August. The downward trend became increasingly notable when the expected
+USD interest hike became a reality at the end of the year. The domestic capital market was generally bullish in the
+first half of the year. However, it suddenly turned into drastic slumps in the middle of the year, then fluctuated
+within certain ranges and plummeted again at the end of the year, reflecting the uncertainties in the effectiveness
+of the PRC government's various reform policies and investors' expectation of sequent economic situation. The
+economic indicators for the whole year suggested a struggle to bottom out from this economic downturn cycle.
+Overview of the macroeconomic and financial outlook
+1.
+Net interest margin
+7
+As at the end of the reporting period, the cost-to-income ratio of the Company was 27.28%, representing
+a decrease of 3.28 percentage points as compared with the previous year; the revenue per person was
+RMB2.54 million, representing an increase of 15.29% as compared with the previous year; the profit before
+tax per person was RMBO.91 million; the profit before tax per outlet was RMB43.80 million.
+5.
+Two Wings"
+"Asset-light Banking", "One Body with
+-
+Subsidiaries
+5.8 Business Development Strategies
+The contents and data in section 5.8 and below are analysed from the Company's
+perspective.
+As at the end of 2015, the Group did not have any outstanding overdue debts.
+5.7.2 Outstanding overdue debts
+Building "Asset-light Banking" is a necessary choice for the Company to stay competitive under the current
+economic situation, which is objectively required by the changes in China's economic structure and the trend of
+developing "Asset-light Banking" in the financial industry, and is also a feasible approach to the accomplishment of
+the Company's transformation and transcendence. The" Asset-light Banking" strategy has been formulated to achieve
+more efficient growth and more lucrative return through less capital consumption, more streamlined operation and
+higher flexibility. Its essence features mainly in "light" assets, "light" operating model and "light" management
+pattern. The Company will make concerted efforts to promptly accommodate market changes and create values for
+customers under the "customer-centric" service concept, thereby achieving the ultimate goal of value enhancement.
+The Company will establish the "One Body with Two Wings" business structure under which retail finance is the
+mainstay business supported by corporate finance and financial institutions finance, and develop those businesses
+into three profit-generating pillars characterised by mutual integration, mutual coordination and mutual promotion.
+As for retail finance, the Company will develop best banking service and increase its value contribution through
+three major businesses, namely wealth management, consumer finance and small- and micro-enterprise finance.
+With respect to corporate finance, the Company will develop professional banking service, establish two business
+systems, namely transaction banking and investment banking, and focus on four major businesses, namely cash
+management, trade finance, cross-border finance and M&A financing, aiming to develop superior business features.
+With regard to financial institutions finance, the Company will develop elite banking service which will forge new
+profit drivers through macro asset management and transactions in the financial market. By establishing the "One
+Body with Two Wings" business structure, the Company will be in a better position to overcome the challenges of
+interest rate liberalisation and periodic economic fluctuations.
+The Group's off-balance sheet items include derivative financial instruments, commitments and contingent
+liabilities. Commitments and contingent liabilities include credit commitments, operating leasing commitments,
+capital expenditure commitments, securities underwriting commitments, bonds redemption commitments, pending
+litigations and disputes and other contingent liabilities. The credit commitment is the primary component. As at the
+end of 2015, the balance of credit commitments was RMB1,170.100 billion. For details of the contingent liabilities
+and commitments, please refer to "Contingent liabilities and commitments" in "Notes to the Financial Statements"
+of this report.
+5.7 Others
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+100
+73,431
+100
+100 4,416,769
+4,731,829
+5.7.1 Balance of off-balance-sheet items that may have a material effect on the
+financial positions and operating results and the related important information
+The operational efficiency was kept at a satisfactory level
+53
+China Merchants Bank
+Annual Report 2015
+As at the end of the reporting period, the capital adequacy ratio and Tier 1 capital adequacy ratio of
+the Company measured under the weighted approach were 11.46% and 9.44% respectively; up by 0.19
+percentage point and 0.32 percentage point respectively as compared with those as at the end of the
+previous year. The capital adequacy ratio and Tier 1 capital adequacy ratio of the Company measured under
+the advanced approach were 12.15% and 10.38% respectively, up by 0.22 percentage point and 0.38
+percentage point respectively as compared with those at the end of the previous year. The risk adjusted
+return on capital (RAROC) before tax under the weighted approach was 21.15%, maintaining at a level
+which was significantly higher than the capital cost.
+The capital efficiency remained stable
+In 2015, the Company continued to vigorously expancyymiound wealth management, credit cards and other
+businesses, resulting in a rapid growth in the net non-interest income. In 2015, the Company realised the net
+non-interest income of RMB59.570 billion, representing a year-on-year increase of 33.74%. The proportion
+of the net non-interest income to our net operating income was 31.02%, up by 2.76 percentage points as
+compared with the previous year. Fee and commission income amounted to RMB53.425 billion, representing
+an increase of 33.68% as compared to the previous year, among which, fees and commission income from
+wealth management services amounted to RMB23.244 billion, representing an increase of 70.32% as
+compared to the previous year. Specifically, income from entrusted wealth management services amounted
+to RMB8.913 billion, representing an increase of 42.75% as compared to the previous year; income from
+agency distribution of trust schemes amounted to RMB3.866 billion, representing an increase of 70.84%
+as compared to the previous year; income from agency distribution of insurance policies amounted to
+RMB2.812 billion, representing an increase of 31.65% as compared to the previous year; income from agency
+distribution of funds amounted to RMB7.519 billion, representing an increase of 164.10% as compared to
+the previous year; income from agency distribution of precious metal amounted to RMB134 million. Such
+growth is primarily attributable to substantial growth in income from wealth management services driven
+by rapid surges in the domestic capital market during the first half of 2015 and the quality customer base
+of the Company. Bank card fees amounted to RMB9.461 billion, representing an increase of 24.62% as
+compared to 2014 (calculated on the same statistical calibre). Income from agency sales of bonds amounted
+to RMB1.809 billion, representing an increase of 66.41% as compared to the previous year. Custodian fee
+income amounted to RMB3.567 billion, representing an increase of 68.89% as compared to the previous
+year.
+4.
+Net non-interest income maintained a rapid growth
+3.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+54
+Firstly, the Company made continuous achievements in its market innovation initiatives. Since the relaunch
+of pilot securitisation, the Company issued the first individual residential mortgage-backed securities (RMBS)
+under the filing system of the CBRC and the first credit card automobile installment asset-backed securities
+among domestic banks under the registration system of the central bank; innovatively connected overseas
+RQFII funds with domestic investments, thus achieving breakthrough in cross-border securitisation of
+assets of domestic commercial banks; issued the first rotation-buying based securities backed by structured
+credit card assets that can be completely transferred out of balance sheet; and innovated issuance of
+securities at a premium, full costing investor-bearing mode and other innovative initiatives. Secondly, the
+Company continued to take the lead in terms of market share. As at the end of the reporting period, the
+Company issued a total of 8 cases of credit asset-backed securities, covering corporate loans, credit card
+automobile installment loans and residential housing mortgages, thus becoming the bank which offers
+the most diversified securitisation portfolios in China. During the reporting period, the total amount of
+newly issued securities was RMB23.02 billion, and the aggregate issue volume of the Company amounted
+to RMB51.66 billion with a market share of approximately 7%, ranking first among domestic commercial
+banks. Specifically, the securitisation of credit card loans, automobile installment loans and RMBS ranked first
+or second in their respective category among domestic commercial banks. Thirdly, the Company enjoyed a
+superior brand advantage in market competition. As at the end of the reporting period, the Company has
+established various securitisation brands, including "HEXIN (1)”, “HEJIA (F)" and "HEXIANG ()"
+for domestic niche market segments, and developed a relatively unique brand influence. The various brands
+of "HE (A)" brands posted a registered total issue amount of RMB110.0 billion, providing larger room for
+future operation transformation.
+Securitisation of credit assets offered new channels for operation transformation
+As at the end of the reporting period, the percentage of risk-weighted assets to total assets under the
+weighted approach was 62.62%, down by 2.99 percentage points from 65.61% as at the end of the
+previous year. The growth rate of risk-weighted assets under the weighted approach stood at 10.69%, 5.27
+percentage points lower than the growth rate of the Company's total assets, which was 15.96%.
+Percentage of risk-weighted assets to total assets continued to decline
+2.
+1.
+Evaluation on implementation of the "Asset-light Banking" strategy
+5.8.2 Progress of "Asset-light Banking" and "One Body with Two Wings" achieved
+gradually through continuous promotion of strategic transformation
+V Report of the Board of Directors
+Based on the Company's exploration and practice for nearly two years, securitisation of credit assets has
+gradually become an important means and breakthrough for the Company to implement the "Asset-light
+Banking" strategy. The Company, with its forward-looking vision, was among the first movers in this field
+and seized opportunities to establish its leading position in the domestic market, which is mainly manifested
+in the following aspects:
+3
+Percentage
+(%)
+3. Net capital
+100
+5,113,220
+100
+5,474,978
+8
+6,263
+6
+296,496
+6
+336,928
+Total
+Subsidiaries
+2
+1,791
+75,079
+3
+3
+(2,671)
+(3.64)
+Total
+75,079
+100.00
+73,431
+100.00
+During the reporting period, the percentage of profit from retail finance of the Group continued to grow. Profit
+before tax amounted to RMB34.792 billion, up by 19.54% from the previous year, representing 46.34% of the total
+profit before tax, representing an increase of 6.70 percentage points as compared with the previous year. At the
+same time, the cost-to-income ratio of retail banking business (excluding business tax and surcharges) was 35.72%,
+representing a decrease of 3.92 percentage points as compared with 2014.
+51
+52
+China Merchants Bank
+V Report of the Board of Directors
+Annual Report 2015
+140,900
+Geographical segments
+100
+Total liabilities
+9
+414,438
+9
+425,612
+Bohai Rim
+15
+10,514
+13
+586,447
+12
+590,741
+Yangtze River Delta
+3
+1,998
+Total assets
+37
+39
+1,863,145
+Head Office
+Amount
+Percentage
+(%)
+Amount
+(%)
+Amount
+(in millions of RMB, except for percentages)
+Percentage
+2014
+31 December 2014
+31 December 2014
+Total profit before tax
+1,629,954
+14,922
+The major outlets of the Group are located in the more economically developed regions of China and some large
+cities in other regions. The following table sets forth the segment results of the Group by geographical location in
+the periods indicated.
+Total liabilities
+761,795
+15
+3,572
+5
+Bohai Rim
+511,402
+9
+503,469
+10
+11,163
+15
+Pearl River Delta and West Side of
+Taiwan Strait
+607,634
+14
+11
+12
+13,218
+18
+North-eastern China
+201,537
+4
+199,294
+4
+2,990
+4
+Central China
+385,401
+6.39
+7
+597,665
+Total assets
+762,902
+42
+31 December 2015
+31 December 2015
+Total profit before tax
+2015
+(in millions of RMB, except for percentages)
+Amount
+142,219
+Overseas
+1
+431
+8
+422,455
+8
+421,469
+Western China
+Yangtze River Delta
+5
+7
+382,889
+Percentage
+(%)
+Percentage
+Amount
+(%)
+Amount
+Percentage
+(%)
+Head Office
+2,105,486
+38
+1,808,257
+35
+31,968
+3,683
+20
+Pearl River Delta and West Side of
+Taiwan Strait
+491,748
+561,704
+561,704
+390,110
+390,110
+Portion not covered by the foundation On-balance sheet
+2,426,490
+2,722,954
+IRB approach
+Off-balance sheet
+Counterparty
+158,050
+7,350
+166,857
+8,927
+491,748
+China Merchants Bank
+Annual Report 2015
+Market risk capital measurement
+The Group uses various approaches to calculate its market risk capital. Specifically, it uses the internal model
+approach to calculate the general market risk capital of the entities in Mainland China, and uses the standardised
+approach to calculate the specific market risk capital of the entities in Mainland China as well as the market risk
+capital and specific market risk capital of overseas institutions. As at the end of 2015, the market risk capital of the
+Group was RMB2.96 billion, and its risk-weighted assets were RMB36.97 billion. Of which, the market risk capital
+calculated under the internal model approach was RMB760 million, and the market risk capital calculated under the
+standardised approach was RMB2.20 billion.
+The Group's market risk capital under the internal model approach was calculated using the market risk value
+based on 250 days of historical market data, a confidence coefficient of 99% and a holding period of 10 days. The
+following table sets forth the market risk value indicators of the Group as at the end of 2015:
+Unit: RMB million
+No.
+Item
+4
+123 +1
+Average value
+Maximum value
+Minimum value
+Value at the end of the period
+Pressure risk
+value during
+the reporting
+General risk
+value during
+the reporting
+V Report of the Board of Directors
+period
+Of which: Personal housing mortgages
+Qualified revolving retail
+Other retail
+1,443,562
+373,886
+331,937
+12.64
+4. Risk-weighted assets
+3,261,357
+2,946,283
+10.69
+5. Core Tier 1 capital adequacy ratio
+9.44%
+9.12%
+6. Tier 1 capital adequacy ratio
+9.44%
+7. Capital adequacy ratio
+11.46%
+1,443,562
+9.12%
+11.27%
+Balance of credit risk exposures
+During the reporting period, the credit risk of the Company under the foundation internal rating-based approach
+(IRB approach) was classified into six types of risk exposures: sovereign, financial institution, corporate, retail,
+shareholding and others. The balances of various risk exposures are as follows:
+Unit: RMB million
+Type of risk exposure
+Legal person
+Group
+Portion covered by the foundation
+IRB approach
+Financial institution
+576,858
+576,858
+Corporate
+1,577,865
+1,577,865
+Retail
+up by 0.32 percentage point
+up by 0.32 percentage point
+up by 0.19 percentage point
+period
+301
+243
+4,796
+3
+126,892
+Overseas
+15
+11,212
+8
+370,196
+8
+378,606
+Western China
+10
+7,510
+5
+Other businesses
+3,865
+15,988
+248
+328,146
+7
+333,656
+Central China
+170,945
+4
+173,827
+North-eastern China
+12
+515,926
+11
+527,907
+22
+22.06
+16,199
+30.61
+815
+347
+109
+109
+671
+234
+5.6 Results of Operating Segments
+The following results of operating segments are presented by business segments and geographical segments. As
+business segment information can better reflect the business operations of the Group, the Group chooses business
+segment information as the primary reporting format. Segment reporting data are principally derived from the
+multi-dimensional profitability report on the Company's management accounting system.
+Business segments
+The principal businesses of the Group include corporate finance, retail finance and financial institutions finance. The
+following table summarises the operating results of the business segments of the Group for the periods indicated.
+2015
+2014
+Item
+(in millions of RMB, except for percentages)
+Corporate finance
+Profit before
+tax by segment
+Percentage
+(%)
+22,983
+Financial institutions finance
+39.64
+29,105
+46.34
+34,792
+2,077
+Retail finance
+30,798
+16.66
+12,508
+(%)
+Percentage
+Profit before
+tax by segment
+41.94
+59
+3
+50
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+As at 31 December 2015, the capital adequacy ratio and the Tier 1 capital adequacy ratio of the Company under the
+weighted approach were 11.46% and 9.44%, respectively, representing an increase of 0.19 percentage point and
+0.32 percentage point respectively as compared with those at the beginning of the year.
+(in millions of RMB, except for percentages)
+The Company
+Capital adequacy ratios under
+the weighted approach
+1. Net core Tier 1 capital
+2. Net Tier 1 capital
+At the end of
+the reporting
+121,176
+period
+2015
+At the end of
+the previous
+year
+31 December
+2014
+Increase/decrease at
+the end of the reporting
+period as compared with
+the end of the previous
+year (%)
+307,888
+268,845
+14.52
+307,888
+31 December
+268,845
+14.52
+As at the end of the reporting period, the Company's wealth management funds invested in the equity-pledged
+financing business amounted to RMB24.442 billion, representing a substantial decrease as compared with that as
+at the end of the previous year, which was mainly due to the fact that the Company had vigorously lowered the
+share pledge ratio, raised the pre-warning/closing line, controlled the concentration of pledged shares and enhanced
+the restricted share pledge management since April 2015 to strictly prevent the market downturn risk, taking into
+consideration the gradual accumulation of investment risk due to the excessive growth in the domestic stock market
+within a short term. The Company has prudently and gradually relaunched the business of wealth management
+funds invested in the equity-pledge financing since the fourth quarter of 2015. As at the end of the reporting
+period, the risks associated with this business were controllable.
+60
+V Report of the Board of Directors
+69
+69
+As at the end of the reporting period, the Company had issued 69.17 million credit cards in total; the total number
+of active cards was 37.82 million, and 6.18 million new cards were issued during the reporting period. As at the
+end of the reporting period, the number of active credit cards users was 31.03 million, representing an increase
+of 19.03% as compared with the end of the previous year. The Company continued to improve the efficiency of
+customer acquisition and customer management. The cumulative transaction value of credit cards in 2015 was
+RMB1,819.5 billion, representing an increase of 36.67% as compared with the previous year, and the average
+transaction value per month of each active card was RMB4,331. The percentage of the revolving balances of credit
+cards was 24.72%. The balance of credit card overdrafts was RMB313.056 billion, representing an increase of
+42.50% as compared with the end of the previous year. In 2015, the Company reclassified the income from credit
+card repayment by instalments from non-interest income to interest income. After the adjustment, interest income
+from credit cards for 2015 amounted to RMB26.729 billion, representing an increase of 56.81% as compared with
+2014 (calculated on the same statistical calibre). Non-interest income from credit cards was RMB9.598 billion,
+representing an increase of 38.78% as compared with 2014 on the same calibre. Adversely affected by the downturn
+of the overall macro-economy of China, the non-performing loan ratio of credit cards business reached 1.37%,
+up by 0.43 percentage point as compared with the end of the previous year. As the Company actively improved
+risk pre-warning system, developed differentiated risk control strategy, introduced multi-dimensional monitoring
+technology based on Big Data and strengthened risk control measures including post-loan management, the quality
+of credit card assets maintained stable, the non-performing loan ratio stayed at a low level in the industry, and the
+risk exposure was under control.
+Credit cards
+In 2015, in order to proactively respond to market fluctuations, the Company continued to deepen customer
+management, strengthen self-initiated customer acquisition, establish overseas organisational framework, promote
+the development of market-research-driven products and implement asset allocation, and pushed forward the
+comprehensive upgrade of private banking business by providing various services including discretionary entrustment,
+tax planning, overseas equity trust, family trust, M&A financing and investment banking matchmaking, with a view
+to building an integrated financial service platform.
+Our private banking business is conducted under the operating philosophy of "It's our job to build your everlasting
+family fortune", which provides high-net-worth individual, family and enterprise customers with professional,
+comprehensive and private services tailored to their diversified demands in respect of investment, taxation, legal
+affairs, M&A, financing and clearing. Our private banking business experienced a rapid growth during the reporting
+period. As at 31 December 2015, the Company had 49,032 private banking customers (retail customers of the
+Company with minimum total daily average assets of RMB10 million per month), representing an increase of 49.12%
+as compared with the beginning of the year; total assets under management from private banking customers
+amounted to RMB1,252.1 billion, representing an increase of 66.37% as compared with the beginning of the year.
+During the reporting period, the net operating income (excluding credit card income) from customers holding private
+banking cards amounted to RMB4.821 billion, representing an increase of 31.97% as compared with the previous
+year. Currently, the Company has established a high-end customer service network consisting of 45 private banking
+centres and 62 wealth management centres.
+Private banking
+During the reporting period, the Company actively responded to the sustained market volatility and intense
+competition from other industries, and assisted customers in recognising investment trends in the global market
+and in building a reasonable investment philosophy with authoritative global market research results constantly
+provided by the Investment Decision-making Committee from time to time. Moreover, the Company progressively
+diversified its wealth management product portfolio, formulated investment strategies, developed and implemented
+product investment portfolio, with a view to continuously create value for customers. In addition, the Company
+further improved customer service procedures for pre-sale, during sale and post-sale stages under the customer-
+centric principle, constantly launched the compliance education program for staff, strengthened the management of
+licensed sales and compliant sales, so as to establish a sound and compliant asset portfolio service system.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+In 2015, the Company recorded RMB7,980.6 billion in accumulated sales of personal wealth management products,
+RMB605.7 billion in the distribution of open-ended funds, RMB105.4 billion in premium from agency distribution of
+insurance policies and RMB280.0 billion in agency distribution of trust schemes. Fee and commission income from
+retail wealth management business was RMB17.079 billion, representing an increase of 83.86% as compared with
+the previous year and accounting for 66.04% of net fee and commission income from retail finance. Among them,
+income from agency distribution of funds amounted to RMB7.511 billion, representing an increase of 164.29% as
+compared with the previous year; income from agency distribution of insurance policies amounted to RMB2.805
+billion, representing an increase of 31.94% as compared with the previous year; income from entrusted wealth
+management amounted to RMB3.209 billion, representing an increase of 54.20% as compared with the previous
+year; income from agency distribution of trust schemes amounted to RMB3.429 billion, representing an increase of
+63.60% as compared with the previous year.
+Wealth management
+In 2015, the Company further consolidated its retail customer base through a number of initiatives, thereby
+achieving steady growth in total assets under management (AUM) and volume of deposits from retail customers.
+During the reporting period, by drawing upon the development opportunities of Internet finance, the Company
+actively capitalised on opportunities brought about by Big Data and vigorously promoted the customer acquisition
+model through "light" channels. The Company also upgraded its services in all aspects and provided its customers
+with professional asset portfolio service according to their customised fund requirements as well as differentiated
+risk preferences and life cycles. At the same time, the Company strengthened analysis of market volatility and
+important policies, and increased efforts in prospective analysis of medium-term trend opportunities and risks and
+portfolio strategy, with a view to help customers preserve and enhance the value of their assets. In addition, the
+Company secured the settlement funds of the mass customers in daily life by providing various facilitation services
+including CMB Life (), All-in-one Net and payment of utility fees, and solidified settlement funds of personal
+loan customers with complementary financing services and convenient settlement instruments. Furthermore, the
+Company continued to strengthen the development and promotion of new deposit products so as to cater for
+customers' demand for diversified and flexible deposit products, thereby effectively mitigating the impact of deposit
+migration as a result of various factors such as interest rate liberalisation, market volatility and diversified wealth
+management products.
+As at the end of December 2015, the number of retail customers of the Company reached 66.94 million,
+representing an increase of 19.00% as compared with the beginning of the year. Among which, the number of
+Sunflower-level and above customers (being retail customers of the Company with minimum total daily average
+assets of RMB500,000 per month) reached 1,647,600, representing an increase of 27.76% as compared with the
+beginning of the year. The balance of total assets under management (AUM) from our retail customers amounted
+to RMB4,749.6 billion, representing an increase of 36.88% as compared with the beginning of the year and an
+incremental increase of RMB635.0 billion as compared with the previous year. Among which, the balance of total
+assets under management from Sunflower-level and above customers amounted to RMB3,729.6 billion, representing
+an increase of 43.41% as compared with the beginning of the year, and accounting for 78.52% of the balance of
+total assets under management from retail customers of the Bank. The balance of deposits from retail customers
+amounted to RMB1,129.124 billion, representing an increase of 11.33% as compared with the beginning of the
+year. Of which, the percentage of demand deposits grew to 71.10%, up by 10.05 percentage points as compared
+with the previous year. According to the data released by the PBOC, the Company continued to rank first among
+domestic small- and medium-sized banks in terms of the balance and the increment of retail deposits. The total
+number of All-in-one Cards held by retail customers was 91.16 million, representing an increase of 19.92%
+as compared with the end of the previous year. The average deposit balance per All-in-one Card amounted to
+RMB11,100, almost unchanged as compared with the previous year; and the accumulated transaction amount of
+All-in-one Cards was RMB2,047.245 billion, representing a growth of 20.13% as compared with the previous year.
+The transaction amount of "All-in-one Card" via POS reached RMB907.3 billion, representing an increase of 11.96%
+as compared with the previous year.
+Retail customers and total assets under management from retail customers
+China Merchants Bank
+Annual Report 2015
+62
+61
+During the reporting period, the Company prudently carried out the business of wealth management funds invested
+in beneficiary rights of margin financing and securities lending. As at the end of the reporting period, balance of
+wealth management funds invested in beneficiary rights of margin financing and securities lending amounted to
+RMB27.570 billion, representing a decrease of RMB39.007 billion or 58.59% as compared to the end of the previous
+year, mainly due to the fact that customers' financing demand weakened in the wake of drastic fluctuations in the
+domestic stock market and that securities firms were able to raise funds by way of bond issues, leading to reduced
+demand for margin financing and securities lending. The Company implemented strict entry approval system for such
+business, strengthened its daily monitoring, verified its asset value on a monthly basis after the stock market crash,
+and suspended the businesses newly introduced by securities firms which were subject to penalty by the CSRC, so as
+to strengthen risk control over such business. As at the end of the reporting period, the risk exposure of the wealth
+management funds invested in beneficiary rights of margin financing and securities lending of the Company was
+kept under control without overdue.
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+In respect of real estate credit business, the Company continued to enhance the on- and off-balance sheet quota
+control on full statistical calibres, proactively and dynamically adjusted its credit policy, and strengthened the
+customer list management. The Company also optimised its resources allocation by allocating its credit resources
+to strategic customers and implemented stringent entry standards with respect to customers, regions and projects,
+thereby further raising the proportion of its strategic customers in the real estate industry and constantly optimising
+its assets structure. As at the end of the reporting period, the risk exposure of our businesses with domestic real
+estate enterprises (calculated on the broad statistical calibre) amounted to RMB331.621 billion (including businesses
+such as actual and contingent credit, bond investments, proprietary trading and investment of wealth management
+products in non-standard assets), representing an increase of RMB22.195 billion as compared with the beginning of
+the year. Among which, the balance of loans for domestic corporate real estate amounted to RMB173.226 billion,
+representing an increase of RMB32.378 billion as compared with the end of the previous year, which accounted
+for 6.69% of the Company's total loans, up by 0.53 percentage point as compared with the end of the previous
+year, and the non-performing loan ratio was 0.67%, up by 0.35 percentage point as compared with the end of
+the previous year. In addition, there was no non-performing asset in our businesses such as contingent credit
+involving real estate, bond investments, proprietary investment and investment of wealth management products in
+non-standard assets.
+In respect of loans extended to local government financing platforms, the Company implemented quota
+management on full statistical calibres. The Company further specified the requirements of controlling the total
+amount of loans, adhered to the entry standard of "high level and strong cash flow", and prioritised the allocation
+of its credit resources to the government financing platforms being operated under commercial principles and
+having relatively adequate cash flow to optimise its loan structure. In addition, the Company continued with
+its research on the change of debt policy of the central and local governments, with a focus on the progress of
+replacement of local government debts, so as to safeguard the creditor's rights of the Company. As at the end of
+the reporting period, the risk exposure of our businesses with local government financing platforms (calculated on
+the broad statistical calibre) amounted to RMB257.605 billion (including businesses such as actual and contingent
+credit, bond investments, proprietary investment and investment of wealth management products in non-standard
+assets), representing an increase of RMB19.009 billion as compared with the beginning of the year. Among which,
+the balance of loans on balance sheet amounted to RMB131.299 billion, representing an increase of RMB16.815
+billion as compared with the end of the previous year, which accounted for 5.07% of the total loans granted
+by the Company, up by 0.06 percentage point as compared with the end of the previous year. There was no
+non-performing asset.
+For overcapacity industries such as iron and steel, cement, plate glass, electrolytic aluminium, shipbuilding,
+polysilicon and coal chemicals, the Company dynamically adjusted its credit policies, raised its entry standards,
+supported its quality customers, refined customer list management and implemented stringent quota management.
+In addition, the Company enhanced the monitoring of withdrawal of risk-bearing loans and optimised risk mitigation
+measures. Due to economic downturn, the Company has been increasingly exposed to the risks associated with
+overcapacity industries and its non-performing loan ratio rose accordingly, which was mainly due to the increase in
+non-performing loans associated with the coal chemical industry. During the reporting period, the balance of our
+loans extended to overcapacity industries amounted to RMB49.044 billion, representing an increase of RMB6.300
+billion as compared with the end of the previous year, and accounting for 1.89% of total loans of the Company, up
+by 0.02 percentage point as compared with that at the beginning of the year. The non-performing loan ratio of the
+Company was 5.46%, up by 3.71 percentage points as compared with that at the beginning of the year.
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+4.
+V Report of the Board of Directors
+Growth rate of risk-weighted assets
+5.
+Capital Management
+6.
+The Company continued to optimise its business structure and enhance capital management. During the reporting
+period, the Company satisfied the minimum capital requirements, the reserve capital requirements and the
+countercyclical capital requirements under the transitional arrangements of the CBRC.
+On 18 April 2014, the CBRC approved the Company's implementation of the advanced approach for capital
+measurement. Meanwhile, the CBRC also allowed a grace period for commercial banks which have been approved
+to adopt the advanced approach for capital measurement. During the grace period, commercial banks shall
+calculate their respective capital adequacy ratio by using the advanced approach for capital measurement and other
+approaches and shall comply with the minimum capital requirements. The volume of risk weighted assets of the
+Company under the advanced approach is significantly lower than that under the weighted approach. This is mainly
+due to the diversified nature of retail assets which bring about significant capital efficient effect under the advanced
+approach. As the Company always places emphasis on the strategy of retail banking, retail assets account for a
+larger proportion in its total assets.
+With respect to the optimisation of asset structure, in 2015, the Company issued a total of 4 credit asset-backed
+bonds with total amounts of RMB23.02 billion in the inter-bank bond market. The Company will further expedite
+the development of its asset securitisation business next year. As regards to the optimisation of capital structure, the
+Company continued to pay attention to various new capital instruments.
+The Company's capital management goals for 2015 to 2017 were set at 9% for the core Tier 1 capital adequacy
+ratio, 10% for the Tier 1 capital adequacy ratio and 12% for the capital adequacy ratio respectively, all to be
+achieved by the end of 2017. The Company's core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio and
+capital adequacy ratio under the advanced approach in 2015 was 1.38, 0.38 and 0.15 percentage point(s) higher
+than the aforesaid capital management goals, respectively.
+The investment of wealth management funds in beneficiary rights of margin financing and securities
+lending, margin financing in the secondary stock trading market, and equity-pledged financing
+As at the end of 2015, the Company's risk-weighted assets under the weighted approach increased by 10.69%, 5.27
+percentage points lower than the growth rate of total assets. The Company has maintained a reasonable and healthy
+growth in its risk-weighted assets, which was mainly attributable to the fact that the Company has implemented the
+operation strategy of "Asset-light Banking", increased its effort to develop the asset-light businesses and moderately
+slowed down the growth of risk-weighted assets. In 2016, the Company will continue to implement the operation
+strategy of "Asset-light Banking", optimise the asset structure, raise the asset turnover rate and improve the lean
+management, in order to keep the growth rate of risk-weighted assets under that of total assets.
+China Merchants Bank
+Annual Report 2015
+68
+67
+China Merchants Bank
+Annual Report 2015
+In 2015, the Company proactively forged a cross-industry alliance to explore the new development model of
+Internet-based finance service. As for living service finance, CMB and Didi Taxi () have jointly announced a
+strategic cooperation in which they will commence comprehensive cooperation in capital, payment and settlement,
+finance, services and marketing in future. The "Didi Mode ()" jointly developed by both parties for
+payment cooperation has entered into the pilot run stage and will be launched in 2016. It is the first time for a
+commercial bank to enter into the mobile payment field through cooperation with a mobile Internet company. As
+for Internet-based consumption finance, CMB-China Unicom Consumption Finance Co., Ltd. (GAR✰27)
+("CMB-China Unicom Company"), jointly established by CMB and China Unicom, received its financial license and
+commenced trial operation in March 2015. It has also launched two flagship product lines known as "Hao Qi Dai
+()" and "Ling Ling Hua (3)", both of which achieved remarkable results. As at the end of the reporting
+period, CMB-China Unicom Company had an aggregate of 6,468,700 registered users, the majority of whom
+were frequent users of small-amount consumption loans, with a credit size of RMB4.913 billion, a loan balance of
+RMB2.028 billion and a non-performing loan ratio of 0.63%. As for Internet-based asset trading, the Company and
+China Merchants Group Ltd. made a joint investment to register and establish a financial asset trading center in
+Qianhai, Shenzhen. By leveraging on the policy advantage in Qianhai and the most cutting-edge Internet technology,
+the Company has offered the cross-border financial asset trading services to institutional members and individual
+investors and forged a cloud-based wealth management platform.
+)" and "Tuo Guan Tong ()". During the reporting period, the number of customers of the "Zhao Ying
+Tong ()" financial institution wealth management business increased by 655 to 731, covering various financial
+institutions such as securities firms, trust companies, financial companies and insurance companies.
+As for financial institutions finance, the Company stepped up the development of the Zhao Ying Tong ()
+financial institution investment and financing platform, promoted the transformation of its financial institution
+business towards "online and mobile Internet-based operation model", developed rapid and convenient transaction
+functions, and relied on its existing platforms to roll out the "official flagship store" business model, thus upgrading
+its services targeted at financial institution customers, and becoming the channel service platform and the financial
+institution resource-sharing platform covering its seven major product lines including "Yi Hu Tong (F)", "Zi
+Chan Tong ()”, “Kua Jing Tong ()", "Li Cai Tong ()", "Jiao Yi Tong ()", "Piao Ju Tong (
+As for corporate finance, the Company continued to innovate its Internet technology and customer service model,
+tapped into innovative corporate customers' various demands for supply chain management, financial management
+and daily production and operation by capitalising on its Small Business E Home (E) platform, and has
+preliminarily built the point-to-point system for its corporate financial services. In order to meet Internet-based
+enterprises' demand for online payment and settlement service, guarantee transactions and offline collection and
+payment service, the Company has improved the mobile cheque service, E+ account service and other innovative
+products, thereby catering to enterprises' demand for non-office transactions and settlements in different banks and
+regions and at different time. As at the end of the reporting period, the number of registered customers of "Small
+Business E Home (E)" exceeded 10,000,000, and the number of customers using the mobile cheque service
+was over 240,000.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+64
+V Report of the Board of Directors
+63
+In 2015, in response to challenges from the Internet, interest rate liberalisation and financial disintermediation
+and the external unfavorable environment of economic downturn, internally, the Company promoted the overall
+development of Internet finance featuring "building service platforms, connecting to external traffic and conducting
+traffic operation (內建平台、 外接流量、 流量經營)”, so as to transform its operation management into the
+Internet-based operation model. Externally, the Company focused on diversified cross-industry cooperation,
+promoted the innovation of the external competition and cooperation model, developed the cross-industry financial
+service platform, tapped external traffic and innovated its financial products and services. The optimised operation
+model has started to demonstrate the vitality of the eco-system, establishing CMB's unique competitive edge in the
+differentiated Internet finance.
+Internet Finance
+8.
+As at 31 December 2015, the balance of the Company's reverse repurchase businesses (CMB as funding provider)
+including the trust beneficiary rights under resale agreements, the asset management schemes and the debenture
+beneficiary rights aggregated to RMB25.724 billion, representing a decrease of 76.65% as compared with that at
+the beginning of the year. The three items of non-performing assets totalled RMB764 million with a non-performing
+loan ratio of 2.97%, of which RMB564 million is being claimed against the relevant financial institutions. It is
+estimated that the possibility to eventually record a loss on those assets is remote. The Company has made capital
+provision for these assets based on the risk exposure of corresponding financial institutions, and has ceased to
+engage in the third-party reverse repurchase businesses of the trust beneficiary rights and the asset management
+schemes as required by the "Notice on Regulating the Interbank Business of Financial Institutions" (Yin Fa [2014]
+No. 127), the existing transactions of which will be settled as contracted. As at the end of the reporting period, the
+balance of the Company's resale to Party C under repurchase agreement () amounted to RMB11.459
+billion, down by 56.28% as compared with that at the end of the previous year.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+As at 31 December 2015, the balance of the Company's proprietary funds invested in non-standard debt assets
+amounted to RMB684.791 billion, representing an increase of 87.40% as compared with that at the end of the
+previous year. Among which, the balance of our proprietary funds invested in non-standard debt assets under the
+credit category amounted to RMB238.384 billion, representing a decrease of 0.21% as compared with that at the
+end of the previous year. The non-performing ratio was 0.80%, up by 0.80 percentage point as compared with that
+at the end of the previous year. The balance of our proprietary funds invested in non-standard debt assets under
+the non-credit category amounted to RMB446.407 billion, representing an increase of 252.77% as compared with
+that at the end of the previous year. Such investment business developed on the basis of risk exposure of financial
+institutions were mainly classified into three categories: the first category comprises negotiated deposits or term
+deposits being placed with other commercial banks, which recorded a balance of RMB53.498 billion as at the end of
+the reporting period, representing a decrease of RMB3.734 billion as compared with that at the end of the previous
+year. The second category comprises the beneficiary rights to discounted bank acceptance bills and commercial
+acceptance bills, which recorded a balance of RMB380.090 billion as at the end of the reporting period, representing
+an increase of RMB320.632 billion as compared with that at the end of the previous year, which was mainly due
+to the fact that the Company had actively adjusted the asset structure and increased the volume of its interbank
+investment in bills assets in response to changes in the economic situation. The third category comprises creditor's
+beneficiary rights to other commercial banks (creditor's rights include wealth management products, domestic letter
+of credit, etc.), which recorded a balance of RMB12.819 billion as at the end of the reporting period, representing
+an increase of RMB2.967 billion as compared with that at the end of the previous year. The Company has enhanced
+and will continue to enhance risk review and compliance review in the use of funds, accurately measure risks and
+make adequate capital provision based on the nature of investment assets in strict compliance with the requirements
+of the "Notice on Regulating the Interbank Business of Financial Institutions" (Yin Fa [2014] No. 127). As at 31
+December 2015, the balance of provision for our proprietary funds invested in non-standard debt assets under the
+credit category amounted to RMB4.774 billion, with an allowance ratio of 2.00%.
+The proprietary funds invested in non-standard debt assets, the resale to Party B under repurchase
+agreement () and the resale to Party C under repurchase agreement () (CMB as
+funding provider)
+As for retail finance, adhering to its strategy of "prioritising the development of mobile phone applications", the
+Company strove to migrate its customer services to mobile handset interface. Meanwhile, the Company focused on
+mobile phone application to restructure its internal and external service processes and promote the Internet-based
+operation across the Company. As at the end of the reporting period, total downloads of the mobile user application
+"CMB Life ()" reached 62,720,000 times, the total number of registered users of CMB Life ()
+reached 20,540,000, and the number of such active customers reached 18,390,900 during the year. For the relevant
+data on Mobile Banking, please refer to Section 5.10.4. As for the Internet account system, the Company has
+developed the "light" account product "All-in-one Net (-)" which has integrated various platforms including
+"CMB Life ()", Mobile Banking and Online Banking, laying a solid foundation for obtaining external traffic
+and securing customers via both online and offline platforms. As for mobile payment, the Company has developed
+the card-free payment product "All-in-one Net Payment (-)" for its users, and introduced two-dimensional
+code, biometrics and other new interactive features. The Company has built into its credit cards a new hybrid
+payment tool "Yi Zhao Guo (-)" which connects merchants with users, thereby restructuring the restaurant
+vouchers and movie ticket system under the existing business system and rapidly expanding the volume of its offline
+consumption platform to seize the payment service market. The Company also jointly launched the VISA-Checkout
+with VISA and the HCE "All-in-one Mobile * Yun Shan Fu (-)" with China Union Pay respectively, both
+receiving high recognition from all walks of life. Thanks to the cooperation with Apple through China Union Pay in
+mobile payment, the Company became one of the first card issuers supporting Apple Pay, and maintained a leading
+position among its peers in terms of market share. As for the online and offline service integration, the Company
+focused on mobile phone application to re-engineer the service processes of its existing outlets, fully explored
+and optimised the 020 "light" customer acquisition model, and improved the data-driven customer acquisition
+efficiency.
+As at the end of the reporting period, the Company's wealth management funds invested in margin financing in the
+secondary stock trading market amounted to approximately RMB30 billion, significantly lower than that as recorded
+during the peak season due to the stock market crash. The Company exercised strict risk control over margin
+financing in the secondary stock trading market and dynamically adjusted the product leverage ratio according to
+market conditions. Following the stock market crash, the Company further verified the source of subordinated funds,
+increased subordinated investors' obligations to cover their short position, raised the threshold for subordinated
+investors to withdraw gains and lowered the concentration of any single stock to constantly strengthen risk control
+over the business, and made reasonable investments within the permitted scope in accordance with the CBRC's
+window guidance and policy requirements for structured products. As at the reporting period, the risks associated
+with this business were kept under control.
+9.
+On 29 August 2015, the decision to amend "The PRC Commercial Banking Law" was voted and approved by
+the Standing Committee of the National People's Congress, pursuant to which the regulatory indicators for the
+deposit-to-loan ratio was officially removed with effect from 1 October 2015. The promulgation of this policy will
+generally benefit the loan granting of the Company. However, due to the fact that credit resources are still subject
+to the requirements of capital adequacy ratio, coupled with the negative impact of macro-economic downturn and
+the deteriorated quality of loan assets as well as the Company's own liquidity management needs, the removal of
+the deposit-to-loan ratio may have limited impact on the grant of the Company's loans, but will have a positive
+effect on weakening the competition on securing deposits and controlling debt level. Subsequently, as for its assets,
+the Company will put in more efforts to support the financing demands of its customers while optimising its loan
+structure and customer portfolio, thereby propelling the development of real economy. As for its liabilities, the
+Company will fully take into consideration liquidity management and profit targets, and constantly optimise its
+liabilities structure and financing channels. Meanwhile, the Company will strive to reduce its liability cost and the
+financing cost for customers by increasing efforts to develop the non-deposit liability business, such as the increase
+in placements from banks and other financial institutions and the issuance of bonds, therefore promoting the stable
+development of all business segments.
+In contrast to its domestic peers, the Company has always prioritised development of retail finance business, and
+promotes construction of its retail finance business system. It has developed a solid, premium and broad retail
+customer base by capitalising on its business management system, product system, service system and risk prevention
+system which are subject to improvement from time to time. The Company possesses outstanding competitive edge
+in such core retail businesses as wealth management, private banking, retail credit and consumer finance.
+In 2015, the retail finance of the Company maintained a rapid growth in its profit contribution and steady
+improvement in value contribution. Its profit before tax reached RMB34.792 billion, representing an increase of
+19.54% as compared with the previous year. As a percentage to the total profit before tax of the Company, it
+increased to 50.47%, representing an increase of 7.73 percentage points as compared with the previous year.
+The net operating income from the retail finance also maintained a rapid growth. It reached RMB89.186 billion,
+representing an increase of 30.04% as compared with the previous year, and accounting for 46.44% of the net
+operating income of the Company, up by 2.93 percentage points as compared with the previous year. Among
+which, the net interest income from retail finance reached RMB62.406 billion, representing an increase of 22.78%
+as compared with the previous year and accounting for 69.97% of the net operating income from retail finance
+of the Company; the net non-interest income from retail finance amounted to RMB26.780 billion, representing an
+increase of 50.81% as compared with the previous year and accounting for 30.03% of the net operating income
+from retail finance, and 44.96% of the net non-interest income of the Company. In 2015, the retail finance of the
+Company recorded a commission income of RMB9.353 billion from bank cards (including credit cards), representing
+an increase of 24.86% as compared with the previous year on the same calibre; the fee and commission income
+from retail wealth management was RMB17.079 billion, representing an increase of 83.86% as compared with the
+previous year and accounting for 66.04% of the net fee and commission income from retail finance.
+Business overview
+5.10.1 Retail finance
+In 2015, facing the challenging and complicated economic and financial situations, the Company continued to
+implement the transformation strategies of "Asset-light Banking" and "One Body with Two Wings", highlighted
+its operational features by leveraging on its own advantages, fortified its business foundation through strict risk
+control, promoted business operations primarily through structural adjustments, pushed forward reform-oriented
+transformation, and achieved sustained and rapid development of all business lines. The profit contribution of
+retail finance exceeded 50%, primarily driven by remarkably predominant businesses such as private banking,
+wealth management and credit card businesses and the continuous rapid growth of high-end customer base. The
+Company further featured its corporate finance and financial institutions finance, resulting in the fast growth in the
+number of core customers of transaction banking business and the volume of settlement deposits, and outraced
+its peers in investment banking, asset management, financial market and bills businesses in terms of business scale
+as it captured market opportunities in a timely manner. Meanwhile, the Company further optimised its assets and
+liabilities structure through promotion of asset-light operation and innovation efforts. As a result, the non-interest
+income business achieved rapid growth, demonstrating the effectiveness of asset-light banking gradually.
+5.10Business Operation
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+Impact of new regulatory requirements for the deposit-to-loan ratio
+Confronted with both challenges and opportunities under the new situation, the Company will unwaveringly implement
+the transformation strategies of "Asset-light Banking" and "One Body with Two Wings", enhance risk management,
+deepen structural adjustments and promote system reform. Under the current operating environment, the Company
+plans to achieve a growth rate of approximately 11% and 9% respectively in proprietary loans and proprietary deposits
+in 2016. Meanwhile, the Company will allow only moderate growth in risk assets, vigorously optimise assets structure,
+raise capital utilisation ratio, and strive to "convert risk assets into good ones" by capitalising on existing credit resources.
+In 2016, the Company intends to take the following major initiatives: Firstly, enhance asset quality management by
+operating non-performing assets as a breakthrough to improve its overall risk management capability and fundamental
+management capability, so as to prevent its existing asset quality from deterioration; secondly, deepen structural reform
+to adjust its credit structure by reducing existing risk assets and utilising quality assets, improve its ability to acquire basic
+retail customers through Internet platforms, optimise the credit financing procedures and culture of corporate finance
+through implementing "customer list management", and raise the resource utilisation ratio by "either retaining or
+reducing risk assets"; thirdly, promote system reform of the second batch of its branches across the Bank, optimise the
+organisational structure of the Head Office, conduct system optimisation and put in place ancillary procedures, so as to
+establish the "customer-centric" operation system which is manifested not only in the "organisational structure", but also
+in the "operation systems".
+Tough operating environment will bring many challenges to the Company. On the front of risk control, decelerating
+macro-economy will pose direct impact on asset quality and put more pressure on making provisions, while the
+complicated and volatile economic situation will fuel volatility in the financial market, posing a greater challenge
+to commercial banks' capability and competency in risk control. On the front of business operation, economic
+restructuring will reduce customers' appetite for traditional credit financing and further increase pressure on assets
+investment. In addition, interest rate cuts will restrict banks' bargaining power on quality customers, and financial
+disintermediation will further increase pressure on the growth of debts. On the front of earnings growth, worsening
+financial environment may urge regulators to raise the regulatory standards for risk control, capital management
+and indicators of commercial banks, which, coupled with the net interest margins adversely impacted by assets and
+debts, particularly, the increase in provision expenditures resulted from deteriorating asset quality, will inevitably lead
+to a slowdown in banks' earnings.
+7.
+China Merchants Bank
+Annual Report 2015
+99
+66
+65
+Looking into 2016, the economic and financial situation at home and abroad will remain complicated and volatile.
+Internationally, the normalisation of US monetary policies and the declining price of bulk commodities will trigger a
+series of deep-seated problems; European economic recovery will be overcast by geopolitical factors; and emerging
+economies will be more vulnerable to volatility. As such, the global economy can hardly shake off sluggishness, and
+the stability of international financial markets and cross-border capital flow will be further undermined. Domestically,
+the central government has set a clear goal to accomplish the five key tasks of "reducing overcapacity, destocking,
+deleveraging, cutting down costs and overcoming weaknesses". The balance sheets of commercial banks will be
+directly affected in the crucial stage of economic adjustment. Financial disintermediation will put more pressure
+on banks' earnings after full liberalisation of deposit interest rates, while new entrants in the financial market will
+trigger fiercer cross-industry competition.
+5.9.2 Outlook and Measures
+At the same time, however, reform of the economic and financial systems and industrial upgrading will bring to
+banks ample opportunities for further growth. Judging from the source of driving force, the three major drivers,
+namely policy adjustments for economic reform, capital flow and resources restructuring and spontaneous market
+evolvement and adjustment, will give birth to eight major growth opportunities for commercial banks: residential
+sector will still have room to explore while retail banking will have larger room for growth; the wealth and asset
+management market will increasingly expand, and diversified cross-market capital deployment will gear up onto
+a faster lane; the multi-layer capital market will grow more mature and reasonably reflect the investment value
+of listed companies, which will provide abundant opportunities for investment banking; investments will play a
+critical role in stabilising economic growth, and infrastructural construction in certain regions will still have room for
+faster growth with more assets to be allocated; the accelerated "going global" process of Chinese enterprises and
+globalisation of RMB will bring valuable opportunities for cross-border finance; regional coordinated development
+will surge with stunning growth and there will be vast market potential in regional transport integration,
+urbanisation construction, public services and other fields; emerging industries will grow mature and provide
+unmissable structural opportunities in the industries; and the dividend from reform of state-owned enterprises will
+release gradually, which will bring multiple opportunities for banking transformation and customer restructuring.
+At a deeper level, enterprises' financing needs are experiencing structural changes "from lower end to upper end",
+"from debts to equities" and "from single market to multi-markets". "From lower end to upper end" means that
+enterprises in need of financing have gradually changed from traditional and mature enterprises at the lower end of
+their life cycles to hi-tech and innovative enterprises at the upper end of their life cycles; "from debts to equities"
+means that enterprises' financing methods have shifted from the heavily reliant traditional debt financing to equity
+financing, which was frequently referred to as financial disintermediation in the past; and "from single market to
+multi-markets" means that financing channels have changed from the previous single market and single financing
+method to multi-faceted market and multiple financing methods with a combination of equity and debt financing,
+domestic and overseas financing, and off- and on-shore financing as well as domestic currency and foreign
+currencies financing. Despite the lessened demand for traditional credit financing, emerging financing needs are
+becoming new growth drivers for banking businesses.
+V Report of the Board of Directors
+60
+73
+Since the establishment of the financial institutions finance segment of the Company in late 2013, all business lines
+of this segment saw rapid development. The financial institutions finance of the Company continued to record stable
+growth in profits with increasing value contribution. During the reporting period, the financial institutions finance
+of the Company realised pre-tax profit of RMB22.983 billion, up by 41.88% as compared with the previous year,
+accounting for 33.34% of the profit before tax of the Company, up by 9.55 percentage points as compared with the
+previous year; the operating income was RMB26.448 billion, representing an increase of 40.29% as compared with
+the previous year, and accounting for 13.77% of the operating income of the Company. In particular, net interest
+income was RMB11.466 billion, up by 24.25% as compared with the previous year, and the net non-interest income
+was RMB14.982 billion, up by 55.66% as compared with the previous year.
+Business overview
+5.10.3 Financial institutions finance
+With respect to M&A finance business, the Company has achieved a leap forward in both volume and efficiency and
+forged a well-received market brand image. During the year, the Company completed a series of professional and
+complicated projects with significant influence, and took a leading position in privatisation of China concept stocks
+and large M&A syndicated financing business. Thanks to the constant improvement and innovation in its business
+models, the Company achieved the zero breakthroughs in M&A matchmaking transactions, and realised seamless
+link-up between M&A bridge financing and corporate wealth management. Moreover, the Company also explored
+to lead syndicated commitment so as to enhance distribution capabilities. During the year, a total of RMB46.840
+billion was granted for financing M&A activities, representing an increase of 64.18% as compared with the previous
+year. Income from M&A intermediary business reached RMB542 million, representing an increase of 216.37% as
+compared with the previous year.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+76
+75
+With respect to bond underwriting business, the Company vigorously developed financial bonds and assets
+securitisation businesses with a focus on perpetual bonds and ultra-short-term commercial papers in 2015.
+During the year, the Company led the underwriting of bonds of RMB400.394 billion, representing an increase of
+64.46% as compared with the previous year, ranking fifth among its domestic peers and first among the national
+small-and medium-sized banks respectively. Specifically, the amount of short-term commercial notes underwritten
+by the Company ranked first (according to the rankings by Bloomberg) in the market, while the amount of financial
+bonds underwritten by the Company ranked second (according to the rankings by WIND). The Company underwrote
+521 bonds, representing an increase of 61.80% as compared with the previous year. During the year, income from
+our lead underwriting business reached RMB1.462 billion, representing a growth of 90.74% as compared with the
+previous year.
+In order to further implement the strategy of "One Body with Two Wings", in 2015, the Company strengthened
+its investment banking division by making appropriate adjustments, established four major business systems,
+namely debt capital market system, M&A finance system, structured financing system, equity capital market system,
+and diversified their respective investment banking product systems, thereby initially achieving embedded risk
+management and promoting the steady development of various businesses.
+With respect to offshore business, the Company increased efforts in marketing and promotion of offshore business
+with a view to enlarging its customer base and solidifying its business foundation, thereby realising a steady growth
+in offshore business. As at 31 December 2015, the number of offshore customers reached 39,700, representing an
+increase of 26.43% as compared with the beginning of the year; offshore international settlement amounted to
+USD283.178 billion, representing an increase of 48.00% as compared with the previous year; and deposits from
+offshore customers amounted to USD16.336 billion, representing an increase of 35.18% as compared with the
+beginning of the year. As a result of the deteriorated foreign trade situation and foreign exchange rate fluctuation,
+balance of offshore loans amounted to USD6.765 billion, representing a decrease of 25.83% as compared with the
+beginning of the year; credit assets remained good with a non-performing loan ratio of 0.55%. The cumulative net
+non-interest income reached USD132 million, which remained stable as compared with the previous year.
+Investment banking business
+With respect to cross-border finance business, the Company increased efforts in the innovation of asset-light
+products by capitalising on structural development opportunities, committed to promoting the rapid development
+of "Cross-border Zi Ben Tong (1)", upgraded the smart cross-border finance platform and successfully
+launched the Global Cash Management Project (±¸Â¥40) (Phase I). Despite a decline in both imports
+and exports under unfavourable external situations, the Company completed onshore international settlements
+of USD307.604 billion, representing a slight increase of 0.42% as compared with the previous year; cross-border
+Renminbi settlements of RMB830.807 billion, representing an increase of 19.08% as compared with the previous
+year, the market share of our cross-border payments was 3.53%, up by 0.14 percentage point as compared with
+the beginning of the year, and ranking second among all domestic small- and medium-sized banks (based on
+the statistics of the State Administration of Foreign Exchange); foreign exchange settlements for customers of
+USD175.233 billion, representing a growth of 9.73% as compared with the previous year, and a market share
+of 4.48%, up by 0.12 percentage point as compared with the beginning of the year, and ranking first among all
+domestic small- and medium-sized banks (based on the statistics of the State Administration of Foreign Exchange).
+The number of onshore customers of our international business reached 65,958, representing a growth of 19.11%
+as compared with the previous year. Affected by the adverse external conditions such as slow recovery of the global
+economy and the inadequacy of effective financing needs of foreign trade enterprises, as well as the internal policies
+which the Company adopts to cease loan granting to the high-risk customers whose transactions were verified to
+be merely cross-border arbitrage in strict compliance with the prudent macro-regulatory requirements of the State
+Administration of Foreign Exchange, the Company granted accumulated international trade facilities of USD21.935
+billion, representing a decrease of 40.73% as compared with the previous year, and handled international factoring
+of USD8.899 billion, representing a decrease of 46.45% as compared with the previous year, and international
+forfeiting of USD9.936 billion, representing a decrease of 46.16% as compared with the previous year.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+With respect to corporate card business, thanks to coordinated marketing of retail and corporate lines, the Company
+had issued a total of 122,200 corporate cards as at 31 December 2015. Intermediary business income amounted to
+RMB108 million during the reporting period.
+With respect to integrated financing for domestic trade as well as for domestic and foreign trade, the Company
+focused on innovation of integrated financing products for domestic trade and foreign trade, and completed
+the first offshore and onshore transaction in the industry via BPO, a new settlement channel. The Company also
+proactively made adjustments to its distribution structure of financing assets, focused on promoting innovation of
+businesses involving the use of domestic letter of credit, and aggressively developed cross-bank domestic letter of
+credit business, with a view to effectively save capital. During the reporting period, the trading volume of cross-bank
+domestic letter of credit business calculated on full statistical calibres amounted to RMB71.1 billion, representing an
+increase of 332.24%; the total amount of domestic letter of credit issued reached RMB238.811 billion, representing
+an increase of 3.94% as compared with the previous year; and the amount of domestic trade financing provided
+totalled RMB515.693 billion, representing an growth of 15.90% as compared with the previous year.
+With respect to supply chain finance, the Company further optimised all the transaction procedures for core
+customers through smart supply chain finance, established a product system which fully covers "settlement plus
+financing" offerings by adhering to the dual-core strategy of fostering the "core banking for core customers",
+focused on developing the innovative products such as C+ smart bill pool, payment agency service, platform-based
+supply chain, new financing channels for supply chain and provided tailored finance solutions for eight core
+industries including healthcare and medical care. In 2015, in adherence to the "customer-oriented" concept, the
+Company further tapped on its quality customers in the supply chain and raised the standards for core enterprises
+and their upstream and downstream customers. Calculated on the new statistical calibre, as at 31 December 2015,
+the Company had a total of 572 core customers in the supply chain and 10,537 customers from upstream and
+downstream industries, representing an increase of 247% and 264% (calculated on the same calibre) respectively
+as compared with the beginning of the year. The balance of supply chain finance amounted to RMB67.998 billion,
+representing an increase of 60.88% as compared with at the end of the previous year.
+With respect to cash management business, the Company proactively responded to challenges arising from interest
+rate liberalisation by providing various types of customers with all-inclusive, multi-model and integrated cash
+management services, thereby making substantial contribution to the acquisition and retention of base customers,
+acquisition of low cost corporate settlement related deposits, and the cross-sales of other corporate and retail
+products. As at 31 December 2015, the total number of customers using cash management service of the Company
+reached 831,906, representing an increase of 51.74% as compared with the end of the previous year. Thanks to the
+Company's continuous efforts to forge the "C+ Cash Management Solution" brand, the number of newly opened
+accounts exceeded 210,000, and the number of newly issued "All-in-one Card for Company (2)" reached
+270,000. Basic cash management business experienced healthy development. The Company continuously pushed
+forward the innovation and promotion of various products such as "C + Account-deposits portfolio", Cross-Border
+Cash Pool, Virtual Cash Pool, Multi-level Cash Pool, and launched mobile terminals for Cross-bank Solution for Cash
+Management ("CBS"). The Company optimised cross-bank cash management products iteratively, and launched
+the "CBS5 Cash Management Cloud Service" (CBS5 R), an innovative cross-bank cash management
+product, which effectively promoted the marketing of various key projects focusing on customs, tax, social security
+and housing provident funds. The number of group customers under management reached 485, and the number of
+companies under management exceeded 25,400.
+Transaction banking business and offshore banking business
+Annual Report 2015
+V Report of the Board of Directors
+China Merchants Bank
+74
+In 2015, the corporate customer deposits of the Company maintained steady growth with significant improvement
+in quality. As at 31 December 2015, the balance of corporate customer deposits amounted to RMB2,292.279
+billion, representing an increase of 6.89% as compared with the end of the previous year; the daily average balance
+amounted to RMB2, 163.282 billion, representing an increase of 9.89% as compared with the previous year; the
+demand deposits accounted for 50.11% of total deposits from our corporate customers, up by 5.30 percentage
+points as compared with the end of the previous year. In 2015, the average cost of deposits from corporate
+customers was 2.06%, down by 0.30 percentage point as compared with the previous year, indicating that the cost
+of deposits from corporate customers was under effective control in the context of interest rate liberalisation.
+In 2015, after taking into consideration its total credit, liquidities, gains and risks profile, the Company effectively
+allocated and promoted its discounted bills business. The volume of the directly discounted bills amounted to
+RMB1.55 trillion during the reporting period, ranking first among its peers for two consecutive years. As at 31
+December 2015, balance of discounted bills amounted to RMB82.816 billion, representing an increase of 24.14% as
+compared with the end of the previous year and accounting for 3.20% of total loans and advances to customers.
+Corporate customer deposits
+Discounted bills
+In 2015, the Company continued to promote syndicated loan business to enhance inter-bank cooperation and
+information sharing and diversify the risks associated with large amount loans. As at 31 December 2015, the balance
+of syndicated loans amounted to RMB86.784 billion, representing an increase of RMB14.434 billion as compared
+with the end of the previous year.
+Financial institutions finance
+The "Qian Ying Zhan Yi (F)" program is a strategic brand of the Company to serve innovative emerging
+enterprises. During the reporting period, targeting at this group of customers, the Company adopted the "equity
+financing plus debt financing" model and focused on promoting the investment and loan coordination business
+model with "consultants plus investments" features, operating as an investment bank, so as to offer comprehensive
+services to innovation-oriented growth corporate customers. As changes in certain enterprises resulted in the
+updating of relevant data at the beginning of the year in accordance with the "Qian Ying Zhan Yi (FR)"
+registration standards, the number of the "Qian Ying Zhan Yi (FR)" customers at the beginning of the
+year was adjusted accordingly compared with the end of the previous year. As at 31 December 2015, the total
+number of registered customers reached 26,442, representing an increase of 25.60% as compared with the
+beginning of the year. The customers that have credit lines granted by the Company accounted for 47.55% of
+all registered customers, indicating a continuous expansion in our customer base; the credit lines granted to such
+customers amounted to RMB411.629 billion, representing an increase of 34.33% as compared with the beginning
+of the year; the balance of loans granted to such customers as at the end of the reporting period amounted to
+RMB158.285 billion, representing an increase of 22.05% as compared with the beginning of the year, more than
+the loans granted to other enterprises. As a high-quality customer base which the Company has been striving to
+expand, the "Qian Ying Zhan Yi (F)" program adopts the customer acquisition model of targeted marketing
+according to a specific target list. As its industry distribution structure is kept in line with the direction of economic
+transformation, its non-performing loan ratio was lower than the overall non-performing loan ratio of the Company's
+loans, which stood at 1.64%. As at end of the reporting period, 47 "Qian Ying Zhan Yi (F)" customers had
+completed IPO in China and opened special accounts to receive proceeds from IPO, with a total of RMB8.516 billion
+under custody.
+The Company intensified construction of channels and enhanced value contribution from its financial institutions
+customers for the purpose of deepening comprehensive cooperation with its customer base of financial institutions;
+proactively responded to changes in the market and regulatory policies and adjusted and optimised the structure
+of the over-the-counter treasury business to generate more revenue; the cross-border RMB interbank collaboration
+business and bills business of the Company saw a rapid growth and maintained their leading position in the
+industry. As at 31 December 2015, the balance of placements from banks and other financial institutions reached
+RMB702.862 billion, representing an increase of 0.40% as compared with the beginning of the year. Among which,
+the proportion of demand deposits increased by 24.52 percentage points as compared with the beginning of the
+year to 58.51%, indicating optimization of the deposit structure; the balance of over-the-counter assets with other
+financial institutions such as placements with other banks and assets purchased under resale agreements (including
+bills and beneficial rights) amounted to RMB147.4 billion as at the end of the reporting period, down by 62.30%
+as compared with the beginning of the year, mainly due to gradual settlement and clearance upon maturity of
+suspended businesses; the balance of funds under third-party custody amounted to RMB173.517 billion, representing
+an increase of 53.52% as compared with the beginning of the year, and the total number of customers under
+third-party custody business was 6,445,400, representing an increase of 51.66% as compared with the beginning
+of the year. During the reporting period, as the Company sped up the turnover of bills and shortened the duration
+of transactions, the trading amount of discounted bills business for the whole year reached RMB33,711.952 billion,
+representing an increase of 270.06% as compared with the previous year; the rediscount business with the central
+bank amounted to RMB69.953 billion, representing an increase of 16.26% as compared with the previous year;
+the volume of interbank cross-border RMB clearing service reached RMB2,260.0 billion, representing an increase
+of 187.90% as compared with the previous year, and the total number of clearing accounts amounted to 132,
+representing an increase of 19 as compared with the beginning of the year. The number of interbank cross-border
+RMB clearing accounts ranked first among national small- and medium-sized banks. As for the settlement and
+custody of margin trading and short selling, the Company maintained business cooperation with 73 securities firms
+including 9 new firms who just commenced cooperation with the Company during the year.
+China Merchants Bank
+Annual Report 2015
+The Company attaches great importance to developing, improving and integrating e-banking channels such as
+mobile banking, online banking and direct banking, which has received high social recognition and effectively
+relieved the pressure on physical outlets of the Company.
+E-banking Channels
+The efficiently operated physical outlets of the Company are primarily located in the economically developed regions
+of China such as Yangtze River Delta, Pearl River Delta and Bohai Rim, and some large- and medium-sized cities
+in other regions. As at 31 December 2015, the Company had 132 branches, 1,575 sub-branches, one exclusive
+branch-level operation center (credit card center), one representative office, 3,202 self-service centers, 12,495
+self-service machines (including 2,197 Automatic teller machines and 10,298 cash recycle machines) and 2,618
+visual counters, 2 subsidiaries, namely CMB Financial Leasing and China Merchants Fund, and 1 joint venture,
+namely CIGNA & CMB Life Insurance in more than 130 cities of Mainland China. The Company also has a number of
+subsidiaries including Wing Lung Bank and CMB International Capital, and a branch in Hong Kong; a branch and a
+representative office in New York, the United States; a branch in Singapore; a representative office in both London
+and Taipei; and a branch in Luxembourg. In addition, the London Branch of the Company has been approved to
+commence operation by the British regulatory authority on 19 January 2016.
+Physical distribution channels
+The Company provides products and services via multiple distribution channels. Our distribution channels are mainly
+divided into physical distribution channels and e-banking channels.
+5.10.4 Distribution channels
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+In 2015, the Company's spot trading volume of bonds reached RMB3,170.6 billion, representing an increase of
+54.58% as compared with the previous year; the trading volume of RMB-denominated options reached USD80.5
+billion, representing an increase of 98.77% as compared with previous year; the trading volume of RMB interest rate
+swap business reached RMB1,260.8 billion, representing an increase of 1,261.56% as compared with the previous
+year; the trading volume of RMB exchange rate swaps reached RMB2,863.6 billion, representing an increase of
+50.00% as compared with the previous year. According to the data from the China Foreign Exchange Trade System
+and the National Interbank Funding Center, the trading volume of RMB options in the interbank market and the
+volume of RMB interest rate swap transactions of the Company both ranked first in the whole market.
+Foreign currency investments: the Company seized opportunities to increase investments based on its judgment on
+the international market situation. Firstly, the Company implemented a prudent investment strategy by controlling
+its investment pace and the duration of its new investments. Meanwhile, the Company actively participated in the
+spread transactions of newly issued bonds and range trading operation to realise interest spread gains. Secondly,
+the Company proactively developed secondary market operations and derivative products to increase returns of debt
+portfolio. As at the end of the reporting period, the balance of the foreign exchange investment portfolio Company
+amounted to USD4.242 billion, with a portfolio duration of 2.12 years and the portfolio yield of 2.65%.
+RMB investment business: the Company, after conducting an intensive study on the domestic financial market,
+grasped the trend of local-currency bond market and formulated its investment plan in a scientific way. Firstly, the
+Company aggressively extended the duration of its investments. The incremental investments were primarily medium
+to long-term bonds with maturity of 5 years or above, prioritising on government bonds and credit bonds with
+good credit standing. Secondly, the Company proactively adjusted and optimised the structure of its portfolios by
+capitalising on the opportunities brought about by fluctuations in interest rates and credit spreads, and reinforced
+analysis and management of credit bonds to increase earnings. As at the end of the reporting period, the balance of
+RMB bond portfolio of the Company was RMB740.621 billion, with a portfolio duration of 4.08 years and a portfolio
+yield rate of 4.02%.
+Financial markets business
+As a typical example of the Company's transformation into an asset-light bank, our asset custody business
+experienced rapid growth in 2015, recording a historical high in terms of volume and income of assets under
+custody, as well as in product offerings. As at the end of the reporting period, the balance of assets under custody
+amounted to RMB7, 155.779 billion, representing an increase of 101.97% as compared with that at the beginning
+of the year; the accumulative custody fee income amounted to RMB3.567 billion, representing a year-on-year
+increase of 68.89%; the number of asset custody projects reached 11,506, representing an increase of 48.71% as
+compared with that at the beginning of the year. In respect of the asset custody business, the Company has not only
+realised full coverage of its customer base of assets under custody, but also established a relatively balanced and
+diversified business structure to effectively mitigate the impact of market volatility on its custody business. During
+the reporting period, the Company took further steps to push ahead its custody services and system innovation by
+focusing on service upgrading. In respect of services, the Company became one of the first recognised outsourcing
+service providers for funds approved to be registered with Asset Management Association of China and also the
+first institution in the industry offering a full range of services for QDIE cross-border innovative products, including
+custody and administrative services. In respect of the system, the Company successfully launched its proprietary
+G2 core business system for asset custody and took the lead to realise direct connection with the systems of China
+Securities Depository and Clearing Corporation Limited (+), China Bonds Depository and
+Clearing Corporation Limited (+¤£#*#$#^) and Shanghai Clearing House, thus maintaining its leading
+position in the industry in terms of custody system, and providing its custody service customers with safe, efficient
+and professional "Valuation at One Key (-)" custody services.
+Asset custody business
+Annual Report 2015
+V Report of the Board of Directors
+China Merchants Bank
+78
+77
+Thirdly, remarkable results were achieved in product innovation. In 2015, the Company was the first to launch
+the following products in China: successfully completed the first QDIE (Qualified Domestic Investment Enterprise)
+transaction across the country after pilot implementation of the QDIE policy in Qianhai, Shenzhen; piloted the first
+property fee asset securitisation product in the country, namely the "Special Plan for Securitisation of Property Fee
+Asset of Shimao Tiancheng (X£»¤¤à¤#)"; and issued the first inter-bank open-ended net value
+structured product, namely the "Ririying Structured Wealth Management Plan (= =5&y)". During the
+reporting period, in order to capture business opportunities emerging in the domestic capital market, the Company
+increased creation and issuance of equity-related products and improved the overall competitiveness of its products.
+The Company innovated and launched the "Zhiyuan" and "Hongyuan" equity plus debt product portfolios for
+investment in private placement assets and hedge funds, and the "Hengruibohui" direct equity investment products
+for investment in the Sunshine Private Placement Funds in the secondary market leveraging on the manager of
+managers fund("MOM") mode.
+Secondly, quality assets were sought extensively. In 2015, in response to changes in risk appetite in the market, the
+Company increased its bond asset investments and carried out actively-managed external investments under custody
+in cooperation with asset management institutions of other financial institutions; made investments in securitised
+assets and government-guided funds in a scientific way in line with market trend; invested in non-standard debt
+assets within the quota limit in strict compliance with the regulatory guidance. As at the end of the year, the balance
+of the wealth management funds of the Company invested in non-standard debt assets amounted to RMB168.761
+billion. The non-standard debt assets were mainly from lending companies and banks and other financial institutions
+in the industry. Based on its analysis on the credit standing of borrowers and the source of repayment funds of
+investment projects, the Company selected to invest mainly in projects which had good credit standing, and for
+which the source of repayment funds could be verified and projects covered by adequate cash flow. As a result, our
+asset quality did not deteriorate obviously. In addition, the Company prudently carried out the business of wealth
+management funds invested in beneficiary rights of margin financing and securities lending as well as the margin
+financing in the secondary stock market, and strictly implemented the equity-pledged financing standards. For
+details, please refer to Section 5.9.1 of this report.
+Firstly, business transformation was continuously deepened. According to regulatory requirements, the Company
+increased the development and issuance of net-value products, and promoted net-value management of interest
+rate products. As at the end of the reporting period, the balance of net-worth products amounted to RMB961.702
+billion, representing an increase of 296.33% as compared with the beginning of the year, and accounting for
+52.82% of the balance of wealth management business, up by 23.64 percentage points as compared with the
+beginning of the year.
+In addition to the rapid increase in volume, the wealth management business of the Company also made a number
+of achievements in other fields as follows.
+During the reporting period, the wealth management business of the Company maintained a good development
+momentum. The Company issued an aggregate of 8,330 wealth management products in the year, and recorded an
+aggregate of RMB13.40 trillion in the sales of bank-wide wealth management products, representing an increase
+of 83.81% as compared with the previous year. As at the end of the reporting period, the balance of wealth
+management business of the Company amounted to RMB1,820.693 billion, representing an increase of 118.97% as
+compared with the beginning of the year.
+Asset management business
+Other Financial Businesses
+V Report of the Board of Directors
+The Company has been qualified as a futures margin depository bank on China Financial Futures Exchange (CFFEX),
+Zhengzhou Commodity Exchange (ZCE), Dalian Commodity Exchange (DCE) and Shanghai Futures Exchange, and
+also as a member of Shanghai Clearing House for comprehensive foreign exchange settlements. As at 31 December
+2015, the balance of all types of deposits of the Company from futures exchanges and futures companies was
+RMB7.637 billion with 271 futures margin depository accounts.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+The underlying data of our small enterprise businesses at the beginning of the year was updated as compared
+with the end of the previous year due to elimination of relevant data as a result of change in the classification of
+certain enterprises based on the calibre of the Company at the beginning of the year after they become larger.
+The Company proactively withdrew from granting loans to small enterprises with potential risks for prudent
+sake, so as to further prevent the general risk of granting loans to small enterprises against the backdrop of the
+current economic slowdown. In the meantime, in order to fully implement the development strategy of "Asset-
+light Banking", the Company proactively reduced the granting of general loans occupying relatively larger amounts
+of capital, and increased the use of bills of acceptance, letters of guarantee, letters of credit and other types of
+credits. Therefore, as at the end of the reporting period, the Company had a total of 783,100 small enterprise
+customers, representing an increase of 56.18% (calculated on the Bank's calibre) as compared with the beginning
+of the year. However, balance of the loans of the Company granted to small enterprises totalled RMB198.199
+billion, representing a decrease of 14.02% over the beginning of the year, and accounting for 15.99% of domestic
+corporate loans, down by 3.32 percentage points as compared with the beginning of the year. Adversely affected
+by the weak financing demand of small enterprises and intensified competition in the industry, the floating range
+of weighted average interest rate of new small enterprises loans of the Company during the reporting period was
+22.35%, down by 0.61 percentage point as compared with the previous year.
+79
+70
+0
+China Merchants Bank
+Annual Report 2015
+During the reporting period, the Company continued to implement mobile Internet transformation for its credit card
+business by rolling out CMB Life 5.0 (5.0) and pioneering with the user-oriented platform system, thereby
+achieving a successful transformation from a payment tool to an open platform with over 20 million subscribers;
+optimised its service channels primarily consisting of the smart "WeChat/Weibo customer service" platform, which
+brought into reality the "Internet+"-based integrated multi-channel services and improved customer's experience and
+enhanced its service value; vigorously promoted its asset-light customer acquisition model, improved its efficiency in
+acquiring customers using data-driven technology, and optimised its customer mix; improved and launched "online
+application + offline verification ()" project across the Bank to boost the cross-sales across the
+retail system of the Bank; continued to build the multi-level and multi-dimensional credit card product system by
+rolling out co-branded credit cards such as mobile Internet-based Hearthstone (), Menghuanxiyou ()
+and Momo (E), as well as Diamond Credit Card (+) tailored for high-end customers and All-Currencies
+MasterCard (*) tailored for customers who have overseas spending needs, with a view to actively secure
+high-value customers through product innovation; launched the first Big Data-based smart marketing platform so
+as to improve the targeted marketing efficiency and operational capability of its high-yield businesses; focused on
+traffic and loyalty management, targeting at restaurant vouchers and movie tickets, being the two popular lifestyle
+activities for customers with a new hybrid payment product known as "All-in-one Payment (-)" which features
+one lump-sum payment by equity and cash and aims at improving customers' easy payment experience. In order
+to promote the mobile Internet-oriented transformation of points management, the Company piloted with a brand
+new management system for points accumulation, and launched various points promotional activities such as "Lucky
+Draw from Point Accumulation" (5), "Accumulated points for bonus" (I) and "Crowd Funding
+Charity" (*); continued to improve customers' experience of using cards in overseas countries and regions
+through a number of special overseas marketing activities, with a view to maintaining its leading position in the
+overseas market, and launched Visa Checkout products ahead of its peers to benefit its customers with an easier
+and safer cross-border payment solution.
+Retail loans
+As at 31 December 2015, the total retail loans of the Company amounted to RMB1,209.524 billion, representing
+an increase of 26.62% as compared with the beginning of the year and accounting for 46.71% of the total loans
+and advances to customers, up by 4.91 percentage points as compared with the end of the previous year. The
+creditworthiness and solvency of certain individual customers deteriorated due to weak macro-economic conditions,
+declining financing demand and accelerated risk exposures. As at 31 December 2015, the balance of the special
+mention retail loans of the Company amounted to RMB16.249 billion, representing an increase of 27.19% as
+compared with the end of the previous year, and the proportion of special mention retail loans remained unchanged
+as compared with the end of the previous year; balance of non-performing loans amounted to RMB13.032 billion
+with a non-performing loan ratio of 1.08%, up by 0.30 percentage point as compared with the end of the previous
+year. Excluding credit cards, the mortgage and pledged loans accounted for 87.72% of the balance of new non-
+performing retail loans of the Company in 2015, representing a mortgage and pledge rate of 60.04%. Given that a
+vast majority of such new non-performing retail loans were fully secured by collaterals, the risk associated with non-
+performing retail loans was generally controllable.
+In 2015, the Company responded to the market and customers' needs by actively supporting the development
+of housing finance and steadily increasing loans to small and micro- enterprises. As at the end of the reporting
+period, balance of housing loans of the Company was RMB491.266 billion, representing an increase of 52.87% as
+compared with the end of the previous year and accounting for 40.62% of retail loan of the Company. Meanwhile,
+the Company proactively carried out asset securitisation of housing mortgage, and became the third bank in China
+to offer securitised personal housing mortgage products. During the reporting period, the Company issued a total
+of RMB7.2 billion of securitised personal housing mortgage products. As at the end of the reporting period, balance
+of loans granted by the Company to small and to micro enterprises totalled RMB308.973 billion, representing a
+decrease of 7.94% (calculated on the Bank's calibre) as compared with the end of the previous year, and accounting
+for 25.55% of retail loans, down by 9.59 percentage points as compared with the beginning of the year. The non-
+performing loan ratio of loans granted to small and micro- enterprises was 1.54%, representing an increase of 0.46
+percentage point as compared with the end of the previous year. During the reporting period, the floating ranges of
+weighted average interest rate of loans of the Company newly granted to small and micro-enterprise was 37.03%,
+up by 3.46 percentage points as compared with the previous year.
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+The Company put great emphasis on loan risk management and endeavoured to formulate a whole-process risk
+management system covering its front, middle and back office. During the reporting period, the Company actively
+strengthened the management of its retail credit team to enhance the team's professional risk management
+capabilities; steadily promoted centralised loan approval by the Head Office, with the proportion of retail loans
+subject to centralised approval accounting for more than 70%, suggesting a new stage of automatic investigation
+and approval for housing mortgage business. After years' development, the centralised loan approval centre of the
+Head Office has developed a number of diversified risk control tools, including information review and verification
+via Extranet. Meanwhile, the Company constantly optimised and applied the risk-control model to product policy
+formulation, loan approval, post-loan and other procedures, and basically established a standardised, systematic
+and data-based risk control system. In addition, after the release of loans, relying on the analysis of system and
+data, the Company achieved effective control over the work flow and strategy for post-loan collection, and built
+a standardised system comprising of pre-warning, loan recovery and disposal so that the Company was able to
+prevent default risks at an early stage and improve the post-loan management efficiency. Moreover, the Company
+constantly upgraded and improved the asset-light development of retail credit operating platforms, further enhanced
+the operational efficiency of the Cloud Mortgage PAD Platform and promoted the online operation of peer-to-peer
+lending serial products by successively launching various projects such as release of loans in peer-to-peer lending and
+supporting services associated with peer-to-peer lending.
+5.10.2 Corporate finance
+V Report of the Board of Directors
+In 2015, in proactive response to external challenges and opportunities for its corporate finance, the Company
+focused on growing its customer base and strategic business transformation, accelerated formation of two major
+business systems, namely transaction banking and investment banking, and thus further enhanced its differentiated
+competitive edges. During the reporting period, the Company achieved profit before tax from corporate finance of
+RMB12.508 billion, accounting for 18.14% of profit before tax of the Company. In view of the narrowing interest
+spread due to interest rate cuts, weak external demand for credit loans and declining imports and exports, the net
+operating income from corporate finance of the Company was RMB74.491 billion, representing a decrease of 3.78%
+as compared with the previous year, and accounting for 38.79% of the net operating income of the Company.
+Among which, the net interest income from corporate finance amounted to RMB58.256 billion, representing a
+decrease of 4.27% as compared with the previous year, and accounting for 78.21% of the net operating income of
+corporate finance; and net non-interest income of corporate finance amounted to RMB16.235 billion, representing a
+decrease of 1.99% as compared with the previous year and accounting for 21.79% of the net operating income of
+corporate finance, and 27.25% of the net non-interest income of the Company.
+In 2015, the Company further optimised the industry distribution structure of corporate loans, giving priority to
+industries undergoing structural upgrading, traditionally competitive industries, strategic emerging industries,
+modern service sectors and green industries, and flexibly adjusted loans to real estate, local government financing
+vehicles and other industries in response to the changes in external operating environment. As at 31 December
+2015, the balance of credit loans to strategic emerging industries was RMB55.913 billion, representing an increase
+of RMB3.627 billion as compared with the end of the previous year, and accounting for 4.31% of the total corporate
+loans of the Company; and the balance of green credit loans was RMB156.503 billion, representing an increase of
+RMB5.556 billion as compared with the end of the previous year, and accounting for 12.07% of the total corporate
+loans of the Company. For further details of loans extended to areas strictly regulated by the state such as the real
+estate industry and local government financing vehicles, please refer to Section 5.9.1 in this report.
+Business overview
+Corporate loan businesses of the Company include working capital loans, fixed asset loans, trade finance and other
+loans, such as M&A loans and corporate mortgage loans. As at 31 December 2015, total corporate loans of the
+Company amounted to RMB1,296.974 billion, representing an increase of 2.64% as compared with the end of the
+previous year and accounting for 50.09% of total loans and advances to customers. Among which, the balance of
+the medium to long-term loans to domestic enterprises amounted to RMB494.340 billion, accounting for 39.89% of
+the total loans to domestic enterprises, up by 0.59 percentage point as compared with the end of the previous year.
+The non-performing loan ratio of corporate loans was 2.60%, representing an increase of 1.01 percentage points
+as compared with the end of the previous year, which was mainly due to weaker solvency of enterprises during the
+economic downturn, as well as the stringent criteria of the Company for recognition of non-performing loans, which
+is aimed to reflect the quality of its loan assets in a more prudent way. The floating range of weighted average
+interest rates of new corporate loans in RMB decreased by 4.01 percentage points to 9.32% as compared with the
+previous year.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+Corporate loans
+71
+During the reporting period, the Company continuously consolidated its customer base. The Company had 1,027,800
+corporate depositors, exceeding one-million benchmark. Among which, more than 300,000 were new customers
+who opened accounts during the reporting period, representing an increase of 38.63% as compared with the
+previous year.
+In 2015, the Company proactively adjusted its customer mix based on the current economic situation for the purpose
+of prudential management, and replaced the granting of general loans with diversified financing services so as to
+actively implement the development strategy of operating as an asset-light bank and keeping abreast of the changes
+in customers' financing needs. The Company had 26,500 corporate borrowers, representing a decrease of 23.85%
+as compared with the beginning of the year.
+Corporate customers
+72
+Established in 2002, the company's Hong Kong Branch is principally engaged in corporate banking and retail
+banking. With regard to corporate banking, the Hong Kong Branch provides enterprises located in Hong Kong with
+diversified corporate banking products and services, such as deposits, loans (including bilateral loans, syndicated
+loans, trade facilities and cross-border M&A portfolio projects), settlement and asset custody, and engages in
+interbank transaction of funds, bonds and foreign exchange trading, and conducts funds clearing and asset transfer
+with customers in the banking industry. With respect to retail banking, the Hong Kong Branch proactively develops
+featured retail banking services and provides cross-border personal banking services for individual customers in
+Hong Kong and Mainland China. These featured products are "Hong Kong All-in-one Card" and "Hong Kong
+Bank-Securities Express".
+China Merchants Bank
+Annual Report 2015
+In 2015, leveraging on the advantages of Hong Kong as the bridgehead of China's foreign economic and trade
+activities and as one major international finance center of the world, the Hong Kong Branch grasped the market
+opportunities brought about by Chinese enterprises "going global" and the "One Belt, One Road" strategy to
+constantly promote cross-border business coordination, proactively develop the local market and rapidly expand its
+share in the retail banking market. Meanwhile, the Hong Kong Branch further strengthened its risk compliance and
+internal fundamental management, constantly improved and innovated its product and service systems and strove to
+explore the asset operation model. However, due to drastic changes in the external operating environment and poor
+performance in the cross-border business coordination, the Hong Kong Branch recorded a decrease in net operating
+income and profit before tax as compared with the previous year. During the reporting period, the Hong Kong
+Branch realised net operating income of HK$1.922 billion, profit before tax of HK$1.658 billion and profit per capita
+for the whole year of over HK$10.76 million.
+81
+2
+82
+V Report of the Board of Directors
+Established in November 2013, the Singapore Branch of the Company is mainly positioned as a significant
+cross-border financial platform in Southeast Asia, which is committed to providing high quality and comprehensive
+cross-border finance solutions to Chinese companies "going global", Singaporean companies "being brought in"
+and high net-worth individual customers. In addition to the general deposit and loan services, it also offers featured
+products including delisting financing, M&A financing, Cross-border Trade Express, global financing and cross-border
+settlement and sales of foreign exchange without solution pay.
+Established in 2008, the Company's New York Branch provides various services including corporate deposits,
+corporate loans, project financing, trade financing, cash management, M&A financing and advisory for enterprises
+and financial institutions in China and the U.S.. With strong support from the parent bank and focusing on the U.S.
+market, the New York Branch, as an integral part of internationalisation of the Company, is committed to providing
+a featured cross-border financial platform characterised by mutual coordination, while serving as a showcase and
+platform in improving the international management level and global service capabilities of the Company.
+In 2015, in addition to its traditional cross-border businesses, the New York Branch grasped the business
+opportunities brought about by privatisation of China concept stocks and overseas M&A deals of Chinese private
+enterprises to handle several privatisation deals and cross-border M&A deals. Meanwhile, the New York Branch
+exerted its own advantage to establish a M&A consultancy and syndication team and develop the coordinated service
+capability as an investment banker and a trading company, and successfully carried out the cross-border investment
+consultancy business and the cross-border non-standard asset custody business. During the reporting period, the
+New York Branch realised the profit before tax of USD60.09 million, representing an increase of 7.47% as compared
+with the previous year.
+Singapore Branch
+In 2015, the Singapore Branch adhered to its strategy of developing cross-border finance and local businesses
+simultaneously, and expanded its M&A financing and other emerging businesses vigorously, thus realising steady
+growth in each business line. During the reporting period, the Singapore Branch grasped policy opportunities
+successfully arranged cross-border RMB loans under the global financing mode for enterprises within the Guangxi
+Yanbian Comprehensive Financial Reform Experimental Zone, completed the first cross-border loan deal under the
+Yanbian financial reform policy, and successfully promoted the M&A business of Singapore enterprises in China.
+Local businesses of the Singapore Branch were gradually transforming towards coordinated development of customer
+base expansion, business growth and capital intensity. During the reporting period, the Singapore Branch realised
+net operating income of USD 17,120,000, up by 6.20% as compared with the previous year.
+Luxembourg Branch
+Established in March 2015, the Luxembourg Branch of the Company is an important cross-border financial platform
+in the EU region. It provides diversified services including corporate deposits, corporate loans, project financing,
+trade financing, M&A financing, M&A consultancy, bond distribution and underwriting, cash management and asset
+management for enterprises "going global" from China and "being brought in" from Europe. It is committed to
+establishing a private banking platform of the Company in Europe on the basis of the superior businesses of the
+parent bank combined with the special advantages of Luxembourg. During the reporting period, the Luxembourg
+Branch carried out every business line in an orderly way, with total assets of €194 million and net operating income
+of €709,400.
+Hong Kong Branch
+New York Branch
+5.10.5 Overseas businesses
+The personal mobile banking business of the Company continued to maintain rapid growth in 2015 as mobile
+banking customers were increasingly active with an aggregate of 1.589 billion logins in the Bank's mobile banking
+application, making it the most dynamic e-channel for customers of the Company. As of 31 December 2015, the
+aggregate number of downloads of the Bank's mobile banking application reached 63,154,800, and the aggregate
+number of customers who downloaded the application reached 27,588,800, of which 18,615,600 users were active
+customers during the year. Meanwhile, the number of mobile banking transactions and volume of mobile payments
+have been increasing rapidly. In 2015, the total cumulative number of mobile banking transactions amounted to
+2.525 billion, up by 182.10% as compared with the previous year; and the cumulative transaction amount reached
+RMB9.20 trillion, up by 158.51% as compared with the previous year. Of which, the cumulative number of mobile
+banking transactions was 535 million, up by 137.28% as compared with the previous year; and the amount of
+mobile banking transactions was RMB8 trillion, up by 155.60% as compared with the previous year; the cumulative
+number of mobile payment transactions was 1.990 billion, up by 197.18% as compared with the previous year; and
+the accumulated amount of mobile payment transactions was RMB1.20 trillion, up by 179.75% as compared with
+the previous year.
+The direct banking service provided by the Company integrates the convenience of direct banking channels and
+the face-to-face service at counters. Under direct banking, direct banking relationship managers provide customers
+with real-time, comprehensive, fast and professional service, including a variety of banking transactions, investment
+and financial advisory services, one-stop loan services and product selling services. The direct banking mainly
+offers business advisory and transaction, visual counters, online loan service, online wealth management, direct
+transactions, distant assistant service and online interactive service.
+60
+80
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+Mobile banking
+During the reporting period, the Company launched its Mobile Bank 4.0 with such core functions as real-time
+interconnection, intelligent services and natural interaction, realising the leaped development in system
+structure, function innovation and user experience, and made a first stride forward in the transformation from
+a transaction-based APP to an operation-based platform featuring self-service and self-selling. The Mobile Bank
+4.0 officially applied the unified and open user system "All-in-one Net", in which customers may get access into
+CMB's various platforms with "a mobile phone number and a password", thus realising the goal of "light account,
+all-in-one net (CFƑ · ±ND)". In addition, the Company continued to optimise and upgrade its "WeChat
+Banking", and the number of users has currently reached 10.32 million, establishing a diversified multi-facet light
+intelligence service model.
+As at 31 December 2015, the number of users of corporate mobile banking services of the Company amounted
+to 253,000. The total number of transactions including account enquiries, payments and settlements completed
+through corporate mobile banking reached 6,670,000 in the year, which effectively met our corporate customers'
+demand for mobile financial services, and has become an online marketing and service channel targeting corporate
+customers.
+Online banking
+The online banking business of the Company maintained a healthy growth in 2015, with a steady increase in the
+number of users and more frequent use of online banking.
+As for the retail online banking business, as at the end of 2015, the number of active users of the retail online
+banking professional edition of the Company reached 20,996,100, and the online banking replacement ratio
+was 96.51%, representing an increase of 2.89 percentage points as compared with the previous year. During the
+reporting period, customers increasingly used mobile phones and other mobile handsets to get access to online
+financial services along with continuous development of Internet finance. As the PC-based e-bank professional
+version was negatively affected by the change of transaction habits and the diversification of transaction channels,
+the total cumulative number of online retail finance transactions was 1.152 billion, representing a decrease of
+6.27% as compared with the previous year; however, the accumulated transaction amount reached RMB30.53
+trillion, representing an increase of 17.29% as compared with the previous year. Specifically, the cumulative
+number of online banking transactions was 398 million, up by 12.43% as compared with the previous year; and
+the accumulated amount of online banking transactions was RMB29.71 trillion, up by 17.76% as compared with
+that the previous year; the cumulative number of online payment transactions was 754 million, down by 13.83% as
+compared with the previous year; and the accumulated amount of online payment transactions was RMB820 billion,
+up by 2.50% as compared with the previous year.
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+As for its corporate online banking business, thanks to the growth of basic customers mainly driven by the "C+ cash
+management solution", as at 31 December 2015, the total number of corporate online banking customers of the
+Company reached 825,411, representing an increase of 52.09% as compared with the end of the previous year. The
+accumulated number of corporate online banking transactions of the whole Bank was 129.65 million, representing
+an increase of 70.64% as compared with the previous year. The accumulated transaction amount of corporate
+online banking transactions of the whole Bank amounted to RMB83.49 trillion, representing an increase of 72.25%
+as compared with the previous year.
+Direct banking
+In 2015, the Company constantly improved the service capability and customer experience for its direct banking in
+accordance with the general targets of implementing "service upgrading" and "Asset-light Banking" throughout the
+bank. As a result, the online intelligent services accounted for 43.21%, up by 9.94 percentage points as compared
+with the previous year; the manual telephone access ratio reached 97.30%; the percentage of manual telephone
+responses within 20 seconds reached 91.46%; and the customer service satisfaction ratio reached 99.27%, up by
+0.93 percentage points as compared with the previous year, all setting a record high.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+As at 31 December 2015, CIGNA & CMB Life Insurance had a registered capital of RMB1.45 billion and a workforce
+of 2,288 employees, total assets of RMB18.164 billion, representing an increase of 25.72% as compared with the
+end of the previous year, and net assets of RMB2.756 billion, representing an increase of 14.40% as compared
+with the end of the previous year. In 2015, CIGNA & CMB Life Insurance realised insurance income of RMB7.847
+billion, representing an increase of 47.92% as compared with the previous year, and net profit of RMB292 million,
+representing an increase of 33.33% as compared with the previous year.
+5.11.1 Credit risk management
+Credit risks refer to risks arising from failure of the borrowers or the counterparties to fulfill their obligations under
+the agreed terms. Credit risks of the Company mainly stem from credit business, investment business, financing
+business and other businesses on and off balance sheet. The Company endeavors to formulate a credit risk
+management framework with independent functions, balanced and checked risks and three dedicated defense lines
+and implements the bank-wide policies and processes regarding credit risk identification, measurement, monitoring
+and management to maintain a balance among risk, capital and profit of the Company.
+Based on different risk profile and authorisation system, the Company conducts risk reviews for credit business
+at different authorisation levels. The decision-making entities include: the Risk and Compliance Management
+Committee, the Loan Approval Committee and the Special Loan Approval Committee of the Head Office, as well as
+the Risk Control Committee and the Special Loan Approval Committee of our branches. The Company developed
+and introduced advanced risk quantifiable modeling tools and a risk management system for business origination,
+due diligence, review and approval of credit, loan disbursement and post-loan management to ensure that the
+risk management procedures were effectively implemented. In accordance with regulatory requirements, based on
+factors like borrowers' ability and willingness to repay, guarantors' credit profile, collaterals' conditions and overdue
+period, and with the employment of the 5-category classification, the Company divided credit assets into different
+categories under an internal 10-category classification system. The classification of a credit asset may be initiated
+by a relationship manager or a risk control officer and then reviewed by credit risk management departments of the
+Head Office and our branches according to their respective authorisation.
+In 2015, under the tough internal and external conditions resulting from the combined adverse impact of the
+four distinctive periods of the Chinese economy, namely "dealing simultaneously with the slowdown in economic
+growth, making difficult structural adjustments, absorbing the effects of the previous economic stimulus policies,
+and exploring new policies", the Company accelerated transformation of risk management by adjusting asset
+structure, supporting strategic businesses and strengthening management fundamentals in accordance with the
+guiding philosophy of "once-and-for-all solution, guarantee the targets for asset quality and build a first-class risk
+management bank", thereby effectively preventing relevant risks.
+Firstly, the Company continued to improve the comprehensive risk management system and the centralized risk
+management mechanism. The Company established the working rules for the Risk and Compliance Management
+Committee of the Head Office of CMB to regulate the existing comprehensive risk and compliance management
+activities; improved the identification, assessment and management mechanism for material risks of CMB to
+strengthen the centralised management of authorisation and risks for investment banking, asset management and
+agency services; streamlined a variety of emerging financing businesses and included them into the unified risk
+management system, thereby laying a solid foundation for the healthy and sustainable development of our business.
+85
+55
+98
+86
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+In 2015, against the background of complicated and volatile economic environment at home and abroad and the
+increasing risks in bank operations, the Company continued to improve its overall risk management system and
+proactively overcome and prevent various risks. For further details of risk management, please also refer to note 54
+to the financial statements.
+Secondly, the Company optimized asset portfolio allocation, and actively adjusted the asset structure. The Company
+aggressively developed low-capital-consumption asset business, such as personal housing mortgage and credit
+card businesses. In relation to corporate credit loans, the Company focused on structural adjustment by strictly
+enforcing admittance standards and continuous optimisation of asset structure in key areas: enforced the control list
+system for overcapacity industries to further reduce the risk loans; applied exposure limits on real estate industries
+and controlled loans for shantytown renovation, extended reasonable support to asset investment of the Bank;
+and controlled total credit facilities extended to government financing platforms to facilitate efficient use of credit
+facilities within such limits.
+Fourthly, the Company introduced innovative approaches for disposal of non-performing loans so as to dispose
+non-performing loans aggressively through different means. The Company had explored quasi-asset securitisation
+disposal of non-performing loans, strengthened recovery of cash, improved the approval system and process for
+restructuring-specific loans, and accelerated the restructuring of risky customers while maintaining the sound
+development of restructuring-specific loan business. As a result, a variety of measures were taken to mitigate the
+risk of non-performing assets.
+Fifthly, the Company strengthened management and comprehensively fortified the three defense lines. To strengthen
+the first defense line, the Company streamlined the procedures, specified the duties and responsibilities of key
+roles in asset business, specified the standards for discharging duties and the risk management responsibilities and
+continued to enforce stringent requirements for qualifications of customer relationship managers. To create a strong
+second defense line, the Company continued to improve regulations and systems in order to provide coverage
+for the whole business, and optimised the business process; and continued to improve the risk manager team,
+and improved the professional skills and overall quality of the risk management team. In order to give full play to
+the supervision, assessment and value-added functions of internal audit of the third defense line, the Company
+continued to carry out inspection of on-site audit, further increased efforts on off-site audit and strengthened
+audit rectification and accountability, thereby promoting the sustained and healthy development of operation and
+management activities.
+Sixthly, the Company steadily increased application of quantitative risk management tools. The Company had
+completed development and optimization of a number of models, including the pre-warning model which are
+applied in the routine risk management for improving the effectiveness of risk monitoring and early warning.
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+5.11.2 Country risk management
+Country risks represent the risks of economic, political and social changes and developments in a country or region
+that may cause borrowers or debtors in that country or region to be unable or unwilling to fulfill their obligations
+to banks, or incur loss to commercial presences of banks in that country or region, or other loss to banks in that
+country or region. Country risk may arise from deteriorating economic conditions, political and social upheavals,
+nationalisation or expropriation of assets, and government repudiation of external indebtedness, foreign exchange
+controls and currency depreciation in a country or region.
+The Company incorporates country risk management into its overall risk management system, dynamically monitors
+the change in its country risk profile in accordance with relevant regulatory requirements, sets limit on its country
+risk based on the rating results from international rating agencies, and evaluates its country risk and makes
+provisions on a quarterly basis. As at the end of 2015, the assets of the Company exposed to the country risk
+remained insignificant, this indicated low country risk ratings. Moreover, we have made adequate provision for
+country risk according to the regulatory requirements. As a result, country risk will not have material effect on our
+operations.
+5.11.3 Market risk management
+1.
+Market risk is the risk that the Company may suffer from loss as the fair value or future cash flows of the Company's
+financial instruments may fluctuate due to changes in foreign exchange rate, interest rate, commodity price, stock
+price and other observable market factors. The interest rate and foreign exchange rate are the two major market risk
+factors relevant to the Company. The Company is exposed to market risk through the financial instruments on the
+trading book and banking book. The financial instruments on the trading book are held for trading purpose or for
+the purpose of hedging the risks arising from the trading book position, and these financial instruments are traded
+in active market. The financial instruments on the banking book are assets and liabilities held by the Company for
+stable and determinable return, or for the purposes of hedging the risks arising from the banking book position. The
+financial instruments under the banking book include both the Company's on-balance sheet and off-balance sheet
+exposures, and have relative stable market value.
+Thirdly, the Company tightened monitoring and control of asset quality, deepened risk warning, examination and
+supervision, reduced or withdrew risky assets in key areas; enhanced examination on new non-performing loans to
+minimise occurrence of non-performing loans. The Company tightened monitoring and management of overdue
+loans by a establishing screening and tracking mechanism for overdue loans; improved the three-layered pre-warning
+mechanism involving the Head Office, branches and sub-branches, perfected the risk pre-warning organization
+with clear division of responsibilities, and established a dynamic risk screening, rating, reduction and withdrawal
+mechanism; enforced risk screening by deepening risk screening on more than ten portfolios, namely corporate
+customers with significant balance, real estate financing, guarantee companies, second-level branches, private
+financing, income-prepaid financial collateral business so as to proactively prevent and control risks; firmly reduced
+and withdrew risky assets in seven areas, namely overcapacity industries, customers with small enterprise risk, private
+guarantee companies, customers with high group risks, customers with general risk pre-warning, risk guarantee
+circle and micro-finance loans; strengthened continuous review of new non-performing loans throughout the whole
+process, sought accountability for the non-performing loans granted to customers who were granted loans for the
+first time to avoid occurrence of non-performing loans.
+Interest rate risk
+The Company, through transforming itself into an asset-light bank, stepped up the construction of a risk
+management system focusing on risk-adjusted value creation under the principles of "Comprehensive, Professional,
+Independent and Balanced Management". The Risk and Compliance Management Committee of the Head Office is
+the supreme authority of the Company in relation to risk management. The Committee is responsible for reviewing
+and deciding the most significant bank-wide risk management policies that align with the risk appetite, strategies,
+policies and authorisations approved by the Board.
+V Report of the Board of Directors
+For detailed financial information on Wing Lung Group, please refer to the 2015 annual report of Wing Lung Bank,
+which is published at the website of Wing Lung Bank (www.winglungbank.com).
+As at 31 December 2015, the total assets of Wing Lung Group amounted to HK$256.976 billion, representing
+an increase of 3.80% as compared with the end of 2014. Total equity attributable to shareholders amounted to
+HK$26.433 billion, representing an increase of 14.59% as compared with the end of 2014. Total loans and advances
+to customers (including trade bills) amounted to HK$146.104 billion, representing a decrease of 5.17% as compared
+with the end of 2014. Deposits from customers amounted to HK$180.213 billion, representing a decrease of 1.74%
+as compared with the end of 2014. Loan-to-deposit ratio was 64.42%, up by 0.95 percentage point as compared
+with the end of 2014. As at 31 December 2015, the total capital ratio of Wing Lung Group was 17.30%, its Tier-1
+capital ratio was 13.54% and its common equity Tier-1 capital ratio was 11.64%. The average liquidity maintenance
+ratio for the reporting period was 41.72%, all above regulatory requirements.
+In 2015, profits attributable to the shareholders of Wing Lung Group was HK$3.250 billion, representing an increase
+of 2.56% as compared with the previous year. In 2015, it recorded a net interest income of HK$3.870 billion,
+representing a decrease of 0.70% as compared with the previous year. The net interest margin was 1.61%, down
+by 11 basis points as compared with the previous year. Net non-interest income was HK$2.088 billion, representing
+an increase of 24.67% as compared with the previous year. The cost-to-income ratio for 2015 was 33.28%,
+representing an increase of 1.12 percentage points as compared with the previous year. The non-performing loan
+ratio (including trade bills) was 0.07%.
+Founded in 1933, Wing Lung Bank has a capital of HK$1.161 billion as at 31 December 2015, and is a
+wholly-owned subsidiary of the Company in Hong Kong. The principal operations of Wing Lung Bank and its
+subsidiaries ("Wing Lung Group") comprise deposit-taking, lending, investment and wealth management, credit
+cards, online banking, documentary bills, leasing and hire purchase loans, foreign exchange, futures and securities
+brokerage, asset management, insurance business, Mandatory Provident Fund, property management, trustee,
+nominee and investment banking services. At present, Wing Lung Bank has a total of 38 banking offices in Hong
+Kong, 4 branches and sub-branch in Mainland China, one branch in Macau, and three overseas branches, located
+respectively in Los Angeles, San Francisco, the United States and the Cayman Islands. As at 31 December 2015, the
+total number of employees of Wing Lung Group is 1,945.
+5.10.6 Wing Lung Group
+5.10.7 CMB Financial Leasing
+CMB Financial Leasing is one of the five pilot bank-affiliated financial leasing firms approved by the State Council.
+Registered in Shanghai, it is wholly owned by the Company and commenced operation on 23 April 2008. CMBFL is
+guided by national industrial policies, and is mainly engaged in the provision of financial leasing services in respect
+of large and medium-sized equipments to domestic large enterprises and SMEs and overseas customers in electricity,
+manufacturing, transportation, construction and mining sectors. It satisfies different needs in respect of procurement
+of equipment, promotion of sales, revitalisation of assets, balancing of tax liabilities and improvement of financial
+structure. CMBFL also provides new financial leasing services such as capital and commodity finance (),
+asset management and financial advisory.
+As at 31 December 2015, CMBFL had a registered capital of RMB6.0 billion and 184 employees; total assets of
+RMB103.966 billion, up by 0.56% as compared with the end of the previous year; net assets of RMB11.998 billion,
+up by 16.14% as compared with the end of the previous year. In 2015, CMBFL realised net profit of RMB1.496
+billion, up by 5.13% as compared with the previous year.
+83
+83
+5.11 Risk Management
+84
+V Report of the Board of Directors
+5.10.8 CMB International Capital
+Established in 1993, CMB International Capital is a wholly-owned subsidiary of the Company in Hong Kong.
+Currently, the business scope of CMBIC and its subsidiaries mainly covers investment banking, securities brokerage,
+asset management, wealth management and equity investments.
+As at 31 December 2015, CMBIC had a registered capital of HK$1.0 billion, 163 employees, total assets of
+HK$3.306 billion, representing an increase of 25.85% as compared with the beginning of the year and net assets of
+HK$2.045 billion, representing an increase of 10.18% as compared with the beginning of the year. In 2015, CMBIC
+achieved net profit of HK$344 million, representing an increase of 6.50% as compared with the previous year.
+On 20 January 2016, the Company increased its capital contribution to CMBIC by USD400 million. The registered
+capital of CMBIC upon completion of the capital increase was increased to HK$4.129 billion.
+5.10.9 China Merchants Fund
+CMFM was established on 27 December 2002 with a registered capital of RMB210 million. As at the end of
+the reporting period, the Company had 55% equity interest in CMFM. The businesses of CMFM include fund
+establishment, fund management and other operations approved by the CSRC.
+As at 31 December 2015, CMFM reported total assets of RMB3.211 billion, up by 40.46% as compared with the
+end of the previous year, net assets of RMB1.439 billion, up by 51.16% as compared with the end of the previous
+year and a workforce of 272 employees. The total size of the asset management business of CMFM (including public
+funds, social security funds and corporate annuity funds of fund firms, as well as the special account business of
+fund firms and their subsidiaries) amounted to RMB866.3 billion, representing an increase of 103.50% as compared
+with the previous year. In 2015, CMFM realised net profit of RMB548 million, representing an increase of 128.33%
+as compared with the previous year.
+5.10.10 CIGNA & CMB Life Insurance
+CIGNA & CMB Life Insurance was established in Shenzhen in August 2003, and is the first sino-foreign joint venture
+life insurance company established after China's entry into World Trade Organisation (WTO). As at the end of
+the reporting period, the Company had 50% equity interest in CIGNA & CMB Life Insurance. CIGNA & CMB Life
+Insurance is mainly engaged in insurance businesses such as life insurance, health insurance and accident injury
+insurance, as well as the reinsurance of the above insurances.
+China Merchants Bank
+Annual Report 2015
+China Merchants Bank
+Annual Report 2015
+Interest rate risk arises from adverse changes in the interest rates and maturity profiles which may result in loss to
+the income and market value of financial instruments and positions held by the Company.
+During the reporting period, the Company recorded an increase in non-performing loans as a result of the adverse
+impact from economic downturns at home and abroad. Thanks to the comprehensive countermeasures including
+accelerated collection, writing off and transfer of non-performing loans, the risk of further decline in asset quality
+had been effectively controlled.
+Trading book
+(1)
+89
+The exchange rate risk management of banking book of the Company is coordinated by the Head Office.
+The Asset and Liability Management Department under the Head Office as a treasurer of the Company is
+in charge of exchange rate risk management of banking book. The treasurer is responsible for managing
+exchange rate risk of banking book on a prudent basis in accordance with relevant regulatory requirements,
+and conducting the centralised exchange rate management of banking book through limit management,
+budget control and other approaches.
+Banking book
+Since 11 August 2015, RMB depreciation deteriorated with increased volatility. To keep relevant risks under
+effective control, the Company reduced risk exposure to and lowered risk limit threshold of foreign exchange
+business while increasing efforts in tracking foreign exchange market trends to strengthen risk monitoring
+work, thereby exercising effective control over risk exposures of the Company's trading book to foreign
+exchange business. The foreign exchange services of its trading book maintained smooth operation and
+the indicators of its market risk achieved good performance since the Company adopted prudent trading
+strategies and implemented strict risk management policies.
+The Company uses the quantitative indicators such as risk exposure indicator, market risk value indicator
+(VaR, including interest rate, exchange rate and commodity risk factors), the loss indicator for exchange rate
+scenario stress test, exchange rate sensibility indicator and accumulated loss indicator to control exchange
+rate risk. The measures for management of exchange rate risk include setting the indicators for business
+authorisation and risk limits, daily monitoring and ongoing reporting.
+The Company has established the market risk (including exchange rate risk) management structure and
+system of trading book to implement centralised management on exchange rate risk of trading book using
+quantitative indicators. The structure, procedure and method of exchange rate risk management of trading
+book are in line with those of interest risk management of trading book.
+Trading book
+(1)
+After the IMF announced admission of RMB to SDR in December 2015, China announced the index for RMB-related
+exchange rates, and it will expedite the de-pegging of RMB to USD to gradually establish the RMB exchange rate
+regime which is determined primarily with reference to a basket of currencies, allowing more transparency to
+enhance the liquidity and stability of RMB in future. Against the backdrop of interest rate hikes by the US Federal
+Reserve and due to the differences between China and the United States in economic development trend, USD
+significantly strengthened at the end of the year, and USD appreciation against RMB was even accelerated as a result
+of faster capital outflow in the fourth quarter. In the context of the currently relaxed exchange rates announced by
+the central bank, in the absence of intervention from the central bank, it is probable that the RMB exchange rates
+will remain at low levels.
+Exchange rate risk arises from the holding of assets, liabilities and equity items denominated in foreign currencies,
+foreign currencies and foreign currency derivative positions which may expose banks to potential losses in their
+gross profit in the event of unfavourable movement in exchange rate. The Company's functional currency is RMB.
+The majority of assets and liabilities of the Company are denominated in RMB and the rest mainly in USD and HKD.
+Under the principle of separating the formulation, implementation and monitoring functions of exchange rate risk
+management policies, the Company has established its exchange rate risk management governance framework,
+specifying the roles, duties and reporting lines of the Board of Directors, the Board of Supervisors, the senior
+management, special committees and relevant departments in exchange rate risk management. The Company's
+cautious attitude towards exchange rate risk, meaning in principle the Company does not bear risks voluntarily, is
+more appropriate for the current development stage of the Company. The current exchange rate risk management
+policies and systems of the Company are basically in line with relevant regulatory requirements and its own
+management requirements.
+Exchange rate risk management
+2.
+V Report of the Board of Directors
+China Merchants Bank
+Annual Report 2015
+(2)
+In 2015, the Company closely monitored the change of the external interest rate environment and conducted
+rolling forecast for future movements in interest rates. In addition, the Company also strengthened its
+monitoring and analysis of NII fluctuation, and deepened its analysis of NII progress and anticipation
+difference. Based on the above-mentioned macro prediction and refined internal management, the Company
+proactively put forward the proposal on optimisation of assets and liabilities, so as to ensure that the overall
+interest rate risk level remains anchored to the management target and to safeguard the stable operation of
+NII.
+The Company has set up its market risk governance framework for trading book, covering interest rate
+risk, foreign exchange risk and commodity price risk. The Company's market risk governance framework for
+trading book specifies the duties, division of responsibilities and reporting lines of the Board of Directors,
+senior management, special committees and bank-related departments in the interest rate risk management
+of the trading book, ensuring the effectiveness of interest rate risk management of trading book. The market
+risk management department under the Bank's entire risk management office is responsible for execution of
+the management of interest rate risk under the trading book.
+In 2015, PBOC cut RMB benchmark deposit and lending rate for a total of five times. Specifically, the
+one-year benchmark deposit rate was cut by a total of 125 basis points, and the one-year benchmark lending
+rate was cut by 125 basis points accordingly. In addition, deposit rate cap was fully liberalised. In order to
+reduce the negative impact brought about by interest rate cuts and liberalisation of deposit rate cap, the
+Company proactively took countermeasures to integrate interest rate risk management with FTP management
+in an organic manner, and continued to make adjustments to duration of loans. Based on the analysis
+of interest rate sensitivity and customers' price behaviour, the Company improved differentiated pricing
+for deposits as well as pricing sensitivity and relevance, and exercised reasonable control over high-cost
+deposits including structured deposit, so as to maintain a comparative advantage in cost of debts. Such
+countermeasures have made a total of positive contribution of approximately RMB4.5 billion to NII. In future,
+the Company will continue to take various measures to enhance its management capabilities of interest
+rate risks associated with bank accounts in terms of system, process and assessment, with a view to achieve
+steady growth in net interest income and economic value.
+The Company has established the market risk limit management framework, covering the interest rate risk,
+foreign exchange rate risk and commodity price risk under the trading book. Within this framework, the
+highest level indicators, which are also the trading book market risk preference quantitative indicators of
+the Company, adopt VaR and portfolio stress testing methodologies and are directly linked to the Company's
+net capital. In addition, according to the product type, trading strategy and characteristics of risk of each
+sub-portfolio, the highest level indicators are allocated to lower level indicators, and also to each front office
+department each year. These indicators are implemented, monitored and reported on a daily basis.
+87
+88
+China Merchants Bank
+Annual Report 2015
+V Report of the Board of Directors
+(2)
+The Company uses quantitative indicators, including volume indicators, market risk value indicators (VaR,
+covering various interest rate risk factors relating to trading book business) interest rate stress testing loss
+indicators, interest rate sensitivity indicators and accumulative loss indicators (covering various risk factors
+relating to trading book), to manage the interest rate risk of trading book. The measures for management of
+interest rate risk include setting the indicators for business authorisation and risk limits, daily monitoring and
+ongoing reporting. Specifically, VaR includes general VaR and stress VaR, which are both calculated using the
+historical simulation model.
+In 2015, RMB market rates continued a downward trend, and the yields of various RMB-denominated bonds
+fell back to their historically low levels, leading to an evident "bull market". The Company conducted a
+comprehensive research and timely track on macro economy, monetary policy and market conditions, and
+formulated corresponding trading strategy. All interest rate risk indicators under the trading book were under
+good control.
+Banking book
+The Company has established the governance and management framework for banking book in accordance
+with the interest rate risk management policy, which specifies the duties, division of responsibilities and
+reporting lines of the Board of Directors, senior management, special committees, and bank-related
+departments in the interest rate risk management of the banking book, ensuring the effectiveness of interest
+rate risk management. The interest rate risk associated with banking book of the Company is subject to
+centralised management by the Asset and Liability Management Department.
+The Company has primarily adopted scenario simulation analysis, re-pricing gap analysis, duration analysis
+and stress testing for the measurement and analysis of interest rate risk under the banking book. By
+convening regular meetings for analysis of assets and liabilities and through its established reporting
+framework, the Company analyses the causes of interest rate risk under the banking book, puts forward
+management suggestions and implements management measures.
+In 2015, the Company continued to enhance the trading book market risk management framework based on
+existing practice, and optimised the approaches, processes and tools for the measurement and monitoring of
+market risk.
+President's Statement
+President's Statement
+110
+129
+VIII Report of the Board of Supervisors
+128
+China Merchants Bank
+Annual Report 2018
+VII Corporate Governance
+In 2018, despite the tough market conditions, CMB overcame the effects of cyclical factors and achieved remarkable results. During
+the year, the Bank realised net operating income and net profit attributable to shareholders of the Bank of RMB248.444 billion
+and RMB80.560 billion, a year-on-year increase of 12.40% and 14.84%, respectively. Our asset quality was stable and continued
+to improve, while the balance of non-performing loans and the non-performing loan ratio, as well as the amount and ratio of
+non-performing loan formation all declined.
+Today, we are profoundly aware that the determinant of the changing industry comes from technology. With the rapid development
+of technologies such as mobile Internet and artificial intelligence, the new possibilities are opened up by cutting-edge technologies
+such as quantum communication and biotechnology. The Fourth Industrial Revolution has been commenced. Following the age of
+steam, the age of electricity and the age of information, mankind has entered into the age of intelligence.
+In 2018, the retail business broke the three "100 million" marks, i.e. the total number of depositors and retail customers reached
+100 million and 125 million, up by 17% and 18% respectively as compared with the previous year, and the total number of CMB
+APP and CMB Life APP users reached 148 million, representing an increase of 43%, of which monthly active users (MAU) exceeded
+81 million, representing an increase of 47%¹. The number of corporate customers exceeded 1.80 million, representing an increase
+of 18%. The number of newly acquired corporate depositors exceeded 400,000. The accelerated expansion of customer base is our
+greatest source of confidence to keep abreast with time.
+As many a little makes a mickle, in 2018, the digital banking transformation moved forward in a progressive manner, from products
+to systems, and from businesses to organisational culture. We firmly adhered to the strategy of "mobile priority", and significantly
+improved the capabilities of platform empowerment, digital operation and providing digital services; we expedited the internal
+establishment and outward expansion of scenarios, and stepped up the construction of an ecological customer service system; we
+increased investment in technology infrastructure so as to promote business agility by means of technology agility. In addition, we
+accelerated the application of Fintech so that every part and parcel benefits from the power of technology; and we promoted the
+penetration of Internet culture so that the Internet mindset and values oriented by customer experience are tacitly cultivated across
+the whole Bank. Accelerating the digital transformation is our mighty stronghold in finding our True North.
+The achievements of CMB are made possible by people from all walks of life. We are extremely grateful for this new era and
+remember the social responsibilities that we have committed to all the time. We sincerely developed inclusive finance, capitalised on
+the power of science and technology to serve the well-being of people, and benefitted more people with more affordable financial
+services. We carried out in-depth targeted poverty alleviation to support the development of two state-level poverty-stricken
+counties, namely Yongren County and Wuding County in Yunnan through education, industrial development and cultural
+development for the past two decades.
+2018 was a year of tribute to the reform and opening up. Inheriting our innate "Shekou Gene", we reviewed the original mindset
+of "creating a real commercial bank for China" proposed by Mr. Yuan Geng, the founding Chairman. To commemorate the past
+is for the commencement of a new history. As the first commercial bank in China to promote financial reform from outside the
+system, at the new starting point of the new era, it is our inevitable historical mission to continue to explore the paths for the
+transformation of Chinese banking industry, promote supply-side financial reform with our own high-quality development, and
+better serve the needs of the real economy and improve the well-being of people.
+At present, the world is confronted with the "most significant changes of the century". The global economic and trade patterns as
+well as production specialisation of industry value chains are undergoing restructuring. The relations among major countries and the
+international competitive landscape are being reshuffled, bringing extensive and profound effects to the market environment. As a
+player in a pro-cyclical industry, commercial banks have to face the very real challenges and impacts in operation and development.
+Nevertheless, we are not afraid, as we believe that no matter what challenges are brought by these great changes, remaining
+unchanged are the nature of the banking industry as a service industry, tenet that customer is the trigger point of business activities,
+and the primary purpose of financial services to serve the real economy and improve people's well-being. Throughout the global
+history, it is not surprising that fallen or disappeared companies were often indulged in commercial opportunism, whereas those
+humble enterprises that stayed focused and embraced the customer-centric principle could become more competitive and stay
+ahead despite adversities.
+1
+22 March 2019
+7
+Starting from 2018, for statistics purpose, the count of MAU makes reference to the number of users who open the Company's CMB APP
+instead of log in the APP and the figure of the same period of the previous year has been adjusted accordingly.
+The driving forces behind the business performance are our continuous dedication to customer service, our belief in the Fintech
+transformation, and our commitment to fulfilling our social responsibilities.
+Chairman
+Chairman's Statement
+Facing the era of change, CMB has constantly made changes in tandem with variation of time and situation, whereas
+the only thing remained unchanged is "we are here just for you". The well-known brand slogan of "we are here just for
+you" reflects the original "customer-centric" mindset and philosophy of CMB. In 2019, with the strong support from
+varies sectors of the society, CMB will continue to forge ahead in regaining its past glory, use technology to drive the
+transformation of business model to make new breakthroughs for the cause of reform and opening up, so as to honour the
+70th anniversary of the founding of the nation with remarkable achievements.
+8
+CMB will continue to improve the supporting system driven by science and technology. In terms of strategy, we will
+further assert the leading role of science and technology; in terms of organisation, we will further build a fittingly agile
+organisation; in terms of capabilities, we will further strengthen the infrastructure and capabilities of Fintech; in terms of
+system, we will further improve our systems and mechanisms to satisfy the needs of scientific and technological innovation;
+in terms of culture, we will further develop an open culture that promotes technological innovation.
+CMB will always keep to the market-based incentive mechanism. To achieve technology-driven development, we must
+have sufficient talents for scientific and technological innovation. The competition for talents rests on the competitiveness
+of mechanisms. CMB will draw on the advantages of market-oriented talent management mechanism in a market-based
+approach, maximise the attraction and incentive for best talents, continuously optimise remuneration incentives and ensure
+the adequacy of incentives, so as to secure adequate talent supply for CMB to develop into a Fintech bank offering the best
+customer experience.
+CMB will continue to increase investment in Fintech as a long-term strategy. Through constant investment in Fintech,
+we will continue to foster enthusiasm for innovation, drive breakthroughs in technological innovation, promote business
+model innovation through technological innovation, and promote a shift from a business model with capital as its core asset
+to one with technology and talent as its core asset, so as to pursue incessant improvement in the level of financial services
+and customer experience.
+How to respond to the changes? By adhering to long-term strategies, seizing present opportunities, focusing on
+technology-driven development and embracing changes, we will stay sensitive in identifying changes, do our best to
+adapt to changes, and proactively pursue changes. Particularly, we will grasp the great opportunities associated with the
+ever-expanding application of Fintech, and focus on science and technology-driven development in order to reconstruct
+the operating model of CMB. Technology-driven development is not only to improve efficiency and reduce costs through
+the application of technology, but more importantly, to reshape the business model of the Bank through Fintech, so as to
+enable CMB to develop into a Fintech bank offering the best customer experience.
+"Change" is the keynote of the modern era. Looking into the future, the scope, speed and intensity of the major
+changes we face are unprecedented. Firstly, there have been changes in economic situation. We saw changes in what
+was a generally stable economic performance, some of which caused concern. Downward pressure on the economy has
+continued to mount; the growth of household consumption has slowed down; the growth of effective investment has
+been weakened; the trade friction between China and the United States has brought great uncertainties; macro risks have
+intensified. Secondly, there have been changes in the financial market. Long accumulated financial risks keep emerging;
+the financial supply side structural reform has commenced; the strict regulatory control has placed higher demand on
+compliance management of banks. Thirdly, there have been changes in customer needs. With the substantial penetration of
+mobile Internet, customers have been requesting better service efficiency and experience, and competition among financial
+institutions and non-financial institutions has increasingly intensified.
+China Merchants Bank
+Annual Report 2018
+6
+Chairman
+Li Jianhong
+M
+Good corporate governance provides important backing for CMB to achieve the above performances. Facing the
+complicated changes in the internal and external situation, the Board of Directors has always upheld the prudent operation
+principles of "ensuring assets quality, efficiency first, putting risks under control and maintaining proper scale", and
+abided by the market-oriented systems and mechanisms. Through such forward-looking measures as strategic directing,
+assessment and guidance as well as resource allocation incentives, CMB took initiative to regulate business expansion, fully
+exposed non-performing assets, removed the blind spots and flaws in risk management, promoted the innovation-driven
+development strategy, and continued to increase investment in Fintech at the same time. All members of the Board of
+Directors have been fully dedicated to their jobs, leveraged their professional expertise and rich experience to predict the
+market and industry development trend, carried out specialised researches, effectively performed the duties of Directors,
+and effectively ensured the efficient operation and scientific decision-making process of the Board of Directors.
+We actively fulfilled social responsibilities and created values for various sectors of the society. In 2018, PB ratio
+of A Shares and H Shares of CMB continued to rank first among the major listed banks in mainland China, and continued
+to create value for shareholders and investors through steady growth in profits and dividends. At the same time, CMB
+fully supported people's needs for a better life and actively supported the national strategic emerging industries and the
+real economy. By fully leveraging the advantages of Fintech, CMB offered more intelligent and more inclusive financial
+services with more scenarios for customers and users. CMB adhered to the "people-oriented" concept, safeguarded the
+legitimate rights and interests of employees, and provided diversified channels for their professional development. Through
+enhancing their capability and quality and setting a stage to showcase their talents, we helped employees to develop
+and excel themselves, so as to realise mutual growth for both employees and CMB. In this regard, CMB was selected as
+one of the top 30 employers of the year in China by Zhaopin Limited. CMB adhered to the notion of "helping the poor
+heartily and helping the really poor", invested a large amount of our resources in the poverty alleviation campaign, and
+approved financial targeted poverty alleviation loans totalling RMB20.85 billion in 2018. In addition, CMB has been actively
+advocating and exploring poverty alleviation through industrial development so that poverty-stricken counties would be in a
+better position to lift themselves out of poverty and generate income. It can be seen that CMB has deployed both physical
+and mental resources for the fight against poverty.
+The innovation-driven development strategy was further promoted. In 2018, the Board of Directors decided to
+increase the allocation to our new Financial Technology Innovation Project Fund from "1% of the pre-tax profit of the
+previous year" to "1% of the operating income of the previous year", and enhanced the efforts in promoting the strategic
+plan for "building the best commercial bank in China with innovation-driven development, leading retail banking and
+distinguished features". Adhering to the mindset of "error tolerance and win-win", CMB promoted business agility by
+means of technology agility and quickened its pace of innovation. CMB established a technology-empowered Fintech
+innovation incubation platform, put in place an independent teamwork operation system and supported various innovation
+projects. It also drove forward staff composition change, and increased the talent bench in technology and data science,
+thereby making various breakthroughs in infrastructure and capacity building of Fintech such as artificial intelligence,
+big data, blockchain and cloud computing. The atmosphere of innovation in CMB became more zealous; the efficiency
+of innovation continued to increase; the layout of scenarios and ecology was further enriched; the perception of the
+technological innovation frontier became more acute.
+Both the customer base and profits reached a new level. As at the end of 2018, the number of retail customers of
+CMB reached 125 million. The total number of monthly active users (MAU) of CMB APP and CMB Life APP exceeded
+81 million and the number of corporate customers exceeded 1.8 million. With the expansion of customer base, CMB
+continued to build a customer service ecosystem, enhanced customer experience, and realised "double-digit growth" in net
+operating income and net profit, with net profit exceeding RMB80 billion. The average return on equity (ROAE) attributable
+to ordinary shareholders of the Bank continued to increase, while assets and liabilities maintained a steady growth. At
+the same time, CMB actively optimised the customer structure and asset structure, strengthened risk management, and
+continued to realise the decrease in both non-performing loan ratio and balance of non-performing loans.
+The year 2018 marked the 40th anniversary of China's reform and opening up. CMB was a brainchild of the reform and
+opening-up policy and has emerged strong in the historical development trend. Amid the changes and challenges in the
+internal and external business environment, CMB has maintained its strategic resolve, laid solid foundation and achieved
+outstanding results with its excellent business performance in regaining its past glory.
+Chairman's Statement
+China Merchants Bank
+IX Financial Statements
+China Merchants Bank Co., Ltd.
+China Merchants Bank
+CIGNA & CMB Life Insurance:
+Annual Report 2018
+Unless otherwise stated, all monetary sums stated in this annual report are expressed in RMB.
+Li Jianhong, Chairman of the Company, Tian Huiyu, President and Chief Executive Officer, Li Hao, First Executive Vice
+President and Chief Financial Officer, and Li Li, the person in charge of the Finance and Accounting Department,
+hereby make representations in respect of the truthfulness, accuracy and completeness of the financial statements in
+this annual report.
+Proposal of profit appropriation: it was proposed that 10% of the audited net profit of the Company for 2018
+of RMB75.232 billion, equivalent to RMB7.523 billion, will be allocated to the statutory surplus reserve, while
+1.5% of the total amount of the risk assets, equivalent to RMB6.028 billion, will be appropriated to the general
+reserve. Based on the total share capital of A Shares and H Shares on the record date for implementation of the
+profit appropriation, the Company will declare a cash dividend of RMB0.94 (tax included) for every share to all
+shareholders of the Company whose names appear on the register, payable in Renminbi for holders of A Shares and
+in Hong Kong Dollars for holders of H Shares. The actual profit appropriations amount in HKD would be calculated
+based on the average benchmark rate for RMB to HKD published by the People's Bank of China for the previous
+week (including the day of the general meeting) before the date of the general meeting. The retained profits will be
+carried forward to the next year. In 2018, the Company did not transfer any capital reserve into share capital. The
+above proposal of profit appropriation is subject to consideration and approval at the 2018 Annual General Meeting
+of the Company.
+We have included in this report certain forward-looking statements with respect to the financial position, operating
+results and business development of the Group. We use words such as "will", "may", "expect", "try", "strive",
+"plan", "anticipate", "aim at", and similar expressions to indicate forward-looking statements. These statements
+are based on current plans, estimates and projections. Although we believe that the expectations reflected in these
+forward-looking statements are reasonable, we give no assurance that these expectations will turn into reality or
+prove to be correct. Therefore they should not be deemed as the Group's commitments. Investors should not place
+undue reliance on such statements and should pay attention to investment risks. You are cautioned that such
+forward-looking statements are related to future events or future financial position, business, or other performances
+of the Group, and are subject to a number of uncertainties which may cause substantial differences from those in
+the actual results.
+China Merchants Bank
+Annual Report 2018
+Definitions
+Definitions/Significant Risk Warning
+The Company, the Bank, CMB or China Merchants Bank:
+China Merchants Bank Co., Ltd.
+The Group:
+China Merchants Bank Co., Ltd. and its subsidiaries
+CBIRC:
+China Banking and Insurance Regulatory Commission
+CSRC:
+China Securities Regulatory Commission
+Hong Kong Stock Exchange or SEHK:
+The Stock Exchange of Hong Kong Limited
+Hong Kong Listing Rules:
+The Rules Governing the Listing of Securities on the SEHK
+CMB Wing Lung Bank:
+Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu (both being auditors of the
+Company) have separately reviewed the 2018 annual financial report prepared in accordance with the PRC Generally
+Accepted Accounting Principles and International Accounting Standards, and issued standard auditing reports with
+unqualified opinions.
+President's Statement
+The 40th meeting of the Tenth Session of the Board of Directors of the Company was held at its Shekou Training
+Center on 22 March 2019. The meeting was presided by Li Jianhong, Chairman of the Board of Directors. 16 out of
+16 eligible Directors attended the meeting in person. 8 Supervisors of the Company were present at the meeting.
+The convening of the meeting complied with the relevant provisions of the "Company Law of the People's Republic
+of China" and the "Articles of Association of China Merchants Bank Co., Ltd.".
+7.
+President's Statement
+Whether we like it or not, technological revolution will lead to exponential growth in productivity outright, and subsequently reshape
+production methods and business models. The banking industry is itself a heritage of a few hundred years and has experienced
+many times of changes, economic cycles, trade conflicts and regulatory policies, but its business model remained unchanged. The
+age of electricity and the age of information have only provided banks with more efficient channels and tools. However, the new
+round of technological revolution may fundamentally revamp the business model of banks.
+Changes have tacitly occurred. In the past decade, traditional financial institutions have witnessed the whole process of how Fintech
+redefined retail business. From payment to deposit, loan and wealth management, the capital market intermediary and information
+intermediary functions of traditional banks were significantly impacted, and a bank's role as credit intermediary is also under threat.
+As social development deepens from the consumer Internet to the industrial Internet, it also urged Fintech to redefine corporate
+finance and asset management.
+In the era of significant changes, what is the future direction for the banking industry? Looking back at the history, we realised
+that the Chinese banking industry has experienced two stages of development. First, there was stage 1.0 of winning by size: in the
+golden age of rapid economic growth, deposits determined assets and size, and size in turn determined income and profit. Banks
+used to be highly dependent on the power of capital which led to the uncoordinated expansion of both balance sheet and sources
+of finance. Business models back then had low variety and were extensively managed, and the profitability and market competitions
+were highly homogenised. After the economy entered the "new normal" phase, the Chinese banking industry has entered into
+development stage 2.0 of winning by structure and quality: the profitability and market values of banks have since no longer entirely
+depended on asset size, whereas asset quality and income structure played more important roles. Customer and asset structure
+determined the quality of bank assets, and further affected profits. Internal capital generation capacity was gradually formed.
+Development of banks was gradually driven by the professional competence in customer service, thereby embarking on a path of
+intensive development and internal quality building, and commencing differentiated competitions.
+Fortunately, CMB has not forgotten its initial intention of reform and has always adhered to its forward-looking strategies,
+allowing it to stay ahead of its peers in the banking reform. We took the lead to initiate the transformation of retail banking
+more than a decade ago. Since 2014, we have vigorously implemented the strategies of "Light-operation Bank" and "One
+Body with Two Wings". We have discarded the emphasis on asset scale, and unswervingly promoted structural adjustment.
+The Company has basically built up a professional customer service system and decisively switched the focus of competition
+from scale to quality and structure, hence, allowing it to benefit from business transformation. The transformation of CMB was
+essentially a reform and service upgrade driven by the needs of customers and supply side.
+The history will eventually become the past, and we must charge ahead fast towards the future. The trend of technological
+change is pushing the Chinese banking industry into development stage 3.0 of winning by a new business model. Since 2017,
+based on our previous exploration, we have further promoted the supply-side financial reform and duly formulated the goal of
+transformation to build the best customer experience bank with Fintech as the driving engine, and started the journey to explore
+the new business model.
+As the exploration furthered, our understandings also became clearer. In the new era, science and technology is the fundamental
+driving force of the supply-side financial reform. In the foreseeable future, Fintech can carry out digital transformation, intelligent
+upgrade and modular splitting for all businesses, operations and management of traditional banks. The stage 3.0 of banks with
+features of digitalisation, intelligence and openness is coming. It will completely change the existing models in service, marketing,
+risk control, and operation of commercial banks, expand the service boundaries, and ultimately change the growth curves of
+banks.
+The general trend of change is irreversible. We have to switch our track without hesitation, and move towards "the 3.0 mode"
+at full speed. Customers and technologies are our two core themes for the future. We are well aware that in the era of mobile
+Internet, technology dominates business models; big data determines customer service capabilities; business logic has changed
+from "small and beautiful" to "big and beautiful." We can only bear the high cost of investment and high risk of technology and
+form a sufficient amount of valuable data with a large enough number of customers. Therefore, we will re-examine all aspects of
+the operation and management of the bank by focusing on customer experience and leveraging on Fintech, and fully commence
+the digital transformation.
+Transforming from customers to users, we will redefine the objects of banking services and business mindset. We will
+expand our service boundaries, jump out of the customer base system with bank accounts as the core, extend our customer
+base system to class II and III accounts as well as APP users who do not bind their bank accounts, and make efforts to build the
+Internet funnel-shaped user system. Guided by user experience, we will continue to enhance the operating concept with MAU
+(monthly active users) as the North Star Metric, so as to drive the digital transformation of the whole Bank in all aspects, from
+business development to organisational system, management methods, service models, and further to mindsets, concepts, culture
+and values.
+Tian Huiyu
+President
+Important Notice
+1.
+2.
+3.
+4.
+5.
+6.
+VI Directors, Supervisors, Senior Management, Employees and Organisational Structure
+The Board of Directors, the Board of Supervisors, Directors, Supervisors and senior management of the Company
+confirm that the contents in this annual report are true, accurate, and complete and have no false representations,
+misleading statements or material omissions, and they will individually and collectively accept legal responsibility for
+such contents.
+V Changes in Shares and Information on Shareholders
+I Company Information
+83
+Annual Report 2018
+M 招商銀行
+CHINA MERCHANTS BANK
+CHINA MERCHANTS BANK CO., LTD.
+(a joint stock company incorporated in the
+People's Republic of China with limited liability)
+H Share Stock Code: 03968
+Preference Share Stock Code: 04614
+2018 Annual Report
+We are here
+Just for
+you
+Chairman's Statement
+無
+BANK
+2009
+ர
+China Merchants Bank
+Annual Report 2018
+Contents
+Contents
+1
+2
+Important Notice
+BUY
+3
+CMB Wing Lung Group:
+CMB Financial Leasing or CMBFL:
+CIGNA & CMB Life Insurance Co., Ltd.
+CM Securities:
+China Merchants Securities Co., Ltd.
+Deloitte Touche Tohmatsu Certified Public
+Accountants LLP:
+Deloitte Touche Tohmatsu Certified Public Accountants LLP
+(Special General Partnership)
+SFO:
+Securities and Futures Ordinance
+CMB Wing Lung Bank and its subsidiaries
+(Chapter 571 of the Laws of Hong Kong)
+Model Code for Securities Transactions by Directors of
+Listed Issuers of Hong Kong Stock Exchange
+Significant Risk Warning
+The Company has disclosed herein the major risks involved in its operations and the proposed risk management measures.
+Please refer to Chapter III for the details in relation to risk management.
+3
+4
+China Merchants Bank
+CMB International Capital Holdings Corporation Limited
+China Merchants Fund or CMFM:
+CMB International Capital or CMBIC:
+CMB Financial Leasing Co., Ltd.
+Model Code:
+Definitions
+3
+Significant Risk Warning
+3.8 Implementation of Business Development Strategies
+43
+3.9 Changes in External Environment and Corresponding Measures
+50
+3.10 Business Operation
+66
+3.11 Risk Management
+72
+3.12 Profit Appropriation
+41
+74
+74
+3.14 Compliance with Relevant Laws and Regulations
+74
+3.15 Management Contracts
+74
+3.16 Permitted Indemnity Provision
+Annual Report 2018
+75
+IV Important Events
+3.13 Requirements of the Environmental, Social and Governance Reporting Guide
+3.7 Other Financial Disclosures under the Regulatory Requirements
+41
+3.6 Results of Operating Segments
+4
+Chairman's Statement
+7
+President's Statement
+12
+China Merchants Fund Management Co., Ltd.
+16
+Il Summary of Accounting Data and Financial Indicators
+19
+III Report of the Board of Directors
+19
+3.1 Analysis of Overall Operation
+19
+3.2 Analysis of Income Statement
+26
+3.3 Analysis of Balance Sheet
+30
+3.4 Analysis of Loan Quality
+37
+3.5 Analysis of Capital Adequacy Ratio
+40
+95
+CMB Wing Lung Bank Limited
+Important Notice
+External Supervisor
+Leung Kam
+Male
+Chung, Antony
+Pan Chengwei Male
+1952.1
+1946.2
+Independent Non-Executive Director
+2015.1-2019.6
+Independent Non-Executive Director
+2012.7 (note 2)
+Zhao Jun
+Male 1962.9
+Independent Non-Executive Director
+2015.1-2019.6
+Wong See Hong Male
+1953.6
+2016.11-2019.6
+Independent Non-Executive Director
+Non-Executive Director
+Male
+2018.10-2019.6
+Hong Xiaoyuan Male
+1963.3
+Non-Executive Director
+2007.6-2019.6
+Zhang Jian
+Male
+1964.10
+Non-Executive Director
+2016.11-2019.6
+Su Min
+Female 1968.2
+Non-Executive Director
+2014.9-2019.6
+Wang Daxiong
+1960.12
+2017.2-2019.6
+Li Menggang
+Male
+386.99
+24 4 4 4 4 2 2 2 2 2 2 2
+No
+Yes
+Yes
+Yes
+Yes
+Yes
+No
+No
+No
+No
+No
+No
+Employee Supervisor
+90,000
+4.17
+4.17
+50.00
+1967.4
+Independent Non-Executive Director
+2018.11-2019.6
+Liu Qiao
+Male
+1970.5
+Independent Non-Executive Director
+Non-Executive Director
+2018.11-2019.6
+Liu Yuan
+Male
+1962.1
+2014.8-2019.6
+50.00
+50.00
+50.00
+Chairman of Board of Supervisors,
+1972.4
+Male
+Zhou Song
+(Y/M)
+Title
+Term of office
+(share)
+(share)
+(RMB ten
+thousand)
+Aggregate
+pre-tax
+remunerations
+during the
+period
+having
+received
+remunerations
+from the
+related
+parties of
+the Company
+during the
+reporting
+period
+Chairman
+Gender
+Name
+the period
+period
+China Merchants Bank
+Annual Report 2018
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+95
+Directors, Supervisors, Senior Management,
+Employees, and Organisational Structure
+6.1 Directors, Supervisors and senior management
+Whether
+received from
+2014.8-2019.6
+Shareholding
+at the
+beginning
+Shareholding
+at the
+reporting
+of the
+end of
+Date of Birth
+the Company
+Wen Jianguo
+Li Jianhong
+1956.5
+2013.9-2019.6
+Sun Yueying
+Female
+1958.6
+Non-Executive Director
+2001.4-2019.6
+Yes
+Executive Director, First Executive
+Li Hao
+Male
+1959.3
+2007.6-2019.6 (note 1)
+100,000
+428.99
+Vice President and Chief Financial Officer
+President and Chief Executive Officer
+No
+468.99
+110,000
+Yes
+Non-Executive Director
+2014.7-2019.6
+Vice Chairman
+2018.7-2019.6
+Fu Gangfeng
+Male
+Male
+1966.12
+Non-Executive Director
+2010.8-2019.6
+Executive Director
+2013.8-2019.6
+Tian Huiyu
+Male
+1965.12
+Yes
+Male
+1962.10
+Shareholder Supervisor
+80,000
+344.99
+No
+Vice President
+2015.1-2019.6
+Wang Liang
+Male
+1965.12
+80,000
+342.99
+No
+Secretary of Board of Directors
+2016.11-2019.6
+Wang Jianzhong Male
+1962.10
+2014.7-present
+Secretary of the Party Discipline Committee
+1963.2
+Xiong Liangjun Male
+Gender
+(Y/M)
+Title
+Term of office
+(share)
+(share)
+thousand)
+Member of the CPC Committee
+period
+Male
+1965.8
+Vice President
+2013.12-2019.6
+80,000
+344.99
+No
+Liu Jianjun
+Name
+2017.4-present
+344.99
+Former Independent Non-Executive Director
+2011.7-2018.11
+Pan Yingli
+Female
+1955.6
+Former Independent Non-Executive Director
+2011.11-2018.11
+50.00
+50.00
+Fu Junyuan
+Male
+1961.5
+Former Shareholder Supervisor
+2015.9-2019.2
+Xu Lizhong
+1949.5
+Male
+Wong Kwai Lam
+2014.11-2018.1
+No
+Shi Shunhua
+Male
+1962.12
+Member of the CPC Committee
+2017.4-present
+85,000
+80,000
+341.54
+Former Vice Chairman
+2015.11-2018.1
+Li Xiaopeng
+Male
+1959.5
+No
+Former Non-Executive Director
+No
+The Company made accounting judgments over its preference shares then issued and outstanding in accordance
+with the requirements of the relevant accounting principles, including the "International Financial Reporting
+Standard 9-Financial Instruments" and the "International Financial Reporting Standard 7-Financial Instruments:
+Disclosures" promulgated by International Accounting Standards Board. As the preference shares issued and
+outstanding of the Company carry no obligation to deliver cash and cash equivalents, nor have they any contractual
+obligations to deliver a variable number of its own equity instruments for settlement, they were therefore measured
+as equity instruments.
+during the
+reporting
+related
+parties of
+External Supervisor
+2016.6-2019.6
+40.00
+Han Zirong
+Male
+1963.7
+2016.6-2019.6
+40.00
+Wang Wanging Male
+1964.9
+Employee Supervisor
+2018.7-2019.6
+60,000
+176.23
+Huang Dan
+1956.6
+Male
+Ding Huiping
+40.00
+2016.6-2019.6
+Wu Heng
+Male
+1976.8
+Shareholder Supervisor
+2016.6-2019.6
+No
+Female
+Yes
+Jin Qingjun
+Male
+1957.8
+External Supervisor
+2014.10-2019.6
+65,800
+65,800
+Yes
+the Company
+1966.6
+2015.3-2019.6
+at the
+reporting
+of the
+end of
+period
+Date of Birth
+period
+the period
+(RMB ten
+Whether
+Aggregate
+pre-tax
+remunerations
+received from
+having
+the Company
+during the
+received
+remunerations
+from the
+beginning
+Shareholding
+Shareholding
+at the
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+45,000
+224.45
+Tang Zhihong
+Male
+1960.3
+Vice President
+2006.5-2019.6
+Employee Supervisor
+80,000
+z z z z zZÁÁ
+No
+No
+No
+No
+96
+China Merchants Bank
+Annual Report 2018
+341.54
+5.6.6 Accounting policies for preference shares and the reason of
+adoption
+During the reporting period, the voting rights of the Company's domestic and offshore preference shares in issue
+had not been restored.
+5.6.5 Restored voting rights of preference shares
+BlackRock, Inc. was deemed to hold a total of 263,574,754 H shares (long position) and 318,000 H shares (short position) in the Company (of
+which 1,562,500 H shares (long position) and 204,000 H shares (short position) were held through cash settled unlisted derivatives) by virtue
+of its control over a number of companies, which were all indirectly wholly-owned by BlackRock, Inc. except for the following:
+(5.1)
+(5.2)
+BR Jersey International Holdings L.P. was indirectly held as to 86% by BlackRock, Inc.. BR Jersey International Holdings L.P. held
+interests in the Company through the following companies:
+(5.1.1) BlackRock Japan Co., Ltd. (indirectly wholly-owned by BR Jersey International Holdings L.P.) held 2,850,418 H shares (long
+position) in the Company.
+(5.1.2)
+(5.1.3)
+(5.1.4)
+BlackRock Asset Management Canada Limited held 577,000 H shares (long position) in the Company. BlackRock Asset
+Management Canada Limited was indirectly owned as to 99.9% by BR Jersey International Holdings L.P..
+BlackRock Investment Management (Australia) Limited (indirectly wholly-owned by BR Jersey International Holdings L.P.) held
+1,168,000 H shares (long position) in the Company.
+BlackRock Asset Management North Asia Limited (indirectly wholly-owned by BR Jersey International Holdings L.P.) held
+2,769,070 H shares (long position) in the Company.
+(5.1.5) BlackRock (Singapore) Limited (indirectly wholly-owned by BR Jersey International Holdings L.P.) held 692,000 H shares (long
+position) in the Company.
+BlackRock Group Limited was held as to 90% by BR Jersey International Holdings L.P. (referred to in (5.1)). BlackRock Group Limited
+held its interests in the Company through its direct or indirect wholly-owned companies as follows:
+(5.2.1) BlackRock (Netherlands) B.V. held 560,500 H shares (long position) in the Company.
+(5.2.2)
+(5)
+V Changes in Shares and Information on Shareholders
+China Merchants Bank
+Annual Report 2018
+The 477,903,500 H shares referred to in (4) and (4.1) to (4.3) represented the same shares.
+(3)
+For details of China Merchants Group Ltd. and its subsidiaries' interests in the Company, please refer to section 5.3 "Information on the
+Company's largest shareholder".
+Anbang Insurance Group Co., Ltd. was deemed to hold interests in a total of 2,704,596,216 A shares (long position) and 229,498,500
+H shares (long position) in the Company by virtue of its control over Anbang Life, Anbang Insurance and Hexie Health.
+JPMorgan Chase & Co. was deemed to hold interests in a total of 231,052,446 H shares (long position) and 2,037,902 H shares (short
+position) in the Company by virtue of its control over a number of corporations.
+The equity interests and short positions of JPMorgan Chase & Co. in the Company included a lending pool of 78,690,591 H shares. Besides,
+5,890,835 H shares (long position) and 2,037,902 H shares (short position) were held through derivatives as follows:
+1,982,835 H shares (long position) and 403,000 H shares (short position)
+1,372,450 H shares (short position)
+1,118,000 H shares (long position) and 262,452 H shares (short position)
+2,790,000 H shares (long position)
+BlackRock Advisors (UK) Limited held 242,500 H shares (long position) in the Company.
+-through physically settled listed derivatives
+-through cash settled listed derivatives
+-through physically settled unlisted derivatives
+-through cash settled unlisted derivatives
+(4.1)
+(4.2)
+(4.3)
+China Merchants Union (BVI) Limited held 477,903,500 H shares (long position) in the Company. Verise Holdings Company Limited
+was deemed to hold interests in the 477,903,500 H shares in the Company held by China Merchants Union (BVI) Limited by virtue of
+holding the 50% interest in China Merchants Union (BVI) Limited.
+Verise Holdings Company Limited was wholly-owned by CNIC Corporation Limited. Therefore, CNIC Corporation Limited was deemed
+to hold the 477,903,500 H shares in the Company which Verise Holdings Company Limited was deemed to hold.
+Compass Investment Company Limited (referred to in (4)) was deemed to hold the 477,903,500 H shares in the Company which
+CNIC Corporation Limited was deemed to hold by virtue of holding the 98.9% interest in CNIC Corporation Limited.
+(4.4)
+Pagoda Tree Investment Company Limited was deemed to hold interests in the 477,903,500 H shares in the Company held by China Merchants
+Union (BVI) Limited by virtue of its wholly-owned subsidiary of Compass Investment Company Limited:
+(2)
+(5.2.3) BlackRock International Limited held 772,498 H shares (long position) in the Company.
+(5.2.4)
+Save as disclosed above, the Company is not aware of any other person (other than the Directors, Supervisors
+and chief executives (as defined in the Hong Kong Listing Rules) of the Company) who has any interests or short
+positions in the shares and underlying shares of the Company as at 31 December 2018 as recorded in the register
+required to be kept by the Company pursuant to Section 336 of the SFO.
+91
+92
+22
+China Merchants Bank
+V Changes in Shares and Information on Shareholders
+Annual Report 2018
+5.5 Issuance and listing of securities
+During the reporting period, the Company did not issue new ordinary shares.
+For details of the issuance and listing of preference shares of the Company, please refer to section 5.6 of this report.
+During the reporting period, the Company did not have any corporate bonds listed on a stock exchange by way of
+public issuance.
+For the issuance of other bonds of the Company and its subsidiaries, please refer to Note 44 to the financial
+statements.
+The Company did not issue any internal staff shares.
+5.6 Preference shares
+5.6.1 Issuance and listing of preference shares
+Pursuant to the approvals by the regulatory authorities, the Company made a non-public issuance of 50,000,000
+non-cumulative perpetual offshore preference shares on 25 October 2017. The offshore preference shares of the
+issuance were listed on Hong Kong Stock Exchange on 26 October 2017 (abbreviated name of shares: "CMB
+17USDPREF"; stock code: 04614; number of listed shares: 50,000,000). The total proceeds from the issuance of the
+offshore preference shares amounted to USD1.0 billion and, after deduction of the expenses relating to the issuance,
+has fully been used to replenish the Company's additional Tier 1 Capital.
+-through physically settled listed derivatives
+-through physically settled unlisted derivatives
+-through cash settled unlisted derivatives
+500,000 H shares (long position) and 500,000 H shares (short position)
+734,272 H shares (long position) and 292,758 H shares (short position)
+7,961,500 H shares (long position) and 486,500 H shares (short position)
+The equity interests and short positions of Citigroup Inc. in the Company included a lending pool of 240,423,406 H shares. Besides, 9,195,772
+H shares (long position) and 1,279,258 H shares (short position) were held through derivatives as follows:
+Citigroup Inc. was deemed to hold a total of 271,099,470 H shares (long position) and 2,122,841 H shares (short position) in the Company by
+virtue of its control over a number of companies.
+BlackRock Asset Management Ireland Limited held 28,798,784 H shares (long position) in the Company.
+(5.2.5)
+(5.2.6)
+BLACKROCK (Luxembourg) S.A. held 10,720,292 H shares (long position) and 18,000 H shares (short position) in the
+Company.
+BlackRock Investment Management (UK) Limited held 15,043,907 H shares (long position) in the Company.
+(5.2.7) BlackRock Asset Management Deutschland AG held 241,731 H shares (long position) in the Company.
+(5.2.8)
+(5.3)
+BlackRock Fund Managers Limited held 9,288,613 H shares (long position) in the Company.
+(5.2.10) BlackRock Asset Management (Schweiz) AG held 33,000 H shares (long position) in the Company.
+BlackRock Holdco 6, LLC was indirectly held as to 90% by BlackRock, Inc.. BlackRock Holdco 6, LLC held its interests in the Company
+through its direct or indirect wholly-owned companies as follows:
+(5.3.1)
+BlackRock Fund Advisors held 120,019,888 H shares (long position) in the Company.
+(5.3.2)
+BlackRock Institutional Trust Company, National Association held 56,848,976 H shares (long position) and 264,000 H shares
+(short position) in the Company.
+(6)
+(5.2.9) BlackRock Life Limited held 6,301,655 H shares (long position) in the Company.
+Pursuant to the approvals by the regulatory authorities, the Company made a non-public issuance of 275,000,000
+domestic preference shares on 22 December 2017. The domestic preference shares of the issuance have been listed
+and traded on the integrated business platform of Shanghai Stock Exchange since 12 January 2018 (abbreviated
+name of shares: "Zhao Yin You 1 (1)"; stock code: 360028; number of listed shares: 275,000,000). The total
+proceeds from the issuance of the domestic preference shares amounted to RMB27.5 billion. The net proceeds of
+RMB27,467,750,000, after deduction of the expenses relating to the issuance, has fully been used to replenish the
+Company's additional Tier 1 Capital.
+(1)
+0.01
+H
+Long
+Limited
+Interest of controlled
+corporation
+477,903,500
+4
+10.41
+1.89
+China Merchants Union (BVI)
+H
+Long
+Beneficial owner
+477,903,500
+4
+10.41
+Verise Holdings Company
+shares (%)
+issue (%)
+Notes
+(4)
+China Merchants Bank
+Annual Report 2018
+V Changes in Shares and Information on Shareholders
+Percentage
+of the
+relevant class
+Percentage
+of total
+1.89
+Name of Substantial
+of shares in
+issued
+ordinary
+Shareholder
+shares
+position
+Capacity
+No. of shares
+Class of Long/short
+Notes:
+Limited
+H
+Long
+Interest of controlled
+30,671,564
+corporation
+Long
+Approved lending agent
+240,423,406
+Short
+Interest of controlled
+corporation
+271,099,470
+2,122,841 6
+66
+6
+5.91
+1.07
+0.05
+interest in shares
+4,500
+Person having a security
+Long
+Long
+Interest of controlled
+263,574,754
+5
+5.74
+1.05
+corporation
+BlackRock, Inc.
+Short
+318,000
+5
+0.01
+0.00
+corporation
+Citigroup Inc.
+H
+Interest of controlled
+Male
+For details, please refer to the relevant announcement(s) published by the Company on the websites of Shanghai
+Stock Exchange, Hong Kong Stock Exchange and the Company, respectively.
+As at the end of the reporting period, the Company had a total of 13 shareholders of preference shares (or their
+nominees), including 1 shareholder of offshore preference shares (or its nominee) and 12 shareholders of domestic
+preference shares.
+5.45
+(Sichuan Province) Company
+person
+shares
+7
+China National Tobacco
+State-owned legal Domestic preference
+15,000,000
+5.45
+(Anhui Province) Company
+person
+shares
+9
+China Construction Bank
+State-owned legal Domestic preference
+15,000,000
+State-owned legal Domestic preference
+China National Tobacco
+shares
+shares
+4
+Ping An Property & Casualty
+Others
+Domestic preference
+20,000,000
+7.27
+10,000,000
+Insurance Company of China, Ltd.
+6
+China Everbright Bank
+Others
+Domestic preference
+19,000,000
+6.91
+Company Limited
+shares
+person
+3.64
+person
+(2)
+(3)
+The shareholdings of preference shareholders are calculated based on the information listed in the register of shareholders of
+preference shares maintained by the Company.
+China National Tobacco (Henan Province) Company, China National Tobacco (Sichuan Province) Company, China National Tobacco
+(Anhui Province) Company and China National Tobacco (Liaoning Province) Company are all wholly-owned subsidiaries of China
+National Tobacco Corporation. Save for the above, the Company is not aware of any affiliated relationship or action in concert
+among the above shareholders of preference shares or between the above shareholders of preference shares and the Company's top
+ten shareholders of ordinary shares.
+"Percentage of shareholdings" represents the percentage of the number of domestic preference shares held by shareholders of
+preference shares to the total number of domestic preference shares.
+5.6.3 Dividend distribution of preference shares
+In accordance with the relevant requirements under the "Resolution Regarding the Plan for the Non-public
+Issuance of Offshore Preference Shares of the Company", which was considered and approved at the 2016 annual
+general meeting, the first class meeting of the shareholders of A Shares for 2017 and the first class meeting of
+the shareholders of H Shares for 2017, the Company fully paid the dividends for offshore preference shares on 25
+October 2018, which was in compliance with the relevant distribution conditions and distribution procedures.
+The dividends for offshore preference shares of the Company are paid once a year in cash. The offshore preference
+shares adopt non-cumulative dividend payment method. After the dividends are distributed to the offshore
+preference shareholders in accordance with the agreed dividend rate, these shareholders will not participate in
+the remaining profit distribution with the ordinary shareholders. Pursuant to the relevant terms of the offshore
+preference shares, the dividend rate per annum of the offshore preference shares is 4.40% (excluding tax, i.e., the
+actual dividend yield to be received by the holders of the preference shares is 4.40%). According to relevant laws
+and regulations, the Company shall withhold an income tax at a rate of 10% when distributing the dividends for the
+offshore preference shares to the offshore non-resident enterprises. According to the terms and conditions of the
+offshore preference shares, the Company is responsible to pay relevant income tax. Total amount of the proceeds
+from the issuance of the Company's offshore preference shares was USD1 billion, the total amount of dividends for
+the offshore preference shares is USD48,888,888.89, comprising of USD44,000,000.00 which was actually paid to
+the holders of the offshore preference shares, and the withholding tax amounted to USD4,888,888.89.
+93
+94
+China Merchants Bank
+Annual Report 2018
+V Changes in Shares and Information on Shareholders
+In accordance with the relevant requirements under the "Resolution Regarding the Plan for the Non-public Issuance
+of Domestic Preference Shares of the Company", which was considered and approved at the 2016 annual general
+meeting, the first class meeting of the shareholders of A Shares for 2017 and the first class meeting of the
+shareholders of H Shares for 2017, the Company fully paid the dividends for domestic preference shares on 18
+December 2018, which was in compliance with the relevant distribution conditions and distribution procedures.
+The dividends for domestic preference shares of the Company are paid once a year in cash. The domestic preference
+shares adopt non-cumulative dividend payment method. After the dividends are distributed to the domestic
+preference shareholders in accordance with the agreed dividend rate, these shareholders will not participate in
+the remaining profit distribution with the ordinary shareholders. Pursuant to the terms of dividends payment for
+domestic preference shares, based on the dividend rate of 4.81% for domestic preference shares, the dividends per
+preference share paid were RMB4.81 (including tax), and based on 275 million of domestic preference in issue, the
+total amount of the dividends paid was RMB1,322.75 million (including tax).
+For the details of dividend distribution for domestic and offshore preference shares, please refer to the relevant
+announcements published by the Company on the websites of Shanghai Stock Exchange, Hong Kong Stock
+Exchange and the Company on 10 December 2018 and 15 October 2018, respectively.
+5.6.4 Repurchase or conversion of preference shares
+During the reporting period, there had been no repurchase and conversion of preference shares.
+(1)
+Notes:
+shares
+person
+shares
+10
+China National Tobacco
+(Liaoning Province) Company
+Changjiang Pension Insurance
+Co., Ltd.
+person
+State-owned legal Domestic preference
+shares
+5,000,000
+Corporation, Guangdong Branch
+1.82
+State-owned legal Domestic preference
+shares
+5,000,000
+1.82
+China Resources SZITIC Trust
+Co., Ltd.
+State-owned legal Domestic preference
+5,000,000
+1.82
+person
+5.6.2 Number of shareholders of preference shares and their shareholdings
+(Henan Province) Company
+20,000,000
+(1)
+(2)
+(3)
+(4)
+The shareholdings of shareholders of preference shares are calculated based on the information listed in the register of shareholders
+of preference shares maintained by the Company.
+As the issuance is an offshore non-public issuance, the information listed in the register of shareholders of preference shares is the
+information on the nominees of the placees.
+The Company is not aware of any affiliated relationship or action in concert among the above shareholders of preference shares and
+the top ten shareholders of ordinary shares.
+"Percentage of shareholdings" represents the percentage of the number of offshore preference shares held by shareholders of
+preference shares to the total number of offshore preference shares.
+China Merchants Bank
+V Changes in Shares and Information on Shareholders
+Annual Report 2018
+As at the end of the reporting period, the shareholdings of the Company's top ten shareholders of domestic
+preference shares (or their nominees) were as follows:
+Changes in
+Shares held
+at the end
+Number of
+shares subject
+Notes:
+shares
+person
+frozen (share)
+Unknown
+As at the end of the previous month (namely 28 February 2019) preceding the date for disclosure of this report, the
+Company had a total of 13 shareholders of preference shares (or nominees), including 1 shareholder of offshore
+preference shares (or nominees), and 12 shareholders of domestic preference shares.
+As at the end of the reporting period, the shareholdings of the Company's top ten shareholders of offshore
+preference shares (or their nominees) were as follows:
+Type of
+Serial No. Name of shareholder
+1
+The Bank of New York Depository
+(Nominees) Limited
+shareholder
+Type of shares
+Overseas legal Offshore preference
+Percentage of
+Changes in
+the reporting
+period (share)
+Number of
+shares subject
+Percentage of
+shareholdings
+(share)
+50,000,000
+(%)
+to trading
+moratorium
+(share)
+Shares
+pledged or
+100
+Shares held
+at the end
+of the period
+7.27
+Serial No. Name of shareholders
+the reporting
+State-owned legal Domestic preference
+30,000,000
+10.91
+person
+shares
+3
+BOC Asset Management Co., Ltd.
+Others
+Domestic preference
+25,000,000
+9.09
+(中銀資產管理有限公司)
+shares
+China National Tobacco
+State-owned legal Domestic preference
+CCB Trust Co., Ltd.
+2
+shares
+person
+of the period
+shareholdings
+to trading
+moratorium
+Shares
+pledged or
+Type of shares
+period (share)
+(share)
+Type of
+shareholders
+(%)
+frozen (share)
+1
+China Mobile Communications
+Group Co., Ltd.
+State-owned legal
+Domestic preference
+106,000,000
+38.55
+(share)
+90
+1964.3
+2016.6-2018.7
+Director of the Executive Committee of the China
+Merchants Financial Group/Platform
+Assistant General Manager
+Chief Accountant
+COSCO Shipping Financial Holdings Co., Limited
+China Communications Construction Co., Ltd.
+China Merchants Group Ltd.
+Su Min
+China Merchants Group Ltd.
+Zhang Jian
+China Merchants Group Ltd.
+China Merchants Group Ltd.
+Zhou Song
+Hong Xiaoyuan
+Chief Accountant
+China COSCO Shipping Corporation Limited
+Sun Yueying
+Director and General Manager
+China Merchants Group Ltd.
+Fu Gangfeng
+China Merchants Group Ltd.
+Li Jianhong
+Name
+Title
+Chairman
+Name of Company
+6.4 Current positions held by Directors and Supervisors in the
+shareholders' companies
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+China Merchants Bank
+Annual Report 2018
+98
+Mr. Jin Qingjun, External Supervisor of the Company, concurrently serves as a Director of Shenzhen Kondarl
+(Group) Co., Ltd., and ceased to serve as a Director of Konka Group Co., Ltd..
+Chief Digital Officer
+Ms. Su Min, Non-Executive Director of the Company, ceased to serve as a Director of China Merchants
+Innovative Investment Management Co., Ltd. and a Supervisor of China Merchants Capital Investments Co.,
+Ltd..
+Deputy Director of the Executive Committee
+of the China Merchants Financial Group/Platform
+Deputy Director of the Executive Committee
+Wang Daxiong
+Fu Junyuan
+Former Employee Supervisor
+Mr. Hong Xiaoyuan is a Non-Executive Director of the Company. Mr. Hong obtained a master's degree in
+Economics from Peking University and a master's degree in Science from Australian National University. He is a
+senior economist. He serves as the Director of China Merchants Holdings (Hong Kong) Company Limited and the
+Assistant General Manager of China Merchants Group Ltd., the Director (Executive) of the Executive Committee of
+the China Merchants Financial Group/Platform and the Chairman and CEO of China Merchants Finance Holdings
+Company Limited. He concurrently serves as the Chairman of China Merchants Finance Investment Holdings Co.,
+Ltd., Shenzhen CMB Qianhai Financial Assets Exchange Centre Co., Ltd. (H£ÌᶤÈÌ9+Ù¤®^=),
+China Merchants United Development Company Limited and China Merchants Innovative Investment Management
+Co., Ltd., and the Director of China Merchants RenHe Life Insurance Co,. Ltd.. He served as the Chairman of
+China Merchants China Direct Investments Limited (a company listed on Hong Kong Stock Exchange), and the Vice
+Chairman of China Merchants Capital Investments Co., Ltd..
+Mr. Zhou Song is a Non-Executive Director of the Company. He obtained a master's degree of World Economics
+in Wuhan University. Mr. Zhou is the Chief Accountant of China Merchants Group Ltd., the Chairman of China
+Merchants Capital Investment Co., Ltd, the Chairman of Shenzhen China Merchants Ping An Asset Management
+Co., Ltd. (ÒRÀ¥ÌÂÌ®ŒÃ) and the Chairman of China Merchants Finance Co., Ltd. (
+BODYMOR). He was the Deputy General Manager of the Planning and Finance Department of the Head
+Office of China Merchants Bank, the Vice President at Wuhan Branch, the Deputy General Manager (in charge of
+work) and General Manager of the Planning and Finance Department of the Head Office, the Employee Supervisor
+of China Merchants Bank, the Business Director and General Manager of the Assets and Liabilities Management
+Department of the Head Office, the President of Interbank Financial Department, the General Manager of the
+Assets Management Department of the Head Office and the Business Director of the Head Office, the President of
+Investment Banking and Financial Market Department, the General Manager of the Assets Management Department
+of the Head Office and the Business Director of the Head Office.
+Mr. Li Hao is an Executive Director, First Executive Vice President and Chief Financial Officer of the Company. Mr.
+Li obtained a master's degree in Business Administration from the University of Southern California and is a senior
+accountant. He concurrently serves as the Chairman of CMFM and the Vice Chairman of Shenzhen CMB Qianhai
+Financial Asset Exchange Co., Ltd. (Þ£££È`¯+), the Vice Chairman of CMB Wing
+Lung Bank, a Director of Merchants Union Consumer Finance Company Limited, the Vice President of Payment &
+Clearing Association of China, Director and Vice President of Asset Management Association of China, and a Director
+of National Internet Finance Association of China. He joined the Company as the Executive Assistant President of the
+Head Office in May 1997. He was the General Manager of the Shanghai Branch of the Company from April 2000 to
+March 2002. He was an Executive Vice President of the Company since December 2001, the Chief Financial Officer
+since March 2007, an Executive Director of the Company since June 2007, and the First Executive Vice President of
+the Company since May 2013.
+A) and the Chairman of COSCO Finance Co., Ltd..
+Ms. Sun Yueying is a Non-Executive Director of the Company. Ms. Sun holds a bachelor's degree and is a senior
+accountant. She is the Chairman of COSCO SHIPPING Development Co., Ltd. (a company listed on Hong Kong Stock
+Exchange and Shanghai Stock Exchange) and the Chairman of COSCO SHIPPING Finance Company Limited (+
+D¶¶¶ƒÂ®¤). She was the Chief Accountant of China COSCO Shipping Corporation Limited (+
+Mr. Tian Huiyu is an Executive Director, President and Chief Executive Officer of the Company. He obtained a
+bachelor's degree in Infrastructure Finance and Credit from Shanghai University of Finance and Economics and a
+master's degree in Public Administration from Columbia University. He is a senior economist. He is concurrently
+the Chairman of CMB Wing Lung Bank, the Chairman of CMBIC, the Chairman of CMB International Capital
+Corporation Limited, the Vice Chairman of Merchants Union Consumer Finance Company Limited and the Chairman
+of Board of Supervisors of National Association of Financial Market Institutional Investors. He was the Vice President
+of Trust Investment Branch of China Cinda Asset Management Co., Ltd. from July 1998 to July 2003, and the Vice
+President of Bank of Shanghai from July 2003 to December 2006. He consecutively served as the Deputy General
+Manager of Shanghai Branch, the head of Shenzhen Branch, and the General Manager of Shenzhen Branch of
+China Construction Bank ("CCB", a company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange)
+from December 2006 to March 2011. He acted as the Business Executive of retail banking at the Head Office and
+the Head and General Manager of Beijing Branch of CCB from March 2011 to May 2013. He joined the Company in
+May 2013 and has served as the President of the Company since September 2013.
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+China Merchants Bank
+Annual Report 2018
+99
+99
+Mr. Fu Gangfeng is the Vice Chairman and Non-Executive Director of the Company. Mr. Fu obtained a bachelor's
+degree in Finance and a master's degree in Management Engineering from Xi'an Highway College and is a senior
+accountant. He is the Director and General Manager of China Merchants Group Ltd.. He concurrently serves as the
+Chairman of China Merchants Port Group Company Limited (¯€¯±ª®) (a company listed on
+Shenzhen Stock Exchange) and the Executive Director and Chairman of the Board of Directors of China Merchants
+Port Holdings Company Limited (a company listed on Hong Kong Stock Exchange), and the Chairman of the Board
+of Supervisors of China Merchants RenHe Life Insurance Co., Ltd.. He was the Deputy Director of the Shekou
+ZhongHua Certified Public Accountants, the Director of the Chief Accountant Office and Deputy Chief Accountant of
+China Merchants Shekou Industrial Zone Co., Ltd., the Chief Financial Officer of China Merchants Shekou Holdings
+Co., Ltd., the Chief Financial Officer of China Merchants Shekou Industrial Zone Co., Ltd., the General Manager of
+the Finance Division of China Merchants Group Ltd. and the Chief Financial Officer and Chief Accountant of China
+Merchants Group Ltd. and the Vice Chairman of China Merchants Shekou Industrial Zone Holdings Co., Ltd. (
+蛇口工業區控股股份有限公司).
+Mr. Li Jianhong is the Chairman and Non-Executive Director of the Company. Mr. Li obtained a master's degree in
+Business Administration from East London University, England and a master's degree in Economy and Management
+from Jilin University and is a senior economist. He is the Chairman of China Merchants Group Ltd. and concurrently
+serves as the Chairman of China Merchants RenHe Life Insurance Co., Ltd.. He was the Vice President of China
+Ocean Shipping (Group) Company, and the Director and President of China Merchants Group Ltd.. He was also the
+Chairman of the Board of Directors of China Merchants Port Holdings Company Limited (a company listed on Hong
+Kong Stock Exchange), the Chairman of China International Marine Containers (Group) Limited (a company listed on
+Hong Kong Stock Exchange and Shenzhen Stock Exchange), the Chairman of China Merchants Capital Investments
+Co., Ltd., the Chairman of China Merchants Energy Shipping Company Limited (a company listed on Shanghai Stock
+Exchange) and the Chairman of China Merchants Huajian Highway Investment Company Limited.
+Directors
+6.5 Biography of Directors, Supervisors and senior management and
+information of their concurrent posts
+From July 2009 up to now
+From May 2015 up to now
+From September 2015 up to now
+From May 2016 up to now
+From September 2006 to
+September 2018
+From June 2018 up to now
+From January 2019 up to now
+From June 2018 up to now
+From September 2011 up to now
+From June 2018 up to now
+From January 2016 to August 2018
+From October 2018 up to now
+From February 2018 up to now
+From July 2014 up to now
+Term of Office
+Director and Chief Accountant
+Deputy General Manager of Finance Department
+Hebei Port Group Co., Ltd.
+SAIC Motor Corporation Limited
+Wen Jianguo
+Wu Heng
+of the China Merchants Financial Group/Platform
+General Manager of China Merchants Finance Holdings
+Chairman
+Executive Director and Chief Financial Officer
+Mr. Zhang Jian, Non-Executive Director of the Company, serves as the Chief Digital Officer of China
+Merchants Group Ltd., and concurrently serves as a Director of China Merchants Innovative Investment
+Management Co., Ltd., a Director of China Merchants Innovative Investment (International) Co. Ltd. (
+À¯N\X(IA) ĦRA¬), a Director of China Merchants Innovative Investment General Partner
+(International) Co. Ltd. (Û¥£¤#ÐÂ%(IA) ĦRA), the Chairman of the Board of Directors
+of China Merchants China Direct Investments Limited, the Vice Chairman of China Merchants Capital
+Investments Co., Ltd. and a Director of China Merchants RenHe Life Insurance Company Limited, and ceased
+to serve as a Director of China Merchants Ping An AMC.
+06
+Ms. Sun Yueying, Non-Executive Director of the Company, ceased to serve as the Chief Accountant of China
+COSCO Shipping Corporation Limited and the Chairman of COSCO Finance Co., Ltd..
+(1)
+Notes:
+No
+No
+Yes
+No
+No
+을을 물을 을 을 을
+174.77
+70,000
+2012.6-2018.7
+1958.5
+Male
+Lian Bolin
+2015.2-2019.2
+Former Vice President
+1964.11
+Male
+Zhao Ju
+2008.12-2019.2
+Former Vice President
+1960.7
+Male
+Zhu Qi
+126.32
+50,000
+Mr. Hong Xiaoyuan, Non-Executive Director of the Company, ceased to concurrently serve as the Chairman
+of China Merchants China Direct Investments Limited and the Vice Chairman of China Merchants Capital
+Investments Co., Ltd..
+(2)
+(3)
+Former Executive Assistant President
+(5)
+6.
+(4)
+Mr. Fu Gangfeng, Non-Executive Director of the Company, serves as the Vice Chairman of the Company and
+concurrently serves as the Chairman of China Merchants Port Group Co., Ltd. and the Chairman of the Board
+of Supervisors of China Merchants RenHe Life Insurance Company Limited.
+5.
+4.
+3.
+2.
+1.
+6.3 Changes of information of Directors and Supervisors
+In July 2018, Mr. Lian Bolin ceased to be the Executive Assistant President of the Company due to the age limit. In
+February 2019, Mr. Zhu Qi and Mr. Zhao Ju resigned as the Executive Vice President of the Company due to other
+business commitment. In February 2019, the Board of Directors of the Company appointed Mr. Wang Jianzhong
+and Mr. Shi Shunhua as the Executive Vice President of the Company, and their qualifications as the Executive Vice
+President are subject to the approval by the CBIRC.
+Mr. Xu Lizhong, a former Employee Supervisor, tendered his resignation letter to the Board of Supervisors of the
+Company in July 2018 due to other work commitments. According to the resolutions passed at Worker's Congress of
+the Company held on 18 July 2018, Mr. Wang Wanqing was newly elected as an Employee Supervisor of the Tenth
+Session of the Board of Supervisors of the Company and Mr. Xu Lizhong ceased to be the Employee Supervisor of
+the Company. In February 2019, Mr. Fu Junyuan resigned as a Shareholder Supervisor of the Company due to his
+work engagements.
+In January 2018, Mr. Li Xiaopeng resigned as the Vice Chairman and Non-Executive Director of the Company due
+to a change of work. In July 2018, the appointment of Mr. Fu Gangfeng as the Vice Chairman was approved by
+the CBIRC. In October 2018, the appointment of Mr. Zhou Song as the Director was approved by the CBIRC. In
+November 2018, the appointment of Mr. Li Menggang and Mr. Liu Qiao as the Independent Non-Executive Directors
+was approved by the CBIRC. Mr. Wong Kwai Lam and Ms. Pan Yingli ceased to serve as Independent Non-Executive
+Directors of the Company.
+6.2 Appointment and resignation of Directors, Supervisors and senior
+management
+97
+For details of the above-mentioned matters, please refer to the relevant announcements published by the Company
+on the websites of Shanghai Stock Exchange, Hong Kong Stock Exchange and the Company.
+China Merchants Bank
+Annual Report 2018
+(6)
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+Mr. Li Hao has been the Chief Financial Officer of the Company since March 2007, an Executive Director of the Company since June 2007, and
+the First Executive Vice President of the Company since May 2013.
+As the term of office of Mr. Pan Chengwei expired in July 2018, the Company is in the process of selecting the candidate for a new
+independent director to take up the position of Mr. Pan Chengwei. Pursuant to the relevant requirements of the "Guiding Opinions on
+Establishing the Independent Director System in Listed Companies" ( (HELIA£ÙƒÙ‡‡ƒ£), not less than one
+third of the total numbers of directors shall be independent directors in a listed company. Therefore, Mr. Pan Chengwei will continue to fulfill
+his duties until the new independent director takes office.
+There was a change in the shareholdings of Mr. Tian Huiyu, Mr. Li Hao, Mr. Liu Yuan, Mr. Wang Wanging, Ms. Huang Dan, Mr. Tang Zhihong,
+Mr. Liu Jianjun, Mr. Xiong Liangjun, Mr. Wang Liang, Mr. Wang Jianzhong, Mr. Shi Shunhua, Mr. Xu Lizhong and Mr. Lian Bolin during the
+reporting period, which was due to an increase in their respective shareholdings. The spouse of Mr. Zhou Song held 23,282 A Shares in the
+Company.
+Mr. Zhu Qi received his remunerations from CMB WLB, a subsidiary of the Company. Mr. Zhao Ju received his remunerations from China
+Merchants International Finance Company Limited, a subsidiary of the Company.
+(7)
+The aggregate pre-tax remunerations of the full-time Executive Directors, Chairman of the Board of Supervisors and senior management of
+the Company are still being verified, and the information about the pre-tax remunerations of other staff will be disclosed separately upon
+confirmation of payment.
+None of the Directors, Supervisors or senior management who holds office currently or resigned during the reporting period has been punished
+by the securities regulator(s) over the past three years.
+(8)
+None of the Directors, Supervisors and senior management listed in the above table holds share options or has been granted restricted shares of
+the Company.
+The remunerations received from the Company by the Directors, Supervisors and senior management who were appointed or resigned during
+the reporting period is calculated on the length of their service in the Company during the reporting period.
+47
+1,656
+72,429
+Urumchi Branch
+2 Huanghe Road, Urumchi
+16
+771
+23,650
+Kunming Branch
+401121
+830006
+88 Xingguang Road, New North District, Chongqing
+1,617
+61,466
+1,859
+64
+710075
+27,073
+906
+28
+730030
+9 Qingyang Road, Chengguan District, Lanzhou
+1 Gaoxin No.2 Road, Xi'an
+Lanzhou Branch
+Xi'an Branch
+55,573
+52
+1 Chongren Street Wuhua District, Kunming
+Chongqing Branch
+650021
+Special Assets Operating Center#
+1,278
+Pre-warning Center#
+610000
+Operation Center#
+Research and Development Center#
+Testing Center#
+Data Center#
+Security Department#
+Anti-money Laundering Management Center#
+Training Center
+Labor Union of the Head Office
+Administration Department
+Representative Offices (Beijing, Shanghai,
+United States of America, London, Taipei)
+Banking Department
+46
+Note #secondary department
+23,120
+522
+21
+530022
+92-1 Minzu Avenue, Nanning
+Nanning Branch
+21,576
+625
+21
+010098
+9 Chilechuan Avenue, Saihan District, Huhhot
+Hohhot Branch
+53,047
+*independent secondary department
+No. 1, the 3rd section of Renmin Road South,
+Wuhou District, Chengdu
+43
+Western China
+1,509
+56
+330008
+468 Dieshan Road, Donghu District, Nanchang
+Nanchang Branch
+126,424
+2,695
+105
+430022
+518 Jianshe Avenue, Wuhan
+Wuhan Branch
+Central China
+24,002
+700
+42,258
+1,086
+32,330
+1,267
+38
+45,778
+1,655
+60
+629
+29
+130022
+9999 Renmin Avenue, Nanguan District, Changchun
+38
+72,518
+Chengdu Branch
+Changsha Branch
+410005
+11,353
+288
+10
+570125
+Complex Building C, Haian Yihao, 1 Shimao Road
+North, Haikou
+Haikou Branch
+28,919
+878
+28
+030012
+265 Nan Zhong Huan Road, Xiaodian District,
+Taiyuan
+Taiyuan Branch
+60,472
+1,280
+42
+450018
+96 Nongye Road East, Zhengzhou
+Zhengzhou Branch
+47,610
+1,281
+42
+230001
+169 Funan Road, Hefei
+Hefei Branch
+41,785
+1,466
+Loan Approval Center#
+766 Wuyi Avenue, Changsha
+Market Risk Management Department#
+General Office of Investment
+CMB Research Institute
+10022
+1
+131
+41,750
+Singapore Branch
+London Representative
+Office
+1 Raffles Place, Tower 2, #32-61, Singapore
+18/F, 20 Fenchurch Street, London, UK
+048616
+1
+50
+13,081
+1
+1
+Taipei Representative
+Office
+Luxembourg Branch
+333, Section 1, Jilong Road, Xinyi District, Taipei
+1
+2
+20 Boulevard Royal, L-2449 Luxembourg
+L-2449
+1
+43
+Other assignments
+London Branch
+Sydney Branch
+18/F, 20 Fenchurch Street, London, UK
+L39, GPT, 1 Farrer Place, Sydney, NSW
+1
+45
+1
+New York, U.S.A
+23rd Floor,535 Madison Avenue,
+New York Branch
+1
+550001
+18
+455
+18,892
+Yinchuan Branch
+138 Beijingzhong Road, Jinfeng District, Yinchuan
+750001
+16
+404
+12,873
+Xining Branch
+4 Xinning Road, Chengxi District, Xining
+810000
+29
+10
+10,450
+Outside Mainland
+China
+Hong Kong Branch
+12 Harcourt Road, Central, Hong Kong
+1
+250
+50
+155,201
+USA Representative Office
+23rd Floor, 535 Madison Avenue,
+New York, U.S.A
+10022
+1
+265
+2 42
+15,584
+8,424
+Bills Center#
+150010
+Banking and Financial Markets
+Head Office
+Branches
+Sub-branches
+China Merchants Bank
+Offshore Finance Center
+Investment Banking Department
+(General Office of Retail Finance
+Financial Market Department
+Asset Management Department
+Asset Custody Department
+Loan Approval Center#
+Bills Business Department*
+Private Banking Department
+Retail Credit Business Department
+(Inclusive Finance Service Center)
+Credit Card Center
+(Consumer Finance Center)
+Network Operation Service Center#
+Overseas Divisions#
+Risk Management Department
+Credit Approval Department
+Asset Security Department
+Operation Management Department
+Information Technology Department
+Audit Department
+Inspection Department
+Legal Compliance Department
+Wealth Management Department
+Operational Risk Management Department#
+Pension Finance Department#
+Transaction Banking Department
+6,362
+38
+Total
+1,822
+74,590
+6,347,615
+China Merchants Bank
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+109
+Annual Report 2018
+Supervision and Management Center for
+6.9 The Company's organisational structure:
+Office of the Board of Directors
+Project Management Department#
+Office of Board of Supervisors
+Human Resources Department
+Strategic Planning and Implementation Department
+the Protection of Customer Interests#
+Assets and Liabilities Management Department
+Investment Management Department#
+Financial Accounting Department
+Procurement Management Department#
+General Office of Corporate
+Finance
+Strategic Customers Department
+Institutional Customers Department
+Financial Institutions Department
+Small Enterprises Finance Department
+General Office
+3 Zhongyang Avenue, Daoli District, Harbin
+523000
+110003
+201201
+2,646,099
+4,804
+1
+518040
+7088 Shennan Boulevard, Shenzhen
+686 Lai'an Road, Pudong New District, Shanghai
+Credit Card Center
+Head Office
+million)
+Staff
+branches
+Postal code
+Business address
+Name of branches
+Regions
+Head Office
+(RMB
+No. of
+No. of
+assets
+Volume of
+The following table sets forth the branches and representative offices as at the end of the reporting period:
+During the reporting period, the Company continued to push forward expansion of its branch network. The Company
+was approved to establish Sanya Branch (second-level), and Zhoushan Branch (second-level) in Zhejiang Pilot Free
+Trade Zone.
+6.8 Branches and representative offices
+107
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+China Merchants Bank
+Annual Report 2018
+The Company has formulated a categorised professional staff training system covering all its staff, and established
+the college education for medium-to-long term cultivation of talents, and short-term training and diversified
+education, aiming at promptly improving its staff's competence. The contents of training focus mainly on knowledge
+of its business and products, professional ethics and security, management skills and leadership. During the reporting
+period, the Company fully completed all its training and education programs.
+1
+6,327
+547,567
+Yangtze River Delta
+31
+315042
+342 Min'an East Road, Ningbo
+Ningbo Branch
+155,715
+2,671
+74
+310007
+23 Hangda Road, Hangzhou
+Hangzhou Branch
+159,709
+2,894
+80
+Staff education and training program
+210005
+Nanjing Branch
+23,260
+1 43
+200131
+6 Jilong Road, Waigaoqiao Bonded Area, Pudong
+New District, Shanghai
+Zone Branch
+Shanghai Pilot Free Trade
+183,406
+4,834
+96
+200120
+1088 Lujiazui Ring Road, Pudong New District,
+Shanghai
+Shanghai Branch
+199 Lushan Road, Jianye District, Nanjing
+1,174
+The Company's remuneration policy is in line with its operation targets, cultural concepts and values. It aims to
+refine and improve its incentive and restrictive mechanisms, realise its corporate goals, enhance its organizational
+performance and minimise its operating risk. The remuneration policy adheres to the principles of remuneration
+management featuring "strategic orientation, performance enhancement, risk control, internal fairness and market
+adaptation" and reflects the remuneration concept of "fixing remuneration based on positions and workload".
+During the reporting period, there was no change in the personnel including the Company's core technical team and
+key technical staff who may have significant influence on the Company's core competitiveness.
+Mr. Jin Qingjun is an External Supervisor of the Company. He obtained a master's degree in Law from the Graduate
+School of China University of Political Science and Law. He is concurrently the senior partner of King & Wood
+Mallesons, Beijing and a part-time professor at the School of Law in both China University of Political Science and
+Law and Renmin University of China; a co-tutor for students of master's degree at the School of Law, Tsinghua
+University; an arbitrator of Shenzhen Court of International Arbitration, Shanghai International Arbitration Center
+and Arbitration Foundation of Southern Africa; a mediator of Shenzhen Securities and Futures Dispute Resolution
+Centre; and the PRC legal counsel of US Court of Appeals for the Washington D.C. Circuit. Currently, he serves as an
+Independent Director of Sino-Ocean Group Holding Limited (a company listed on Hong Kong Stock Exchange), Bank
+of Tianjin Co., Ltd. (a company listed on Hong Kong Stock Exchange), Guotai Junan Securities Co., Ltd. (a company
+listed on Hong Kong Stock Exchange and Shanghai Stock Exchange), CSG Holding Co., Ltd. (a company listed on
+Shenzhen Stock Exchange), Times China Holdings Limited (a company listed on Hong Kong Stock Exchange), Zhong
+Fa Zhan Holdings Limited (a company listed on Hong Kong Stock Exchange), Shenzhen Asiantime International
+Construction Co., Ltd. (a company listed on Shenzhen Stock Exchange), Invesco Great Wall Fund Management
+Company Limited as well as a director of Shenzhen Kondarl (Group) Co., Ltd. (a company listed on Shenzhen Stock
+Exchange). He once served as an Independent Director of China International Marine Containers (Group) Co., Ltd. (a
+company listed on Hong Kong Stock Exchange and Shenzhen Stock Exchange), New China Asset Management Co.,
+Ltd., Xi'an Dagang Road Machinery Co., Ltd. (a company listed on Shenzhen Stock Exchange), Tianjin Changrong
+Print and Packing Equipment Co., Ltd. (a company listed on Shenzhen Stock Exchange) and Gemdale Corporation
+(a company listed on Shanghai Stock Exchange) as well as a Director of Konka Group Co., Ltd. (a company listed on
+Shenzhen Stock Exchange).
+Mr. Wu Heng is a Shareholder Supervisor of the Company and a postgraduate from the Department of Accounting
+of Shanghai University of Finance and Economics. Mr. Wu obtained a master's degree in Management and is a senior
+accountant. He is a Deputy General Manager of Finance Affairs Department of SAIC Motor Corporation Limited,
+and General Manager of SAIC Motor Financial Holding Management Co., Ltd.. He consecutively served as a Deputy
+Manager and Manager of Planning and Finance Department as well as a Manager of Fixed Income Department of
+Shanghai Automotive Group Finance Company, Ltd. from March 2000 to March 2005. He consecutively served as
+a Division Head, Assistant to Executive Controller and concurrently a Manager of Accounting Division of Finance
+Department of SAIC Motor Corporation Limited from March 2005 to April 2009, the Chief Financial Officer of Huayu
+Automotive Systems Co., Ltd. (a company listed on Shanghai Stock Exchange) from April 2009 to May 2015, and
+concurrently serving as a Director and General Manager of Huayu Automotive Systems (Shanghai) Co., Ltd. (
+()) during the period from May 2014 to May 2015.
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+China Merchants Bank
+Annual Report 2018
+Mr. Wen Jianguo is a Shareholder Supervisor, a university graduate and an accountant. He is a Director and Chief
+Accountant of Hebei Port Group Co., Ltd. (¯) and concurrently a Director and Vice Chairman
+of Hebei Port Group Finance Company Limited and a Director of Caida Securities and Bank of Hebei Co., Ltd.. He
+once served as a deputy head and head of Finance Department of Qinhuangdao Port Bureau () as well
+as head of Finance Department of Qinhuangdao Port Group Co., Ltd.. He served as a Director and Chief Accountant
+of Qinhuangdao Port Group Co., Ltd. from July 2007 to July 2009. He served as a Shareholder Supervisor of the
+Company from June 2010 to May 2013.
+Company since August 2014.
+), researcher of the regulatory office I of the banking division (í), head of the regulatory
+office III of the banking regulatory division II (£ƒ¯¯¯¯) and head of the regulatory office VII of the
+banking regulatory division II (í¬K¥=¬K¥Ł) of the People's Bank of China from February 1994 to July
+2003. He served as the deputy head of the Banking Supervision Department II (‹ƒ£=±1) of the CBRC,
+director of CBRC Shanxi Bureau, director of CBRC Shenzhen Bureau, head of the Banking-related Case Audit Bureau
+(£1¯**1*) of the CBRC and head of the Banking-related Consumer Protection Bureau (Rí¯☀☀⠀¾
+) of the CBRC from July 2003 to July 2014. He has been the Chairman of the Board of Supervisors of the
+Mr. Liu Yuan is the Chairman of the Board of Supervisors of the Company and an Employee Supervisor. Mr. Liu
+obtained a bachelor's degree in Global Economy from Renmin University of China and is a senior economist. He
+is concurrently a member of the council of Shenzhen Finance Institute, The Chinese University of Hong Kong
+(Shenzhen), a visiting professor of Renmin University of China, the Chairman of the professional committee
+under the supervisory committee of Chinese Association of Listed Companies and a member of Shenzhen Finance
+Development Decision-making Consultation Committee (ξ**NEA). He served as the deputy
+section officer and section officer of the management office of foreign affairs bureau () of the People's
+Bank of China from August 1984 to October 1991. He was the Secretary (division deputy level) and Deputy Chief
+of the Monetary Office of Foreign Exchange Affairs Division (¤†¬Î¯) of State Administration of Foreign
+Exchange from October 1991 to February 1994. He held the positions of Secretary of the General Office (
+Supervisors
+Mr. Liu Qiao is an Independent Non-Executive Director of the Company. He obtained a bachelor of science degree in
+Economics and Mathematics from Renmin University of China, a master's degree in Economics from the Institute of
+Finance of People's Bank of China and a Ph.D. in Economics from University of California, Los Angeles in the United
+States and is a distinguished professor () of Changjiang Scholars Program. He has been serving as the Dean
+at the Guanghua School of Management of Peking University, professor of Finance and Economics and doctoral
+supervisor. He is also a member of the 17th Session of the Public Offering Review Committee of the CSRC and the
+expert panel of the Shenzhen Stock Exchange; an advisor of the post-doctoral stations of the CSRC, the Shenzhen
+Stock Exchange, the China Financial Futures Exchange and China Minsheng Banking Corp., Ltd. etc., the Vice
+Chairman of the China Enterprise Reform and Development Society (+), an Independent
+Non-Executive Director of CSC Financial Co., Ltd. (a company listed on Hong Kong Stock Exchange), an Independent
+Non-Executive Director of ZH International Holdings Limited (a company listed on Hong Kong Stock Exchange) and
+an Independent Director of Beijing Capital Co., Ltd. (a company listed on Shanghai Stock Exchange). Mr. Liu served
+as an assistant professor at School of Economics and Finance of the University of Hong Kong, a consultant of the
+Asia-Pacific Corporate Finance & Strategy Practice of McKinsey & Company and an assistant professor and associate
+professor (with tenure) at the Faculty of Business and Economics of the University of Hong Kong.
+Mr. Li Menggang is an Independent Non-Executive Director of the Company. He obtained a Ph.D. in Economics and
+a double post-doctoral degree in Transportation and Communication Engineering and Theoretical Economics from
+Beijing Jiaotong University. He has been serving as a professor and doctoral supervisor at Beijing Jiaotong University,
+the Joint Dean of the National Academy of Economic Security (NAES) of Beijing Jiaotong University, the Director of
+Beijing Laboratory of National Economic Security Pre-Warning Project, the Chief Expert of Major Bidding Projects of
+the National Social Science Fund, the Project Review Expert of the National Social Science Fund, the Chairman of the
+Professional Committee of the Logistics Informatization and Industrial Security System of the Institute of Electrical
+and Electronics Engineers (IEEE) and a special economic analyst of Xinhua News Agency. He concurrently serves
+as the Vice President and the Deputy Director of the Expert Committee of China Human Resource Development
+Association, the Deputy Director of the Independent Board Committee of China Association for Public Companies,
+an Independent Director of Daqin Railway Co., Ltd. (a company listed on Shanghai Stock Exchange) and Hunan
+Copote Science & Technology Co., Ltd. (a company listed on Shanghai Stock Exchange). He served as an Independent
+Director of Sichuan Golden Summit (Group) Joint-stock Co., Ltd. (a company listed on Shanghai Stock Exchange) and
+an Independent Non-Executive Director of Yuxing InfoTech Investment Holdings Limited (a company listed on Hong
+Kong Stock Exchange).
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+China Merchants Bank
+Annual Report 2018
+102
+101
+Mr. Wong See Hong is an Independent Non-Executive Director of the Company. Mr. Wong obtained a bachelor's
+degree in Business Administration from the National University of Singapore, a master's degree in Investment
+Management from Hong Kong University of Science and Technology, and a doctoral degree in Transformational
+Leadership (DTL) from Bethel Bible Seminary. He is an Independent Director of The Frasers Hospitality Assets
+Management Pte., Ltd. (ê¤å¤¬), EC World Asset Management Private Limited and an
+Independent Director of Tahoe Life Insurance Company Limited. He previously served as the Deputy Chief Executive
+of BOCHK, head of ABN AMRO Bank for the Southeast Asia region, Managing Director and President for the
+Southeast Asia region, and the head of the Financial Market Department in Asia (P), a Director
+of Bank of China Group Insurance Company Limited, the Chairman of the Board of BOC Group Trustee Company
+Limited, the Chairman of BOCI-Prudential MPF (+), the Chairman of BOCHK Asset Management
+Limited, a member of the Board of Directors of the Civil Servants Institute of Prime Minister's Office Singapore (
+坡總理辦公室公務員學院), Client Consulting Commission of Thomson Reuters (Thomson Reuters客戶諮詢委員會) and
+Financial Management Commission of the Hong Kong Administration Society (€£?@!¾¢¤§Ãª).
+Mr. Pan Chengwei is an Independent Non-Executive Director of the Company. Mr. Pan obtained an associate
+bachelor's degree from Cadre Institute under the Ministry of Transport and is an accountant. He is an Independent
+Non-Executive Director of China International Marine Containers (Group) Co., Ltd. (a company listed on Hong
+Kong Stock Exchange and the Shenzhen Stock Exchange). He was the General Manager of the Finance Department
+of China Ocean Shipping (Group) Company, the General Manager of the Finance Department of COSCO (Hong
+Kong)Group Limited, the General Manager of COSCO (H.K.) Property Development Limited, the General Manager
+of COSCO (H.K.) Industry & Trade Holdings Ltd., the Chief Representative of Shenzhen Representative Office of
+COSCOHK Group, the General Manager of COSCO (Cayman) Fortune Holding Co., Ltd. and its Hong Kong branch,
+and the Compliance Manager of the Fuel Oil Futures Department of China Ocean Shipping (Group) Company.
+Mr. Zhao Jun is an Independent Non-Executive Director of the Company. Mr. Zhao obtained a bachelor's degree
+from the Department of Shipbuilding Engineering of Harbin Engineering University, a master's degree from the
+Department of Ocean Engineering of Shanghai Jiao Tong University, a doctorate degree in Civil Engineering from
+the University of Houston, a master's degree in Financial Management from the School of Management of Yale
+University, and an EMBA in PBC School of Finance of Tsinghua University. Mr. Zhao is currently the Chairman of
+Beijing Fellow Partners Investment Management Ltd.. He concurrently serves as the Independent Non-Executive
+Director of Bright Scholar Education Holdings Limited (a company listed on New York Stock Exchange) and the
+Independent Non-Executive Director of Sichuan Xunyou Network Technology Co., Ltd. (||EBSOB
+A), a company listed on the Shenzhen Stock Exchange. He was a Managing Partner of DT Capital Partners, the
+Managing Director and the Chief Representative in China of ChinaVest, Ltd..
+Mr. Leung Kam Chung, Antony is an Independent Non-Executive Director of the Company. Mr. Leung obtained a
+bachelor's degree in Social Sciences from the University of Hong Kong. He also attended Harvard Business School's
+Program for Management Development and Advanced Management Program. He is the Chairman and Chief
+Executive Officer of Nan Fung Group, the Chairman and co-founder of New Frontier, and the Chairman of two
+charitable organizations, Heifer - Hong Kong and "Food Angel". Mr. Leung served as a member of Blackstone's
+Executive Committee, the Senior Managing Director and the Chairman of Greater China Region. He also acted as
+the Chairman of Asia for JP Morgan Chase and worked for Citi in various positions, including the country corporate
+officer for Hong Kong SAR and China, the Regional Treasurer for North Asia, head of Investment Banking for North
+Asia, South West Asia and head of Private Banking for Asia. Past board membership of Mr. Leung included an
+Independent Director of Industrial and Commercial Bank of China Limited (a company listed on Hong Kong Stock
+Exchange and Shanghai Stock Exchange), China Mobile Hong Kong Company Limited and American International
+Assurance, the Vice Chairman of China National Bluestar Group, a member of the international advisory board of
+China Development Bank and European Advisory Group. In terms of government services, Mr. Leung had served
+as financial secretary, non-official member of the Executive Council of Hong Kong SAR, Chairman of the Education
+Commission, Chairman of the University Grants Committee, member of the Exchange Fund Advisory Committee,
+member of the Preparatory Committee for the Hong Kong Special Administrative Region and Election Committee
+and Hong Kong Affairs Advisors to the Chinese Government, a member of the Board of Hong Kong Airport
+Authority and a Director of the Hong Kong Futures Exchange.
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+284 Zhonghua Road North, Yunyan District, Guiyang
+China Merchants Bank
+Annual Report 2018
+Mr. Wang Daxiong is a Non-Executive Director of the Company. Mr. Wang obtained a bachelor's degree in
+Shipping Finance and Accounting from the Department of Marine Transportation Management of Shanghai Maritime
+University and a master's degree in Business Administration for Senior Management from Shanghai University of
+Finance and Economics. He is a senior accountant. He is the Chairman of COSCO Shipping Financial Holdings Co.,
+Ltd, the Executive Director and Chief Executive Officer of COSCO SHIPPING Development Co., Ltd. (a company
+listed on Hong Kong Stock Exchange and Shanghai Stock Exchange). He concurrently serves as a Director of China
+Merchants Securities Co., Ltd. (a company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange), the
+Chairman of COSCOSHIPPING Capital Insurance Co., Ltd. (ÉRAR) and a Vice Chairman
+of New China COSCO Financial Holdings Limited (R2). He served as a Director of China
+Merchants Bank from March 1998 to March 2014. He also served as the Vice President and Chief Accountant of
+China Shipping (Group) Company, Deputy General Manager of China Shipping (Group) Company and the Chairman
+of China Shipping (HK) Holdings Limited.
+Ms. Su Min is a Non-Executive Director of the Company. Ms. Su obtained a bachelor's degree in Finance from
+Shanghai University of Finance and Economics and a master's degree in Business Administration from China
+University of Technology. She is a senior accountant, certified public accountant and certified public valuer. She is
+the Deputy Director (Executive) of the Executive Committee of the China Merchants Financial Group/Platform and
+the General Manager of China Merchants Finance Holdings Co., Limited. She concurrently serves as a Director
+of China Merchants Securities Co., Ltd. (a company listed on Hong Kong Stock Exchange and Shanghai Stock
+Exchange). She successively served as the Deputy Director of Property Office of the State-owned Assets Supervision
+and Administration Commission of Anhui Province, a Director of Huishang Bank, the Deputy General Manager and
+Chief Accountant of Anhui Energy Group Co., Ltd., the Chief Accountant and a member of the Communist Party
+of China Committee of China Shipping (Group) Company, the Chairman of CS Finance Company, the Chairman
+of COSCO Financial Leasing Co., Ltd. (), a Director of Bank of Kunlun, and a Director of China
+Shipping Development Co., Ltd. (a company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange) and
+China Shipping Container Lines Company Limited (a company listed on Hong Kong Stock Exchange and Shanghai
+Stock Exchange). She served as a Director of China Merchants Innovation Investment Management Co., Ltd. (
+Â¥¤¤¥£ÁR) and a Supervisor of China Merchants Capital Investments Co., Ltd..
+Mr. Zhang Jian is a Non-Executive Director of the Company. Mr. Zhang obtained a bachelor's degree in Economics
+and Management from the Department of Economics of Nanjing University and a master's degree in Econometrics
+from the Business School of Nanjing University, and is a senior economist. He is the Chief Digital Officer of China
+Merchants Group Ltd., General Manager of Finance Department, the Deputy Director (Executive) of the Executive
+Committee of the China Merchants Financial Group/Platform and the Deputy General Manager of China Merchants
+Finance Holdings Co., Ltd.. He concurrently serves as a Director of China Merchants RenHe Life Insurance Company
+Limited, a Director of China Merchants Innovative Investment Management Co., Ltd., a Director of China Merchants
+Innovative Investment (International) Co., Ltd. ( (IX) ĦRA), a Director of China Merchants
+Innovation Investment General Partnership (International) Co., Ltd. (ĦRX#ŒAB (IA) ĦRA¬]), a
+Director of Shi Jin Shi Credit Service Co., Ltd. (¯¯®2), a Director of Siyuanhe Equity Investment
+Management Co., Ltd. (£#£ŒÎ£OR), a Director of Shenzhen CMB Qianhai Financial Asset
+Exchange Co., Ltd., the Chairman of China Merchants Financial Technology Co., Ltd. (2), the
+Chairman of the Board of Directors of China Merchants China Direct Investments Limited and the Vice Chairman
+of China Merchants Capital Investments Co., Ltd.. He had held various positions including General Manager of the
+Suzhou Branch of China Merchants Bank, Deputy General Manager of the Corporate Banking Department at the
+Head Office of China Merchants Bank (in charge), Business Director and General Manager of the Corporate Banking
+Department at the Head Office of China Merchants Bank, Business Director and General Manager of the Credit Risk
+Management Department at the Head Office of China Merchants Bank and Business Director and General Manager
+of the Comprehensive Risk Management Office at the Head Office of China Merchants Bank, and a Director of China
+Merchants Insurance Holdings Co., Ltd. (RĦRA) and China Merchants Ping An Asset Management
+Co., Ltd..
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+China Merchants Bank
+Annual Report 2018
+100
+Mr. Ding Huiping is an External Supervisor of the Company. He obtained a doctorate degree in Enterprise
+Economics from Universitet | Linkoeping in Sweden. He is currently a professor and a tutor of doctorate candidates
+in the School of Economics and Management and the head of PRC Enterprise Competitiveness Research Center of
+Beijing Jiaotong University, and Honorary Professor in the Business School of Duquesne University. He is concurrently
+an Independent Director of Huadian Power International Corporation Limited (a company listed on Hong Kong
+Stock Exchange and Shanghai Stock Exchange), Metro Land Corporation Ltd. (a company listed on Shanghai Stock
+Exchange), Shandong International Trust Co., Ltd.. He has been an Independent Director of Shandong Luneng
+Taishan Cable Company Limited (a company listed on Shenzhen Stock Exchange), Road & Bridge International Co.,
+Ltd. (a company listed on Shanghai Stock Exchange), China International Marine Containers (Group) Ltd. (a company
+listed on Hong Kong Stock Exchange and Shenzhen Stock Exchange) and China Merchants Securities Co., Ltd. (a
+company listed on Hong Kong Stock Exchange and Shanghai Stock Exchange). He served as an Independent Director
+of the Company from May 2003 to May 2006.
+Mr. Han Zirong is an External Supervisor of the Company, an economist and certified public accountant. Mr. Han
+obtained a bachelor's degree from Jilin Finance and Trade College. He has been a partner of Shu Lun Pan Hong
+Kong CPA Limited, and has concurrently been an External Supervisor of Bank of Chengdu Corporation Limited (a
+company listed on Shanghai Stock Exchange) and an Independent Director of Bank of Hainan. He served as a credit
+administrator of Industrial and Commercial Bank of China, Changchun Branch from August 1985 to October 1992.
+From October 1992 to September 1997, he served as an Assistant Director in Accounting Firm of Shenzhen Audit
+Bureau (†). He served as a managing partner of Shenzhen Finance Accounting Firm (
+D) from October 1997 to October 2008. He served as a senior partner of Daxin Certified Public
+Accountants from October 2008 to October 2012.
+103
+104
+As at the end of the reporting period, the Company had 74,590 employees (including dispatched employees). The
+classification of our employees by profession is: 30,625 employees in retail finance, 16,056 employees in corporate
+finance, 13,884 employees in operation management, 7,547 employees in general management, 3,895 employees
+in risk management, 2,003 employees in research and development, and 580 employees in administrative and
+logistical support. The classification of our employees by educational background is: 14,461 employees with master's
+degree and above, 52,280 employees with bachelor's degree, 6,887 employees with junior college degree, and 962
+employees with technical secondary school degrees or below.
+6.7 Information about employees
+The Board of Directors of the Company evaluates the performance of the senior management through the "Policies
+on Remunerations of Senior Management of China Merchants Bank Co., Ltd." and the "Assessment Standards
+of the H-Share Appreciation Rights Incentive Scheme for the Senior Management". According to the "Policies on
+Evaluation of Performance of Directors by the Board of Supervisors" and the "Policies on Evaluation of Performance
+of Supervisors by the Board of Supervisors", the Board of Supervisors evaluates the annual duty performance of
+the Directors and Supervisors through monitoring their duty performance in the ordinary course, reviewing and
+evaluating their annual duty performance record (including but not limited to, attendance of meetings, participation
+of researches, provision of recommendations and the term of office in the Company), the "Duty Performance
+Self-Evaluation Questionnaire" completed by each Director and Supervisor and work summaries, and then reports
+the same to the general meeting and regulatory authorities. According to the "Policies on Evaluation of Duty
+Performance of Senior Management by the Board of Supervisors (Trial)", the Board of Supervisors evaluates the
+annual duty performance of senior management through monitoring their duty performance in the ordinary
+course and accessing to their duty performance information (including but not limited to, major speeches, major
+meeting minutes and the evaluation of the duty performance of senior management by the Board of Directors),
+duty performance interviews and work reports, and then reports the same to the General Meeting and regulatory
+authorities.
+The Company offers remuneration to Independent Directors and external Supervisors according to the "Resolution
+in respect of Adjustment to Remuneration of Independent Directors" and the "Resolution in respect of Adjustment
+to Remuneration of External Supervisors" considered and passed at the 2016 First Extraordinary General Meeting;
+offers remuneration to Executive Directors and other senior executives according to the "Policies on Remunerations
+of Senior Management of China Merchants Bank Co., Ltd."; and offers remuneration to Employee Supervisors in
+accordance with the policies on remuneration of employees of the Company. All of the Directors and Supervisors
+nominated by shareholders of the Company do not receive any remuneration from the Company.
+6.6 Evaluation and incentive system for Directors, Supervisors and
+senior management
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+China Merchants Bank
+Annual Report 2018
+106
+105
+-
+Mrs. Seng Sze Ka Mee, Natalia, the Company's Joint Company Secretary, holds a master's degree in Business
+Administration (Executive) from City University of Hong Kong, a Chartered Secretary. She is the Vice Chairman of
+Tricor Hong Kong and Offshore, and Member of Tricor China Management Committee (hereafter collectively referred
+to as "Tricor"). She leads the strategic development and management of Tricor's operations across Hong Kong,
+China and Offshore markets. Her professional practice area covers business advisory, corporate governance, fiduciary
+services and regulatory compliance for private and public listed companies and non-profit organisations. Mrs.
+Seng is a Past President (2007-2009) and an incumbent Council Member of The Hong Kong Institute of Chartered
+Secretaries (HKICS), a Fellow of The Taxation Institute of Hong Kong (TIHK) and The Hong Kong Institute of Directors
+(HKIOD) and a Council Member of The Hong Kong Committee for UNICEF. She has been appointed by government
+as a member of the Standing Committee on Company Law Reform (SCCLR) for a period of two consecutive terms
+(February 2016 January 2020), and has represented HKICS as a member of an Advisory Group on the Rewrite of
+the Companies Ordinance. She was also appointed by government as a lay member to the Council of the Hong
+Kong Institute of Certified Public Accountants (HKICPA) (December 2013 – November 2015).
+Mr. Wang Liang, please refer to his biography in "Senior management" above.
+Joint company secretaries
+Staff remuneration policy
+Mr. Shi Shunhua is a member of the CPC Committee of the Company. He obtained an MBA degree from China
+Europe International Business School and is a senior economist. Mr. Shi joined the Company in November 1996
+and successively served as the Assistant General Manager and the Deputy General Manager of Shanghai Branch
+of the Company, the General Manager of Suzhou Branch, the General Manager of Shanghai Branch and the
+Business Director of General Office of Corporate Finance Group of the Head Office since May 2003. He has served
+as a Member of the CPC Committee of the Company since April 2017. He is concurrently the Business Director of
+General Office of Corporate Finance Group of the Head Office of the Company.
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+China Merchants Bank
+Annual Report 2018
+Mr. Wang Liang is an Executive Vice President and the Secretary of the Board of Directors of the Company. Mr.
+Wang obtained a master's degree in Money and Banking from Renmin University of China and is a senior economist.
+He successively served as the Assistant General Manager, the Deputy General Manager and the General Manager of
+Beijing Branch of the Company. He served as the Executive Assistant President of the Company and concurrently, the
+General Manager of Beijing Branch since June 2012. He ceased to serve as the General Manager of Beijing Branch
+in November 2013, and has served as an Executive Vice President of the Company since January 2015. He has
+concurrently served as the Secretary of the Board of Directors of the Company since November 2016.
+Mr. Xiong Liangjun is the Secretary of the Party Discipline Committee of the Company. Mr. Xiong obtained a
+master's degree in Money and Banking from Zhongnan University of Finance and Economics and an EMBA degree
+from the Cheung Kong Graduate School of Business. He is a senior economist. He successively served as the Deputy
+Director-General of the CBRC Shenzhen Bureau, the Director-General of CBRC Guangxi Bureau and CBRC Shenzhen
+Bureau from September 2003 to July 2014. He has been the Secretary of the Party Discipline Committee of the
+Company since July 2014.
+Mr. Liu Jianjun is an Executive Vice President of the Company. Mr. Liu obtained a master's degree in National
+Economics from Dongbei University of Finance and Economics and is a senior economist. He has successively served
+as the Deputy General Manager of Jinan Branch of the Company, the General Manager of the Retail Banking
+Department under the Head Office, a Senior Vice President of the Retail Banking Department under the Head Office
+and the Business Executive since September 2000. He has been an Executive Vice President of the Company since
+December 2013. He is concurrently the Director of the Credit Card Center of the Company, the Chairman of CIGNA
+& CMB Life Insurance and a Director of China UnionPay Co., Ltd. and a member of Visa Asia Pacific Senior Advisory
+Council.
+Mr. Tang Zhihong is an Executive Vice President of the Company. Mr. Tang obtained a bachelor's degree in Chinese
+Language and Literature from Jilin University and is a senior economist. He joined the Company in May 1995.
+He successively served as the Deputy General Manager of Shenyang Branch, the deputy head of the Shenzhen
+Administration Unit, the General Manager of Lanzhou Branch, the General Manager of Shanghai Branch, the head
+of the Shenzhen Administration Unit, and an Executive Assistant President of the Head Office. He has been an
+Executive Vice President of the Company since May 2006. He concurrently serves as a Director of Asian Financial
+Cooperation Association.
+Mr. Li Hao, please refer to Mr. Li Hao's biography under the paragraph headed "Directors" above.
+Mr. Tian Huiyu, please refer to Mr. Tian Huiyu's biography under the paragraph headed "Directors" above.
+Mr. Liu Yuan, please refer to Mr. Liu Yuan's biography under the paragraph headed "Supervisors" above.
+Senior management
+Ms. Huang Dan is an Employee Supervisor of the Company. Ms. Huang obtained a bachelor's degree in Computer
+Software from Huazhong University of Science and Technology, and a master's degree in Finance from Southwestern
+University of Finance and Economics and is an engineer. She is the Deputy Director of the Labor Union of the Head
+Office of the Company. She started her career in Tongji Medical University in July 1988, and then served in China
+Chang Jiang Energy Corp. (Group) in April 1993. She joined the Human Resources Department of the Head Office
+of the Company in April 1994 and successively served as Assistant Manager, Deputy Manager, Manager and Senior
+Manager. She successively served as the Assistant General Manager and Deputy General Manager in the Human
+Resources Department of the Head Office of the Company from April 2005 to December 2014. She has been an
+Employee Supervisor of the Company since March 2015.
+Mr. Wang Wanqing is an Employee Supervisor of the Company. Mr. Wang obtained a bachelor's degree in Chinese
+Language & Literature from Anhui University. Mr. Wang currently serves as the Business Director of the Head Office
+and the General Manager of the Audit Department of the Company. He is concurrently the executive member of
+the China Institute of Internal Audit. Mr. Wang started his career in Anhui University in July 1986. He worked in
+the General Office in Anhui Province from November 1991 to February 2001. From February 2001 to April 2007, he
+successively served as the Head, Assistant President and Vice President of the Hefei Branch of the Company. From
+April 2007 to August 2012, he served as the General Manager of the Human Resources Department at the Head
+Office of the Company and the Deputy Director of the Labour Union. From September 2012 to March 2014, he
+served as the Business Director of the Head Office of the Company, the General Manager of the Human Resources
+Department and the Deputy Director of the Labour Union. He has been an Employee Supervisor of the Company
+since July 2018.
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+China Merchants Bank
+Annual Report 2018
+Mr. Wang Jianzhong is a member of the CPC Committee of the Company. He obtained a bachelor's degree in
+Accounting from Dongbei University of Finance and Economics and is an assistant economist. Mr. Wang joined
+the Company in November 1991 and successively served as the General Manager of Changsha Branch, the Deputy
+General Manager of Corporate Banking Department of the Head Office, the General Manager of Foshan Branch, the
+General Manager of Wuhan Branch, the Business Director of General Office of Corporate Finance Group of the Head
+Office and the General Manager of Beijing Branch of the Company since October 2002. He serves as a Member of
+the CPC Committee of the Company and has concurrently served as the General Manager of Beijing Branch of the
+Company since April 2017.
+116001
+64,344
+36 Wansheng Street, Industrial Park, Suzhou
+18
+362000
+Huangxing Building, No. 301, the middle section of
+52,904
+990
+31
+361012
+18 Lingshiguan Road, Siming District, Xiamen
+56,350
+1,148
+32
+350014
+316 Jiangbingzhong Boulevard Road, Fuzhou
+354,375
+5,185
+115
+518001
+2016 Shennan Boulevard, Futian District, Shenzhen
+133,909
+2,746
+80
+510623
+5 Huasui Road, Tianhe District, Guangzhou
+Guangzhou Branch
+Shenzhen Branch
+Fuzhou Branch
+Xiamen Branch
+Quanzhou Branch
+Pearl River Delta and
+West Side of
+Taiwan Strait
+227
+14,240
+485
+17,683
+Fengze Street, Quanzhou
+Dongguan Branch
+Foshan Branch
+12 Shiyiwei Road, Heping District, Shenyang
+17 Renmin Road, Zhongshan District, Dalian
+Shenyang Branch
+Dalian Branch
+Harbin Branch
+Changchun Branch
+North-eastern China
+million)
+Staff
+branches
+Postal code
+Business address
+Name of branches
+Regions
+(RMB
+No. of
+No. of
+444
+assets
+VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
+China Merchants Bank
+Annual Report 2018
+108
+District, Foshan
+42,354
+937
+31
+528200
+12 Denghu Road East, Guicheng Street, Nanhai
+38,623
+909
+28
+200 Hongfu Road, Nancheng District, Dongguan
+Volume of
+Suzhou Branch
+Wuxi Branch
+37
+13
+156 Fuxingmen Nei Dajie, Xicheng District, Beijing
+19
+23,139
+13 537
+226007
+100045
+26/F, Building 3, No.1 Yuetan South Street, Xicheng
+District, Beijing
+Beijing Representative
+Office
+Beijing Branch
+Bohai Rim
+111 Gongnong Road, Nantong
+Nantong Branch
+30,839
+544
+13
+325000
+1-3/F, Block 2, 4, 5, Hongshengjin Garden, Wuqiao
+Avenue, Lucheng District, Wenzhou
+Wenzhou Branch
+35,551
+741
+18
+101,645
+1,313
+28
+214001
+6-107, 6-108 1st Financial Street, Binhu District,
+Wuxi
+29
+215028
+100031
+Qingdao Branch
+65 Hai'er Road, Laoshan District, Qingdao
+266103
+050000
+172 Zhonghua Street South, Shijiazhuang
+45 Beixin Road West, Lubei District, Tangshan
+Shijiazhuang Branch
+Tangshan Branch
+14,069
+541
+19
+264006
+66 Zhujiang Road, Economic & Technological
+Development Area, Yantai
+Yantai Branch
+65,742
+1,805
+59
+250012
+063000
+7 Gongqingtuan Road, Jinan
+78,227
+1,790
+44
+45,937
+1,586
+304,705
+4,853
+99
+24
+300201
+255 Guangdong Road and 9 Qianjin Road, Hexi
+District, Tianjin
+Tianjin Branch
+49
+Jinan Branch
+3,223
+Guiyang Branch
+3.
+18/18
+Su Min
+6/6
+17/18
+Zhang Jian
+6/6
+2/2
+18/18
+Hong Xiaoyuan
+1/1
+5/5
+Zhou Song
+6/6
+2/2
+18/18
+Sun Yueying
+5/5
+7/7
+18/18
+Fu Gangfeng
+3/3
+6/6
+7/7
+4/4
+18/18
+2/2
+4/4
+1/2
+6/6
+18/18
+Li Hao
+3/3
+7/7
+18/18
+Tian Huiyu
+Executive Directors
+2/2
+2/2
+2/2
+2/2
+1/1
+2/2
+2/2
+0/2
+៩ ន ន ន នននន
+6/6
+Wang Daxiong
+នន
+18/18
+Non-Executive Directors
+7.4.4 Chairman of the Board of Directors and the President
+Annual Report 2018
+VII Corporate Governance
+China Merchants Bank
+114
+113
+During the reporting period, the Company initiated annual appraisal of the performance of Directors performed by
+the Board of Supervisors, and annual report and cross-appraisal performed by Independent Non-Executive Directors.
+The appraisal results have been reported to the general meeting.
+The Company also pays high attention to the continuous training of Directors, so as to ensure that they have a
+proper understanding of the operations and businesses of the Company, and that they are fully aware of their
+responsibilities under the laws and the regulatory requirements of the CBIRC, the CSRC, Shanghai Stock Exchange,
+Hong Kong Stock Exchange and the Articles of Association of the Company. The Company has renewed the
+"insurance for liabilities of Directors and senior management" for all its Directors.
+The Board of Directors of the Company reviewed its work during the reporting period, for which it also consulted
+the senior management for their opinions and took consideration of those opinions of the Board of Supervisors. The
+Board of Directors believes that it has effectively performed its duties and safeguarded the interests of the Company
+and shareholders during the reporting period. The Company is of the opinion that all the Directors have devoted
+sufficient time to perform their duties.
+The Independent Non-Executive Directors of the Company have presented their professional advice on the resolutions
+reviewed by the Board of Directors, including offering independent written opinions on significant matters such
+as the preliminary profit appropriation plan, nomination and election of directors, changes in accounting policies,
+engagement of accounting firms, related party transactions and external guarantees. In addition, for the relevant
+special committees under the Board of Directors, the Independent Non-Executive Directors of the Company made full
+advantage of their professional edge, provided professional and independent advice regarding corporate governance
+and operation management of the Company, and thereby ensured the scientific decision-making of the Board of
+Directors.
+During the reporting period, all Directors of the Company cautiously, earnestly and diligently exercised their rights
+under the articles of association of the Company and the domestic and overseas regulatory rules, devoted sufficient
+time and attention to the business of the Company, ensured that the business practices of the Company were fully
+compliant with the requirements of the laws and administrative regulations and economic policies of the country,
+gave all shareholders fair treatment, readily reviewed the business operation and management of the Company, and
+fulfilled the responsibilities stipulated under the laws and administrative regulations, departmental regulations and
+the Articles of Association of the Company. All Directors of the Company were aware of their joint and individual
+responsibilities towards shareholders. During the year, the average attendance rate of Directors at meetings of the
+Board of Directors and the special committees under the Board of Directors was 96%.
+7.4.3 Responsibilities of Directors
+The procedures for appointment, re-election and removal of Directors of the Company are set out in the Articles
+of Association of the Company. The Nomination Committee of the Company carefully considers the qualifications
+and experience of every candidate for Director and recommends suitable candidates to the Board of Directors. Upon
+passing the candidate nomination proposal, the Board of Directors proposes election of related candidates at a
+general meeting and proposes the relevant resolution at a general meeting for consideration and approval.
+The term of office for Independent Non-Executive Directors of the Company shall be the same as that for other
+Directors of the Company. The term of office for an Independent Non-Executive Director of the Company shall
+comply with the relevant laws and requirements of the governing authority.
+A Director may be removed by an ordinary resolution at a general meeting before the expiry of his/her term of office
+in accordance with relevant laws and administrative regulations (however, any claim made in accordance with any
+contract will not be affected).
+In accordance with the Articles of Association of the Company, the Directors of the Company shall be elected or
+replaced by shareholders at general meetings, and the term of office for a Director shall be three years commencing
+from the date on which the approval from the banking regulatory authority of the State Council is obtained. A
+Director is eligible for re-election upon the expiry of his/her current term of office. The Director's term of office shall
+not be terminated without any justification at a general meeting before expiry of his/her term.
+7.4.2 Appointment, re-election and removal of Directors
+VII Corporate Governance
+China Merchants Bank
+Annual Report 2018
+The list of Directors of the Company is set out in Chapter VI of this report. To comply with the Hong Kong Listing
+Rules, the Independent Non-Executive Directors have been clearly identified in all corporate communications of the
+Company which disclose their names.
+At present, the Board of Directors of the Company has sixteen members, including eight Non-Executive Directors,
+two Executive Directors, and six Independent Non-Executive Directors. All the eight Non-Executive Directors are from
+large state-owned enterprises where they hold key positions such as the Chairman of the Board of Directors, General
+Manager, Deputy General Manager or Chief Financial Officer. They have extensive experience in management,
+finance and accounting fields. Both Executive Directors have been engaged in financial management for a long time
+with extensive professional experience. Among the six Independent Non-Executive Directors, there are renowned
+experts in accounting and finance and financial experts and investment bankers with international vision, and they
+all have extensive knowledge of the development of domestic and overseas banking industry. The two Independent
+Non-Executive Directors from Hong Kong are proficient in international accounting standards and the requirements
+of Hong Kong capital market. The Board of Directors of the Company has two female Directors who, together
+with other Directors of the Company, offer professional opinions to the Company in their respective fields. Such
+diversified composition of the Board of Directors of the Company has brought about a wide spectrum of vision and
+highly professional experience, and also has maintained strong independence which enables the Board of Directors
+to make independent judgments and scientific decisions effectively when studying and considering important issues.
+The Company values the diversity of the members of the Board of Directors, and has had in place policies requiring
+that the Nomination Committee of the Company shall review the structure, number of Directors and composition
+(including their skills, knowledge and experience) of the Board of Directors regularly and put forward proposals in
+respect of any intended changes to the Board of Directors in line with the strategies of the Company.
+The position of the Chairman of the Board of Directors and the President of the Company has been taken up by
+different persons and their duties have been clearly defined in accordance with the requirements of the Hong Kong
+Listing Rules. Mr. Li Jianhong serves as the Chairman of the Board of Directors and is responsible for leading the
+Board of Directors, ensuring that all Directors are updated regarding issues arising at board meetings, managing
+the operations of the Board of Directors, and ensuring that all major and relevant issues are discussed by the Board
+of Directors in a constructive and timely manner. In order to allow the Board of Directors to discuss all major and
+relevant matters in time, the Chairman and senior management worked together to ensure that the Directors duly
+receive appropriate, complete and reliable information for their reference and review. Mr. Tian Huiyu serves as the
+President, responsible for the business operations and implementation of the strategic and business plans of the
+Company.
+Li Jianhong
+7.4.5 Attendance of Directors at relevant meetings
+Directors
+Meeting
+General
+Protection
+Committee
+Committee
+Committee
+Audit
+Management
+Nomination
+Committee
+Actual times of attendance/Required times of attendance (2)
+and Appraisal
+Committee
+Shareholders'
+Rights
+Capital
+Remuneration
+and Consumer
+Risk and
+Management
+Transactions
+Related Party
+Special committees under the Board of Directors
+Strategy
+Committee
+Board of
+Directors (1)
+The following table sets forth the records of attendance of each Director at the meetings convened by the Board of
+Directors and the special committees under the Board of Directors and at the shareholders' general meetings held in
+2018.
+7.4.1 Composition of the Board of Directors
+Independent Non-Executive Directors
+17/18
+116
+115
+The Independent Non-Executive Directors reviewed the continuing connected transactions of the Company
+and made confirmations as required by the Hong Kong Listing Rules.
+The Independent Non-Executive Directors reviewed the procedures for convening board meetings in the year,
+the decision-making procedures for matters on the agenda and the adequacy of information about such
+meetings.
+Prior to the annual audit conducted by the accounting firm in charge of annual audit, the Independent
+Non-Executive Directors discussed with the certified public accountants in charge of annual audit in respect
+of the audit team, audit schedule, audit plan, key concerns, communication mechanism and quality control.
+After receiving the initial audit opinions from the accounting firm in charge of annual audit, the Independent
+Non-Executive Directors discussed with the certified public accountants in charge of annual audit in respect
+of major matters and prepared their written opinions.
+The Independent Non-Executive Directors reviewed the work plan for preparing the annual report and the
+unaudited financial statements of the Company.
+The Independent Non-Executive Directors listened to the reports on the operation of the Company in 2018.
+The Independent Non-Executive Directors believed that the reports had fully and objectively reflected the
+operation of the Company in 2018 as well as the progress of significant matters. They recognised and were
+satisfied with the work performed and the results achieved in 2018.
+6.
+5.
+4.
+3.
+2.
+1.
+According to the "Rules Governing Independent Directors' Work on Annual Reports" of the Company, the
+Independent Non-Executive Directors of the Company performed the following duties in preparing and reviewing
+this report:
+During the reporting period, the Independent Non-Executive Directors of the Company expressed their independent
+opinions on significant matters such as the preliminary profit appropriation plan, nomination and election of
+directors, changes in accounting policies, engagement of accounting firms, related party transactions and external
+guarantees. They made no objection to the resolutions of the Board of Directors and others of the Company in the
+year.
+The Board of Directors of the Company currently has six Independent Non-Executive Directors, which meets
+the requirement that at least one third of the total Directors of the Company shall be Independent Directors.
+The qualification, number and proportion of Independent Non-Executive Directors are in compliance with the
+relevant requirements of the CBIRC, the CSRC, Shanghai Stock Exchange and the Hong Kong Listing Rules. All
+six Independent Non-Executive Directors of the Company are not involved in the circumstances set out in Rule
+3.13 of the Hong Kong Listing Rules which would cause doubt on their independence. The Company has received
+from the Independent Non-Executive Directors their respective annual confirmation of independence which was
+made in accordance with Rule 3.13 of the Hong Kong Listing Rules. Therefore, the Company is of the opinion
+that all the Independent Non-Executive Directors have complied with the requirement of independence set out in
+the Hong Kong Listing Rules. The majority of the members of the Nomination Committee, the Remuneration and
+Appraisal Committee, the Audit Committee and the Related Party Transactions Management and Consumer Rights
+Protection Committee under the Board of Directors of the Company are Independent Non-Executive Directors, and
+all of such committees are chaired by an Independent Non-Executive Director. During the reporting period, the six
+Independent Non-Executive Directors maintained communication with the Company through personal attendance
+at the meetings, on-site visits, research and investigations and conferences. They effectively performed their roles
+as Independent Non-Executive Directors by diligently attending the meetings held by the Board of Directors and
+its various special committees, actively expressing their opinions and suggestions and attending to the interests
+and requests of minority shareholders. For details of the attendance of Independent Non-Executive Directors at the
+meetings convened by the Board of Directors and its special committees, please refer to "Attendance of Directors at
+relevant meetings" in this report.
+7.4.7 Performance of duties by Independent Non-Executive Directors
+The Company has also established the guidelines for the relevant employees' dealings in the Company's securities,
+which are no less exacting than the Model Code. The Company is not aware of any non-compliance with the
+aforesaid guidelines by the relevant employees.
+The Company has adopted the Model Code set out in Appendix 10 to the Hong Kong Listing Rules as the code
+of conduct for Directors and Supervisors of the Company in respect of their dealings in the Company's securities.
+Having made specific enquiry of all the Directors and Supervisors, the Company confirmed that they had complied
+with the aforesaid Model Code during the reporting period.
+7.4.6 Securities transactions of Directors, Supervisors and relevant employees
+Annual Report 2018
+China Merchants Bank
+VII Corporate Governance
+VII Corporate Governance
+7.5 Special committees under the Board of Directors
+VII Corporate Governance
+China Merchants Bank
+Annual Report 2018
+In 2018, the Strategy Committee studied and reviewed the "Annual Strategy Implementation and Appraisal Report of
+China Merchants Bank in 2017", strengthened the predictability of guiding strategies, ensured the implementation
+of strategies through process supervision, maintained strategic continuity through unswerving execution, and
+assisted the Board of Directors to steadily promote the achievement of the development vision "to build itself into
+the best commercial bank in China featuring innovation-driven development, the retail banking-prioritised business
+strategy and distinctive advantages". In order to strengthen the integrated operation of the Company and reinforce
+the capital base of its branches, the Strategy Committee also considered various significant investments including the
+establishment of a legal entity operating as a direct sales bank by way of joint venture, the establishment of an asset
+management company, and the increase of investment in Merchants Union Consumer Finance Company Limited.
+In 2018, the Strategy Committee focused on reviewing various proposals including the Fintech special report, the
+adjustment in the amount of provision for the fund of Fintech innovation projects and the projects winning the
+financial innovation award, increased the amount of provision for the fund of Fintech innovation projects from 1%
+of the Company's pre-tax profit to 1% of its operating income, and assisted the Board of Directors to effectively
+promote the implementation of the "Digital Bank" strategy.
+Any other task delegated by the Board of Directors.
+6.
+Make recommendations and proposals on the important issues for discussion and determination by the Board
+of Directors.
+5.
+Evaluate and monitor the implementation of the Board resolutions; and
+4.
+Supervise and review the implementation of the annual operation and investment plans;
+3.
+Consider material investment and financing plans and make proposals to the Board of Directors;
+2.
+Formulate the operational goals and medium-to-long term development strategies of the Company, and
+make an overall assessment on strategic risks;
+1.
+Main authorities and duties:
+The Strategy Committee consists of Non-Executive Directors and Executive Directors. The members of the Strategy
+Committee are Li Jianhong (Chairman) (a Non-Executive Director), Fu Gangfeng (a Non-Executive Director) and
+Tian Huiyu (an Executive Director). The Strategy Committee is mainly responsible for formulating the operation and
+management goals and the medium-to-long term development strategies of the Company, as well as supervising
+and examinating its annual operation plan and investment plan.
+7.5.1 Strategy Committee
+The composition and duties of the six special committees under the Board of Directors of the Company as well as
+their work in 2018 are summarized as follows:
+There are six special committees under the Board of Directors of the Company, namely the Strategy Committee, the
+Nomination Committee, the Remuneration and Appraisal Committee, the Risk and Capital Management Committee,
+the Audit Committee and the Related Party Transactions Management and Consumer Rights Protection Committee.
+In 2018, all the special committees under the Board of Directors of the Company carried out their duties in an
+independent, compliant and effective manner. During the year, these committees held a total of 28 meetings to
+study and review 125 significant issues, including strategic implementation and assessment, profit appropriation,
+annual financial budget and final account, remuneration and appraisal, capital management plan, comprehensive risk
+management, internal control and external investments, and reported their audit opinions and advices to the Board
+of Directors by submitting meeting minutes and holding on-site meetings, hence fully playing its role in assisting the
+Board of Directors to make scientific decisions.
+Annual Report 2018
+Leung Kam Chung, Antony
+China Merchants Bank
+(3)
+Pan Yingli (resigned)
+16/16
+Wong Kwai Lam (resigned)
+0/0
+2/2
+Liu Qiao
+2/2
+Li Menggang
+6/6
+17/18
+Wong See Hong
+3/3
+18/18
+Zhao Jun
+6/6
+3/3
+18/18
+Pan Chengwei
+2/2
+5/6
+2/2
+16/16
+Li Jianhong, the Chairman of the Board of Directors, did not attend the general meeting due to his other business engagements.
+3/3
+ཟུཟུཐཱ་
+Actual number of attendance does not include attendance by proxy.
+(2)
+During the reporting period, the Board of Directors of the Company held a total of 18 meetings, and the special committees under the
+Board of Directors held a total of 28 meetings.
+Notes: (1)
+2/2
+2/2
+0/0
+0/0
+2/2
+2/2
+នន 88 នននន
+0/1
+6/6
+1/1
+1/1
+0/0
+1/1
+4/4
+4/4
+2/2
+4/4
+་ ཌཱུ➢ང➢
+7.5.2 Nomination Committee
+The Board of Directors of the Company facilitates scientific and reasonable decision-making through the
+establishment of a diversified directorship structure, and continues to improve the decision-making and operational
+efficiency through promoting the effective operation of special committees. The Board of Directors focuses on key
+issues, directions, and strategies, and continues to strengthen the development philosophy to seek balance, health
+and sustainability. The Board of Directors ensures the Company to achieve dynamic and balanced development
+in quality, efficiency and scale through effective management of its strategy, risks, capital, remuneration, internal
+control and connected transactions, etc., thus providing a solid basis for the Company to enhance its operation and
+management capabilities.
+7.4 Board of Directors
+Arrange and instruct risk prevention works in accordance with the authorisation of the Board of Directors;
+and
+6.
+5.
+Submit proposals on perfecting the management of risks and capital of the Company;
+4.
+Perform relevant duties under the advanced capital measurement method pursuant to the authorisation given
+by the Board of Directors;
+Make regular assessment on the risk policies, management status, risk-withstanding ability and capital status
+of the Company;
+Supervise the status of risk control by the senior management of the Company in relation to credit risk,
+market risk, operational risk, liquidity risk, strategic risk, compliance risk, reputation risk, country risk and
+other risks;
+2.
+1.
+Main authorities and duties:
+The members of the Risk and Capital Management Committee are Hong Xiaoyuan (Chairman), Sun Yueying, Zhang
+Jian, Su Min (all being Non-Executive Directors), Li Hao (an Executive Director) and Leung Kam Chung, Antony
+(an Independent Non-Executive Director). The Risk and Capital Management Committee is mainly responsible for
+supervising the status of risk control by the senior management of the Company in relation to major risks, making
+regular assessment on the risk policies, risk-withstanding ability and capital management status of the Company and
+submitting proposals on perfecting the management of risks and capital of the Company.
+7.5.4 Risk and Capital Management Committee
+VII Corporate Governance
+China Merchants Bank
+Annual Report 2018
+118
+117
+In 2018, the Remuneration and Appraisal Committee fully considered the current macroeconomic situation, the
+development trend of the banking industry and the development trend of the Company, reviewed and approved the
+"Resolution on Staff Costs of China Merchants Bank", and further improved the incentive and restrictive mechanism.
+Pursuant to the provisions of the H Share Appreciation Rights Scheme, the Remuneration and Appraisal Committee
+conducted validity appraisal and price adjustment in respect of the appreciation rights granted, which ensured the
+continuous implementation of the medium-to-long term incentive mechanism of the Company.
+Any other task delegated by the Board of Directors.
+4.
+Review the systems and policies for remuneration management of the whole Bank; and
+3.
+Study and review the remuneration policies and proposals in respect of Directors and senior management of
+the Company, make recommendations to the Board of Directors and supervise the implementation of such
+proposals;
+Study the standards for assessment of Directors and senior management and make assessment and put
+forward proposals depending on the actual conditions of the Company;
+2.
+1.
+The majority of members of the Remuneration and Appraisal Committee were Independent Non-Executive Directors,
+and the committee was chaired by an Independent Non-Executive Director. The members of the Remuneration and
+Appraisal Committee currently include Li Menggang (Chairman), Leung Kam Chung, Antony, Liu Qiao (all being
+Independent Non-Executive Directors) and Sun Yueying and Hong Xiaoyuan (both being Non-Executive Directors).
+The Remuneration and Appraisal Committee is responsible mainly for reviewing the remuneration management
+system and policies of the Company, formulating the remuneration package for directors and senior management,
+making proposals to the Board of Directors and supervising the implementation of proposals.
+Main authorities and duties:
+Any other task delegated by the Board of Directors.
+In 2018, the Risk and Capital Management Committee adhered to the operating philosophy of dynamic and
+balanced development based on "quality, efficiency and size" and prudent risk management concepts. In response
+to the trend of changes in complicated external situations and internal operation management, the Risk and Capital
+Management Committee assisted the Board of Directors to focus on and prevent liquidity risk, credit risk, compliance
+risk and asset management risk and, on the premise of fully exposing risks, improved quality and efficiency,
+consolidated the asset quality foundation, enhanced the Company's comprehensive competitiveness, and fully
+implemented the strategic requirements of the Board of Directors to "outrunning the market and outperforming the
+peers".
+The Risk and Capital Management Committee studied and considered various resolutions on the comprehensive risk
+reports, the risk preference implementation reports and the comprehensive risk consolidated management plans
+for various quarters to strengthen the predictability of risk management mechanism, consistently implemented the
+"Substance over Form" concept in various works regarding the risk exposure management of the Company and
+constantly improved the construction of the risk management system. Also, the Risk and Capital Management
+Committee reviewed various resolutions on the annual business continuity management work report, the annual
+anti-money laundering work report, the stress test report, the verification policy implementation report and the
+outsourcing management report, effectively monitored the risk management work and assisted the Board of
+Directors to further enhance its risk management capability.
+China Merchants Bank
+Annual Report 2018
+119
+Before the convening of the annual meeting of the Board of Directors, the Audit Committee reviewed
+the Company's Annual Report for 2018 and agreed to submit the same to the Board of Directors for
+consideration and approval. Moreover, the Audit Committee reviewed and submitted to the Board of
+Directors the conclusion report prepared by the auditors in charge of annual audit in respect of the audit
+work of the Company in 2018.
+In the course of annual audit and after the issue of a preliminary audit opinion by the accounting firm in
+charge of annual audit, the Audit Committee reviewed the report on the operation of the Company for
+2018. The Audit Committee exchanged opinions on the significant matters and audit progress with the
+accounting firm in charge of annual audit, and reviewed the financial statements of the Company. The Audit
+Committee then formed written opinions on the above issues.
+Before the auditors commenced their annual audit, the Audit Committee considered and discussed the
+accounting firm's audit plan for 2018 and the unaudited financial statements of the Company.
+3.
+2.
+1.
+According to the "Work Procedures on Annual Reports for Audit Committee under the Board of Directors" adopted
+by the Company, the Audit Committee under the Board of Directors of the Company performed the following duties
+in preparing and reviewing the annual report for 2018:
+In 2018, based on the quarterly regular meeting system, the Audit Committee took the regular reports and internal
+and external audit reports as the starting point, supervised and verified the truthfulness, accuracy and timeliness
+of information set out in the financial statements. The Company obtained the findings of internal audits in a
+timely manner and strengthened the rectification of and the accountability for the problems found in bank-wide
+self-examination and concerned by relevant regulators so as to practically consolidate the third defense line, and
+promoted an effective communication mechanism between internal and external audits by constantly enhancing
+the communication and contact with internal auditors and external auditors. Moreover, the Audit Committee also
+reviewed various resolutions on the change of accounting policies and the appraisal of internal control, gave full play
+to the important role of monitoring operating management, disclosing risks and issues and improving management
+levels, and effectively discharged relevant functions.
+Examine the accounting policies, financial reporting procedures and financial position of the Company; and
+Any other task delegated by the Board of Directors.
+8.
+7.
+Review and supervise the mechanism for the Company's employees to whistle blow any misconduct in respect
+of financial statements, internal control or otherwise, so as to ensure that the Company always handles the
+whistle blowing issues in a fair and independent manner and takes appropriate actions;
+7.5.3 Remuneration and Appraisal Committee
+Examine the internal control system of the Company, and put forward the advices to improve the internal
+control of the Company;
+6.
+5.
+4.
+Coordinate the communications between internal auditors and external auditors;
+3.
+Monitor the internal audit system of the Company and its implementation, and evaluate the work procedures
+and work effectiveness of the internal audit department;
+Propose the appointment or replacement of external auditors;
+2.
+1.
+The Board of Directors is an independent policy-making body of the Company, responsible for executing resolutions
+passed by the general meetings; formulating of the Company's major principles and policies, including development
+strategy, risk preference, internal control and internal auditing systems, remuneration regulations; deciding on the
+Company's operating plans, investment and financing proposals and the establishment of internal management
+organs; preparing annual financial budgets, final accounts and profit appropriation plans; and appointing and
+evaluating members of senior management. The Company adopts a system in which the President assumes full
+responsibility under the leadership of the Board of Directors. The senior management team has discretionary powers
+in terms of operation and makes daily decisions on operation management within the scope of authorisation by the
+Board of Directors, and the Board of Directors would not intervene in any specific matters in the Company's daily
+operation and management.
+The majority of members of the Audit Committee are Independent Non-Executive Directors, and the committee
+was chaired by an Independent Non-Executive Director. The members of the Audit Committee are Wong See Hong
+(Chairman), Pan Chengwei and Li Menggang (all being Independent Non-Executive Directors), Zhou Song and
+Wang Daxiong (both being Non-Executive Directors). None of the above persons has ever served as a partner of
+the incumbent auditors of the Company. The Audit Committee is mainly responsible for examining the accounting
+policies and financial position of the Company; and is responsible for the annual audit work of the Company,
+proposing the appointment or replacement of external auditors and examining the status of the internal audit and
+internal control of the Company.
+7.5.5 Audit Committee
+VII Corporate Governance
+Audit the financial information of the Company and disclosure of such information, and is responsible for
+the annual audit work of the Company, including issue of a conclusive report on the truthfulness, accuracy,
+completeness and timeliness of the information contained in the audited financial statements, and submit the
+same to the Board of Directors for consideration;
+In 2018, the Nomination Committee reviewed and approved the Resolution in relation to the "Addition of Mr. Zhou
+Song as Non-Executive Director", the Resolution in relation to the "Addition of Mr. Li Menggang as Independent
+Non-Executive Director", the Resolution in relation to the "Addition of Mr. Liu Qiao as Independent Non-Executive
+Director" and the Resolution in relation to the "Addition of Mr. Luo Sheng as Non-Executive Director".
+Main authorities and duties:
+5.
+Audit Department
+Supervisory Committee
+Assets and Liabilities Management Committee
+Risk and Compliance Management Committee)
+IT Management Committee
+Beijing Audit
+Division
+Business Continuity and Emergency Committee)
+Xi'an Audit
+Division
+Wuhan Audit
+Division
+Chengdu Audit
+Division
+Fuzhou Audit
+Division
+Fintech Committee
+Division
+China Merchants Bank
+Annual Report 2018
+7.2 Overview of corporate governance
+During the reporting period, the Company convened a total of 59 important meetings at which 258 proposals were
+reviewed and 44 reports were delivered. Among the 59 meetings, there were 2 shareholders' general meetings (19
+proposals were reviewed), 18 meetings of the Board of Directors (95 proposals were reviewed and 16 reports were
+delivered), 7 meetings of the Board of Supervisors (31 proposals were reviewed and 10 reports were delivered), 28
+meetings of the special committees under the Board of Directors (108 proposals were reviewed and 17 reports were
+delivered), 3 meetings of the special committees under the Board of Supervisors (5 proposals were reviewed) and 1
+meeting of Non-Executive Directors (1 report was delivered). In addition, 3 special researches were organised by the
+Board of Directors, and 4 by the Board of Supervisors.
+Having conducted thorough self-inspection, the Company was not aware of any non-compliance of its corporate
+governance practice during the reporting period with the requirements set out in the CSRC's regulatory documents
+governing the corporate governance of listed companies.
+During the reporting period, the Company received recognitions from the capital markets and regulatory authorities
+in respect of corporate governance, information disclosure as well as investor relations management, and won a
+number of honors, mainly including the "Best Board of Directors Award" and the "Most Innovative Board Secretary
+Award" in the selection of the "Gold Round Table Award" by the Board of Directors; the "Gold Award for Annual
+Reports Worldwide" selected by League of American Communications Professionals LLC, the highest level of "A" in
+the annual evaluation of information disclosures by Shanghai Stock Exchange; the awards of "Best Investor Relations
+Management Company", the "Best Corporate Governance" and the "Best Analyst Open Day" for the Asian listed
+banks selected by Institutional Investor of U.S., and the "Best IR Companies Listed in Hong Kong" hosted firstly by
+the New Fortune magazine.
+7.3 Information about general meetings
+During the reporting period, the Company convened 2 shareholders' general meetings, namely the 2017 Annual
+General Meeting on 27 June 2018 and the 2018 First Extraordinary General Meeting on 7 November 2018.
+For details of the resolutions, please refer to the documents on shareholders' general meetings published on the
+websites of Shanghai Stock Exchange and the Company as well as the circulars regarding the shareholders' general
+meetings published on the websites of Hong Kong Stock Exchange and the Company. The notification, gathering,
+convening and voting procedures of the meetings complied with relevant requirements of the Company Law of the
+People's Republic of China, the Articles of Association of the Company and the Hong Kong Listing Rules. Relevant
+resolutions were published on the websites of Shanghai Stock Exchange, Hong Kong Stock Exchange and the
+Company and on China Securities Journal, Shanghai Securities News and Securities Times. For more information on
+the attendance of Directors at shareholders' general meetings, please refer to the section headed "Attendance of
+Directors at Relevant Meetings" of this report.
+111
+112
+China Merchants Bank
+VII Corporate Governance
+Annual Report 2018
+Any other task delegated by the Board of Directors.
+VII Corporate Governance
+Shenyang Audit
+The majority of members of the Nomination Committee are Independent Non-Executive Directors, and the committee
+was chaired by an Independent Non-Executive Director. The members of the Nomination Committee include Pan
+Chengwei (Chairman), Zhao Jun and Liu Qiao (all being Independent Non-Executive Directors), Li Jianhong (a
+Non-Executive Director) and Tian Huiyu (an Executive Director). The Nomination Committee is mainly responsible
+for formulating the procedures and standards for election of the Directors and senior management, conducting
+preliminary verification on the qualification for appointment of the Directors and senior management and making
+proposals to the Board of Directors.
+Shenzhen Audit
+Division
+Nanjing Audit
+Division
+Conduct preliminary examination on the candidates for Directors and senior management and make
+recommendations to the Board of Directors; and
+Conduct extensive searches for qualified candidates for Directors and senior management;
+Study the standards and procedures for selection of Directors and senior management, and make
+recommendations to the Board of Directors;
+Review the structure, size and composition of the Board of Directors (including their expertise, knowledge
+and experience) at least once a year and make recommendations on any changes to the Board of Directors
+to implement the strategies of the Company according to the Company's business operation, asset scale and
+shareholding structure of the Company;
+4.
+3.
+1.
+Main authorities and duties:
+110
+China Merchants Bank
+VII Corporate Governance
+Annual Report 2018
+Corporate Governance
+2.
+Strategy Committee
+7.1 Corporate governance structure:
+Shanghai Audit
+Division
+Related Party Transactions Management and
+Consumer Rights Protection Committee
+Office of Board of
+Supervisors
+Executive Office of
+President
+Audit Committee
+Risk and Capital Management Committee
+Office of the Board of
+Directors
+Remuneration and Appraisal
+Committee
+Board of Supervisors
+Board of Directors
+Nomination Committee
+Nomination Committee
+Shareholders' General Meeting
+Independent opinions on relevant matters from the Board of Supervisors:
+During the reporting period, the Board of Supervisors has proactively and effectively carried out supervision on the financial
+activities, internal control, risk management, lawful operation as well as the duty performance of the Board of Directors and
+the senior management of the Company pursuant to the Company Law, the Articles of Association of the Company and the
+supervisory duties delegated by relevant supervisory authorities.
+Report of the Board of Supervisors
+Annual Report 2018
+Lawful operation
+VIII Report of the Board of Supervisors
+7.17 Internal audit
+128
+127
+In 2018, the Company focused on risk prevention and control, with audit transformation as the main theme,
+ongoing audit as the starting point and audit rectification as the driving force, closely focused on key areas, key risks
+and key points, and continuously expanded the extent and scope of audit supervision. We also put more resources in
+building the audit information platform, further strengthened off-site audit, shifted our focus from post-supervision
+to pre-warning and warning, identified the potential problems in a timely manner, prompted the risk in a timely
+manner, proposed prevention and control measures in a timely manner, strictly carried out audit rectification through
+various measures, and promoted the continuous improvement of the mechanisms, processes and systems across the
+Bank, so as to ensure the high-quality development of the Bank.
+The Company has an independent and vertical internal audit management system. The Board of Directors shall
+assume the ultimate responsibility for the independence and effectiveness of internal audit, being responsible
+for reviewing and approving the constitutional documents of internal audit, establishing the audit organisation
+system, formulating the medium-to-long term audit plan and annual audit plan, appointing the head officer of the
+audit department, providing necessary support to carry out independent internal audit work, and assessing the
+independence and effectiveness of internal audit work. The Board of Directors has an Audit Committee, which is
+responsible for reviewing important systems and reports such as the constitutional documents of internal audit,
+approving the medium-to-long term audit plan and the annual audit plan, and guiding, assessing and evaluating
+the internal audit work. The Head Office has an Audit Department which consists of nine audit divisions, which are
+under the guidance of the Board of Supervisors and senior management, and shall undertake the specific internal
+audit duties. In June 2018, the Company implemented an organisational restructuring of the Audit Department
+and added a virtual "direct division" to the headquarters of the Audit Department under the Head Office, so as to
+strengthen the audit on the departments under the Head Office, overseas institutions and anti-money laundering
+work; nine specialised teams were established to strengthen the off-site audit work such as "research, analysis,
+organisation and guidance" and enhanced the support and management of the inspection teams of audit divisions.
+In each audit division, five professionally mixed audit teams were established, including a new ongoing audit team,
+to strengthen the ongoing audit and rectification following-up of regional branches and institutions.
+Annual Report 2018
+VII Corporate Governance
+Authenticity of financial statements
+China Merchants Bank
+Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu have audited the financial
+statements for 2018 in accordance with the PRC Generally Accepted Accounting Principles and the International Financial
+Reporting Standards respectively and have each produced a standard unqualified audit report, stating that the financial
+statements have given a true, objective and accurate view of the financial position and operating results of the Company.
+22 March 2019
+During the reporting period, the use of proceeds of the Company was consistent with such usages as committed in the
+Prospectus of the Company.
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+China Merchants Bank
+Chairman of the Board of Supervisors
+Liu Yuan
+By Order of the Board of Supervisors
+The Board of Supervisors had reviewed the "Report on Assessment of Internal Control of China Merchants Bank Co.,
+Ltd. for 2018", and concurred with the Board of Directors' representations regarding the completeness, reasonableness,
+effectiveness and implementation of the internal control system of the Company.
+Internal control
+The Board of Supervisors lodged no objections to the reports and proposals submitted by the Board of Directors to the
+general meeting in 2018, and concluded that the Board of Directors had duly implemented relevant resolutions passed at
+the general meeting(s).
+Implementation of resolutions passed at the general meeting(s)
+During the reporting period, the Board of Supervisors was not aware of any related party transactions which were not
+conducted on an arm's length basis or were detrimental to the interests of the Company and its shareholders.
+Related party transactions
+During the reporting period, the Company is unaware of any insider trading in its acquisition and sale of assets which
+would damage shareholders' interests or cause loss in the assets of the Company.
+Purchase and sale of assets
+Use of proceeds
+During the reporting period, the Company organised evaluation campaigns regarding internal control during the
+year 2018 across all departments of the Head Office, its branches and sub-branches. As reviewed by the Board of
+Directors of the Company, no significant defects in terms of completeness, reasonableness and effectiveness were
+found in the Company's internal control system. For more details, please refer to the "Report of Assessment on
+Internal Control of China Merchants Bank Co., Ltd. in 2018", and the "Auditors' Report on Internal Control" issued
+by Deloitte Touche Tohmatsu Certified Public Accountants LLP with standard unqualified opinions.
+An extraordinary board meeting may be held if it is requisitioned by shareholders representing more than one-tenth
+(10%) of the voting rights. The Chairman shall convene the extraordinary board meeting within ten (10) days upon
+receiving such proposal.
+7.16 Internal control
+The Company's well-regulated operation and outstanding information disclosure practice met with recognition from
+the regulatory authorities, and received Grade A (the highest grade) in the annual appraisal of information disclosure
+of listed companies organised by the SSE.
+During the reporting period, by dispatching the notices regularly and clarifying the scope and quantitative standards
+for circulation of the significant sensitive information, the Company effectively enhanced the accuracy and timeliness
+of its reporting of sensitive information, which resulted in the smooth operation of the information disclosure
+contact mechanism. The Company also put great efforts on the management of information disclosure and insider
+dealing, enhanced its employees' awareness of compliance, increased their vigilance against insider information
+leakage and insider dealing, which effectively reduced risks in information disclosure.
+VII Corporate Governance
+China Merchants Bank
+Annual Report 2018
+During the reporting period, the Company disclosed the material information in a true, accurate, complete, timely
+and fair manner in strict accordance with the requirements of relevant information disclosure laws and regulations,
+and released over 340 disclosure documents on Shanghai Stock Exchange and Hong Kong Stock Exchange,
+including periodic reports and temporary announcements, corporate governance documents, shareholders' circulars,
+etc., which have an aggregate of over 2.6 million words. While fulfilling its statutory obligations for information
+disclosure, the Company further improved the initiative and transparency of information disclosure. By timely
+releasing its annual and interim reports, the Company aimed to guide the market expectations in a reasonable
+manner. The Company has adhered to the guideline of "investor-oriented" disclosure, and made proactive disclosure
+of the hot issues of investors' interest and the distinctive information about the banking industry in combination
+with the macroeconomic and financial situation, so as to help the investors to obtain a thorough understanding of
+the Company's business models, competitive edges and risk status, which met with the recognition of the capital
+market. During the reporting period, the Company did not make any mistakes in respect of information disclosure.
+During the reporting period, the Company formulated the "Regulations on the Preparation and Review of Periodic
+Reports and Performance Presentation Materials" in consideration of the regulatory requirements and daily work
+practices, which imposed further regulation and constriction on the division of responsibilities and work processes
+for the preparation and review of its periodic reports and results presentation materials.
+The Company's information disclosure is based on good corporate governance practice, sound internal control,
+and an effective information disclosure system, which ensures that our investors can obtain information in a timely,
+accurate and equal manner.
+Information disclosure
+Our investor relations management efforts again met with the recognition of the capital market. In the votes for
+the "Gold Medal Board Secretary" held by the domestic "New Fortune ( ( )" magazine, Mr. Wang Liang,
+our Deputy President and Secretary of the Board of Directors, attended the selection campaign for the first time
+and secured the seventh place in all industries and the first place in the banking industry. Also, the Company won
+the first "Best IR Company Listed in Hong Kong" award presented by the New Fortune. In the votes held by the
+"Institutional Investor", a US magazine, the Company won the "Respectable Company in Asia" award in 2018, and
+secured the second place of the "Company with Best Investor Relations Management" among the Asian listed banks
+and the third place of the "Best Analyst Open Day".
+manner.
+VII Corporate Governance
+China Merchants Bank
+Annual Report 2018
+124
+123
+In 2018, the Company remained investor-oriented, focused on its fundamentals and movements in the market, and
+maintained effective communication with its investors and analysts at home and abroad in a positive, innovative
+and professional manner and conveyed the Company's development strategy, operating results, business highlights
+and investment value efficiently, accurately, comprehensively and objectively to its investors in a variety of forms,
+while constantly enhancing the investor experience and the capital market's understanding of the Company's
+differentiated features, and enhancing the Company's good market image of professionalism, openness and
+transparency. Notwithstanding the significant fluctuations in the capital market throughout the year, the valuation
+of the Company's A+H Shares remained at the forefront in the domestic banking industry, with its market value
+maintaining the fifth place among the domestic banks.
+120
+7.12 Shareholders' rights
+During the reporting period, according to the unified arrangements of the CBIRC, the Company has conscientiously
+organised and made further efforts to rectify the market disorders in the banking industry throughout the Bank,
+conducted comprehensive assessment on the effectiveness and implementation of a series of special rectification
+works of "Three Violations, Three Arbitrages, Four Improprieties and Ten Problems" carried out in 2017, fully carried
+out self-examination and self-correction by focusing on the "major issues to rectify the market disorders in the
+banking industry in 2018" proposed by the CBIRC, and implemented comprehensive rectification work in respect
+of system improvement, culture promotion activities, system construction, processes optimisation, business training,
+supervision and inspection, etc., continued to strengthen compliance on internal control and risk management,
+returning to the origins of the business of serving the real economy. In accordance with the relevant provisions of
+the "Guidelines for the Management of Practitioners in Banking and Financial Institutions", in 2018, the Company
+revised and improved the "Management Measures on Employees' Behavior of China Merchants Bank", further
+improved the governance structure and responsibility system of employees' behavior management, and established
+a employees' behavior management system with characteristics of clear responsibilities, complete process, division
+of work and cooperation, and joint management. Faced with the "new normal" of strict regulations and severe
+punishment, the Company further improved the education on compliance and case warning trainings for its
+employees during the reporting period; in addition to the normalisation of investigation on employees' abnormal
+behaviors, carried out special rectification on major harmful violations such as "employees' investment and
+shareholding in credit granting enterprises", "employees' financial dealings with P2P platforms", "employees using
+customers' insider information for personal interests" and other harmful violations, identifying and eliminating
+all kinds of potential risks in a timely manner; further increased the efforts in applying employees' behavior
+management tools such as keeping a list of employee violation points and a list of names of violating employees,
+strengthening non-compliance accountability and conducting due diligence investigation on termination of
+employment, and earnestly implemented the strict management requirements with a view to ensuring the compliant
+operation and healthy development of various businesses.
+Convening of extraordinary general meeting
+Making proposals at the shareholders' general meeting
+During the reporting period, except as disclosed, the Company has applied the principles of the Corporate
+Governance Code set out in Appendix 14 of the Hong Kong Listing Rules, and has complied with all the code
+provisions and recommended practices (if applicable).
+7.15 Compliance with the Corporate Governance Code
+The senior management of the Company provided the Board of Directors with adequate explanation and sufficient
+information to enable the Board of Directors to make informed assessment on the financial and other information
+submitted to it for approval. The Directors of the Company acknowledged their responsibility for preparing the
+financial statements for the year ended 31 December 2018 to present a true view of the operating results of the
+Company. So far as the Directors are aware, there are no material uncertainties related to events or conditions that
+might have a significant adverse effect on the Company's ability of sustainable operation.
+7.14 Statement made by the Directors about their responsibility for
+the financial statements
+Annual Report 2018
+VII Corporate Governance
+China Merchants Bank
+126
+125
+During the reporting period, the Company amended the Articles of Association. For details, please refer to the
+announcement, shareholders' circular and the documents of shareholders' general meetings of the Company
+published on 3 May 2018, 9 June 2018 and 8 October 2018, respectively.
+7.13 Major amendments to the Articles of Association of the Company
+Shareholders are entitled to review the information on the Company (including the Articles of Association, the
+status of share capital, the minutes of shareholders' general meeting, resolutions of board meetings, resolutions of
+meetings of the Board of Supervisors, financial and accounting reports, etc. in accordance with the provisions of the
+Articles of Association of the Company upon the submission of written documents certifying the class and quantity
+of shares of the Company held by the shareholders, the identity of whom has been verified by the Company.
+Making inquiries to the Board of Directors
+Convening of extraordinary board meeting
+If the Company convenes a shareholders' general meeting, shareholders individually or jointly holding more than
+3% of the total issued voting shares of the Company may submit interim proposals in writing to the Company 15
+working days before the convening of the shareholders' general meeting and submit the same to the convenor. The
+convenor shall issue a supplemental notice to the shareholders' general meeting and announce the contents of the
+interim proposal within two working days after receiving the proposal.
+An extraordinary general meeting shall be convened by the Board of Directors within two months upon request in
+writing by shareholders individually or jointly holding more than 10% of the Company's voting shares.
+During the reporting period, the Company rolled out a global road show for its annual results, held two performance
+presentations and analysts' meetings, one media press, and one seminar for the investor analysts. Chairman Li
+Jianhong and President Tian Huiyu attached great importance to investor relations management, and attended the
+2017 performance presentation for investor analysts and press conference for the announcement of our annual
+results, and answered the questions from the investors, analysts and news media. Following the release of our
+2017 annual results, President Tian Huiyu and other senior management led three road show teams to roll out
+global road shows in Hong Kong, the United States, Europe, Japan, Singapore and Australia, including visits to
+116 key institutions, communicating with them adequately and intensively on the Company's financial technology
+transformation, business development, advantages and characteristics as well as strategic visions; A total of 373
+institutional investors, analysts and 55 media reporters attended our 2017 annual results presentation and press
+conference, setting a record since the Company was listed in 2002. A total of 343 domestic and foreign institutional
+investors and analyst attended the Company's 2017 interim results phone presentation; we visited 21 important
+A-share institutional investors in Beijing, Shanghai, Guangzhou and Shenzhen, and conducted in-depth exchanges
+with 281 investment research directors, fund managers and researchers. In addition, the Company arranged for
+and received 103 visits and telephone surveys by 230 domestic and foreign institutional investors, investment banks
+and brokerage analysts throughout the year, attended the investor conferences held by 39 domestic and foreign
+investment banks and securities brokers, and conducted 156 one-to-one or one-to-many discussions with a total of
+1,151 Institutional investors; we also answered hundreds of phone calls from the investors and processed hundreds
+of messages from investors on the Company's official website, investors' mailbox, and SSE E-interaction. The above
+measures satisfied the needs of our investors and analysts to communicate with the Company in an effective
+During the reporting period, the business activities of the Company complied with the Company Law, the Commercial
+Banking Law and the Articles of Association, the internal control system was improved, and the decision making procedures
+were lawful and valid. None of the Directors and senior management of the Company were found to have violated the
+relevant laws, regulations or the Articles of Association or had done anything detrimental to the interests of the Company
+and shareholders.
+Financial statements and notes thereto
+Review the strategies, policies and objectives of the consumer rights protection work of the Company;
+Regularly listen to the report on the implementation of the consumer rights protection work of the Company
+and the relevant resolution, and make recommendations to the Board of Directors in respect of the relevant
+work;
+Any other task delegated by the Board of Directors.
+In 2018, the Related Party Transactions Management and Consumer Rights Protection Committee reviewed the
+fairness of the related party transactions, assisted the Board of Directors to ensure the legitimacy and compliance
+of related party transactions, carried out relevant responsibilities of consumer right protection in accordance with
+the regulatory requirements, reviewed and approved various resolutions on, among others, the 2017 Annual
+Related Party Transaction Report and the List of Related Parties in 2018, reviewed the related party transactions
+of the Company with China Merchants Group Ltd., China Communications Construction Group (Limited), Anbang
+Life, Merchants Union Consumer Finance Company Limited, CMB Financial Leasing and Bank of Tianjin Co., Ltd.,
+and reviewed the caps for the connected transactions with Anbang Insurance Group Co., Ltd. and CM Securities.
+The functions of consumer right protection were added into the functions of the Committee, and the name of the
+Committee was changed accordingly, and the Committee reviewed the report on the relevant rules and regulations
+of consumer rights protection.
+7.6 Corporate governance functions
+During the reporting period, the Board of Directors has performed the following duties on corporate governance:
+Formulate and evaluate the policies and practices on corporate governance of the Company and make certain
+amendments as it deems necessary, so as to ensure the validity of those policies and practices;
+1.
+2.
+3.
+4.
+5.
+6.
+Evaluate and supervise the trainings and the improvement of professional competence of Directors and senior
+management;
+Evaluate and supervise the policies and practices of the Company for compliance with laws and regulatory
+requirements;
+Formulate, evaluate and supervise the Code of Conduct and the Compliance Handbook applicable to the
+Directors and employees of the Company;
+Review the compliance of the Company with the Code of Corporate Governance and the disclosures in the
+Report of Corporate Governance; and
+Manage, control, monitor and assess the risks of the Company and evaluate the internal control status of the
+Company. The Board of Directors is of the opinion that the risk management and internal control systems of
+the Company are effective.
+China Merchants Bank
+Annual Report 2018
+Review the administrative measures on related party transactions of the Company, and monitor the
+establishment and improvement of the related party transaction management system of the Company;
+Review the announcements on related party transactions of the Company;
+Inspect, supervise and review the major related party transactions and continuing related party transactions,
+and control the risks associated with related party transactions;
+Identify related parties of the Company pursuant to relevant laws and regulations;
+8.
+Main authorities and duties:
+7.5.6 Related Party Transactions Management and Consumer Rights Protection Committee
+The majority of members of the Related Party Transactions Management and Consumer Rights Protection Committee
+are Independent Non-Executive Directors, and the committee was chaired by an Independent Non-Executive
+Director. The members of the Related Party Transactions Management and Consumer Rights Protection Committee
+are Pan Chengwei (Chairman), Zhao Jun, Wong See Hong (all being Independent Non-Executive Directors), Su Min
+(a Non-Executive Director) and Li Hao (an Executive Director). The Related Party Transactions Management and
+Consumer Rights Protection Committee is mainly responsible for inspection, supervision and review of related party
+transactions of the Company and protection of the legitimate rights and interests of consumers.
+VII Corporate Governance
+China Merchants Bank
+Annual Report 2018
+129
+284
+135
+130
+VII Corporate Governance
+(See Annexures)
+Independent Auditor's Report
+Financial Statements
+2.
+3.
+4.
+5.
+6.
+7.
+Unaudited supplementary financial information
+7.7 Board of Supervisors
+Supervise and evaluate the comprehensiveness, timeliness and effectiveness of the consumer rights protection
+work of the Company, the duty performance of senior management in the protection of consumer rights,
+and the information disclosure of consumer rights protection work;
+7.7.1 Composition of the Board of Supervisors
+The Supervisory Committee under the Board of Supervisors
+As at the end of the reporting period, the members of the Supervisory Committee of the Tenth Session of the
+Board of Supervisors were Jin Qingjun (Chairman), Wu Heng, Han Zirong and Wang Wanqing. The major duties
+of the Supervisory Committee are to formulate the supervisory plans for performance of supervisory duties by
+the Board of Supervisors; to formulate the supervisory plans for financial activities of the Company and conduct
+relevant examinations; to supervise the adoption by the Board of Directors of prudent business philosophy and value
+standards and its formulation of suitable development strategies in line with the actual situations of the Company;
+to conduct supervision and assessment on the important financial decisions of the Board of Directors and the senior
+management and their implementations, the establishment and improvement of the internal control governance
+structure and the overall risk management governance structure and the division of duties of relevant parties and
+their duty performance; to formulate the specific plans for reviewing the operation decisions, internal control and
+risk management of the Company under the authorisation of the Board of Supervisors when necessary; to formulate
+the plans for conducting resignation audit on Directors, President and other senior management when necessary.
+In 2018, the Supervisory Committee under the Board of Supervisors convened a total of two meetings where the
+work plan of the Board of Supervisors in 2018 and the audit opinions on resignation of senior management were
+reviewed and considered. In addition, members of the Supervisory Committee under the Board of Supervisors were
+also present at various on-site meetings convened by the Risk and Capital Management Committee and Audit
+Committee under the Board of Directors. They also reviewed the consideration and discussion on the financial
+decisions, risk management, internal control management and capital management of the Company, supervised the
+duty performance of the Directors, offered comments and suggestions on some issues and made monitoring records.
+7.8 Trainings and investigations/surveys conducted by Directors and
+Supervisors during the reporting period
+During the reporting period, the Board of Directors and the Board of Supervisors of the Company organised seven
+investigations/surveys, through which the duty performance, decision-making and effectiveness of supervision of our
+Directors and Supervisors continued to improve.
+During the reporting period, the Board of Directors of the Company organised three investigations/surveys/visits for
+the Directors, which involved visits to the Head Office, branches and sub-branches to get familiar with their business
+operations, the implementation of the strategies of "Light-operation Bank" and the work reports in respect of the
+development of key businesses, risk management and internal control and compliance, while providing professional
+guidance to the branches.
+VII Corporate Governance
+1.
+Investor relations
+During the reporting period, the Board of Supervisors strengthened on-site research and subsequent supervision
+based on budget assessments, and effectively improved its capability to coordinate and solve difficulties and
+problems, aiming to "build itself into the bank with best customer experience". The Board of Supervisors organised
+a total of four collective surveys throughout the year, including three domestic surveys and one overseas survey,
+involving 13 branches. Through such researches and surveys, the Board of Supervisors came up with high-quality
+opinions and suggestions on the circumstances faced by the surveyed branches, particularly the direction of their
+strategic development, risk control and prudent management, leveraging the momentum of financial technology
+transformation, improvement of customer experience, management of second-level branches, compliance and risk
+control of our overseas branches, care for our employees and enhancement of their satisfaction, etc., and formed
+a complete supervision process for collecting problems and appeals, sorting out and integrating supervision-related
+matters, communicating with the relevant authorities for timely feedback and finally solving the problems. In
+addition, the Board of Supervisors renovated the carrier of supervision by launching the "Core Requirements on
+the Work of the Board of Supervisors", which focused on the core and key aspects of supervision, and regularly
+circulated the concerns and movements of the Board of Supervisors among the directors, Supervisors and senior
+management, giving full play to its role in strengthening supervision on duty performance in support of our business
+development.
+During the reporting period, the Directors of the Company participated in relevant trainings or researches according
+to the requirements on duty performance, the contents of which include corporate governance, policies and
+regulations and banking operation and management. The above trainings or researches helped improve the duty
+performance of the Directors, ensure that the Directors were fully aware of the information required for duty
+performance, and continued to make contributions to the Board of Directors of the Company based on the actual
+situation of the Company. If necessary, the Company would assist the Directors to participate in appropriate trainings
+and researches and make reimbursements for relevant expenses.
+The Board of Supervisors is a supervisory body of the Company and is accountable to the general meetings, and
+oversees the strategic management, financial activities, internal control, risk management, legal operation, corporate
+governance, the duty performance of the Board of Directors and senior management with an aim to protect the
+legitimate rights and interests of the Company, its shareholders, employees, creditors and other stakeholders.
+7.9 Company secretary under Hong Kong Listing Rules
+Mr. Wang Liang, Secretary of the Board of Directors of the Company, and Mrs. Sang Size Ka Me, Natalia of TRICOR
+Services Limited, an external services provider, are the joint company secretaries of the Company under Hong Kong
+Listing Rules. Mr. Wang Liang is the major contact person of the Company on internal issues.
+During the reporting period, Mr. Wang Liang and Mrs. Sang Size Ka Me, Natalia both attended the relevant
+professional trainings for not less than 15 hours in compliance with the requirements of Rule 3.29 of Hong Kong
+Listing Rules.
+7.10 Misconduct reporting and monitoring
+During the reporting period, the Company had no internal cases that inflict huge losses, or external cases or
+incidents of theft or robbery, or material safety issues.
+7.11 Communication with shareholders
+In 2018, the Nomination Committee under the Board of Supervisors convened one meeting where proposals
+regarding the evaluation report on duty performance of the Board of Directors and its members in 2017, the
+evaluation report on duty performance of the Board of Supervisors and its members in 2017, the evaluation report
+on duty performance of the senior management and its members in 2017 were considered.
+As at the end of the reporting period, the members of the Nomination Committee of the Tenth Session of the Board
+of Supervisors were Ding Huiping (Chairman), Fu Junyuan, Wen Jianguo and Huang Dan. The major duties of the
+Nomination Committee are as follows: to make proposals to the Board of Supervisors on the size and composition
+of the Board of Supervisors; to study the standards and procedures for the election of Supervisors and propose
+the same to the Board of Supervisors; to conduct extensive searches for qualified candidates for Supervisors; to
+undertake preliminary examination on the qualifications of the candidates for Supervisors nominated by Shareholders
+and provide relevant recommendations; to supervise the procedures for election of Directors; to evaluate the duty
+performance of the members of the Board of Directors, Board of Supervisors and senior management and their
+members, and submit reports to the Board of Supervisors; to supervise whether the remuneration management
+system and policies of the whole Bank and the remuneration package for its senior management are scientific and
+reasonable.
+China Merchants Bank
+Annual Report 2018
+The Nomination Committee and the Supervisory Committee are established under the Board of Supervisors, each
+consisting of four Supervisors, and those committees were chaired by an External Supervisor.
+The Board of Supervisors of the Company consists of nine members, including three Shareholder Supervisors,
+three Employee Supervisors and three External Supervisors. The proportion of Employee Supervisors and External
+Supervisors in the members of the Board of Supervisors each meets the regulatory requirements. The three
+Shareholder Supervisors are from large state-owned enterprises where they serve as key responsible persons and
+have extensive experience in business management and professional knowledge in finance and accounting; the three
+Employee Supervisors have long participated in banking operation and administration, and thus accumulated rich
+professional experience in finance; and the three External Supervisors have been engaged in legal affairs, economic
+management study in universities and accounting, thus accumulated extensive experience in those fields. The
+composition of the Board of Supervisors of the Company has adequate expertise and independence which ensures
+the effective supervision by the Board of Supervisors.
+A Nomination Committee and a Supervisory Committee are established under the Board of Supervisors.
+7.7.2 How the Board of Supervisors performs its supervisory duties
+The Board of Supervisors performs its supervisory duties primarily by: holding regular meetings of Board of
+Supervisors and special committees, attending shareholders' general meetings, board meetings and special
+committee meetings, attending various meetings on operation and management held by the senior management;
+reviewing various documents submitted by the Company, reviewing work reports and specific reports of the senior
+management, conducting opinion exchanges and discussions, carrying out special investigations and surveys at
+domestic and overseas branches of the Company on a collective or separate basis and having talks with Directors
+and the senior management over their duty performance in the year, communicating with external auditors regularly,
+etc. By doing so, the Board of Supervisors comprehensively monitors the operation and management status, risk
+management status and internal control status of the Company as well as duty performance of the Directors and
+the senior management, and puts forward the constructive and targeted operation and management advice and
+supervision opinions.
+7.7.3 Duty performance of the Board of Supervisors during the reporting period
+During the reporting period, the Board of Supervisors convened a total of seven meetings, of which three were
+on-site meetings and four were meetings convened and voted by correspondence. 31 proposals regarding business
+operations, financial activities, internal control, risk management, consolidated statement management, related
+party transactions, corporate governance, evaluation of the duty performance of the Directors and Supervisors
+and resignation audit on the senior management were considered, ten special reports involving disposal of
+non-performing assets, the prevention and control of crimes, consumer rights protection, assessment on strategic
+implementation and internal audit were reviewed at those meetings.
+In 2018, the Company convened a total of two shareholders' general meetings and three on-site board meetings.
+Supervisors attended the general meetings and were present at all the on-site board meetings, and supervised the
+legal compliance of convening the shareholders' general meetings and the Board meetings, voting procedures, the
+Directors' attendance at those meetings, issue of opinions and voting details.
+The Nomination Committee under the Board of Supervisors
+During the reporting period, the Board of Supervisors of the Company had no objection to each of the supervisory
+matters.
+121
+During the reporting period, all the three External Supervisors were able to perform their supervisory duties
+independently. The External Supervisors discharged their supervisory duties by attending meetings of the Board of
+Supervisors, convening special committee meetings of the Board of Supervisors, participating in meetings of the
+Board of Directors or any of its special committee, participating in the Board of Supervisors' investigations and
+surveys conducted at branch level on a collective or separate basis, proactively familiarising themselves with the
+operation and management of the Company, and giving opinions or suggestions on significant matters. During the
+adjournment of the meetings of the Board of Directors and Board of Supervisors, the External Supervisors were able
+to review various documents and reports of the Company, and exchange opinions with the Board of Directors and
+senior management in respect of the problems found in a timely manner, thereby playing an active role in assisting
+the Board of Supervisors in performing their supervisory duties.
+7.7.4 Operation of the special committees under the Board of Supervisors
+122
+China Merchants Bank
+VII Corporate Governance
+Annual Report 2018
+27
+5,183
+8,622
+26
+Intangible assets
+Property and equipment
+Investment properties
+Interest in associates
+23,248
+572,241
+249
+24(g)
+558,218
+Interest in joint ventures
+N/A
+32,568
+Debt securities classified as receivables
+20
+Other assets
+2,061
+33
+N/A
+50,120
+58,374
+32
+9,954
+9,954
+31
+The notes form part of these consolidated financial statements.
+Total assets
+Deferred tax assets
+Goodwill
+7,255
+9,150
+30
+49,812
+56,206
+29
+1,612
+28
+24(f)
+220,039
+383,101
+330,302
+24(a)
+Investments at fair value through profit or loss
+28,726
+N/A
+6,745,729
+In preparing the consolidated financial statements, the directors of the Bank are responsible for assessing the Group's ability
+to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
+basis of accounting unless the directors of the Bank either intend to liquidate the Group or to cease operations, or have no
+realistic alternative but to do so.
+Those charged with governance are responsible for overseeing the Group's financial reporting process.
+64,796
+Auditor's Responsibilities for the Audit of the Consolidated Financial
+Statements
+133
+134
+China Merchants Bank
+Annual Report 2018
+IX Financial Statements
+DTTHK(A)(19)100046
+Auditor's Responsibilities for the Audit of the Consolidated Financial
+Statements (continued)
+23
+As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism
+throughout the audit. We also:
+Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
+from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion solely
+to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume
+responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high
+level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material
+misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
+the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
+consolidated financial statements.
+Held-to-maturity investments
+Derivative financial assets
+34,220
+N/A
+24(e)
+Available-for-sale financial assets
+N/A
+4,015
+24(d)
+other comprehensive income
+Equity investments designated at fair value through
+61(f)
+N/A
+24(c)
+comprehensive income
+Debt investments at fair value through other
+N/A
+916,012
+24(b)
+Debt investments at amortised cost
+18,916
+421,070
+6,297,638
+- Non-controlling interest
+138
+450
+5,665
+43
+N/A
+5,607
+42
+26,701
+20,411
+41
+8,020
+8,475
+40(a)
+36,501
+N/A
+39
+4,064,345
+4,427,566
+38
+125,620
+78,141
+37
+44
+21,857
+424,926
+32
+(3,812)
+5,532
+49
+67,523
+67,523
+48
+34,065
+34,065
+47
+34,065
+34,065
+25,220
+25,220
+46
+40
+5,814,246
+79,896
+69,318
+6,202,124
+45
+1,070
+1,211
+296,477
+36,570
+61(f)
+26,619
+- Preference shares
+Other equity instruments
+Share capital
+Equity
+Total liabilities
+Other liabilities
+Deferred tax liabilities
+Debt securities issued
+Provision
+Contract liabilities
+Tax payable
+Salaries and welfare payable
+Interest payable
+Deposits from customers
+Amounts sold under repurchase agreements
+Deposits from banks and other financial institutions
+Placements from banks and other financial institutions
+Financial liabilities at fair value through profit or loss
+Derivative financial liabilities
+Borrowing from central bank
+Liabilities
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+Capital reserve
+Investment revaluation reserve
+Hedging reserve
+Surplus reserve
+44,144
+36
+272,734
+203,950
+35
+439,118
+470,826
+34
+414,838
+405,314
+137
+2017
+(Restated)
+Notes
+Total equity
+- Perpetual debt capital
+о
+Non-controlling interests
+Total equity attributable to shareholders of the Bank
+Exchange reserve
+Proposed profit appropriations
+Retained profits
+Regulatory general reserve
+2018
+Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
+or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
+and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
+fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
+misrepresentations, or the override of internal control.
+(5,890)
+Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
+disclosures made by the directors of the Bank.
+6,243
+Fair value gain on debt instruments measured at fair value
+through other comprehensive income
+44
+(36)
+26
+comprehensive income
+Items that may be reclassified subsequently to profit or loss
+Equity-accounted investees share of other
+after tax and reclassification adjustments
+Other comprehensive income for the year
+N/A
+Profit for the year
+80,819
+2018
+Notes
+For the year ended 31 December 2018
+(Expressed in millions of Renminbi unless otherwise stated)
+Consolidated Statement of Profit or Loss and Other Comprehensive Income
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+136
+2017
+70,638
+Net changes in expected credit losses of debt
+instruments measured at fair value through other
+comprehensive income
+16
+Other comprehensive income for the year, net of tax
+60
+(62)
+Remeasurement of defined benefit liability
+N/A
+332
+(2,359)
+1,995
+(67)
+149
+(5,369)
+N/A
+N/A
+496
+Fair value gain on equity instruments measured at fair value
+through other comprehensive income
+Items that will not be reclassified to profit or loss
+of foreign operations
+Cash flow hedge: net movement in hedging reserve
+Exchange difference on translation of financial statements
+reserve
+Available-for-sale financial assets: net movement in fair value
+135
+9,117
+488
+70,150
+Profit before taxation
+Share of profits of associates
+Share of profits of joint ventures
+(4)
+(8)
+Impairment losses on other assets
+(59,922)
+(60,829)
+14
+Income tax
+Expected credit losses
+166,025
+Operating profit before impairment losses
+(70,431)
+(81,110)
+10
+50
+N/A
+Operating income
+247,135
+149,608
+26
+1,272
+995
+80,560
+70,638
+80,819
+The notes form part of these consolidated financial statements.
+2.78
+3.13
+17
+Basic and diluted (RMB)
+Earnings per share
+Non-controlling interests
+Equity shareholders of the Bank
+Attributable to:
+Profit for the year
+(20,042)
+(25,678)
+15
+90,680
+106,497
+3
+37
+27
+259
+(7,691)
+Attributable to:
+Equity shareholders of the Bank
+(110,527)
+(97,153)
+160,384
+144,852
+8
+73,046
+69,908
+Fee and commission expense
+(6,566)
+7
+Operating expenses
+66,480
+64,018
+Other net income
+9
+20,271
+11,169
+- Disposal of financial instruments at amortised cost
+(350)
+Interest receivable
+Net fee and commission income
+242,005
+270,911
+6
+Conclude on the appropriateness of the directors of the Bank's use of the going concern basis of accounting and,
+based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
+may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material
+uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the
+consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
+based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions
+may cause the Group to cease to continue as a going concern.
+Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
+disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
+manner that achieves fair presentation.
+Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
+within the Group to express an opinion on the consolidated financial statements. We are responsible for the
+direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
+We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
+the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
+audit.
+We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
+regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought
+to bear on our independence, and where applicable, related safeguards.
+From the matters communicated with those charged with governance, we determine those matters that were of most
+significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
+matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the
+matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
+because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
+such communication.
+The engagement partner on the audit resulting in the independent auditor's report is Eric Tong.
+Deloitte Touche Tohmatsu
+Certified Public Accountants
+Hong Kong
+22 March 2019
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+Consolidated Statement of Profit or Loss
+For the year ended 31 December 2018
+(Expressed in millions of Renminbi unless otherwise stated)
+Notes
+2018
+2017
+Interest income
+Interest expense
+Net interest income
+Fee and commission income
+3,414,612
+3,749,949
+22
+Loans and advances to customers
+Notes
+(Expressed in millions of Renminbi unless otherwise stated)
+At 31 December 2018
+Consolidated Statement of Financial Position
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+489
+282
+62,458
+89,654
+The notes form part of these consolidated financial statements.
+Non-controlling interests
+Equity shareholders of the Bank
+Attributable to:
+62,947
+89,936
+(7,692)
+1
+9,094
+Total comprehensive income for the year
+Non-controlling interests
+2018
+Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
+appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
+Group's internal control.
+2017
+(Restated)
+Cash
+252,550
+199,386
+21
+Amounts held under resale agreements
+154,628
+313,411
+20
+Placements with banks and other financial institutions
+76,918
+100,160
+19
+Balances with banks and other financial institutions
+600,007
+477,568
+18
+9,309
+6,638
+16,412
+15,814
+Balances with central bank
+Precious metals
+Assets
+63
+23
+51
+69
+(23,707)
+23,707
+(1,659)
+(1,659)
+(1,659)
+(e) Transfers within equity upon disposal
+of equity Instruments designated
+at FVTOCI
+4
+China Merchants Bank
+At 31 December 2018
+(64)
+25,220
+5,532
+63 53,682
+78,542 250,654
+23,707
+1,130 540,118
+1,158
+(86)
+The directors of the Bank are responsible for the preparation of the consolidated financial statements that give a true and
+fair view in accordance with IFRSS and the disclosure requirements of the Hong Kong Companies Ordinance, and for such
+internal control as the directors of the Bank determine is necessary to enable the preparation of consolidated financial
+statements that are free from material misstatement, whether due to fraud or error.
+Responsibilities of Directors and Those Charged with Governance for
+the Consolidated Financial Statements
+139
+The notes form part of these consolidated financial statements.
+2,329 543,605
+34,065 67,523
+In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
+and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial
+statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work
+we have performed, we conclude that there is a material misstatement of this other information, we are required to report
+that fact. We have nothing to report in this regard.
+(64)
+(21,185)
+general reserve
+52
+(iii) Dividends declared and paid
+for the
+year 2017
+(iv) Distribution to perpetual capital
+instruments
+63
+(v) Proposed dividends for the year 2018
+(vi) Dividends paid for preference shares
+125
+125
+(4) (21,189)
+(34)
+7,523
+7,621
+(40,510)
+2,522
+(22,844)
+(64)
+(4) (22,912)
+(7,523)
+7,621
+(7,621)
+1
+(21,185)
+(34)
+The directors of the Bank are responsible for the other information. The other information comprises the information
+included in the annual report, but does not include the consolidated financial statements and our auditor's report thereon.
+Our opinion on the consolidated financial statements does not cover the other information and we do not express any form
+of assurance conclusion thereon.
+Other Information
+DTTHK(A)(19)100046
+Principal accounting policies, accounting estimates and
+judgement applied in determining the loss allowance of
+loans and advances to customers at amortised cost and
+debt investments at amortised cost are set out in notes
+4(5) and 5(4) to the consolidated financial statements.
+Key judgements and estimates in respect of the
+measurement of ECLs include: the criteria selected to
+identify a significant increase in credit risk (SICR) are highly
+judgemental; the identification of credit impairment events
+is a key area of judgement; significant judgments are
+required to the determination of inputs used in the ECL
+model, as well as the determination of the forward-looking
+information.
+As at 31 December 2018, as set out in note 22, the Group
+reported loans and advances to customers at amortised
+cost of RMB3,764,074 million and RMB191,895 million
+of relevant expected credit loss allowance. While as set
+out in note 24(b), the Group reported debt investments at
+amortised cost of RMB924,138 million and related credit
+loss allowance of RMB8, 126 million.
+We identified expected credit loss allowance of loans
+and advances to customers at amortised cost and debt
+investments at amortised cost as a key audit matter
+due to the materiality of the balances of these financial
+instruments. The expected credit loss (ECL) model was
+applied by the Group to estimate ECLs since 1 January
+2018, which involves significant management judgement
+and estimates.
+Expected credit loss allowance of loans and advances
+to customers at amortised cost and debt investments
+at amortised cost
+Key audit matter
+Key Audit Matters (continued)
+DTTHK(A)(19)100046
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
+consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
+consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
+opinion on these matters.
+How our audit addressed the key audit matter
+Key Audit Matters
+Basis for Opinion
+In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the
+Group as at 31 December 2018, and of its consolidated financial performance and its consolidated cash flows for the year
+then ended in accordance with International Financial Reporting Standards ("IFRSS") and have been properly prepared in
+compliance with the disclosure requirements of Hong Kong Companies Ordinance.
+We have audited the consolidated financial statements of China Merchants Bank Co., Ltd. (the "Bank") and its subsidiaries
+(collectively referred to as the "Group") set out on pages 135 to 283, which comprise the consolidated statement of
+financial position as at 31 December 2018, and the consolidated statement of profit or loss, consolidated statement of
+profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated cash flow
+statement for the year then ended, and notes to the consolidated financial statements, including a summary of significant
+accounting policies.
+Opinion
+德勤
+DTTHK(A)(19)100046
+(A joint stock company incorporated in the People's Republic of China with limited liability)
+To the shareholders of China Merchants Bank Co., Ltd.
+Deloitte
+Independent Auditor's Report
+Annual Report 2018
+IX Financial Statements
+We conducted our audit in accordance with International Standards on Auditing ("ISAS"). Our responsibilities under those
+standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
+section of our report. We are independent of the Group in accordance with the International Ethics Standards Board
+for Accountants' Code of Ethics for Professional Accountants (the "Code"), and we have fulfilled our other ethical
+responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and
+appropriate to provide a basis for our opinion.
+Our procedures in relation to the expected credit loss
+allowance of loans and advances to customers at amortised
+cost and debt investments at amortised cost included:
+We understood management's process and tested the
+design and operating effectiveness of key controls across the
+processes relevant to the ECL of the Group. These controls
+included the validation and review of the ECL model; the
+controls over the model data input, including manual
+controls and automatic controls; the automatic controls over
+the ECL model calculation process; the controls over the
+identification of SICR indicators and impairment evidence.
+We assessed whether the ECL model applied by the
+Group has covered all the exposures that should be taken
+into consideration. In respect of different portfolios of
+loans and advances to customers at amortised cost and
+debt investments at amortised cost, we involved our
+internal modelling specialist to assist us in assessing the
+appropriateness of the Group's methodology of ECL
+model. We reviewed relevant documents and evaluated the
+applicability and appropriateness of the ECL model.
+IX Financial Statements
+China Merchants Bank
+Annual Report 2018
+We also evaluated management judgement in whether
+has control in the structured entities and the conclusion
+about whether or not the consolidation criteria is met, with
+assessment, on a sample basis, of the terms of the relevant
+contracts, including the rights to variable returns of the
+structured entities and the ability of the Group to use its
+power to affect its return. We formed our own judgment
+and compared with that of the Group.
+Our procedures in relation to consolidation of structured
+entities included understanding and testing the design and
+operating effectiveness of key controls over the management
+process in determining the consolidation scope for interests
+in structured entities as well as understanding the purpose
+for setting up the structured entities.
+With the support of our internal valuation specialists, we
+performed independent valuations, on a sample basis, of
+level 2 and level 3 financial instruments and compared our
+valuations with the Group's valuations.
+We assessed the level 1 fair values, on a sample basis, by
+comparing the fair values applied by the Group with publicly
+available market data.
+We evaluated the valuation techniques, inputs and
+assumptions through comparison with the valuation
+techniques commonly used in the markets, validation
+of observable inputs using external market data, and
+comparison with valuation outcomes obtained from various
+pricing sources.
+Our procedures in relation to the valuation of the fair value
+of financial instruments included understanding and testing
+the design and operating effectiveness of key internal
+controls over the determination of valuation model and
+valuation of the financial instrument at fair value.
+How our audit addressed the key audit matter
+As describe in note 4(1), the consolidation of structured
+entities is determined based on the control. Control is
+achieved when the investor has power over the investee,
+the investor is exposed, or has rights, to variable returns
+from its involvement with the investee; and the investor
+has the ability to use its power to affect its returns. When
+performing the assessment of whether the Group has
+control of structured entities, the Group considers several
+factors including, among other things, the scope of its
+decision-making authority over the structured entities, the
+rights held by other parties, the remuneration to which it
+is entitled in accordance with the related agreements for
+the assets management services and the Group's exposure
+to variability of returns from interests that it holds in the
+structured entities.
+The structured entities include the wealth management
+products, asset management schemes, mutual funds,
+etc. as disclosed in note 65 in the consolidated financial
+statements.
+We identified consolidation of structured entities as an
+area of key audit matter since significant judgment is
+applied by management to determine whether the Group
+has control of structured entities and the consolidation of
+structured entities or not significantly affects most of the
+accounts in the consolidated financial statements.
+Consolidation of Structured Entities
+Significant estimates applied in fair value of financial
+instruments and the disclosure of fair value are set out
+in notes 5(5) and 61(g) to the consolidated financial
+statements.
+As at December 31, 2018, as set out in note 61(g) the
+Group's financial assets and financial liabilities at fair
+value totalled RMB958,339 million and RMB80,670 million
+respectively, accounting for 14% and 1% of total assets
+and liabilities of the Group respectively.
+We identified the valuation of financial instruments as a
+key audit matter due to the materiality of the balances
+and the complexity involved in valuing certain financial
+instruments, of which significant judgement and estimation
+are required in determining the valuation technique and
+the inputs used in the valuation models.
+The valuation of the Group's financial instruments,
+measured at fair value, is based on a combination of
+market data and valuation models which require a
+considerable number of inputs. Most of these inputs are
+obtained from readily available data, in particular for
+level 1 and level 2 financial instruments, the valuation
+techniques for which use quoted market prices and
+observable inputs, respectively. Where observable data
+is not readily available, as in the case of level 3 financial
+instruments, estimates are required to determine the
+unobservable inputs, which involve significant management
+judgement.
+Valuation of financial instruments
+Key audit matter
+Key Audit Matters (continued)
+DTTHK(A)(19)100046
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+132
+131
+With the support of our internal modelling specialist,
+we assessed the reasonableness of the key definitions,
+parameters and assumptions used in the ECL model. This
+included assessing stage allocation, probability of default,
+loss given default, exposure at default and forward-looking
+information. We selected samples to conduct credit reviews
+in order to assess whether the SICR and impairment events
+were occurred and were appropriately recognized without
+delay. In addition, we tested the input data samples of the
+ECL model to evaluate the completeness and accuracy of the
+data input. We also tested the calculation of the ECL model
+on a sample basis. For the loans and advances at amortised
+cost and debt investments at amortised cost at stage 3,
+we selected samples to test the reasonableness of future
+cash flows estimated by the Group, including the expected
+recoverable amount of collateral, to assess whether there
+were significant misstatements in the loss allowance.
+(ii) Appropriations to regulatory
+7,523
+(4)
+surplus reserve
+For the year ended 31 December 2018
+(Expressed in millions of Renminbi unless otherwise stated)
+At 31 December 2017
+Adjustments of application of accounting
+2018
+Other
+Notes
+Total equity attributable to equity shareholders of the Bank
+Investment
+Share equity Capital revaluation Hedging Surplus
+capital instruments reserve
+25,220 34,065 67,523
+Non-controlling interests
+Regulatory
+general Retained
+Proposed
+Perpetual Non-
+profit Exchange
+debt controlling
+reserve reserve reserve
+(3,812) (86) 46,159
+reserve
+profits appropriations
+(6,902)
+(6,902)
+(9,270)
+2,368
+3
+2,012 483,392
+Consolidated Statement of Changes in Equity
+1,170
+21,185
+70,921 219,878
+interest Total
+capital
+Subtotal
+reserve
+(843) 480,210
+25,220
+Annual Report 2018
+China Merchants Bank
+53,682
+46,159
+52
+78,542
+70,921
+250,654
+219,878
+53(b)
+23,707
+21,185
+54
+1,130
+(843)
+540,118
+480,210
+3,487
+3,182
+Company Chop
+Tian Huiyu
+Director
+Li Jianhong
+Director
+Approved and authorised for issue by the Board of Directors on 22 March 2019.
+The notes form part of these consolidated financial statements.
+Total equity and liabilities
+IX Financial Statements
+6,297,638
+543,605
+6,745,729
+1,170
+1,158
+63(a)
+2,012
+2,329
+483,392
+51
+130
+80,560
+1,973
+6,972
+195 80,819
+64
+80,560
+317 67,115
+(12)
+1,973 66,810
+2,522
+40,046
+9,094
+7,621
+6,976
+2,012 476,490
+1,170
+(843) 473,308
+21,185
+210,608
+70,921
+(86) 46,159
+(1,444)
+34,065 67,523
+149 7,523
+(12)
+149
+6,972
+(i) Appropriations to statutory
+(d) Profit appropriations
+(ii) Decrease in non-controlling interests
+owned subsidiaries
+contribution to non-wholly
+(i) Non-controlling shareholders'
+(c) Capital contribution from equity holders
+Total comprehensive income for the year
+(b) Other comprehensive income for the year 16
+35 9,117
+Changes in equity for the year
+At 1 January 2018
+(a) Net profit for the year
+91
+149
+policy changes
+1,973
+89,654
+80,560
+52
+350
+230 89,936
+91
+9
+(17,492)
+(16,336)
+2,173
+Proceeds from the disposal of subsidiaries, associates, joint venture
+Proceeds from other investing activities
+Payment for the purchase of properties and equipment and other assets
+Proceeds from the disposal of properties and equipment and other assets
+191
+67
+803,283
+1,785
+19,718
+(84,471)
+The notes form part of these consolidated financial statements.
+141
+142
+(606)
+Net cash generated from(used in) investing activities
+(2,154)
+Payment for the purchase of subsidiaries, associates, joint venture
+(561)
+(11,390)
+336,329
+262,296
+Deposits and placements from banks and other financial institutions
+(87,461)
+(129,953)
+Balances and placements with banks and other financial institutions with
+original maturity over 3 months
+(21,311)
+30,597
+Borrowing from central bank
+(14,693)
+84,730
+Other liabilities
+(48,130)
+48,692
+20,833
+3,868
+25,174
+Income tax paid
+(39,589)
+(30,834)
+Net cash used in operating activities
+(35,721)
+(5,660)
+Investing activities
+Payment for the purchase of investments
+Proceeds from the disposal of investments
+(994,234)
+(923,275)
+980,939
+Cash generated from operating activities before tax
+Investments and net gains received from investments
+(322,105)
+(25,205)
+- Depreciation of properties and equipment and investment properties
+5,270
+5,062
+- Amortisation of other assets
+1,005
+724
+- Net gain on debt securities and equity investments
+(200)
+(729)
+- Interest income on investments
+- Interest expense on issued debt securities
+- Share of profits of associates
+- Share of profits of joint ventures
+- Net gains on disposal of properties and equipment
+(375,451)
+Changes in:
+Loans and advances to customers
+52,205
+Other assets
+Deposits from customers
+(48,267)
+(52,042)
+14,530
+13,436
+(37)
+(1,272)
+(995)
+(196)
+(127)
+91,162
+Balances with central bank
+(14,437)
+463 35,698
+- Unwind of discount
+(5,266) (67)
+459 70,638
+29
+70,150
+70,150
+1,000 80,030
+1,170
+77,860
+(2,359)
+2,522
+3,083 39,431
+(67) 6,451
+(5,266)
+34,065
+1,012 403,362
+(2,359)
+1,516 402,350
+(7,692)
+(5,266)
+owned subsidiaries
+contribution to non-wholly
+(i) Non-controlling shareholders'
+(c) Capital contribution from equity holders
+Total comprehensive income for the year
+(b) Other comprehensive income for the year 16
+1,170
+34,065
+34,065
+460 62,947
+29
+62,458
+(2,359)
+70,150
+(67)
+1 (7,691)
+25(iv)
+18,663
+(19) 39,708
+equity Capital
+Share
+Proposed
+Regulatory
+Investment
+Other
+Total equity attributable to equity shareholders of the Bank
+2017
+IX Financial Statements
+(a) Net profit for the year
+Changes in equity for the year
+At 1 January 2017
+China Merchants Bank
+Annual Report 2018
+140
+China Merchants Bank
+revaluation Hedging Surplus
+67,838 180,447
+general Retained
+Non-controlling interests
+1,454
+67,523
+25,220
+capital interests Total
+Subtotal
+reserve
+appropriations
+reserve profits
+reserve reserve reserve
+reserve
+instruments
+capital
+Notes
+debt controlling
+Perpetual Non-
+profit Exchange
+(ii) Decrease in non-controlling interests
+(ii) Capital injection from preference
+shareholders
+Note: (i) China Merchants Fund Management Co., Ltd. cancelled the dividends distribution scheme of the year 2016 in 2017.
+The notes form part of these consolidated financial statements.
+2,012 483,392
+1,170
+(843) 480,210
+21,185
+70,921 219,878
+(86) 46,159
+(3,812)
+34,065 67,523
+25,220
+At 31 December 2017
+21,185
+(21,185)
+(v) Proposed dividends for the year 2017
+(29)
+China Merchants Bank
+(29)
+IX Financial Statements
+Consolidated Cash Flow Statement
+(126)
+1,585
+- Impairment losses on investments and other assets
+60,052
+59,252
+- Impairment losses on loans and advances
+90,680
+106,497
+Adjustments for:
+Profit before tax
+Cash flows from operating activities
+2017
+2018
+(Expressed in millions of Renminbi unless otherwise stated)
+For the year ended 31 December 2018
+Annual Report 2018
+instruments
+(iv) Distribution to perpetual capital
+77 (18,586)
+(32)
+495
+495
+for the year 2016 (note(i))
+(ii) Dividends declared and paid
+52
+(ii) Appropriations to regulatory
+general reserve
+51
+surplus reserve
+(i) Appropriations to statutory
+(d) Profit appropriations
+instruments
+(iv) Issuance of perpetual capital
+34,065
+47
+(32)
+34,065
+34,065
+1,170
+1
+(18,663)
+(18,663)
+.
+.
+3,083 (3,083)
+(6,451)
+(307)
+6,451
+(29)
+(18,663)
+2,522
+(30,719)
+3,083
+6,451
+1,170
+77 (18,615)
+IX Financial Statements
+Payment for other financing activities
+Note
+IAS 39
+(1.1) Impacts from classification and measurement (continued)
+Impacts and changes in accounting policies of application on IFRS 9 Financial Instruments and the
+related amendments (continued)
+(1)
+(continued)
+New and revised IFRSS effective in the current period applied by the Group
+3. Application of new and amendments to IFRSS (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+IFRS 9
+146
+318,591
+(917)
+49,055
+205,657
+64,796
+IFRS 9
+(note (iii))
+From debt securities classified as receivables (note (iii))
+Remeasurement: from amortised cost to fair value
+From available-for-sale financial assets (note (ii))
+IAS 39
+Investments at FVTPL
+145
+136,828
+31 December
+Reclassification Remeasurement
+572,241
+Transfer to Debt investments at amortised cost (note (v))
+IFRS 9
+Transfer to Debt investments at FVTOCI
+Transfer to Investments at FVTPL (note (iii))
+IAS 39
+Debt securities classified as receivables
+(558,218)
+Transfer to Debt investments at amortised cost (note (vi))
+IFRS 9
+558,218
+IAS 39
+2017
+Held-to-maturity investments
+(1,648)
+(49,055)
+(331,498)
+383,101
+Transfer to Debt investments at amortised cost
+IFRS 9
+Transfer to Equity investments designated at FVTOCI
+Transfer to Debt investments at FVTOCI (note (iv))
+Transfer to Investments at FVTPL (note (ii))
+IAS 39
+Available-for-sale financial assets
+1 January
+2018
+(900)
+(205,657)
+(1,540)
+IFRS 9
+Remeasurement: from amortised cost to fair value
+(note (i))
+institutions
+76,896
+(22)
+76,918
+2018
+Reclassification Remeasurement
+2017
+1 January
+31 December
+IFRS 9
+IAS 39
+IAS 39
+IFRS 9
+Remeasurement: ECL
+IAS 39
+Balances with banks and other financial institutions
+The directors of the Bank reviewed and assessed the Group's financial assets as at 1 January 2018 based on
+the facts and circumstances that existed at that date. Changes in classification and measurement (including
+impairment) on the Group's financial assets and the impacts thereof are detailed below:
+(1.1) Impacts from classification and measurement
+Impacts and changes in accounting policies of application on IFRS 9 Financial Instruments and the
+related amendments (continued)
+(1)
+(continued)
+New and revised IFRSS effective in the current period applied by the Group
+Placements with banks and other financial
+(90)
+Remeasurement: ECL
+154,628
+136,918
+From loans and advances to customers at amortised
+cost (note (i))
+IAS 39
+Loans and advances to customers at FVTOCI
+3,276,771
+IFRS 9
+(923)
+Remeasurement: ECL
+(136,918)
+FVTOCI (note (i))
+IFRS 9
+Transfer to loans and advances to customers at
+IAS 39
+Loans and advances to customers at amortised cost
+251,940
+(610)
+252,550
+IFRS 9
+Remeasurement: ECL
+IAS 39
+154,579
+(49)
+3,414,612
+3. Application of new and amendments to IFRSS (continued)
+(365,044)
+IAS 39
+450
+IFRS 9
+Remeasurement: ECL
+IAS 39
+Provision
+52,331
+2,211
+IFRS 9
+Remeasurement
+50,120
+4,824
+IAS 39
+23,272
+IFRS 9
+(100)
+Transfer to Equity investments designated at FVTOCI
+23,372
+IAS 39
+Other assets
+9,326
+17
+28,180
+Deferred tax assets
+(546)
+5,274
+IAS 39
+Annual Report 2018
+(1)
+(continued)
+New and revised IFRSS effective in the current period applied by the Group
+3. Application of new and amendments to IFRSS (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+148
+147
+Investment revaluation reserve
+210,608
+219,878
+IFRS 9
+Remeasurement
+IAS 39
+Retained profits
+(1,444)
+IFRS 9
+2,368
+Remeasurement
+(3,812)
+(9,270)
+Debt investments at FVTOCI
+9,309
+2018
+Remeasurement: ECL
+365,044
+From Debt securities classified as receivables (note (v))
+558,218
+From Held-to-maturity investments (note (vi))
+900
+From Available-for-sale financial assets
+IAS 39
+Debt investments at amortised cost
+2,925
+Remeasurement: from fair value to amortised cost
+1,177
+IFRS 9
+Remeasurement: from cost to fair value
+From other assets
+From Available-for-sale financial assets
+Equity investments designated at FVTOCI
+IAS 39
+333,380
+342
+1,540
+331,498
+From Available-for-sale financial assets (note (iv))
+From Debt securities classified as receivables
+Remeasurement: from amortised cost to fair value
+IFRS 9
+1,648
+100
+28,726
+(2,670)
+2
+921,494
+2017 Reclassification Remeasurement
+1 January
+31 December
+IFRS 9
+IAS 39
+IFRS 9
+Remeasurement: ECL (note (vii))
+IAS 39
+Precious metals
+IFRS 9
+IFRS 9
+IAS 39
+Interest receivable
+(1.1) Impacts from classification and measurement (continued)
+Impacts and changes in accounting policies of application on IFRS 9 Financial Instruments and the
+related amendments (continued)
+(1)
+(continued)
+New and revised IFRSS effective in the current period applied by the Group
+3. Application of new and amendments to IFRSS (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+Remeasurement: ECL
+Annual Report 2018
+Amounts held under resale agreements
+China Merchants Bank
+The notes form part of these consolidated financial statements.
+Interest paid
+IX Financial Statements
+460,425
+543,683
+56(a)
+(4,219)
+4,928
+532,112
+460,425
+214,843
+(67,468)
+Net increase/decrease in cash and cash equivalents
+22,663
+94,333
+Cash and cash equivalents as at 31 December
+Cash and cash equivalents as at 1 January
+Effect of foreign exchange rate changes
+Net cash generated from financing activities
+(431)
+(14,483)
+(11,813)
+(18,692)
+78,330
+(22,912)
+188,045
+83,869
+22
+49
+610
+446
+546
+(17)
+Amounts remeasured through
+2.
+The principal activities of the Bank and its subsidiaries (the "Group") are providing corporate and personal banking
+services, conducting treasury business, providing asset management and other financial services.
+(2) Principal activities
+95,349
+As at 31 December 2018, apart from the Head Office, the Bank had 51 branches in the Mainland China, Hong
+Kong, New York, Singapore, Sydney and Luxembourg. In addition, the Bank has four representative offices in Beijing,
+London, New York and Taipei.
+China Merchants Bank Co., Ltd. (the "Bank") is a commercial bank incorporated in Shenzhen, the People's Republic
+of China (the "PRC"). With the approval of the China Securities Regulatory Commission (the "CSRC") of the PRC,
+the A-Shares of the Bank were listed on Shanghai Stock Exchange on 9 April 2002.
+Organisation
+Organisation and principal activities
+(1)
+1.
+(Expressed in millions of Renminbi unless otherwise stated)
+For the year ended December 31, 2018
+Notes to the Financial Consolidated Statements
+IX Financial Statements
+China Merchants Bank
+Annual Report 2018
+On 22 September 2006, the Bank's H-Shares were listed on the Main Board of The Stock Exchange of Hong Kong
+Limited (the "HKEX").
+investment revaluation
+reserve
+165
+990
+2,921
+Proceeds from other financing activities
+495
+125
+Proceeds from non-controlling shareholders
+34,065
+Proceeds from the issue of preferred shares
+1,170
+Proceeds from the issue of perpetual debt capital
+19,086
+Repayment of issued debt securities
+32,300
+559,795
+407,328
+of deposits
+Proceeds from the issue of negotiable interbank certificates
+52,449
+73,029
+Proceeds from the issue of debt securities
+Financing activities
+2017
+2018
+Proceeds from the issue of certificates of deposits
+(15,590)
+Repayment of negotiable interbank certificates of deposits
+(342,201)
+At 1 January 2018
+151,340
+180
+1,445
+7,065
+4,824
+13
+138
+184
+1,364
+559
+5
+(1.3) Impacts from Hedge accounting
+The Group applies the hedge accounting requirements of IFRS 9 prospectively. At the date of the initial
+application, hedging relationships that qualified for hedge accounting in accordance with IAS 39 are regarded
+as continuing hedging relationship if all qualifying criteria under IFRS 9 are met, after taking into account any
+rebalancing of the hedging relationship on transition. Consistent with prior periods, the Group has continued
+to designate several interest rate swap contracts as the hedging instrument for all of its hedging relationships
+involving interest rate risk. As such, the adoption of the hedge accounting requirements of IFRS 9 had not
+resulted in adjustments to comparative figures.
+149
+Dividends paid
+(32)
+(34)
+Payment for acquiring additional non-controlling equity
+(11,916)
+(28,389)
+Repayment of certificates of deposit
+(30,186)
+(569,088)
+4,824
+2,670
+Cash flows from operating activities include:
+Interest received
+923
+IX Financial Statements
+2.
+China Merchants Bank
+Annual Report 2018
+144
+143
+Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
+between market participants at the measurement date, regardless of whether that price is directly observable or
+estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes
+into account the characteristics of the asset or liability if market participants would take those characteristics into
+account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure
+purposes in these consolidated financial statements is determined on such a basis, except for share-based payment
+transactions that are within the scope of IFRS 2 Share-based Payment, leasing transactions that are within the scope
+of IAS 17 Lease, and measurements that have some similarities to fair value but are not fair value, such as net
+realisable value in IAS 2 Inventories or value in use in IAS 36 Impairment of Assets.
+The consolidated financial statements have been prepared on the historical cost basis except for financial instruments
+that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the
+accounting policies below.
+Unless otherwise stated, the consolidated financial statements are presented in Renminbi ("RMB"), which is the
+Group's functional and presentation currency, rounded to the nearest million.
+(2) Basis of measurement
+These consolidated financial statements have been prepared in accordance with International Financial Reporting
+Standards ("IFRSS") and its interpretations promulgated by the International Accounting Standards Board ("IASB"),
+and the disclosure requirements of the Hong Kong Companies Ordinance. These consolidated financial statements
+also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the HKEX.
+Basis of preparation of consolidated financial statements (continued)
+(2) Basis of measurement (continued)
+(1)
+Impacts and changes in accounting policies of application on IFRS 9 Financial Instruments and the
+related amendments (continued)
+(1.1) Impacts from classification and measurement (continued)
+Notes:
+(i)
+(ii)
+(iii)
+(iv)
+(v)
+(vi)
+Loans and advances to customers at amortised cost of RMB136,918 million were reclassified to loans and advances to customers at
+FVTOCI, as these loans and advances to customers are held within a business model whose objective is achieved by both collecting
+contractual cash flows and selling of these assets and the contractual cash flows of these loans are solely payments of principal
+and interest on the principal amount outstanding. Related fair value losses of RMB90 million was adjusted to loans and advances to
+customers at FVTOCI and revaluation reserve as at 1 January 2018.
+Basis of preparation of consolidated financial statements
+Statement of compliance and basis of preparation
+Available-for-sale investments of RMB49,055 million were reclassified to investments at FVTPL. This is because the cash flows of these
+investments did not represent solely payments of principal and interest on the principal amount outstanding.
+In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on
+the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to
+the fair value measurement in its entirety, which are described as follows:
+Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
+liability, either directly or indirectly; and
+Accounting policies resulting from application of IFRS 9 are disclosed in note 4(5).
+In the current year, the Group has applied IFRS 9 Financial Instruments and the related consequential
+amendments to other IFRSS. IFRS 9 introduces new requirements for 1) the classification and measurement of
+financial assets and financial liabilities, 2) expected credit losses ("ECL") for financial assets, contract assets,
+leases receivable, loan commitments and financial guarantee contracts, and 3) general hedge accounting.
+The Group has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9. i.e. applied the
+classification and measurement requirements (including impairment) retrospectively to instruments that have
+not been derecognised as at 1 January 2018 (date of initial application) and has not applied the requirements
+to instruments that have already been derecognised as at 1 January 2018. The difference between carrying
+amounts as at 31 December 2017 and the carrying amounts as at 1 January 2018 are recognized in the
+opening retained profits and investment revaluation reserve, without restating comparative information.
+Accordingly, certain comparative information may not be comparable in these consolidated financial
+statements.
+Impacts and changes in accounting policies of application on IFRS 9 Financial Instruments and the
+related amendments
+(1)
+The new and amendments to IFRSS have been applied in accordance with the relevant transition provisions in the
+respective standards and amendments which results in changes in accounting policies, amounts reported and/or
+disclosures as described below.
+As part of the annual Improvements to IFRS standards 2014-2016 Cycle
+Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
+Transfers of Investment Property
+Classification and Measurement of Share-based Payment Transactions
+Revenue from Contracts with Customers and the related Amendments
+Foreign Currency Transactions and Advance Consideration
+Financial Instruments
+Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
+access at the measurement date;
+Amendments to IAS 40
+Amendments to IAS 28
+Amendments to IFRS 2
+IFRIC 22
+IFRS 15
+IFRS 9
+New and revised IFRSS effective in the current period applied by the Group
+3. Application of new and amendments to IFRSS
+Judgements made by management in the application of IFRSS that have significant effect on the consolidated
+financial statements and estimates with a significant risk of material adjustment in the future period are discussed in
+Note 5.
+The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
+recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of
+the revision and future periods if the revision affects both current and future periods.
+Interest paid on financing activities
+Level 3 inputs are unobservable inputs for the asset or liability.
+Amendments to IFRS 4
+Debt securities classified as receivables of RMB205,657 million were reclassified to investments at FVTPL upon the application of IFRS
+9 because the contractual cash flows did not represent solely payments of principal and interest on the principal amount outstanding.
+The related fair value losses of RMB917 million was adjusted to investments at FVTPL and retained profits as at 1 January 2018.
+Available-for-sale investments of RMB331,498 million were reclassified to debt instruments at FVTOCI, as these investments are held
+within a business model whose objective is achieved by both collecting contractual cash flows and selling of these assets and the
+contractual cash flows of these investments are solely payments of principal and interest on the principal amount outstanding.
+The preparation of the financial statements in conformity with IFRSS requires management to make judgements,
+estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities,
+income and expenses. The estimates and associated assumptions are based on historical experience and various
+other factors that are believed to be reasonable under the circumstances, the results of which form the basis of
+making the judgements about carrying values of assets and liabilities that are not readily apparent from other
+sources. Actual results may differ from these estimates.
+Bonds previously classified as held-to-maturity investments were reclassified and measured at amortised cost upon application of IFRS
+9. The Group intends to hold the assets to maturity to collect contractual cash flows and these cash flows consist solely of payments
+of principal and interest on the principal amount outstanding.
+Interest Precious
+receivable
+metals
+At 31 December 2017
+- IAS 39
+150,432
+531
+4,302
+93
+116
+135
+and Amounts held
+other financial under resale
+institutions agreements
+754
+(15)
+15
+455
+4,395
+(531)
+(4,302)
+(93)
+Amounts remeasured through
+opening retained profits
+Debt securities classified as receivables of RMB365,044 million were reclassified and measured at amortised cost upon application
+of IFRS 9. The Group intends to hold the assets to maturity to collect contractual cash flows and these cash flows consist solely of
+payments of principal and interest on the principal amount outstanding.
+Reclassification
+classified as Held-to-maturity other financial
+receivables investments institutions
+22
+commitment
+(vii)
+financial assets
+The Group recognised a loss allowance for ECL on precious metals lease which are subject to impairment under IFRS 9.
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+3. Application of new and amendments to IFRSS (continued)
+(1)
+Impacts and changes in accounting policies of application on IFRS 9 Financial Instruments and the
+related amendments (continued)
+(1.2) Impacts from ECL
+As at 1 January 2018, the directors of the Bank reviewed and assessed the Group's existing financial
+assets, leases receivable, loan commitments and financial guarantee contracts etc. for impairment using
+reasonable and supportable information that is available without undue cost or effort in accordance with the
+requirements of IFRS 9.
+New and revised IFRSS effective in the current period applied by the Group
+(continued)
+at amortised
+cost
+Debt securities
+All loss allowances for financial assets, leases receivable, loan commitments and financial guarantee contracts
+etc. as at 31 December 2017 reconciled to the opening loss allowances as at 1 January 2018 are as follows:
+contracts
+and credit Available-for-sale
+Financial
+guarantee
+Debt
+investments
+Balances with
+banks and
+Debt
+instruments
+at FVTOCI
+Loans and
+advances to
+customers at
+FVTOCI
+Loans and
+advances to
+customers at
+amortised cost
+Placements
+with banks
+whether the decisions about the joint ventures' relevant activities require the unanimous consent of the
+parties sharing control.
+Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions
+about the relevant activities require the unanimous consent of the parties sharing control.
+When judge whether there is a joint control, the Group usually considers the following cases:
+whether any party within the joint arrangement cannot control the relevant activities of the joint ventures;
+A joint venture is an arrangement in which the Group has joint control, where by the Group has rights to the net
+assets of the arrangement, rather than rights to its assets and obligation for its liabilities.
+Unrealised profits and losses resulting from transactions between the Group and its joint ventures are eliminated
+to the extent of the Group's interest in the joint ventures, except where unrealised losses provide evidence of an
+impairment of the asset transferred, in which case they are recognised immediately in profit or loss.
+Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group's share
+of the acquisition-date fair value of the investee's identifiable net assets over the cost of the investment (if any).
+Thereafter, the investment is adjusted for the post acquisition change in the Group's share of the joint ventures' net
+assets. Any excess of the group's share of the net fair value of the identifiable assets and liabilities over the cost
+of the investments, is recognized immediately in profit or loss in the period in which investment is acquired. The
+consolidated statement of profit or loss includes post-tax results of the joint ventures for the year, including any
+impairment loss on goodwill relating to the investment in the joint ventures recognised for the year (see Notes 4(4)
+and 4(11)).
+ventures.
+Interests in the joint ventures are accounted for using the equity method. They are initially recognised at cost,
+which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the
+Group's share of the profit or loss and other comprehensive income of the joint ventures, until the date on which
+significant influence or joint control ceases.
+When the Group's share of losses exceeds its interest in the joint ventures, the Group's interest is reduced to nil and
+recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive
+obligations or made payments on behalf of the joint ventures. For these purposes, the Group's interest in the joint
+ventures is the carrying amount of the investment under equity method together with the Group's interests that in
+substance form part of the Group's net investment in the joint ventures.
+When the Group ceases to have joint control over a joint venture and no significant impact occurs, it is accounted
+for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in the
+consolidated statement of profit or loss, previous other comprehensive income would be reclassified to profit or loss.
+Any interest retained in that former investee at the date when joint control is lost is recognised at fair value and this
+amount is regarded as the fair value on initial recognition of a financial asset (see Note 4(5)).
+(2) Joint ventures
+The consolidated statement of profit or loss includes the Group's share of the results of joint ventures for the
+year and the consolidated statement of financial position includes the Group's share of the net assets of the joint
+Principal accounting policies (continued)
+Business combination
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+156
+155
+Non-controlling interests that represent ownership interests in the acquiree, and entitle their holders to a
+proportionate share of the entity's net assets in the event of liquidation are accounted for at either fair value or the
+non-controlling interests' proportionate share in the recognized amounts of the acquiree's identifiable net assets.
+The choice of measurement basis is made on a transaction-by-transaction basis.
+Goodwill is measured as the excess of the difference between (i) the consideration transferred, the fair value of
+any non-controlling interests in the acquiree, and the fair value of the Group's previously held equity interest in
+the acquiree (if any) and (ii) the net fair value of the identifiable assets acquired and the liabilities and contingent
+liabilities incurred or assumed.
+At the acquisition date, irrespective of non-controlling interests, the identifiable assets acquired and liabilities and
+contingent liabilities assumed are recognized at their fair values; except that deferred tax assets or liabilities, and
+assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS
+12 - Income Taxes and IAS 19 - Employee Benefits, respectively.
+Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a
+business combination is measured at fair value, which is calculated as the sum of the acquisition date fair value of
+the assets transferred by the Group, liabilities incurred or assumed by the Group, and any equity interests issued by
+the Group. Acquisition related costs are recognized in the consolidated income statement as incurred.
+When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary,
+with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at
+the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial
+recognition of a financial asset (see Note 4(5)) or, when appropriate, the cost on initial recognition of an investment
+in a joint venture (see Note 4(2)) or, an associate (see Note 4(3)).
+Changes in the Group's interests in a subsidiary that do not result in a loss of control are accounted for as equity
+transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within
+consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain
+or loss is recognised.
+China Merchants Bank
+An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control
+commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised
+profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements.
+Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Bank, and
+in respect of which the Group has not agreed any additional terms with the holders of those interests which would
+result in the group as a whole having a contractual obligation in respect of those interests that meets the definition
+of a financial liability. For each business combination, the Group can elect to measure any non-controlling interests
+either at fair value or at their proportionate share of the subsidiary's identifiable net assets. Non-controlling interests
+are presented in the consolidated statement of financial position and consolidated statement of changes in equity
+within equity, separately from equity attributable to the shareholders of the Bank. Non-controlling interests in the
+results of the Group are presented in the consolidated statement of profit or loss and the consolidated statement
+of profit or loss and other comprehensive income as an allocation of the net profit or loss and total comprehensive
+income for the year between non-controlling interests and the equity shareholders of the Bank.
+4.
+IX Financial Statements
+IX Financial Statements
+4. Principal accounting policies (continued)
+Financial statements include financial statements of the Bank and its subsidiaries. Subsidiaries are entities controlled
+by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement
+with the entity and has the ability to affect those returns through its power over the entity. When assessing whether
+the Group has power, only substantive rights (held by the Group and other parties) are considered.
+Initial recognition
+Financial instruments
+(5)
+4. Principal accounting policies (continued)
+Annual Report 2018
+China Merchants Bank
+158
+157
+On disposal of a CGU during the year, any attributable amount of purchased goodwill is included in the calculation
+of the profit or loss on disposal.
+Goodwill is stated at cost less accumulated impairment. Goodwill arising on a business combination is allocated
+to each cash-generating unit ("CGU") or groups of CGUs, that is expected to benefit from the synergies of the
+combination and is tested annually for impairment (see Note 4(11)).
+the net fair value of the acquiree's identifiable assets and liabilities measured as at the acquisition date.
+When (ii) is greater than (i), then this excess is recognized immediately in profit or loss as a gain on a bargain
+purchase.
+(ii)
+Annual Report 2018
+(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest
+based on the fair value of net assets acquired in the acquiree and the fair value of the Group's previously
+held equity interest in the acquiree; over
+(4) Goodwill
+When the Group ceases to have significant influence over an associate entity, it is accounted for as a disposal of the
+entire interest in that investee, with a resulting gain or loss being recognised in the consolidated statement of profit
+or loss, previous other comprehensive income would be reclassified to profit or loss. Any interest retained in that
+former investee at the date when significant influence is lost is recognised at fair value and this amount is regarded
+as the fair value on initial recognition of a financial asset (see Note 4(5)).
+Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the
+extent of the Group's interest in the associates, except where unrealised losses provide evidence of an impairment of
+the asset transferred, in which case they are recognised immediately in profit or loss.
+When the Group's share of losses exceeds its interest in the associates, the Group's interest is reduced to nil and
+recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive
+obligations or made payments on behalf of the associates. For these purposes, the Group's interest in the associates
+is the carrying amount of the investment under equity method together with the Group's interests that in substance
+form part of the Group's net investment in the associates.
+Thereafter, the investment is adjusted for the post acquisition change in the Group's share of the associates' net
+assets. Any excess of the group's share of the net fair value of the identifiable assets and liabilities over the cost
+of the investments, is recognized immediately in profit or loss in the period in which investment is acquired. The
+consolidated statement of profit or loss includes the Group's post-tax results of the associates for the year, including
+any impairment loss on goodwill relating to the investment in the associates recognised for the year (see Notes 4(4)
+and 4(11)).
+Investments in associates are accounted for in the consolidated financial statements under the equity method. Under
+the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group's share of the
+acquisition-date fair value of the investee's identifiable net assets over the cost of the investment (if any).
+material transactions between the entity and its investee.
+participation in policy-making processes;
+representation on the Board of Directors or equivalent governing body of the investee;
+When judging whether there is a significant influence, the Group usually considers the following cases:
+Significant influence is the power to participate in the financial and operating policy decisions of the investee but is
+not control or joint control of those policies.
+Associate is an entity in which the Group has significant influence, but not control, or joint control, including
+participation in the financial and operating policy decisions.
+(3) Associates
+Goodwill represents the excess of
+(1) Subsidiaries and non-controlling interests and business combination
+6,295,560
+4.
+18,916
+Debt investments at amortised cost
+921,494
+921,494
+Debt investments at fair value through
+other comprehensive income
+333,380
+333,380
+18,916
+Equity investments designated
+comprehensive income
+2,925
+2,925
+Available-for-sale financial assets
+383,101
+(383,101)
+Held-to-maturity investments
+558,218
+at fair value through other
+(558,218)
+Derivative financial assets
+253,795
+154,628
+(49)
+154,579
+Amounts held under resale agreements
+252,550
+(610)
+251,940
+Loans and advances to customers
+318,591
+3,414,612
+3,413,599
+Interest receivable
+28,726
+(546)
+28,180
+Investments at fair value through
+profit or loss
+64,796
+(1,013)
+other financial institutions
+Debt securities classified as receivables
+(572,241)
+Other assets
+23,248
+(100)
+23,148
+Total assets
+6,297,638
+(2,078)
+6,295,560
+52,331
+151
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+3. Application of new and amendments to IFRSS (continued)
+New and revised IFRSS effective in the current period applied by the Group
+(continued)
+(3)
+Impacts opening consolidated statement of financial position arising from the application of all new
+standards, amendments (continued)
+Liabilities
+152
+572,241
+2,211
+9,954
+Interests in joint ventures
+5,183
+5,183
+Interests in associates
+Investment properties
+Property and equipment
+Intangible assets
+Goodwill
+50,120
+Deferred tax assets
+20
+1,612
+1,612
+49,812
+49,812
+7,255
+7,255
+9,954
+20
+31 December
+Placements with banks and
+(22)
+it has been acquired principally for the purpose of selling in the near term; or
+•
+A financial asset is classified as held for trading if:
+All other financial assets are subsequently measured at fair value through profit or loss ("FVTPL"), except that at
+the date of initial application/initial recognition of a financial asset the Group may irrevocably elect to present
+subsequent changes in fair value of an equity investment, which is not held for trading, in other comprehensive
+income ("OCI").
+the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
+of principal and interest on the principal amount outstanding.
+the financial asset is held within a business model whose objective is achieved by both collecting contractual
+cash flows and selling; and
+•
+•
+•
+Debt instruments that meet the following conditions are subsequently measured at fair value through other
+comprehensive income ("FVTOCI"):
+•
+the financial asset is held within a business model whose objective is to collect contractual cash flows; and
+•
+Debt instruments that meet the following conditions are subsequently measured at amortised cost:
+The Group classifies its financial assets into the following measurement categories at initial recognition: financial
+assets at amortised cost; financial assets fair value through other comprehensive income; and financial assets at fair
+value through profit or loss.
+Classification and measurement of financial assets
+The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability
+and of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate
+that exactly discounts estimated future cash receipts and payments (including all fees and points paid or received
+that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through
+the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net
+carrying amount on initial recognition.
+At initial recognition, financial assets and financial liabilities are initially measured at fair value except for trade
+receivables arising from contracts with customers which are initially measured in accordance with IFRS 15 since
+1 January 2018. Transaction costs that are directly attributable to the acquisition or issue of financial assets and
+financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to
+or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
+Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through
+profit or loss are recognised immediately in profit or loss.
+the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
+of principal and interest on the principal amount outstanding ("SPPI").
+All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular
+way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame
+established by regulation or convention in the market place.
+on initial recognition it is a part of a portfolio of identified financial instruments that the Group manages
+together and has a recent actual pattern of short-term profit-taking; or
+it is a derivative that is not designated and effective as a hedging instrument.
+159
+Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as
+FVTOCI are measured at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting
+period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss
+includes any dividend or interest earned on the financial asset and is included in the "other net income" line item.
+Financial assets at FVTPL
+Dividends from these investments in equity instruments are recognised in profit or loss when the Group's right
+to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the
+investment. Dividends are included in the "other net income" line item in profit or loss.
+At the date of initial application/initial recognition, the Group may make an irrevocable election (on an
+instrument-by-instrument basis) to designate investments in equity instruments which are not held for trading as
+at FVTOCI. Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs.
+Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised
+in OCI and accumulated in the investment revaluation reserve; and are not subject to impairment assessment. The
+cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, and will be
+transferred to retained profits.
+Equity instruments designated as at FVTOCI
+Subsequent changes in the carrying amounts for debt instruments and loans and advances to customers classified
+as at FVTOCI as a result of interest income calculated using the effective interest method, foreign exchange gains
+and losses are recognised in profit or loss. All other changes in the carrying amount of debt instruments and loan
+and advances to customers are recognised in OCI and accumulated under the heading of investment revaluation
+reserve. Impairment losses are recognised in profit or loss with corresponding adjustment to OCI without reducing
+the carrying amounts of debt instruments and loan and advances to customers. The amounts that are recognised
+in profit or loss are the same as the amounts that would have been recognised in profit or loss if debt instruments
+and loan and advances to customers had been measured at amortised cost. When debt instruments and loan
+and advances to customers are derecognised, the cumulative gains or losses previously recognised in investment
+revaluation reserve are reclassified to profit or loss.
+Debt instruments and loans and advances to customers classified as at FVTOCI
+•
+Interest income is recognised using the effective interest method for financial assets measured subsequently at
+amortised cost and debt instruments/receivables subsequently measured at FVTOCI. Interest income is calculated
+by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets
+that have subsequently become credit-impaired. For financial assets that have subsequently become credit-impaired,
+interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset from
+the next reporting period. If the credit risk on the credit impaired financial instrument improves so that the financial
+asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross
+carrying amount of the financial asset from the beginning of the reporting period following the determination that
+the asset is no longer credit impaired.
+Classification and measurement of financial assets (continued)
+(5) Financial instruments (continued)
+4. Principal accounting policies (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
+In addition, the Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria
+Amortised cost and interest income
+76,896
+A financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial liability or
+equity instrument of another enterprise.
+China Merchants Bank
+1 January
+IFRS 9
+IFRS 15
+2018
+Assets
+Cash
+16,412
+16,412
+31 December
+2017
+Precious metals
+17
+9,326
+Balances with central bank
+600,007
+600,007
+Balances with banks and
+other financial institutions
+76,918
+9,309
+150
+As a result of the changes in the Group's accounting policies as described above, the opening consolidated
+statement of financial position had to be adjusted. The following table show the adjustments recognised for
+each individual line item.
+(3)
+IX Financial Statements
+Annual Report 2018
+3. Application of new and amendments to IFRSS (continued)
+New and revised IFRSS effective in the current period applied by the Group
+(continued)
+(2)
+Impacts and changes in accounting policies of application on IFRS 15
+The Group has applied IFRS 15 for the first time in the current annual period. IFRS 15 superseded IAS 18
+Revenue and the related interpretations. In accordance with the transition provisions in IFRS 15, the Group
+has elected to apply the Standard retrospectively only to contracts that are not completed at 1 January 2018
+and has used the practical expedient for all contract modifications that occurred before the date of initial
+application. Accordingly, certain comparative information may not be comparable as comparative information
+was prepared under IAS 18 and the related interpretations.
+Impacts opening consolidated statement of financial position arising from the application of all new
+standards, amendments
+There is no significant impact on retained profits on initial application of IFRS 15. At 1 January 2018,
+total deferred income RMB4,244 million were reclassified from other liabilities to contract liabilities upon
+application of IFRS 15.
+The accounting policies resulting from application of IFRS 15 are disclosed in notes 4(14).
+Except as described above, the application of other amendments to IFRSS in the current year has had no
+material effect on the amounts reported and/or disclosures set out in these consolidated financial statements.
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+3. Application of new and amendments to IFRSS (continued)
+New and revised IFRSS effective in the current period applied by the Group
+(continued)
+As at 31 December 2018, if the statement of financial position was presented without application of IFRS
+15, contract liabilities amounting to RMB5,607 million upon application of IFRS 15 would be presented and
+included in other liabilities.
+2017
+IFRS 9
+IFRS 15
+(2,078)
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+3. Application of new and amendments to IFRSS (continued)
+Standards and amendments that are not yet effective and have not been
+adopted by the Group
+IFRS 16
+Effective for annual
+6,297,638
+period beginning
+1 January 2019
+Leases
+Amendments to IFRS 9
+Prepayment Features with Negative Compensation
+1 January 2019
+IFRIC 23
+Uncertainty over Income Tax Treatments
+1 January 2019
+on or after
+Amendments to IAS 19
+476,490
+483,392
+(843)
+(843)
+Total equity attributable to equity
+shareholders of the Bank
+480,210
+(6,902)
+473,308
+Non-controlling interests
+(6,902)
+3,182
+- Non-controlling interests
+2,012
+2,012
+- Perpetual debt capital
+1,170
+1,170
+Total equity
+Total equity and liabilities
+3,182
+Exchange reserve
+Plan Amendment, Curtailment or Settlement
+Amendments to IAS 28
+IX Financial Statements
+Annual Report 2018
+3. Application of new and amendments to IFRSS (continued)
+Standards and amendments that are not yet effective and have not been
+adopted by the Group (continued)
+IFRS 16 Leases
+IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments
+for both lessors and lessees. IFRS 16 will supersede IAS 17 Leases and the related interpretations when it becomes
+effective.
+IFRS 16 distinguishes lease and service contracts on the basis of whether an identified asset is controlled by a
+customer. In addition, IFRS 16 requires sales and leaseback transactions to be determined based on the requirements
+of IFRS 15 as to whether the transfer of the relevant asset should be accounted as a sale. Distinctions of operating
+leases and finance leases are removed for lessee accounting, and are replaced by a model where a right-of-use asset
+and a corresponding liability have to be recognised for all leases by lessees, except for short-term leases and leases
+of low value assets.
+The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions)
+less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease
+liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently,
+the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst
+others. For the classification of cash flows, the Group currently presents upfront prepaid lease payments as investing
+cash flows in relation to leasehold lands for owned use and those classified as investment properties while other
+operating lease payments are presented as operating cash flows under IAS 17. Under IFRS 16, lease payments in
+relation to lease liability will be allocated into a principal and an interest portion which will be presented as financing
+cash flows.
+China Merchants Bank
+In contrast to lessee accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17,
+and continues to require a lessor to classify a lease either as an operating lease or a finance lease.
+Furthermore, extensive disclosures are required by IFRS 16.
+The application of new requirements may result in changes in measurement, presentation and disclosure as indicated
+above. The Group elected the practical expedient to apply IFRS 16 to contracts that were previously identified as
+leases applying IAS 17 and IFRIC-Int 4 Determining whether an Arrangement contains a Lease and not apply this
+standard to contracts that were not previously identified as containing a lease applying IAS 17 and IFRIC-Int 4.
+Therefore, the Group will not reassess whether the contracts are, or contain a lease which already existed prior to
+the date of initial application.
+In addition, the Group also elected to use the following practical expedients when applying this Standard
+retrospectively in accordance with IFRS 16 to leases previously classified as operating leases applying IAS 17:
+Applying a single discount rate to a portfolio of leases with reasonably similar characteristics.
+Exclude initial direct costs from the measurement of the right-of-use asset at the date of initial application.
+Using hindsight, such as in determining the lease term if the contract contains options to extend or terminate
+the lease.
+Furthermore, the Group elected the modified retrospective approach for the application of IFRS 16 as lessee and
+recognised the cumulative effect of initial application to opening retained profits without restating comparative
+information. Based on the assessment by the Group, the adoption of IFRS 16 would not have a material impact on
+retained earnings of the Group at 1 January 2019.
+China Merchants Bank
+Annual Report 2018
+IX Financial Statements
+As at 31 December 2018, the Group has non-cancellable operating lease commitments of RMB14,548 million as
+disclosed in note 59(c). Under IFRS 16, the Group will recognise a right-of-use asset and a corresponding liability in
+respect of all these leases unless they qualify for low value or short-term leases.
+1 January 2019
+154
+The above new and amendments to IFRSS have been effective for the year beginning on or after 1 January 2019,
+and have not been used in advance in the consolidated financial statements of this year. Except for the new and
+amendments to IFRSS mentioned below, the Group anticipates that the application of all other new and amendments
+to IFRSS will have no material impact on the consolidated financial statements in the foreseeable future.
+Long-term Interests in Associates and Joint Ventures
+1 January 2019
+Amendments to IFRSS
+Annual Improvements to IFRS standards 2015-2017 Cycle
+1 January 2019
+IFRS 17
+Insurance Contracts
+1 January 2021
+153
+Sale or Contribution of Assets between an Investor and
+its Associate or Joint Venture
+Definition of Material
+Amendments to IFRS 10
+and IAS 28
+Amendments to IFRS 3
+Amendments to IAS 1
+and IAS 8
+1 January 2020
+Note: (i) Effective for business combinations and asset acquisitions for which the acquisition date is on or after the beginning of the first annual
+period beginning on or after 1 January 2020.
+a date to be determined
+Note (i)
+Definition of a Business
+21,185
+21,185
+Proposed profit appropriations
+21,857
+125,620
+4,064,345
+Interest payable
+36,501
+36,501
+Salaries and welfare payable
+8,020
+4,064,345
+8,020
+26,701
+26,701
+Contract liabilities
+4,244
+4,244
+Provision
+450
+4,824
+Tax payable
+5,274
+Deposits from customers
+agreements
+1 January
+2018
+Borrowing from central bank
+414,838 3 - - 414,838
+Deposits from banks and other
+financial institutions
+439,118
+Placements from banks and other
+financial institutions
+125,620
+272,734
+through profit or loss
+26,619
+- 439,118
+272,734
+26,619
+Derivative financial liabilities
+21,857
+Amounts sold under repurchase
+Financial liabilities at fair value
+Debt securities issued
+296,477
+296,477
+67,523
+Investment revaluation reserve
+(3,812)
+2,368
+(1,444)
+Hedging reserve
+(86)
+(86)
+67,523
+Surplus reserve
+46,159
+Regulatory general reserve
+70,921
+70,921
+Retained profits
+219,878
+(9,270)
+210,608
+46,159
+Capital reserve
+34,065
+34,065
+Deferred tax liabilities
+1,070
+1,070
+Other liabilities
+Total liabilities
+Equity
+79,896
+(4,244)
+75,652
+5,814,246
+4,824
+5,819,070
+Share capital
+25,220
+25,220
+Other equity instruments
+34,065
+34,065
+Including: Preference shares
+Principal accounting policies
+Annual Report 2018
+IX Financial Statements
+Balances and placements with banks and other financial institutions
+The Group recognises a loss allowance for ECL on financial assets which are subject to impairment under IFRS 9
+(including financial assets at amortised cost, debt instruments assets at fair value through other comprehensive
+income), leases receivable, loan commitments and financial guarantee contracts etc. The amount of ECL is updated
+at each reporting date to reflect changes in credit risk since initial recognition.
+Impairment under ECL model
+(5) Financial instruments (continued)
+4. Principal accounting policies (continued)
+Banks represent other banks approved by the People's Bank of China ("PBOC") and other authorities. Other financial
+institutions represent finance companies, insurance companies, investment trust companies and leasing companies
+which are registered with and under the supervision of the China Banking and Insurance Regulatory Commission
+(the "CBIRC") and securities firms and investment fund companies, etc. which are registered with and under the
+supervision of other regulatory authorities. Balances and placements with banks and other financial institutions are
+accounted for as loans and receivables.
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+4. Principal accounting policies (continued)
+(5)
+Financial instruments (continued)
+The Group assesses the ECL of financial assets with forward-looking information. 12-month ECL ("12m ECL")
+represents the portion of lifetime ECL that is expected to result from default events that are possible within 12
+months after the reporting date. In contrast, lifetime ECL represents the ECL that will result from all possible default
+events over the expected life of the relevant instrument. Assessment are done based on the factors that are specific
+to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date
+as well as the forecast of future conditions.
+Specific items (continued)
+Amounts for purchase of financial assets under resale agreements are accounted for under "amounts held under
+resale agreements". Amounts from sale of financial assets under repurchase agreements are accounted for under
+"amounts sold under repurchase agreements".
+Cash equivalents comprise balances with banks and the central bank, and short-term, highly liquid investments
+that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in
+value, having been within three months of maturity at acquisition.
+The difference between the purchase and resale consideration or sale and repurchase consideration is amortised over
+the period of the transaction using the effective interest method and is included in interest income or expense (as
+appropriate).
+Investments
+Equity investments are accounted for as financial assets at fair value through profit or loss or equity investments
+designated at fair value through other comprehensive income. Debt investments are classified as financial assets at
+fair value through profit or loss, debt investments at amortised cost, debt investments at fair value through other
+comprehensive income in accordance with the entity's business model, contractual cash flow characteristics and the
+fair value option.
+Loans and advances to customers
+Loans and advances directly granted by the Group to customers, participation in syndicated loans and finance leases
+receivables are accounted for as loans and advances to customers.
+Loans and advances to customers are classified as loans and advances customers at fair value through profit or loss
+(loans and advances customers at FVTPL), loans and advances customers at amortised cost, loans and advances
+customers at fair value through other comprehensive income (loans and advances customers at FVTOCI) in
+accordance with the entity's business model, contractual cash flow characteristics and the fair value option.
+Derivative financial instruments
+The Group's derivative financial instruments mainly include forward, foreign currency swaps, interest rate swaps and
+option contracts undertaken in response to customers' needs or for the Group's own asset and liability management
+purposes. To hedge against risks arising from derivative transactions undertaken for customers, the Group enters
+into similar derivative contracts with other banks.
+Derivative financial instruments are stated at fair value, with gains and losses arising recognised in the consolidated
+statement of profit or loss other than cash flow hedge, for cash flow hedge, the gains and losses arising from the
+effective hedging part recognised in other comprehensive income.
+Resale and repurchase agreements
+Embedded derivatives
+For the above financial instruments that apply the IFRS 9 Impairment Model of Financial Instruments, an assessment
+of whether credit risk has increased significantly since initial recognition is performed at each reporting period by the
+Group to determine whether to recognize lifetime ECL. When the credit risk of these financial instruments does not
+increase significantly after the initial recognition, the Group makes provision for credit losses according 12-month
+ECL; in the event of a significant increase in credit risk, the group makes provision for the credit losses in accordance
+with the ECL for the entire duration.
+In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk
+of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on
+the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both
+quantitative and qualitative information that is reasonable and supportable, including historical experience and
+forward-looking information that is available without undue cost or effort. The assessment of whether the credit risk
+has increased significantly are detailed in Note 61(a).
+such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
+otherwise arise; or
+A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial
+recognition if:
+it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective
+hedging instrument.
+on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
+together and has a recent actual pattern of short-term profit-taking; or
+it has been acquired principally for the purpose of repurchasing it in the near term; or
+A financial liability is classified as held for trading if:
+Financial liabilities are classified as at FVTPL when the financial liability is (i) held for trading or (ii) it is designated as
+at FVTPL.
+Financial liabilities at FVTPL
+All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
+Classification and measurement of financial liabilities
+(5) Financial instruments (continued)
+Significant increase in credit risk
+4. Principal accounting policies (continued)
+IX Financial Statements
+China Merchants Bank
+For investments in debt instruments and loans and advances to customers that are measured at FVTOCI, the loss
+allowance is recognised in OCI and accumulated in the investment revaluation reserve without reducing the carrying
+amounts of these financial assets. The loss allowance for loan commitments and financial guarantee contracts is
+recognised in profit or loss and accumulated in provision. The loss allowance for other financial assets which are
+subject to impairment under IFRS 9 is recognised in profit or loss through a loss allowance account.
+the cash flows that the Group expects to receive if the loan is drawn down.
+if the holder of the loan commitments draws down the loan, and
+For undrawn loan commitments, ECL is the present value of the difference between the contractual cash flows that
+are due to the Group:
+For a financial guarantee contract, the Group is required to make payments only in the event of a default by the
+debtor in accordance with the terms of the instrument that is guaranteed. Accordingly, the expected losses is the
+present value of the expected payments to reimburse the holder for a credit loss that it incurs less any amounts that
+the Group expects to receive from the holder, the debtor or any other party.
+For a lease receivable, the cash flows used for determining the ECL is consistent with the cash flows used in
+measuring the lease receivable in accordance with IAS 17 Leases.
+Generally, ECL is estimated as the difference between all contractual cash flows that are due to the Group in
+accordance with the contract and all the cash flows that the Group expects to receive, discounted at the effective
+interest rate determined at initial recognition.
+ECL is measured based on the probability of default, loss given default and the exposure at default. Measurement of
+ECL are detailed in Note 61(a).
+Measurement and recognition of ECL
+Annual Report 2018
+the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed
+and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk
+management or investment strategy, and information about the grouping is provided internally on that basis.
+Derivatives embedded in hybrid contracts that contain financial asset hosts within the scope of IFRS 9 are not
+separated. The entire hybrid contract is classified and subsequently measured in its entirety as either amortised cost
+or fair value as appropriate. Derivatives embedded in non-derivative host contracts that are not financial assets within
+the scope of IFRS 9 are treated as separate derivatives when they meet the definition of a derivative, their risks and
+characteristics are not closely related to those of the host contracts and the host contracts are not measured at
+FVTPL. Separated embedded derivatives are measured at fair value, with all changes in fair value recognised in profit
+or loss unless they form part of a qualifying cash flow hedging relationship. Separated embedded derivatives are
+presented in the statement of financial position together with the host contract.
+164
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+The Group writes off a financial asset when there is information indicating that the counterparty is in severe
+financial difficulty and there is no realistic prospect of recovery. A write-off constitutes a derecognition event.
+Any subsequent recoveries are recognised in profit or loss.
+Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the
+lower of the original carrying amount of the asset and the maximum amount of consideration that the Group
+could be required to repay.
+Where the Group has transferred its rights to receive cash flows from an asset or has retained its rights
+to receive cash flows from the asset but has entered into a pass-through arrangement, and has neither
+transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the
+asset, the asset is recognised to the extent of the Group's continuing involvement in the asset.
+has retained its rights to receive cash flows from the asset but has assumed an obligation to pay them
+in full without material delay to a third party under a "pass-through" arrangement; and either the
+Group has transferred substantially all the risks and rewards of ownership of the financial asset; or the
+Group has neither transferred nor retained substantially all the risks and rewards of ownership of the
+financial asset, but has transferred control of the asset.
+the Group has transferred its rights to receive cash flows from the asset; or
+the rights to receive cash flows from the asset have expired; or
+A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)
+is derecognised when:
+Financial Assets
+4. Principal accounting policies (continued)
+(a)
+The Group classifies preference shares issued as an equity instrument. Fees, commissions and other transaction costs
+of preference shares issuance are deducted from equity. The dividends on preference shares are recognised as profit
+distribution at the time of declaration.
+Preference shares: At initial recognition, the Group classifies the preference shares issued or their components
+as financial liabilities or equity instruments based on their contractual terms and their economic substance after
+considering the definition of financial liabilities and equity instruments.
+Perpetual debt capitals issued that should be classified as equity instruments are recognised in equity based on
+the actual amount received. Any distribution of interests during the instruments' duration is treated as profit
+appropriation. When the perpetual debt capitals are redeemed, the redemption price is charged to equity.
+If the financial instrument will or may be settled in the Group's own equity instruments, it is a non-derivative
+instrument that includes no contractual obligations for the Group to deliver a variable number of its own
+equity instruments; or a derivative that will be settled only by the Group exchanging a fixed amount of cash
+or another financial asset for a fixed number of its own equity instruments.
+(!!)
+(i) The financial instrument includes no contractual obligation to deliver cash or another financial asset to
+another entity, or to exchange financial assets or financial liabilities with another entity under conditions that
+are potentially unfavorable to the Group; and
+A financial instrument is an equity instrument if, and only if, both conditions (i) and (ii) below are met:
+Perpetual debt capitals: At initial recognition, the Group classifies the perpetual debt capitals issued or their
+components as financial liabilities or equity instruments based on their contractual terms and their economic
+substance after considering the definition of financial liabilities and equity instruments.
+The consideration received from the issuance of equity instruments net of transaction costs is recognised in
+shareholders' equity. Consideration and transaction costs paid by the Group for repurchasing self-issued equity
+instruments are deducted from shareholders' equity.
+Equity instruments
+Specific items (continued)
+Derecognition of financial instruments
+163
+(5) Financial instruments (continued)
+(b)
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+4. Principal accounting policies (continued)
+4.
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+166
+165
+Financial assets and liabilities are offset and the net amount reported in the statement of financial position when
+there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis
+or realize the asset and settle the liability simultaneously.
+Derecognition of financial instruments (continued)
+Offsetting financial instruments
+Financial liabilities
+(d)
+The derecognition of financial assets sold on condition of repurchase is determined by the economic
+substance of the transaction. If a financial asset is sold under an agreement to repurchase the same or
+substantially the same asset at a fixed price or at the sale price plus a reasonable return, the Group will not
+derecognise the asset. If a financial asset is sold together with an option to repurchase the financial asset
+at its fair value at the time of repurchase (in case of transferor sells such financial asset), the Group will
+derecognise the financial asset.
+Sales of assets on condition of repurchase
+(c)
+when the Group neither transfers nor retains substantially all the risks and rewards of ownership
+of the financial assets, the Group would determine whether it has retained control of the financial
+assets. If the Group has not retained control, it shall derecognise the financial assets and recognise
+separately as assets or liabilities any rights and obligations created or retained in the transfer. If the
+Group has retained control, it shall continue to recognise the financial assets to the extent of its
+continuing involvement in the financial assets.
+when the Group retains substantially all the risks and rewards of ownership of the financial assets, the
+Group shall continue to recognise the financial assets; and
+when the Group transfers substantially all the risks and rewards of ownership of the financial assets,
+the Group shall derecognise the financial assets;
+When applying the policies on securitised financial assets, the Group has considered both the degree of
+transfer of risks and rewards on the transferred financial assets and the degree of control exercised by the
+Group over the transferred financial assets:
+As part of its operational activities, the Group securities financial assets, generally through the sale of these
+assets to structured entities which issue securities to investors. Interests in the securitised financial assets may
+be retained in the form of senior or junior tranches, or other residual interests (retained interests).
+When a securitisation of financial assets does not qualify for derecognition, the relevant financial assets are
+not derecognised, and the consideration collected from third parties are recorded as a financial liability.
+When the securitisation results in derecognisation or partial derecognisation of financial assets, the Group
+allocates the carrying amount of the transferred financial assets between the financial assets derecognised
+and the retained interests based on their relative fair values at the date of the transfer. Gains or losses on
+securitisation, which is the difference between the consideration received and the allocated carrying amount
+of the financial assets derecognised, are recorded in "other net income". The retained interests continue to
+be recognised on the same basis before the securitisation.
+Securitisation
+A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired.
+Financial liabilities at amortised cost
+Financial liabilities including borrowing from central bank, deposits from banks and other financial institutions,
+placements from banks and other financial institutions, amounts sold under repurchase agreements, deposits from
+customers are subsequently measured at amortised cost, using the effective interest method.
+Hedge accounting
+Insurance contracts classification
+(10) Insurance contracts
+Principal accounting policies (continued)
+4.
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+168
+167
+Property, equipment and investment property leased out under operating leases are depreciated in accordance with
+the depreciation policies described in Note 4(6) and if impaired, impairment losses are provided for in accordance
+with the accounting policy described in Note 4(11). Income derived from operating leases is recognised in the
+consolidated statement of profit or loss using the straight-line method over the lease term. If initial direct costs
+incurred in respect of the assets leased out are material, the costs are initially capitalised and subsequently amortised
+in profit or loss over the lease term on the same basis as the lease income. Otherwise, the costs are charged to profit
+or loss immediately. Contingent lease income is charged to profit or loss in the accounting period in which they are
+incurred.
+Assets leased out under operating leases
+Insurance contracts are those contracts under which the Group has accepted significant insurance risk, relative to an
+insured event or occurrence. When necessary, the Group enters into reinsurance contracts to transfer insurance risks
+to reinsurer. A significant insurance risk test is performed at inception of the insurance contracts.
+Rental payments under operating leases are recognised as costs or expenses on a straight-line basis over the lease
+term. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.
+Operating leases
+Where the Group is a lessor under finance leases, an amount representing the net investment in the lease is included
+in the consolidated statement of financial position as "loans and advances to customers". Unrecognised finance
+income under finance leases are amortised using an effective interest rate method over the lease term. Impairment
+losses are accounted for in accordance with the accounting policy as set out in Note 4(5).
+Finance leases
+Lease is classified into finance and operating lease. A finance lease is a lease that transfers substantially all the risks
+and rewards incidental to ownership of an asset. Title may or may not eventually be transferred. An operating lease
+is a lease other than a finance lease.
+Classification
+(9) Finance and operating lease
+Core deposit
+28 years
+Both the periods and method of amortisation are reviewed annually.
+Software and Others
+2~20 years
+30~50 years
+Land use right
+Assets leased in under operating leases
+The amortization period of intangible assets is as follow:
+Insurance income recognition
+Insurance contract liabilities
+China Merchants Bank
+160
+169
+Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated
+reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is
+remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or
+more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits
+is remote.
+Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive
+obligation arising as a result of a past event, it is highly probable that an outflow of economic benefits will be
+required to settle the obligation and a reliable estimate can be made. Where the time value of money is material,
+provisions are stated at the present value of the expenditures expected to settle the obligation.
+Other provisions and contingent liabilities
+Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to
+reimburse the beneficiary of the guarantee (the holder) for a loss the holder incurs because a specified debtor fails to
+make payment when due in accordance with the terms of a debt instrument. The provision of financial guarantees
+issued is confirmed in the statement of financial position in accordance with note 4 (5).
+Financial guarantees issued
+(13) Financial guarantee issued, provisions and contingent liabilities
+Precious metals that are not related to the Group's trading activities are initially measured at acquisition cost and
+subsequently measured at the lower of cost and net realizable value. Precious metals that are related to the Group's
+trading activities are initially recognized at fair value, with changes in fair value arising from re-measurement
+recognized directly in the consolidated statement of profit or loss in the period in which they arise.
+(12) Precious metals
+Premiums from long-term life insurance contracts are recognized as revenue when due from policy holders.
+Premiums related to short-term non-life insurance contracts are recognized when received at the inception of the
+policy, as unearned insurance premiums in the consolidated statement of financial position, and are amortized
+on a straight-line basis into the consolidated income statement over the term of the policy. When the Group has
+transferred insurance risk through reinsurance contracts, the Group calculates the amount of premium ceded and
+the reinsurers' share of expenses and recognizes them through the consolidated income statement in accordance
+with the terms of the reinsurance contracts.
+An impairment loss is recognised in the consolidated statement of profit or loss whenever the carrying
+amount of an asset, or the cash-generating unit to which it belongs exceeds its recoverable amount.
+Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying
+amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the
+carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the
+carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use,
+if determinable.
+(11) Impairment on tangible, intangible assets other than impairment under ECL
+model (continued)
+4. Principal accounting policies (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+The recoverable amount of an asset or a cash-generating unit is the greater of its fair value net disposal
+expense and the present value of future cash flow. In assessing value in use, the estimated future cash flows
+are discounted to their present value using a pre-tax discount rate that reflects current market assessments
+of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows
+largely independent of those from other assets, the recoverable amount is determined for the smallest group
+of assets that generates cash inflows independently (i.e. a cash-generating unit).
+Calculation of recoverable amount
+If any such indication exists, the asset's recoverable amount is estimated. In addition, for goodwill, intangible assets
+that are not yet available for use and intangible assets that have indefinite useful lives, the recoverable amount is
+estimated by the Group at the end of the reporting period whether or not there is any indication of impairment.
+The carrying amount of tangible and intangible assets other than impairment under ECL model is reviewed
+periodically in order to assess whether the recoverable amount has declined below the carrying amount, including
+property and equipment, intangible assets, investment properties, interest in joint ventures, interest in associates,
+good will and other non-current assets. When such a decline has occurred, the carrying amount is reduced to the
+recoverable amount. The amount of impairment loss is recognised in the consolidated statement of profit or loss.
+The recoverable amount of an asset is the greater of its fair value less disposal expense and present value of future
+expected cash flow. In assessing value in use, the estimated future cash flows are discounted to their present values.
+Internal and external sources of information are reviewed at the end of the reporting period to identify indications
+that other assets may be impaired.
+(11) Impairment on tangible, intangible assets other than impairment under ECL
+model
+Insurance contract liabilities are measured based on a reasonable estimate of the amount of payments that the
+Group will be required to make to fulfil its obligations under the insurance contracts, which represents the difference
+between expected future cash outflows and inflows related to such contracts. A reasonable estimate of expected
+future net cash flows is determined based on information currently available as at the end of the reporting period.
+The Group has considered the impact of time value in the liability calculation for long-term life insurance. The
+Group performs liability adequacy tests based on information currently available, as at the reporting date. Additional
+insurance contract liabilities should be recorded if any deficiency exists.
+Recognition of impairment losses
+Intangible assets are not amortised while their useful lives are assessed to be indefinite. The Group does not have
+intangible assets with useful lives assessed to be indefinite as at the end of reporting period.
+Land use rights are stated at cost, amortised on a straight-line basis over the respective lease periods.
+Intangible assets are stated at cost less accumulated amortisation (only intangible assets with finite useful lives) and
+impairment losses (see Note 4(11)). Amortisation of intangible assets with finite useful lives is charged to profit or
+loss on a straight-line basis over the assets' estimated useful lives.
+Specific items
+All gains and losses from changes in the fair value of derivatives that are managed in conjunction with financial
+instruments designated at fair value and do not qualify for hedge accounting are recognised immediately in the
+consolidated statement of profit or loss.
+Derivatives that do not qualify for hedge accounting
+If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk
+management objective for that designated hedging relationship remains the same, the Group adjusts the hedge ratio
+of the hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again.
+the effect of credit risk does not dominate the value changes that result from that economic relationship; and
+the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged
+item that the Group actually hedges and the quantity of the hedging instrument that the entity actually uses
+to hedge that quantity of hedged item.
+there is an economic relationship between the hedged item and the hedging instrument;
+•
+.
+For hedge effectiveness assessment, the Group considers whether the hedging instrument is effective in offsetting
+changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging
+relationships meet all of the following hedge effectiveness requirements:
+The Group has elected to adopt the new general hedge accounting in IFRS 9. This requires the Group to ensure that
+hedge accounting relationships are aligned with its risk management objectives and strategy and to apply a more
+qualitative and forward-looking approach to assessing hedge effectiveness.
+Hedge effectiveness testing
+Cash equivalents
+The effective portions of changes in the fair value of derivatives that are designated and qualified as cash flow
+hedge are recognised in other comprehensive income and accumulated separately in hedging reserve. Any gain or
+loss relating to an ineffective portion is recognised immediately in the consolidated statement of profit or loss.
+For cash flow hedge of a recognised asset or liability, the associated cumulative gain or loss is reclassified from
+hedging reserve to the consolidated statement of profit or loss in the same periods during which the hedged cash
+flow affect profit and loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the
+criteria for hedge accounting, any cumulative gain or loss at that time remains in hedging reserve until the forecast
+transaction is ultimately recognised in the consolidated statements of profit or loss. When a forecast transaction is
+no longer expected to occur, the cumulative gain or loss is immediately reclassified to the consolidated statement of
+profit or loss.
+Hedge accounting (continued)
+Financial instruments (continued)
+Principal accounting policies (continued)
+(5)
+4.
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+162
+161
+The Group designates certain derivatives as hedging instruments for cash flow hedge. The Group documents
+the relationship between the hedging instruments and hedged items, as well as its risk management objective
+and strategy for undertaking the hedge, at the inception of a hedging relationship,. The Group also requires
+documentation of the assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
+are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items attributable
+to the hedged risks.
+Cash flow hedge
+Principal accounting policies (continued)
+(6)
+Property, equipment, investment property and depreciation
+Intangible assets
+(8)
+4. Principal accounting policies (continued)
+IX Financial Statements
+China Merchants Bank
+Annual Report 2018
+Repossessed assets of equity instruments are detailed in note 4 (5).
+Repossessed assets except equity instrument are measured at fair value at the date of exchange. They are not
+depreciated or amortised. Impairment losses on subsequent remeasurement are recognised in the consolidated
+statement of profit or loss.
+In the recovery of impaired loans and receivables, the Group may take possession of assets held as collateral through
+court proceedings or voluntary delivery of possession by the borrowers. When it is intended to achieve an orderly
+realisation of the impaired assets and the Group is no longer seeking repayment from the borrowers, repossessed
+assets except the equity instrument are reported in "other assets".
+(7) Repossessed assets
+Profits or losses on disposal of property, equipment and investment property are determined as the difference
+between the net disposal proceeds and the carrying amount of the property, equipment, investment property and
+are accounted for in the consolidated statement of profit or loss as they arise.
+Subsequent expenditure relating to a property, equipment and investment property is capitalised only when it is
+probable that future economic benefits associated with the property and equipment will flow to the Group. All other
+expenditure is recognised in the consolidated statement of profit or loss as an expense as incurred.
+Construction in progress represents property under construction and is stated at cost less impairment losses. Cost
+comprises the direct and indirect cost of construction. Construction in progress is transferred to an appropriate class
+of property or other asset when the asset is ready for its intended use. No depreciation is provided for construction
+in progress.
+the estimated useful lives
+3 years
+3-5 years
+3 years
+20 years
+20 years
+Leasehold improvements (self-owned property)
+Leasehold improvements (leasing property)
+Motor vehicles and others
+Computer equipment
+Investment properties
+Depreciation is calculated to write off the cost of property, equipment and investment property over their following
+estimated useful lives, after taking into account an estimated residual value on a straight-line basis:
+Land and buildings
+Property, equipment and investment property, are stated at cost or deemed cost less accumulated depreciations and
+impairment losses. These also include land held under operating leases and buildings thereon, where the fair value
+of the leasehold interest in the land and buildings cannot be measured separately at the inception of the lease and
+the building is not clearly held under an operating lease.
+Financial instruments (continued)
+(5)
+983
+2018
+6,807
+Commissions from credit commitment and lending business
+12,287
+12,723
+Agency services fees
+9,209
+10,267
+Remittance and settlement fees
+6,372
+14,011
+Bank cards fees
+2017
+2018
+Fee and commission income
+8.
+97,153
+110,527
+Interest expense on financial liabilities measured at amortised cost
+16,727
+Commissions on trust and fiduciary activities
+23,351
+25,245
+- derivatives instruments
+104
+1,803
+- financial instruments at fair value through profit or loss
+671
+1,091
+Profit/(loss) from fair value change
+2017
+2018
+Other net income
+9.
+IX Financial Statements
+China Merchants Bank
+Annual Report 2018
+69,908
+73,046
+Total
+2,784
+3,171
+Others
+13,436
+Note:
+14,530
+6,091
+N/A
+12,256
+52,042
+5,136
+7,531
+6,019
+8,802
+1,271
+36,011
+1,980
+7,961
+4,608
+8,718
+98,386
+113,698
+65,864
+73,954
+2017
+8,679
+N/A
+270,911
+242,005
+3,568
+Amounts sold under repurchase agreements
+4,441
+7,294
+Placements from banks and other financial institutions
+13,606
+12,166
+Deposits from banks and other financial institutions
+9,250
+10,982
+50,329
+61,987
+Borrowing from central bank
+Deposits from customers
+2017
+2018
+Interest expense
+7.
+For the year ended 31 December 2018, included in the above is interest income of RMB307 million accrued on impaired loans (2017: RMB561
+million) and nil for impaired debt securities investments (2017: nil), and RMB9,462 million on loans and advances to customers at fair value
+through other comprehensive income (for the year ended 31 December 2017: not applicable).
+Debt securities issued
+48,267
+- Retail loans
+Interest income on financial assets measured at amortised cost
+Current income tax and movements in deferred tax balances are recognised in the consolidated statement of profit
+or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in
+equity.
+(15) Taxation
+Principal accounting policies (continued)
+4.
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+172
+171
+A contract liability represents the Group's obligation to transfer goods or services to a customer for which the Group
+has received consideration (or an amount of consideration is due) from the customer.
+A contract asset represents the Group's right to consideration in exchange for goods or services that the Group has
+transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with IFRS 9. In
+contrast, a receivable represents the Group's unconditional right to consideration, i.e. only the passage of time is
+required before payment of that consideration is due.
+When another party is involved in providing goods or services to a customer, the Group determines whether the
+nature of its promise is a performance obligation to provide the specified goods or services itself (i.e. the Group is a
+principal) or to arrange for those goods or services to be provided by the other party (i.e. the Group is an agent).
+The Group is an agent if its performance obligation is to arrange for the provision of the specified goods or service
+by another party. In this case, the Group does not control the specified goods or service provided by another
+party before that goods or service is transferred to the customer. When the Group acts as an agent, it recognises
+revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the
+specified goods or services to be provided by the other party.
+The customer has accepted the services.
+The customer has the significant risks and rewards of ownership of the service;
+•
+The Group has transferred physical possession of the service;
+•
+Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially
+enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.
+The Group has a present right to payment for the services;
+Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in
+the consolidated financial statements and the corresponding tax base used in the computation of taxable profit.
+Deferred tax assets also arise from unused tax losses and unused tax credits. The amount of deferred tax provided is
+based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax
+rates of expected returns of the assets or the repayment of the liabilities. Deferred tax assets and liabilities are not
+discounted.
+The Group shall recognise a deferred tax liability for all taxable temporary differences associated with investments in
+subsidiaries, and associates, and interests in joint ventures, except to the extent that both of the following conditions
+are satisfied: the parent, investor, joint venturer or joint operator is able to control the timing of the reversal of the
+temporary difference; and it is probable that the temporary difference will not reverse in the foreseeable future.
+On the disposal of a foreign operation, all of the exchange differences accumulated in exchange reserve in respect
+of that operation attributable to the owners of the Bank are reclassified to profit or loss.
+at the end of each reporting period. Income and expense items are translated at the average exchange rates for
+the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at
+the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive
+income and accumulated in exchange reserve (and attributed to non-controlling interests as appropriate).
+For the purposes of presenting these consolidated financial statements, the assets and liabilities of the Group's
+foreign operations are translated into currency units using exchange rates prevailing
+(16) Foreign currencies translations (continued)
+Principal accounting policies (continued)
+IX Financial Statements
+4.
+China Merchants Bank
+Annual Report 2018
+Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is
+neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are
+recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the
+monetary items.
+Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:
+Exchange differences on transactions entered into in order to the effective portion of the hedge certain foreign
+currency risks;
+In preparing the financial statements of each individual group entity, transactions in currencies other than the
+entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the
+transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated
+at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign
+currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary
+items that are measured in terms of historical cost in a foreign currency are not retranslated.
+(16) Foreign currencies translations
+different taxable entities, which, in each future period in which significant amounts of deferred tax
+liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and
+settle the current tax liabilities on a net basis or realise and settle simultaneously.
+the same taxable entity; or
+in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation
+authority on either:
+in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realise
+the asset and settle the liability simultaneously; or
+Current tax balances and deferred tax balances, and movements therein, are presented separately from each other
+and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against
+deferred tax liabilities if the Group has the legally enforceable right to set off current tax assets against current tax
+liabilities and the following additional conditions are met:
+A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
+against which the asset can be utilised. Deferred tax assets are reduced by the extent that it is no longer probable
+that the related tax benefit will be realised.
+(17) Employee benefits
+•
+If the revenue is recognised over time, the Group recognizes revenue in accordance with the progress towards
+complete satisfaction of a performance obligation. The progress towards complete satisfaction of a performance
+obligation is measured based on output method, which is to recognise revenue on the basis of direct measurements
+of the value of the goods or services transferred to the customer to date relative to the remaining goods or services
+promised under the contract, that best depict the Group's performance in transferring control of goods or services.
+Premium income represents gross insurance premium written less reinsurance ceded, as adjusted for unearned
+premium. Gross premiums written are recognised at date of risk inception.
+Premium income
+Income derived from operating leases is recognised in the consolidated statement of profit or loss using the
+straight-line method over the lease term.
+Rental income
+Where the investments are unlisted, interim dividend income is recognised when declared by the Board of Directors
+of the investees. Final dividend income is recognised only when the amount proposed by the Board of Directors of
+the investees is approved by shareholders at general meetings.
+Dividend income from listed investments is recognised when the underlying investment is declared ex-dividend.
+Dividend income
+Interest income and expense for all financial instruments except for those classified as at FVTPL are recognised in
+"Interest income" and "Interest expense" in the profit or loss account using the effective interest method. Interest
+on financial instruments measured as at FVTPL is included within the fair value movement during the period, which
+is recognized in "Other net income".
+Net Interest income
+Revenue is the inflow of economic benefits that the Group has formed in its daily activities that will result in an
+increase in shareholders' equity and have nothing to do with the capital invested by shareholders.
+(14) Income recognition
+Principal accounting policies (continued)
+4.
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+170
+Fee and commission income
+If a performance obligation is not satisfied over time, it is satisfied at a point in time. To determine the point in time
+at which a customer obtains control of a promised service, the following indicators of the transfer of control should
+also be considered; these include, but are not limited to:
+Under IFRS 15, the Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when "control"
+of the goods or services underlying the particular performance obligation is transferred to the customer.
+The stand-alone selling price of the distinct goods or service underlying each performance obligation is determined
+at contract inception. It represents the price at which the Group would sell a promised goods or service separately
+to a customer. If a stand-alone selling price is not directly observable, the Group estimates it using appropriate
+techniques such that the transaction price ultimately allocated to any performance obligation reflects the amount of
+consideration to which the Group expects to be entitled in exchange for transferring the promised goods or services
+to the customer.
+Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or
+service.
+the Group's performance does not create an asset with an alternative use to the Group and the Group has an
+enforceable right to payment for performance completed to date.
+•
+the Group's performance creates and enhances an asset that the customer controls as the Group performs; or
+•
+the customer simultaneously receives and consumes the benefits provided by the Group's performance as the
+Group performs;
+•
+Control is transferred over time and revenue is recognised over time by reference to the progress towards complete
+satisfaction of the relevant performance obligation if one of the following criteria is met:
+At the end of each reporting period, the Group updates the estimated transaction price (including updating its
+assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances
+present at the end of the reporting period and the changes in circumstances during the reporting period.
+The estimated amount of variable consideration is included in the transaction price only to the extent that it is highly
+probable that such an inclusion will not result in a significant revenue reversal in the future when the uncertainty
+associated with the variable consideration is subsequently resolved.
+Fee and commission income (continued)
+(14) Income recognition (continued)
+4. Principal accounting policies (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+For contracts that contain variable consideration, the Group estimates the amount of consideration to which it will
+be entitled using either (a) the expected value method or (b) the most likely amount, depending on which method
+better predicts the amount of consideration to which the Group will be entitled.
+A performance obligation represents a good and service (or a bundle of goods or services) that is distinct or a series
+of distinct goods or services that are substantially the same. For contracts that contain more than one performance
+obligations, the Group allocates the transaction price to each performance obligation on a relative stand-alone
+selling price basis, except for the allocation of discounts and variable consideration.
+and fair value through other comprehensive income.
+Salaries and staff welfare
+Post employment benefits
+For a number of financial instruments, no quoted prices in an active market exist. The fair value for these financial
+instruments are established by using valuation techniques. These techniques include using recent arm's length
+market transactions, reference to the current fair value of similar instruments and discounted cash flow analysis and
+option pricing models. The Group has established a process to ensure that valuation techniques are constructed
+by qualified personnel and are validated and reviewed by personnel independent of the area that constructed the
+valuation techniques. Valuation techniques are certified before being implemented for valuation and are calibrated to
+ensure that outputs reflect actual market conditions. Valuation models established by the Group make the maximum
+use of market inputs and rely as little as possible on the Group's specific data. However, it should be noted that
+some inputs, such as credit and counterparty risk and risk correlations, require management estimates. Management
+estimates and assumptions are reviewed periodically and are adjusted if necessary. If the fair value is measured using
+third party information such as brokerage quotes or pricing services, the valuation team will evaluate the evidence
+obtained from third parties to support the conclusion.
+(5) Fair value of financial instruments
+5. Significant accounting estimates and judgements (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+Loss Given Default ("LGD"): LGD is an estimate of the loss arising on default. It is based on the difference
+between the contractual cash flows due and those that the lender would expect to receive, taking into
+account cash flows from collateral and integral credit enhancements. Refer to Note 61(a) for more details.
+Probability of Default ("PD"): PD constitutes a key input in measuring ECL. PD is an estimate of the likelihood
+of default over a given time horizon, the calculation of which includes historical data, assumptions and
+expectations of future conditions. Refer to Note 61(a) for more details.
+Forward-looking information: When measuring ECL the Group uses reasonable and supportable forward
+looking information, which is based on assumptions for the future movement of different economic drivers
+and how these drivers will affect each other. Refer to Note 61(a) for more details.
+Models and assumptions used: The Group uses various models and assumptions in measuring fair value
+of financial assets as well as in estimating ECL. Judgement is applied in identifying the most appropriate
+model for each type of asset, as well as for determining the assumptions used in these models, including
+assumptions that relate to key drivers of credit risk. See Note 61(a) for more details on ECL and Note 61(g)
+for more details on fair value measurement.
+Establishing groups of assets with similar credit risk characteristics: When ECLs are measured on a collective
+basis, the financial instruments are grouped on the basis of shared risk characteristics. Refer to Note 61(a) for
+details of the characteristics considered in this judgement. The Group monitors the appropriateness of the
+credit risk characteristics on an ongoing basis to assess whether they continue to be similar. This is required
+in order to ensure that should credit risk characteristics change there is appropriate re-segmentation of the
+assets. This may result in new portfolios being created or assets moving to an existing portfolio that better
+reflects the similar credit risk characteristics of that group of assets. Assets move from 12-month to lifetime
+ECLs when there is a significant increase in credit risk, but it can also occur within portfolios that continue
+to be measured on the same basis of 12-month or lifetime ECLS but the amount of ECL changes because the
+credit risk of the portfolios differ.
+Significant increase of credit risk: ECL are measured as an allowance equal to 12-month ECL for stage 1
+assets, or lifetime ECL assets for stage 2 or stage 3 assets. An asset moves to stage 2 when its credit risk
+has increased significantly since initial recognition. In assessing whether the credit risk of an asset has
+significantly increased the Group takes into account qualitative and quantitative reasonable and supportable
+forward looking information. Refer to note 61(a) for more details.
+5. Significant accounting estimates and judgements (continued)
+(4) Impairment under ECL model
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+176
+(6) Income taxes
+175
+Determining income tax provisions involves judgement on the future tax treatment of certain transactions. The
+Group carefully evaluates tax implications of transactions and tax provisions are set up accordingly. The tax treatment
+of such transactions is reconsidered periodically to take into account all changes in tax legislations. Deferred tax
+assets are recognised for tax losses not yet used and temporary deductible differences. As those deferred tax assets
+can only be recognised to the extent that it is probable that future taxable profit will be available against which the
+unused tax credits can be utilised, management's judgement is required to assess the probability of future taxable
+profits. Management's assessment is constantly reviewed and additional deferred tax assets are recognised if it
+becomes probable that future taxable profits will allow the deferred tax asset to be recovered.
+The Group determines whether goodwill is impaired at least on an annual basis and when circumstances indicate
+that the carrying value may be impaired. This requires an estimation of the recoverable amount of the groups to
+which the goodwill is allocated. Estimating the recoverable amount requires the Group to make an estimate of the
+expected future cash flows from groups and also to choose a suitable discount rate in order to calculate the present
+value of those cash flows.
+- Debt investments at amortised cost
+- Debt investments at FVTOCI
+Investments
+Amounts held under resale agreements
+Placements with banks and other financial institutions
+Balances with banks and other financial institutions
+Balances with central bank
+- Discounted bills
+52
+- Corporate loans
+Loans and advances to customers
+6. Interest income
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+178
+177
+(7) Impairment of goodwill
+Salaries, bonuses and other benefits are accrued in the period in which the associated services are rendered by
+employees.
+the extent to which the associated risks and rewards of ownership of the financial assets are transferred.
+Significant judgment is applied in the Group's estimation with regard to the cash flows before and after
+the transfers and other factors that effect the outcomes of Group's assessment on the extent that risks and
+rewards are transferred.
+The Group analyzes the contractual rights and obligations in connection with such transfers to determine whether
+the de-recognition criteria are met based on the following considerations:
+(19) Segmental reporting
+For the purposes of these consolidated financial statements, parties are considered to be related to the Group if
+the Group has the ability, directly, indirectly or jointly, to control the party or exercise significant influence over
+the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject
+to common control or common significant influence. Related parties may be individuals (being members of key
+management personnel, significant shareholders and/or their close family members) or other entities and include
+entities which are under the significant influence of related parties of the Group where those parties are individuals,
+and post-employment benefit plans which are for the benefit of employees of the Group or of any entity that is a
+related party of the Group.
+(18) Related parties
+4. Principal accounting policies (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+174
+173
+The fair value of the H share appreciation rights is using Black-Scholes model, taking into account the terms and
+condition upon which the H share appreciation rights were granted.
+The Group offers H share appreciation rights to its employee, namely H Share Appreciation Rights Scheme for the Senior
+Management ("the Scheme"), the Scheme is settle by cash. Cash-settled share-based payments are measured at the fair
+value of the liabilities incurred by the Group, which are determined based on the price of the share. The Group recognises
+the services for the period as related costs or expenses, with a corresponding increase in liability, at an amount equal to
+the fair value of the liability based on the best estimate of the outcome of vesting at the end of each reporting period
+within the vesting period. Until the liability is settled, the Group remeasures the fair value of the liability at each balance
+sheet date and at the date of settlement, with any changes in fair value recognised in profit or loss for the period.
+Share-based payment
+When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to
+past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gains
+and losses on the settlement of a defined benefit plan when the settlement occurs.
+Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan
+assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately
+in other comprehensive income. The Group determines the net interest expense (income) on the net defined benefit
+liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the
+beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes
+in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net
+interest expense and other expenses related to defined benefit plans are recognised in personnel expenses in the
+consolidated statement of profit or loss.
+The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit
+credit method. When the calculation results in a potential asset for the Group, the recognised asset is limited to
+the present value of economic benefits available in the form of any future refunds form the plan or reductions in
+future contributions to the plan. To calculate the present value of economic benefits consideration is given to any
+applicable minimum funding requirements.
+The Group's net obligation in respect of defined benefit plans is calculated separately for each plan by estimating
+the amount of future benefit that employees have earned in the current and prior periods, discounting that amount
+and deducting the fair value of any plan assets.
+The Group participates in a number of defined contribution retirement benefit schemes managed by different
+provincial governments or independent insurance companies. Obligation for contributions to these schemes are
+jointly borne by the Group and the staff, and contributions paid by the Group are recognised as an expense in the
+consolidated statement of profit or loss as incurred.
+Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are
+identified from the financial information provided regularly to the Group's most senior executive management for
+the purposes of allocating resources to, and assessing the performance of, the Group's various lines of business and
+geographical locations. Individually material operating segments are not aggregated for financial reporting purposes
+unless the segments have similar economic characteristics and are similar in respect of the nature of products and
+services, the nature of production processes, the type or class of customers, the methods used to distribute the
+products or provide the services, and the nature of the regulatory environment. Operating segments which are not
+individually material may be aggregated if they meet most of these criteria.
+whether it has transferred the rights to receive contractual cash flows from the financial assets or the transfer
+qualifies for the "pass through" of those cash flows to independent third parties.
+(20) Fiduciary activities
+(21) Dividends or profit distributions
+Where the Group enters into structured transactions by which it transfers financial assets to structured entities, the
+Group analyzes whether the substance of the relationship between the Group and these structured entities indicates
+that it controls these structured entities to determine whether the Group needs to consolidate these structured
+entities. This will determine whether the following de-recognition analysis should be conducted at the consolidated
+level or at the entity level from which the financial assets are transferred.
+In its normal course of business, the Group transfers its financial assets through various types of transactions
+including regular way sales and transfers, securitization, financial assets sold under repurchase agreements. The
+Group applies significant judgement in assessing whether it has transferred these financial assets which qualify for a
+full de-recognition.
+De-recognition of financial assets transferred
+(3)
+Business model assessment: Classification and measurement of financial assets depends on the results of the SPPI
+and the business model test. The Group determines the business model at a level that reflects how groups of
+financial assets are managed together to achieve a particular business objective. This assessment includes judgement
+reflecting all relevant evidence including how the performance of the assets is evaluated and their performance
+measured, the risks that affect the performance of the assets and how these are managed and how the managers
+of the assets are compensated. The Group monitors financial assets measured at amortised cost or FVTOCI that
+are derecognised prior to their maturity to understand the reason for their disposal and whether the reasons
+are consistent with the objective of the business for which the asset was held. Monitoring is part of the Group's
+continuous assessment of whether the business model for which the remaining financial assets are held continues to
+be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective
+change to the classification of those assets.
+Classification of financial assets
+Where the Group acts as asset manager of structured entities, the Group makes judgment on whether it is the
+principal or an agent to assess whether the Group controls the structured entities and should consolidate them.
+When performing this assessment, the Group considers several factors including, among other things, the scope of
+its decision-making authority over the structured entities, the rights held by other parties, the remuneration to which
+it is entitled in accordance with the related agreements for the assets management services, the Group's exposure to
+variability of returns from interests that it holds in the structured entities.
+(2)
+(1) Control over structured entity
+Significant accounting estimates and judgements (continued)
+5.
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+In determining the carrying amounts of some assets and liabilities, the Group makes assumptions for the effects
+of uncertain future events on the assets and liabilities at the end of the reporting period. These estimates involve
+assumptions about cash flows and the discount rates used. The Group's estimates and assumptions are based on historical
+experience and expectations of future events and are reviewed periodically. In addition to the assumptions and estimations
+of future events, judgements are also made during the process of applying the Group's accounting policies.
+5. Significant accounting estimates and judgements
+Dividends or profit distributions are recognised as a liability in the year in which they are approved and declared.
+The Group acts in a fiduciary capacity in entrusted loan and entrusted investment business. Assets held by the Group
+and the related undertakings to return such assets to customers are excluded from the consolidated statement of
+financial position as the risks and rewards of the assets reside with the customers. The Group only charges a relevant
+commission.
+400
+Staff costs
+(764)
+2,152
+2,132
+Business tax and surcharges
+39,512
+46,025
+Subtotal
+6,530
+7,171
+Property, equipment and investment properties depreciation
+4,696
+- Social insurance and corporate supplemental insurance
+Others
+-
+28,286
+33,077
+- Salaries and bonuses (note (i))
+2017
+2018
+10. Operating expenses
+5,777
+5,270
+5,062
+Intangible assets amortization
+precious metals
+179
+Auditors' remuneration amounted to RMB30 million for the year ended 31 December 2018(2017: RMB20 million), which was included in other
+general and administrative expenses.
+(ii)
+Performance bonus is included in the salaries and bonuses, the details of which are disclosed in Note 40(a).
+(i)
+Notes:
+70,431
+81,110
+Total
+18,570
+Other general and administrative expenses (note (ii))
+232
+244
+Charge for insurance claims
+4,189
+4,242
+Rental expenses
+714
+11,169
+20,271
+22,214
+426
+N/A
+154
+- dividend income from equity investments designated at FVTOCI
+N/A
+1,742
+- of which: gain on disposal of bills
+N/A
+1,816
+- disposal of debt instruments at FVTOCI
+N/A
+(350)
+1,138
+9,734
+- financial instruments at FVTPL
+4,911
+11,327
+Investment income
+451
+167
+- available-for-sale financial assets
+N/A
+- disposal of financial instruments at amortised cost
+- gain on disposal of bills
+836
+320
+2,882
+3,555
+3,202
+334
+1,934
+3,538
+Total
+Others
+3,889
+- insurance income
+- rental income
+Other income
+Exchange gain
+34
+(27)
+- others
+2,903
+N/A
+1,995
+1,995
+(2,359)
+(2,359)
+Items that will not be reclassified
+subsequently to profit or loss
+- Remeasurement of defined
+benefit scheme redesigned
+through reserve
+instruments measured at fair
+value through other
+comprehensive income
+332
+N/A
+439
+(107)
+- Fair value gain on equity
+of financial statements of foreign
+operations
+(89)
+44
+1,785
+(5,369)
+N/A
+(7,154)
+- Net movement in cash flow
+hedge reserve
+180
+(31)
+149
+22
+(67)
+- Equity-accounted investees-share
+of other comprehensive income
+- Exchange difference on translation
+(36)
+(36)
+44
+N/A
+2017
+12
+8,059
+N/A
+(1,816)
+N/A
+Net movement in the debt instrument revaluation reserve during the
+year recognised in other comprehensive income
+6,243
+Reserve changes in debt instruments at FVTOCI
+Changes in fair value recognised during the year
+Reclassification adjustments for amounts transferred to profit or loss
+On disposal
+N/A
+496
+N/A
+Net movement in the debt instrument revaluation reserve during the
+year recognised in other comprehensive income
+N/A
+496
+N/A
+Changes in expected credit losses in financial assets at FVTOCI
+Changes in expected credit losses recognised during the year
+Reclassification adjustments for amounts transferred to profit or loss
+2018
+Movements relating to components of other comprehensive income are as
+follows:
+(b)
+(62)
+72
+(12)
+60
+Other comprehensive income
+11,488
+(2,371)
+9,117
+(9,486)
+1,795
+(7,691)
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+16. Other comprehensive income (continued)
+(74)
+N/A
+(358)
+financial assets
+Income tax expense
+2018
+2017
+106,497
+26,624
+90,680
+22,670
+- Other
+1,574
+(5,917)
+(5,235)
+(210)
+3,570
+Equity instruments measured at fair value through other
+comprehensive income
+1,970
+37
+25,678
+184
+811
+- Transfer out of prior deferred tax assets
+in other jurisdictions
+- Effects of different applicable rates of tax prevailing
+32,744
+1,017
+216
+35,849
+1,129
+149
+33,977
+37,127
+(8,299)
+25,678
+(17,085)
+20,042
+(b) A reconciliation of income tax expense in the consolidated statement of profit
+or loss and that calculated at the applicable tax rate is as follows:
+Profit before taxation
+Tax at the PRC statutory income tax rate of 25% (2017: 25%)
+Tax effects of the following items:
+- Effects of non-deductible expenses
+- Effects of non-taxable income
+20,042
+Note:
+(i)
+The applicable income tax rate for the Group's operations in Mainland China is 25% during 2018 (2017: 25%).
+(expense)
+8,494
+(2,251)
+6,243
+N/A
+N/A
+N/A
+490
+6
+496
+N/A
+N/A
+N/A
+- Net movement in fair value
+reserve of available-for-sale
+amount
+N/A
+Before-tax Tax benefit/ Net-of-tax
+Net-of-tax
+(ii)
+The applicable income tax rate in Hong Kong is 8.25% on assessable profits up to HKD2,000,000; and 16.5% on any part of assessable profits
+over HKD2,000,000 during 2018 (2017: 16.5%).
+(iii)
+Taxation for overseas operations is charged at the applicable rates of tax prevailing in relevant jurisdictions.
+185
+186
+16. Other comprehensive income
+(a) Tax effects relating to each component of other comprehensive income
+Items that may be reclassified to
+profit or loss
+- Fair value gain on debt instruments
+measured at fair value through
+other comprehensive income
+Net changes in expected credit
+losses of debt
+instruments measured at fair
+value through other
+comprehensive income
+2018
+amount
+Before-tax
+amount
+2017
+Tax benefit/
+(expense)
+amount
+Changes in fair value recognised during the year
+(1,659)
+N/A
+76,918
+309
+N/A
+100,160
+76,918
+2018
+99,851
+2017
+49,093
+2,833
+2,942
+63,055
+52,035
+36,861
+60,222
+(116)
+(171)
+77,034
+(a) Analysed by nature of counterparties
+Balances in Mainland China
+- Banks
+- Other financial institutions
+Subtotal
+Balances outside Mainland China
+- Banks
+- Other financial institutions
+Subtotal
+Total
+Less: Impairment allowances
+- Banks
+- Other financial institutions
+Subtotal
+Total
+2017
+24,937
+Total
+106
+36,967
+116
+196
+22
+N/A
+138
+196
+2017
+43
+(10)
+171
+116
+189
+China Merchants Bank
+2017
+(80)
+2018
+Balance as at the end of the year
+Exchange difference
+24,999
+100,022
+77,034
+(133)
+(116)
+(38)
+(171)
+(116)
+99,851
+76,918
+(b) Movements of allowances for impairment losses are as follows:
+Balance as at the end of last year
+Adjustments under IFRS 9
+Balance as at the beginning of the year
+Charge/(release) for the year (note 14)
+62
+332
+Interest receivable
+2018
+100,022
+- Realised losses
+43
+21
+Net movement in the hedging reserve during the year recognised
+in other comprehensive income
+149
+(67)
+to profit or loss
+187
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+17. Earnings per share
+The calculation of basic earnings per share for the years 2018 and 2017 is based on the net profit attributable
+to ordinary shareholders of the Bank and the weighted average number of shares in issue. There is no difference
+between basic and diluted earnings per share as there are no potential ordinary shares outstanding during the years
+2018 and 2017.
+Net profit attributable to equity shareholders of the Bank
+188
+(88)
+106
+Effective portion of changes in fair value of hedging instruments
+Reclassification adjustment for realised loss transferred
+Net movement in the equity investment revaluation reserve during the
+year recognised in other comprehensive income
+332
+N/A
+Available-for-sale financial assets
+Changes in fair value recognised during the year
+N/A
+(4,868)
+Reclassification adjustments for amounts transferred to profit or loss:
+- On disposal
+N/A
+(501)
+Net movement in the investment reserve during the year recognised
+in other comprehensive income
+N/A
+(5,369)
+Cash flow hedge
+Less: Net profit attributable to preference shareholders of the Bank
+Net profit attributable to ordinary shareholders of the Bank
+Weighted average number of shares in issue (in million)
+Subtotal
+Basic and diluted earnings per share attributable
+Note:
+2017
+530,509
+68,012
+1,486
+N/A
+477,568
+600,007
+Notes:
+2018
+438,777
+36,488
+2,056
+247
+(i)
+Statutory deposit reserve funds are deposited with the PBOC and other central banks outside the Mainland China as required and are not
+available for the Group's daily operations. The statutory deposit reserve funds of the Bank are calculated at 11% and 5% for eligible RMB
+deposits and foreign currency deposits respectively as at 31 December 2018 (2017: 15% and 5% for eligible RMB deposits and foreign
+currency deposits respectively). Eligible deposits include deposits from government authorities and other organizations, retail deposits,
+corporate deposits, and net credit balances of entrusted business and RMB deposits placed by the financial institutions outside mainland China.
+Surplus deposit reserve maintained with the PBOC and central banks outside the Mainland China are mainly for clearing purposes.
+China Merchants Bank
+Annual Report 2018
+IX Financial Statements
+19. Balances with banks and other financial institutions
+Principal (a)
+Impairment losses (a)(b)
+(ii)
+Total
+Interest receivable
+Fiscal deposits
+2018
+2017
+80,560
+70,150
+78,901
+70,150
+25,220
+25,220
+3.13
+2.78
+The Bank issued non-cumulative preference shares in year 2017. For the purpose of calculating basic earnings per share for the year ended 31 December
+2018 and 2017, dividends on non-cumulative preference shares declared in respect of the year should be deducted from the amounts attributable to
+equity shareholders of the Bank.
+The conversion feature of preference shares is considered to be contingently issuable ordinary shares. The triggering events of conversion did not occur
+as at 31 December 2018 and 2017. Therefore the conversion feature of preference shares has no effect on the diluted earnings per share calculation.
+18. Balances with central bank
+Statutory deposit reserve (note (i))
+Surplus deposit reserve (note (ii))
+to equity shareholders of the Bank (in RMB)
+2018
+Total
+Deferred taxation
+500
+500
+63
+1,263
+63
+2,263
+The former executive, Non-Executive Directors' and Supervisors' emoluments shown above were for their services as
+Directors or Supervisors of the Bank.
+Total
+Notes:
+1,200
+1,200
+(i)
+17,675
+445
+22,404
+The total remuneration before tax for the full-time Directors, Supervisors and executive officers of the Group is not yet finalised. Details of their
+remaining compensation will be disclosed separately when their total remuneration is confirmed.
+(ii)
+During the reporting period, the appointment qualification of Mr.Zhou Song was approved by the China Banking and Insurance Regulatory
+Commission in October 2018.
+Annual Report 2018
+(iii)
+(iv)
+4,284
+1,000
+500
+500
+RMB'000
+11. Directors' and Supervisors' emoluments (continued)
+Former Executive, Non-Executive
+Directors and Supervisors
+Li Xiaopeng (vi)
+Wong Kwai Lam (vii)
+Pan Yingli (vii)
+Xu Lizhong (v)
+Subtotal
+2018
+Salaries,
+allowances
+Directors'
+and benefits
+Discretionary
+Retirement
+scheme
+fees
+in kind
+RMB'000
+RMB'000
+bonuses
+RMB'000
+contributions
+RMB'000
+Total
+(v)
+IX Financial Statements
+During the reporting period, the appointment qualification of Mr. Li Menggang and Liu Qiao were approved by the China Banking and
+Insurance Regulatory Commission in November 2018.
+In July 2018, Mr. Xu Lizhong, the former employee Supervisor, submitted his resignation to the Supervisory Committee of the Bank for work
+reasons. According to the results of the employee representative meeting held on July 18, 2018, Mr. Wang Wanqing was newly elected as
+the employee Supervisor of the tenth session of the Supervisory Committee of the Bank, and Mr. Xu Lizhong no longer served as employee
+Supervisor of the Bank.
+Total
+RMB'000
+4,620
+4,200
+8,820
+601
+5,221
+546
+4,746
+Retirement
+scheme
+contributions
+RMB'000
+1,147
+The Executive Directors' emoluments shown above were for their services in connection with the management of the
+affairs of the Bank and the Group.
+Non-Executive Directors
+Li Jianhong
+Li Xiaopeng
+Sun Yueying
+Fu Gangfeng
+Hong Xiaoyuan
+Su Min
+Zhang Jian
+9,967
+bonuses
+RMB'000
+RMB'000
+in kind
+In January 2018, Mr. Li Xiaopeng resigned as the Bank's vice chairman and Non-Executive Director.
+(vi)
+(vii)
+In November 2018, Mr. Wong Kwai Lam and Mrs. Pan Yingli resigned as the Bank's independent Non-Executive Director.
+(viii)
+As at 31 December 2018, the Group has offered 10 phases of H share appreciation rights scheme to its senior management ("the Scheme").
+Details of the Scheme are set out in Note 40(a)(iii).
+181
+182
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+11. Directors' and Supervisors' emoluments (continued)
+Executive directors
+Tian Huiyu
+Li Hao
+Subtotal
+2017
+Salaries,
+allowances
+Directors'
+fees
+RMB'000
+and benefits
+Discretionary
+Mr. Fu Junyuan resigned as a shareholder Supervisor of the Bank and a member of the Nomination Committee of the Board of Supervisors for
+work reasons, effective since February 28, 2019.
+Wang Daxiong
+Annual Report 2018
+The independent Non-Executive Directors' and Supervisors' emoluments shown above were for their services as
+Directors or Supervisors of the Bank.
+4,200
+8,820
+70
+4,690
+90
+4,290
+160
+8,980
+The Executive Directors' emoluments shown above were for their services in connection with the management of the
+affairs of the Bank and the Group.
+4,620
+Non-Executive Directors
+Sun Yueying
+Fu Gangfeng
+Zhou Song (ii)
+Hong Xiaoyuan
+Su Min
+Zhang Jian
+Wang Daxiong
+Subtotal
+The Non-Executive Directors' emoluments shown above were for their services as directors of the Bank.
+Li Jianhong
+(i)
+RMB'000
+RMB'000
+180
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+11. Directors' and Supervisors' emoluments
+The emoluments of the Directors and Supervisors during the year are as follows:
+Executive Directors
+Tian Huiyu
+Li Hao
+Subtotal
+Directors'
+fees
+RMB'000
+Salaries,
+allowances
+and benefits
+2018
+Retirement
+Discretionary
+in kind
+RMB'000
+bonuses
+RMB'000
+scheme
+contributions
+Total
+Independent Non-Executive
+China Merchants Bank
+T
+500
+Ding Huiping
+Han Zirong
+Wang Wanqing (v)
+Huang Dan
+Subtotal
+400
+400
+400
+1,723
+Jin Qingjun
+2,152
+7,655
+400
+400
+400
+39
+1,762
+2,245
+11,161
+-222
+3,284
+Wu Heng
+Wen Jianguo
+Fu Junyuan (iv)
+500
+500
+42
+42
+42
+3,780
+90
+3,870
+Directors and Supervisors
+Liang Jinsong
+Pan Chengwei
+500
+500
+Zhao Jun
+500
+Wong See Hong
+500
+Li Menggang (iii)
+42
+Liu Qiao (iii)
+22
+Liu Yuan
+500
+Subtotal
+IX Financial Statements
+Independent Non-Executive
+520
+23,200
+Total
+30,014
+22,680
+Contributions to defined contribution retirement schemes
+Discretionary bonuses (Note 11)
+Salaries and other emoluments
+2017
+RMB'000
+2018
+RMB'000
+3,736
+Of the five individuals with the highest emoluments for the year ended 31 December 2018, 3 (2017: 3) are Directors
+or Supervisors of the Bank whose emoluments are included in Note 11 above. The aggregate of the emoluments in
+respect of the five individuals during the year is as follows:
+IX Financial Statements
+China Merchants Bank
+Annual Report 2018
+184
+During the year ended 31 December 2018, no emoluments were paid by the Group to any of the persons who are
+directors or Supervisors as an inducement to join or upon joining the Group or as compensation for loss of office.
+During the year ended 31 December 2018, there was no arrangement under which a director or a Supervisor waived
+or agreed to waive any remuneration.
+25
+1
+25
+5,500,001 – 6,000,000
+6,000,001 -6,500,000
+Total
+55 |-|-||27
+12. Individuals with highest emoluments
+33,750
+The number of the five highest paid individuals whose emoluments fell within the following bands is set out below:
+2018
+Maximum aggregate amount of relevant loans made by
+50
+47
+Aggregate amount of relevant loans made by the Group
+outstanding at year end
+2017
+2018
+Loans to Directors, Supervisors and executive officers of the Group are as follows:
+13. Loans to Directors, Supervisors and executive officers
+During the year ended 31 December 2018, the five highest paid individuals include six persons in total as three
+of them are with the same emoluments and being the forth highest paid individuals. During the year ended 31
+December 2017, the five highest paid individuals include eight persons in total as two of them are with the same
+emoluments and being the second highest paid individuals and four of them are with the same emoluments and
+being the fifth highest paid individuals.
+6,000,001 -6,500,000
+1
+T5 T2-
+1
+1
+1
+3
+5,000,001 -5,500,000
+5,500,001 -6,000,000
+4,500,001 - 5,000,000
+4,000,001 - 4,500,000
+3,500,001 -4,000,000
+HKD
+2017
+2017
+the Group outstanding during the year
+1
+1
+2,303
+18,187
+4,117
+Total
+The former executive, Non-Executive Directors' and Supervisors' emoluments shown above were for their services as
+Directors or Supervisors of the Bank.
+Subtotal
+(i)
+RMB'000 RMB'000
+Total
+24,607
+Retirement
+scheme
+bonuses contributions
+RMB'000
+Discretionary
+and benefits
+Directors'
+fees
+RMB'000
+Salaries,
+allowances
+2017
+Guo Xuemeng (iv)
+Directors and Supervisors
+Former Executive, Non-Executive
+The Non-Executive Directors' emoluments shown above were for their services as directors of the Bank.
+in kind
+RMB'000
+Notes:
+(i)
+The total remuneration before tax for the full-time Directors, Supervisors and executive officers of the Group is not yet finalised. Details of their
+remaining compensation will be disclosed separately when their total remuneration is confirmed.
+64--|-7-
+1
+1
+16
+5,000,001 - 5,500,000
+4,500,001 – 5,000,000
+4,000,001 – 4,500,000
+3,500,001 -4,000,000
+3,000,001 -3,500,000
+2,000,001 -2,500,000
+2,500,001 -3,000,000
+1,000,001 – 1,500,000
+1,500,001-2,000,000
+500,001 – 1,000,000
+0 - 500,000
+HKD
+The number of the Directors and Supervisors whose emoluments are within the following bands is set out below:
+2018
+During the reporting period, Wong See Hong was approved by the China Banking and Insurance Regulatory Commission in February 2017.
+In February 2017, Guo Xuemeng resigned as the Bank's independent Non-Executive Director.
+(iv)
+(iii)
+As at 31 December 2017, the Group has offered 10 phases of H share appreciation rights scheme to its senior management ("the Scheme").
+Details of the Scheme are set out in Note 40(a)(iii).
+(ii)
+1
+54
+183
+China Merchants Bank
+2,953
+2,159
+417
+4,117
+9,367
+500
+500
+500
+500
+500
+400
+491
+400
+400
+400
+384
+3,337
+281
+2,440
+417
+1,156
+4,746
+400
+400
+4,255
+Liang Jinsong
+57
+Directors and Supervisors
+Wong Kwai Lam
+Pan Chengwei
+Pan Yingli
+Zhao Jun
+Liu Yuan
+Wen Jianguo
+Wu Heng
+Jin Qingjun
+Ding Huiping
+Han Zirong
+Xu Lizhong
+Huang Dan
+Wong See Hong (iii)
+Subtotal
+| | | |
+| | |│5
+500
+500
+500
+500
+500
+14,640
+The independent Non-Executive Directors' and Supervisors' emoluments shown above were for their services as
+directors or Supervisors of the Bank.
+Fu Junyuan
+Annual Report 2018
+Expected credit losses relating to financial guarantees and
+loan commitments
+- Debt securities classified as receivables (Note 24(g))
+- Held-to-maturity investments (Note 24(f))
+- Available-for-sale financial assets
+- Debt investments at FVTOCI (Note 24(c))
+N/A
+787
+- Debt investments at amortised cost (Note 24(b))
+Investments
+Others
+121
+Amounts due from banks and other financial institutions
+60,052
+59,252
+2017
+2018
+China Merchants Bank
+14. Expected credit losses
+Annual Report 2018
+IX Financial Statements
+(368)
+389
+Loans and advances to customers (Note 22(c))
+N/A
+Subtotal
+N/A
+- Hong Kong
+11. Directors' and Supervisors' emoluments (continued)
+Current income tax expense
+(a) Income tax in the consolidated statement of profit or loss represents:
+15. Income tax
+59,922
+60,829
+Total
+- Mainland China
+395
+(55)
+N/A
+682
+8
+N/A
+- Overseas
+374
+IX Financial Statements
+N/A
+(886)
+1.4 Honors and Awards
+In 2018, the Company received a number of honors and awards from organisations both at home and abroad,
+including:
+The "Report on the Survey of Preferred Brand Names of Chinese Multimillionaires of 2018" was officially
+released by Hurun Rich List in January 2018 and the credit card business of the Company received the "Most
+Favoured Credit Card by Multimillionaires" in Hurun Rich List for 14 consecutive years.
+In the "Top 500 World Banks" released by The Banker, a UK magazine in February 2018, the Company
+ranked 11th worldwide with a brand value of USD16.673 billion, up by 1 place from the previous year. In
+July, in The Banker's list of "Top 1,000 World Banks 2018", the Company ranked 20th, up by 3 places from
+the previous year.
+In February 2018, in the "2018 Global Best Private Banking and Wealth Management Institutions Awards
+Ceremony" staged by Euromoney, the Company received the "Best Private Bank in China" for the eighth
+time.
+In March 2018, in the "2018 International Excellence in Retail Financial Services Awards Ceremony"
+organised by The Asian Banker, the Company was named the "Best Retail Bank in the Asia Pacific Region".
+In May, in the "2018 Future Finance Summit & Industry Achievement Awards Ceremony" organised by The
+Asian Banker, the Company was named the "Best Innovation Center for Financial Institutions in China" and
+the "Best Custodian Bank in China".
+In June 2018, in the selection campaign for the "2018 Finance Innovation Award in China" organised
+by The Banker in China, the Company won the "Best Financial Innovation Award". The corporate wealth
+management business of the Company was awarded "Top 10 Wealth Management Innovation Award", and
+its private banking business won the "Top 10 Family Trust Management Innovation Award". "Zhao Ying Tong
+()" Internet Transaction Platform for Industry Peers" products won the "Top 10 Financial Technology
+Product Innovation Award" and "CMB APP 6.0" products won the "Top 10 Financial Product Innovation
+Award", respectively.
+In July 2018, The Company was awarded the "2017 Best Socially Responsible Financial Institution in China's
+Banking Industry" at the "Conference for Publication of the Corporate Social Responsibility Reports of the
+PRC Banking Industry for 2017 and Commendation on Social Responsibility Practices" by China Banking
+Association.
+In September 2018, in the "Awards of Excellence in Corporate and Investment Banking in China 2018"
+organised by Asiamoney, the Company won the "Best Finance Institutions and Investment Banking Business
+in China" award. In December, the Company was awarded "China's Leaders in Fintech: Best National
+Commercial Bank" in 2018 by Asiamoney.
+In November 2018, in the "2018 China Human Capital International Management Forum and China's Best
+Employer Awards Ceremony" hosted by Zhilian Zhaopin, the Company received two awards, namely the
+"2018 Best Employer of China" and "2018 Employer with the Most Female Attention of China".
+Annual Report 2018
+15
+16
+China Merchants Bank
+Il Summary of Accounting Data and Financial Indicators
+In July 2018, the list of Fortune China 500 was released, with the Company ranking 38th. The Company was
+included in the list of Fortune Global 500 for 7 consecutive years, ranking 213th, up by 3 places from the
+previous year.
+In November 2018, the Company was once again included in Component of SynTao Green Finance-Caixin
+ESG (Environmental, Social and Corporate Governance) 50 Index by Caixin Magazine.
+Advantageous retail finance. The retail business of the Company set an early lead in the industry and formed an
+inward development system in terms of customer base, channels, products and brands. At the same time, through
+vigorous promotion of inclusive and intensive growth and enhancement of refined management, key factors
+including the proportion of net operating income, profit contribution and the proportion of high-end customers are
+among the best in the industry. The Company enjoys a leading advantage in its retail finance.
+I Company Information
+Adhering to the strategic positioning of "One Body with Two Wings", focusing on the
+construction of basic customer base and core customer base, enriching two product
+systems namely basic products and professional products, equipping retail business
+with significant competitive edges and wholesale business with distinctive features, and
+enhancing the coordination among business lines.
+Proactively occupy the strategic dominant position in the future: firstly, the Company will continually promote
+structural adjustment and operational transformation to realise the objective of a "Light-operation Bank". Secondly,
+the Company will strengthen the proactive management of risks and maintain sound operation in active response
+to the challenge from the deceleration of economic growth. Thirdly, the Company will promote digitalisation in a
+comprehensive manner to build a digitalised CMB and achieve sustainable development. Fourthly, the Company will
+build a professional system of "investment banking - asset management - wealth management", so as to form its
+new core competitive edges.
+Summary of Accounting Data
+13
+14
+China Merchants Bank
+Annual Report 2018
+I Company Information
+Push forward the transformation of the business model. The Company will strive to combine "experience" with
+"technology", build a leading digitalised innovative bank and an excellent wealth management bank, form a new
+model for retail banking service in the Internet era, and bring the systematic competitiveness of retail finance to
+a new height. Focusing on "promoting transformation, adjusting structure and improving quality", the Company
+will promote in-depth transformation of the development model of corporate finance, and vigorously forge our
+differentiated competitive advantages. The Company will adhere to the integration of investment banking and
+commercial banking, capitalise on the overall strength of corporate finance and vigorously promote the coordinated
+development between "transaction banking" and "investment banking" so as to build a leading business system of
+transaction banking and investment banking. The Company will also strengthen business synergy, exert its unique
+advantage of "One Body with Two Wings" and steadily promote integration so as to provide all-inclusive financial
+services to customers. In addition, the Company will push forward internationalisation so as to enhance our overseas
+operation and management level.
+Annual Report 2018
+Build a strong strategic supporting system. Firstly, the Company will gradually adopt the lean and agile development
+models to realise the "dual-model developments" of IT projects, and vigorously enhance its technology-based
+capability. Secondly, the Company will put emphasis on both management and services, and build a "light-operation"
+human resources management system. Thirdly, the Company will optimise its resources allocation, and further
+strengthen asset and liability management and financial management. Fourthly, the Company will strive to enhance
+its risk management level and address both symptomatic and fundamental problems, so as to build a professional,
+independent and vertical comprehensive risk management system. Fifthly, the Company will form an integrated
+internal control and management system to reinforce the foundation of its internal control and compliance.
+Sixthly, the Company will push forward the structural reform of organisations, so as to build a complete flattened,
+intensive and professional organisational structure for the future. Seventhly, the Company will promote the reform
+of operation system and process restructuring, so as to form a "light-operation" system. Eighthly, the Company
+will optimise channel construction and management to enhance the efficiency of channel operation. Ninthly, the
+Company will reinforce cultural branding of CMB and cultivate the driving force for sustainable development.
+Investment Value and Core Competitiveness:
+Accelerating innovation and changes in corporate culture. With the "Shekou gene" inherited from the reform
+and opening up, the Company formulated a business philosophy of "we are here just for you", held onto its core
+values of "service, innovation and prudence", adhered to the distinct corporate culture that strived for excellence
+and accelerated innovation and changes in the course of its business development.
+Fully empowered Fintech. The Company endeavoured to build itself into a "Digital Bank", and used Fintech
+as the locomotive to provide "nuclear power" for its transformation and development, so as to fully empower
+its business development. Through benchmarking with Fintech companies, the Company will build up the overall
+infrastructure for the Company's financial science and technology, establish an ecological system for the business of
+the Company with an open mindset and a long-term perspective, and transform the business management model
+with the concepts and methods of Fintech so as to strengthen the capability of science and technology, promote the
+integration of technology with business and promote business agility based on agile technology.
+Well-structured layout of business plans. Leveraging on its own endowment of resources, the Company
+established a clear strategic positioning of "One Body with Two Wings" through its focus on business and
+customers, built a professional system of "Investment Bank - Asset Management - Wealth Management", thereby
+creating a large number of leading and distinctive businesses and forming the layout of business plans with a
+coherent structure and stronger capability to withstand cyclical risks.
+Distinctive wholesale finance. The Company actively builds a market-leading wholesale finance business with
+distinctive features and leverages on its professional advantages to provide its clients with customized and integrated
+financial services. New growth engines such as investment banking, transaction banking, asset custody, asset
+management, bills and financial markets have been growing continuously and professional service capabilities have
+been affirmed and recognized by the market and customers.
+Scientific and efficient management system. Based on the principle of serving customers and boosting business
+development, the Company successfully established the comprehensive, modern and scientific risk management
+system, the capital management system, the operational management system, the information management system,
+the performance appraisal system and the human resource management system of the Company which have been
+put in place and the relevant capabilities acquired can guarantee the steady development of business operation in
+the long run.
+Continuous improvement of the organizational system. In accordance with the direction of "professionalism,
+delayering and intensification", the Company creates an efficient light management structure, establishes an end-to-end
+customer service process and builds organizational models with distinctive features, such as setting up business divisions
+in the branch level. The professionalization level and the efficiency of operation and management have been improving
+and the speed to respond to customer needs and market changes has been picking up.
+Industry-leading quality service. The Company developed a unique service model ever since it was founded.
+Through its long-term practice, it has established its service concept of "we are here just for you". We attach
+importance to the customer service experience, proactively promote service upgrading, and always keep its service
+quality ahead. "Good service" has been the tag for the Company to attract customers and expand market.
+Excellent professional personnel. The Company has cultivated and created a high-quality talent team through a
+people-oriented culture and a market-based talent incentive mechanism. The senior management team has extensive
+experience and is well settled down. The overall quality of staff and their professional skills are industry-leading. We
+proactively embrace competition in Fintech by expanding the investment and recruitment of Fintech talents.
+China Merchants Bank
+Well-developed and refined strategic management. Adhering to the strategy-driven development, the
+Company's strategic management has become increasingly well-developed. It has given full play to its comparative
+advantages and management potential amidst the crucial period of technological progress, industrial restructuring
+and deepening of financial markets. The Company attains proper strategic positioning and vigorously carries out
+structural adjustment for business development, customers, channels and products in an effort to promote the
+dynamic and balanced development of "Quality, Efficiency and Scale", thus navigating a differentiated development
+path with outstanding performance.
+and Financial Indicators
+Basic earnings attributable to ordinary shareholders of the Bank(2)
+Diluted earnings attributable to ordinary shareholders of the Bank
+Year-end net assets attributable to ordinary shareholders
+of the Bank
+Operating Results
+Changes
++/(-)%
+3.13
+2.78
+12.59
+3.13
+2.78
+12.59
+20.07
+17.69
+13.45
+(in millions of RMB, excluding percentages)
+Total assets
+of which: total loans and advances to customers (3)
+Total liabilities
+of which: total deposits from customers (3)
+Total equity attributable to shareholders of the Bank
+Closely adhering to the transformation objective of building a "Light-operation Bank",
+realising balanced development among "quality, efficiency and scale", continually
+optimising operational structure, basically completing the system of a "Light-operation
+Bank", initially achieving digitalisation of the Bank, and vigorously promoting
+internationalisation and integration.
+31 December
+2018
+2017
+2.1 Key accounting data and financial indicators
+2018
+Per Share (RMB)
+Changes
+(in millions of RMB, excluding percentages)
+2018
+2017
++/(-)%
+Net operating income (1)
+248,444
+221,037
+12.40
+Profit before tax
+106,497
+90,680
+17.44
+Net profit attributable to shareholders of the Bank
+80,560
+70,150
+14.84
+Volume Indicators
+Building the "Best Commercial Bank in China" with innovation-driven development,
+leading retail banking and distinguished features.
+A Shares: Shanghai Stock Exchange
+Strategic positioning:
+Authorised Representatives: Tian Huiyu, Li Hao
+Secretary of the Board of Directors: Wang Liang
+Joint Company Secretaries: Wang Liang, Seng Sze Ka Mee Natalia (FCIS, FCS (PE), FHKIOD, FTIHK)
+Securities Representative: Huo Jianjun
+1.1.3 Registered and Office Address:
+7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province, China
+1.1.4 Mailing Address:
+7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province, China
+Postcode: 518040
+Tel: +86 755 8319 8888
+Fax: +86 755 8319 5109
+E-mail: cmb@cmbchina.com
+Website: www.cmbchina.com
+Hotline for complaints on customer service: 95555-7
+Hotline for consumer rights protection: +86 755 8307 7333
+1.1.5 Principal Place of Business in Hong Kong:
+21st Floor, Bank of America Tower, 12 Harcourt Road, Hong Kong
+1.1.6 Share Listing:
+Abbreviated Name of A Shares: CMB
+1.1.2 Legal Representative: Li Jianhong
+Stock Code: 600036
+1.1.1 Registered Company Name in Chinese: RESĦRA (Abbreviated Name in Chinese: ÀRͯ)
+Registered Company Name in English: China Merchants Bank Co., Ltd.
+Company Information
+31 December
+2017
+10
+China Merchants Bank
+Annual Report 2018
+President's Statement
+Transforming from bank cards to APPS, we will redefine the boundaries of banking services. With the shift of customer
+behaviors and habits, APPS have become the main platforms for banks to interact with customers. 24 years ago, in responding
+to the needs of customers, CMB innovatively launched "All-in-one Card", and took the lead in eliminating bankbooks; in 2018,
+we once again led the trend, took the lead in realising comprehensive card-free operation in the outlets, and launched the
+"eliminating bank cards" campaign. Under the macro environment of the era, only by changing with our users, can we keep
+abreast with time, even if it means painful reforms and self-revolution. We are fully aware that a bank card is just a product,
+but APP is a platform that integrates the whole ecological system. Currently, 27% and 44% of the traffic of CMB APP and CMB
+Life APP come from non-financial services respectively. Both internal and external scenarios have achieved initial results. Our
+two major APPs have 15 internal scenarios, each of which has more than 10 million MAUS, and we have initially set up a user
+ecosystem covering subways, buses, parking lots and other convenience travel scenarios. It's just the beginning.
+Transforming from trading mindset to customer journey, we will redefine banking service logic and customer
+experience. Trading mindset is from the business perception, whereas service journey is from the customer's perception. To
+become a bank offering the best customer experience, we must think from the customer's perspective, understanding and
+changing the product logics, service methods and interaction designs of the Bank in all processes. As such, we have attached
+great importance to user experience, established user experience monitoring system for both retail finance and corporate finance,
+perceived the customer experience in real time, given feedback and made improvement in a timely manner. We will build a
+powerful digital business center, and strive to empower the online customer service platform and front-line customer managers in
+an intelligent way to fundamentally enhance customer experience.
+Transforming from centralisation to openness, we will redefine the technology base and corporate culture of the Bank.
+Technology provides the fundamental support for commercial banks. We are benchmarking Fintech companies to establish an
+open IT architecture and comprehensively enhance the research, development and application of technology-based capabilities.
+The foundation of Fintech is culture. We will build a fault-tolerant mechanism, support creative innovation, encourage young
+people to take charge, tolerate non-mainstream ideas, and strive to change the traditional bureaucracy culture in banks, so that
+CMB will have a lighter and simpler organisational structure.
+No product is appropriate for both bullish and bearish markets, but services can. We are here just for you, and we will provide
+uninterrupted customised services for you at all time. 32 years ago, CMB was established because of China's reform and opening
+up. Today, the best way to pay tribute to the great cause of reform and opening up is to promote the supply-side financial reform
+and initiate the business model transformation with the self-revolution spirit and a more open attitude. Let us take the lead in
+exploring the stage 3.0 of the banking industry and continue the legend of CMB.
+China Merchants Bank Co., Ltd.
+President
+22 March 2019
+Liu Yuan
+Chairman of the Board of Supervisors
+12
+China Merchants Bank
+I Company Information
+Annual Report 2018
+1.1 Company Profile
+H Shares: SEHK
+Abbreviated Name of H Shares: CM BANK
+Stock Code: 03968
+Place for maintenance of annual reports: Office of the Board of Directors of the Company
+1.1.11 Sponsor for Domestic Preference Shares:
+UBS Securities Co., Ltd.
+Office Address: 12th and 15th Floor, Yinglan International Financial Center, No. 7 Financial Street, Xicheng
+District, Beijing
+Sponsor Representatives: Liu Wencheng, Luo Yong
+China Merchants Securities Co., Ltd.
+Office Address: No. 111, Fuhua 1st Road, Futian Street Committee, Futian District, Shenzhen
+Sponsor Representatives: Wang Yuting, Wei Jinyang
+Continuous Supervision Period: 12 January 2018 to 31 December 2019
+1.2 Corporate business overview
+Founded in 1987 with its head office in Shenzhen, China, the Company is a national commercial bank with sizeable
+scale and strength in China. The Company mainly focuses on the market in China. The Company's distribution
+network primarily covers China's major economic centres such as Yangtze River Delta, Pearl River Delta and Bohai
+Rim, and some large and medium cities in other regions. For details, please refer to the sections headed "Distribution
+Channels" and "Branches and Representative Offices". As at the end of the reporting period, the Company has
+1,783 domestic and overseas correspondent banks in 106 countries (including China) and regions. The Company was
+listed on Shanghai Stock Exchange in April 2002 and on the SEHK in September 2006.
+The Company provides customers with various wholesale and retail banking products and services, and maintains
+treasury businesses for proprietary purpose and on behalf of customers. Many innovative products and services of
+the Company, such as "All-in-one Card", a multi-function debit card, "All-in-one Net", a comprehensive online
+banking service platform, credit cards, the "Sunflower Wealth Management" services and private banking services,
+CMB APP and CMB Life APP, CMB Corporate APP, transaction banking services and offshore business services, global
+cash management as well as trade financing, asset management, asset custody, investment banking and other
+services, have been widely recognised by consumers in China.
+In 2018, the Company took the initiative to adapt to the changes in the external and internal environment, used
+Fintech as the locomotive to provide "nuclear power", and endeavored to develop itself into the bank that offers the
+best customer experience. Over the past year, the Company has made remarkable results in business development,
+further consolidated its customer base and steadily improved its customer service capabilities. In 2019, the Company
+will closely center on the two critical points of customers and technologies to deepen the strategic transformation
+and promote the formation of new business models. For details, please refer to the sections headed "Chairman's
+Statement" and "President's Statement".
+1.3 Development strategies, investment value and core
+competitiveness
+Development vision:
+Strategic objective:
+website of the Company (www.cmbchina.com)
+website of SEHK (www.hkex.com.hk)
+Hong Kong:
+Mainland China: "China Securities Journal", "Securities Times", "Shanghai Securities News"
+website of Shanghai Stock Exchange (www.sse.com.cn)
+website of the Company (www.cmbchina.com)
+Domestic Preference Shares: Shanghai Stock Exchange
+Abbreviated Name of Shares: Zhao Yin You 1 (1)
+Stock Code: 360028
+1.1.7
+Offshore Preference Shares: SEHK
+Abbreviated Name of Shares: CMB 17USDPREF
+Stock Code: 04614
+Domestic Auditor: Deloitte Touche Tohmatsu Certified Public Accountants LLP
+Office Address: 30th Floor, Bund Center, 222 Yan'an Road East, Shanghai, China
+Certified Public Accountants for Signature: Zeng Hao, Zhu Wei
+International Auditor: Deloitte Touche Tohmatsu
+Development Strategies:
+Office Address: 35th Floor, One Pacific Place, 88 Queensway, Hong Kong
+Legal Advisor as to Hong Kong Law: Herbert Smith Freehills
+1.1.9 Registrar for A Shares: China Securities Depository & Clearing Corporation Ltd., Shanghai Branch
+Share Register and Transfer Office as to H Shares: Computershare Hong Kong Investor Services Ltd.
+Shops 1712-1716, 17/F, Hopewell Center, 183 Queen's Road East, Wanchai, Hong Kong
+Registrar for Domestic Preference Shares: China Securities Depository & Clearing Corporation Ltd., Shanghai Branch
+Registrar and Transfer Agent for Offshore Preference Shares:
+The Bank of New York Mellon SA/NV, Luxembourg Branch
+China Merchants Bank
+I Company Information
+Annual Report 2018
+1.1.10 Newspapers and Websites Designated for Information Disclosure:
+1.1.8 Legal Advisor as to PRC Law: Jun He Law Offices
+Changes
+Return on average assets attributable
+6,745,729
+ordinary shareholders of the Bank
+Return on average equity attributable to
+1.28
+1.13
+1.09
+1.15
+1.24
+shareholders of the Bank
+Return on average assets attributable to
+Key Financial Ratios
+(%)
+25,220
+315,060
+4,416,769
+3,304,438
+5,474,978 4,731,829
+2,824,286 2,513,919
+25,220
+361,758
+5,113,220
+3,571,698
+25,220
+25,220
+483,392 403,362
+5,814,246 5,538,949
+4,064,345 3,802,049
+6,297,638 5,942,311
+3,565,044 3,261,681
+3,933,034
+16.57
+Total loans and advances to customers
+16.54
+17.09
+the advanced approach
+Core Tier 1 capital adequacy ratio under
+1.11
+1.68
+1.87
+1.61
+1.36
+Non-performing loan ratio
+30.42
+27.55
+27.60
+30.21
+31.04
+Cost-to-income ratio
+19.28
+16.27
+6,745,729
+Total assets
+4,400,674
+Diluted earnings attributable to ordinary
+2.22
+2.29
+2.46
+2.78
+3.13
+shareholders of the Bank
+Basic earnings attributable to ordinary
+0.67
+0.69
+0.74
+0.84
+0.94
+Dividend (tax inclusive)
+Per Share
+shareholders of the Bank
+3.13
+2.78
+2.46
+Deposits from customers
+25,220
+543,605
+6,202,124
+Total liabilities
+Total shareholders' equity
+Share capital
+Year end
+(in millions of RMB)
+11.78
+12.47
+15.95
+17.69
+20.07
+shareholders of the Bank
+Year-end net assets attributable to ordinary
+2.22
+2.29
+14.31
+(RMB)
+12.06
+10.83
+(8)
+Impairment losses on other assets
+311
+(907)
+998
+(59,922)
+(60,829)
+1,309
+Share of profits of associates and joint ventures
+Expected credit losses
+(10,679)
+(70,431)
+(81,110)
+Operating expenses
+9,102
+11,169
+20,271
+Other net income
+Profit before tax
+2,462
+106,497
+(25,678)
+19
+The new financial instrument standard refer to IFRS 9 "Financial Instruments". Before the implementation of the standard, some of the financial
+instruments were measured at amortised cost or measured at fair value through other comprehensive income. After the implementation, the
+measurement attributes and accounting methods are adjusted to be measured at fair value through profit or loss. The impact on the data of revenue
+will be: fair value changes of the current period will affect the net non-interest income and the net operating income; the presentation of investment
+income will be changed from the interest income to the non-interest income, affecting the net interest income and net non-interest income structure,
+but will not affect the total net operating income.
+2
+10,410
+70,150
+80,560
+Net profit attributable to shareholders of the Bank
+10,181
+70,638
+80,819
+Net profit
+(5,636)
+15,817
+(4)
+(4)
+90,680
+(20,042)
+Income tax
+64,018
+66,480
+Net fee and commission income
+12.38
+12.57
+13.33
+15.48
+15.68
+approach
+Capital adequacy ratio under the advanced
+10.44
+10.83
+11.54
+13.02
+12.62
+advanced approach
+Tier 1 capital adequacy ratio under the
+10.44
+China Merchants Bank
+III Report of the Board of Directors
+Annual Report 2018
+Report of the Board of Directors
+15,532
+144,852
+160,384
+Net interest income
+Changes
+2017
+2018
+11.54
+(in millions of RMB)
+3.2.1 Financial highlights
+3.2 Analysis of income statement
+The non-performing loans decreased and the allowance coverage ratio remained solid. As at the end of the reporting
+period, the Group had total non-performing loans of RMB53.605 billion, representing a decrease of RMB3.788
+billion as compared with the end of the previous year. The non-performing loan ratio was 1.36%, down by 0.25
+percentage point as compared with the end of the previous year. The non-performing loan allowance coverage ratio
+was 358.18%, representing an increase of 96.07 percentage points as compared with the end of the previous year.
+The scale of assets and liabilities expanded steadily. As at the end of the reporting period, the Group's total assets
+amounted to RMB6,745.729 billion, representing an increase of 7.12% as compared with the end of the previous
+year. The total loans and advances to customers amounted to RMB3,933.034 billion, representing an increase
+of 10.32% as compared with the end of the previous year. Total liabilities amounted to RMB6,202.124 billion,
+representing an increase of 6.67% as compared with the end of the previous year. Total deposits from customers
+amounted to RMB4,400.674 billion, representing an increase of 8.28% as compared with the end of the previous
+year.
+Earnings increased steadily. In 2018, the Group realised a net profit attributable to shareholders of the Bank of
+RMB80.560 billion, representing a year-on-year increase of 14.84%; the net interest income was RMB160.384 billion,
+representing a year-on-year increase of 10.72%; the net non-interest income was RMB88.060 billion, representing a
+year-on-year increase of 15.59%, up by 3.67% year-on-year after eliminating the impact of implementing the new
+financial instrument standard². The return on average asset (ROAA) and return on average equity (ROAE) attributable
+to ordinary shareholders of the Bank were 1.24% and 16.57%, up by 0.09 percentage point and 0.03 percentage
+point from the previous year, respectively.
+In 2018, the Group continued to implement its strategic direction of "Light-operation Bank" and the strategic
+positioning of "One Body with Two Wings" by carrying out various businesses in a proactive and sound manner.
+Our overall operation continued to improve and the dynamic and balanced development of "Quality, Efficiency and
+Scale" was achieved, which were reflected mainly in the following aspects:
+3.1 Analysis of overall operation
+In 2018, the Group realised a profit before tax of RMB106.497 billion, representing a year-on-year increase of
+17.44%. The effective income tax rate was 24.11%, representing a year-on-year increase of 2.01 percentage points.
+The following table sets out the changes in major income/loss items of the Group in 2018.
++/(-)%
+55,911
+62,081
+- Net non-interest income
+percentage point
+Decreased by 0.97
+65.53
+64.56
+- Net interest income
+As percentage of net operating income
+percentage point
+Increased by 0.14
+2.43
+2.57
+Net interest margin
+percentage point
+Increased by 0.15
+2.29
+35.44
+2.44
+34.47
+percentage point
+2017
+2018
+31 December
+31 December
+Equity to total assets
+Capital adequacy ratio(2)
+Tier 1 capital adequacy ratio
+Core Tier 1 capital adequacy ratio
+Capital adequacy indicators under the
+advanced approach
+(%)
+percentage point
+Increased by 0.83
+30.21
+31.04
+Cost-to-income ratio(1)
+Increased by 0.97
+Net interest spread
+percentage point
+to ordinary shareholders of the Bank
+Notes: (1) Net operating income is the sum of net interest income, net fee and commission income, other net income as well as share of profits of
+associates and joint ventures.
+12.48
+480,210
+540,118
+8.28
+4,064,345
+4,400,674
+6.67
+5,814,246
+6,202,124
+10.32
+3,565,044
+3,933,034
+7.12
+6,297,638
+(2)
+(3)
+The Bank issued non-cumulative preference shares in 2017, and paid dividends on the preference shares during the year. Therefore, when
+calculating basic earnings per share, return on average equity and net assets per share, dividends on the preference shares were deducted
+from "net profit attributable to shareholders of the Bank", while the preference shares were deducted from both the "average equity"
+and the "net assets".
+In accordance with the "Notice on the Revision and Issuance of the Format of the Financial Statements of the Financial Enterprise for 2018"
+(Cai Kuai [2018] No. 36) (《關於修訂印發2018年度金融企業財務報表格式的通知》(財會〔2018〕36號)) issued by the Ministry of Finance,
+the interest on financial instruments accrued based on the effective interest rate method shall be included in the balance of the relevant
+financial instruments, and shall be reflected in the relevant items of the financial reports, and the "interest receivable" or "interest payable"
+item shall no longer be listed separately. The balance of "interest receivable" or "interest payable" listed in the "other assets" or "other
+liabilities" item is only the interest receivable or payable where the relevant financial instruments have expired but the interest has not
+yet been received or paid at the balance sheet date. The comparable figures for the corresponding period of 2017 may not be adjusted.
+Since the 2018 annual report, the Group has adjusted the financial statements and its accompanying notes in accordance with the above
+requirements. Unless otherwise stated, the balances of the relevant items herein and set out below do not include the above interest on
+financial instruments accrued based on the effective interest method.
+percentage point
+Increased by 0.03
+16.54
+16.57
+Return on average equity attributable
+to shareholders of the Bank
+Increased by 0.09
+1.15
+Changes over
+2017 year-end
+1.24
+2017
+2018
+Profitability indicators
+(%)
+2.2 Financial ratios
+Il Summary of Accounting Data and Financial Indicators
+China Merchants Bank
+Annual Report 2018
+Changes
+57,696
+11.78
+Decreased by 0.28
+70,431
+81,110
+Operating expenses
+166,525
+202,302
+210,270
+221,037
+248,444
+2014
+2015
+2017
+2018
+Net operating income
+Results for the year
+(in millions of RMB)
+65,148
+2.3 Five-year financial summary
+67,957
+Impairment losses
+70,150
+80,560
+of the Bank
+Net profit attributable to shareholders
+73,431
+75,079
+78,963
+90,680
+106,497
+Profit before tax
+31,681
+59,266
+66,159
+59,926
+60,837
+61,413
+Il Summary of Accounting Data and Financial Indicators
+China Merchants Bank
+Annual Report 2018
+18
+1.36
+Non-performing loan ratio
+Asset quality indicators
+percentage point
+Increased by 0.38
+7.68
+8.06
+percentage point
+Increased by 0.20
+15.48
+15.68
+percentage point
+percentage point
+Decreased by 0.40
+13.02
+12.62
+1.61
+Decreased by 0.25
+Allowance coverage ratio of non-performing loans (3)
+358.18
+17
+(4) Allowance ratio of loans = allowances for impairment losses/total loans and advances to customers.
+Allowance coverage ratio of non-performing loans = allowances for impairment losses/balance of non-performing loans.
+(3)
+As at the end of the reporting period, the Group's capital adequacy ratio, Tier 1 capital adequacy ratio and Core Tier 1 capital adequacy
+ratio under the weighted approach were 13.06%, 11.04% and 10.31% respectively.
+Cost-to-income ratio = operating expenses/net operating income. The numerator does not include taxes and surcharges, provisions for
+insurance claims and the depreciation charges on fixed assets under operating lease and investment properties.
+percentage point
+12.06
+(2)
+Increased by 0.66
+4.22
+4.88
+Allowance ratio of loans (4)
+percentage points
+percentage point
+Increased by 96.07
+262.11
+Notes: (1)
+2016
+2017
+190
+Net loans and advances to customers
+at amortised cost
+(191,772)
+(47,277)
+(38,517)
+(105,978)
+Total
+3,755,264
+53,611
+90,942
+3,610,711
+Loans and advances measured at amortised cost
+Less: Loss allowances of loans and advances to
+customers at amortised cost
+Loans and advances to customers at FVTOCI
+Loss allowances of loans and advances to
+customers at FVTOCI
+impaired)
+ECL)
+-Stage 3
+(Lifetime
+ECL-credit
+-Stage 2
+(Lifetime
+ECL- not
+credit-
+-Stage 1
+(12-month
+2018
+Analyzed by ECL
+(ii)
+(b) Analysis of loans and advances to customers (continued)
+22. Loans and advances to customers (continued)
+Annual Report 2018
+IX Financial Statements
+impaired)
+3,504,733
+52,425
+6,334
+41,520
+(33,931)
+(13,784)
+(102,717)
+Less: allowance
+15,866
+3,507,658
+Loans and advances
+Total
+assessed
+assessed
+assessed
+Which are
+individually
+Which are
+collectively
+Impairment allowances for
+impaired loans and advances
+2017
+advances
+which are
+collectively
+for loans and
+Impairment
+allowances
+(228)
+(41)
+(187)
+177,367
+2,289
+175,078
+3,563,492
+China Merchants Bank
+3,565,044
+241,305
+20,940
+2,196
+Mining
+1,937
+5,635
+Construction
+7,065
+7,889
+heating power, gas and water
+Production and supply of electric power,
+11,371
+9,309
+4,211
+Telecommunications, software and IT services
+12,505
+Wholesale and retail
+14,221
+26,860
+Manufacturing
+(b) Analysed by residual maturity
+38,212
+Transportation, storage and postal services
+47,198
+52,174
+63,209
+13,934
+Leasing and commercial services
+2,001
+13,444
+21,696
+11,376
+12,720
+1,747
+1,525
+7,613
+204
+17,743
+220,365
+191
+As at 31 December 2018, over 90% of the Group's loans and advances to customers were conducted in the People's Republic of China
+(31 December 2017: over 90%).
+In 2018, the Group divided industry sector and category according to the newly revised "Industrial Classification for National Economic
+Activities" (GB/T 4754-2017) standards issued by the General Administration of Quality Supervision, Inspection and Quarantine of the People's
+Republic of China and the Standardization Administration of the People's Republic of China and has restated the corresponding comparative
+figures.
+Notes:
+Gross loans and advances to customers
+Retail loans and advances subtotal
+Others
+Micro-finance loans
+Credit cards
+7,260
+Residential mortgage
+228,856
+Corporate loans and advances subtotal
+17,882
+Others
+419
+26
+Water, environment and public utilities management
+250,552
+54,167
+(150,432)
+3,404,941
+assessed
+Which are
+individually
+Which are
+collectively
+collectively
+advances
+which are
+Impairment allowances for
+impaired loans and advances
+2017
+for loans and
+Impairment
+allowances
+191,772
+47,277
+assessed
+38,517
+Balance as at the end of the year
+279
+78
+49
+152
+Exchange difference
+7,453
+7,453
+Recovery of loans and advances written off
+(307)
+(307)
+105,978
+assessed
+Total
+Balance as at the beginning of the year
+(560)
+(1)
+Unwinding of discount
+22
+22
+Transfer
+(24,283)
+(15,682)
+(8,601)
+Write-offs
+(4,398)
+(3,392)
+(1)
+(1,005)
+Release for the year (Note 14)
+64,450
+21,255
+9,955
+33,240
+Charge for the year (Note 14)
+Impairment losses for the year
+110,032
+29,230
+10,108
+70,694
+Unwinding of discount on allowance
+Net loans and advances
+(26,197)
+Write-offs
+impaired)
+impaired)
+ECL)
+ECL-credit
+credit-
+(12-month
+-Stage 3
+(Lifetime
+ECL- not
+-Stage 1
+-Stage 2
+(Lifetime
+2018
+Balance as at the beginning of the year
+Reconciliation of allowance for expected credit loss measured at amortised cost:
+(i)
+(c)
+22. Loans and advances to customers (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+196
+195
+3,414,612
+7,589
+2,082
+Movements of allowance for impairment losses
+68,107
+33,815
+49,418
+(76,946)
+(19,723)
+(17,646)
+(39,577)
+Release for the year (Note 14)
+136,150
+29,779
+28,151
+78,220
+Charge for the year (Note 14)
+Impairment losses for the year
+7,186
+(6,341)
+(845)
+- Stage 3
+(327)
+1,951
+(1,624)
+- Stage 2
+(83)
+(1,462)
+1,545
+- Stage 1
+Transfer to
+Total
+151,340
+(26,197)
+(561)
+Financial concerns
+2017
+Less: loss allowances
+Gross loans and advances to customers at amortised cost
+Retail loans and advances
+Corporate loans and advances
+31 December 2018
+Loans and advances to customers at amortised cost
+(i)
+3,414,612
+3,749,949
+N/A
+403
+- Stage 1 (12-month ECL)
+Total
+N/A
+177,367
+Loans and advances to customers at FVTOCI (ii)
+3,414,612
+3,572,179
+Loans and advances to customers at amortised cost
+(150,432)
+(191,895)
+Subtotal
+N/A
+(150,432)
+Loans and advances to customers at FVTPL
+- Stage 2 (Lifetime ECL- not credit-impaired)
+- Stage 3 (Lifetime ECL- credit impaired)
+Subtotal
+Subtotal
+- Collectively assessed
+- Individually assessed
+Less: Impairment allowances
+Gross loans and advances to customers
+Subtotal
+Others
+Micro-finance loans
+Credit cards
+Residential mortgage
+Retail loans and advances
+Subtotal
+Discounted bills
+Corporate loans and advances
+1,663,861
+115,888
+31 December 2017
+3,563,492
+(191,772)
+(47,277)
+(38,517)
+(105,978)
+3,755,264
+2,009,339
+1,745,925
+Net loans and advances to customers at amortised cost
+(191,772)
+(123)
+Net loans and advances to customers
+loss allowances of loans and advances to customers at amortised cost (i)
+loss allowances of Interest receivable
+3,764,074
+Adjustments under IFRS 9
+Balance as at the end of last year
+(d) Movements of allowances for impairment losses are as follows:
+252,550
+199,181
+1,048
+6,443
+245,059
+188,429
+10,752
+2017
+2018
+Balance as at the beginning of the year
+Total
+Bills
+Bonds
+(c) Analysed by assets types
+252,550
+199,181
+249,563
+2,987
+998
+- Between one month and one year (inclusive)
+Total
+198,183
+- Within one month (inclusive)
+Maturing
+Asset management schemes
+(Release)/charge for the year (note 14)
+Exchange difference
+Balance as at the end of the year
+Subtotal
+3,565,044
+N/A
+3,755,264
+8,810
+Gross loans and advances to customers at amortised cost (i)
+Interest receivable
+31 December 2018 31 December 2017
+(a) Loans and advances to customers
+22. Loans and advances to customers
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+192
+191
+754
+737
+2
+82
+(629)
+672
+1,364
+N/A
+610
+672
+754
+2017
+2018
+3,565,044
+Property development
+1,779,749
+491,383
+Residential mortgage
+115,888
+149,766
+Discounted bills
+1,443,496
+1,545,073
+Corporate loans and advances subtotal
+56,721
+59,021
+Others
+39,136
+921,500
+35,349
+61,920
+55,890
+Water, environment and public utilities management
+67,964
+60,703
+Telecommunications, software and IT services
+46,276
+61,963
+Financial concerns
+74,804
+84,475
+Mining
+825,797
+Credit cards
+575,299
+2018
+Operation outside Mainland China
+Analysed by industry sector and category: (continued)
+(i)
+Analysis of loans and advances to customers (continued)
+(b)
+Loans and advances to customers (continued)
+22.
+IX Financial Statements
+China Merchants Bank
+Annual Report 2018
+194
+193
+3,323,739
+3,682,482
+Gross loans and advances to customers
+1,764,355
+1,987,643
+Retail loans and advances subtotal
+136,410
+141,835
+Others
+310,969
+349,009
+Micro-finance loans
+491,179
+Construction
+833,410
+123,768
+Leasing and commercial services
+31 December 2018
+Subtotal
+- Stage 3 (Lifetime ECL- credit impaired)
+- Stage 2 (Lifetime ECL- not credit-impaired)
+· Stage 1 (12-month ECL)
+Loss allowances
+Loans and advances to customers at FVTOCI
+Discount bills
+Corporate loans and advances
+Loans and advances to customers at FVTOCI
+(ii)
+27,601
+(a) Loans and advances to customers (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+3,414,612
+(150,432)
+(116,501)
+(33,931)
+3,565,044
+1,785,295
+147,786
+312,716
+22. Loans and advances to customers (continued)
+149,766
+177,367
+(187)
+121,900
+138,773
+205,884
+157,984
+204,322
+248,815
+251,979
+255,683
+188,822
+262,323
+heating power, gas and water
+Production and supply of electric power,
+Wholesale and retail
+Transportation, storage and postal services
+Manufacturing
+Property development
+2017
+2018
+Operation in the Mainland China
+Analysed by industry sector and category:
+(i)
+(b) Analysis of loans and advances to customers
+No loss allowance is recognised in the consolidated statement of financial position for loans and advances to
+customers at FVTOCI as the carrying amount is at fair value.
+(228)
+(41)
+124,094
+Recoveries of loans and advances previously
+written off
+Exchange difference
+911,348
+2018
+Total
+Subtotal
+Impairment losses of interest receivable
+Impairment losses of principal (i)(ii)(iii)
+Subtotal
+Interest receivable
+Debt investments at amortised cost (i)(ii)
+Debt investments at amortised cost
+(b)
+12,790
+The amounts of changes in the fair value of these investments that are attributable to changes in credit risk are
+considered not significant during the years ended 31 December 2018 and 2017 and as at 31 December 2018 and
+2017.
+4,099
+4,762
+520
+7,652
+5,372
+160
+Listed outside mainland China
+Listed inside mainland China
+Classification
+9,381
+13,184
+Unlisted
+924,138
+(8,080)
+(46)
+Amounts held under resale agreements in Mainland China
+- Banks
+47,793
+32,365
+- Other financial institutions
+152,125
+220,939
+Subtotal
+199,918
+253,304
+Banks
+Less: Impairment allowances
+- Other financial institutions
+Subtotal
+(229)
+(659)
+(508)
+(95)
+(737)
+(754)
+Total
+199,181
+199
+916,012
+(8,126)
+Total
+2017
+4,714
+1,576
+Listed inside Mainland China
+Bonds
+Total
+Others
+Wealth management products
+Investments in funds
+Equity investments
+Non-standard assets -Bills
+Other debt securities
+Bonds issued by commercial banks and other financial institutions
+Bonds
+Unlisted
+Other investments measured at FVTPL
+(i)
+(a) Financial assets at fair value through profit or loss (continued)
+24. Investments (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+371
+3,323
+271
+121
+2
+Investments measured at FVTPL (continued)
+Non-standard assets -Bills
+Unlisted
+Investments in equity, funds, wealth management products and others
+Unlisted
+7,190
+Bonds issued by commercial banks and other financial institutions
+Other debt securities
+2,571
+252,550
+2,310
+Bonds issued by policy banks
+520
+Government bonds
+2017
+2018
+Financial assets designated at fair value through profit or loss
+(ii)
+17,278
+173,988
+387
+24,303
+215,956
+3
+1,060
+14,765
+1,450
+173,988
+2,338
+22,352
+2018
+3,684
+84
+2018
+252,550
+Total
+2017
+154,763
+(405)
+(135)
+312,154
+154,628
+1,257
+N/A
+313,411
+154,628
+- Over one year
+2018
+99,487
+74,098
+136,274
+52,747
+235,761
+126,845
+76,798
+27,918
+76,798
+27,918
+312,559
+2017
+- Between one month and one year (inclusive)
+- Within one month (inclusive)
+Maturing
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+20. Placements with banks and other financial institutions
+Principal (a)
+Impairment losses (a)(c)
+2018
+312,559
+Subtotal
+Interest receivable
+Total
+(a) Analysed by nature of counterparties
+Placements in Mainland China
+- Banks
+- Other financial institutions
+Subtotal
+Placements outside Mainland China
+- Banks
+Subtotal
+Total
+Less: Impairment allowances
+- Banks
+- Other financial institutions
+Subtotal
+Total
+(b) Analysed by residual maturity
+154,763
+(a) Analysed by nature of counterparties
+(180)
+(225)
+218
+119
+3
+405
+135
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+21. Amounts held under resale agreements
+Principal(a)
+Impairment losses (a)(d)
+16
+Subtotal
+Total
+2018
+2017
+199,918
+(737)
+253,304
+(754)
+199,181
+252,550
+205
+N/A
+199,386
+Interest receivable
+184
+N/A
+49
+(37)
+(405)
+(135)
+312,154
+154,628
+2018
+2017
+208,432
+102,493
+1,229
+36,202
+116,526
+1,900
+312,154
+154,628
+(c)
+Movements of allowances for impairment losses are as follows:
+Balance as at the end of last year
+Adjustments under IFRS 9
+Balance as at the beginning of the year
+Charge for the year (note 14)
+Exchange difference
+Balance as at the end of the year
+2018
+2017
+135
+16
+(98)
+Unlisted
+Listed outside mainland China
+Listed inside mainland China
+- Stage 2 (Lifetime ECL-
+N/A
+N/A
+N/A
+(2,411)
+Stage 1 (12-month ECL)
+Less: Impairment allowances
+125,283
+(20,972)
+146,255
+134,663
+not credit-impaired)
+(22,456)
+Subtotal
+27,428
+(4,787)
+32,215
+28,450
+(6,603)
+35,053
+Over 5 years
+65,776
+(11,092)
+76,868
+157,119
+(492)
+N/A
+N/A
+Total
+Others
+Loans and advances to customers
+Debt securities
+23. Interest receivable
+122,183
+130,913
+leases receivable
+Net investment in finance
+(2,674)
+N/A
+N/A
+N/A
+- Collectively assessed
+(426)
+N/A
+N/A
+N/A
+- Individually assessed
+N/A
+N/A
+N/A
+(847)
+- Stage 3 (Lifetime ECL
+-credit impaired)
+N/A
+72,389
+2017
+(11,777)
+(inclusive)
+48
+180
+180
+Balance as at the end of the year
+Charge for the year (note 14)
+Balance as at the beginning of the year
+Adjustments under IFRS 9
+Balance as at the end of last year
+2018
+Movements of allowance for impairment losses (continued)
+(ii) Reconciliation of allowance for impairment losses measured at FVTOCI:
+(c)
+228
+22. Loans and advances to customers (continued)
+China Merchants Bank
+Annual Report 2018
+150,432
+33,931
+13,784
+102,717
+Balance as at the end of the year
+(349)
+5,519
+3,195
+(137)
+(212)
+2,324
+IX Financial Statements
+(d) Finance leases receivable
+The table below provides an analysis of finance lease receivable for leases of equipment in which the Group is the
+lessor:
+2018
+Over 1 year but within 5 years
+32,079
+(5,093)
+37,172
+33,824
+(4,076)
+37,900
+Within 1 year (inclusive)
+receivable
+income
+leases
+finance
+Present
+value of
+minimum
+Unearned
+Total
+minimum
+leases
+receivable
+receivable
+leases
+finance
+income
+receivable
+leases
+Present
+value of
+minimum
+Unearned
+minimum
+Total
+2017
+84,166
+15,089
+10,240
+3,397
+17,362
+Bonds issued by commercial banks and other financial institutions
+1,317
+9,091
+Bonds issued by policy banks
+12,286
+20,917
+Government bonds
+Bonds
+2017
+2018
+36,085
+Financial assets held for trading
+(i)
+64,796
+330,302
+Total
+N/A
+2,659
+Interest receivable
+64,796
+327,643
+Subtotal
+9,381
+Investments measured at FVTPL
+Other debt securities
+47,605
+5,083
+Investments in equity, funds, precious metal contracts and others
+9,086
+1,082
+Unlisted
+9,848
+8,514
+Listed outside mainland China
+35,837
+85,379
+Listed inside mainland China
+Bonds
+55,415
+98,503
+Total
+1,217
+Others
+211
+111
+Long position in precious metal contracts
+401
+2,089
+Investments in funds
+32
+111
+Equity investments
+13,184
+(ii)
+Financial assets designated at fair value through profit or loss
+55,415
+Debt investments at FVTOCI
+Held-to-maturity investments
+N/A
+916,012
+24(b)
+Debt investments at amortised cost
+18,916
+34,220
+61(f)
+Derivative financial assets
+64,796
+330,302
+24(a)
+Financial assets at fair value through profit or loss
+2017
+2018
+Notes
+24. Investments
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+198
+197
+As at 31 December 2018, the interests accrued on financial instruments of the Group are included in the carrying
+amounts of the corresponding financial assets.
+28,726
+Available-for-sale financial assets
+2018
+Debt securities classified as receivables
+421,070
+314,459
+(i)
+Investments measured at FVTPL
+2017
+2018
+Notes
+Financial assets at fair value through profit or loss
+(a)
+1,597,272
+1,705,619
+Total
+572,241
+N/A
+24(g)
+558,218
+N/A
+24(f)
+383,101
+N/A
+24(e)
+N/A
+4,015
+24(d)
+Equity investments designated at FVTOCI
+N/A
+24(c)
+25,613
+(3,582)
+incorporation Particulars of issued
+and operation and paid up capital
+(in thousands)
+(g) Debt securities classified as receivables
+24. Investments (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+204
+203
+93
+2017
+90
+542,523
+714
+2,661
+554,936
+(93)
+558,218
+558,311
+2017
+Bonds
+Government bonds
+908
+(4,302)
+Less: impairment allowances
+576,543
+Subtotal
+3,000
+Creditor's beneficiary rights to other commercial banks
+1,962
+509
+Wealth management products
+Loans and advances to customers
+Bills
+Non-standard assets
+9,817
+Other debt securities
+9,428
+Bonds issued by commercial banks and other financial institutions
+290,215
+261,213
+25,072
+202,610
+330,120
+531
+(28)
+(35)
+(75)
+Balance as at the end of the year
+Exchange difference
+Write-offs
+(f)
+Releases for the year
+Charge for the year
+645
+Balance as at the beginning of the year
+2017
+Movements of allowances for impairment losses are as follows:
+(e)
+24. Investments (continued)
+24
+Total
+Held-to-maturity investments
+Bonds issued by policy banks
+2017
+Balance as at the end of the year
+Exchange difference
+Charge for the year(note 14)
+Balance as at the beginning of the year
+Movements of allowances for impairment losses are as follows:
+Fair value of listed debt securities
+Government bonds
+Unlisted
+Listed inside mainland China
+Classification
+Total
+Less: impairment allowances
+Subtotal
+Other debt securities
+Bonds issued by commercial banks and other financial institutions
+Listed outside mainland China
+IX Financial Statements
+Classification
+Inside mainland China
+(ii)
+(i)
+Notes:
+Li Hao
+Limited company
+55% Asset management
+RMB1,310
+Shenzhen
+China Merchants Fund Management
+Co., Ltd. (note (iv))
+Tian Huiyu
+Limited company
+100% Banking
+HKD1,161
+Hong Kong
+CMB Wing Lung Bank Limited
+(note (iii))
+(iii)
+(iv)
+CMB International Capital Holdings Corporation Limited ("CMBICHC"), formerly known as Jiangnan Finance Company Limited and CMB
+International Capital Corporation Limited, is the Bank's wholly-owned subsidiary approved by the PBOC through its Yin Fu [1998] No. 405.
+In 2014, the Bank made an additional capital contribution of HKD750 million in CMBICHC. The capital of CMBICHC increased to HKD1,000
+million, and the Bank's shareholding percentage remains unchanged.
+The Board of Directors have considered and passed "The Resolution regarding the Capital Increase and Restructuring of CMBICHC" which
+agreed that the Bank made capital contribution of USD400 million (or its equivalent) to CMBICHC on 28 July 2015. The capital contribution
+completed on 20 January 2016.
+(Restated)
+2017
+2018
+Details of the Group's interest in major joint ventures are as follows:
+Share of other comprehensive (expense) income for the year
+Share of profits for the year
+Share of net assets
+Shi Shunhua
+26. Interest in joint ventures
+IX Financial Statements
+China Merchants Bank
+206
+205
+In 2012, the Bank acquired 21.6% equity interests in China Merchants Fund Management Co., Ltd. ("CMFM"), its former associate, from ING
+Asset Management B.V. at a consideration of EUR 63,567,567.57. Following the settlement of the above consideration in cash, the Bank's
+shareholding in CMFM increased from 33.4% to 55.0% in 2013. As a result, the Bank obtained the control over CMFM, which became the
+Bank's subsidiary on 28 November 2013. In December 2017, the Bank made an additional capital contribution of RMB605 million in CMFM,
+and other shareholders of CMFM also make capital contribution of RMB495 million proportionally. The capital of CMFM increased to RMB1,310
+million, and the Bank's shareholding percentage remains unchanged.
+CMB Wing Lung Bank Limited ("WLB"), formerly known as Wing Lung Bank Limited. On 30 September 2008, the Bank acquired a 53.12%
+equity interests in WLB. WLB became a wholly owned subsidiary of the bank on 15 January 2009. WLB had withdrawn from listing on the
+HKEx as of 16 January 2009.
+CMB Financial Leasing Company Limited ("CMBFLC") is a wholly-owned subsidiary of the Bank approved by the CBIRC through its Yin Jian Fu
+[2008] No. 110 and commenced its operation in April 2008. In 2014, the Bank made an additional capital contribution of RMB2,000 million in
+CMBFLC. The capital of CMBFLC increased to RMB6,000 million and the Bank's shareholding percentage remains unchanged.
+Annual Report 2018
+Limited company
+100% Finance lease
+RMB6,000
+China Merchants Bank
+Annual Report 2018
+4,302
+(988)
+(2,227)
+Balance as at the end of the year
+Write-off for the year
+Release for the year(note 14)
+IX Financial Statements
+1,341
+6,176
+Balance as at the beginning of the year
+2017
+Movements of allowances for impairment losses are as follows:
+38
+576,505
+Outside mainland China
+Charge for the year(note 14)
+572,241
+25. Particulars of principal subsidiaries of the bank
+Name of company
+Shanghai
+CMB Financial Leasing Company
+Limited (note (ii))
+Tian Huiyu
+Limited company
+100% Financial advisory
+services
+HKD4,129
+Hong Kong
+The following list contains only particulars of subsidiaries which principally affected the results, assets or liabilities of
+the Group. Unless otherwise stated, the class of all shares held is ordinary. All of these companies are subsidiaries as
+defined under Note 4(1) and have been included in the scope of the consolidated financial statements of the Group.
+CMB International Capital Holdings
+Corporation Limited (note (i))
+Legal
+representative
+Economic
+nature
+Bank Principal activities
+up capital
+% of
+ownership
+held by the
+Particulars of the
+issued and paid
+Place of
+incorporation
+and operation
+(in millions)
+China Merchants Bank
+Annual Report 2018
+46,886
+1,057
+Balance as at the end of the year
+36
+4
+32
+Exchange difference
+192
+3,121
+(2,334)
+(518)
+192
+Recoveries of debt previously written off
+(19)
+(1,797)
+- Release for the year (note 14)
+1,707
+507
+907
+3,582
+517
+3,981
+8,080
+2018
+Debt investments at FVTOCI by type :
+(i)
+No loss allowances are recognised in the consolidated statement of financial position for debt investments at FVTOCI
+as the carrying amount is at fair value.
+(1,912)
+(15)
+(1,897)
+- Charge for the year (note 14)
+421,070
+2018
+Total
+Impairment losses of debt investments at FVTOCI (ii)
+Impairment losses of interest receivable
+Total
+Interest receivable
+Debt investments at FVTOCI(i)
+(c) Debt investments at FVTOCI
+414,691
+6,379
+Charge for the year
+(3)
+35
+ECL-credit
+not credit-
+(12-month
+-Stage 3
+(Lifetime
+2018
+(Lifetime ECL-
+-Stage 1
+ECL)
+-Stage 2
+(iii)
+(b) Debt investments at amortised cost (continued)
+24. Investments (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+903,268
+Movements of allowances for impairment losses
+Government bonds
+impaired)
+Balance as at the beginning of the year
+51
+(9)
+(42)
+6
+(3)
+(7)
+(17)
+impaired)
+24
+- Stage 2
+- Stage 1
+Transfer to:
+Total
+7,065
+2,555
+49
+4,461
+- Stage 3
+220,078
+Bonds issued by policy banks
+60,365
+49,703
+Other debt securities
+78,940
+Bonds issued by commercial banks and other financial institutions
+51,715
+Bonds issued by policy banks
+153,426
+Subtotal
+Government bonds
+(e) Available-for-sale financial assets
+During the year ended 31 December 2018, the fair value of the equity investment designated at the date of
+derecognition was RMB17 million, the cumulative loss on disposal was RMB4 million which was transferred from
+investment revaluation reserve to retained profits on disposal.
+2,539
+Listed outside Mainland China
+Unlisted
+1,410
+66
+4,015
+2017
+220
+3,795
+333,784
+3,301
+1,905
+58,123
+44,195
+231,466
+383,101
+(531)
+383,632
+Equity investments
+46,547
+Listed inside mainland China
+Listed outside mainland China
+Unlisted
+Bonds
+Classification
+Total
+Less: impairment allowances
+Subtotal
+Investments in funds
+Investments in equity and funds
+Listed inside mainland China
+Listed outside mainland China
+Unlisted
+8,622
+2018
+63
+IX Financial Statements
+China Merchants Bank
+202
+201
+71,858
+50,486
+292,347
+Annual Report 2018
+Unlisted
+Listed inside Mainland China
+414,691
+Classification
+Total
+35,820
+98,428
+Bonds issued by commercial banks and other financial institutions
+Other debt securities
+Listed outside Mainland China
+1,897
+24. Investments (continued)
+(ii)
+389
+1,445
+1,445
+2018
+Listed inside Mainland China
+Total
+Others
+(c) Debt investments at FVTOCI (continued)
+Movements of allowances for impairment losses
+Repossessed equity instruments
+(d)
+Balance as at the end of the year
+Exchange difference
+Charge for the year (note 14)
+Balance as at the beginning of the year
+Adjustments under IFRS 9
+Balance as at the end of last year
+Equity investments designated at FVTOCI
+60
+1,272
+(36)
+comprehensive
+income
+comprehensive
+income
+Profit or loss
+Total
+Other
+Group's effective interest
+Others
+2017
+Group's effective interest
+Others
+2018
+The following list contains the information of associates, which are unlisted corporate entities and are not
+individually material to the Group:
+3
+20
+249
+37
+4,837
+37
+83
+4,837
+37
+Disposals
+109
+550
+Transfers in/(out)
+2,884
+2,855
+At 1 January
+Share of profits for the year
+Cost:
+2018
+28. Investment properties
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+3
+8
+2017
+Total
+2
+18
+(111)
+1,051
+137
+income
+comprehensive
+Total
+comprehensive
+income
+Profit or loss
+940
+Other
+Others
+2017
+Group's effective interest
+Others
+2018
+Summarised financial information of the joint ventures that are not individually material to the Group:
+192
+Group's effective interest
+(12)
+(23)
+398
+249
+Goodwill
+Share of net assets
+2017
+2018
+27. Interest in associates
+Annual Report 2018
+114
+IX Financial Statements
+208
+207
+92
+11
+81
+451
+53
+China Merchants Bank
+4
+Exchange difference
+(138)
+2,864
+1,781
+1,781
+2018
+Level 3
+Level 2
+Level 1
+as at 31
+December
+Fair Value
+Total
+Held overseas
+Held in Mainland China
+The fair value hierarchy of Investment properties of the Group are listed as below:
+358
+530
+2,864
+4,645
+4,645
+Fair Value
+209
+In estimating the fair value of the properties, the highest and best use of the properties is their current use.
+3,721
+3,721
+Total
+2,688
+2,688
+2
+Held overseas
+2017
+Level 3
+1,033
+Held in Mainland China
+Level 2
+Level 1
+31 December
+as at
+1,033
+2
+140
+251
+At 31 December
+Exchange difference
+Disposals
+(27)
+17
+Transfers in/(out)
+147
+Net book value:
+At 31 December
+134
+1,183
+1,243
+At 1 January
+Accumulated depreciation:
+2,855
+3,488
+At 31 December
+Depreciation
+95
+At 1 January
+Investment properties of the Group mainly represent the leased properties of WLB and the portion of the Bank's
+properties in Qingdao, Hefei, Huhehaote, Guangzhou and Ningbo that have been leased out under operating leases
+or are available for lease. The fair value of the Group's investment properties are assessed by the independent
+appraiser A.G.Wilkinson & Associates, and the fair value is determined by the method of capitalization of net rental
+income. There has been no change to the valuation methodology during the year. As at 31 December 2018, the fair
+value of these properties was RMB4,645 million (2017: RMB3,721 million). The Group's total future minimum lease
+payments under non-cancellable operating leases are receivables as follows:
+Total
+1 year to 5 years (inclusive)
+Over 5 years
+216
+277
+Within 1 year (inclusive)
+2017
+2018
+As at 31 December 2018, no impairment was considered necessary for investment properties by the management of
+the Group (2017: nil).
+1,701
+1,612
+2,061
+1,243
+1,427
+(60)
+45
+(12)
+1,612
+406
+595
+595
+39,549
+45,332
+CIGNA & CMB Life
+2018
+Income tax
+equivalents amortisation
+income
+income
+Revenue Profit or loss
+Equity
+Assets Liabilities
+and
+Cash Depreciation
+and cash
+Total
+Other
+comprehensive comprehensive
+5,783
+16,649
+1,045
+(25)
+23
+14
+245
+81
+152
+496
+(13)
+(i)
+509
+2,891
+19,775
+22,666
+Group's effective interest
+28
+303
+1,020
+8,325
+Summarised financial information of the joint ventures which are individually material to the Group is as below:
+CIGNA & CMB Life
+26. Interest in joint ventures (continued)
+Annual Report 2018
+CIGNA &CMB Life Insurance Company
+Limited (note(i))
+of the Bank subsidiaries Principal activity
+interest
+of the
+ownership
+effective
+Form of business
+structure
+Limited company
+Name of joint ventures
+of
+Group's
+Place of
+of
+Percentage
+Percentage
+44
+ownership
+123
+Shenzhen
+50.00%
+IX Financial Statements
+China Merchants Bank
+The Bank's subsidiary, WLB, and China United Network Communications Limited ("CUNC"), which is a subsidiary of China Unicom Limited,
+jointly set up Merchants Union Consumer Finance Company Limited ("MUCFC"). CBIRC has approved the operation of MUCFC on 3 March
+2015. WLB and CUNC hold 50.00% equity interests in MUCFC respectively and share the risks, profits and losses based on the above
+proportion of their shareholding. In December 2017, the Group made an additional capital contribution of RMB600 million in CUNC, and
+other shareholders of CUNC injected capital proportionally. The capital of CUNC increased to RMB2,859 million, and the Bank's shareholding
+percentage is 15%, WLB's shareholding percentage is 35%, and the Group's shareholding percentage remains unchanged. In December
+2018, the Group made an additional capital contribution of RMB1,000 million in CUNC, and the other shareholder of CUNC injected capital
+proportionally. The Bank's shareholding percentage is 24.15%, WLB's shareholding percentage is 25.85%, and the Group's shareholding
+percentage remains unchanged.
+The Group holds 50.00% equity interests in CIGNA & CMB Life Insurance Company Limited ("CIGNA & CMB Life"), and Life Insurance Company
+of North America ("INA") holds the other 50.00% equity interests in CIGNA & CMB Life. CIGNA & CMB Life is the only joint venture directly
+held by the Bank. The Bank and INA share the joint venture's profits, risks and losses based on the above proportion of their shareholding. The
+Bank's investment in CIGNA & CMB Life is accounted as an investment in a joint venture.
+(ii)
+(i)
+Notes:
+RMB2,800,000
+25.85% Consumer finance
+50.00%
+RMB3,868,964
+Shenzhen
+Limited company
+Merchants Union Consumer Finance
+Company Limited. (note(ii))
+Life insurance business
+50.00%
+24.15%
+2017
+CIGNA & CMB Life
+35,942
+626
+626
+3,478
+3,946
+33,428
+37,374
+Group's effective interest
+1,137
+10
+1,253
+1,253
+6,956
+7,893
+66,855
+74,748
+MUCFC
+2,273
+2018
+15
+196
+2,082
+2,320
+21,170
+23,490
+Group's effective interest
+383
+8
+391
+812
+1,189
+4,163
+4,641
+42,339
+46,980
+MUCFC
+2017
+1,189
+5,183
+995
+Income tax
+equivalents
+945
+732
+3332
+33
+66
+63
+319
+31
+6,968
+15,576
+17,971
+Group's effective interest
+666
+13,935
+4,790
+31,152
+2,395
+amortisation
+75
+473
+income
+Revenue Profit or loss
+Equity
+Liabilities
+Assets
+and
+Depreciation
+352
+Cash
+and cash
+Total
+MUCFC:
+(ii)
+116
+188
+38
+16
+comprehensive
+(8,080)
+Available-for-sale financial assets (continued)
+Bonds issued by policy banks
+253,422
+666,092
+3,089
+3,490
+651,347
+Unlisted
+903,268
+(3,981)
+(517)
+(3,582)
+911,348
+Non-standard assets
+Fair value for the listed bonds
+Listed outside Mainland China
+Unlisted
+Listed inside Mainland China
+(ii)
+Analyzed by ECL :
+2018
+-Stage 2
+(Lifetime ECL-
+(3,981)
+(517)
+443
+902,765
+Net debt investments at amortised cost
+at amortised cost
+Less: Loss allowances of debt investments
+Total
+911,348
+Bonds
+4,041
+906,347
+Debt investments at amortised cost
+ECL- credit
+impaired)
+impaired)
+ECL)
+not credit-
+-Stage 3
+(Lifetime
+960
+Stage 3 (Lifetime ECL- credit impaired)
+-Stage 1
+(12-month
+Stage 1 (12-month ECL)
+Stage 2 (Lifetime ECL- not credit-impaired)
+200
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+24. Investments (continued)
+(i)
+Debt investments at amortised cost by type:
+2018
+Bonds
+Government bonds
+400,107
+219,275
+Bonds issued by commercial banks and other financial institutions
+(b) Debt investments at amortised cost (continued)
+Other debt securities
+Total
+29,602
+Less: loss allowances
+Subtotal
+538
+3,000
+Creditor's beneficiary rights to other commercial banks
+Others
+Loans and advances to customers
+43,655
+Bills
+Non-standard assets
+8,942
+206,229
+9,150
+Land
+735
+At 1 January 2018
+4,208
+3,003
+2,310
+737
+7,255
+use rights
+Transfers/disposals
+Exchange difference
+Core deposits
+Total
+Cost:
+At 1 January 2017
+Additions
+1,593
+3,886
+5,412
+1,178
+6,657
+Software and
+Others
+At 31 December 2018
+3,397
+4,408
+2,613
+2,975
+426
+13,558
+219
+As at 31 December 2018, the interests accrued on financial instruments of the Group are included in the carrying
+amounts of the corresponding financial liabilities.
+36,501
+358
+237
+706
+40
+983
+(3)
+(5)
+1
+3
+29
+33
+662
+3,319
+427
+Net book value:
+1,070
+426
+79
+(30)
+Exchange difference
+(2)
+(2)
+(26)
+(30)
+At 31 December 2017
+34,681
+2,613
+358
+3,397
+Net book value:
+At 31 December 2017
+4,208
+2,310
+737
+7,255
+At 1 January 2017
+1,302
+1,778
+834
+(29)
+4,045
+(1)
+714
+(30)
+49
+(13)
+(3)
+(83)
+(99)
+At 31 December 2017
+4,634
+4,923
+1,095
+10,652
+Amortisation:
+At 1 January 2017
+291
+2,108
+344
+2,743
+Additions (Note 10)
+138
+536
+40
+Transfers/disposals
+1,820
+2,837,721
+Total
+85,571
+Discounted bills
+7,853
+40,049
+Total
+78,029
+125,620
+China Merchants Bank
+IX Financial Statements
+70,176
+Annual Report 2018
+Principal (a)
+Interest payable
+Total
+(a) Analysed by nature of counterparties
+Corporate customers
+Demand deposits
+- Time deposits
+Subtotal
+Retail customers
+38. Deposits from customers
+Subtotal
+928
+1,917
+120,423
+7,769
+5,162
+35
+7,769
+5,197
+78,029
+125,620
+2018
+2017
+Debt securities
+- PRC government bonds
+41,391
+31,900
+- Bonds issued by policy banks
+21,399
+48,273
+- Bonds issued by commercial banks and other financial institutions
+5,469
+4,470
+- Other debt securities
+- Demand deposits
+- Time deposits
+Subtotal
+Total
+Guarantee for issuing letters of credit
+Deposit for letters of guarantee
+Others
+Total
+2018
+2017
+64,919
+78,123
+20,908
+27,931
+12,974
+19,035
+46,107
+44,429
+19,054
+20,417
+163,962
+189,935
+39. Interest payable
+Issued debt securities
+Customer deposits and others
+Guarantee for acceptance bills
+Guarantee for loans
+2017
+(b) Customer deposits including deposits for guarantees are as follows:
+4,400,674
+2018
+2017
+4,400,674
+26,892
+4,064,345
+N/A
+4,427,566
+4,064,345
+2018
+2017
+1,815,427
+1,581,802
+1,022,294
+1,144,021
+3,914
+2,725,823
+1,059,923
+972,291
+503,030
+366,231
+1,562,953
+1,338,522
+4,064,345
+211
+212
+China Merchants Bank
+351
+(1,308)
+N/A
+2,211
+At 1 January 2018
+43,894
+921
+2,208
+3,884
+354
+51,261
+Recognised in profit or loss
+7,819
+(6)
+(297)
+N/A
+762
+21
+8,299
+Recognised in other
+comprehensive Income
+(2,352)
+N/A
+(19)
+(2,371)
+Exchange difference
+5
+N/A
+(31)
+921
+2,247
+Adjustments under IFRS 9
+49,050
+(1,070)
+213
+214
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+32. Deferred tax assets, deferred tax liabilities (continued)
+(b) Movements of deferred tax are as follows:
+Impairment
+allowances
+on loans and
+advances at
+amortised
+cost to
+customers
+Available-
+and other
+Financial
+instruments
+(26)
+Financial
+instruments
+Salary and
+welfare
+assets
+at FVTOCI
+at FVTPL
+assets
+payable
+Others
+Total
+At 31 December 2017
+41,647
+1,857
+1,308
+3,884
+354
+for-sale
+financial
+(6,867)
+At 31 December 2018
+(1,437)
+1,751
+44
+1,795
+(5)
+41,647
+8
+55
+57
+1,857
+1,308
+3,884
+354
+49,050
+No deferred tax liability has been recognised in respect of temporary differences associated with investments in subsidiaries because the Group
+is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the
+foreseeable future.
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+33. Other assets
+2018
+2017
+(Restated)
+Amounts pending for settlement
+9,344
+7,818
+Interest receivable
+2,888
+N/A
+Prepaid lease payments
+1,117
+1,109
+Repossessed assets (note (a))
+17,085
+543
+1,260
+1,764
+1,911
+N/A
+4,646
+325
+57,163
+At 1 January 2017
+Recognised in profit or loss
+Recognised in other comprehensive
+Income
+Exchange difference
+At 31 December 2017
+Note:
+Impairment
+allowances
+on loans and
+advances to
+51,718
+customers and
+Financial
+instruments at
+FVTPL
+Available-for-
+sale financial
+Salary and
+assets
+welfare payable
+Others
+Total
+28,134
+85
+(443)
+2,625
+(288)
+30,113
+13,518
+other assets
+70,260
+(1,211)
+Total
+10,533
+(579)
+9,954
+On 30 September 2008, the Bank acquired a 53.12% equity interests in WLB. On the acquisition date, the fair value of WLB's identifiable
+net assets was RMB12,898 million, of which the Bank accounted for RMB6,851 million. A sum of RMB10,177 million being the excess of
+acquisition cost over the fair value of the identifiable net assets was recognised as goodwill. The details about WLB are set out in Note 25.
+On 28 November 2013, the Bank acquired a 55.00% equity interests in CMFM. On the acquisition date, the fair value of CMFM's identifiable
+net assets was RMB752 million of which the Bank accounted for RMB414 million. A sum of RMB355 million being the excess of acquisition
+cost 769 million over the fair value of the identifiable net assets was recognised as goodwill. The details about CMFM are set out in Note 25.
+On 1 April 2015, CMBICHC acquired a 100% equity interests in Zhaoyin Internet Technology (Shenzhen) Corporation Limited ("Zhaoyin
+Internet"). On the acquisition date, the fair value of Zhaoyin Internet's identifiable net assets was RMB3 million. A sum of RMB1 million being
+the excess of acquisition cost over the fair value of the identifiable net assets was recognised as goodwill. Zhaoyin Internet's principal activities
+include development and sale of computer software and hardware, sale of communication equipment and office automation equipment,
+advisory service of computer technology and information.
+Impairment test for CGU containing goodwill
+Goodwill is allocated to the Group's CGU, WLB which was acquired on 30 September 2008 and CMFM which was
+acquired on 28 November 2013 and Zhaoyin Internet which was acquired on 1 April 2015.
+The recoverable amounts of the CGUS are determined based on value-in-use calculations. These calculations use cash
+flow projections based on financial forecasts approved by management covering a 5-year period. Cash flows beyond
+the 5-year period are extrapolated using a steady growth rate. The growth rate does not exceed the long-term
+average growth rate for the business in which the CGU operates.
+In assessing impairment of goodwill, the Group assumed that the terminal growth rate is comparable to the forecast
+long-term economic growth rate issued by authoritative institutions. A pre-tax discount rate of 12% and 14% (2017:
+9% and 12%) was used. The Group believes any reasonably possible further change in the key assumptions on
+which recoverable amount are based would not cause the carrying amounts to exceed their recoverable amounts.
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+32. Deferred tax assets, deferred tax liabilities
+Deferred tax assets
+Deferred tax liabilities
+Net amount
+(a) Analysed by nature of deferred tax assets and liabilities
+The components of deferred tax assets/liabilities are as follows:
+Deferred tax assets
+Impairment allowances on loans and
+2018
+2017
+58,374
+50,120
+(1,211)
+57,163
+(1,070)
+49,050
+2018
+2017
+Deductible/
+(taxable)
+temporary
+difference
+Deductible/
+1
+1
+1
+10,533
+355
+IX Financial Statements
+Annual Report 2018
+31. Goodwill
+WLB (note (i))
+CMFM (note (ii))
+Zhaoyin Internet
+(note (iii))
+Total
+Notes:
+(i)
+(ii)
+(iii)
+Impairment
+loss at 1
+Net value at
+(taxable)
+As at 31
+1 January
+2018 & 31
+As at 1
+January 2018
+Addition in Release in the
+the year
+December
+December
+December
+year
+2018
+2018
+2018
+10,177
+355
+10,177
+355
+(579)
+9,598
+January
+2018 & 31
+(8,189)
+temporary
+difference
+201,347
+50,120
+Total
+Deferred tax liabilities
+Impairment allowances on loans and
+advances to customers at amortised cost
+and other assets
+207
+34
+189
+31
+Financial assets at FVTOCI
+244
+38
+N/A
+N/A
+Financial assets at FVTPL
+(116)
+(29)
+Available-for-sale financial assets
+N/A
+N/A
+(124)
+(36)
+Others
+(8,524)
+(1,254)
+(6,932)
+(1,065)
+58,374
+234,353
+1,419
+6,413
+Deferred tax
+advances to customers at amortised cost
+and other assets
+206,932
+51,684
+166,590
+41,616
+Financial assets at FVTOCI
+(5,899)
+(1,475)
+N/A
+N/A
+Financial assets at FVTPL
+7,758
+Deferred tax
+1,940
+1,857
+Available-for-sale financial assets
+N/A
+N/A
+5,381
+1,344
+Salary and welfare payable
+18,582
+4,646
+15,535
+3,884
+Others
+6,980
+1,579
+7,428
+5,468
+30. Intangible assets
+69,089
+1,171
+16,713
+At 1 January 2018
+56,206
+1,027
+30,735
+2,800
+3,487
+1,646
+16,511
+At 31 December 2018
+Net book value:
+31,581
+5,342
+3,169
+4,869
+8,789
+9,412
+At 31 December 2018
+147
+4
+19
+6
+24
+94
+Exchange difference
+(1,032)
+(487)
+2,482
+(256)
+2,492
+24,473
+8,399
+402
+1,465
+1,516
+113
+Additions
+67,351
+6,410
+19,054
+6,269
+9,167
+3,797
+22,654
+At 1 January 2017
+Cost:
+Total
+and others
+professional Motor vehicles
+equipment
+equipment improvements
+Leasehold
+Computer
+Construction
+in progress
+Land and
+buildings
+vessels and
+Aircrafts,
+49,812
+1,128
+2,524
+410
+(18)
+(19)
+14
+54
+180
+Exchange difference
+(3,006)
+(490)
+(2,094)
+(19)
+(252)
+(151)
+Disposals
+(550)
+109
+(1,641)
+982
+Reclassification and transfers
+12,783
+431
+8,437
+736
+2,309
+805
+65
+Additions
+77,159
+6,416
+26,420
+1,141
+(252)
+12
+At 31 December 2018
+Disposals
+(17)
+(17)
+Reclassification and transfers
+5,136
+537
+1,459
+576
+1,344
+1,220
+597
+Depreciation
+27,347
+5,288
+1,947
+4,305
+7,673
+8,134
+At 1 January 2018
+Accumulated depreciation:
+87,787
+6,369
+33,904
+7,669
+12,276
+1,646
+25,923
+1,401
+6,829
+12,305
+2,402
+6,322
+1,162
+IX Financial Statements
+China Merchants Bank
+(c) As at 31 December 2018, the Group has no significant unused property and equipment (2017: nil).
+(b) As at 31 December 2018, the process of obtaining the registration license for the Group's properties with an aggregate net carrying value of
+RMB2,066 million (2017: RMB4,080 million) was still in progress.
+(a) As at 31 December 2018, the Group considered that there is no impairment loss on property and equipment (2017: nil).
+43,857
+1,423
+18,145
+2,585
+2,357
+3,797
+15,550
+At 1 January 2017
+49,812
+1,128
+24,473
+2,524
+2,492
+2,482
+16,713
+At 31 December 2017
+Net book value:
+27,347
+5,288
+1,947
+6,074
+4,305
+At 31 December 2018
+At 31 December 2018
+Land
+use rights
+Software
+and others
+Core deposits
+Total
+Cost:
+At 1 January 2018
+Additions
+4,634
+4,923
+1,095
+10,652
+3,224
+1,398
+4,622
+Transfers
+(1,785)
+(1,785)
+Disposals
+(4)
+(4)
+(8)
+Exchange difference
+5
+5
+67
+77
+Amortisation:
+At 1 January 2018
+Additions (Note 10)
+Transfers/disposals
+Exchange difference
+Reclassification and transfers
+7,673
+At 31 December 2017
+Accumulated depreciation:
+77,159
+6,416
+26,420
+6,829
+10,165
+2,482
+24,847
+At 31 December 2017
+(1,362)
+(6)
+(1,033)
+(32)
+(60)
+(231)
+Exchange difference
+(912)
+(411)
+(7)
+(403)
+(91)
+Disposals
+(223)
+13
+197
+(4)
+(2,831)
+At 1 January 2017
+8,134
+7,104
+3,684
+(229)
+(2)
+(80)
+(16)
+(25)
+(106)
+Exchange difference
+(847)
+(400)
+(6)
+(392)
+(49)
+Disposals
+14
+(13)
+27
+Reclassification and transfers
+4,915
+703
+1,118
+656
+1,280
+1,158
+Depreciation
+23,494
+4,987
+909
+6,810
+114,955
+10,165
+24,847
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+36. Financial liabilities at fair value through profit or loss
+Financial liabilities held for trading(a)
+Financial liabilities designated at fair value through profit or loss(b)
+Interest payable
+Total
+(a)
+Financial liabilities held for trading
+Precious metal relevant financial liabilities
+Short selling securities
+Total
+2018
+18,962
+2017
+11,389
+25,138
+15,230
+44
+N/A
+44,144
+26,619
+2018
+2017
+17,872
+272,734
+11,325
+202,974
+72,787
+Subtotal
+Outside Mainland China
+2,482
+- Banks
+- Other financial institutions
+Subtotal
+Guarantee deposits
+Total
+2018
+202,974
+976
+203,950
+2017
+272,734
+N/A
+272,734
+2018
+2017
+81,876
+48,311
+122,305
+88,862
+130,187
+211,167
+72,769
+61,565
+18
+2
+61,567
+1,090
+64
+18,962
+Interest payable
+Total
+(a) Analysed by nature of counterparties
+In Mainland China
+- Banks
+- Other financial institutions
+Subtotal
+Outside Mainland China
+- Banks
+- Other financial institutions
+Subtotal
+Total
+(b) Analysed by assets type
+2018
+2017
+78,029
+112
+125,620
+Annual Report 2018
+N/A
+78,141
+125,620
+2018
+2017
+Principal (a) (b)
+37. Amounts sold under repurchase agreements
+Annual Report 2018
+IX Financial Statements
+11,389
+(b) Financial liabilities designated at fair value through profit or loss
+2018
+2017
+In Mainland China
+- Precious metal contracts with other banks
+- Others
+- Certificates of deposit issued
+Outside Mainland China
+- Debt securities issued
+Total
+9,663
+- Other financial institutions
+7,688
+118
+2,619
+3,185
+9,977
+4,239
+25,138
+15,230
+As at 31 December 2018 and 2017, the difference between the fair values of the Group's financial liabilities
+designated at fair value through profit or loss and the contractual payable at maturity is not significant. The amounts
+of changes in the fair value that are attributable to changes in credit risk of these liabilities are not significant during
+the years ended 31 December 2018 and 2017 and as at 31 December 2018 and 2017.
+217
+218
+China Merchants Bank
+2,879
+- Banks
+868
+(a) Analysed by nature of counterparties
+Total
+32,568
+9,388
+23,248
+(a) Repossessed assets
+Residential properties
+Others
+Total
+Less: impairment allowances
+Net repossessed assets
+2018
+2017
+767
+1,026
+18
+15,060
+488
+1,514
+(188)
+(646)
+597
+868
+Note:
+(i)
+In 2018, the Group has disposed of repossessed assets with a total cost of RMB143 million (2017: RMB73 million).
+(ii)
+The Group plans to dispose of the repossessed assets by auction, bid or transfer.
+215
+216
+China Merchants Bank
+Annual Report 2018
+IX Financial Statements
+785
+Others
+109
+31
+At 1 January 2018
+Cost:
+Total
+others
+equipment
+Motor
+vehicles and
+professional
+Leasehold
+equipment improvements
+in progress
+Computer
+Construction
+Land and
+buildings
+Aircrafts,
+vessels and
+29. Property and equipment
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+- Defined benefit plan (Note 40(b))
+Post-employment benefits
+88
+112
+Premium receivables
+3,054
+34. Deposits from banks and other financial institutions
+2,416
+207
+209
+Recoverable from reinsurers
+607
+794
+210
+Prepayment for lease improvement and other miscellaneous items
+Principal(a)
+2018
+469,008
+Interest payable
+350,347
+359,598
+459,079
+9,897
+7,185
+32
+11
+72,324
+9,929
+469,008
+439,118
+In Mainland China
+Total
+Interest payable
+Principal (a)
+35. Placements from banks and other financial institutions
+7,196
+108,732
+431,922
+Subtotal
+Total
+2017
+439,118
+Total
+N/A
+470,826
+439,118
+(a) Analysed by nature of counterparties
+2018
+1,818
+In Mainland China
+- Banks
+- Other financial institutions
+Other financial institutions
+Subtotal
+Outside Mainland China
+- Banks
+2017
+China Merchants Bank
+228
+227
+296,477
+2,599
+Total
+N/A
+Interest payable
+20,935
+Annual Report 2018
+424,926
+Subordinated notes issued
+the year
+(a)
+amortisation
+the year
+balance
+Nominal value
+Annual interest rate
+Date of issuance
+44. Debt securities issued (continued)
+Ending
+Issue during
+Beginning
+Term to
+maturity
+Debt type
+Discount or
+As at the end of the reporting period, subordinated notes issued by the Bank were as follows:
+premium Repayment for
+IX Financial Statements
+147
+229
+10
+160
+(1,320)
+2,743
+T represents the 5 years US Treasury rate.
+China Merchants Bank
+Annual Report 2018
+IX Financial Statements
+3,893
+44. Debt securities issued (continued)
+As at the end of reporting period, long-term debt securities issued by the Bank were as follows:
+Discount or
+Debt type
+Term to
+maturity
+Beginning
+Issue during
+premium Exchange rate
+(b) Long-term debt securities issued
+Total
+notes are not called by
+the Bank)
+year onwards, if the
+USD200
+1,293
+9
+18
+(1,320)
+T*+2.80 (from 6 year
+onwards, if the notes
+are not called by the
+Bank)
+Fixed to floating rate notes 120 months 22 Nov 2017
+3.75 (for the first 5 years);
+USD400
+2,600
+1
+142
+2,743
+T*+1.75% (from 6
+Ending
+Date of issuance
+Annual interest rate
+Nominal value
+17,979
+5
+17,984
+Medium term note
+36 months
+12 Jun 2017
+3M Libor+0.825
+USD800
+5,206
+4
+286
+5,496
+Fixed rate bond
+36 months
+Fixed rate bond
+36 months
+14 Sep 2017
+17 Aug 2018
+RMB18,000
+3.50 (for the first 5 years);
+4.20
+36 months
+balance
+the year
+amortisation
+fluctuation
+balance
+(RMB in
+(RMB in
+(RMB in
+(RMB in
+(RMB in
+(in million)
+million)
+million)
+million)
+million)
+million)
+Fixed rate bond
+22 May 2017
+4.30
+6 Nov 2012
+Fixed to floating rate notes
+Fixed rate bond
+180 months
+28 Dec 2012
+5.20
+RMB11,700
+11,689
+4
+the Bank)
+11,693
+120 months
+18 Apr 2014
+6.40
+RMB11,300
+11,289
+(4)
+11,285
+Fixed rate bond
+notes are not called by
+year onwards, if the
+years); 8.90 (from 11
+(RMB in
+(RMB in
+(RMB in
+(RMB in
+(in million)
+million)
+million)
+million)
+million)
+million)
+Fixed rate bond
+180 months 4 Sep 2008
+5.90 (for the first ten
+RMB7,000
+7,106
+(106)
+(7,000)
+Fixed rate bond
+120 months
+15 Nov 2018
+4.65
+balance
+amortisation
+fluctuation
+the year
+balance
+(RMB in
+(RMB in
+(RMB in
+(RMB in
+(RMB in
+(%)
+(in million)
+million)
+million)
+million)
+million)
+million)
+Nominal value
+120 months
+Annual interest rate
+Ending
+RMB20,000
+19,996
+(3)
+19,993
+30,084
+19,996
+(109)
+(7,000)
+42,971
+Total
+As at the end of the reporting period, subordinated note issued by WLB was as follows:
+Discount or
+Debt type
+Term to
+maturity
+Beginning
+premium
+Exchange rate Repayment for
+Date of issuance
+RMB12,000
+11,985
+5
+4.50
+RMB4,000
+3,988
+4
+3,992
+Fixed rate bond (note (iv))
+36 months
+15 Mar 2017
+5 Jul 2017
+RMB1,500
+1,496
+1
+1,497
+Fixed rate bond (note (v))
+36 months
+20 Jul 2017
+4.80
+36 months
+Fixed rate bond
+706
+Fixed rate bond (note (iii)
+60 months
+29 Nov 2016
+3.25
+USD900
+5,862
+7
+288
+6,157
+Leased asset backed securities
+31 months
+21 Feb 2017
+4.3/4.5/4.73
+RMB4,930
+2,186
+3
+(1,483)
+4.89
+RMB2,500
+2,494
+2
+36 months
+16 Jul 2018
+4.50
+RMB4,000
+RMB4,000
+3,988
+1
+3,989
+3,988
+3.989
+Total
+29,485
+11,963
+40
+545
+(3,936)
+38,097
+RMB900 million of these securities bears a fixed interest rate of 2.98% per annum. RMB600 million of these securities bears a fixed interest
+rate of 3.09% per annum and the remaining RMB2,610 million of these securities bears an interest rate based on the benchmark lending rate
+(R) for one to five years published by PBOC minus a spread of 1.35%. The benchmark interest rate published by PBOC is 4.75% during both
+the year ended 31 December 2018 and 2017.
+4.80
+2,056
+9 May 2018
+Fixed rate bond (note (vii))
+Fixed rate bond
+2,496
+Fixed rate bond
+36 months
+3 Aug 2017
+4.60
+RMB2,000
+1,995
+2
+1,997
+Fixed rate bond (note (vi))
+36 months
+14 Mar 2018
+5.24
+RMB4,000
+3,987
+2
+3,989
+36 months
+4
+1,956
+USD300
+60 months
+26 Jun 2013
+5.08
+RMB1,000
+Beginning
+Issue during
+Nominal value balance the year
+(in million) (RMB in million) (RMB in million)
+996
+premium
+amortisation
+Exchange rate
+fluctuation
+Repayment for
+the period
+Ending
+balance
+(RMB in million) (RMB in million) (RMB in million) (RMB in million)
+4
+(1,000)
+Fixed rate bond (note (i))
+60 months
+24 Jul 2013
+Fixed rate bond (note (i))
+4.98
+(%)
+Issuance
+11,990
+3.95
+RMB30,000
+29,966
+(2)
+29,964
+Total
+35,170
+29,966
+12
+286
+65,434
+As at the end of the reporting period, long-term debt securities issued by CMBFLC were as follows:
+Discount or
+Debt type
+Term to
+maturity
+Date of
+Annual interest rate
+26,724
+RMB1,000
+4
+3.27
+RMB3,800
+3,795
+3
+3,798
+Leased asset backed securities
+74.5 months
+5 May 2016
+2.98/3.09/R-1.35**
+RMB4,110
+253
+-
+(253)
+Fixed rate bond (note (iii)
+36 months
+29 Nov 2016
+2.63
+11 Mar 2016
+996
+36 months
+(200)
+(1,000)
+Fixed rate bond
+60 months
+11 Aug 2014
+3.25
+USD500
+3,268
+2
+161
+3,431
+Fixed rate bond
+36 months
+7 Dec 2015
+3.75
+RMB200
+200
+-
+Fixed rate bond (note (ii))
+Certificates of deposit issued
+(RMB in
+403
+As at 31 December 2017 and 2018, there is no significant change of the amount in the liabilities of the retirement
+benefit plan due to the above mentioned actuarial assumptions.
+4.3
+5.0
+1.3
+1.8
+1.7
+1.9
+%
+%
+2017
+2018
+Pension increase rate for the defined benefit pension plan
+Long-term average rate of salary increase for the Plan
+- Defined benefit pension scheme
+41. Tax payable
+- Defined benefit scheme
+The principal actuarial assumptions adopted in the valuation are as follows:
+Deposit with the Bank included in the amount of the Plan assets was RMB56 million(2017: Nil).
+100.0
+394
+100.0
+357
+16.0
+63
+21.8
+78
+16.2
+64
+17.6
+63
+Discount rate
+67.8
+Corporate income tax
+Others
+1,100
+Total
+Other estimated liabilities
+N/A
+4,565
+Expected credit loss provision
+2017
+2018
+5,607
+4,799
+808
+2018
+43. Provision
+Total
+Others deferred fee and commission income
+Value added tax
+Credit card points
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+26,701
+20,411
+1,029
+1,045
+3,831
+3,137
+21,841
+16,229
+2017
+2018
+Total
+42. Contract liabilities
+267
+60.6
+216
+2017
+2018
+The movements in the fair value of the Plan assets during the year are as follows:
+285
+326
+Actual obligation at 31 December
+(23)
+16
+7
+Actuarial gain or losses due to demographic assumption changes
+Exchange difference
+11
+Actuarial profit or losses due to financial assumption changes
+3
+10
+Fair value of the Plan assets at 1 January
+Actuarial profit or losses due to liability experience
+(18)
+Actual benefits paid
+5
+5
+Interest cost
+11
+10
+Current service cost
+320
+285
+Present value of obligation at 1 January
+2017
+2018
+The movements in the defined benefit obligation during the year are as follows:
+(28)
+394
+373
+Interest income
+%
+Amount
+%
+Amount
+2017
+2018
+Total
+Cash
+Bonds
+Equities
+The major categories of the Plan assets are as follows:
+Post-employment benefits – defined benefit plan (continued)
+(b)
+40. Staff welfare scheme (continued)
+IX Financial Statements
+China Merchants Bank
+Annual Report 2018
+226
+7
+6
+Expected return on the Plan assets other than interest profit or losses
+Actual benefits paid
+(46)
+72
+(18)
+450
+(28)
+20
+(29)
+Fair value of the Plan assets at 31 December
+357
+394
+225
+Exchange difference
+5,665
+450
+Expected credit loss provision as for loan commitments and financial guarantee contracts follows:
+11.44
+28.60
+1.80
+12.34
+(0.08)
+13.43
+(3.30)
+16.06
+(1.30)
+14.26
+(2.70)
+19.00
+5.86
+19.32
+15.81
+7.24
+0.96
+12.05
+0.53
+The share appreciation rights outstanding at 31 December 2018 had a weighted average exercise price of HKD19.00
+(2017: HKD19.32) and a weighted average remaining contractual life of 7.10 years (2017: 7.81 years).
+Pursuant to the requirements set out in the Scheme, if there are any dividends distributed, capital reserve converted
+into shares, share split or dilution, adjustments to the exercise price will be applied.
+China Merchants Bank
+Annual Report 2018
+IX Financial Statements
+40. Staff welfare scheme (continued)
+(a) Salaries and welfare payable (continued)
+(iii)
+Other long-term employee benefits (continued)
+(3)
+Fair value of share appreciation rights and assumptions
+The fair value of services received in return for share appreciation rights granted are measured by reference to the
+fair value of share appreciation rights granted. The estimate of the fair value of the share appreciation rights granted
+is measured based on the Black-Scholes model. The contractual lives of the rights are used as an input of the model.
+14.13
+7.24
+19.32
+Weighted Number of share
+appreciation
+rights
+(in million)
+10 years
+0.192
+3 years after the grant date
+10 years
+1.020
+3 years after the grant date
+10 years
+1.560
+3 years after the grant date
+10 years
+1.410
+3 years after the grant date
+10 years
+1.580
+3 years after the grant date
+10 years
+Share appreciation rights granted on 4 May 2012 (Phase V)
+Share appreciation rights granted on 22 May 2013 (Phase VI)
+Share appreciation rights granted on 7 Jul 2014 (Phase VII)
+Share appreciation rights granted on 22 Jul 2015 (Phase VIII)
+Share appreciation rights granted on 24 Aug 2016 (Phase IX)
+Share appreciation rights granted on 25 Aug 2017 (Phase X)
+The number and weighted average exercise prices of share appreciation rights are as follows:
+price
+(HKD)
+appreciation average exercise
+rights
+(in million)
+(HKD)
+exercise price
+Number
+of share
+Weighted
+average
+2018
+2017
+Exercisable at the end of the year
+Outstanding at the end of the year
+Forfeited during the year
+Exercised during the year
+Granted during the year
+Outstanding as at the beginning of the year
+2018
+The actual loss on the Plan assets for the year ended 31 December 2018 was RMB39 million (2017: actual profit
+RMB78 million).
+Phase V
+Phase VII
+6.58
+7.67
+178,189
+245,406
+Negotiable interbank certificates of deposit
+63,376
+104,483
+(b)
+Long-term debt securities issued
+33,977
+45,714
+Subordinated notes issued
+2017
+2018
+5.50
+Notes
+Total
+4,565
+410
+1,221
+2,934
+Expected credit loss provision
+impaired)
+impaired)
+(12-month ECL)
+ECL-credit
+not credit-
+-Stage 1
+-Stage 3
+(Lifetime
+-Stage 2
+(Lifetime ECL-
+2018
+44. Debt securities issued
+4.42
+3.33
+Share appreciation rights life (year)
+Phase VIII
+Phase IX
+Phase X
+Fair value at measurement date (in RMB)
+16.06
+15.04
+14.51
+10.19
+10.70
+7.20
+Share price (in HKD)
+29.15
+29.15
+29.15
+29.15
+29.15
+29.15
+32.46%
+32.46%
+32.46%
+32.46%
+32.46%
+32.46%
+Phase VI
+Expected volatility
+17.05
+18.48
+11.33
+11.26
+10.70
+Exercise price (in HKD)
+27.59
+(10)
+(11)
+2017
+240
+180
+100
+50
+Tian Hui Yu
+Tang Zhi Hong
+Li Hao
+thousands) thousands) thousands) thousands) thousands) thousands) thousands) thousands)
+(in
+(in
+(in
+Phase V Phase VI Phase VII Phase VIII
+(in
+(in
+270
+(in
+(in
+Exercised
+Total
+Phase X
+Phase IX
+2018
+The number of share appreciation rights granted to members of senior management:
+(4)
+(iii) Other long-term employee benefits (continued)
+(a) Salaries and welfare payable (continued)
+40. Staff welfare scheme (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+(in
+300
+1,140
+991
+330
+180
+150
+Xu Shi Qing
+810
+240
+210
+210
+150
+Wang Liang
+52
+818
+240
+210
+210
+158
+Liu Jian Jun
+46
+92
+158
+210
+210
+240
+224
+956
+225
+300
+300
+330
+1,155
+75
+947
+Xiong Liang Jun
+Total
+223
+The expected volatility is based on the historical volatility (calculated based on the weighted average remaining
+life of the share appreciation rights) and adjusted for any expected changes to future volatility based on publicly
+available information. Expected dividends are based on historical dividends. Changes in the subjective input
+assumptions could materially affect the fair value estimate.
+30.55
+30.55
+30.55
+Share price (in HKD)
+4.06
+6.98
+6.71
+10.51
+11.14
+12.19
+Fair value at measurement date (in RMB)
+Phase X
+Phase IX
+Phase VIII
+30.55
+Phase VII
+Phase V
+2017
+1.43%
+1.43%
+1.43%
+1.43%
+1.43%
+1.43%
+Risk-free interest rate
+3.39%
+3.39%
+3.39%
+3.39%
+3.39%
+Phase VI
+30.55
+30.55
+Exercise price (in HKD)
+1.43%
+1.43%
+4.29%
+4.29%
+9.67
+8.67
+7.58
+4.29%
+1.43%
+1.43%
+1.43%
+1.43%
+Risk-free interest rate
+4.29%
+6.50
+5.42
+4.29%
+4.29%
+Expected dividends rate
+4.33
+11.71
+12.28
+12.34
+19.49
+18.06
+28.60
+Share appreciation rights were granted under service conditions. The conditions have not been taken into account in
+the grant date fair value measurement of the services received. There were no market conditions associated with the
+share appreciation rights granted.
+Expected volatility
+25.68%
+25.68%
+25.68%
+25.68%
+25.68%
+Share appreciation rights life (year)
+25.68%
+3 years after the grant date
+210
+240
+Post-employment benefits – defined benefit plan (continued)
+(b)
+40. Staff welfare scheme (continued)
+IX Financial Statements
+China Merchants Bank
+Annual Report 2018
+The latest actuarial valuation of the Plan was performed in accordance with IAS 19 issued by the IASB as at 12
+February 2019 by Willis Towers Watson Limited, a professional actuarial firm. The present values of the defined
+benefit obligation and current service cost of the Plan are calculated based on the projected unit credit method. At
+the valuation date, the Plan had a funding level of 110% (2017: 138%).
+The Group's subsidiary WLB operates a defined benefit plan (the "Plan") for the staff, which includes a defined
+benefit scheme and a defined benefit pension section. The contributions of the Plan are determined based on
+periodic valuations by qualified actuaries of the assets and liabilities of the Plan. The Plan provides benefits based on
+members' final salary. The costs are solely funded by WLB.
+Post-employment benefits - defined benefit plan
+(b)
+Note: In 2018, senior management had exercised 0.75 million shares of appreciation rights and the weighted average exercise price is HKD11.33.
+(2017: HKD13.43).
+3,296
+7,241
+1,800
+1,590
+The amounts recognised in the statement of financial position as at 31 December 2018 are analysed as follows:
+1,740
+499
+8.67
+660
+240
+210
+210
+Total
+Xiong Liang Jun
+330
+180
+150
+37
+683
+210
+1,209
+2018
+2017
+Fair value of the Plan assets
+(8)
+2
+(10)
+2018
+Net expense for the year included in retirement benefit costs
+Net interest income
+Current service cost
+There was no plan amendment, curtailment or settlement impact for the years ended 31 December 2018 and 2017.
+The amounts recognised in the consolidated statement of profit or loss are as follows:
+A portion of the above asset is expected to be recovered after more than one year. However, it is not practicable
+to segregate this amount from the amounts receivable in the next twelve months, as future contributions will
+also relate to future services rendered and future changes in actuarial assumptions and market conditions. No
+contribution to the Plan is expected to be paid in 2018.
+109
+31
+(285)
+(326)
+Net asset recognised in the statement of financial position
+Present value of the funded defined benefit obligation
+394
+357
+Charge
+for the year
+balance
+7,756
+Short-term employee benefits (i)
+Beginning
+Payment/
+2018
+180
+(i)
+40. Staff welfare scheme
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+220
+balance
+(a) Salaries and welfare payable
+210
+180
+810
+Li Hao
+1,269
+614
+307
+307
+Ma Wei Hua
+thousands) thousands) thousands) thousands) thousands) thousands) thousands) thousands)
+(in
+(in
+(in
+Exercised
+Total
+Phase X
+Phase IX
+(in
+50
+(in
+(in
+(in
+Phase VIII
+Phase V Phase VI Phase VII
+2017
+2,065
+5,869
+1,590
+1,410
+1,560
+1,021
+192
+96
+660
+(in
+100
+180
+240
+240
+210
+210
+150
+52
+818
+240
+210
+210
+158
+Wang Liang
+Lian Bo Lin
+Xu Shi Qing
+Liu Jian Jun
+1,230
+330
+300
+300
+300
+270
+300
+1,140
+991
+Tang Zhi Hong
+46
+113
+92
+210
+210
+240
+956
+947
+Tian Hui Yu
+158
+3.39%
+0.096
+Exercise conditions
+balance
+Beginning
+Payment/
+2017
+8,475
+(42,591)
+43,046
+8,020
+Total
+49
+(17)
+129
+(3,642)
+3,543
+30
+36
+Other long-term employee benefits(iii)
+228
+contribution plans (ii)
+defined
+Charge
+for the year
+Post-employment benefits
+Transfers
+in the year
+35,528
+7,048
+36
+(55)
+46
+45
+Other long-term employee benefits(iii)
+Total
+228
+(3,247)
+2,791
+684
+7,756
+(31,254)
+32,691
+rights
+2,085
+6,319
+Short-term employee benefits (i)
+Post-employment benefits - defined
+contribution plans (ii)
+balance
+Ending
+8,297
+(38,932)
+39,473
+(2,130)
+65
+1,356
+(1,462)
+43
+Unemployment insurance
+18
+53
+(50)
+21
+Total
+228
+3,543
+(3,642)
+129
+2017
+Beginning
+Basic retirement security
+Supplementary pension
+2,134
+61
+149
+Supplementary pension
+Basic retirement security
+Ending
+balance
+in the year
+Transfers
+(2,061)
+171
+1,546
+1,093
+(1,023)
+1,616
+(34,556)
+6,319
+(31,254)
+7,756
+(ii) Post-employment benefits-defined contribution plans
+2018
+Beginning
+balance
+Charge
+for the year
+Payment/
+Transfers
+in the year
+Ending
+balance
+32,691
+8,020
+Short-term employee benefits
+2018
+balance
+Beginning
+Payment/
+2017
+Total
+education expenses
+Labour union and employee
+Housing reserve
+- Maternity insurance
+- Injury insurance
+- Medical insurance
+Welfare expense
+Social insurance
+Salary and bonus
+(i) Short-term employee benefits (continued)
+(a) Salaries and welfare payable (continued)
+40. Staff welfare scheme (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+Charge
+for the year
+transfers
+Ending
+in the year
+4
+(68)
+67
+5
+3
+(22)
+23
+42
+(1,752)
+8,297
+1,791
+62
+(3,337)
+3,337
+62
+5,858
+(22,991)
+24,295
+4,554
+balance
+3 25
+balance
+62
+610
+(38,932)
+7,756
+2,108
+42
+- Medical insurance
+73
+(3,523)
+3,534
+6,112
+(29,872)
+30,126
+balance
+in the year
+Ending
+transfers
+Charge
+for the year
+Beginning
+balance
+5,858
+62
+Social insurance
+Welfare expense
+Salary and bonus
+Payment/
+(2,112)
+38
+- Injury insurance
+3
+Total
+1,867
+(1,035)
+1,286
+1,616
+education expenses
+Labour union and employee
+198
+(2,282)
+39,473
+2,309
+Housing reserve
+5
+(80)
+81
+4
+- Maternity insurance
+4
+(28)
+29
+171
+Charge
+for the year
+Expected dividends rate
+in the year
+Charge
+for the year
+Payment/
+Transfers
+in the year
+Ending
+balance
+36
+30
+(17)
+49
+2017
+Payment/
+Beginning
+balance
+Charge
+Transfers
+Ending
+for the year
+balance
+45
+Contract period of
+share appreciation
+at the end of 2018
+(in millions)
+Number of
+unexercised share
+appreciation rights
+(2)
+All share appreciation rights shall be settled in cash. The terms and conditions of the scheme are listed below:
+As at 31 December 2018, the Group has offered 10 phases of H share Appreciation Rights Scheme to its senior
+management ("the Scheme"). The share appreciation rights of the Scheme vest after 2 years or 3 years from the
+grant date and are then exercisable within a period of 7 years or 8 years. Each of the share appreciation right is
+linked to one H-share.
+(1)
+36
+(55)
+46
+Payment/
+Transfers
+Beginning
+balance
+2018
+in the year
+Cash settled share-based transactions
+Ending
+balance
+Cash settled share-based transactions
+Unemployment insurance
+12
+1,884
+851
+56
+(1,885)
+61
+(1,312)
+(50)
+18
+Total
+684
+2,791
+149
+China Merchants Bank
+228
+Defined contribution pension schemes
+In accordance with the regulations in the PRC, the Group participates in statutory pension schemes organised by
+the municipal and provincial governments for its employees (endowment insurance). During the year ended 31
+December 2018, the Group's contributions to the schemes are determined by local governments and vary at a range
+of 12% to 20% (2017: 12% to 20%) of the staff salaries.
+In addition to the above statutory pension schemes, the Group has established a supplementary defined contribution
+plan for its employees (annuity insurance) in accordance with relevant annuity policies for corporate entities in the
+PRC. During the year ended 31 December 2018, the Group's annual contributions to this plan are determined based
+on 0% to 8.33% of the staff salaries and bonuses (2017: 0% to 8.33%).
+For its employees outside Mainland China, the Group participates in defined contribution retirement schemes at
+funding rates determined in accordance with the local practise and regulations.
+221
+222
+(a) Salaries and welfare payable (continued)
+IX Financial Statements
+Annual Report 2018
+40. Staff welfare scheme (continued)
+(iii) Other long-term employee benefits
+(3,247)
+67,838
+Note:
+70,921
+3,083
+7,621
+2017
+(b)
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+44. Debt securities issued (continued)
+Long-term debt securities (continued)
+78,542
+230
+70,921
+2018 dividends profit appropriation is proposed in accordance with the resolution passed at the meeting of the
+Board of Directors held on 22 March 2019 and will be submitted to the 2018 annual general meeting for approval.
+2017
+(i)
+233
+The exchange reserve comprises all foreign exchange differences arising from the translation of the consolidated
+financial statements of operations outside Mainland China.
+54. Exchange reserve
+30,719
+38,851
+21,185
+23,707
+3,083
+7,621
+6,451
+7,523
+2017
+2018
+18,663
+2018
+21,185
+The Bank holds financial bonds issued by CMBFLC amounted to 0 as of 31 December 2018 (31 December 2017: RMB382 million).
+(RMB in million) (RMB in million)
+The Bank holds financial bonds issued by CMBFLC amounted to 0 as of 31 December 2018(31 December 2017: RMB200 million).
+3.72
+Nominal value
+(in million) (RMB in million) (RMB in million)
+USD300
+2,007
+Beginning
+balance
+Issue during
+the year
+premium Repayment for
+amortisation
+the year
+(RMB in million) (RMB in million)
+Exchange rate
+9 Jul 2018
+fluctuation Ending balance
+53
+2,060
+2,007
+53
+2,060
+45. Other liabilities
+234
+36 months
+Fixed rate bond
+Total
+Annual interest rate
+(%)
+(iii)
+The Bank holds financial bonds issued by CMBIL amounted to USD30 million as of 31 December 2018(31 December 2017: USD30 million).
+(iv)
+(v)
+The Bank holds financial bonds issued by CMBIL amounted to RMB300 million as of 31 December 2018(31 December 2017: RMB300 million).
+The Bank holds financial bonds issued by CMBIL amounted to RMB200 million as of 31 December 2018(31 December 2017: RMB200 million).
+(vi)
+The Bank holds financial bonds issued by CMBIL amounted to RMB260 million as of 31 December 2018.
+(vii)
+The Bank holds financial bonds issued by CMBIL amounted to RMB140 million as of 31 December 2018.
+As at the end of the reporting period, long-term debt securities issued by CMBI were as follows:
+Discount or
+Term to
+Debt type
+maturity
+Date of issuance
+(ii)
+China Merchants Bank
+3,159,655
+Annual Report 2018
+Investments in subsidiaries
+Debt securities classified as receivables
+Held-to-maturity investments
+341,571
+N/A
+Available-for-sale financial assets
+Interest in joint ventures
+N/A
+other comprehensive income
+Equity investments designated at fair value through
+N/A
+380,971
+Debt investments at fair value through other comprehensive income
+N/A
+3,465
+Investment properties
+Property and equipment
+Intangible assets
+8,157
+23,145
+23,169
+621
+1,262
+3,095
+4,797
+43,901
+43,901
+570,175
+N/A
+557,942
+N/A
+Other assets
+Deferred tax assets
+915,410
+IX Financial Statements
+Debt investments at amortised cost
+33,582
+14,997
+Interest receivable
+Loans and advances to customers
+Amounts held under resale agreements
+Placements with banks and other financial institutions
+Balances with banks and other financial institutions
+15,724
+Balances with central bank
+Cash
+Assets
+2017
+2018
+bank's reserves
+55. The bank's statement of financial position and changes in the
+Precious metals
+6,573
+9,243
+474,380
+Derivative financial assets
+57,902
+315,000
+Financial assets at fair value through profit or loss
+27,216
+N/A
+Clearing and settlement accounts
+3,471,874
+252,464
+199,555
+165,511
+299,981
+43,189
+68,501
+583,692
+17,691
+Salary risk allowances (note)
+By type of share:
+Payment and collection account
+48. Capital reserve
+The capital reserve primarily represents share premium of the Bank. The capital reserve can be used to issue shares
+with the shareholders' approval.
+At 1 January and 31 December
+49. Investment revaluation reserve
+2018
+67,523
+2018
+2017
+Debt instruments measured at fair value through other
+comprehensive income: investment revaluation reserve
+3,688
+N/A
+Fair value gain on equity instruments measured at fair value through
+other comprehensive income
+1,857
+N/A
+Remeasurement of defined benefit liability
+1,170
+1,158
+- Equity attributed to non-controlling holders of
+other equity instrument (note 63)
+2,012
+2018
+At 31 December
+2017
+Equity attributed to shareholders of the bank
+- Equity attributed to ordinary shareholders of the bank
+540,118
+480,210
+506,053
+29
+446,145
+34,065
+34,065
+Equity attributed to non-controlling interests
+3,487
+3,182
+- Equity attributed to non-controlling holders of ordinary shares
+2,329
+- Equity attributed to other equity holders of the bank
+2018
+Equity-accounted investees share of other comprehensive income
+Available-for-sale financial assets: investment revaluation reserve
+(42)
+Pursuant to relevant MOF notices, the Bank and the Group's financial services subsidiaries in Mainland China are
+required to set aside a general reserve according to a certain percentage of the ending balance of gross risk-bearing
+assets through profit after tax to cover potential losses against their assets. The Bank and the Group's financial
+services subsidiaries in Mainland China have complied with the requirements as of 31 December 2018.
+52. Regulatory general reserve
+46,159
+53,682
+6,451
+7,523
+39,708
+At 1 January
+46,159
+2018
+At 31 December
+Statutory surplus reserve
+At 1 January
+Statutory surplus reserve is calculated according to the requirements of the Accounting Standards for Business
+Enterprises and other relevant regulations issued by the Ministry of Finance ("MOF") and is provided at 10% of the
+audited profit after tax. Surplus reserve can be used to offset accumulated losses or capitalised as paid-up capital
+with the approval of shareholders.
+51. Surplus reserve
+The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging
+instruments used in cash flow hedges pending subsequent recognition of the hedged cash flow in accordance with
+the accounting policy adopted for cash flow hedge in Note 4(5).
+2017
+At 31 December
+Statutory surplus reserve
+53. Profit appropriations
+(6)
+N/A
+(3,897)
+Total
+- cash dividend: RMBO.94 per shares (2017: RMB0.84 per shares)
+Total
+5,532
+(3,812)
+At 31 December
+China Merchants Bank
+Annual Report 2018
+50. Hedging reserve
+Dividends
+Regulatory general reserve
+Statutory surplus reserve
+(b) Proposed profit appropriations
+Dividends in 2017, approved and to be declared RMB0.84 per shares
+Dividends in 2016, approved and to be declared RMBO.74 per shares
+(a) Dividends approved/declared by shareholders
+IX Financial Statements
+Insurance liabilities
+(b) Relative Information Attributed to Equity Instrument Holders
+Upon the occurrence of a Tier-2 Capital Trigger Event, the Bank shall have the right to convert, without the approval of the holders
+of Preference Shares, all of the Preference Shares then issued and outstanding into Ordinary A Shares based on the total par value of
+the Preference Shares. A Tier-2 Capital Trigger Event means the earlier of the following events: 1) the China Banking and Insurance
+Regulatory Commission (the "CBIRC") having concluded that without a conversion or write-off, the Bank would become non-viable,
+and 2) the relevant authorities having concluded that without a public sector injection of capital or equivalent support, the Bank
+would become non-viable.
+IX Financial Statements
+46. Share capital
+Listed shares
+2018 and 2017
+No. of shares
+(in million)
+- A-Shares
+- H-Shares
+Total
+20,629
+4,591
+25,220
+All H-Shares are ordinary shares and rank pari passu with the A-Shares. There is no restriction condition on these
+shares.
+At 1 January 2018 and at 31 December 2018
+47. Preference shares
+(a) Preference Shares
+Capital
+China Merchants Bank
+Annual Report 2018
+Salary risk allowances are specific funds withheld from the employees' (excluding senior management of the Bank) annual remunerations of
+which the payments are delayed for the purpose of risk management. The allocation of the funds is based on performance assessment and
+risk management results, taking into account the short term and long term benefit. In the event of a decline in the asset quality, a sharp
+deterioration of risk profiles and profitability, the occurrence legal case, or a significant regulatory violation identified by any regulatory
+authorities, the relevant employees will be restricted from the allocation of these allowances.
+Note:
+Total
+Cheques and remittances returned
+2018
+2017
+7,661
+21,990
+16,000
+13,000
+No. of shares
+(in million)
+25,220
+1,832
+2,532
+1,394
+70
+41,223
+69,318
+44
+41,757
+79,896
+Others
+1,711
+Amount
+25,220
+31 December 2018
+No.
+Pursuant to the approvals by the relevant authorities in China, the Bank issued the US Dollar settled non-cumulative Domestic Preference
+Shares in the aggregate par value of RMB27,500 million on 18 December 2017. Each Domestic Preference Share has a par value of RMB100
+and 275 million Domestic Preference Shares were issued in total. The initial dividend rate is 4.81% and is subsequently subject to reset per
+agreement, but shall not exceed 16.68%. Dividends on the Domestic Preference Shares shall be paid out by cash. Save for such dividend at
+the agreed dividend pay-out ratio, the holders of the above Preference Shares shall not be entitled to share in the distribution of the remaining
+profits of the Bank together with the holders of the ordinary shares. The dividends on preference shares are non-cumulative. The Bank shall
+be entitled to cancel any dividend on the Preference Shares, and such cancellation shall not be deemed a default. In the event that the Bank
+cancels the distribution of part or all of the dividends on the Preference Shares, the Bank will not distribute any profit to holders of Ordinary
+Shares during the period from the date when the shareholders' general meeting adopts relevant resolution to the restoration of full dividend
+payment to the holders of Preference Shares. The dividends on the preference shares are non-cumulative, that is, the Bank will not distribute
+the dividends that be cancelled in prior years to preference shares holders.
+231
+232
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+47. Preference shares (continued)
+The Offshore Preference Shares have no maturity date. However, until five years or longer since the issuance ending date, subject to the
+satisfaction of the redemption conditions and having obtained the prior approval of the CBIRC, all or part of the Offshore Preference Shares
+may be redeemed at the discretion of the Bank, but the Bank does not have the obligation to redeem Preference Shares. The holders of
+Preference Shares do not have the right to demand the Bank to redeem the Preference Shares and shall not expect that the Preference Shares
+will be redeemed.
+(a)
+(!!)
+(continued)
+The Domestic Preference Shares have no maturity date. However, until five years or longer since the issuance ending date, subject to the
+satisfaction of the redemption conditions and having obtained the prior approval of the CBIRC, all or part of the Domestic Preference Shares
+may be redeemed at the discretion of the Bank, but the Bank does not have the obligation to redeem Preference Shares. The holders of
+Preference Shares do not have the right to demand the Bank to redeem the Preference Shares and shall not expect that the Preference Shares
+will be redeemed.
+The domestic and offshore preference shares have conditions of events triggering mandatory conversion as follows:
+(1)
+(2)
+Upon the occurrence of any additional Tier-1 Capital Instrument Trigger Event, that is, the Core Tier-1 Capital Adequacy Ratio drops
+to 5.125% or below, the Bank shall have the right to convert, without the approval of the holders of Preference Shares, part or all
+of the Preference Shares then issued and outstanding into Ordinary A Shares based on the total par value of the Preference Shares in
+order to restore the Core Tier- 1 Capital Adequacy Ratio of the Bank to above 5.125%. In case of partial conversion, the Preference
+Shares shall be converted on a pro rata basis and on identical conditions.
+Preference Shares (continued)
+Upon the occurrence of the above mandatory conversion events, the Bank shall report to the CBIRC for review and determination and shall
+fulfill the relevant information disclosure obligations of the Securities Law, the CSRC and Hong Kong's laws and regulations such as making
+provisional reports or announcements in accordance with relevant regulatory requirements.
+Pursuant to the approvals by the relevant authorities in China, the Bank issued the US Dollar settled non-cumulative Offshore Preference Shares
+in the aggregate par value of USD 1,000 million on 25 October 2017. Each Offshore Preference Share has a par value of USD20 and 50 million
+Offshore Preference Shares were issued in total. The initial dividend rate is 4.40% and is subsequently subject to reset per agreement, but not
+exceed 16.68%. Dividends on the Offshore Preference Shares shall be paid out by cash, which shall be priced and announced in RMB. Save for
+such dividend at the agreed dividend pay-out ratio, the holders of the above Preference Shares shall not be entitled to share in the distribution
+of the remaining profits of the Bank together with the holders of the ordinary shares. The dividends on preference shares are non-cumulative.
+The Bank shall be entitled to cancel any dividend on the Preference Shares, and such cancellation shall not be deemed a default. In the event
+that the Bank cancels the distribution of part or all of the dividends on the Preference Shares, the Bank will not distribute any profit to holders
+of Ordinary Shares during the period from the date when the shareholders' general meeting adopts relevant resolution to the restoration of
+full dividend payment to the holders of Preference Shares. The dividends on the preference shares are non-cumulative, that is, the Bank will
+not distribute the dividends that be cancelled in prior years to preference shares holders.
+(i)
+(millions
+of shares)
+Amount
+31 December 2017
+No.
+(millions of
+shares)
+Amount
+Issuance of Offshore Preference Shares in 2017 (note (i))
+Issuance of Domestic Preference Shares in 2017 (note (ii))
+Total
+50
+275
+(ii)
+6,597
+27,468
+6,597
+275
+27,468
+325
+34,065
+325
+34,065
+50
+91
+233 82,667
+239
+386,806
+18,663
+158,317
+67,030
+39,708
+(19)
+1,206
+Changes in equity for 2017:
+76,681
+At 1 January 2017
+Total
+appropriations reserve
+profits
+reserve
+reserve
+reserve
+25,220
+34,065
+(5,299)
+(67)
+Appropriations to statutory
+Profit appropriations
+preference shareholders
+Capital injection from
+for the year
+Total comprehensive income
+for the year
+Other comprehensive income
+64,510
+64,510
+Net profit for the year
+74,468
+(78)
+2,522
+34,114
+2,760
+6,451
+reserve
+(5,299)
+instruments reserve
+profit Exchange
+At 31 December 2018
+(1,659)
+(1,659)
+Dividends paid for preference shares
+23,707
+(23,707)
+Proposed dividends for the year 2018
+25,220
+(21,185)
+Dividends paid for the year 2017
+(6,028)
+6,028
+general reserve
+(7,523)
+7,523
+(22,844)
+(21,185)
+34,065
+76,681
+5,540
+Retained
+general
+Surplus
+revaluation Hedging
+Capital
+equity
+Share
+Proposed
+Regulatory
+Investment
+Other
+514,463
+155
+23,707
+219,622
+75,818
+(27) 53,682
+capital
+2,522
+(67)
+(67)
+249,992
+191,923
+61,872
+200,326
+58,814
+84,517
+84,424
+14,615
+543,683
+52,302
+2018
+Total
+Debt securities investments
+Balance with banks and other financial institutions
+Placements with banks and other financial institutions
+Amounts held under resale agreements
+Cash and balances with central bank
+(a) Analysis of the balances of cash and cash equivalents (with original maturity
+within 3 months):
+56. Notes to consolidated cash flow statements
+2017
+5,323
+460,425
+(b) Reconciliation of liabilities arising from financing activities
+32,300
+407,328
+Proceeds from the issue
+Cash changes:
+305,747
+Total
+Interest Dividend financial
+payable payable liabilities
+1,820
+26
+Other
+Debt
+securities
+issued
+101,592
+24,120
+178,189
+At 1 January 2018
+of deposit
+issued
+of deposit
+interbank Certificates
+certificates
+Negotiable
+The table below details changes in the Group's liabilities from financing activities, including both cash and non-cash
+changes. Liabilities arising from financing activities are those which cash flows were classified in the Group's
+consolidated statement of cash flows as cash flows from financing activities
+Annual Report 2018
+(5,299)
+IX Financial Statements
+236
+(30,396)
+2,760
+6,451
+34,065
+34,065
+At 31 December 2017
+Proposed dividends for the year 2017
+2,522
+Dividends paid for the year 2016
+Appropriations to regulatory
+surplus reserve
+59,066
+(78)
+64,510
+(5,444)
+(78)
+general reserve
+(18,663)
+6,451
+(6,451)
+235
+461,274
+(78)
+21,185
+69,790
+46,159
+(86)
+(4,093)
+76,681
+34,065
+25,220
+21,185
+(21,185)
+(18,663)
+(18,663)
+(2,760)
+2,760
+China Merchants Bank
+(38,917)
+6,028
+6,354
+reserve
+profits appropriations reserve Subtotal
+At 31 December 2017
+25,220
+34,065
+76,681
+(4,093) (86)
+reserve reserve
+46,159
+192,431
+21,185
+(78)
+461,274
+Adjustments of application of
+accounting policy changes
+2,490
+69,790
+reserve
+reserve
+capital instruments
+Total equity and liabilities
+6,347,615
+(78)
+461,274
+5,943,375
+China Merchants Bank
+Annual Report 2018
+IX Financial Statements
+55. The bank's statement of financial position and changes in the
+bank's reserves (continued)
+The reconciliation between the opening and closing balances of each component of the Group's consolidated equity
+is set out in the consolidated statement of changes in equity. Details of the changes in the Bank's reserves are as
+follows.
+Other
+Share
+equity
+Investment
+Capital revaluation
+Hedging
+Surplus
+Regulatory
+general
+Retained
+Proposed
+profit Exchange
+(9,124)
+514,463
+(6,634)
+25,220
+75,232
+Other comprehensive income
+for the year
+Total comprehensive income
+for the year
+Profit appropriations
+Appropriations to statutory
+75,232
+surplus reserve
+7,143
+59
+233
+7,435
+7,143
+59
+75,232
+Appropriations to regulatory
+Net profit for the year
+59,823
+233
+34,065
+76,681
+(1,603)
+(86)
+46,159
+69,790
+183,307
+21,185
+(78)
+454,640
+Changes in equity for the year
+7,143
+59
+7,523
+6,028
+36,315
+2,522
+At 1 January 2018
+Total equity
+155
+Exchange reserve
+Amounts sold under repurchase agreements
+77,064
+125,585
+Deposits from customers
+4,237,430
+3,890,024
+Interest payable
+21,194
+N/A
+Salaries and welfare payable
+6,697
+6,245
+Tax payable
+Contract liabilities
+Provision
+Debt securities issued
+34,398
+35,795
+Derivative financial liabilities
+26,437
+56,866
+48,734
+25,174
+15,550
+Total assets
+Liabilities
+6,347,615
+5,943,375
+Borrowing from central bank
+405,314
+414,838
+Deposits from banks and other financial institutions
+Placements from banks and other financial institutions
+Financial liabilities at fair value through profit or loss
+452,305
+421,251
+116,072
+189,825
+40,175
+Other liabilities
+19,512
+25,942
+5,607
+5,540
+(4,093)
+Hedging reserve
+(27)
+(86)
+Surplus reserve
+53,682
+46,159
+Regulatory general reserve
+75,818
+69,790
+Retained profits
+219,622
+192,431
+Proposed profit appropriations
+23,707
+21,185
+Investment revaluation reserve
+73,029
+76,681
+Capital reserve
+N/A
+5,638
+450
+375,625
+260,560
+55,918
+65,352
+Total liabilities
+5,833,152
+5,482,101
+Equity
+Share capital
+25,220
+25,220
+Other equity instruments - Preference Shares
+34,065
+34,065
+76,681
+2,921
+515,578
+Repayment
+(19,737)
+(21,522)
+(39,826)
+(38,171)
+losses on other assets
+Expected credit losses and impairment
+149,608
+(1,144)
+166,025
+8,155
+68,152
+79,785
+76,610
+78,085
+impairment losses
+Reportable segment profit before
+4,846
+(363)
+(60,837)
+(59,926)
+3,291
+Capital expenditure (note(i))
+90,680
+106,497
+5,481
+8,320
+48,415
+58,263
+36,784
+39,914
+Reportable segment profit before tax
+998
+1,309
+998
+1,309
+joint ventures
+Share of profit of associates and
+(65,369)
+2,930
+(75,840)
+(2,354)
+103,015
+109,295
+Operating income
+11,169
+20,271
+3,515
+7,565
+125,843
+1,035
+6,619
+12,181
+Other net income
+64,018
+66,480
+3,757
+3,685
+525
+108,383
+11,997
+8,641
+(37,863)
+(43,803)
+(24,863)
+(29,683)
+- Others
+(5,062)
+(5,270)
+(1,152)
+(1,488)
+(2,368)
+(2,255)
+(1,542)
+(1,527)
+- Depreciation
+Operating expenses
+220,039
+247,135
+(2,643)
+4,858
+4,494
+9,256
+Liabilities
+Consolidated total assets
+Other unallocated assets
+Deferred tax assets
+Intangible assets
+Goodwill
+Total assets for reportable segments
+Total liabilities for reportable segments
+Tax payable
+Assets
+Total operating income for reportable segments
+For the year ended 31 December
+(b) Reconciliations of reportable segment revenue, profit or loss, assets, liabilities
+and other material items
+57. Operating segments (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+Total profit before income tax for reportable segments
+Other unallocated liabilities
+Consolidated total liabilities
+2018
+247,135
+106,497
+5,814,246
+6,202,124
+67,931
+26,701
+20,411
+50,151
+5,719,614
+6,131,562
+6,297,638
+6,745,729
+9,954
+737
+50,120
+4,627
+4,674
+58,374
+6,232,200
+6,671,992
+9,954
+735
+31 December 2018 31 December 2017
+220,039
+90,680
+2017
+(i) Capital expenditure represents the amount incurred for acquiring long-term segment assets.
+Note:
+5,203
+8,871
+2018
+2017
+2018
+2017
+2018
+2017
+2018
+31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
+Total
+Other business
+financial business
+financial business
+Retail
+Wholesale
+16,350
+17,405
+8,926
+2017
+36,390
+(Restated)
+(Restated)
+5,203
+8,871
+Interest in associates and joint ventures
+5,719,614
+6,131,562
+901,122
+1,007,225
+6,232,200
+6,671,992
+1,592,575
+1,794,697
+2,045,530 1,814,963
+1,598,208 1,359,453
+2,824,662
+3,459,039
+3,526,129
+2,831,765
+Reportable segment liabilities
+Reportable segment assets
+(Restated)
+7,523
+42,700
+20,095
+559,795
+Proceeds from the issue
+Cash changes:
+289,131
+103
+1,413
+81,253
+19,086
+18,114
+At 1 January 2017
+Total
+Dividend
+payable
+Interest
+payable
+Debt
+securities
+issued
+issued
+of deposit
+188,248
+52,449
+631,330
+Repayment
+18,692
+18,692
+(77)
+Dividend cancelled
+Dividend declared
+5,018
+5,018
+Accrued interest
+Non-cash changes:
+(33,175)
+(18,692)
+(4,611)
+(9,872)
+Interest/dividend paid
+(611,190)
+(30,186)
+(11,916)
+(569,088)
+of deposit
+(77)
+Certificates
+2,593
+440,427
+Discount or premium amortisation
+Dividend declared
+5,933
+5,933
+Accrued interest
+Non-cash changes:
+(34,725)
+22,912
+(22,912)
+(6,659)
+Interest/dividend paid
+(386,611)
+(431)
+(15,590)
+(28,389)
+(342,201)
+(5,154)
+22,912
+8,588
+56
+2,879
+26
+2,599
+160,174
+1,186
+1,246
+29,343
+245,406
+161
+403
+389
+4
+10
+At 31 December 2018
+Foreign exchange
+Fair value adjustments
+8,597
+(47)
+Negotiable
+interbank
+certificates
+Discount or premium amortisation
+9,113
+Fair value adjustments
+89,674
+100,299
+28,441
+24,466
+External net interest income
+2017
+2018
+35,619
+2017
+2017
+2018
+2017
+2018
+Total
+Other business
+financial business
+2018
+26,737
+160,384
+144,852
+Net fee and commission income
+144,852
+160,384
+1,369
+747
+70,958
+82,618
+72,525
+77,019
+Net interest income
+(25,368)
+(34,872)
+(18,716)
+(17,681)
+44,084
+52,553
+Internal net interest income/(expense)
+financial business
+Retail
+Wholesale
+Segment results, assets and liabilities
+305,747
+26
+1,820
+101,592
+24,120
+178,189
+At 31 December 2017
+(2,402)
+(1,247)
+(1,148)
+(7)
+Foreign exchange
+2
+(11)
+8,418
+(666)
+(29)
+13
+(c) Significant non-cash transactions
+23,871
+There are no significant non-cash transactions during the year.
+IX Financial Statements
+(a)
+57. Operating segments (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+238
+237
+As listed in Note (4), the accounting policies of the operating segments are the same as the Group's accounting
+policies. Operating segment income represents income generated from external customers, inter-segment
+transactions are offset. No customer contributed 10% or more to the Group's revenue for 2018 and 2017. Internal
+transactions are conducted at fair value.
+Other business includes: property leasing and businesses operated by subsidiaries other than WLB, and associates
+and joint ventures. None of these segments meets any of the quantitative thresholds so far for segments division.
+For the purpose of operating segment analysis, external net interest income/expense represents the net interest
+income earned or expense incurred on banking services provided to external parties. Internal net interest income/
+expense represents the assumed profit or loss by the internal funds transfer pricing mechanism which has taken into
+account the structure and market returns of the assets and liabilities portfolio. Cost allocation is based on direct
+costs attributable to each reporting segment and apportion according to the relevant factors.
+(3) Other Business
+The provision of financial services to retail customers includes: lending and deposit taking activities, bank card
+business, wealth management services, private banking and other services.
+(2) Retail finance business
+The financial services for the corporate clients, sovereigns, and financial institutions include: loan and deposit
+service, settlement and cash management service, trade finance and offshore business, investment banking business,
+inter-bank business comprised of lending and buy-back, asset custody business, financial market business, and other
+services.
+(1) Wholesale finance business
+The Group manages its businesses by divisions, which are organised by a mixture of both business lines and
+geography.
+The Group's principal activities are commercial lending and deposits taking. The funding of existing retail and
+corporate loans are mainly from customer deposits.
+57. Operating segments
+China Merchants Bank
+Annual Report 2018
+192,431
+Non-current assets include interests in joint ventures, interests in associates, property and equipment, investment properties, intangible assets,
+goodwill, etc.
+China Merchants Bank
+2018
+Entrusted funds
+Entrusted loans
+At the end of the reporting period, the entrusted assets and liabilities were as follows:
+Entrusted lending are not assets of the Group and are not recognised in the consolidated statement of financial
+position. Income received and receivable for providing these services are recognised in the consolidated statement of
+profit or loss as fee and commission income.
+The Group's entrusted lending business refers to activities where principals such as government departments,
+business entities and individuals provide capital for loan advances through the Group to their specified targets
+on their behalf in accordance with specific terms and conditions, with the help of the Group in monitoring loan
+usage and seeking loan recovery. The entrusted lending business does not expose the Group to any credit risk. As
+instructed by these principals, the Group holds and manages underlying assets and liabilities only in the capacity of
+an agent, and charges handling fees for related services.
+Entrusted lending business
+(a)
+60. Transactions on Behalf of Customers
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+244
+243
+The Group expects that the amount of redemption before the maturity date of these government bonds through the
+Group will not be material.
+2017
+25,182
+2018
+25,568
+Redemption obligations
+As an underwriting agent of PRC government bonds, the Group has the responsibility to buy back its bonds if the
+holders decide to early redeem the bonds held. The redemption price for the bonds at any time before their maturity
+date is based on the coupon value plus any interest unpaid and accrued up to the redemption date. Accrued interest
+payables to the bond holders are calculated in accordance with relevant rules issued by the MOF and the PBOC. The
+redemption price may be different from the fair value of similar instruments traded at the redemption date.
+The redemption obligations below represent the nominal value of government bonds underwritten and sold by the
+Group, but not yet matured at the end of the reporting period:
+(e) Redemption obligations
+At 31 December 2018, the Group was a defendant in certain outstanding litigations with gross claims of RMB515
+million (2017: RMB728 million) arising from its banking activities. The Board of Directors considers that no material
+losses would be incurred by the Group as a result of these outstanding litigations and therefore no provision has
+been made in the consolidated financial statements.
+(d) Outstanding litigations
+The Group leases certain properties under operating leases. The leases typically run for an initial period of 1 to 5
+years, and may include an option to renew the lease when all terms are renegotiated. None of the leases includes
+contingent rental.
+1 year to 5 years (inclusive)
+Over 5 years
+Total
+14,471
+417,263
+2017
+489,351
+(417,263)
+(489,351)
+China Merchants Bank
+246
+245
+Analysis of loans and advances by industry and loan portfolio are stated in Note 22.
+Concentration of credit risk: when certain number of customers are in the same business, located in the same
+geographical region or their industries share similar economic characteristics, their ability to meet their obligations
+may be affected by the same economic changes. The level of concentration of credit risk reflects the sensitivity of
+the Group's operating result to a specific industry or geographical region. To prevent concentration of credit risk, the
+Group has formulated the quota limit management policy to monitor and analyse the loan portfolio.
+The risks involved in contingent liabilities and commitments are essentially the same as the credit risk involved
+in loans and advances to customers. These transactions are, therefore, subject to the same credit application,
+post-lending monitoring and collateral requirements as for customers applying for loans.
+In respect of loan classification, the Group adopts a risk based loan classification methodology. Currently, the Group
+categorises its loans on a ten-grade loan classification basis in order to refine internal risk classification management
+(normal (grades 1-5), special mention (grades 1-2), substandard, doubtful and loss).
+To mitigate risks, the Group requests customers to provide collateral and guarantees when necessary. Certain
+guidelines have been set for the acceptability of specific types of collateral or credit risk offset. Collateral structures
+and legal covenants are reviewed regularly to ensure that they can still cover the given risks and be consistent with
+market practices.
+With respect to the credit risk management of retail financial business, the Group relies on credit assessment of
+applicants as the basis for loan approval. Customer relationship managers are required to assess the income level,
+credit history, and repayment ability of the applicant. The Group monitors post-lending conditions by focusing on
+borrowers' repayment ability, the status of collateral and any changes to collateral value. Once a loan becomes
+overdue, the Group starts the collection process according to standard retail loans collection procedures.
+With respect to the credit risk management of corporate financial business, the Group formulates credit policy
+guideline, and enhances credit acceptance and exit policies for corporate and institutional clients, and implements
+limit control measures to improve the quality of credit exposure.
+With respect to daily operations, the Risk Management Department, as directed by the Risk and Capital Management
+Committee, participates in, coordinates and monitors the work of other risk management functions, including each
+business unit and the Legal and Compliance Department. The Group manages credit risk throughout the entire credit
+process including pre-lending evaluations, credit approval and post-lending monitoring.
+The Group has designed its organisation framework, credit policies and processes with an objective to identify,
+evaluate and manage its credit risk effectively. The Risk and Capital Management Committee, set up and appointed
+by the Board of Directors is responsible for supervising and evaluating the set-up, organisational structure, work
+process and effectiveness of various risk management functions.
+14,548
+Credit risk represents the potential loss that may arise from the failure of a counterparty or a debtor to meet its
+obligation or commitment to the Group. Credit risk increases when all counterparties are concentrated in a single
+industry or a geographical region, as different counterparties in the same region or industry may be affected by the
+same economic development, which may eventually affect their repayment abilities.
+61. Risk management
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+In current period, funds received from customers under wealth management services are the funds received from customers under
+unconsolidated non-principal-guaranteed wealth management services, and has restated the corresponding comparative figures.
+Notes:
+2017
+1,730,847
+2018
+1,851,964
+Funds received from customers under wealth management services
+At the end of the reporting period, funds received from customers under unconsolidated non-principal-guaranteed
+wealth management services were as follows:
+The Group's wealth management services to customers mainly represent sales of wealth management products to
+corporate and personal banking customers. The funds obtained from wealth management services are invested
+in investment products, including bonds, funds, and entrusted loans. The Group initiated the launch of wealth
+management products. The investment risk associated with these products is borne by the customers who invest in
+these products. The Group does not consolidate these wealth management products. The Group earns commission
+which represents the charges on customers in relation to the provision of custody, sales and management services.
+The wealth management products and funds obtained are not assets and liabilities of the Group and are not
+recognised in the consolidated statement of financial position. The funds obtained from wealth management services
+that have not yet been invested are recorded under other liabilities.
+(b) Wealth management services
+(a) Credit risk
+IX Financial Statements
+1,845
+8,925
+Apart from the irrevocable loan commitments, the Group had loan commitments of RMB2,236,875 million at 31
+December 2018 (31 December 2017: RMB2,042,851 million) which are unconditionally cancellable by the Group
+or automatically cancellable due to deterioration in the creditworthiness of the borrower as stipulated in respective
+lending agreements. The Group will not assume any risks on the unused credit limits for these loan customers. As a
+result, such balances are not included in the above contingent liabilities and commitments.
+These contingent liabilities and commitments have off-balance sheet credit risk. Before the commitments are fulfilled
+or expired, management assesses and makes allowances for any probable losses accordingly. As the facilities may
+expire without being drawn upon, the total of the contractual amounts is not representative of expected future cash
+outflows.
+Irrevocable loan commitments include credit limits granted to offshore customers by overseas branches, subsidiaries
+and onshore and offshore syndicated loans etc.
+1,407,008
+68,227
+690,898
+78,561
+1,908
+80,469
+245,007
+54,480
+6,586
+9,658
+70,724
+90,276
+161,407
+251,683
+Note: Other payment commitments refers to the Group as the acceptor of letters of credit payment commitments.
+Total
+Others
+Credit card commitments
+- with an original maturity over 1 year
+- with an original maturity within 1 year (inclusive)
+Irrevocable loan commitments
+Bills of acceptances
+Credit risk weighted amounts of contingent liabilities and commitments
+2018
+373,397
+2017
+355,050
+The Group calculated the credit risk weighted amount of its contingent liabilities and commitment in accordance
+with the requirements of the Administrative Measures on Capital of Commercial Banks (Trial) issued by the CBIRC.
+The amount within the scope approved by the CBIRC in April 2014 is calculated using the internal rating-based
+approach, and the risk-weighted approach is used to calculate those not eligible to the internal rating-based
+approach.
+8,933
+3,701
+3,874
+Within 1 year (inclusive)
+2017
+2018
+Total future minimum lease payments under non-cancellable operating leases of properties are payable as follows:
+Operating lease commitments
+(c)
+59. Contingent Liabilities and Commitments (continued)
+Annual Report 2018
+IX Financial Statements
+1,741
+China Merchants Bank
+740
+2,279
+394
+6,325
+1,885
+2017
+2018
+Total
+- Authorised but not contracted for
+- Contracted for
+Authorised capital commitments were as follows:
+Capital commitments
+7,065
+Other payment commitments (note)
+Annual Report 2018
+(a) Credit risk (continued)
+(ix)
+Bonds issued by the governments, central banks and policy banks held by the Group amounted to RMB932,143 million (2017: RMB755,473
+million) are included.
+975,123
+1,201,436
+974,842
+1,200,923
+Note:
+Total
+Subtotal
+(480)
+(3,575)
+206,881
+214,019
+23,417
+27,649
+Impairment allowances
+Unrated
+Lower than A-
+517,664
+597,066
+38,110
+70,199
+189,250
+295,565
+281
+Collateral
+An estimate of the fair value of collateral and other credit enhancements held against financial assets that are
+overdue but not impaired is as follows:
+Estimate of the fair value of collateral and other credit
+enhancements held against - Loans and advances to customers
+240
+249
+The Group continued to strengthen bank account exchange rate risk monitoring and authorization
+management of quota limit to ensure that risks are controlled within a reasonable range.
+The Group has adopted foreign exchange exposure analysis, scenario simulation analysis and stress testing
+for the measurement and analysis of foreign exchange risk. The Group regularly measures and analyses
+the foreign exchange risk exposure fluctuations, monitors and reports foreign exchange risk on a monthly
+basis under the limit framework, and adjusts the foreign exchange exposures based on the trend of foreign
+exchange rate movements to avoid the banking book foreign exchange risk.
+The banking book foreign exchange risk of the Group arises from the mismatch of the non-RMB assets and
+liabilities. The Group stringently monitors its foreign exchange risk exposures to manage its foreign exchange
+risk within acceptable limits.
+The Group's foreign exchange risk under the banking book is overall managed by the Head Office. The Asset
+and Liability Management Department, as the treasurer of the Bank is in charge of the banking book foreign
+exchange risk management. The audit department is responsible for auditing. The treasurer is responsible to
+manage the foreign exchange risk under the banking book with a prudent approach and compliance with the
+regulatory requirements, and manage the foreign exchange risk through approaches such as management of
+transaction limits and adjustment of plans.
+Banking book
+(2)
+For management and risk measurement purpose, the Group adopts quantitative indicators such as exposure
+indicator, market value at risk indicator (VaR, including interest rate, foreign exchange rate, and commodity
+risk factors), exchange rate scenario stress test loss index, exchange rate sensitivity index, cumulative
+loss index, the management method includes conducting business entitlement, setting quota limits, daily
+monitoring and continuous reporting, etc.
+The Group has established a market risk structure and system of the trading book, which including exchange
+rate risk, to quantify the exchange rate risk of the trading book for unified management. The structure,
+process and method of exchange rate risk of trading book are consistent with the interest rate risk of trading
+book.
+Trading book
+(1)
+513
+Foreign exchange risk arises from the holding of foreign currency assets, liabilities and equity items, and the foreign
+currency and foreign currency derivative positions which may expose the Group to potential losses in the event of
+unfavourable foreign exchange rate movement. The financial assets and liabilities of the Group are denominated
+in RMB, and the other currencies are mainly USD and HKD. The Group has established its foreign exchange
+risk management and governance framework based on segregation of duty principle, which segregates the
+responsibilities of the establishment, execution and supervision of foreign exchange risk. This framework specified
+the roles, responsibilities and reporting lines of the Board of Directors, the board of Supervisors, senior management,
+designated committees and relevant departments of the Bank in the management of foreign exchange risk. The
+Group takes a prudent strategy in the management of foreign exchange risk, and would not voluntarily take foreign
+exchange risk, which suits the current development of the Group. The current foreign exchange risk management
+policies and procedures of the Group fulfil the regulatory requirements and the requirements of the Group in the
+management of foreign exchange risk.
+(b) Market risk (continued)
+61. Risk management (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+Market risk is the risk that the fair value or future cash flows of the Group's financial instruments will fluctuate and
+which may result in loss to the Group, because of changes in foreign exchange rate, interest rate, commodity price,
+stock price and other observable market factors. Interest rate and foreign exchange rate are the two major market
+risk factors relevant to the Group. The Group is exposed to market risk through the financial instruments under the
+trading book and banking book. The financial instruments under the trading book are held for trading purposes
+or for the purposes of hedging the risks arising from the trading book position, and these financial instruments
+are traded in active market. The financial instruments under the banking book are assets and liabilities held by
+the Group for stable and determinable return, or for the purposes of hedging the risks arising from the banking
+book position. The financial instruments under the banking book include both the Group's on-balance sheet and
+off-balance sheet exposure, and have relative stable market value.
+13,460
+20,618
+2017
+2018
+Market risk
+(b)
+(i) Foreign exchange risk
+61. Risk management (continued)
+(802)
+1,083
+Incorporation of forward-looking information
+(iv)
+These figures are generally derived from internally developed statistical models and other historical data and they are
+adjusted to reflect forward-looking information.
+exposure at default (EAD): is the risk exposure on a debt instrument.
+probability of default (PD): is an estimate of the likelihood of default over 12 months or lifetime horizon;
+loss given default (LGD): is the proportion of the loss arising on default to the exposure at default;
+The key inputs used for measuring ECL are:
+Measurement of ECL
+(iii)
+(a) Credit risk (continued)
+61. Risk management (continued)
+Annual Report 2018
+China Merchants Bank
+The Group considers that a debt instrument has been credit impaired when its 5-tier loan classification is
+substandard, doubtful or loss or is more than 90 days overdue.
+For loan commitments and financial guarantee contracts, the date that the Group becomes a party to the irrevocable
+commitment is considered to be the date of initial recognition for the purposes of assessing the financial instrument
+for impairment.
+A debt instrument is determined to have low credit risk if i) it has a low risk of default, ii) the borrower has a strong
+capacity to meet its contractual cash flow obligations in the near term and iii) adverse changes in economic and
+business conditions in the longer term may not necessarily reduce the ability of the borrower to fulfil its contractual
+cash flow obligations.
+For credit card business, credit risk is considered as significantly increased if any of the following conditions are met:
+the 5-tier loan classification is special mention; more than 30 days (inclusive) overdue; the customer has early credit
+risk warning signals; or the customer has other significant risk signals identified by the Group etc.
+For retail business, credit risk is considered as significantly increased if any of the following conditions are met:
+the 5-tier loan classification is special mention; more than 30 days (inclusive) overdue; or the customer has other
+significant risk signals identified by the Group etc.
+For wholesale business, credit risk is considered as significantly increased if any of the following conditions are met:
+the 5-tier loan classification is special mention; more than 30 days (inclusive) overdue; the internal credit risk rating
+of the customer has met the standard of downgrading; the early warning signal of the customer has reached a
+certain level; or the customer has other significant risk signals identified by the Group etc.
+In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk
+of a default occurring on the financial instrument and other items as at the reporting date with the risk of a default
+occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Group
+considers an actual or expected significant deterioration in the financial instrument's internal credit risk rating (Note
+61(a)(i)), as well as internal warning signal, the result of 5-tier classification and overdue information. The Group
+regularly reviews whether the evaluation criteria are applicable to the current situation.
+As describe in Note 4, the Group recognises lifetime ECL if there are significant increases in credit risk.
+Significant increase in credit risk
+The Group classifies credit risk based on probability of default. The Group classifies credit risk into 25 grades. The
+internal credit risk rating is based on the predicted default risk. Internal credit risk ratings are based on qualitative
+and quantitative factors. For customers of wholesale business include net profit growth rate, sales growth rate,
+industry, etc. For customers of retail business include maturity, ageing, mortgage rate, etc.
+(ii)
+Internal credit risk rating
+(i)
+According to the different risk characteristics of assets, the Group divides assets into different asset groups, identifies
+macro indicators related to credit risks, and establishes regression models.
+The Group uses forward-looking information that is available without undue cost or effort, and predict the
+macroeconomic assumptions. External information includes macroeconomic data, forecast information issued by
+government or regulatory agencies, for example, GDP, fixed asset investment, total social consumption, etc. The
+Group assigns different scenarios to different possibilities.
+During the reporting period, the Group did not make any changes to the predicted technology and important
+assumptions.
+(v)
+968
+2017
+2018
+A- to A+
+AA- to AA+
+AAA
+Neither overdue nor impaired
+Subtotal
+Impairment allowances
+Impaired gross amount of debt investments
+At the end of the reporting period, the analysis of the credit quality of debt investments by designated external
+credit assessment institution, Standard & Poor's, is as follows:
+(viii) Credit quality of debt investments
+(455)
+(a) Credit risk (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+248
+247
+The carrying amount of loans and advances that were impaired and the terms been renegotiated was RMB22,766
+million as at 31 December 2018 (31 December 2017: RMB18,009 million).
+(vii) Renegotiated loans and advances to customers
+The Group's maximum exposure to credit risk without taking account of any collateral held or other credit
+enhancements is the carrying amount of the relevant financial assets (including derivatives) as disclosed in the
+consolidated statement of financial position and the contract amount of the off balance sheet items disclosed in
+Note 59(a). At 31 December 2018, the amount of the Group's maximum credit risk exposure is RMB10,371,303
+million (2017: RMB9,597,033 million).
+Maximum exposure
+(vi)
+The Group divides the primary business into credit card business, retail business, wholesale business. According to
+the type of business, the Group divides the retail business into housing mortgage loans, consumer loans, etc. The
+Group divides the wholesale business into different types according to the scale.
+Groupings based on shared risk characteristics
+61. Risk management (continued)
+Usance letters of credit
+IX Financial Statements
+Irrevocable letters of credit
+11,930
+2,573
+2,524
+352,226
+6,610
+6,349
+1,555
+(1,320)
+1,162
+1,125
+150,447
+151,548 146,060
+29,758
+31,936
+15,998
+19,279
+2,074
+2,137
+632,515
+679,961
+693,830 645,313
+144,367
+389,081 358,334 380,025
+380,152 360,547 371,913
+240,080 199,836 234,741 196,693
+376,424 338,891
+465,295 419,432
+Subsidiaries
+Overseas
+Western region
+8,108
+16,925
+15,181
+355,602
+Note:
+220,039
+90,680 247,135
+106,497
+73,836
+86,242
+6,745,729 6,297,638 6,202,124 5,814,246
+Total
+14,763
+17,240
+9,077
+10,337
+Central region
+30,764
+3,399
+4,285
+2,071
+3,041
+165
+145
+16,015
+17,491
+6,745
+10,790
+2,490
+2,389
+38,903
+China Merchants Bank
+Northeast region
+Pearl River Delta and
+2017
+2018
+2018
+2018
+31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
+2018
+2017
+2017
+Geographical information
+Operating income
+For the year For the year
+ended ended
+Profit before tax
+For the year For the year
+ended ended
+Non-current assets
+Total liabilities
+Total assets
+"Subsidiaries" refers to subsidiaries wholly owned or controlled by the Group, including WLB, CMBICHC,
+CMBFLC, CMFM, etc.
+"Overseas" refers to overseas branches in Hong Kong, New York, Singapore, Luxembourg, London, Sydney
+and representative offices in London, New York, and Taipei; and
+"Western region" refers to branches in Sichuan province, Chongqing municipality, Guizhou province, Yunnan
+province, Shaanxi province, Gansu province, Ningxia Hui Autonomous region, Xinjiang Uyghur autonomous
+region, Guangxi Zhuang autonomous region, Inner Mongolia autonomous region, Qinghai province and Tibet
+autonomous region;
+"Pearl River Delta and West Coast region" refers to branches in Guangdong province and Fujian province;
+"Northeast region" refers to branches in Liaoning province, Heilongjiang province and Jilin province;
+"Central region" refers to branches in Henan province, Anhui province, Hunan province, Hubei province,
+Jiangxi province, Shanxi province and Hainan province;
+"Bohai Rim region" refers to branches and representative offices in Beijing municipality, Tianjin municipality,
+Shandong province and Hebei province;
+"Yangtze River Delta region" refers to branches in Shanghai municipality, Zhejiang province and Jiangsu
+province;
+To support the Bank's operations and management's assessments, the geographical segments are defined as follows:
+"Headquarter" refers to the Group headquarter, special purpose vehicles at the branch level which are
+directly under the headquarter, associates and joint ventures, including the headquarter and credit card
+centres, etc.;
+In presenting information on the basis of geographical segments, operating income is allocated based on the
+location of the branches, subsidiaries that generate the revenue. Segment assets and non-current assets are allocated
+based on the geographical location of the underlying assets.
+The Group operates principally in the PRC with branches located in major provinces, autonomous regions and
+municipalities directly under the central government. The Group also has branches operation in Hong Kong,
+New York, Singapore, London, Sydney and Luxembourg, subsidiaries operating in Hong Kong and Shanghai and
+representative offices in Beijing, London, New York and Taipei.
+(c) Geographical segments
+57. Operating segments (continued)
+Annual Report 2018
+IX Financial Statements
+Of which: Sight letters of credit
+2018
+2017
+2017
+(Restated)
+25,116
+26,946
+12,080
+16,383
+2,015
+484,410
+32,517
+34,386
+19,659
+24,040
+2,849
+2,948
+West Coast region
+745,677
+76,680
+91,577
+15,387
+12,017
+29,628
+34,056
+2,739,929 2,557,785
+2,908,217
+761,970
+492,441 513,813
+3,129,174
+777,607
+526,143
+Bohai Rim region
+Yangtze River Delta region
+Headquarter
+759,258
+IX Financial Statements
+2,131
+58. Assets Pledged as Security
+53,951
+- with an original maturity over 1 year
+42,856
+12
+54
+42,790
+- with an original maturity within 1 year (inclusive)
+96,890
+12
+137
+96,741
+Irrevocable loan commitments
+236,827
+12
+2,134
+234,681
+Bills of acceptances
+67,242
+6
+1,038
+66,198
+Irrevocable letters of credit
+91,872
+354
+82
+83
+54,034
+Credit card commitments
+8,497
+Non-financial guarantees
+Annual Report 2018
+Of which: Financial guarantees
+Irrevocable guarantees
+Contractual amount
+2017
+(b)
+As at 31 December 2018, the Group's irrevocable letters of credit includes sight letters of credit of RMB8,679
+million, usance letters of credit of RMB5,640 million, other commitments of RMB52,923 million.
+(a) Credit commitments (continued)
+59. Contingent Liabilities and Commitments (continued)
+Annual Report 2018
+IX Financial Statements
+91,436
+China Merchants Bank
+241
+1,556,484
+468
+12,181
+1,543,835
+74,923
+5
+74,918
+Total
+Others
+845,502
+81
+242
+Non-financial guarantees
+836,924
+3
+- Held-to-maturity investments
+95,828
+N/A
+N/A
+71,196
+- Debt investments at fair value through other comprehensive income
+N/A
+280,262
+- Debt investments at amortised cost
+5,316
+18,925
+- Financial assets at fair value through profit or loss
+N/A
+Assets pledged
+483,455
+Subtotal
+125,620
+78,141
+Amounts sold under repurchase agreements
+414,838
+405,314
+Borrowing from central bank
+2017
+143,228
+2018
+The following assets have been pledged as collateral for liabilities under repurchase arrangements:
+540,458
+409,092
+- Available-for-sale financial assets
+109,757
+288
+142,937
+Of which: Financial guarantees
+235,100
+357
+370
+234,373
+Irrevocable guarantees
+- Other assets
+Total
+ECL-
+credit
+impaired)
+-Stage 3
+(Lifetime
+-Stage 2
+(Lifetime
+ECL- not
+credit-
+impaired)
+ECL)
+-Stage 1
+(12-month
+Total
+2018
+Contractual amount
+The contractual amounts of commitments and contingent liabilities are set out in the following table by category.
+The amounts reflected in the table for commitments assume that amounts are fully advanced. The amount reflected
+in the table for guarantees and letters of credit represents the maximum potential loss that would be recognised at
+the end of the reporting period if counterparties defaulted.
+The Group provides financial guarantees and letters of credit to guarantee the performance of customers to third
+parties. Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group
+expects most acceptances to be settled simultaneously with the reimbursement from the customers.
+At any given time the Group has outstanding commitments to extend credit. These commitments take the form of
+approved loans and credit card limits.
+(a) Credit commitments
+59. Contingent Liabilities and Commitments
+The transactions under repurchase agreements are conducted under terms that are usual and customary to standard
+lending and securities borrowing and lending activities.
+586,182
+75,946
+480,140
+13,725
+194,051
+68,339
+13,343
+Debt securities issued
+17,200
+213
+9,530
+8,400
+16,859
+101,780
+14,564
+80,491
+44,814
+558,761
+Other liabilities (note (iv))
+1,051,229
+516,618
+profit or loss (including derivatives)
+3,438,172
+(Short)/long position
+Total liabilities
+422,327
+148,476
+766
+5,517
+19,273
+9,438
+45,029
+65,131
+3,322
+Financial liabilities at fair value through
+140,244
+2,597
+200
+568,746
+3,053
+164,600
+216,605
+Total assets
+Amounts due to banks and
+1,053,468
+469,112
+1,409,522
+1,682,861
+1,334,392
+633,170
+22,960
+4,400,674
+6,745,729
+328,999
+269,494
+184,328
+334,596
+25,383
+5,744
+1,612
+1,150,156
+Deposits from customers (note (iii))
+3,029,478
+217,170
+246,113
+486,450
+418,866
+other financial Institutions
+63,451
+880,201
+6,202,124
+Indefinite
+Overdue
+Total
+Cash and balances with central
+bank (note (i))
+84,424
+531,995
+616,419
+Amounts due from banks and
+other financial institutions
+43,809
+299,502
+33,898
+102,778
+5 years
+1,900
+484,096
+Loans and advances to customers
+358,319 268,551
+1,006,228
+887,849
+13,464
+3,414,612
+Investments (note (ii))
+- Financial assets at fair value through
+profit or loss (including derivatives)
+5,298
+14,697
+11,418
+42,895
+2,209
+5,147
+5 years
+3 months
+(3,297,928)
+494,707
+(47,506)
+358,293
+1,114,115
+1,270,941
+628,023
+22,960
+543,605
+257
+258
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+1 year
+61. Risk management (continued)
+2017
+After
+After
+After
+1 month
+3 months
+1 year
+Repayable
+on demand
+Within
+but within
+but within
+but within
+After
+1 month
+(c) Liquidity risk (continued)
+7,010
+(25)
+23,800
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+61. Risk management (continued)
+(c)
+Liquidity risk
+Liquidity risk is the risk that the Group will not be able to obtain sufficient funds at a reasonable cost in a timely
+manner to meet the maturity obligations, perform other payment obligations and meet the capital requirements of
+normal business operations.
+In line with its liquidity risk management policies, the Group sets out and implements the principle of supervisory
+duty segregation. It also puts in place a governing framework under which the roles, responsibilities and reporting
+lines of the Board of Directors, the board of Supervisors, senior management, designated committees and relevant
+departments to ensure the effectiveness of the liquidity risk management. The Board of Directors shall accept the
+ultimate responsibility for liquidity risk management, ensure the Company can effectively identify, measure, monitor
+and control liquidity risk and are responsible for determining liquidity risk level which the Group can withstand.
+The Risk and Capital Management Committee under the Board of Directors shall discharge responsibilities in
+liquidity risk management on behalf of the Board of Directors. The board of Supervisors shall be responsible for the
+supervision and evaluation of the performance of the Board of Directors and senior management in the liquidity
+risk management and report to the general meeting of shareholders. The senior management (being the Executive
+Office of President of the Head Office) shall be responsible for the concrete management work relating to liquidity
+risk and developing a timely understanding of changes in liquidity risks, and shall report the same to the Board of
+Director. Assets and Liabilities Committee (ALCO) shall, under the authority of the senior management, exercise
+the corresponding liquidity risk management functions. The Assets and Liabilities Management Department of the
+Head Office is a day-to-day working body of ALCO, and shall be responsible for various concrete management
+work including formulating policies and procedures relating to liquidity risk management and conducting qualitative
+and quantitative analysis of liquidity risk. The Audit Department of the Head Office shall perform duties in respect
+of audit work of liquidity risk management, and conduct comprehensive audit on the Group's liquidity risk
+management.
+The Group is prudent in managing the risk, which better suits its current development stage. Basically, the Group's
+existing liquidity risk management policies and systems meet regulatory requirements and its own management
+needs.
+The Group's liquidity risk management is coordinated by Head Office with branches, subsidiaries acting in concert.
+The Asset and Liability Management Department acts as the treasurer of the Group is in charge of routine
+liquidity risk management. The treasurer is responsible for managing liquidity on a prudent basis under regulatory
+requirement, and conducting centralised liquidity management through quota management, budget control,
+initiative debt management as well as internal fund transfer pricing.
+The Group measures, monitors and identifies liquidity risk by short-term reserves as well as duration structures and
+contingencies. It monitors the limit indicators closely at fixed intervals. Specifically, the Group adopts information
+outsourced from Wind, Reuters and other systems as its external liquidity indicators, and uses self-developed liquidity
+risk management system to measure its internal liquidity indicators and cash flow statements.
+It closely monitors various limit indicators at regular intervals, performs regular stress testing to judge whether it can
+address liquidity needs under extreme circumstances. In addition to the annual stress tests required by the regulatory
+authorities, the Company conducts stress tests on the liquidity risk associated with domestic and foreign currencies
+on a monthly basis. In addition, the Group draws up liquidity contingency plans and conducts liquidity contingency
+drills to prepare for liquidity crises.
+China Merchants Bank
+IX Financial Statements
+256
+Annual Report 2018
+(c)
+Liquidity risk (continued)
+Analysis of the Group's assets and liabilities by residual maturity is as follows:
+2018
+After
+After
+After
+Repayable
+Within
+1 month
+but within
+3 months
+1 year
+but within
+but within
+61. Risk management (continued)
+After
+255
+3,174
+18,354
+39,883
+207,609
+(1,286,083)
+1,071,770
+300,150
+376,452
+21,103
+Note:
+(i)
+(ii)
+For loans and advances to customers, the "3 months or less" category includes overdue amounts as at 31 December 2018 and
+31 December 2017, net of allowances for impairment losses. Overdue amounts represent loans of which the whole or part of the
+principals or interests were overdue.
+Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
+The Group uses sensitivity analysis to measure the potential effect of changes in interest rates on the
+Group's net interest income and equity. The following table sets forth the results of the Group's interest rate
+sensitivity analysis on the assets and liabilities as at 31 December 2018 and 31 December 2017.
+2018
+Actual changes in the Group's net interest income and equity resulting from increase or decrease in interest
+rates may differ from the results of this sensitivity analysis.
+2017
+Change in interest
+rates (in basis points)
+25
+25
+(25)
+(Decrease)/increase in annualised
+net interest income
+(1,966)
+1,966
+(2,010)
+2,010
+(Decrease)/increase in equity
+(3,544)
+3,756
+(3,152)
+Change in interest
+rates (in basis points)
+6,524
+on demand
+3 months
+33,898
+42,361
+25,549
+1,827
+275
+361,567
+- Debt investments at amortised cost
+9,809
+75,329
+106,912
+467,555
+240,250
+3,413
+903,268
+62,960
+- Debt investments at fair value through
+434
+21,042
+16,391
+74,532
+204,145
+97,770
+377
+414,691
+- Equity investments designated at
+fair value through other
+comprehensive income
+Other assets (note (iv))
+4,015
+4,015
+other comprehensive income
+1 month
+191,652
+profit or loss (including derivatives)
+1 year
+5 years
+5 years
+Indefinite
+Overdue
+Total
+Cash and balances with central
+bank (note (i))
+31,621
+461,514
+493,135
+Amounts due from banks and
+other financial institutions
+81,344
+3,045
+410,287
+85,447
+1,230
+1,214
+611,186
+Loans and advances to customers
+414,154
+275,758
+1,097,315
+964,517
+970,623
+18,895
+3,741,262
+Investments (note (ii))
+- Financial assets at fair value through
+31,664
+1,592
+45,108
+83,712
+29,990
+1,853
+276
+- Debt investments at
+amortised cost
+903,268
+1,059,887
+11,876
+79,543 126,478
+539,495
+298,966
+3,529
+- Debt investments at fair value
+through other comprehensive
+34,099
+income
+469,935
+434
+22,104
+18,406
+83,448
+232,981
+112,052
+510
+- Equity investments designated
+at fair value through other
+comprehensive income
+4,015
+4,017
+4,017
+414,691
+Other assets
+23,145
+188,738
+Cash and balances with central bank
+493,135
+493,135
+31,621
+461,514
+Amounts due from banks and
+other financial institutions
+611,186
+664,376
+92,117
+425,647
+42,522
+99,309
+3,567
+59,383
+1,214
+3,741,262
+4,485,884
+429,359
+305,185
+1,224,946
+1,225,783
+1,281,883
+18,728
+Investments
+- Financial assets at fair value
+through profit or loss
+327,643
+340,529
+3,045
+Loans and advances to customers
+Non-derivative financial assets
+70,949
+70,824
+6,566,024 7,588,712 151,283 1,084,121
+213
+Debt securities issued
+422,327
+454,141
+23,224
+68,511 224,268
+88,801
+49,337
+Other liabilities
+117,228 117,734
+35,565
+44,540
+9,085
+17,487
+10,279
+7,224
+1,970
+Total
+6,134,485 6,366,184 3,472,356
+599,868
+528,405
+1,095,986
+604,134
+61,853
+3,582
+Gross loan commitments
+942,392 942,392
+Note:
+Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
+259
+1,863
+Total
+5,320
+5,765
+24,066
+6,397
+6,963
+11,143
+3,003
+200
+19,177
+512,002 1,568,469
+2,038,928
+1,723,091
+487,775
+23,043
+Non-derivative financial liabilities
+Amounts due to banks and
+1,999
+other financial institutions
+1,150,156 1,225,600 342,929 305,526
+4,400,674 4,523,601 3,072,330
+197,112
+220,813 251,698
+344,251
+27,644
+6,526
+1,612
+504,660
+470,186
+3,914
+Financial liabilities at fair value
+through profit or loss
+44,100
+478,658
+21,532
+Deposits from customers
+876
+Overdue
+5 years
+7,096
+185,239
+Total assets
+143,532
+909,814 378,025
+1,415,820
+1,494,604
+1,256,972
+676,623
+22,248 6,297,638
+Amounts due to banks and
+other financial Institutions
+296,528
+403,330
+137,166
+182,894
+23,509
+5,404
+Deposits from customers (note (iii))
+2,554,598
+364,232
+350,167
+570,414
+221,560
+3,374
+1,252,310
+4,064,345
+Financial liabilities at fair value through
+profit or loss (including derivatives)
+6,815
+6,119
+340,645
+7,905
+505
+2,793
+- Available-for-sale financial assets
+8,337
+18,304
+68,573
+166,935
+116,255
+4,277
+420
+383,101
+-Held-to-maturity investments
+3,418
+6,444
+31,217
+306,655
+1,292
+210,484
+- Debt securities classified as
+receivables
+216,900
+33,083
+161,336
+119,267
+40,287
+100
+1,268
+572,241
+Other assets
+15,299
+18,040
+3,048
+558,218
+Indefinite
+21,743
+649
+483,392
+(ii)
+For balances with central bank, the amount with an indefinite maturity represents statutory deposit reserve and fiscal balances maintained with
+the PBOC.
+The residual maturities of financial assets at fair value through profit or loss included in investments do not represent the Group's intention to
+hold them to maturity.
+The deposits from customers that are repayable on demand include matured time deposits which are pending for customers' instructions.
+(iii)
+(iv)
+Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+61. Risk management (continued)
+(c)
+Liquidity risk (continued)
+22,248
+The following table provides an analysis of the contractual undiscounted cash flow of the non-derivative financial
+assets, liabilities and gross loan commitments of the Group as at the end of the reporting period. The Group's
+expected cash flow on these instruments may vary significantly from this analysis.
+After
+After
+Carrying
+amount
+Total
+Repayable
+on demand
+Within
+1 month
+but within
+1 month
+3 months
+3 months
+but within
+1 year
+After
+1 year
+but within
+After
+5 years
+2018
+5,126
+1,213,662 670,550
+49,175 (262,629) 411,036
+119
+48,476
+Debt securities issued
+48,497
+91,414
+59,187
+64,695
+32,684
+296,477
+Other liabilities
+Total liabilities
+(Short)/long position
+Notes:
+(i)
+1,170,989
+77,230
+8,274
+12,795
+8,725
+1,199
+5,954
+152,638
+2,935,171
+860,639 640,654
+1,004,784
+323,615
+43,310
+6,073
+5,814,246
+(2,791,639)
+38,461
+152,473
+2,757
+32,684
+Cash and balances with central bank
+Amounts due from banks and
+569,550
+27,997
+16,665
+2,207
+616,419
+4,299
+20,001
+other financial institutions
+355,030
+99,931
+12,419
+16,716 484,096
+15,346
+Assets
+14,905
+3,036,190
+198,058
+145,395
+34,969
+3,414,612
+30,415
+174,502
+Investments (including derivatives)
+1,492,420
+69,878
+24,625
+10,349 1,597,272
+10,731
+29,556
+Loans and advances to customers
+Other assets
+HKD
+Total
+(24,796)
+(45,387) (1,156,166)
+(79,104)
+(28,280)
+364
+27,788
+(650)
+3,500
+9,404
+415
+(20,583)
+26,918
+15,733
+31,692
+China Merchants Bank
+USD
+IX Financial Statements
+61. Risk management (continued)
+(b) Market risk (continued)
+(i)
+Foreign exchange risk (continued)
+Banking book (continued)
+(2)
+Assets and liabilities by original currency are shown as follows: (continued)
+2017
+Equivalent in RMB million
+Original
+currency in million
+RMB
+USD
+HKD
+Others
+Annual Report 2018
+59,557
+135,223
+16,960
+2,151
+Debt securities issued
+255,686
+33,038
+6,930
+823
+296,477
+5,073
+8,317
+Other liabilities
+134,726
+8,308
+6,631
+2,973
+3,493
+152,638
+7,958
+Total
+Net position
+5,097,833
+490,580
+(74,354)
+503,578 170,606
+45,458
+42,229 5,814,246
+21,708 483,392
+77,331
+204,760
+(11,419) 54,559
+Net off-balance sheet position:
+Credit commitments (note(ii)
+1,207,229
+133,144
+1,276
+33,360
+48,476
+22,750
+(304) 185,239
+5,121
+20,355
+Total
+5,588,413
+429,224
+216,064
+63,937 6,297,638
+65,912
+259,319
+Liabilities
+Amounts due to central bank, banks and
+other financial institutions
+1,141,054
+1,791
+103,011
+Deposits from customers
+3,542,432
+336,471
+149,594
+2,585
+35,848
+1,252,310
+15,819
+6,794
+4,064,345
+51,670
+179,540
+Financial liabilities at fair value through
+profit or loss (including derivatives)
+23,935
+5,660
+85,433
+25,454 1,179,584
+52,220
+611,186
+24,247
+21,517
+Loans and advances to customers
+3,377,558
+191,839
+130,064
+41,801 3,741,262
+27,941
+148,339
+Investments (including derivatives)
+1,574,122
+73,659
+23,497
+11,244
+12,263 1,683,541
+26,798
+Other assets (note(i))
+158,173
+43,612
+12,925
+1,895 216,605
+6,353
+14,741
+Total
+5,992,760
+493,854
+190,032
+69,083 6,745,729
+71,930
+10,729
+1
+18,866
+other financial institutions
+250
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+61. Risk management (continued)
+(b) Market risk (continued)
+(i)
+Foreign exchange risk (continued)
+(2)
+Banking book (continued)
+Assets and liabilities by original currency are shown as follows:
+2018
+Equivalent in RMB million
+Original
+currency in million
+414,598 166,478
+RMB
+HKD
+Others
+Total
+USD
+HKD
+Assets
+Cash and balances with central bank
+Amounts due from banks and
+468,309
+18,266
+4,680
+1,880
+493,135
+2,660
+5,338
+USD
+Liabilities
+Amounts due to central bank, banks and
+other financial institutions
+Total
+5,483,475
+495,592 171,467
+51,590
+6,202,124
+72,182
+195,558
+Net position
+509,285
+(1,738)
+18,565
+17,493
+543,605
+(252)
+6,466
+21,175
+Credit commitments (note(ii)
+1,384,833
+119,708
+28,089
+23,854 1,556,484
+17,435
+32,036
+Derivatives:
+- forward purchased
+-forward sold
+- net currency option position
+Total
+(88,309)
+515,342 586,568
+(542,869) (543,114)
+(60,782) 64,568
+108,022
+Net off-balance sheet position:
+1,065
+148,476
+4,181
+1,025,703
+Deposits from customers
+3,903,972
+103,989 13,116
+316,770 142,793
+7,348
+37,139 4,400,674
+1,150,156
+15,146
+14,959
+46,137
+162,857
+Financial liabilities at fair value through
+profit or loss (including derivatives)
+49,376
+29,138
+1,964
+13
+80,491
+5,671
+7,313
+131,311
+Other liabilities (note(i))
+9,036
+5,590
+35,740
+422,327
+7,923
+38,382
+373,113
+Debt securities issued
+2,240
+4,244
+2,909
+30,895 1,407,008
+216,733
+42,896
+232,375
+543,605 (1,265,391)
+1,092,316
+296,336
+368,232
+52,112
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+61. Risk management (continued)
+(b) Market risk (continued)
+(ii)
+Interest rate risk (continued)
+(2)
+52,307
+Banking book (continued)
+3 months
+Total
+or less
+(include
+overdue)
+Over
+Over
+Non-
+3 months
+1 year
+Over
+interest
+to 1 year
+to 5 years
+5 years
+bearing
+2017
+Assets
+539,398
+4,366,105
+4,683
+5,179
+Deposits from customers
+4,400,674
+3,485,761
+484,156
+417,315
+2,597
+10,845
+Financial liabilities at fair value through
+profit or loss (including derivatives)
+80,491
+206
+2,667
+1,011,939
+9,511
+67,894
+Debt securities issued
+422,327
+77,883
+197,850
+101,780
+44,814
+Other liabilities (note (ii))
+148,476
+19
+148,457
+Total liabilities
+Asset-liability gap
+6,202,124
+213
+10,792
+Cash and balances with central bank
+600,007
+329,543
+7,628
+3,457
+Deposits from customers
+4,064,345
+3,056,891
+588,581
+404,127
+3,354
+11,392
+Financial liabilities at fair value through
+profit or loss (including derivatives)
+48,476
+83
+908,925
+3,823
+388
+40,987
+Debt securities issued
+296,477
+143,759
+Other liabilities
+152,638
+Total liabilities
+Asset-liability gap
+5,814,246
+483,392
+4,109,658
+56,327
+164
+978,438
+20,447
+63,707
+3,195
+616,419
+1,252,310
+Liabilities
+16,412
+Amounts due from banks and
+other financial institutions
+484,096
+388,406
+90,437
+1,901
+3,352
+Loans and advances to customers (note (i))
+3,414,612
+1,481,059
+1,669,795
+210,845
+52,913
+Amounts due to banks and
+Investments (including derivatives)
+354,103
+289,976
+566,062
+363,422
+23,709
+Other assets
+185,239
+185,239
+Total assets
+6,297,638
+2,823,575 2,050,208
+778,808
+416,335
+228,712
+1,597,272
+327,266
+other financial institutions
+1,150,156
+100
+(100)
+100
+Increase/decrease) in annualised net profit
+177
+(177)
+364
+(364)
+Increase/decrease) in annualised equity
+177
+(177)
+364
+(364)
+Actual changes in the Group's net profit and equity resulting from increases or decreases in foreign exchange
+rates may be different from the results of this sensitivity analysis.
+(100)
+(ii)
+Interest rate risk arises from adverse change in interest rates and maturity profiles which may result in loss to the
+income and market value of financial instruments and positions held by the Group.
+(1)
+Trading book
+The Group has set up its market risk governance framework for trading book, covering interest rate risk,
+foreign exchange risk and commodity price risk. The Group's market risk governance framework for trading
+book specifies the roles, responsibilities and reporting line of the Board of Directors, senior management,
+designated committees and relevant departments to ensure the effectiveness of the trading book market risk
+management. The market risk management department is responsible for execution of the management of
+interest rate risk under the trading book.
+The Group has established market risk limits management framework, covering the interest rate risk, foreign
+exchange rate risk and commodity price risk under the trading book. Within this framework, the highest
+level indicators (or limits), which are also the trading book market risk preference quantitative indicators (or
+limits) of the Group, adopt VaR and portfolio stress testing methodologies and directly link to the Group's net
+capital. In addition, according to the product type, trading strategy and characteristics of risk of sub-portfolio,
+the highest level indicators are allocated to lower level indicators, and to each front office departments.
+These indicators are monitored and reported on a daily basis.
+For management purpose, the Group adopts quantitative indicators such as exposure indicator, market value
+at risk indicator (VaR, including all interest rate risk factors related to trading book), interest rate scenario
+stress test loss index, interest rate sensitivity index, and cumulative loss index (covering all risk factors related
+to trading book). Management measures include setting the limit and authorization of transaction, daily
+monitoring and constant reporting. Market value at risk indicator (VAR) includes normal market risk value and
+stress market value, both of which are calculated using historical simulation method.
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+61. Risk management (continued)
+(b) Market risk (continued)
+(ii)
+Interest rate risk (continued)
+(2)
+Interest rate risk
+Banking book
+Change in foreign currency
+exchange rate (in basis points)
+2017
+Derivatives:
+-forward purchased
+802,236
+- forward sold
+- net currency option position
+Total
+(166,860)
+396,668 519,657 37,360 17,382 971,067 79,800
+(462,581) (409,541) (37,628) (37,210) (946,960) (62,890)
+(100,947) (80,313) (185) (3,399) (184,844) (12,333)
+29,803
+(453) (23,227) (160,737)
+44,839
+(45,161)
+(222)
+4,577
+(544)
+Note:
+Change in foreign currency
+exchange rate (in basis points)
+(i)
+(ii)
+Credit commitments generally expire before they are drawn, therefore the above net position does not represent the future cash
+outflows.
+252
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+61. Risk management (continued)
+(b) Market risk (continued)
+(i)
+Foreign exchange risk (continued)
+(2)
+Banking book (continued)
+Under the existing managed floating exchange rate regime, the Group uses sensitivity analysis to measure the
+potential effect of changes in foreign currency exchange rates on the Group's net foreign exchange gains and
+losses and equity. The following table sets forth the results of the Group's foreign exchange risk sensitivity
+analysis on the assets and liabilities as at 31 December 2018 and 31 December 2017.
+2018
+Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
+The Group has established the governance and management framework according to the interest rate risk
+management policy for the banking book, which specified the roles, responsibilities and reporting lines of
+the Board of Directors, senior management, designated committees and relevant departments to ensure the
+effectiveness of interest rate risk management. Interest risk of the banking book of the Group is centrally
+managed by the Asset and Liability Management Department. The audit department is responsible for
+auditing.
+251
+The Group has formulated the principles for risk control at different interest rate risk levels. Based on the
+risk measurement and monitoring results, the Group will propose the corresponding risk management policy
+at the regular meetings of the assets and liabilities management committee and through the reporting
+mechanism, and the Assets and Liabilities Management Department is responsible for its implementation.
+The major measures for risk management include the adjustment in business volume, duration structure and
+interest rate structure of on-balance sheet asset and liability business and the utilisation of off-balance sheet
+derivative tools to offset risk exposure.
+84,679
+268
+1,214
+6,412
+Loans and advances to customers (note (i))
+3,741,262
+1,665,384
+1,846,122
+170,453
+59,303
+Investments (including derivatives)
+1,683,541
+439,396
+173,454
+518,613
+665,013
+45,656
+Other assets (note (ii))
+216,605
+Total assets
+6,745,729
+3,100,714
+2,104,255
+835,734
+420,539
+284,487
+other financial institutions
+The Group has mainly adopted scenario simulation analysis, re-pricing exposure analysis, duration analysis
+and stress testing for the measurement and analysis of interest rate risk under the banking book. Stress
+test is a form of scenario simulation used to assess the changes in NII and EVE indicators when there is an
+extreme fluctuation in interest rates. The Group conducts stress test on interest rate risk of banking book on
+a monthly basis. The results of stress test for 2018 showed that the interest rate risk of banking book of the
+Company was generally stable with various indicators staying within the set limits.
+Amounts due to banks and
+Liabilities
+360,022
+611,186
+216,605
+other financial institutions
+Total
+2018
+The following table indicates the expected next repricing dates (or maturity dates whichever are earlier) for
+assets and liabilities at the end of the reporting period.
+Banking book (continued)
+(2)
+Interest rate risk (continued)
+3 months
+or less
+(include
+overdue)
+(b) Market risk (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+The Group measures and monitors interest rate risk of banking book through the asset and liability
+management system. Major models and parameter assumptions used in the course of measurement shall be
+verified independently by the Risk Management Department before official use and shall be reviewed and
+verified regularly upon official use.
+254
+253
+61. Risk management (continued)
+Over
+(ii)
+Cash and balances with central bank
+493,135
+15,814
+477,321
+Assets
+bearing
+interest
+Over
+1 year
+to 5 years
+Amounts due from banks and
+to 1 year
+3 months
+Non-
+Over
+5 years
+34,220
+403
+414,691
+Loans and advances to customers at FVTOCI
+156,683
+Financial liabilities held for trading
+78,551
+Debt investments at FVTOCI
+403
+336,140
+Equity investments designated at FVTOCI
+97,443
+20,684
+2,540
+177,367
+4,015
+Total
+833,635
+27,261
+958,339
+- Precious metal relevant financial liabilities
+Loans and advances to customers at FVTPL
+Liabilities
+1,475
+34,220
+73
+13,184
+336
+16,854
+17,872
+- Wealth management products
+1,060
+1,060
+- Non-standard assets -Bills
+173,988
+- Others
+1,147
+Derivative financial assets
+1,561
+Subtotal
+12,477
+298,389
+3,593
+314,459
+Investments designated at FVTPL
+- Debt securities
+4,940
+8,203
+41
+173,988
+1,220
+17,872
+39,554
+1,090
+38,602
+2,514
+80,670
+China Merchants Bank
+Annual Report 2018
+IX Financial Statements
+61. Risk management (continued)
+(g) Fair value information (continued)
+(ii) Assets and liabilities which are measured at fair value at date of financial position on a recurring basis
+(continued)
+2017
+Level 1
+36,570
+Level 2
+Total
+Assets
+Financial assets held for trading
+Debt securities
+10,181
+44,590
+- Long position in precious metal contracts
+1,378
+- Equity investments
+211
+32
+Level 3
+36,570
+25,138
+2,514
+1,090
+Subtotal
+18,962
+18,962
+Financial liabilities designated at FVTPL
+- Precious metal contracts with other banks
+9,663
+9,663
+- Certificates of deposit issued
+2,619
+2,619
+- Debt securities issued
+9,977
+9,977
+- Others
+Subtotal
+Derivative financial liabilities
+Total
+365
+2,514
+2,879
+19,640
+2,984
+- Short selling securities
+58
+14,514
+(21,857)
+- Investments in funds
+221
+(112)
+Subtotal
+18,830
+15,836
+10,630
+641
+45,937
+273
+(123)
+38,504
+Total
+The credit risk weighted amounts in respect of these derivatives are as follows. These amounts have taken the
+effects of bilateral netting arrangements into account.
+Credit risk weighted assets of counterparties
+Interest rate derivatives
+Currency derivatives
+Other derivatives
+Credit valuation adjustment risk weighted assets
+Total
+Note:
+2018
+2017
+18,916
+272
+524
+13,459
+54,771
+211
+2,400
+8,500
+(79)
+Derivatives managed in
+conjunction with financial
+instruments designated
+at fair value through
+profit or loss
+Interest rate derivatives
+5,791
+Interest rate swaps
+2,377
+4,839
+117
+7,433
+62
+52
+(11)
+Currency derivatives
+Foreign exchange swaps
+18,730
+100
+1,190
+7,728
+8,357
+Annual Report 2018
+61. Risk management (continued)
+(g) Fair value information (continued)
+(ii)
+Assets and liabilities which are measured at fair value at date of financial position on a recurring basis
+The table below analyses financial instruments without interests, measured at fair value at the end of the reporting
+period, by the level in the fair value hierarchy:
+2018
+Level 1
+Level 2
+Level 3
+Total
+IX Financial Statements
+Assets
+Debt securities
+10,237
+108,682
+746
+119,665
+- Long position in precious metal contracts
+111
+111
+- Equity investments
+125
+Investments measured at FVTPL
+China Merchants Bank
+266
+265
+4,236
+3,467
+17,606
+18,836
+29,842
+31,850
+The credit risk weighted amounts in respect of derivatives are calculated in accordance with the Administrative Measures on Capital of
+Commercial Banks (Trial) issued by CBIRC, covering default risk weighted assets of counterparties and credit valuation adjustment risk weighted
+assets. The amount within the scope approved by CBIRC in April 2014 was calculated using the internal rating-based approach, and the
+risk-weighted approach is adopted to calculate those not eligible to the internal rating-based approach.
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+61. Risk management (continued)
+(g) Fair value information
+(i)
+Financial instruments at fair value
+A number of the Group's accounting policies and disclosures require the measurement of fair values, for both
+financial and non-financial assets and liabilities.
+The Group has established a control framework to govern the measurement of fair values. This includes a valuation
+team that has responsibility for overseeing all significant fair value measurements including three levels of fair values,
+and reports directly to the person in charge of accounting affairs.
+The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party
+information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team
+assesses the evidence obtained from the third parties to support the conclusion that such valuation meets the
+requirements of IFRSS, including the level in the fair value hierarchy in which such valuation should be classified.
+When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible.
+Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation
+techniques as follows.
+The following table presents the fair value information and the fair value hierarchy, at the end of the current
+reporting period, of the Group's assets and liabilities which are measured at fair value at each balance sheet date
+on a recurring basis. The level in which fair value measurement is categorised is determined by the level of the fair
+value hierarchy of the lowest input that is significant to the entire fair value measurement. The levels are defined as
+follows:
+Level 1 inputs: unadjusted quoted prices in active markets that are observable at the measurement date for
+identical assets or liabilities;
+Level 2 inputs: other than quoted prices included in level 1 inputs that are either directly or indirectly
+observable for underlying assets or liabilities inputs;
+Level 3 inputs: inputs that are unobservable for assets or liabilities.
+The Group recognises transfers between levels of the fair value hierarchy in which they occur.
+The Group's assets and liabilities measured at fair value are measured on a recurring basis. The Group does not have
+assets nor liabilities measured at fair value on a non-recurring basis.
+2,004
+32
+liquidity discount
+401
+Investments measured at FVTPL
+Risk-adjusted discount rate,
+actual trading conditions-
+adjusted discount rate,
+cash flow
+Risk-adjusted discount rate,
+actual trading conditions-
+adjusted discount rate,
+cash flow
+- Debt securities
+746
+Discounted cash flow
+approach
+cash flow
+– Equity investments
+Discounted cash flow
+approach
+1,373
+- Equity investments
+5
+Discounted cash flow
+approach
+cash flow
+- Investments in funds
+292
+Market approach
+- Investments in funds
+44
+Discounted cash flow
+approach
+Market approach
+cash flow
+customers at FVTOCI
+Loans and advances to
+(ii) Assets and liabilities which are measured at fair value at date of financial position on a recurring basis
+(continued)
+(3)
+Valuation techniques used and the qualitative and quantitative information of key parameters for
+recurring fair value measurements categorised within Level 3 Quantitative information of Level 3
+fair value measurement is as below:
+Fair value
+as at
+31 December
+2018
+Valuation techniques
+Unobservable input
+Equity investments designated
+1,031
+20,684
+Market approach
+at FVTOCI
+Equity investments designated
+1,509
+at FVTOCI
+Net asset value
+approach
+Book net assets,
+Loans and advances to
+403
+customers at FVTPL
+Discounted cash flow
+approach
+Liquidity discount
+(g) Fair value information (continued)
+- Wealth management products
+Discounted cash flow
+approach
+Unlisted available-for-sale
+equity investments
+2017
+779
+Valuation techniques
+Market comparison
+approach
+Unlisted available-for-sale
+727
+Market approach
+equity investments
+31 December
+Unlisted available-for-sale
+equity investments
+Unlisted available-for-sale
+fund investments
+Discounted cash flow
+161 Discounted cash flow
+Unobservable input
+Liquidity discount
+Transaction of near delivery rate
+Risk-adjusted discount rate,
+cash flow
+Risk-adjusted discount rate,
+cash flow
+269
+2,700
+499
+1,060
+Fair value
+as at
+Risk-adjusted discount rate,
+cash flow
+cash flow
+- Others
+15
+Market approach
+- Others
+58
+Discounted cash flow
+approach
+cash flow
+Investments designated at FVTPL
+41
+Book net assets, liquidity discount
+Discounted cash flow
+approach
+2,514
+Net fund value approach
+Risk-adjusted discount rate,
+Liquidity discount
+Risk-adjusted discount rate,
+Liquidity discount
+Risk-adjusted discount rate,
+Risk-adjusted discount rate,
+Liquidity discount
+Risk-adjusted discount rate,
+Financial liabilities designated
+at FVTPL
+- Investments in funds
+61. Risk management (continued)
+IX Financial Statements
+44,481
+161
+46,547
+Subtotal
+76,354
+304,581
+2,166
+383,101
+91,664
+372,983
+1,905
+2,166
+Total
+Liabilities
+Financial liabilities held for trading
+- Precious metal relevant financial liabilities
+11,325
+11,325
+- Short selling securities
+64
+64
+Subtotal
+466,813
+11,325
+- Investments in funds
+2,005
+401
+Subtotal
+10,424
+44,991
+55,415
+Financial assets designated at fair value
+through profit or loss
+- Debt securities
+4,886
+4,495
+3,225
+9,381
+18,916
+18,916
+Available-for-sale financial assets
+- Debt securities
+– Equity investments
+73,391
+259,938
+333,329
+1,058
+162
+Derivative financial assets
+Annual Report 2018
+64
+Financial liabilities designated at fair value
+268
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+61. Risk management (continued)
+(g) Fair value information (continued)
+(ii) Assets and liabilities which are measured at fair value at date of financial position on a recurring basis
+(continued)
+(1)
+Basis of determining the market price for recurring fair value measurements categorised within
+Level 1
+Bloomberg's quoted prices are used for financial instruments with quoted prices in an active market.
+267
+(2)
+Fair value of RMB denominated bonds whose value is available on China bond pricing system on the
+valuation date is measured using the latest valuation results published by China bond pricing system.
+Fair value of foreign currency bonds without quoted prices in an active market, is measured by using the
+comprehensive valuations issued by Bloomberg, etc.
+Fair value of foreign exchange forwards contracts in derivative financial assets is measured by discounting
+the differences between the contract prices and market prices of the foreign exchange forwards contracts.
+The discount rates used are the applicable RMB denominated swap yield curve as at the end of the reporting
+period.
+Fair value of foreign exchange options is measured using the Black-Scholes model, applying applicable foreign
+exchange spot rates, foreign exchange yield curves and exchange rate volatilities. The above market data
+used are quoted price in an active market, provided by Bloomberg, Reuters and other market information
+providers.
+Fair value of interest rate swaps in derivative financial assets is measured by discounting the expected
+receivable or payable amounts under the assumption that these swaps had been terminated at the end of
+reporting date. The discount rates used are the related currency denominated swap yield curve as at the end
+of reporting period.
+Dealing price of the investment fund derived from the net asset values of the investment funds with reference
+to observable quoted price in market is used as the basis of determining the market price for recurring fair
+value.
+The fair value of loans and advances to customers at FVTOCI in Mainland China is measured based on the
+transaction interest rate of rediscounted bills announced by Shanghai Commercial Paper Exchange; the Group
+uses 10-day average of the transaction interest rate as the basis for calculating the value of discounted
+bills. The fair value of loans and advances to customers at FVTOCI outside Mainland China is measured by
+discounted cash flow approach. The discount rates used are determined by factors such as credit rating of
+the loan customer provided by S&P, Moody's or Fitch, customer industry, term to maturity of the loan, loan
+currency and the issuer credit spread.
+The fair value of non-standard bills at FVTPL in Mainland China is measured based on the transaction interest
+rate of rediscounted bills announced by Shanghai Commercial Paper Exchange; the Group uses 10-day
+average of the transaction interest rate as the basis for calculating the value of discounted bills.
+The fair value of certificates of deposit issued is measured by using the comprehensive valuations issued by
+Bloomberg.
+China Merchants Bank
+Valuation techniques used and the qualitative and quantitative information of key parameters for
+recurring fair value measurement categorised within Level 2
+11,389
+During the year there were no significant transfers of financial instruments between Level 1 and Level 2 of the fair
+value hierarchy.
+25,224
+through profit or loss
+- Precious metal contracts with other banks
+7,688
+7,688
+- Certificates of deposit issued
+3,185
+3,185
+- Debt securities issued
+4,239
+4,239
+48,476
+- Others
+118
+118
+11,927
+3,303
+15,230
+Derivative financial liabilities
+Total
+21,857
+21,857
+23,252
+Subtotal
+3,400
+other financial institutions
+Interest rate derivatives
+IX Financial Statements
+China Merchants Bank
+771,367 771,367
+Gross loan commitments
+5,266
+55,073
+368,487
+1,012,542
+647,040
+863,521
+Annual Report 2018
+5,756,598 5,908,149 2,956,220
+5,148
+1,244
+8,824
+14,013
+8,490
+38,696
+42,868
+116,847 119,283
+Other liabilities
+37,384
+Total
+79,597
+61. Risk management (continued)
+Operational risk
+(f) Use of derivatives
+The Group adopts the scenario simulation and stress testing methods to forecast, plans and manages its capital
+adequacy ratio with considerations of factors such as strategic development planning, business expansion status,
+and risk movement trends.
+The Group's capital management focuses on the capital adequacy ratio management. The capital adequacy
+ratio reflects the Group's capability of sound operations and risk resisting. The Group's capital adequacy ratio
+management's objective is to carefully determine capital adequacy ratio, as legally required by regulators, according
+to actual risk profiles and with reference to capital adequacy ratio levels of globally leading market peers and the
+Group's operating conditions.
+Since 1 January 2013, the Group has calculated its capital adequacy ratio in accordance with the CBIRC's
+Administrative Measures on the Capital of Commercial Banks (Trial) and other relevant regulations. On 18 April 2014,
+the CBIRC approved the Bank to adopt the advanced capital management approach. Within the scope of approval
+of the CBIRC, the Bank could calculate corporation and financial institutions risk exposure using the primary internal
+rating-based approach, retail risk exposure using the internal rating-based approach, market risk using the internal
+model approach, and operational risk using the standardised approach. At the same time, the CBIRC implemented
+a transition period for commercial banks approved to use the advanced approach to calculate capital. During the
+transition period, the commercial banks should use both the advanced approach and other approaches to calculate
+capital adequacy ratios, and comply with minimum capital requirements. During the period, the Group has complied
+with the capital requirement set by the regulators.
+(e) Capital management (continued)
+61. Risk management (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+262
+(d)
+261
+The Group manages its capital structure and adjust it based on the economic condition and the risk characteristics
+of its operations. To maintain or adjust its capital structure, the Group may modify its profit distribution policy,
+issue or repurchase shares, additional tier-1 capital instruments, eligible tier-2 capital instruments, and convertible
+debentures. The Group's management regularly monitors capital adequacy ratio under an approach regulated by
+CBIRC. The Group and the Bank file required information to CBIRC half-yearly and quarterly.
+Reasonably use all kinds of capital instruments, continue to upgrade capital strengths, improve capital
+structures, raise capital quality, lower capital costs, and create the best returns to shareholders.
+Put in place an economic capital-centred banking value management system by fully applying various
+risk-specific quantitative deliverables, enhance decision-making processes and management application
+regimes, strengthen capital restraint and capital incentive mechanisms, reinforce capabilities to facilitate client
+pricing and decision-making, and increase capital deployment efficiency; and
+Comply with capital regulatory requirements, perform procedures to assess internal capital adequacy, openly
+disclose information related to capital management, fully cover all risks and ensure safe operation of the
+entire group;
+Keep capital adequacy ratios at reasonable levels, satisfy capital-specific regulatory provisions and policy
+requirements on an ongoing basis, and maintain a solid capital base in support of its business expansion and
+strategic planning implementation for comprehensive and coordinated and sustainable growth;
+The objectives of the Group's capital management are to:
+(e) Capital management
+In face of challenges from internal and external operations and management, the Group will, based on its risk
+preference, continue to upgrade its risk management skills, strengthen operational risk monitoring and controls, as
+well as endeavour to prevent and reduce operational risk losses.
+During the reporting period, through the strengthening of operational risk appraisal and assessment mechanisms,
+stepping up the identification, evaluation and monitoring of operational risk in key areas, the Group carried out a
+comprehensive special management of low-risk business. Starting with process, institution, employee and system, the
+Group focused on the existing problems of critical control segment, and measured these problems by management
+requirement's solidification and refinement. Meanwhile, further improvement on operational risk management
+framework and methods, developing operational risk assessment mechanism and strengthening operational risk
+management economic capital allocation mechanism can enhance the ability and effectiveness of operational risk's
+management in the Group. Now all major indexes can meet the requirements of the Group's risk preference.
+Operational risk arises from the direct and indirect loss due to technique, procedure, infrastructure and staff
+deficiency, as well as other risks which have effect on operation, which includes legal risk. But the strategic risk and
+reputation risk are not included.
+The Group's capital adequacy ratio calculation covers the Bank and its subsidiaries. The Bank's capital adequacy ratio
+calculation covers the Bank's all branches. As at 31 December 2018, the Group's subsidiaries that were within the
+scope of consolidated statements in respect of the capital adequacy ratio included: WLB, CMBICHC, CMBFLC and
+CMFM, etc.
+Derivatives include forward, swap and option transactions undertaken by the Group in the foreign exchange and
+interest rate markets.
+62,025
+49,027
+Deposits from customers
+1,265,833
+1,252,310
+Amounts due to banks and
+Non-derivative financial liabilities
+570,585
+1,603,878
+1,839,188
+1,560,176
+411,211
+4,064,345
+938,597
+6,153,979 7,074,112
+Total
+19,519
+505
+1,292
+2,793
+3,048
+18,040
+15,299
+60,496
+150,477
+92,948
+4,175,394
+403,939 185,110
+320,981
+296,477
+Debt securities issued
+118
+388
+3,237
+8,464
+3,697
+3,939
+6,815
+296,594
+2,609,943
+26,658
+through profit or loss
+Financial liabilities at fair value
+6,878
+252,097
+581,761
+356,795
+367,920
+9,179
+24,732
+346,279
+26,619
+60,496
+The Group enters into interest rate, currency and other financial derivative transactions for treasury business and its
+assets and liabilities management purpose. The Group's derivative financial instruments can be divided into trading
+derivative financial instruments, cash flow hedge financial instruments and derivative financial instruments managed
+in conjunction with financial instruments designated at fair value through profit or loss.
+The Group is exposed to foreign exchange risk when assets or liabilities denominated in foreign currencies. Such risk
+can be offset through the use of forward foreign exchange contracts or foreign exchange option contracts.
+69
+303
+11
+171
+121
+Commodity trading
+(169)
+57,086
+55,926
+1,160
+(69)
+Equity options written
+57,086
+55,926
+1,160
+Equity options purchased
+Other derivatives
+(21,321)
+17,618
+11,172
+15,292
+886,259
+169
+690,344
+Credit default swap
+137
+Interest rate swaps
+52
+Interest rate swaps
+Interest rate derivatives
+Cash flow hedge derivatives
+(437)
+440
+116,624
+112,343
+1,359
+570
+2,922
+(198)
+198
+1,442
+343
+618
+481
+Bond Forwards
+(1)
+4
+707
+Subtotal
+The Group will choose appropriate hedging strategies and tools in light of the risk profile of interest rates or
+exchange rates of its assets and liabilities, as well as its analyses and judgement regarding future interest rates or
+exchange rate movements.
+Subtotal
+2,766
+636,827 1,804,827
+Interest rate swaps
+Liabilities
+Assets
+Total
+More than
+5 years
+Between
+1 year
+and 5 years
+Between
+3 months
+and 1 year
+Within
+3 months
+Fair value
+1,922,312
+Notional amounts with remaining life of
+Interest rate derivatives
+Derivatives at fair value
+through profit or loss
+Use of derivatives (continued)
+(f)
+61. Risk management (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+The following tables provide an analysis of the notional amounts and the corresponding fair value of derivatives of
+the Group by residual maturity at the end of the reporting period. The notional amounts of the derivatives indicate
+the transaction volume that has not been delivered at the end of the reporting period, not representing amounts at
+risk.
+In cash flow hedge, the Group uses interest rate swaps as hedging instruments to hedge the interest cash flows
+arising from the RMB loans and interbank assets portfolios.
+2018
+(7,903)
+3,323
+15,929
+444,355
+5,377
+253,869
+185,109
+Options
+(12,551)
+13,748
+1,064,084
+9,767
+604,153
+4,367,289
+450,164
+(867)
+1,104
+94,628
+11,172
+148
+28,237
+55,071
+Forwards
+Currency derivatives
+(14,748)
+Foreign exchange swaps
+Other assets
+1,603,067
+49,555
+Notional amounts with remaining life of
+Derivatives held for trading
+Fair value
+Within
+3 months
+Between
+3 months
+and 1 year
+Between
+1 year and
+5 years
+More than
+5 years
+Total
+2017
+Assets
+Interest rate derivatives
+Interest rate swaps
+309,254
+1,254,997
+487,858
+5,682
+2,057,791
+2,197
+(1,808)
+Currency derivatives
+Liabilities
+Forwards
+(f) Use of derivatives (continued)
+Annual Report 2018
+629
+Currency derivatives
+Foreign exchange swaps
+2,164
+618
+2,782
+12
+Subtotal
+624
+2,899
+61. Risk management (continued)
+5,325
+115
+(62)
+Total
+34,220
+(36,570)
+There was no ineffective portion of cash flow hedge during the year ended 31 December 2018 and 2017.
+263
+264
+China Merchants Bank
+IX Financial Statements
+8,848
+(62)
+47,939
+6,273
+Other derivatives
+Equity options purchased
+5
+301
+54,092
+54,398
+322
+Equity options written
+143
+294
+(19,524)
+54,092
+(323)
+Subtotal
+148
+595
+108,184
+108,927
+322
+(323)
+Cash flow hedge derivatives
+1,368
+54,529
+24,254
+16,124
+23,598
+3,594
+82,060
+1,452
+(1,595)
+Foreign exchange swaps
+372,129
+460,552
+15,532
+58
+848,271
+3,652
+12,438
+Options
+149,618
+185,538
+1,793
+336,949
+2,234
+(3,926)
+Subtotal
+569,686
+670,344
+(14,003)
+103
+1,267,280
+4,707
+16,741
+35,379
+10,209
+2,363
+64,796 71,187
+through profit or loss
+- Financial assets at fair value
+Investments
+6,689
+1,185,940
+1,307
+2,221
+106,161
+1,123,118 1,127,013
+298,493
+371,155
+6,822
+3,414,612 4,119,230
+Loans and advances to customers
+34,503
+300,198
+43,932
+489,042
+2,027
+484,096
+5,188
+383,101
+133,974
+170,282
+35,113
+6,066
+217,399
+607,691
+572,241
+as receivables
+- Debt securities classified
+255,456
+- Available-for-sale financial assets
+366,084
+9,825
+5,176
+558,218
+- Held-to-maturity investments
+3,613
+111,115
+192,057
+20,020 76,330
+24,266
+427,401
+46,113
+other financial institutions
+682,646
+531,995
+After
+2017
+(c) Liquidity risk (continued)
+61. Risk management (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+260
+2,103
+6,864
+339
+9,358
+118
+Derivatives managed in
+conjunction with financial
+instruments designated
+at fair value through
+profit or loss
+Amounts due from banks and
+735
+624
+Interest rate derivatives
+Interest rate swaps
+1 month
+3 months
+(2)
+5 years
+After
+616,419
+84,424
+Non-derivative financial assets
+Indefinite
+Cash and balances with central bank
+5 years
+1 year
+3 months
+1 month
+on demand
+616,419
+After
+Total
+Carrying
+Within
+but within
+Repayable
+but within
+After
+amount
+but within
+1 year
+46,191
+Level 1
+46,191
+45,714
+Subordinated notes issued
+Level 3
+Level 2
+542,664
+Carrying
+amount
+2018
+Financial liabilities mainly include deposits from customers, amounts due to banks and other financial
+institutions, sold under repurchase agreements, and debts securities issued by the Group. The carrying value
+of financial liabilities approximate their fair value at the end of the reporting period of the year presented,
+except the financial liabilities set out below:
+Financial Liabilities
+(2)
+2,967 539,697
+Fair value
+Long-term debt securities issued
+Carrying
+104,483
+33,945
+558,218
+33,945
+33,977
+Subordinated notes issued
+Level 3
+Level 2
+Level 1
+Fair value
+amount
+2017
+150,903
+150,903
+150,197
+104,712
+104,712
+63,376
+Long-term debt securities issued
+Total
+N/A
+amount
+N/A
+2017
+2018
+The fair value measurements for Level 1 are based on quoted price in active market, for example, released
+by Bloomberg. For Level 2, the latest valuation results released by China bond pricing system are used to
+measure fair value of bonds denominated in RMB. The Level 2 category also includes foreign currency bonds
+without active quoted price, which are measured by Bloomberg comprehensive valuation. The Level 3 adopts
+expected cash flow valuation technique to measure fair value.
+The carrying value, fair value and fair value hierarchy of held-to-maturity investments not measured or
+disclosed at fair value are listed as below :
+Debt investments at amortised cost are stated at amortised costs less impairment, and the fair value of listed
+debt securities classified as held-to-maturity investments are disclosed in Note 24(b) and 24(f).
+Except for loans and advances and held-to-maturity investments, most of the financial assets will mature
+within 1 year, and their carrying value approximate their fair value. Loans and advances are stated at
+amortised costs less allowances for impairment loss (Note 22). Loans and advances are mostly priced at
+floating rates close to the PBOC rates and repriced at market rates at least annually, and impairment
+allowance is made to reduce the carrying amount of impaired loans to estimate the recoverable amount.
+Accordingly, the carrying value of loans and advances is close to the fair value.
+The Group's financial assets that are not measured at fair value mainly include cash, balances with central
+banks, balances and placements with banks and other financial institutions, amounts held under resale
+agreements, loans and advances to customers and investments.
+Financial Assets
+(1)
+Financial assets and financial liabilities that are not measured at fair value
+(iii)
+Fair value information (continued)
+(g)
+61. Risk management (continued)
+63,224
+Annual Report 2018
+IX Financial Statements
+Carrying
+N/A
+Debt investments at amortised cost
+Fair
+value Level 1
+925,363 4,777 663,110
+N/A
+N/A
+Held-to-maturity investments
+N/A
+N/A
+N/A
+N/A
+N/A
+257,476
+Level 2 Level 3
+Level 1
+value
+amount
+Level 3
+Level 2
+Fair
+Carrying
+903,268
+63,224
+RMB600 million 1,258,542,349 4.99%
+97,353
+RMB600 million 944,013,171
+Shenzhen
+Shenzhen Chu Yuan
+marketing business, etc.
+materials supply and
+Co., Ltd.
+domestic commerce,
+3.74%
+Investment Development
+Limited company
+Shareholder
+Invest and set up industries,
+Shenzhen
+Shenzhen Yan Qing
+shareholder
+Li Jianhong
+Xu Xin
+Limited company
+Invest and set up industries,
+Limited company
+Investment Holdings
+Co., Ltd.
+China Merchants Bank
+Hong Xiaoyuan
+Limited company
+Shareholder
+Invest and set up industries,
+4.55%
+Shareholder
+RMB600 million 1,147,377,415
+China Merchants Finance
+marketing business, etc.
+materials supply and
+Development Co., Ltd.
+domestic commerce,
+Investment and
+Xu Xin
+Shenzhen
+The largest
+Transportation, building and
+repair, procurement, supply
+chain management and
+distribution, shipping agency
+services, etc.
+RMB7,000 million 3,289,470,337 13.04% (note
+The
+Company
+of the
+Proportion
+Proportion
+of the
+Bank held
+the Bank
+Shares of
+Company name
+No. of
+Material connected person information
+(a)
+62. Material related-party transactions
+IX Financial Statements
+China Merchants Bank
+Annual Report 2018
+97,169
+97,169
+The Bank's main shareholders and its parent company and the Bank's subsidiaries.
+Registered
+location
+China Merchants Group (CMG) Beijing
+Issued and
+fully paid capital
+RMB16,700 million
+Beijing
+China Merchants Steam
+Navigation Co., Ltd.
+(CMSNCL)
+Legal
+representative
+Li Jianhong
+with the Bank
+The largest
+Legal form
+Limited company
+parent company
+shareholder's
+building and facility, repair and
+contracting, sales operating
+management service, etc.
+warehousing and storage,
+leasing, manufacturing
+(i)(viii))
+Transportation, shipping agency,
+the Bank Business
+Company Company
+7,559,427,375 29.97% (note
+relationship
+held by
+by the
+held by the
+Total
+272
+N/A
+During the year ended 31 December 2018, the Group has not changed the valuation technique of the
+above financial assets which are measured at fair value on an on-going basis.
+86
+8རྗ
+31,732
+388
+3,457
+Purchases
+26
+N/A
+- In other comprehensive income
+N/A
+376
+- In profit or loss
+Profit or loss
+19,460
+2,380
+14,909
+381
+112
+101
+35,678
+3,634
+At 31 December 2018
+(317)
+N/A
+(27)
+10
+(300)
+Exchange difference
+(28,332)
+N/A
+(25,983)
+(2,349)
+Disposals or settlement on maturity
+279
+N/A
+279
+Transfer to Level 3
+2,171
+403
+At 1 January 2018
+(2,166)
+Financial
+assets at fair
+value through
+The following table shows a reconciliation from the beginning balances to the ending balances for fair
+value measurements in Level 3 of the fair value hierarchy:
+Valuation of financial instruments with significant unobservable inputs
+1)
+Valuation techniques used and the qualitative and quantitative information of key parameters for
+recurring fair value measurements categorised within Level 3 Quantitative information of Level 3
+fair value measurement is as below (continued)
+(3)
+Assets and liabilities which are measured at fair value at date of financial position on a recurring basis
+(continued)
+Assets
+(ii)
+(g)
+61. Risk management (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+270
+domestic commerce,
+Fair value information (continued)
+profit or loss
+Loans and
+advances to
+customers
+at FVTPL
+Loans and
+advances to
+2,380
+14,909
+2,171
+Adjustments under IFRS 9
+2,166
+2,166
+At 31 December 2017
+Total
+assets
+at FVTOCI
+at FVTOCI
+financial
+designated
+customers
+for-sale
+Available-
+Equity
+investments
+17,294
+271
+20,684
+N/A
+or loss
+Financial
+liabilities
+at fair value
+through profit
+2)
+Valuation of financial instruments with significant unobservable inputs (continued)
+1)
+Valuation techniques used and the qualitative and quantitative information of key parameters for
+recurring fair value measurements categorised within Level 3 Quantitative information of Level 3
+fair value measurement is as below: (continued)
+(3)
+Liabilities
+(ii) Assets and liabilities which are measured at fair value at date of financial position on a recurring basis
+(continued)
+61. Risk management (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+(4)
+(4)
+statement of profit or loss for
+assets held at the end of the
+reporting period
+(g) Fair value information (continued)
+At 1 January 2018
+In profit or loss
+Issues
+Changes in valuation technique and the reasons for making the changes
+3)
+During the year ended 31 December 2018, there were no significant transfers between different levels
+for financial instruments which are measured at fair value on an on-going basis.
+Transfers between level 1 and level 2 for financial instruments which are measured at fair value on an
+on-going basis, the reasons for these transfers and the policy for determining when transfers between
+level 1 and level 2 are deemed
+Total unrealised gains and losses included in the consolidated statement of
+profit or loss for liabilities held at the end of the reporting period
+At 31 December 2017
+Disposals and settlement on maturity
+Issues
+In profit or loss
+At 1 January 2017
+251
+Total unrealised gains and losses included in the consolidated statement of
+profit or loss for liabilities held at the end of the reporting period
+2,514
+At 31 December 2018
+Disposals and settlement on maturity
+2,263
+251
+included in the consolidated
+2,540
+Total unrealised gains and losses
+Exchange difference
+1,873
+1,873
+Total
+assets
+securities financial assets
+Available- for-
+sale financial
+Derivative
+(4)
+assets-debt
+381
+N/A
+5
+376
+included in the consolidated
+statement of profit or loss for
+assets held at the end of the
+reporting period
+Total unrealised gains and losses
+27,261
+Tradable
+financial
+(4)
+(67)
+(67)
+maturity
+Disposals and settlement on
+Purchases
+- In other comprehensive income
+- In profit or loss
+Profit or loss
+At 1 January 2017
+Assets
+2,166
+2,166
+(68)
+(68)
+(1,186)
+(1,186)
+| | |
+1,618
+1,618
+At 31 December 2017
+materials supply and
+Legal form
+Best Winner Investment
+13.04 4,129,000,000 100.00
+6,000,000,000 100.00 1,160,950,575 100.00
+RMB
+720,500,000 55.00
+%
+At 31 December 2018
+3,289,470,337 13.04
+4,129,000,000 100.00
+6,000,000,000 100.00 1,160,950,575 100.00
+720,500,000
+55.00
+The Bank held by the
+largest shareholder
+The subsidiaries held by the Bank
+CMSNCL
+RMB
+%
+3,289,470,337
+CMBICHC
+HKD
+At 1 January 2018
+Change
+CMFM
+(a)
+Material connected person information (continued)
+The change of proportion of the Bank held by the largest shareholder and the portion of the subsidiaries
+held by the Bank
+(b)
+The Bank held by the
+largest shareholder
+The subsidiaries held by the Bank
+CMSNCL
+RMB
+%
+CMBICHC
+HKD
+CMBFLC
+%
+RMB
+%
+WLB
+HKD
+%
+CMBFLC
+WLB
+CMFM
+55.00
+Transaction terms and conditions
+In each year, the Group entered into transactions with related parties in the ordinary course of its banking business
+including lending, investment, deposit, securities trading, agency services, trust services, and off-balance sheet
+transactions. The opinion of the directors is that the Group's material related-party transactions were all entered into
+normal commercial terms. The banking transactions were priced at the market rates at each time of transaction.
+Interest rates on loans and deposits are required to be set in accordance with the following benchmark rates set by
+the PBOC:
+Short-term loans
+2018
+4.35%
+2017
+4.35%
+Medium to long-term loans
+Demand deposits
+Time deposits
+4.75% to 4.90%
+0.35%
+1.10% to 2.75%
+4.75% to 4.90%
+0.35%
+1.10% to 2.75%
+There were no credit impaired loans and advances granted to related parties during the year.
+277
+278
+China Merchants Bank
+115,500,000
+605,000,000
+720,500,000 55.00
+100.00
+1,160,950,575
+3,289,470,337 13.04 4,129,000,000 100.00 6,000,000,000 100.00
+%
+RMB
+%
+HKD
+%
+RMB
+%
+62. Material related-party transactions (continued)
+At 1 January 2017
+Change
+13.04 4,129,000,000
+100.00
+6,000,000,000
+100.00
+1,160,950,575
+100.00
+At 31 December 2017
+3,289,470,337
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+RMB37,000,000,000
+RMB37,000,000,000
+Hexie Health Insurance Co.,Ltd
+RMB13,900,000,000
+RMB8,900,000,000
+Anbang Life Insurance Co.,Ltd
+RMB30,790,000,000
+RMB30,790,000,000
+China COSCO Shipping Corporation Limited.
+RMB11,000,000,000
+RMB11,000,000,000
+China Ocean Shipping Co., Ltd.
+RMB16,191,351,300
+RMB16,191,351,300
+China COSCO Shipping (Guangzhou) Co., Ltd.
+Anbang Property & Casualty Insurance Co., Ltd.
+RMB61,900,000,000
+RMB61,900,000,000
+Anbang Insurance Group Co., Ltd
+RMB600,000,000
+Development Company Ltd.
+RMB600,000,000
+RMB600,000,000
+China Merchants Finance Investment Holdings Co., Ltd.
+RMB600,000,000
+RMB600,000,000
+Guangzhou Haining Maritime Technology Service Co., Ltd.
+Best Winner Investment Ltd.
+USD50,000
+USD60,000
+USD50,000
+China Merchants Industry Development
+(Shenzhen) Co., Ltd.
+USD10,000,000
+USD60,000
+USD10,000,000
+China Merchants Union (BVI)Ltd.
+IX Financial Statements
+China COSCO Shipping (Shanghai) Co., Ltd.
+RMB3,191,200,000
+Hebei Port Group Co., Ltd.
+RMB8,000,000,000
+RMB8,000,000,000
+CMBICHC
+CMBFLC
+WLB
+CMFM
+HKD4,129,000,000
+HKD4,129,000,000
+RMB6,000,000,000
+RMB6,000,000,000
+HKD1,160,950,575
+HKD1,160,950,575
+RMB1,310,000,000
+RMB1,310,000,000
+RMB11,683,461,365
+RMB11,683,461,365
+RMB21,599,175,737
+RMB21,599,175,737
+RMB2,000,000
+RMB2,000,000
+RMB1,398,941,000
+RMB3,191,200,000
+China COSCO Shipping Financial Holdings Co., Ltd.
+HKD500,000,000
+HKD500,000,000
+RMB1,398,941,000
+Shenzhen Tri-Dynas Oil & Shipping Co., Ltd.
+China Communications Construction Group LTD
+RMB299,020,000
+RMB5,855,423,830
+RMB5,855,423,830
+China Communications Construction Co., Ltd
+RMB16,174,735,425
+RMB16,174,735,425
+Shanghai Automotive Industry Corporation (Group)
+SAIC Motor Corporation Limited
+RMB299,020,000
+RMB600,000,000
+Annual Report 2018
+(c)
+Other shareholders holding more than 5% shares
+2018
+2017
+2,748
+2,665
+1,696
+902
+9,500
+2,700
+8,701
+8,700
+11
+37
+17
+16
+Other net income
+1,123
+Operating expenses
+Interest expense
+22
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+62. Material related-party transactions (continued)
+(e) Associates and joint ventures other than those under Note 62(c) above
+(f)
+On-balance sheet:
+- Loans and advances to customers
+- Deposits from customers
+-
+- Placements
+Off-balance sheet:
+- Irrevocable guarantees
+Interest income
+Net fee and commission income
+928
+10
+11
+5,898
+360
+11
+267
+43
+Interest expense
+971
+274
+Net fee and commission income
+1,360
+905
+Other net income
+55
+13
+279
+16,144
+30
+13,880
+27,601
+200
+1
+2018
+2017
+On-balance sheet:
+- Loans and advances to customers
+- Investments
+- Deposits from customers
+(87)
+Off-balance sheet:
+- Irrevocable letters of credit
+- Bills of acceptances
+- Factoring
+Interest income
+22,306
+5,848
+934
+- Irrevocable guarantees
+Other net income
+(1,178)
+(1,436)
+4,526
+5,109
+59,156
+53,686
+1,868
+1,489
+434
+91
+146
+36
+161
+718
+707
+728
+758
+11,122
+12,151
+Other net income
+Operating expenses
+Shareholders and their related companies
+The Bank's largest shareholder CMG holds 29.97% (2017: 29.97%) shares of the Bank through its subsidiaries as at
+31 December 2018 (among them 13.04% shares is held by CMSNCL (2017: 13.04%)). The Group's transactions and
+balances with CMSNCL and its related companies are disclosed as follows:
+2018
+2017
+On-balance sheet:
+- Loans and advances to customers
+- Investments
+398
+- Deposits from customers
+- Irrevocable guarantees
+- Irrevocable letters of credit
+- Bills of acceptances
+- Factoring
+Interest income
+Interest expense
+Net fee and commission income
+Off-balance sheet:
+62. Material related-party transactions (continued)
+404
+(31)
+97
+- Bills of acceptances
+2,056
+- Factoring
+1,628
+Interest income
+672
+536
+Interest expense
+470
+634
+Net fee and commission income
+562
+700
+Operating expenses
+673
+5,017
+25,327
+32,269
+3
+34
+(d) Companies controlled by or be significantly influenced by or appointed
+common directors, senior management and/or Supervisors of the Bank other
+than those under Note 62(c) above
+On-balance sheet:
+- Loans and advances to customers
+- Investments
+- Deposits from customers
+(47)
+Off-balance sheet:
+- Irrevocable letters of credit
+2018
+2017
+13,489
+6,955
+3,549
+1,063
+- Irrevocable guarantees
+marketing business, etc.
+Shenzhen Yan Qing Investment Development Co., Ltd.
+Shenzhen Chu Yuan Investment and
+RMB7,000,000,000
+9.97%
+(note(iv))
+import and export of goods
+and technology, etc.
+International shipping business, Shareholder's
+parent
+company
+Limited company
+Xu Lirong
+China Ocean Shipping
+Co., Ltd.
+Beijing
+RMB16,191 1,574,729,111
+million
+6.24%
+Transportation business,
+Shareholder
+Limited company
+Xu Lirong
+RMB11,000 2,515,193,034
+million
+shipping space booking,
+Beijing
+government, etc.
+accident insurance, and
+company
+other personal insurance
+services, etc.
+Hexie Health Insurance Chengdu
+Co.,Ltd
+RMB13,900 1,258,949,171
+million
+4.99%
+Various RMB and foreign
+currency health insurance
+business, accidental
+injury insurance business,
+supporting the national
+medical security policy,
+Shareholder
+Joint stock limited
+company
+Gu Hongmei
+and health insurance
+business entrusted by the
+China COSCO Shipping
+Corporation Limited.
+time charter, voyage charter,
+leasing, constructing and
+trading ships, etc.
+75,617,340
+0.30%
+Shipping business, leasing
+business, ship repairing and
+building etc.
+Shareholder
+Limited company
+Zhao Bangtao
+China COSCO Shipping
+Hong Kong
+HKD500 million
+54,721,930 0.22%
+Leasing business, financing
+Shareholder
+Limited company
+Financial Holdings
+business, insurance business
+RMB1,399 million
+Shanghai
+China COSCO Shipping
+(Shanghai) Co., Ltd.
+Co., Ltd.
+China COSCO Shipping
+(Guangzhou) Co., Ltd.
+Guangzhou
+RMB3.191 million 696,450,214
+2.76%
+Shipping business
+Shareholder
+Limited company
+He Xiaofeng
+Shou Jian
+RMB2 million
+103,552,616
+0.41%
+Business services
+Shareholder
+Limited company
+Huang Biao
+Guangzhou Haining Maritime Guangzhou
+Technology Service
+Joint stock limited
+Life insurance, health insurance, Shareholder
+4.99%
+Anbang Insurance Group Beijing
+Co., Ltd
+RMB61,900 million 2,934,094,716
+11.63%
+(note (iii))
+Investing and establishing
+insurance companies,
+supervising and managing
+Shareholder's parent Joint stock limited
+company
+company
+He Xiaofeng
+various domestic and
+international businesses of
+holding investment enterprises,
+and investment business
+permitted by national laws and
+regulations, etc.
+273
+274
+China Merchants Bank
+enterprise management
+consulting and investment
+consulting, etc.
+Wang Xiaoding
+Limited company
+Shareholder
+Co., Ltd.
+British Virgin
+Islands
+USD0.05 million 386,924,063
+1.53%
+Shareholder
+Joint stock limited
+company
+China Merchants Union (BVI) British Virgin
+Limited
+Islands
+IX Financial Statements
+USD0.06 million 477,903,500
+Shareholder
+Limited company
+China Merchants Industry
+Development (Shenzhen)
+Limited
+Shenzhen
+USD10 million 55,196,540
+0.22%
+Invest and set up industries,
+1.89%
+etc.
+Annual Report 2018
+(a) Material connected person information (continued)
+RMB37,000
+million
+416,196,445
+1.65%
+Property damage insurance,
+Shareholder
+liability insurance, credit
+Joint stock limited
+company
+insurance and guarantee
+Legal
+representative
+He Xiaofeng
+insurance, short-term health
+insurance and accident
+insurance, etc.
+Anbang Life Insurance
+Co.,Ltd
+Beijing
+RMB30,790 1,258,949,100
+million
+Insurance Co., Ltd.
+Anbang Property & Casualty Shenzhen
+with the Bank
+Business
+No. of
+Shares of
+the Bank
+Proportion
+of the
+Bank held
+Proportion
+of the
+Company
+Company name
+62. Material related-party transactions (continued)
+Registered
+location
+held by the
+by the
+held by
+The
+relationship
+Company
+Company
+the Bank
+Issued and
+fully paid capital
+RMB5,900,000,000
+Co., Ltd.
+IX Financial Statements
+CMB Financial Leasing
+Shanghai
+RMB6,000 million
+100% Finance lease
+Subsidiary
+Limited company
+Shi Shunhua
+Company Limited
+(CMBFLC)
+CMB Wing Lung Bank
+Hong Kong
+HKD1,161 million
+100% Banking
+Subsidiary
+Limited company
+Tian Huiyu
+Limited (CMBICHC)
+Limited (WLB)
+Holdings Corporation
+Limited company
+and exports
+Hebei Port Group Co., Ltd. Qin Huangdao RMB8,000 million 305,434,127
+1.21%
+(note(v))
+Port construction and
+investment management,
+Shareholder
+Limited company
+Cao Ziyu
+port leasing and
+maintenance business,
+handling and warehousing
+business etc.
+CMB International Capital Hong Kong
+HKD4,129 million
+100% Financial advisory services
+Subsidiary
+Tian Huiyu
+China Merchants Fund
+Shenzhen
+RMB1,310 million
+China COSCO Shipping Corporation Ltd. holds 9.97% of the Bank (2017: 9.97%) through its subsidiaries.
+(v)
+Hebei Port Group Company Ltd. directly holds 1.21% of the Bank (2017: 1.21%).
+(vi)
+(vii)
+(viii)
+China Communications Construction Group LTD ("China Communications Construction Group") holds 2.27% of the bank through its
+subsidiaries (2017: 2.27%).
+Shanghai Automotive Industry Corporation (Group) ("Shanghai Automotive Industry Group") holds 1.23% of the bank through its subsidiary
+(SAIC Motor Corporation Limited) (2017 1.71%).
+The sum of the direct ratio of CMG's shareholdings in the Bank and the above-mentioned relevant numbers may differ slightly in the mantissa
+due to rounding.
+The information of registered capital of the related parties as at 31 December 2018 and 2017 is as below:
+Name of related party
+2018
+CMG
+CMSNCL
+RMB 16,700,000,000
+2017
+RMB13,750,000,000
+(iv)
+As the largest shareholder, CMSNCL who is the subsidiary of CMG, holds 13.04% of the Bank as at 31 December 2018 (2017: 13.04%).
+Anbang Insurance Group Company Ltd. ("AIGC") holds 11.63% of the Bank (2017:11.63%) through its subsidiary.
+(iii)
+(ii)
+55% Asset Management
+Subsidiary
+Limited company
+Li Hao
+Management Co., Ltd.
+(CMFM)
+275
+276
+company
+China Merchants Bank
+Annual Report 2018
+62. Material related-party transactions (continued)
+(a)
+Material connected person information (continued)
+Notes:
+(i)
+CMG holds 29.97% of the Bank (2017: 29.97%) through its subsidiaries.
+IX Financial Statements
+consulting service, imports
+Chen Hong
+Joint stock limited
+10,121,823
+0.04%
+The
+relationship
+with the Bank
+Ship purchasing and marketing Shareholder
+Legal form
+Limited company
+business, shipping agency,
+leasing business, shipping
+Legal
+representative
+Ren Zhaoping
+business etc.
+China Communications
+Beijing
+RMB5,855 million 571,845,625
+Construction Group LTD
+2.27%
+(note(vi))
+RMB299 million
+Business
+the Bank
+Company
+62. Material related-party transactions (continued)
+(a) Material connected person information (continued)
+No. of
+Shares of
+the Bank
+Proportion
+of the
+Bank held
+Proportion
+of the
+General contraction for
+Company
+Shenzhen Tri-Dynas Oil &
+Shipping Co., Ltd.
+Registered
+location
+Shenzhen
+Issued and
+fully paid capital
+held by the
+by the
+held by
+Company
+Company name
+China Merchants Bank
+Annual Report 2018
+Shareholder's
+Liu Qitao
+1.23%
+(note(vii))
+Production and sale of vehicles, Shareholder's
+Limited company
+Chen Hong
+asset management business,
+parent
+domestic trade business,
+company
+consulting service
+SAIC Motor Corporation
+Limited
+Shanghai
+RMB11,683
+million
+310,125,822
+1.23%
+Production and sale of vehicles, Shareholder
+310,125,822
+RMB21,599
+million
+Shanghai Automotive Industry Shanghai
+Corporation (Group)
+business
+construction
+parent
+company
+China Communications
+Beijing
+Construction Co., Ltd
+RMB16,175
+million
+Limited company
+450,164,945
+General contraction for
+construction, leasing and
+Shareholder
+Joint stock limited
+company
+Liu Qitao
+repair, technical consulting
+service, imports and exports,
+investment and management
+1.78%
+5
+280
+reverse repurchase agreements and
+553,084
+78,093
+21,100
+453,891
+576,049
+77,376
+34,567
+464,106
+569,876
+Forward written
+Spot liabilities
+Non-structural position
+Spot assets
+(in millions of RMB)
+Total
+Others
+HKD
+USD
+2018
+Forward purchased
+15,866
+96,770
+682,512
+2017
+40,794
+547
+32,039
+8,208
+Net structural position
+31,655
+(2,292)
+11,219
+22,728
+(4,299)
+511
+(107)
+(4,703)
+Net option position
+669,524
+98,857
+18,007
+552,660
+(D) Currency concentrations other than RMB
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+Other cash inflows
+611,834
+868,522
+617,257
+902,066
+Cash inflows from fully honoured payments
+175,291
+175,291
+241,902
+241,925
+securities borrowed)
+Secured lending transactions (including
+Cash inflows
+1,424,424
+1,678,144
+Total cash outflows
+18,562
+2,668,869
+76,864
+303,041
+USD
+302,573
+51,686
+288
+287
+101.90%
+144.41%
+585,613
+516,412
+596,666
+745,738
+LCR is calculated based on the arithmetic mean of the item as at the end of each month for the latest quarter during the reporting period.
+(i)
+Note:
+LCR (%))
+TOTAL NET CASH OUTFLOWS
+TOTAL HQLA
+Adjusted value
+Adjusted value
+838,811
+1,161,732
+Total cash inflows
+53,418
+4,376,071
+HKD
+Total
+49,092
+Asia Pacific excluding Mainland China
+178,022
+60,589
+5,976
+111,457
+Mainland China
+Foreign currencies transactions in
+22,016
+Total
+entities
+institutions
+sector
+financial
+Public
+Banks
+and other
+2018
+International claims have been disclosed by different countries or geographical areas. A country or geographical
+area is reported where it constitutes 10% or more of the aggregate amount of international claims, after taking
+into account any risk transfers. Risk is transferred only when the claims are guaranteed by a party in country which
+is different from that of the counterparty or if the claims are on an overseas branch of a bank whose head office is
+located in another country.
+Others
+162,613
+233,721
+- of which attributed to Hong Kong
+567,837
+298,231
+47,131
+222,475
+Total
+120,026
+57,912
+18,407
+43,707
+North and South America
+36,068
+17,117
+732
+18,219
+Europe
+190,785
+143,855
+20,720
+26,210
+International claims include loans and advances, balances and placements with banks and other financial institutions,
+holdings of trade bills, certificates of deposit and securities investment.
+The Group is principally engaged in business operations within Mainland China, and regards all claims on third
+parties outside Mainland China and claims in foreign currencies on third parties within the Mainland China as
+international claims.
+(E) International claims
+IX Financial Statements
+414,026
+Forward written
+560,670
+60,313
+16,083
+484,274
+Forward purchased
+561,283
+59,902
+37,867
+463,514
+Spot liabilities
+547,760
+75,178
+55,164
+417,418
+Spot assets
+Non-structural position
+(in millions of RMB)
+23,742
+Others
+74,085
+Net option position
+China Merchants Bank
+Annual Report 2018
+Investments in subsidiaries.
+Capital and statutory reserves of overseas branches; and
+Investment properties, property and equipment, net of depreciation charges;
+The net option position is calculated using the delta equivalent approach required by the Hong Kong Monetary
+Authority (the "HKMA"). The net structural position of the Group includes the structural positions of the Bank's
+branches substantially involved in foreign exchange. Structural assets and liabilities include:
+40,661
+522
+31,898
+8,241
+30,894
+1,621
+9,447
+19,826
+Net structural position
+Net long position
+(4,399)
+117
+(190)
+(4,326)
+511,853
+2017
+Other contingent funding obligations
+19,230
+with all derivatives transactions
+(net of eligible cash variation margin)
+Replacement cost associated with all derivatives transactions
+6,001,076
+6,480,720
+(excluding derivatives and SFTs)
+Balance of adjusted on-balance sheet assets
+(18,792)
+17,420
+(21,795)
+6,019,868
+6,502,515
+securities financing transactions (SFT))
+On-balance sheet items (excluding derivatives and
+2017
+2018
+Leverage ratio, net tier-1 capital, on-balance sheet and off-balance sheet exposures and other information:
+Leverage ratio (continued)
+Less: Asset amounts deducted in determining Basel III Tier 1 capital
+18,088
+Add-on amounts for potential future exposure associated
+24,590
+Counterparty credit risk exposure for SFT assets
+cash receivables of gross SFT assets
+Less: Netted amounts of cash payables and
+252,550
+199,386
+after adjusting for sale accounting transactions
+Gross SFT assets (with no recognition of netting),
+49,351
+42,964
+Total derivative exposures
+Less: Adjusted effective notional deductions for written credit derivatives
+1,515
+954
+Effective notional amount of written credit derivatives
+Less: Exempted central counterparty leg of client-cleared trade exposures
+Less: Deductions of receivables assets for cash variation margin
+provided in derivatives transactions
+from the balance sheet assets
+Gross-up for derivatives collateral provided where deducted
+29,748
+(B)
+IX Financial Statements
+China Merchants Bank
+Annual Report 2018
+286
+Total consolidated assets as per published financial statements
+Adjustments for investments in banking, financial, insurance or
+commercial entities that are consolidated for accounting purposes
+In accordance with the CBIRC's Administrative Measures on Leverage Ratio of Commercial Banks (Revision) issued in
+2015 and effective on 1 April 2015, the Group's leverage ratio and relevant components were as follows. The basis
+used herein may differ from those adopted in Hong Kong or other countries.
+Summary comparison of accounting assets and leverage ratio exposure measure:
+(B) Leverage ratio
+In 2018, by the method of calculating credit risk using the risk-weighted approach, market risk using the
+standardised approach and operational risk using the basic indicator approach, the Bank's core tier-1 capital
+adequacy ratio is 9.82%, tier-1 capital adequacy ratio is 10.55%, capital adequacy ratio is 12.66%, net capital is
+RMB542,610 million and total risk-weighted assets is RMB4,286,653 million.
+In 2018, by the method of calculating credit risk using the risk-weighted approach, market risk using the
+standardised approach and operational risk using the basic indicator approach, the Group's core tier-1 capital
+adequacy ratio is 10.31%, tier-1 capital adequacy ratio is 11.04%, capital adequacy ratio is 13.06%, net capital is
+RMB611,025 million and total risk-weighted assets is RMB4,677,967 million.
+In 2018, in accordance with the advanced capital management approach approved by CBIRC in April 2014, the Bank
+calculated core tier-1 capital adequacy ratio is 11.39%, tier-1 capital adequacy ratio is 12.25%, capital adequacy
+ratio is 15.52%, net capital is RMB573,466 million and total risk-weighted assets is RMB3,694,893 million.
+(A) Capital adequacy ratio (continued)
+Annual Report 2018
+IX Financial Statements
+China Merchants Bank
+The Group's additional tier-1 capital includes qualifying portion of non-controlling interests, preferred shares and etc.
+(ii) :
+Others represent exchange reserve of foreign currency consolidated financial statements under CBIRC's Administrative Measures on the Capital
+of Commercial Banks (Trial).
+:
+(i)
+Notes:
+3,530,745
+546,534
+641,881
+4,092,890
+but outside the scope of regulatory consolidation
+Agent transaction exposures
+Adjustments for fiduciary assets
+Adjustment for securities financing transactions
+285
+7,309,756
+7,812,054
+Balance of adjusted on-balance sheet and off-balance sheet assets
+(18,792)
+(21,795)
+977,930
+1,054,031
+Other adjustments
+Adjustment for off-balance sheet items
+28,849
+34,953
+30,435
+8,744
+(6,304)
+(9,608)
+2017
+6,297,638
+6,745,729
+2018
+Adjustments for derivative financial instruments
+19,230
+34,953
+Total securities financing transaction exposures
+unsecured funding
+- Liabilities and obligations arising from
+647,894
+1,192,084
+616,297
+1,199,128
+(including all the counterparties)
+- Non-business relations deposits
+15,738
+406,679
+411,011
+1,649,778
+correspondent banks operations)
+- Business relations deposits (excluding
+Unsecured wholesale funding, of which:
+115,443
+1,154,427
+123,463
+1,636,910
+15,738
+63,258
+63,258
+34,114
+34,114
+Other contractual lending obligations
+42,699
+743,527
+49,820
+898,776
+- Committed credit facilities and
+committed liquidity facilities
+- Cash outflows arising from secured debt
+instruments funding
+52,134
+52,145
+318,937
+318,937
+contracts and other transactions arising
+from related collateral requirements
+- Cash outflows arising from derivative
+Additional requirements, of which:
+42,401
+13,954
+- Secured funding
+1,234,633
+- Less stable deposits
+16,124
+322,474
+6.61%
+Leverage ratio
+7,309,756
+7,812,054
+Balance of adjusted on-balance sheet and off-balance sheet assets
+459,782
+516,433
+Net tier-1 capital
+977,930
+1,054,031
+Balance of adjusted off-balance sheet assets
+(776,906)
+(910,508)
+Less: Adjustments for conversion to credit equivalent amounts
+1,754,836
+1,964,539
+Off-balance sheet exposure at gross notional amount
+281,399
+234,339
+6.29%
+28,849
+China Merchants Bank
+Annual Report 2018
+17,946
+358,911
+Stable deposits
+596,666
+745,738
+(Average value)
+(Average value)
+(Average value) (Average value)
+Weighted
+amount
+Unweighted
+amount
+Quarter ended 31 December 2018
+Unweighted
+Weighted
+amount
+amount
+Retail deposits and small business funding,
+of which:
+Cash outflows
+Total high quality liquid assets (HQLA)
+High quality liquid assets
+Quarter ended 31 December 2017
+In accordance with CBIRC's Administrative Measures on Liquidity Coverage Ratio of Commercial Banks effective on
+31 December 2015, the Group's liquidity coverage ratio and relevant components were as follows. The basis used
+herein may differ from those adopted in Hong Kong or other countries. For the quarter ended 31 December 2018,
+the Group's liquidity coverage ratio was as follows:
+(C) Liquidity coverage ratio
+IX Financial Statements
+Banks
+Net long position
+Public
+Debt
+investments
+Maximum
+profit or loss
+cost
+at FVTOCI
+Total
+exposure
+Debt
+investments
+at amortised
+Asset management schemes
+151,481
+247,685
+247,685
+Trust beneficiary rights
+82,457
+82,457
+82,457
+Asset backed securities
+96,204
+value through
+Financial
+assets at fair
+Carrying amount
+64. Transfers of financial assets
+The Group enters into transactions in the normal course of business by which it transfers recognised financial assets
+to third parties or to special purpose vehicles. In some cases where these transfers may give rise to full or partial
+derecognition of the financial assets concerned. In other cases where the transferred assets do not qualify for
+derecognition as the Group has retained substantially all the risks and rewards of these assets, the Group continued
+to recognize the transferred assets.
+Securitisation of credit assets
+The Group enters into securitisation transactions in the normal course of business by which it transfers credit assets
+to special purpose trusts which in turn issue asset-backed securities to investors. Except for those finance leases
+receivable mentioned below, during the year 2018 the Group has transferred the ownership of the loans amounted
+to RMB45,071 million (2017: RMB73,698 million), as well as substantially all the risks and rewards of the loans have
+been transferred, the full amount of such securitised loans were derecognised.
+As the underlying assets, certain finance leases receivable did not meet the criteria of derecognition, the Group did
+not derecognize such finance leases receivable, the consideration received was recognised as financial liabilities.
+As at 31 December 2018, the carrying amount of such transferred but not derecognised finance leases receivable
+amounted to RMB1,415 million (31 December 2017: RMB3,668 million) and correspondently the carrying amount of
+recognised financial liabilities is RMB706 million (31 December 2017: RMB2,439 million).
+Transactions of credit assets
+During the year 2018, the Group has transferred credit assets to third party institutions directly amounted to
+RMB79,544 million (2017: RMB46,338 million); RMB77,607 million of these transferred credit assets are transferred
+to structured entities (2017: RMB45,817 million). The Group carried out an assessment based on the criteria as
+detailed in Note 4(5), and concluded that these transferred assets qualified for full de-recognition.
+Repurchase transactions and securities lending transactions
+Transferred financial assets that do not qualify for derecognition mainly include debt securities, discounted bills
+held by counterparties as collateral under repurchase agreements and debt securities lent to counterparties under
+securities lending agreements. The counterparties are allowed to sell or repledge those securities sold under
+agreements to repurchase in the absence of default by the Group, but has an obligation to return the securities at
+the maturity of the contract. If the securities increase or decrease in value, the Group may in certain circumstances
+require or be required to pay additional cash collateral. The Group has determined that it retains substantially all the
+risks and rewards of these securities and therefore has not derecognised them. In addition, it recognises a financial
+liability for cash received as collateral.
+281
+282
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+65. Interests in unconsolidated structured entities
+(a)
+Interest in the structured entities sponsored by third party institutions
+The Group holds interests in some structured entities sponsored by third party institutions through investments in
+the notes issued by these structured entities. Such structured entities include wealth management products, asset
+management schemes, trust beneficiary rights, assets backed securities and investments in funds, and the Group
+does not consolidate these structured entities. The nature and purpose of these structured entities are to generate
+income from managing assets on behalf of investors and are financed through the issue of notes to investors.
+The following table sets out an analysis of the carrying amounts of interests held by the Group as at 31 December
+2018 and 31 December 2017 in the structured entities sponsored by third party institutions and an analysis of the
+line items in the statement of financial position as at 31 December 2018 and 31 December 2017 in which assets are
+recognised relating to the Group's interests in structured entities sponsored by third parties:
+31 December 2018
+1,469
+855
+1,214
+3,538
+Debt
+securities
+classified as
+Maximum
+receivables
+Total
+exposure
+Asset management schemes
+Asset backed securities
+Investment in funds
+Total
+Wealth management products
+Trust beneficiary rights
+1,048
+1,048
+446,603
+447,651
+447,651
+93,993
+93,993
+Held-to-
+maturity
+investments
+There is no maturity of the instruments and the payments of distribution can be cancelled at the discretion of the
+issuers. Cancelled interest is not cumulative. There is no obligation of contract that deliver the cash payment to
+other parties. WLB declared and paid distributions at 5.2% set on the contract items of perpetual debt capital in
+2018.
+financial
+assets
+agreements
+3,538
+Investment in funds
+16,854
+16,854
+16,854
+Total
+114,527
+234,793
+1,214
+350,534
+350,534
+31 December 2017
+Carrying amount
+Amounts
+Available-
+held under
+Financial
+for-sale
+resale
+assets held
+for trading
+1,158
+(12)
+(64)
+- Deposits from customers
+Off-balance sheet
+- Irrevocable guarantees
+- Bills of acceptances
+Interest income
+Interest expense
+Net fee and commission
+Operating expenses
+Other net income
+All significant balances and transactions between the Bank and its subsidiaries have been eliminated in the
+consolidated financial statements.
+1,036
+2,835
+3,433
+3,256
+573
+91
+699
+413
+800
+7,973
+1,419
+12,859
+1,330
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+62. Material related-party transactions (continued)
+(g) Subsidiaries
+On-balance sheet
+2018
+2017
+- Balances with banks and other financial institutions
+2,545
+1,078
+- Placements with banks and other financial institutions
+25,689
+25,782
+- Loans and advances to customers
+3,237
+2,196
+- Investments
+1,142
+- Deposits from banks and other financial institutions
+93,993
+13
+1
+China Merchants Bank
+Annual Report 2018
+IX Financial Statements
+63. Non-controlling interests
+(a)
+Non-controlling interests represent the interests that the Group does not hold in the subsidiaries. As CMFM's
+net assets and net profit are not material to the Group, there is no subsidiary of the Group which has material
+non-controlling interests during the reporting period.
+Perpetual debt capital
+The perpetual debt capital is issued by the bank's subsidiary, WLB, on 27 April 2017, with the aggregate nominal
+amount is USD170 million as follows:
+At 1 January 2018
+and other
+Paid in 2018
+Exchange difference
+At 31 December 2018
+Principal
+1,170
+Distributions/Paid
+(12)
+1,158
+Total
+1,170
+64
+64
+(64)
+Apart from the obligation for defined contributions to the annuity scheme and normal banking transactions, no
+other transactions were conducted between the Group and the annuity scheme for the years ended 31 December
+2018 and 31 December 2017.
+1,596
+12
+Annuity scheme
+(i)
+16
+(h)
+Key management personnel
+Key management personnel are those persons having authority and responsibility for planning, directing and
+controlling the activities of the Group, directly or indirectly, including directors, Supervisors and executive officers.
+Salaries and other emoluments
+Discretionary bonuses (Note 11(i))
+Share-based payment
+Contributions to defined contribution retirement schemes
+Total
+2018
+RMB'000
+2017
+RMB'000
+51,472
+47,557
+29,444
+46,494
+1,312
+5,543
+82,228
+99,594
+The above share-based payments represent the estimated fair value of the share appreciation rights granted (Note
+40(a)(iii)) to senior management under the Bank's H share Appreciation Rights Scheme. The fair value is measured by
+using the Black-Scholes model and according to the accounting policy set out in Note 4(17); and the amounts have
+been charged to the consolidated statement of profit or loss and other comprehensive income. As the share options
+may expire without being exercised, the directors consider the amounts disclosed are not representative of actual
+cash flows received or to be received by senior management.
+401
+Distributions in 2018
+563
+30,000
+Surplus provision for loans impairment
+82,393
+54,586
+Qualifying portion of non-controlling interests
+2,166
+Total tier-2 capital
+125,448
+86,752
+Regulatory deductions from core tier-2 capital
+Net tier-2 capital
+Net capital
+Total risk-weighted assets
+125,448
+86,752
+43,000
+289
+Qualifying portion of tier-2 capital instruments and their premium
+459,782
+(817)
+Total core tier-1 capital
+504,135
+444,481
+Regulatory deductions from core tier-1 capital
+21,795
+18,792
+Net core tier-1 capital
+482,340
+425,689
+Additional tier-1 capital (note (ii))
+34,093
+34,093
+Net tier-1 capital
+516,433
+Tier-2 capital:
+467,489
+263,272
+49,620
+31,322
+Asia Pacific excluding Mainland China
+179,172
+73,302
+9,758
+96,112
+Mainland China
+Foreign currencies transactions in
+Total
+Others
+entities
+institutions
+sector
+financial
+3,437
+21,051
+35,942
+149,651
+216,915
+- of which attributed to Hong Kong
+154,597
+Total
+47,931
+34,515
+1,863
+11,553
+North and South America
+6,858
+23,471
+2,057
+15,610
+Europe
+196,252
+139,530
+35,912
+20,810
+5,804
+Others (note (i))
+55
+China Merchants Bank
+During year ended 31 December 2018, the amount of fee and commission income received from such category
+of non-principal-guaranteed wealth management products by the Group is RMB8,972 million (2017: RMB14,000
+million).
+During the year ended 31 December 2018, the amount of management fee income received from the unconsolidated
+mutual funds by the Group is RMB1,448 million (2017: RMB1,533 million).
+During the year ended 31 December 2018, the amount of management fee income received from the unconsolidated
+asset management schemes by the Group is RMB762 million (2017: RMB1,027 million).
+The total amount of non-principal-guaranteed wealth management products issued by the Group after 1 January
+2018 with a maturity date before 31 December 2018 was RMB3,008,657 million (2017: RMB3,289,090 million).
+66. Non-adjusting events after the reporting period
+On 11 March 2019, the Bank redeemed its subordinated debt of RMB3,800 million issued on 11 March 2016.
+Up to the date of approval of the financial report, the Group has no other material events that require disclosure in
+or adjustments of the financial report after 31 December 2018.
+67. Comparative figures
+During the year ended 31 December 2018, the Group divided industry sector and category according to the newly
+revised "Industrial Classification for National Economic Activities" (GB/T 4754-2017) standards issued by the
+General Administration of Quality Supervision, Inspection and Quarantine of the People's Republic of China and the
+Standardization Administration of the People's Republic of China in note 22(b) and has restated the corresponding
+comparative figures.
+During the year ended 31 December 2018, the Group reclassified the profit or loss related to precious metal to from
+"investment income" to "Profit (loss) from fair value change" in the note 9, and has restated the corresponding
+comparative figures.
+During the year ended 31 December 2018, funds received from customers under wealth management services
+in note 60(b) are the funds received from customers under unconsolidated non-principal-guaranteed wealth
+management services, and has restated the corresponding comparative figures.
+During the year ended 31 December 2018, the Group reclassified the joint venture Hong Kong Life Insurance Limited
+from assets held for sale under other assets to investment in the joint ventures due to the termination of the sale
+transaction, and has restated the corresponding comparative figures.
+During the year ended 31 December 2018, in note 8, the Group reclassified finance lease fee reclassified from
+"Others" to "Commissions from credit commitment and lending business", reclassified cross-border financing
+business services fee from "Remittance and settlement fees" to "Commissions from credit commitment and lending
+business", reclassified subsidiary fund management fee from "Agency services fees" and "Others" to "Commissions
+on trust and fiduciary activities". The comparative figures has restated respectively.
+283
+284
+208
+As at 31 December 2018, the balance of amounts held under resale agreements and placement with banks and
+other financial institutions between the Group and its non-principal-guaranteed wealth management products,
+which are sponsored by the Group, is RMB87,903 million (31 December 2017: RMB201,641 million) and RMB60,591
+million (31 December 2017: RMB9,013 million) respectively. The above transactions were made in accordance with
+normal business terms and conditions.
+(b) Interest in the unconsolidated structured entities sponsored by the Group
+(continued)
+65. Interests in unconsolidated structured entities (continued)
+Annual Report 2018
+21,452
+21,452
+401
+24,488
+563
+545,023
+571,523
+IX Financial Statements
+571,523
+(b) Interest in the unconsolidated structured entities sponsored by the Group
+The unconsolidated structured entities sponsored by the Group include non-principal- guaranteed wealth
+management products, funds and asset management schemes. The nature and purpose of these structured entities
+are to generate income from managing assets on behalf of investors. These structured entities are financed through
+the issue of investment products to investors. Interest held by the Group includes fees charged on management
+services provided.
+As at 31 December 2018, the amount of the unconsolidated non-principal-guaranteed wealth management
+products, which are sponsored by the Group, is RMB2,052,183 million (31 December 2017: RMB2,177,856 million).
+As at 31 December 2018, the amount of the unconsolidated mutual funds, which are sponsored by the Group, is
+RMB382,772 million (31 December 2017: RMB392,292 million).
+As at 31 December 2018, the amount of the unconsolidated asset management schemes, which are sponsored by
+the Group, is RMB271,239 million (31 December 2017: RMB264,591 million).
+China Merchants Bank
+IX Financial Statements
+The maximum exposures held by the Group in the subordinated tranches of assets backed securities, investments
+in funds, the wealth management products, asset management schemes, trust beneficiary rights, senior tranches of
+assets backed securities are the carrying amount of the assets held by the Group at the reporting date in accordance
+with the line items of these assets recognised in the statement of financial positions.
+8,427
+4,427
+Core tier-1 capital adequacy ratio
+Components of capital base
+Core tier-1 capital:
+2018
+2017
+11.78%
+12.06%
+12.62%
+13.02%
+15.68%
+15.48%
+Qualifying portion of share capital
+25,220
+25,220
+Qualifying portion of capital reserve
+67,149
+63,272
+Surplus reserves
+53,648
+46,131
+Regulatory general reserve
+78,543
+70,907
+Retained profits
+272,510
+239,560
+Qualifying portion of non-controlling interests
+207
+Capital adequacy ratio
+Tier-1 capital adequacy ratio
+8,427
+Annual Report 2018
+The Group's capital adequacy ratio was prepared solely in accordance with the CBIRC's Administrative Measures on
+the Capital of Commercial Banks (Trial) issued in 2012 and effective on 1 January 2013. The bases used herein may
+differ from those adopted in Hong Kong or other countries.
+(A) Capital adequacy ratio
+(Expressed in millions of Renminbi unless otherwise stated)
+Unaudited Supplementary Financial Information
+In accordance with the advanced capital management approach approved by CBIRC in April 2014, the Group
+calculated core tier-1 capital adequacy ratio, tier-1 capital adequacy ratio and capital adequacy ratio as follows:
+61,987
+1.45 3,965,462
+50,329
+1.27
+Interest expense on deposits and placements from banks and other financial institutions
+In 2018, the interest expense of the Group on deposits and placements from banks and other financial institutions
+amounted to RMB23.028 billion, representing a year-on-year decrease of 4.60%, which was primarily due to the
+fact that the Group continued to optimise the liability structure, and the proportion of high cost liabilities was
+maintained at a reasonably controllable level.
+(in millions of RMB, except for percentages)
+In 2018, the interest expense on debt securities issued of the Group amounted to RMB14.530 billion, representing a
+year-on-year increase of 8.14%, which was primarily attributable to the higher cost ratio of debt securities issued.
+In 2018, the Group's net interest income amounted to RMB160.384 billion, representing a year-on-year increase of
+10.72%, or 15.10% after eliminating the impact of implementing the new financial instrument standard.
+The following table sets out the average balances of assets and liabilities, interest income/interest expense, and
+average yield/cost ratio of the Group for the periods indicated. The average balances of interest-earning assets and
+interest-bearing liabilities are the average of the daily balances.
+2018
+Interest expense on debt securities issued
+3.2.5 Net interest income
+0.80
+Total
+10,446
+1.03 1,299,616
+15,180
+1,468,291
+Subtotal
+2.06
+6,846
+331,547
+2.69
+11,771
+Average
+balance
+4,269,523
+2017
+12,641
+Time
+Interest
+income
+0.81 1,483,512
+10,794
+0.73
+Time
+1,242,061
+34,166
+2.75
+1,182,334
+29,089
+2.46
+Subtotal
+438,373
+2,801,232
+1.67
+2,665,846
+39,883
+1.50
+Deposits from retail customers
+Demand
+1,029,918
+3,409
+0.33
+968,069
+3,600
+0.37
+46,807
+Average
+yield (%)
+22
+Interest
+income
+242,005
+4.06
+21
+22
+1,559,171
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+Average
+Average
+Average
+Interest
+cost ratio
+Average
+Interest
+cost ratio
+(in millions of RMB, except for percentages)
+balance
+expense
+(%) balance
+expense
+(%)
+Interest-bearing liabilities
+Deposits from customers
+4,269,523
+61,987
+2.71
+12,426
+2.91 459,129
+4.34 5,966,601
+6,244,967 270,911
+Average
+yield (%)
+Interest-earning assets
+Loans and advances to customers
+3,825,123
+196,370
+5.13
+Investments
+1,278,915
+48,267
+3.77
+Balances with the central bank
+510,760
+Average
+balance
+7,961
+3,508,470
+1,432,408
+566,594
+168,858
+4.81
+52,042
+3.63
+8,679
+1.53
+Balances and placements with banks and
+other financial institutions
+630,169
+18,313
+Total
+1.56
+Demand
+100.00
+(%)
+5.72
+5.81
+Share of profits of associates and
+joint ventures
+0.52
+0.46
+0.15
+0.07
+0.09
+Total
+100.00
+100.00
+100.00
+100.00
+3.2.3 Interest income
+In 2018, the Group recorded an interest income of RMB270.911 billion, representing a year-on-year increase of
+11.94%, or 14.57% after eliminating the impact of implementing the new financial instrument standard, mainly due
+to the increase in interest-earning assets, and increased yield of interest-earning assets brought by the continuous
+optimisation of asset structure as well as improvement in risk pricing. Interest income from loans and advances to
+customers continued to be the biggest component of the interest income of the Group.
+Interest income from loans and advances to customers
+In 2018, the interest income from loans and advances to customers of the Group was RMB196.370 billion,
+representing a year-on-year increase of 16.29%.
+The following table sets forth, for the periods indicated, the average balances, interest income and average yields of
+different types of loans and advances to customers of the Group.
+2018
+2017
+Average
+Interest
+Average
+Average
+6.89
+5.05
+8.16
+Other net income
+1.45
+20
+China Merchants Bank
+III Report of the Board of Directors
+Annual Report 2018
+3.2.2 Net operating income
+In 2018, the net operating income of the Group was RMB248.444 billion, representing an increase of 12.40% as
+compared with the previous year. The net interest income accounted for 64.56% of the net operating income, the
+net non-interest income accounted for 35.44% of the net operating income, representing a year-on-year increase of
+0.97 percentage point.
+The following table sets out the percentages of the components of the net operating income of the Group in the
+recent five years.
+(%)
+2018
+2017
+2016
+Interest
+2015
+Net interest income
+64.56
+65.53
+64.01
+68.01
+70.38
+Net fee and commission income
+26.76
+28.96
+28.95
+26.20
+23.72
+2014
+Average
+(in millions of RMB, except for percentages)
+balance
+168,858
+4.81
+In 2018, from the perspective of the maturity structure of loans and advances to customers of the Company, the
+average balance of short-term loans was RMB1,602.721 billion with the interest income amounting to RMB95.849
+billion, and the average yield reached 5.98%; the average balance of medium-to-long term loans was RMB1,944.671
+billion with the interest income amounting to RMB89.575 billion, and the average yield reached 4.61%. The average
+yield of short-term loans was higher than that of medium-to-long term loans, which was attributable to the higher
+yield of credit card overdrafts and micro-finance loans in short-term loans.
+Interest income from investments
+In 2018, the interest income from investments of the Group was RMB48.267 billion, representing a year-on-year
+decrease of 7.25%, which was mainly attributable to the impact of implementing the new financial instrument
+standard. The accounting measurement of certain financial assets was adjusted to be measured at fair value through
+profit or loss, and the presentation of relevant income was changed from the interest income to the non-interest
+income. The average yield of investments was 3.77%, up by 0.14 percentage point as compared with the previous
+year.
+Interest income from balances and placements with banks and other financial institutions
+In 2018, the interest income of the Group from balances and placements with banks and other financial institutions
+was RMB18.313 billion, representing a year-on-year increase of 47.38%, and the average yield of balances and
+placements with banks and other financial institutions was 2.91%, representing a year-on-year increase of 0.20
+percentage point, which was primarily attributable to the significant improvement in liquidity. The Group moderately
+increased the allocation of assets with banks and other financial institutions, and enhanced the structure of assets to
+improve the yields on placements with banks and other financial institutions.
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+3.2.4 Interest expense
+In 2018, the interest expense of the Group was RMB110.527 billion, representing a year-on-year increase of 13.77%,
+which was primarily attributable to the increase in the scale of interest-bearing liabilities and the rigid increase in the
+cost ratio of liabilities from customers that have pushed up the interest expense of the Group.
+Interest expense on deposits from customers
+3,508,470
+In 2018, the Group's interest expense on deposits from customers was RMB61.987 billion, up by 23.16% as
+compared with the previous year. In addition to various impacts including the increase in the scale of deposits, it was
+also affected by intensified interbank competition and the demand for higher return on deposits from customers,
+resulting in an increase in the cost ratio of deposits.
+2018
+2017
+Average
+Interest
+(in millions of RMB, except for percentages)
+balance
+expense
+Average
+cost ratio
+(%)
+Average
+balance
+Interest
+Average
+cost ratio
+expense
+The following table sets forth, for the periods indicated, the average balances, interest expenses and average cost
+ratios for the deposits from corporate and retail customers of the Group.
+Deposits from corporate customers
+5.13
+2.81
+income
+yield (%)
+balance
+income
+yield (%)
+Corporate loans
+1,743,614
+73,954
+4.24
+1,650,406
+65,864
+3.99
+196,370
+Retail loans
+113,698
+6.03
+1,694,059
+98,386
+5.81
+Discounted bills
+Loans and advances to customers
+195,120
+3,825,123
+8,718
+4.47
+164,005
+4,608
+1,886,389
+3,965,462
+340,151
+1.27
+10.28
+20,806
+1.23
+644
+0.04
+Derivative financial assets
+34,220
+173,988
+2.02
+1.18
+Debt investments at fair value through other
+comprehensive income
+414,691
+24.50
+N/A
+N/A
+18,916
+Equity investments designated at fair value
+- Non-standardised credit asset investments
+- Others(1)
+64,152
+The following table sets forth the components of investment securities and other financial assets of the Group by
+line items.
+31 December 2018
+31 December 2017
+(in millions of RMB, except for percentages)
+Investments at fair value through profit or loss
+- Bond investments
+Amount
+4.00
+Percentage of
+the total (%)
+Percentage of
+the total (%)
+327,643
+19.36
+64,796
+4.04
+132,849
+7.85
+Amount
+The Group's investment securities and other financial assets consist of listed and unlisted financial instruments
+denominated in RMB and foreign currencies.
+through other comprehensive income
+0.24
+N/A
+N/A
+Less: allowances for impairment losses
+(8,080)
+(0.48)
+N/A
+N/A
+0.03
+Available-for-sale financial assets
+N/A
+383,101
+23.91
+Held-to-maturity investments
+N/A
+N/A
+558,218
+N/A
+4,015
+538
+N/A
+N/A
+N/A
+Debt investments at amortised cost
+903,268
+53.36
+N/A
+N/A
+- Others
+- Bond investments
+38.87
+N/A
+N/A
+- Non-standardised credit asset investments
+50,329
+14.94
+N/A
+657,926
+34.84
+3.3.1.2 Investment securities and other financial assets
+III Report of the Board of Directors
+3,565,044
+56.61
+Allowances for impairment losses on loans (1)
+(191,895)
+(2.84)
+(150,432)
+(2.39)
+58.43
+Net loans and advances to customers
+55.59
+3,414,612
+54.22
+Investment securities and other financial assets(2)
+Cash, precious metals and balances with the
+1,714,490
+25.42
+1,602,475
+3,749,949
+25.45
+3,941,844
+Percentage of
+the total (%)
+Expected credit losses of loans and advances to customers were the largest component of expected credit losses. In
+2018, expected credit losses of loans and advances to customers of the Group were RMB59.252 billion, representing
+a year-on-year decrease of 1.33%. For details of the allowances for impairment losses on loans, please refer to the
+section headed "Analysis of Loan Quality" in this chapter.
+25
+26
+China Merchants Bank
+III Report of the Board of Directors
+Annual Report 2018
+3.3 Analysis of balance sheet
+Total loans and advances to customers
+3.3.1 Assets
+To maintain the figures comparable, the financial instruments in section "3.3.1 Assets" were still analysed on the
+statistical calibre excluding interest receivable, except for the table "components of the total assets of the Group",
+in which interest receivable calculated using the effective interest method was included as required by the Ministry
+of Finance.
+The following table sets forth, as at the dates indicated, the components of the total assets of the Group.
+31 December 2018
+31 December 2017
+(in millions of RMB, except for percentages)
+Percentage of
+Amount the total (%)
+Amount
+As at the end of the reporting period, the total assets of the Group amounted to RMB6,745.729 billion, up by 7.12%
+from the end of the previous year, which was mainly attributable to the increase in loans and advances to customers
+and bond investments of the Group.
+Annual Report 2018
+central bank
+7.41
+0.16
+158,359
+2.35
+160,773
+2.54
+6,745,729
+100.00
+9,954
+6,297,638
+Notes: (1) The "allowances for impairment losses on loans" as at the end of the year include the allowances for impairment losses on loans and
+advances to customers measured at amortised cost and the allowances for impairment losses on interest receivable from loans and
+advances to customers measured at amortised cost. The allowances for impairment losses of RMB228 million were not deducted from the
+carrying values of the loans and advances to customers measured at fair value through other comprehensive income. For details, please
+refer to Note 22 to the financial statements.
+(2)
+During the reporting period, the Group reclassified the joint venture, Hong Kong Life Insurance Limited, from "assets held for sale" under
+"Other assets" to "Investments in joint ventures" due to the termination of the sale transaction, and adjusted the comparative figures of
+the previous year accordingly. For details, please refer to Notes 26 and 67 to the financial statements.
+(3) Including fixed assets, intangible assets, investment properties, deferred tax assets and other assets.
+3.3.1.1 Loans and advances to customers
+As at the end of the reporting period, total loans and advances to customers of the Group amounted to
+RMB3,933.034 billion, representing an increase of 10.32% as compared with the end of the previous year; total
+loans and advances to customers accounted for 58.30% of the total assets, representing an increase of 1.69
+percentage points as compared with the end of the previous year. For details of the loans and advances to customers
+of the Group, please refer to the section headed "Analysis of Loan Quality" in this chapter.
+China Merchants Bank
+100.00
+500,020
+0.15
+6.47
+625,728
+9.94
+Balances with banks and other financial institutions
+100,160
+1.48
+76,918
+1.22
+9,954
+Placements with banks and other financial
+agreements
+Goodwill
+Other assets(3)
+Total assets
+512,797
+7.60
+407,178
+institutions and amounts held under resale
+59,922
+Investments classified as receivables
+N/A
+(in millions of RMB, except for percentages)
+Deposits from customers
+Deposits from banks and other financial institutions
+Borrowings from the central bank
+Percentage of
+Amount the total (%)
+Amount
+Percentage of
+the total (%)
+4,427,566
+31 December 2017
+71.39
+69.90
+470,826
+7.59
+439,118
+7.55
+405,314
+6.54
+4,064,345
+414,838
+31 December 2018
+To maintain the figures comparable, the financial instruments in section "3.3.2 Liabilities" were still analysed on the
+statistical calibre excluding interest payable, except for the table "components of the total liabilities of the Group"
+in which interest payable calculated using the effective interest method was included as required by the Ministry of
+Finance.
+151,101
+98,389
+69,826
+Total Bond investments
+1,205,466
+976,400
+Note:
+The following table sets forth, as at the dates indicated, the components of the total liabilities of the Group.
+"Official authorities" include the Ministry of Finance of the PRC, local governments and the central bank etc.; "Others" mainly refer to
+enterprises.
+III Report of the Board of Directors
+Investments in joint ventures and associates
+As at the end of the reporting period, the net investments in joint ventures and associates of the Group were
+RMB8.871 billion, representing an increase of 70.50% as compared with the end of the previous year, which was
+mainly due to an increase in the investments in its joint ventures. As at the end of the reporting period, the balance
+of allowances for impairment losses on investments in joint ventures and associates of the Group was zero. For
+details, please refer to Notes 26 and 27 to the financial statements.
+3.3.1.3 Goodwill
+In compliance with the PRC enterprise accounting principles, at the end of 2018, the Group conducted an
+impairment test on the goodwill arising from the acquisition of CMB WLB, China Merchants Fund and other
+companies and determined that provision for impairment was not necessary for the current year. As at the end of
+the reporting period, the Group had a balance of allowances for impairment losses on goodwill of RMB579 million
+and the carrying value of goodwill was RMB9.954 billion.
+3.3.2 Liabilities
+As at the end of the reporting period, the total liabilities of the Group amounted to RMB6,202.124 billion,
+representing an increase of 6.67% as compared with the end of the previous year, which was primarily attributable
+to the steady growth in deposits from customers.
+China Merchants Bank
+Annual Report 2018
+174,934
+7.13
+203,950
+6.85
+296,477
+5.10
+Others (note)
+110,687
+1.78
+152,638
+424,926
+2.63
+6,202,124
+100.00
+5,814,246
+100.00
+Note:
+Including salaries and welfare payable, taxes payable, deferred income tax liabilities and other liabilities.
+29
+Total liabilities
+Placements from banks and other financial institutions
+Debt securities issued
+125,620
+3.29
+272,734
+4.69
+Financial liabilities at fair value through profit or loss
+44,144
+0.71
+26,619
+2.16
+0.46
+36,570
+0.59
+21,857
+0.38
+Amounts sold under repurchase agreements
+78,141
+1.26
+Derivative financial liabilities
+N/A
+Commercial banks and other financial institutions
+291,041
+28
+China Merchants Bank
+III Report of the Board of Directors
+Annual Report 2018
+Derivative financial instruments
+As at the end of the reporting period, the major categories and amount of derivative financial instruments held by
+the Group are indicated in the following table. For details, please refer to Note 61(f) to the financial statements.
+(in millions of RMB)
+27
+Interest rate derivatives
+Other derivatives
+Total
+31 December 2018
+31 December 2017
+Notional
+Notional
+amount
+Currency derivatives
+Fair value
+As at the end of the reporting period, the Group's investments at fair value through profit or loss amounted to
+RMB327.643 billion. The main categories were bond investments and non-standardised credit asset investments.
+Bond investments were made mainly to cater to the need of the Group to grasp the trading opportunities in the
+bond market to increase investment income. In 2018, affected by trade frictions between China and the United
+States, coupled with the slowdown in macro-economy growth, interest rates in the bond market fell notably, and the
+overall income of trading account increased substantially. By strengthening market research and adopting a radical
+trading strategy that matches the market situation, the Group has drastically and rapidly lengthened the duration
+of trading account and continuously increased the scale of investment while at the same time actively conducting
+range trading using long-term interest rate bonds and interest rate derivatives as well as further improving portfolio
+revenue. Non-standardised credit asset investments were mainly non-standardised bill investments. For details, please
+refer to Note 24(a) to the financial statements.
+During the year, the Group reclassified the joint-venture, Hong Kong Life Insurance Limited, from "assets held for sale" under "Other assets"
+to "Investments in joint ventures" due to the termination of the sale transaction, and adjusted the comparative figures of the previous year
+accordingly.
+572,241
+35.71
+Investments in joint ventures and associates (2)
+8,871
+0.52
+5,203
+0.32
+Investments at fair value through profit or loss
+Total investment securities and other
+financial assets (2)
+100.00
+1,602,475
+100.00
+Note:
+(1)
+(2)
+Including equity investments, investments in funds, wealth management products, long position in precious metal contracts and others.
+1,692,708
+258,213
+amount
+Assets
+As at the end of the reporting period, the balance of debt investments at fair value through other comprehensive
+income of the Group amounted to RMB414.691 billion. Such investments were made mainly to cater to the need
+of the Group to improve business performance. During the reporting period, affected by changes in the market
+environment, the interest rate of the RMB bond market saw a general decline, and credit default events increased
+accordingly. The Group closely monitored market changes, grasped the opportunities arising from market trends,
+appropriately lengthened the duration of the RMB currency portfolio, timely adjusted the structure of the existing
+portfolio, focused on increasing treasury bonds, local bonds and other interest rate-related assets with a higher
+allocation value, optimised the asset allocation structure and effectively avoided credit risks. For details, please refer
+to Note 24(c) to the financial statements.
+Equity investments designated at fair value through other comprehensive income
+As at the end of the reporting period, the balance of equity investments designated at fair value through other
+comprehensive income of the Group amounted to RMB4.015 billion. Such investments were mainly non-trading
+equity investments held by the Group in the investees where the Group had no control, joint control or significant
+influence. For details, please refer to Note 24(d) to the financial statements.
+Debt instrument investments measured at amortised cost
+As at the end of the reporting period, the balance of the Group's debt investments measured at amortised cost
+amounted to RMB903.268 billion. Among them, the bond investments were made mainly in the bonds issued by
+the PRC government and policy banks. This category of investments was held on a long-term basis for the strategic
+allocation of assets and liabilities of the Group, based on the requirements of interest rate risk management of bank
+accounts and liquidity management, while taking into account the benefits and risks. For details, please refer to
+Note 24(b) to the financial statements.
+The composition of the Group's total bond investments classified by the issuing entities
+31 December
+Debt investments at fair value through other comprehensive income
+31 December
+2018
+2017
+Official authorities (note)
+641,102
+497,260
+Policy banks
+Others (note)
+(in millions of RMB)
+Fair value
+In 2018, the RMB exchange rate was pegged to a basket of currencies, and its volatility was fully affected by the
+supply and demand of the foreign exchange market. At the same time, the bilateral volatility of the RMB exchange
+rate intensified, resulting in customers' higher willingness to use derivative products to avoid exchange rate risks.
+The Group continued to leverage on the professional advantages of derivative transactions in the financial market,
+vigorously expanded its derivative trading business, and actively used derivative instruments such as interest rate
+swaps to hedge risks. As a result, the number of customers served and the scale of transactions continued to rise.
+The above table shows the nominal value and fair value of the Group's derivatives by their remaining maturity on
+each balance sheet date. The nominal value refers only to the amounts of the transactions that have not yet been
+due or completed on the balance sheet date, and does not represent the value at risk.
+18,916
+Liabilities
+Assets
+Liabilities
+4,382,713
+16,150
+1,605,849
+17,630
+(21,857)
+(14,812) 2,073,724
+(21,321) 1,305,784
+16,345
+(1,898)
+(19,636)
+116,624
+6,105,186
+440
+34,220
+(437) 108,927
+(36,570) 3,488,435
+322
+(323)
+2,249
+60,829
+252,884
+682
+average
+Average
+Interest
+average
+(in millions of RMB, except for percentages)
+Interest-earning assets
+balance
+income
+Interest
+yield (%)
+income
+yield (%)
+Loans and advances to customers
+3,910,859
+50,603
+5.13
+3,920,319
+balance
+51,661
+Average
+Annualised
+1,332
+400
+1,732
+Changes in interest expense
+5,308
+8,066
+13,374
+Annualised
+Changes in net interest income
+6,276
+15,532
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+The following table sets out the average balances of assets and liabilities, interest income/interest expense and
+annualised average yield/cost ratio of the Group for the periods indicated. The average balances of interest-earning
+assets and interest-bearing liabilities are the average of the daily balances.
+July to September 2018
+October to December 2018
+9,256
+Borrowings from the central bank
+5.23
+1,280,918
+Total
+6,394,164
+69,169
+4.29
+6,337,546
+70,567
+4.42
+3.02
+July to September 2018
+(in millions of RMB, except for percentages)
+Average
+balance
+Annualised
+average
+Interest cost ratio
+expense
+(%)
+Annualised
+average
+Average
+balance
+Interest
+cost ratio
+October to December 2018
+Investments
+4,977
+2.52
+12,165
+3.77
+1,275,105
+12,004
+3.73
+Balances with the central bank
+512,102
+654,649
+2,009
+487,473
+1,925
+1.57
+Balances and placements with banks and other
+financial institutions
+690,285
+4,392
+1.56
+expense
+1,094
+35
+3.02
+Total expected credit losses
+5,820,808
+110,527
+1.90 5,491,455
+97,153
+1.77
+9,250
+Net interest income
+160,384
+144,852
+/
+Net interest spread
+Net interest margin
+2.44
+2.57
+2.29
+1
+2.43
+305,886
+10,982
+Deposits and placements from banks and
+other financial institutions
+863,041
+23,028
+2.67
+880,787
+24,138
+3.15
+2.74
+14,530
+4.27
+339,320
+13,436
+3.96
+Borrowings from the central bank
+348,093
+Debt securities issued
+1,059
+In 2018, the average yield of the interest-earning assets of the Group was 4.34%, while the average cost ratio
+of interest-bearing liabilities was 1.90%, representing a year-on-year increase of 28 basis points and 13 basis
+points respectively. The net interest spread was 2.44%, while the net interest margin was 2.57%, representing a
+year-on-year increase of 15 basis points and 14 basis points respectively.
+2018 compared with 2017
+Increase (decrease) due to
+5,887
+Changes in interest income
+14,564
+14,342
+28,906
+Interest-bearing liabilities
+Deposits from customers
+916
+4,415
+11,658
+Deposits and placements from banks and other
+financial institutions
+(474)
+(636)
+(1,110)
+Debt securities issued
+7,243
+The following table sets forth, for the periods indicated, the breakdown of changes in interest income and interest
+expense due to changes in volumes and interest rates of the Group. Changes in volume are measured by changes
+in average balances (daily average balance), while changes in interest rate are measured by changes in the average
+interest rate; the changes in interest income and interest expense due to changes in both volume and interest rate
+have been included in the amount of changes in interest income and interest expense due to changes in volume.
+4,971
+Balances and placements with banks and other
+(in millions of RMB)
+Interest-earning assets
+Loans and advances to customers
+Volume
+Interest rate
+16,256
+11,256
+financial institutions
+Investments
+2,018
+Net increase
+(decrease)
+27,512
+(3,775)
+Balances with the central bank
+(870)
+152
+(718)
+(5,793)
+(%)
+Total
+Deposits from customers
+Total net non-interest income
+1,309
+998
+88,060
+76,185
+During the period, the Group adjusted the statistical calibre of the breakdown items of the fee and commission income, the fee related to financial
+leasing was adjusted from "others" to "commissions from credit commitment and loan business"; part of the fee related to cross-border financing
+business was adjusted from "settlement and clearing fees" to "commissions from credit commitment and loan business"; the fund management fee
+income of the subsidiaries was adjusted from "agency service fees" and "others" to "commissions on trust and fiduciary activities", and corresponding
+adjustments were made to the comparative figures of the previous year.
+Since the beginning of the period, the Group has included the profit and loss of the precious metals transaction as a whole under the "net gains
+from fair value changes". The "net gains from fair value changes" and "net investment income" of the Income Statement were adjusted for the
+corresponding period of 2017.
+- Share of profits of associates and joint ventures
+China Merchants Bank
+Annual Report 2018
+3.2.7 Operating expenses
+In 2018, the Group's operating expenses amounted to RMB81.110 billion, representing an increase of 15.16% as
+compared with the previous year. Among which, staff costs of the Group increased by 16.48% as compared with
+the previous year. Other general and administrative expenses increased by 19.62% as compared with the previous
+year. The cost-to-income ratio was 31.04%, representing an increase of 0.83 percentage point as compared with
+the previous year. The increase in operating expenses was primarily attributable to the following reasons. The Group
+increased its efforts to further support financial technology innovation, enhanced technology-based capability, and
+increased the investment of IT infrastructure and human resources for research and development. At the same time,
+in order to improve the brand image and service level of outlets, the Group focused on upgrading the hardware and
+software of digital outlets. In addition, by focusing on the strategic development direction of monthly active users
+(MAU), the Company increased the resources invested in online customer acquisition and operation. The Company's
+cost-to-income ratio was 31.23%, up by 0.95 percentage point as compared with the previous year.
+The following table sets forth, for the periods indicated, the principal components of the operating expenses of the
+Group.
+(in millions of RMB)
+Staff costs
+Taxes and surcharges
+Depreciation of fixed assets and investment properties
+III Report of the Board of Directors
+Amortisation of intangible assets
+3,653
+1,934
+- Other net income
+Net gains from fair value changes
+- Net investment income
+- Exchange gain
+Other net operating income
+66,480
+64,018
+4,315
+21,580
+20,271
+11,169
+1,091
+671
+11,327
+4,911
+3,538
+12,167
+Other net non-interest income
+Rental expenses
+Allowances for insurance claims
+(in millions of RMB)
+2018
+2017
+Loans and advances to customers
+60,052
+Investments
+1,176
+The following table sets forth, for the periods indicated, the principal components of expected credit losses of the
+Group.
+(933)
+(368)
+121
+Expected credit losses relating to financial guarantees and loan commitments
+Other assets
+374
+N/A
+395
+Interest-bearing liabilities
+Amounts due from banks and other financial institutions
+Other general and administrative expenses
+In 2018, the expected credit losses of the Group were RMB60.829 billion, representing a year-on-year increase of
+1.51%.
+70,431
+Total
+2018
+2017
+46,025
+39,512
+2,132
+2,152
+3.2.8 Expected credit losses
+5,270
+983
+714
+4,242
+22,214
+4,189
+18,570
+244
+81,110
+232
+5,062
+Net fee and commission income
+59,252
+899,692
+4,109
+4.20
+2,766
+Total
+5,915,737
+28,209
+1.89
+388,434
+5,890,720
+1.90
+Net interest income
+40,960
+42,412
+/
+Net interest spread
+2.40
+2.54
+28,155
+2.52
+2.51
+797,923
+(5,890)
+4,319,201
+16,081
+1.48 4,360,202
+16,239
+1.48
+Deposits and placements from banks
+5,041
+and other financial institutions
+Debt securities issued
+351,024
+3,810
+Borrowings from the central bank
+345,820
+2,769
+2.45
+4.31
+3.18 344,161
+5,549
+2.66
+3.19
+Facing the rising pressure on debt costs, the Group continued to optimise its asset and liability structure and improve
+its risk pricing management level. In the fourth quarter of 2018, the net interest margin of the Group was 2.66%,
+up by 12 basis points as compared with the third quarter of 2018, and its net interest spread was 2.52%, up by 12
+basis points as compared with the third quarter of 2018. The annualised average yield of the interest-earning assets
+was 4.42%, up by 13 basis points as compared with the third quarter of 2018 while the annualised average cost
+ratio of interest-bearing liabilities was 1.90%, up by 1 basis point as compared with the third quarter of 2018.
+10,267
+9,209
+- Agency service fees
+12,723
+12,287
+- Commissions from credit commitment and loan business
+6,807
+- Settlement and clearing fees
+6,372
+Net interest margin
+25,245
+- Others
+3,171
+2,784
+Less: fees and commission expense
+(6,566)
+- Commissions on trust and fiduciary activities
+14,011
+23,351
+- Bank card fees
+16,727
+24
+China Merchants Bank
+III Report of the Board of Directors
+Annual Report 2018
+In 2018, the Group recorded a net non-interest income of RMB88.060 billion, up by 15.59% from the previous year,
+or up by 3.67% year-on-year after eliminating the impact of implementing the new financial instrument standard.
+The components are as follows:
+Net fee and commission income amounted to RMB66.480 billion, representing an increase of 3.85% as compared
+with the previous year. Among the fee and commission income, income from bank card fees increased by
+RMB2.716 billion or 19.38% as compared with the previous year, which was primarily attributable to the increase in
+intermediary business income from credit cards; income from settlement and clearing fees³ increased by RMB1.058
+billion or 11.49% as compared with the previous year calculated on the same statistical calibre, which was primarily
+attributable to the increase in income from e-payment; income from agency services fees increased by RMB436
+million or 3.55% as compared with the previous year calculated on the same statistical calibre, which was primarily
+attributable to the increase in income from agency distribution of funds. The commissions from credit commitment
+and loan business increased by RMB435 million or 6.83% as compared with the previous year calculated on the
+same statistical calibre, which was mainly attributable to the increase in the fee income from financial leasing and
+the fee income from the domestic factoring business; commissions on trust and fiduciary activities decreased by
+RMB1.894 billion or 7.50% as compared with the previous year calculated on the same statistical calibre, which
+were mainly affected by factors such as the New Regulation on Asset Management, the decline in social financing
+demand and the lowered interest rate. The high-yield assets of wealth management investment decreased while
+the liability-side interest rates were less flexible. The asset management VAT policy was implemented, resulting a
+decrease in the fee income from entrusted wealth management services.
+Other net non-interest income amounted to RMB21.580 billion, representing an increase of 77.37% as compared
+with the previous year. Among which, net investment income 4 amounted to RMB11.327 billion, representing an
+increase of RMB6.416 billion or 130.65% as compared with the previous year calculated on the same statistical
+calibre, and net gains from fair value changes amounted to RMB1.091 billion, representing an increase of RMB420
+million or 62.59% as compared with the previous year calculated on the same statistical calibre. Both increases
+were primarily attributable to the impact of implementing the new financial instrument standard. Other net income
+amounted to RMB4.315 billion, representing an increase of RMB662 million or 18.12% as compared with the
+previous year, which was primarily attributable to the increase in the income from operating leasing business.
+Among the business segments, the net non-interest income from retail finance amounted to RMB43.225 billion,
+representing an increase of 15.50% as compared with the previous year and accounting for 49.09% of the Group's
+net non-interest income; the net non-interest income from wholesale finance amounted to RMB32.276 billion,
+representing an increase of 5.86% as compared with the previous year and accounting for 36.65% of the Group's
+net non-interest income; the net non-interest income from other businesses amounted to RMB12.559 billion,
+representing an increase of 51.86% as compared with the previous year and accounting for 14.26% of the Group's
+net non-interest income.
+The following table sets forth, for the periods indicated, the principal components of net non-interest income of the
+Group.
+3.2.6 Net non-interest income
+(in millions of RMB)
+Fee and commission income
+23
+2018
+2017
+69,908
+73,046
+39,136
+56,721
+1,443,496
+92
+115,888
+825,797
+491,179
+310,969
+100
+54
+3,323,739
+136,410
+66
+35 673 788 2265
+44
+1,764,355
+100
+61,920
+28
+67,964
+38
+141,835
+Retail loans and advances subtotal
+1,987,643
+Gross loans and advances to customers
+3,682,482
+61
+22223 123388 265
+123,768
+28
+74,804
+40
+46,276
+33
+121,900
+94
+IX Financial Statements
+China Merchants Bank
+38,212
+Transportation, storage and postal services
+349,009
+40
+47,198
+36
+52,174
+Financial concerns
+58
+63,209
+66
+54,167
+Property development
+other security
+Amount
+other security
+Amount
+Annual Report 2018
+IX Financial Statements
+(F) Further analysis on loans and advances to customers analysed by
+industry sector (continued)
+Operation outside Mainland China
+2018
+2017
+70
+% of gross
+advances
+% of gross
+loans and
+advances
+covered by
+covered by
+collateral or
+collateral or
+loans and
+575,299
+Transportation, storage and postal services
+Micro-finance loans
+248,815
+33
+251,979
+31
+255,683
+Manufacturing
+62
+188,822
+56
+262,323
+Property development
+other security
+Amount
+other security
+34
+Amount
+collateral or
+covered by
+covered by
+% of gross
+loans and
+advances
+advances
+loans and
+% of gross
+2017
+2018
+Operation in Mainland China
+industry sector
+(F) Further analysis on loans and advances to customers analysed by
+Annual Report 2018
+65
+collateral or
+204,322
+35
+Wholesale and retail
+Credit cards
+100
+921,500
+Residential mortgage
+100
+149,766
+Discounted bills
+1,545,073
+Corporate loans and advances subtotal
+59,021
+Others
+35,349
+Mining
+55,890
+public utilities management
+Water, environment and
+60,703
+157,984
+37
+205,884
+42
+Production and supply of electric power,
+heating power, gas and water
+Others
+138,773
+124,094
+Construction
+84,475
+Financial concerns
+61,963
+Telecommunications, software and IT services
+Leasing and commercial services
+14,221
+61
+Manufacturing
+3,869
+9,787
+Overdue loans
+and advances
+Credit card
+Residential mortgage
+2017
+6,044
+2,054
+435
+12,895
+4,213
+7,655
+-Stage 3
+(Lifetime ECL-
+credit impaired)
+-Stage 2
+-Stage 1 (Lifetime ECL-
+(12-month ECL) not credit-impaired)
+Impaired loans
+and advances
+2,610
+6,394
+3,614
+12,595
+2,734
+Residential mortgage
+Credit card
+2018
+When the amount of loans and advances to customers for an industry/variety accounts for 10% or above of the total
+amount of loans and advances to customers, the amount of overdue loans, impaired loans and credit impairment
+allowances in each expected credit loss stage are disclosed as follows:
+industry sector (continued)
+(F) Further analysis on loans and advances to customers analysed by
+IX Financial Statements
+China Merchants Bank
+Annual Report 2018
+292
+291
+241,305
+57
+250,552
+Gross loans and advances to customers
+90
+20,940
+Overdue loans
+and advances
+5,467
+16,701
+As at 31 December 2018, for corporate loans and advances measured at amortised cost, the fair value of collateral
+held against impaired loans and advances is RMB 6,868 million (31 December 2017: RMB 5,404 million).
+5,990
+China Merchants Bank
+7,798
+7,813
+7,834
+4,495
+6,025
+2017
+2018
+(ii) By overdue period
+Total
+Subsidiaries
+Outside Mainland China
+Western region
+Central region
+Northeast region
+Pearl River Delta and West Coast region
+Impaired loans
+and advances
+Individually
+assessed impairment
+allowance
+Collectively
+assessed impairment
+allowance
+11,273
+China Merchants Bank
+92
+IX Financial Statements
+(G) Overdue loans and advances to customers
+(i)
+By geographical segments
+Headquarters
+Yangtze River Delta region
+Bohai Rim region
+Annual Report 2018
+83
+11,376
+88
+Residential mortgage
+228,856
+Corporate loans and advances subtotal
+17,882
+Others
+26
+public utilities management
+Water, environment and
+2,001
+Leasing and commercial services
+2,196
+Mining
+5,635
+Construction
+7,889
+heating power, gas and water
+Production and supply of electric power,
+26,860
+45
+11,371
+44
+Wholesale and retail
+12,505
+Credit cards
+51
+90
+Telecommunications, software and IT services
+9,309
+68
+13,444
+35
+25,613
+58
+7,260
+191
+Micro-finance loans
+98
+1,747
+99
+204
+100
+7,613
+58
+67
+17,743
+220,365
+54
+72
+17
+419
+7
+73
+13,934
+89
+Others
+1,525
+12,720
+Retail loans and advances subtotal
+21,696
+6228 28 282
+16
+100
+7,065
+25
+4,211
+89
+97
+1,937
+81
+49
+290
+6,020
+to review the announcements on related party transactions of the Bank.
+Board committees
+The Board of Directors has established six committees including the Strategy Committee, Audit committee, Related
+Party Transactions Control Committee, Risk and Capital Management Committee, Remuneration and Appraisal
+Committee and Nomination Committee.
+(i)
+Strategy Committee
+Main authorities and duties of the Strategy Committee are:
+to formulate the operational goals and medium-to-long term development strategies of the Bank, and
+make an overall assessment on strategic risks;
+to consider material investment and financing plans and make proposals to the Board of Directors;
+to supervise and review the implementation of the annual operational and investment plans;
+to evaluate and monitor the implementation of Board resolutions; and
+to make recommendations and proposals on important issues for discussion and determination by the
+Board of Directors.
+(ii)
+Audit Committee
+Main authorities and duties of the Audit Committee are:
+to propose the appointment or replacement of external auditors;
+to monitor the internal audit system of the Bank and its implementation, and evaluate the work
+procedures and work effectiveness of its internal audit department;
+to coordinate the communication between internal auditors and external auditors;
+to audit the financial information of the Bank and disclosure of such information, and is responsible
+for the annual audit work of the Bank, including issue of a conclusive report on whether the
+information contained in the audited financial statements is true, accurate, complete and updated,
+and submit the same to the Board of Directors for consideration;
+to examine the internal control system of the Bank, and make recommendations for improvement in
+the internal control of the Bank;
+to review and supervise the mechanism for the Bank's employees to whistle blow any misconduct
+in respect of financial reports, internal control or otherwise, so as to ensure that the Bank always
+handles the whistle blowing issues in a fair and independent manner and takes appropriate actions;
+to examine the accounting policies, financial reporting procedures and financial position of the Bank;
+and
+(J) Corporate governance
+any other task delegated by the Board of Directors.
+Annual Report 2018
+The Bank is a commercial bank incorporated in the Mainland China with its banking business primarily conducted
+in the Mainland China. As of 31 December 2018 and 31 December 2017, most of the Bank's exposures arose from
+businesses with Mainland China non-bank institutions or individuals. Analyses of various types of exposure by
+counterparty have been disclosed in the notes to the financial report.
+and advances
+0.58%
+18,009
+0.51%
+Less:
+- rescheduled loans and advances overdue
+more than 90 days
+16,218
+0.41%
+11,293
+0.32%
+Rescheduled loans and advances overdue
+less than 90 days
+6,548
+0.17%
+6,716
+0.19%
+Note: Represents the restructured non-performing loans.
+The amount of the Group's rescheduled loans and advances to financial institutions as at 31 December 2018 was 1
+million (2017: 1 million).
+Non-bank mainland china exposures
+IX Financial Statements
+(iii) Related Party Transactions Control Committee
+Main authorities and duties of the Related Party Transactions Control Committee are:
+to identify connected persons of the Company according to relevant laws and regulations;
+to review the regulations and policies in respect of remuneration of the Bank; and
+any other task delegated by the Board of Directors.
+Nomination Committee
+Main authorities and duties of the Nomination Committee are:
+to review the structure, size and composition of the Board of Directors (including their expertise,
+knowledge and experience) at least once a year and make recommendations on any change to
+the Board of Directors to implement the strategies of the Bank according to the Bank's business
+operations, asset scale and shareholding structure of the Bank;
+to study the standards and procedures for selection of directors and senior management, and make
+recommendations to the Board of Directors;
+to conduct extensive searches for qualified candidates for directors and senior management;
+to conduct preliminary examination on the candidates for directors and senior management and make
+recommendations to the Board of Directors; and
+any other task delegated by the Board of Directors.
+http
+Add
+Tel
+Fax
+://www.cmbchina.com
+: China Merchants Bank Tower, No 7088,
+Shennan Boulevard, Shenzhen, China
+7,758
+: (0755) 8319 8888
+(0755) 8319 5555
+Postcode 518040
+to study and review the remuneration policies and proposals in respect of directors and senior
+management of the Bank, make recommendations to the Board of Directors and supervise the
+implementation of such proposals;
+to study the appraisal standards for directors and senior management, and conduct appraisals and
+make recommendations based on the actual conditions of the Bank;
+Main authorities and duties of the Remuneration and Appraisal Committee are:
+Remuneration and Appraisal Committee
+to inspect, supervise and review major related party transactions and continuing related party
+transactions, and to control the risks associated with related party transactions;
+to review the administrative measures on related party transactions of the Bank, and to monitor the
+establishment and improvement of the related party transactions management system of the Bank;
+and
+295
+296
+China Merchants Bank
+IX Financial Statements
+Annual Report 2018
+(J) Corporate governance (continued)
+Amount
+Board committees (continued)
+Main authorities and duties of the Risk and Capital Management Committee are:
+to supervise the status of risk control by the senior management of the Bank in relation to credit risk,
+market risk, operational risk, liquidity risk, strategic risk, compliance risk, reputation risk, country risk
+and other risks;
+to make regular assessment on the risk policies, management status, risk-withstanding ability and
+capital status of the Bank;
+to perform relevant duties under the advanced capital measurement method pursuant to the
+authorisation given by the Board of Directors;
+to submit proposals on perfecting the management of risks and capital of the Bank;
+to arrange and instruct risk prevention works in accordance with the authorisation of the Board of
+Directors; and
+any other task delegated by the Board of Directors.
+(v)
+(vi)
+(iv) Risk and Capital Management Committee
+and advances
+China Merchants Bank
+% of
+total loans
+-
+- between 3 and 6 months (inclusive)
+- between 6 and 12 months (inclusive)
+- over 12 months
+Total
+7,057
+6,570
+As a percentage of total gross loans and advances:
+9,390
+25,825
+28,855
+42,272
+45,679
+0.18%
+0.18%
+0.24%
+10,254
+Total
+- over 12 months
+- between 6 and 12 months (inclusive)
+3,922
+4,061
+4,003
+5,119
+5,460
+9,334
+248
+42
+962
+1,067
+42,272
+45,679
+Amount
+2017
+Gross loans and advances to customers which have been overdue
+with respect to either principal or interest for periods of:
+- between 3 and 6 months (inclusive)
+0.29%
+0.66%
+2018
+1.08%
+N/A
+28,088
+The amount of the Group's overdue loans and advances to financial institutions as at 31 December 2018 was RMB1
+million (2017: RMB1 million).
+Note:
+The above analysis represents loans and advances overdue for more than 90 days as required and defined by the HKMA.
+Loans and advances with a specific repayment date are classified as overdue when the principal or interest is overdue.
+For loans and advances repayable by regular installments, if part of the installments is overdue, the whole amount of these loans would be
+classified as overdue.
+Loans and advances repayable on demand are classified as overdue when a demand for repayment has been served on the borrower but
+repayment has not been made in accordance with the instructions. If the loans and advances repayable on demand are outside the approved
+limit that was advised to the borrower, they were also considered as overdue.
+The collateral of the Group included cash deposit, shares, land use right, property, motor vehicles and other equipment, etc. The fair value
+of collateral was estimated by management based on the latest available external valuations adjusted by taking into account the current
+realisation experience as well as market situation. Where collateral values are greater than gross advances, only the amount of collateral up to
+the gross advance had been included in the "secured portion of overdue loans and advances" as set out in the above tables.
+(I)
+2018
+2017
+Rescheduled loans and advances to
+customers (Note)
+22,766
+% of
+total loans
+0.81%
+13,239
+19,137
+(H) Rescheduled loans and advances to customers
+IX Financial Statements
+293
+294
+China Merchants Bank
+1.28%
+Annual Report 2018
+(G) Overdue loans and advances to customers (continued)
+(iii) Collateral information
+Secured portion of overdue loans and advances
+34,185
+Unsecured portion of overdue loans and advances
+Value of collateral held against overdue loans and advances
+Provision of overdue loans and advances for which impairment losses
+are individually assessed
+2018
+2017
+9,277
+11,494
+32,978
+5.11
+11.75
+21,416
+4.61
+418,769
+(%)(note)
+1,653,517
+42.04
+20,332
+20,769
+1.26
+Collateralised loans
+11.22
+9,752
+Guaranteed loans
+0.72
+7,844
+30.55
+1,089,261
+0.74
+33.57
+1,320,545
+Credit loans
+1,550,904
+loan
+441,212
+43.50
+57,393
+1.48
+Total loans and advances to
+loan ratio
+customers
+3,933,034
+100.00
+53,605
+1.36
+3,565,044
+100.00
+1.61
+Note:
+Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+22,931
+3.25
+3.81
+149,766
+Discounted bills
+1.33
+5,202
+10.95
+390,222
+0.75
+2,752
+9.36
+367,994
+Pledged loans
+115,888
+performing
+1.61
+balance
+53,605
+100.00
+3,933,034
+customers
+Total loans and advances to
+0.79
+2,054
+7.30
+260,347
+0.69
+1,968
+7.23
+1.36
+284,366
+As at the end of the reporting period, collateralised and pledged loans increased by 4.14% as compared with the
+end of the previous year. Guaranteed loans increased by 5.36% as compared with the end of the previous year, and
+the credit loans increased by 21.23% as compared with the end of the previous year while there was an increase of
+0.02 percentage point in the non-performing ratio of credit loans and decreases in the non-performing ratio of all
+other guaranteed loans as compared with the end of the previous year.
+0.19
+203
+3.07
+109,508
+0.37
+456
+3.13
+123,337
+Overseas
+3.42
+12,012
+Subsidiaries
+of the
+total (%)
+3,565,044
+57,393
+(%)(nate)
+loan
+total (%)
+balance
+(in millions of RMB, except for percentages)
+Loan
+loan ratio
+performing
+of the
+Loan
+Non-
+performing
+Non-
+100.00
+Percentage
+Non-
+Percentage
+31 December 2017
+31 December 2018
+3.4.5 Distribution of loans and non-performing loans by type of guarantees
+III Report of the Board of Directors
+China Merchants Bank
+Annual Report 2018
+34
+33
+Given the differences in economic patterns and customer bases of various regions, the Group implemented
+differentiated risk supervisory management by category for branches and sub-branches in different regions. For the
+risk concentrated regions, the Group selectively raised the credit access standard and dynamically adjusted the credit
+authorisation so as to prevent the occurrence of regional systematic risks. As at the end of the reporting period, the
+percentage of the balance of loans extended to the Bohai Rim by the Group showed a relatively fast increase, while
+the percentages of the balance of loans extended by the Head Office to the Yangtze River Delta, North-eastern
+China, Western China and subsidiaries recorded decreases. The regions where the Company incurred a large volume
+of non-performing loans were Yangtze River Delta, Bohai Rim and Western China, where the non-performing loan
+ratios of the Company decreased by 0.18 percentage point, increased by 0.02 percentage point and decreased
+by 1.33 percentage points, respectively as compared with the end of the previous year. Among which, the
+non-performing loan ratio of the Company in the Bohai Rim increased due to the impact of certain large customers.
+Note: Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+1.61
+Non-
+performing
+3.4.6 Loans to the top ten single borrowers
+38.92
+(in millions of RMB)
+9.85
+Time
+1,022,294
+23.23
+1,144,021
+28.15
+Subtotal
+2,837,721
+64.48
+2,725,823
+67.07
+Deposits from retail customers
+Demand
+1,059,923
+24.09
+972,291
+23.92
+Time
+503,030
+11.43
+366,231
+9.01
+Subtotal
+Total deposits from customers
+1,562,953
+1,581,802
+41.25
+1,815,427
+Demand
+Total
+Property development
+H
+G
+F
+E
+Transportation, storage and postal services
+Finance
+Production and supply of electric power,
+heat, gas and water
+Property development
+Transportation, storage and postal services
+Manufacturing
+Property development
+30
+35.52
+China Merchants Bank
+Annual Report 2018
+Deposits from customers
+As at the end of the reporting period, total deposits from customers of the Group amounted to RMB4,400.674
+billion, representing an increase of 8.28% as compared with the end of the previous year. Deposits from customers,
+accounting for 70.95% of the total liabilities of the Group, was the major funding source of the Group.
+The following table sets forth, as at the dates indicated, the deposits from customers of the Group by product type
+and customer type.
+31 December 2018
+31 December 2017
+(in millions of RMB, except for percentages)
+Amount
+Percentage of
+the total (%)
+Amount
+Percentage of
+the total (%)
+Deposits from corporate customers
+III Report of the Board of Directors
+1,338,522
+32.93
+4,400,674
+57,201
+1.60
+13,526
+0.34
+17,100
+0.48
+25,041
+0.64
+21,577
+0.61
+Loss
+Total loans and advances to customers
+1.51
+Total non-performing loans
+0.38
+18,716
+0.52
+3,933,034
+100.00
+3,565,044
+100.00
+53,605
+1.36
+Industry
+ABCD
+В
+15,038
+Top ten
+borrowers
+59,329
+3,450,450
+100.00
+4,064,345
+100.00
+As at the end of the reporting period, the percentage of demand deposits to total deposits from customers of the
+Group was 65.34%, representing an increase of 2.50 percentage points as compared with the end of the previous
+year. Among which, the corporate demand deposits accounted for 63.97% of the corporate deposits, representing
+an increase of 5.94 percentage points as compared with the end of the previous year, and the retail demand deposits
+accounted for 67.82% of the retail deposits, representing a decrease of 4.82 percentage points as compared with
+the end of the previous year.
+3.3.3 Shareholders' equity
+As at the end of the reporting period, the shareholders' equity of the Group was RMB543.605 billion, representing
+an increase of 12.46% as compared with the end of the previous year. Among which, retained profits amounted to
+RMB274.361 billion, representing an increase of 13.81% as compared with the end of the previous year, which was
+due to the realisation of net profit and the factor of profit distribution in the year. Investment revaluation reserve
+amounted to RMB5.532 billion, representing an increase of RMB9.344 billion as compared with the end of the
+previous year, which was mainly due to an increase in the valuation of bonds.
+3.4 Analysis of loan quality
+During the reporting period, the Group saw a steady growth in the volume of credit assets, and a continued
+optimisation in asset quality with a decrease in both balance and proportion of non-performing loans. The allowance
+coverage ratio remained solid, and our risk loss endurance capability was further improved. As at the end of the
+reporting period, the balance of non-performing loans of the Group amounted to RMB53.605 billion, representing
+a decrease of RMB3.788 billion as compared with the end of the previous year; the non-performing loan ratio was
+1.36%, down by 0.25 percentage point from the end of the previous year; the non-performing loan allowance
+coverage ratio was 358.18%, representing an increase of 96.07 percentage points as compared with the end of the
+previous year; the loan allowance ratio was 4.88%, representing an increase of 0.66 percentage point as compared
+with the end of the previous year.
+China Merchants Bank
+III Report of the Board of Directors
+Annual Report 2018
+3.4.1 Distribution of loans by 5-tier loan classification
+96.79
+The following table sets forth the 5-tier loan classification of the Group as at the dates indicated.
+31 December 2017
+(in millions of RMB, except for percentages)
+Amount
+Percentage of
+the total (%)
+Percentage of
+Amount the total (%)
+Normal
+Special mention
+Substandard
+Doubtful
+3,820,100
+97.13
+31 December 2018
+57,393
+350,991
+7,975
+Notes: (1) Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+(2) Consists primarily of other corporate loans such as financial leasing, M&A loans and corporate mortgage loans.
+(3)
+The Company will transfer discounted bills to corporate loans for accounting purposes once overdue.
+(4)
+The "Others" category consists primarily of general consumption loans, commercial housing loans, automobile loans, house decoration
+loans, education loans and other personal loans secured by monetary assets.
+31
+32
+32
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+In 2018, the Group actively expanded its retail credit business. The proportion of retail loans increased; asset quality
+was optimised; the amount and ratio of non-performing loans both decreased. The Group steadily developed the
+businesses of residential mortgage loans for self-occupation housing and micro-finance loans in order to support
+private economy, and steadily granted credit card loans. As a result, the percentage of retail loans at the end of the
+period increased by 1.01 percentage points to 51.09%. As at the end of the reporting period, the non-performing
+retail loans amounted to RMB15.847 billion, down by RMB24.00 million as compared with the end of the previous
+year, and the non-performing retail loan ratio was 0.79%, down by 0.10 percentage point as compared with the
+end of the previous year. Among which, the non-performing credit card loan ratio was 1.11%, remaining at the
+same level as compared with the end of the previous year.
+With respect to corporate loans, the Group more vigorously granted medium-to-long term fixed asset loans in 2018.
+As at the end of the reporting period, fixed asset loans accounted for 11.97%, up by 0.81 percentage point as
+compared with the end of the previous year. As at the end of the reporting period, the non-performing corporate
+loan ratio of the Group was 2.13%, representing a decrease of 0.37 percentage point as compared with the end of
+the previous year. Among them, the amount and ratio of non-performing working capital loans, fixed-asset loans
+and other corporate loans all decreased. Due to the decrease in the scale of trade financing and the non-performing
+loan formation of certain large customers, as at the end of the reporting period, the non-performing loan ratio of
+trade financing was 1.57%, representing an increase of 0.62 percentage point as compared with the end of the
+previous year.
+3.4.3 Distribution of loans and non-performing loans by industry
+31 December 2018
+31 December 2017
+Percentage
+Non-
+Non-
+performing
+of the total
+performing
+1.61
+57,393
+100.00
+3,565,044
+14.63
+6,392
+1.11
+491,383
+13.78
+5,470
+1.11
+Others(4)
+154,555
+3.93
+loan ratio
+2,163
+147,786
+4.15
+2,118
+1.43
+Total loans and advances to
+customers
+3,933,034
+100.00
+53,605
+1.36
+1.40
+575,490
+Loan
+Non-
+7.07
+3,211
+1.27
+Transportation, storage and
+postal services
+287,027
+7.30
+1,674
+0.58
+229,935
+6.45
+2,241
+0.97
+Manufacturing
+282,543
+7.18
+18,760
+6.64
+266,200
+7.47
+17,447
+252,031
+1.03
+3,263
+8.05
+Non-
+performing
+performing
+loan ratio
+(in millions of RMB, except for percentages) Loan balance
+(%)
+loan
+(%) (1)
+balance
+(%)
+loan
+Percentage
+of the total
+(%)(1)
+1,773,929
+45.10
+37,758
+2.13
+1,663,861
+46.67
+41,522
+2.50
+Property development
+316,490
+Corporate loans
+Credit card loans
+0.33
+2,734
+45.10
+37,758
+2.13
+1,663,861
+46.67
+41,522
+2.50
+Working capital loans
+884,660
+22.49
+25,698
+2.90
+868,844
+24.37
+27,300
+3.14
+Fixed asset loans
+470,521
+11.97
+5,067
+1.08
+1,773,929
+Corporate loans
+(%) (1)
+loan
+Under the 5-tier loan classification system, non-performing loans of the Group are divided into substandard loans,
+doubtful loans and loss loans. During the reporting period, the 5-tier loan classification system of the Group was
+further optimised, the amount and ratio of non-performing loans both decreased. The proportion of special mention
+loans decreased, accounting for 1.51% of the total loans as at the end of the reporting period, and representing a
+decrease of 0.09 percentage point as compared with the end of the previous year. The proportion of substandard
+loans and loss loans both decreased by 0.14 percentage point, as compared with the end of the previous year.
+3.4.2 Distribution of loans and non-performing loans by product type
+31 December 2018
+31 December 2017
+Loan
+Percentage
+of the
+Non-
+Non-
+performing
+performing
+loan ratio
+397,807
+Loan
+balance
+total (%)
+loan
+(%) (1)
+balance
+Percentage
+of the
+total (%)
+Non-
+Non-
+performing
+performing
+loan ratio
+(in millions of RMB, except for percentages)
+11.16
+5,770
+1.45
+15,847
+0.79
+1,785,295
+50.08
+15,871
+0.89
+Micro-finance loans
+350,534
+8.91
+4,682
+51.09
+1.34
+8.77
+5,549
+1.77
+Residential mortgage loans
+928,760
+23.62
+2,610
+0.28
+833,410
+23.38
+312,716
+6.55
+2,009,339
+3.25
+Trade finance
+157,093
+3.99
+2,465
+1.57
+159,090
+4.46
+1,516
+0.95
+Others(2)
+Retail loans
+261,655
+4,528
+1.73
+238,120
+6.68
+6,936
+2.91
+Discounted bills (3)
+149,766
+3.81
+115,888
+6.65
+2.09
+Wholesale and retail
+4.33
+balance
+of the
+total (%)
+performing
+loan ratio
+Loan
+of the
+performing
+loan ratio
+loan
+(%)(note)
+balance
+total (%)
+loan
+(%)(note)
+Head Office
+650,128
+16.53
+6,567
+1.01
+596,631
+16.74
+(in millions of RMB, except for percentages)
+Loan
+Non-
+performing
+Non-
+53,605
+1.36
+3,565,044
+100.00
+57,393
+1.61
+Notes: (1) Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+(2)
+Consists primarily of agriculture, forestry, animal husbandry, fishery, accommodation and catering, health and social work, etc.
+(3)
+5,637
+In 2018, the Group classified the industries and adjusted the figures at the beginning of the year on the same statistical calibre based
+on the revised National Standard of the Industrial Classification for National Economic Activities (GB/T 4754-2017) issued by the General
+Administration of Quality Supervision, Inspection and Quarantine of the PRC and the Standardisation Administration of the PRC.
+III Report of the Board of Directors
+In 2018, the Group followed the key national strategic plans, continued to support the development of the real
+economy, constantly optimised its asset portfolio and actively invested resources in national pillar industries such
+as emerging technological industries, modern service industries and advanced manufacturing industries. The Group
+formulated the differentiated prevention and control strategy for key areas such as industries from which our loans
+should be reduced and recovered, the real estate industry and local government financing platforms. The Group
+focused on reducing and withdrawing loans granted to customers with high risks such as customers associated with
+overcapacity, high debt level and high leveraging level. The Group also continued to optimise the allocation of credit
+resources portfolio.
+During the reporting period, due to the formation of non-performing loans in certain large-sized enterprises
+with overcapacity, the non-performing loan ratio related to leasing and commercial services, water conservancy,
+environment and public utilities and manufacturing industries increased by 0.32, 0.23 and 0.09 percentage point
+respectively, as compared with the beginning of the year, while there was a decrease in the non-performing loan
+ratio of all other industries as compared with the beginning of the year.
+3.4.4 Distribution of loans and non-performing loans by region
+31 December 2018
+31 December 2017
+Percentage
+Non-
+Non-
+performing
+Percentage
+China Merchants Bank
+Annual Report 2018
+100.00
+0.94
+793,637
+North-eastern China
+146,198
+3.72
+5,583
+3.82
+145,204
+4.07
+4,260
+2.93
+Central China
+384,094
+9.77
+5,005
+1.30
+343,343
+9.63
+6,394
+1.86
+Western China
+380,675
+9.68
+1.45
+8,674
+16.78
+598,374
+20.18
+10,334
+1.30
+735,044
+20.62
+10,893
+1.48
+Bohai Rim
+503,588
+12.80
+Yangtze River Delta
+8,708
+425,602
+11.94
+7,266
+1.71
+Pearl River Delta and West
+Side of Taiwan Strait
+667,011
+16.96
+7,009
+1.05
+1.73
+3,933,034
+customers
+Total loans and advances to
+0.14
+Finance
+114,137
+2.90
+3
+0.00
+93,474
+2.62
+1
+0.00
+Construction
+90,110
+2.29
+1,080
+1.20
+76,741
+2.15
+1,452
+1.89
+Information transmission,
+software and IT service
+196
+3.85
+137,212
+0.46
+6,867
+4.03
+219,818
+6.17
+9,101
+4.14
+Production and supply of
+electric power, heat,
+gas and water
+146,662
+70,012
+3.73
+0.56
+128,965
+3.62
+925
+0.72
+Leasing and commercial
+services
+126,095
+3.21
+576
+827
+1.78
+70
+710
+76,903
+1.96
+685
+0.89
+74,464
+2.08
+751
+1.01
+Discounted bills
+149,766
+Others(2)
+3.81
+3.25
+Retail loans
+2,009,339
+51.09
+15,847
+0.79
+1,785,295
+50.08
+15,871
+0.89
+115,888
+170,489
+10.66
+1.22
+1.01
+79,335
+2.23
+1,391
+1.75
+Water conservancy,
+environment and
+public utilities
+55,916
+1.42
+4,622
+294
+62,339
+1.74
+184
+0.30
+Mining
+37,545
+0.95
+3,019
+8.04
+43,347
+0.53
+Transportation, storage and postal services
+12.69%
+Loan balance
+Note:
+Represents the interest income accrued on impaired loans as a result of the increase in their present value due to the passage of time.
+The Group continued to adopt a stable and prudent policy in respect of making allowances. As at the end of the
+reporting period, the balance of allowances for impairment losses on loans of the Group amounted to RMB192.000
+billion, representing an increase of RMB41.568 billion as compared with the end of the previous year. The
+non-performing loan allowance coverage ratio was 358.18%, representing an increase of 96.07 percentage points
+as compared with the end of the previous year; the loan allowance ratio was 4.88%, representing an increase of 0.66
+percentage point as compared with the end of the previous year.
+China Merchants Bank
+III Report of the Board of Directors
+Annual Report 2018
+3.5 Analysis of capital adequacy ratio
+As at the end of the reporting period, the capital adequacy ratio, the Tier 1 capital adequacy ratio and the core
+Tier 1 capital adequacy ratio of the Group under the advanced approach were 15.68%, 12.62% and 11.78%,
+respectively, representing an increase of 2.62 percentage points, 1.58 percentage points and 1.47 percentage points
+respectively as compared with those under the weighted approach.
+150,432
+For details of the reasons for the decrease in the Tier 1 capital adequacy ratio and the core Tier 1 capital adequacy
+ratio under the advanced approach, please refer to section 3.9.1 headed "Capital management".
+31 December
+2017
+Increase/decrease at
+the end of the current
+year as compared
+with the end of the
+previous year (%)
+(in millions of RMB, except for percentages)
+The Group
+Capital adequacy ratios under
+the advanced approach (1)
+Net core Tier 1 capital
+Net Tier 1 capital
+31 December
+2018
+482,340
+(349)
+(26,197)
+279
+192,000
+151,520
+110,032
+Charge for the period
+136,198
+64,450
+Release for the period
+(76,946)
+(4,398)
+5,519
+(24,283)
+Transfer into/(out) for the period
+Unwinding of discount on impaired loans and advances (note)
+(307)
+(561)
+Recovery of loans and advances previously written off
+7,453
+Write-offs/disposal
+Foreign exchange rate movements
+Balance at the end of the period
+22
+425,689
+13.31
+516,433
+Core Tier 1 capital adequacy ratio
+Tier 1 capital adequacy ratio
+4,092,890
+11.78%
+3,530,745
+12.06%
+15.92
+Decreased by 0.28
+12.62%
+13.02%
+floor requirements during the parallel run period)
+percentage point
+Decreased by 0.40
+Information on leverage ratio (2)
+Adjusted balance of on- and off-balance sheet assets
+Leverage ratio
+7,812,054
+6.61%
+7,309,756
+6.29%
+6.87
+Increased by 0.32
+15.68%
+15.48%
+Capital adequacy ratio
+Risk-weighted assets (taking into consideration the
+6.65
+386,192
+459,782
+12.32
+Net capital
+641,881
+546,534
+17.45
+Risk-weighted assets (without taking into consideration
+the floor requirements during the parallel run period)
+Of which: Credit risk weighted assets
+Market risk weighted assets
+3,530,424
+3,291,816
+7.25
+3,052,636
+2,848,064
+7.18
+65,906
+57,560
+14.50
+Operational risk weighted assets
+411,882
+Balance as at the beginning of the year
+N/A
+1,088
+instrument standard
+Percentage
+of total
+loans (%)
+Overdue within 3 months
+19,731
+0.50
+16,178
+0.46
+Overdue from 3 months up to 1 year
+16,447
+Loan
+balance
+0.42
+0.47
+Overdue from 1 year up to 3 years
+19,130
+0.49
+26,093
+0.73
+Overdue more than 3 years
+6,695
+16,824
+loans (%)
+balance
+(in millions of RMB, except for percentages)
+0.15
+0.89
+0.15
+101,744
+15.85
+2.59
+8,316
+6,873
+6,669
+As at the end of the reporting period, the loan balance of the Group's largest single borrower amounted to
+RMB24.100 billion, representing 3.75% of the Group's net capital under the advanced approach. The loan balance
+of the top ten single borrowers totalled RMB101.744 billion, representing 15.85% of the Group's net capital under
+the advanced approach, 16.65% of the Group's net capital under the weighted approach, and 2.59% of the Group's
+total loan balance, respectively.
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+3.4.7 Distribution of loans by overdue term
+31 December 2018
+31 December 2017
+Percentage
+Loan
+of total
+0.17
+percentage point
+Increased by 0.20
+percentage point
+2,762
+Total overdue loans
+0.32
+Note:
+Represents the restructured non-performing loans.
+The Group imposed strict and prudent control over loan restructuring. As at the end of the reporting period, the
+percentage of the Group's restructured loans to total loans was 0.58%, up by 0.07 percentage point as compared
+with the end of the previous year.
+35
+36
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+11,293
+3.4.9 Repossessed assets and impairment allowances
+3.4.10 Changes in the allowances for impairment losses on loans
+The Group adopted the new financial instrument standard to make adequate allowances for credit risk losses by
+using the expected credit loss model and the risk quantification parameters such as the probability of customer
+defaults and the loss ratio of defaults, after taking into consideration the adjustments in macro perspectiveness.
+The following table sets forth the changes in the allowances for impairment losses on loans and advances of the
+Group.
+(in millions of RMB)
+2018
+Balance as at the end of the previous year
+150,432
+2017
+110,032
+Adjustment at the beginning of the period under the new financial
+As at the end of the reporting period, the balance of repossessed assets (other than financial instruments) of
+the Group amounted to RMB785 million. After deducting the impairment allowances of RMB188 million, the
+net carrying value amounted to RMB597 million. The balance of repossessed financial instruments amounted to
+RMB1,079 million.
+0.41
+16,218
+Of which: restructured loans overdue more than
+90 days
+Total loans and advances to customers
+62,003
+3,933,034
+1.58
+61,857
+1.74
+Information transmission, software and IT service
+3,565,044
+100.00
+As at the end of the reporting period, overdue loans of the Group amounted to RMB62.003 billion, up by RMB146
+million from the end of the previous year and accounting for 1.58% of its total loans, representing a decrease of
+0.16 percentage point as compared with the end of the previous year. Among the overdue loans, collateralised and
+pledged loans accounted for 42.23%; guaranteed loans accounted for 31.40%; credit loans accounted for 26.37%
+(the majority of which were overdue loans of credit cards). The Group adopted prudent classification criteria for
+overdue loans, and the ratio of its non-performing loans to the loans overdue for more than 90 days was 1.27.
+3.4.8 Restructured loans
+(in millions of RMB, except for percentages)
+Loan
+balance
+Restructured loans (note)
+22,766
+31 December 2018
+Percentage
+of total
+loans (%)
+0.58
+31 December 2017
+Loan
+balance
+18,009
+Percentage
+of total
+loans (%)
+0.51
+0.08
+0.93
+Notes: (1)
+percentage point
+Capital adequacy ratios under
+the weighted approach
+Net core Tier 1 capital
+420,996
+371,416
+13.35
+Net Tier 1 capital
+452,449
+The Company
+402,869
+Net capital
+542,610
+475,774
+14.05
+Risk-weighted assets
+4,286,653
+3,911,286
+9.60
+12.31
+Core Tier 1 capital adequacy ratio
+year as compared
+with the end of the
+previous year (%)
+31 December
+2017
+10.01%
+Increased by 0.30
+Tier 1 capital adequacy ratio
+11.04%
+10.81%
+percentage point
+Increased by 0.23
+percentage point
+Capital adequacy ratio
+Increase/decrease at
+the end of the current
+13.06%
+Increased by 0.40
+percentage point
+Note:
+The "weighted approach" refers to the weighted approach for credit risk, the standardised approach for market risk and the basic indicator
+approach for operational risk in accordance with the relevant provisions of the "Capital Rules for Commercial Banks (Provisional)" issued by the
+CBRC on 7 June 2012. Same as below.
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+As at the end of the reporting period, the capital adequacy ratio, the Tier 1 capital adequacy ratio and the core
+Tier 1 capital adequacy ratio of the Company under the weighted approach were 12.66%, 10.55% and 9.82%
+respectively, representing an increase of 0.50 percentage point, 0.25 percentage point and 0.32 percentage point,
+respectively as compared with those at the end of the previous year.
+31 December
+2018
+12.66%
+9.82%
+9.50%
+Increased by 0.32
+1,322,393
+Group
+1,322,393
+1,863,316
+1,863,316
+2,541,554
+2,541,554
+967,481
+967,481
+Legal person
+1,144,335
+429,738
+2,062,279
+94,872
+45,204
+429,738
+2,489,129
+106,485
+46,676
+Measurement of market risk capital
+The Group uses mixed approaches to calculate its market risk capital. Specifically, it uses the internal model
+approach to calculate the general market risk capital of the Company (excluding overseas branches), and uses the
+standardised approach to calculate the general market risk capital of overseas branches and affiliated companies of
+the Company as well as the specific market risk capital of the Company and its affiliated companies. As at the end
+of the reporting period, the market risk capital of the Group was RMB5.272 billion, and market risk-weighted assets
+were RMB65.906 billion. Of which, the general market risk capital calculated under the internal model approach was
+RMB3.805 billion, and the market risk capital calculated under the standardised approach was RMB1.467 billion.
+39
+1,144,335
+On-balance sheet
+Off-balance sheet
+Counterparty
+Portion not covered
+by the IRB approach
+Other retail
+Tier 1 capital adequacy ratio
+10.55%
+10.30%
+percentage point
+Increased by 0.25
+percentage point
+Capital adequacy ratio
+12.66%
+12.16%
+Increased by 0.50
+percentage point
+Balance of credit risk exposures
+During the reporting period, the credit risk of the Company under the foundation internal rating-based approach
+(IRB approach) was classified into six types of risk exposures: sovereign, financial institution, corporate, retail,
+shareholding and others. The balances of various risk exposures are as follows:
+(in millions of RMB)
+Portion covered
+Type of risk exposure
+Financial institution
+by the IRB approach
+Corporate
+Retail
+Of which: Residential mortgage exposures
+Qualified revolving retail
+10.31%
+Core Tier 1 capital adequacy ratio
+9.96
+4,254,180
+Net capital
+573,466
+483,546
+18.60
+Risk-weighted assets (without taking into
+consideration the floor requirements
+during the parallel run period)
+3,142,192
+12.31
+2,945,175
+Of which: Credit risk weighted assets
+2,698,166
+2,531,510
+6.58
+Market risk weighted assets
+60,272
+51,513
+17.00
+6.69
+402,869
+452,449
+Net Tier 1 capital
+The "advanced approach" refers to the advanced measurement approach set out in the "Capital Rules for Commercial Banks (Provisional)"
+issued by the CBRC on 7 June 2012 (same as below). In accordance with the requirements of the advanced approach, the scope of
+entities for calculating the capital adequacy ratio of the Group shall include China Merchants Bank and its subsidiaries. The scope of
+entities for calculating the capital adequacy ratio of the Company shall include all the domestic and overseas branches and sub-branches
+of China Merchants Bank. As at the end of the reporting period, the Group's subsidiaries for calculating its capital adequacy ratio included
+CMB Wing Lung Bank, CMB International Capital, CMB Financial Leasing and China Merchants Fund. During the parallel run period when
+the advanced approach for capital measurement is implemented, a commercial bank shall use the capital floor adjustment coefficients
+to adjust the amount of its risk-weighted assets multiplying the sum of its minimum capital required and reserve capital required, total
+amount of capital deductions and the allowances for excessive loan loss which can be included into capital. The capital floor adjustment
+coefficients shall be 95%, 90% and 80% respectively in the first year, the second year, and the third and subsequent years during the
+parallel run period. 2018 is the fourth year since the implementation of the parallel run period.
+Since 2015, the leverage ratio shall be calculated based on the "Measures for Management of the Leverage Ratio of Commercial Banks
+(Revised)" promulgated by the CBRC on 12 February 2015. The leverage ratio of the Group was 6.56%, 6.25% and 6.52% respectively as
+at the end of the third quarter of 2018, the end of the first half of 2018 and the end of the first quarter of 2018.
+37
+38
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+As at the end of the reporting period, the capital adequacy ratio, the Tier 1 capital adequacy ratio and the core
+Tier 1 capital adequacy ratio of the Company under the advanced approach were 15.52%, 12.25% and 11.39%,
+respectively, representing an increase of 2.86 percentage points, 1.70 percentage points and 1.57 percentage points
+respectively as compared with those under the weighted approach.
+(in millions of RMB, except for percentages)
+The Company
+Capital adequacy ratios under
+31 December
+2018
+31 December
+2017
+Increase/decrease at
+the end of the current
+year as compared
+with the end of the
+previous year (%)
+the advanced approach
+Net core Tier 1 capital
+420,996
+371,416
+13.35
+Operational risk weighted assets
+(2)
+383,754
+5.96
+2018
+31 December
+2017
+Increase/decrease at
+the end of the current
+year as compared
+with the end of the
+previous year (%)
+Net core Tier 1 capital
+482,340
+425,689
+13.31
+31 December
+Net Tier 1 capital
+459,782
+12.32
+Net capital
+611,025
+538,761
+13.41
+Risk-weighted assets
+4,677,967
+516,433
+the weighted approach (note)
+Capital adequacy ratios under
+The Group
+Risk-weighted assets (taking into consideration the
+floor requirements during the parallel run period)
+3,694,893
+Core Tier 1 capital adequacy ratio
+11.39%
+3,173,532
+11.70%
+16.43
+Decreased by 0.31
+percentage point
+Tier 1 capital adequacy ratio
+12.25%
+Decreased by 0.44
+percentage point
+15.52%
+15.24%
+Capital adequacy ratio
+Increased by 0.28
+percentage point
+As at the end of the reporting period, the capital adequacy ratio, the Tier 1 capital adequacy ratio and the core
+Tier 1 capital adequacy ratio of the Group under the weighted approach were 13.06%, 11.04% and 10.31%
+respectively, representing an increase of 0.40 percentage point, 0.23 percentage point and 0.30 percentage point,
+respectively as compared with those at the end of the previous year.
+(in millions of RMB, except for percentages)
+362,152
+5,993
+5,680
+100.00
+1.04
+as at
+31 December
+Percentage
+of net capital
+(under the
+advanced Percentage of
+2018 approach) (%) total loans (%)
+24,100
+14,650
+12,150
+8,664
+3.75
+0.17
+2.28
+(in millions of RMB, except for percentages)
+8,649
+11
+0.37
+1.89
+0.31
+1.35
+0.22
+0.61
+0.22
+1.30
+0.21
+1.07
+0.18
+1.35
+3.8 Implementation of business development strategies
+The following content and data starting from Section 3.8 are analysed from the
+perspective of the Company.
+As at the end of the reporting period, the Group did not have any outstanding overdue debts.
+3.7.2 Outstanding overdue debts
+The Group's off-balance sheet items include derivative financial instruments, commitments and contingent
+liabilities. Commitments and contingent liabilities include credit commitments, operating leasing commitments,
+capital expenditure commitments, securities underwriting commitments, bonds redemption commitments,
+pending litigations and disputes and other contingent liabilities. Among which, the credit commitment is the
+primary component. As at the end of the reporting period, the balance of credit commitments of the Group was
+RMB1,556.484 billion. For details of the contingent liabilities and commitments, please refer to Note 59 to the
+financial statements.
+100
+5,814,246
+100
+100
+822720
+9,077
+Continuous implementation of strategic transformation
+338,891
+7
+90,680
+In 2018, despite the complicated internal and external situations, the Company maintained its strategic
+concentration, further promoted the strategic transformation of "Light-operation Bank" and "One Body with Two
+Wings", determinedly used Fintech as the "nuclear power", and endeavored to develop itself into the bank that
+offers the best customer experience.
+China Merchants Bank
+Annual Report 2018
+The "One Body with Two Wings" strategy was implemented on solid foundation. In 2018, the customer base
+of the Company expanded at a faster pace and its business foundation was further reinforced. For the customers of
+retail finance, known as the "One Body", the cumulative numbers of users of our two major APPS, namely "CMB APP"
+and "CMB Life APP", reached 148 million, and the total number of our retail customers reached 125 million, bringing
+the total number of customers to a new level. Among them, the number of new users of the "Sunflower and Gold
+Card Holder Customer Group" exceeded 1 million for the first time, making a record high. Diamond-class customer
+group and its AUM (assets under management) maintained a steady growth; credit card transaction amount reached
+RMB3.79 trillion. The Company ranked first in terms of private banking and credit card business, the advantage
+over its peers continued to expand. The business foundation of the "Two Wings" was further solidified. The total
+number of corporate customers exceeded 1.8 million. The number of newly acquired corporate depositors in the year
+exceeded 400,000 which contributed daily average deposits of RMB161.482 billion. Daily average balance of RMB
+deposits from institutional customers increased by RMB71.562 billion as compared with the previous year, representing
+a year-on-year increase of 10.22%, therefore becoming the primary stable source of low-cost liabilities. With its
+outstanding achievement of ranking first in both selections, the institutional business of the Company won the bid
+for the two qualifications of the direct payment agency bank of the central government and the authorised payment
+agency bank of the central government. The market share of full-process financial services for local governments'
+special bonds accounted for more than 50%. The balance of wealth management products and asset custody business
+remained stable, both ranking second in the industry. Meanwhile, financial markets, bills, bond underwriting and other
+businesses of the Company continued to enjoy a leading position in the industry.
+China Merchants Bank
+Annual Report 2018
+Since 2018, the statistical standards of the monthly active users of CMB APP of the Company have been changed from the number of users login the
+APP to the number of users open the APP, and the data for the previous year has been adjusted accordingly.
+5
+Fintech has promoted the improvement of risk management. Retail finance monitored more than 4,000
+variables through multiple dimensions such as customer equipment, environment, and counterparty, achieving
+millisecond-level risk decision-making and billion-level data computing capabilities to prevent fraud risks.
+During the reporting period, approximately 2 billion retail financial transactions were covered. Wholesale
+finance built a risk big data platform, integrated 15 types of external data and customer transaction data
+of the Company within 3 years, and the Company has established a customer relationship map and an
+intelligent pre-warning system. Among them, the intelligent pre-warning system for corporate customers
+has been launched for 9 months, and the accuracy of pre-warning identification of risk-associated corporate
+customers was 73.05%. The online bond approval process was continuously optimised, 80% of the bond
+credit rating model of the Company was processed automatically online, and the timeliness of the approval
+process was 30% higher than the offline process.
+The application of Fintech was accelerated in wholesale finance, and the ecological perspective of
+customer operations was actively explored. With the forward-looking layout of the industry Internet, the
+Company explored industrial Internet in advance to carry out supply chain innovation and pilot application.
+The Company participated in the construction of the trade finance Blockchain platform of Guangdong-Hong
+Kong-Macao Greater Bay Area led by the central bank, and launched the first interbank multi-level accounts
+receivable transfer financing business. Being the only cooperation bank for the industrial Internet Phase I
+project of leading enterprises in petrochemical industry, the Company provided a comprehensive "Cloud Bill
+()" B2B account solution for its e-commerce platform. Working closely with leading enterprises in the
+construction industry, the Company has built a blockchain-based industrial Internet cooperation platform,
+focusing on the centralised procurement supply chain finance service for the member companies of a group.
+The corporate customer "aggregated collection" business was innovated, while the industrial scenarios
+were expanded in various fields such as highway, medical treatment, education and automobile. There was
+an increase of 28,300 corporate merchants with an annual transaction amount of RMB39.903 billion. The
+construction of a digital business platform was promoted, while CMB Enterprise APP was launched. In less
+than half a year, the number of customers and monthly active customers of CMB Enterprise APP reached
+533,900 and 205,500, respectively; and the number of online corporate banking customers and monthly
+active customers reached 1,688,900 and 823,400, respectively, with the trend of digital service system for
+corporate customers becoming more significant. During the reporting period, the online bills discounted
+business amounted to RMB205.88 billion; the number of customers of online bills discounted business
+reached 9,110, of which small and medium-sized enterprises accounted for 88.44%, and the digitalised
+inclusive finance services capability continued to improve. The number of visits by the account manager
+to the mobile corporate customer relationship management system increased to 1.53 million times in a
+single month, representing an increase of 53% as compared with the end of the previous year, and the
+management efficiency and service capabilities for corporate customers increased significantly.
+The increase in retail MAU accelerated, and digital transformation entered into a new era. During
+the reporting period, the number of monthly active users (MAU) of our two major APPs, namely "CMB
+APP" and "CMB Life APP", reached 81,046,700, representing an increase of 47.24% 5 as compared with the
+end of the previous year. These two major APPs had 27.11% and 44.21% of the traffic from non-financial
+services, respectively. The special areas in cities with branch operation had enthusiastic atmosphere, and
+41 branches and 335 outlets have established online stores. The scenario expansion focused on vertical
+segments such as travel, meal ticket and movie ticket, mall, school and medical treatment, covering urban
+public transportation, subways, parking lots and other scenarios. The construction of the digital platform
+was gradually deepened. The two major APPs became the main platforms for customer operations. The
+percentage of debit card customers acquired through online channels reached 17.89%, while the percentage
+of credit card customers acquired through data reached 61.21%. In order to optimise internal organisational
+structure and improve service quality and efficiency, the Company has established a network operation
+service center at the Head Office to carry out customer digital operation. As at the end of the reporting
+period, the network operation service center directly operated 3.86 million online retail customers, with the
+AUM of the directly-operated customers increasing by 17.84% year on year, which is 7.49 percentage points
+higher than the growth rate of the AUM of the total retail customers. By generating 1,726 user portraits for
+retail customers, the Company increased the number of applications by marketed customers by 6.56 times,
+the successful marketing ratio reached 17.42%, and the personalised recommendation of "customised for
+different people" was initially commenced.
+3.
+The "Light-operation Bank" strategy was implemented with remarkable results. Under the backdrop of stricter
+financial regulation, the general decline in income from the intermediary business and the concentrated investment
+of newly added assets in the on-balance sheet items, the Company unremittingly promoted the "Light-operation
+Bank" strategy, and the compound growth rate of the net profit of the Company was 4.69 percentage points higher
+than growth rate of risk-weighted assets under the weighted approach in the past two years. Leveraging on the
+application of Fintech, the Company will further promote the "Light-operation Bank" strategy, make the "Light
+Assets" even lighter, realise the operating model of "Light Management" and "Light Operation", and create a "Light
+Culture" environment with more Internet elements.
+2.
+The Company continued to increase its technology development expenses. During the reporting period, the
+information technology expenses amounted to RMB6.502 billion, representing a year-on-year increase of 35.17%,
+the proportion of information technology expenses to the Company's net operating income of the year was 2.78%,
+up by 0.46 percentage point as compared with the previous year. The number of Fintech project applications totalled
+931, of which 304 projects have been launched and put in use, and obvious achievements have been made in the
+construction of "Digital Bank".
+Obvious achievements have been made in the construction of "Digital Bank".
+III Report of the Board of Directors
+419,432
+6,297,638
+42
+42
+41
+1.
+Total
+199,836
+2,071
+151,548
+North-eastern China
+10
+645,313
+Taiwan Strait
+Pearl River Delta and West Side of
+13
+Central China
+12,080
+484,410
+8
+492,441
+Bohai Rim
+22
+19,659
+13
+8
+Subsidiaries
+358,334
+360,547
+3
+196,693
+3
+4.
+Overseas
+6,745
+8,108
+Western China
+1,555
+9366
+355,602
+352,226
+150,447
+11
+632,515
+9260
+15,998
+III Report of the Board of Directors
+In 2018, the Company's net interest margin was 2.64%, up by 14 basis points year-on-year, mainly due to the
+impact of monetary policies and the adjustment of its business strategy, including 1) the central bank lowered the
+deposit reserve ratio 4 times in 2018, resulting in a gradual decline in the proportion of the Company's deposits in
+the central bank to its interest-earning assets and an increase in the proportion of its proprietary loans and other
+assets with higher yield accordingly; 2) the Company continued to optimise its asset-liability structure. On the
+asset side, the Company prioritised its support to the investments in high-yield assets, and on the liability side, the
+Company actively promoted the growth of proprietary deposits, and replaced its high-cost liabilities at the right time
+which is in sync with market interest rate changes on the premise of liquidity safety; 3) the Company continued to
+improve its risk pricing capability.
+There was steady progress in the development of the Company into the bank that offers the best customer
+experience. The two major retail APPS have established a quantifiable user experience monitoring system and a
+rigorous feedback mechanism. A dedicated user experience team and a corporate Fintech experience center have
+been established for the wholesale business line. The new outlets 3.0 was debuted to present new digital experience
+for customers.
+For the 16 industries that we have reduced or withdrawn from such as coal, iron and steel, shipbuilding,
+photovoltaic and coal chemicals, the Company implemented the strategy of customer classification management,
+raised its entry threshold for customers, focused on supporting leading enterprises in industries and regional quality
+enterprises with core competitive advantages in the industry, prioritised the green credit financing needs related to
+energy conservation and emission reduction and technological upgrading of enterprises, devoted to reducing and
+withdrawing from customers associated with significant risks and low-end overcapacity, especially for customers in
+the process of reducing production capacity, deleveraging, and those meeting the "zombie enterprise" standards. In
+addition, the Company implemented stringent financing quota management and control requirements for industries,
+and actively optimised and adjusted the asset structure and customer structure through total amount control,
+elimination of the inferior and selection of the superior. As at the end of the reporting period, the financial exposure
+of the industries that we have reduced or withdrawn from (calculated on the full statistical calibre) amounted to
+RMB130.004 billion, representing a decrease of RMB21.740 billion as compared with the beginning of the year.
+Among them, the exposure of nonferrous metal smelting and calendaring and glass increased slightly as compared
+with the beginning of the year, and the exposure of other industries were reduced. The non-performing loan ratio
+was 9.55%, down by 0.54 percentage point as compared with the beginning of the year. The non-performing loan
+ratio of 7 industries, namely iron and steel, steel trade, basic chemical, engineering machinery, nonferrous metal
+smelting and calendaring, shipbuilding and metal ore mining increased as compared with the beginning of the
+year, the non-performing ratio of other industries decreased as compared with the beginning of the year mainly
+due to the exposure of risk associated with certain large customers and decline in business balances. Thanks to
+the continuous risk control over the past few years, there saw a significant decline in the financial exposure of the
+industries that the Company has reduced or withdrawn from. It is expected that the risks in those areas will be
+generally controllable in 2019.
+III Report of the Board of Directors
+8
+8.
+China Merchants Bank
+Annual Report 2018
+48
+47
+Capital management
+The broad statistical calibre of risk associated businesses has been changed, and the figures at the beginning of the year has been adjusted with the
+same calibre.
+7
+6
+In respect of local government financing platform business, the Company followed the State's policy requirements
+to standardise local government debts management, effectively strengthened the control and management of
+compliance risks and credit risks, followed the requirements of internal and external policies and systems, conducted
+related businesses in a legal and compliant manner. Through further strengthening quota management on full
+statistical calibres, the Company prioritised the allocation of its credit resources to local government financing
+platforms being operated under the market-based and commercial principles, with good cash flow and complying
+with relevant national policies, and strengthened post-lending management and monitoring. As at the end of the
+reporting period, the risk exposure of our businesses with local government financing platforms (calculated on the
+broad statistical calibre) amounted to RMB280.985 billion (including businesses such as actual and contingent
+credit, bond investments, proprietary investments and fund investments of wealth management products),
+representing a decrease of RMB5.412 billion as compared with the beginning of the year. Included therein was the
+balance of loans on balance sheet which amounted to RMB102.386 billion, representing an increase of RMB3.651
+billion as compared with the end of the previous year, and accounted for 2.80% of the total loans and advances
+granted by the Company, down by 0.19 percentage point as compared with the end of the previous year. There was
+no non-performing asset for our businesses involving local government financing platforms. Against the backdrop
+that the national fiscal and financial policies remains stable, it is expected that the quality of the Company's assets
+granted to local government financing platforms will remain stable in 2019.
+In respect of real estate credit business, by adhering to the basic principles of "controlling total amount, focusing
+on customers, focusing on regions, adjusting structure, and implementing strict management", the Company
+actively responded to national policies and dynamically adjusted its internal credit policy to allocate and invest its
+assets in the industrial development direction of house leasing, real estate asset securitisation and real estate equity
+investment according to the real estate control policies and the development status of the industry. The Company
+strengthened quota management of real estate industry, continuously optimised the classification management by
+cities and customers, and focused on the economically vibrant cities and strategic customers of the Head Office
+and branches. The Company strictly controlled the proportion of financing in the cities with constant record of
+high property price and high property inventory, strictly controlled the financing for the development of commercial
+properties, real estate projects with high leverage and high financing cost, strictly implemented the closed
+management requirements for real estate loans, and continuously optimised the asset structure. As at the end of the
+reporting period, the risk exposure of our businesses with domestic real estate enterprises (calculated on the broad
+statistical calibre) 6 amounted to RMB484.547 billion (including businesses such as actual and contingent credit,
+bond investments, proprietary trading and investment of wealth management products in non-standard assets),
+representing an increase of RMB38.080 billion as compared with the beginning of the year. Included therein was
+the balance of loans to domestic real estate enterprises which amounted to RMB245.121 billion, representing an
+increase of RMB60.565 billion as compared with the beginning of the year, and were mainly granted to the quality
+strategic customers while putting a strict curb on the grant of any incremental loans to those customers not in the
+strategic customer list. Balance of such loans accounted for 6.71% of the total loans and advances granted by the
+Company, up by 1.13 percentage points as compared with the beginning of the year. As at the end of the reporting
+period, the assets in the domestic real estate enterprises were of better quality with a non-performing loan ratio of
+1.09%, down by 0.43 percentage point as compared with the beginning of the year. In 2019, it is expected that the
+risks associated with real estate industry are mainly concentrated in third- and fourth-tier cities with slow destocking,
+as well as some small and medium-sized real estate enterprises with high leverage. The Company has timely adjusted
+the credit management and control policies. It is expected that without significant changes in macro environment
+and industrial policies, the asset quality of the Company in the real estate sector will remain relatively stable.
+In response to changes in external macroeconomic environment, the Company proactively strengthened the control
+of its risks associated with real estate industry, local government financing platforms, the industries from which our
+loans should be reduced and recovered and other key areas.
+Asset quality in key areas
+7.
+In 2018, the Company implemented the newly revised National Economic Industry Classification (GB/T 4754-2017) standard issued by the General
+Administration of Quality Supervision, Inspection and Quarantine and the National Standards Committee to classify the industries and adjust the figures
+at the beginning of the year with the same statistical calibre. The broad statistical calibre of risk associated businesses has been changed, and the figures
+at the beginning of the year has been adjusted with the same calibre.
+III Report of the Board of Directors
+The Company continued to optimise its business structure and enhance capital management. During the reporting
+period, the Company satisfied the minimum capital requirements, the reserve capital requirements and the
+counter-cyclical capital requirements of the CBIRC. The capital buffer was sufficient.
+As at the end of the reporting period, the growth rate of risk-weighted assets (without taking into consideration
+the floor requirements during the parallel run period) under the advanced approach of the Company was only
+6.69%, lower than the growth rate of risk-weighted assets under the weighted approach of 9.60%, which was
+mainly attributable to the Company's continuous promotion of the strategy of "Light Capital", resulting in further
+optimisation in the business structure. The growth rate of risk-weighted assets (having taken into consideration the
+floor requirements during the parallel run period) under the advanced approach was 16.43%, significantly higher
+than the growth rate of the risk-weighted assets under the weighted approach, which was mainly due to the
+impact of regulatory measurement rules requiring more risk-weighted assets to be added back under the advanced
+approach. According to the regulatory minimum capital calculation rules, the risk-weighted assets added back from
+the minimum capital under the advanced approach are positively related to their over-allowances. As the Company
+has adhered to a more prudent and sound risk management strategy, the allowances in 2018 were more adequate
+and the over-allowances calculated into the Tier 2 capital under the advanced approach increased correspondingly.
+Therefore, the risk-weighted assets added back from the minimum capital increased by RMB324.3 billion as
+compared with the previous year, thereby accelerating the growth in the risk-weighted assets under the advanced
+approach (taking into consideration the floor requirements during the parallel run period). As at the end of the
+reporting period, the capital adequacy ratio of the Company under the advanced approach increased as compared
+with the end of the previous year while the Tier 1 capital adequacy ratio and core Tier 1 capital adequacy ratio
+declined as compared with the end of the previous year, mainly due to an increase in the over-allowances which may
+be included into the Tier 2 capital. The growth rate of net capital was higher than the growth rate of risk-weighted
+assets (having taken into consideration the floor requirements during the parallel run period) while the increases
+in net Tier 1 capital and net core Tier 1 capital compared with the end of the previous year were lower than the
+growth rate of risk-weighted assets (having taken into consideration the floor requirements during the parallel run
+period).
+Notwithstanding the unfavorable factors, China's economic growth will remain resilient in 2019. The demand for
+infrastructure investment is expected to rebound from the bottom. With the completion of the investigation into
+local governments' hidden debts and the clarification of local governments' borrowing rules, financing channels
+such as local governments' special bonds and PPP are expected to be more efficient. In respect of the investment
+in the manufacturing sector, those high energy-consuming projects such as mining, metallurgy and petrochemical
+projects will undergo a much slower growth, while investment in those high-tech projects such as equipment and
+information are expected to increase much faster; the investment in household decoration and building materials
+will remain at a high level. Domestic consumption is expected to be boosted with further tax cuts. Benefiting from
+its complete production categories and industrial chain, China's export is expected to maintain its resilience, which
+gains time and space for the mitigation of trade friction. The Producer Price Index (PPI) of industrial producers may
+decline significantly due to the drop in bulk commodity prices, while the Consumer Price Index (CPI) is expected to
+maintain a mild inflation pattern. In 2019, the appreciation of the US dollar may be diminished, which will help ease
+the pressure on the depreciation of RMB. With the Chinese economy maintaining its stable growth, the pressure of
+depreciation of RMB in the long term is expected to be insignificant.
+Looking into 2019, the global geopolitical risks will be accumulating amid the populist gloom. Global trade activities
+is slowing down, which will hinder the global economic growth. With the impact of the US fiscal stimulus gradually
+fading out, the global economy will slow down in a synchronised manner. Affected by this, the global liquidity
+contraction will tend to ease. Domestically, the economy will face greater downward pressure on its growth.
+The dual pressure of short-term decelerating growth and long-term structural contradiction has overlapped, and
+the adverse effect of trade friction may gradually emerge. On the one hand, traditional growth drivers such as
+infrastructure investment and property development are obviously weaker than their historical performance, and the
+trade surplus may be narrowed. On the other hand, the driving force for domestic consumption is weakening, the
+efforts in cultivating new industries appear inefficient, the improvement in total factor productivity is limited, and
+new economic growth drivers are still to be cultivated.
+3.9.2 Outlook and countermeasures for 2019
+On the other hand, the Company will strengthen the construction of a digital data platform at middle office,
+reinforce the digital operation capability for billion-level customers through more intelligent and efficient network
+management tools and methods, and improve the quality and efficiency of the whole process of customer
+operations. Firstly, by leveraging on the two major APPS, the Company will create a digital service platform to
+improve its digital operation by carrying out intelligent data application marketing, risk control, customer service
+and operation with the help of Fintech. Secondly, the Company will enhance Fintech infrastructure construction by
+focusing on "cloud + API + Blockchain" and "Data + Al", so as to establish an open and intelligent Internet business
+ecosystem and service system. Thirdly, the Company will carry out digital process reengineering based on "customer
+journey map" to examine and rebuild the entire process of the services of the Company from a customer's
+perspective, so as to realise the best balance of customer experience, business efficiency, risk control and operating
+costs.
+On the one hand, the Company will enhance its customer acquisition capability and user conversion capability, carry
+out traffic management by focusing on the construction of effective core scenarios, and establish the channel for
+user-to-customer conversion. Firstly, by adhering to the strategy of "promoting the two APPS at the same time", the
+Company will build an Internet customer acquisition system with large traffic, full customer base and high efficiency
+to promote a rapid traffic growth. Secondly, by focusing on the scenario construction to cater for basic daily
+needs of users, such as travel, medical care and education, the Company will offer its financial service capabilities
+through the "Cloud + API (application programming interface)" model, so as to strengthen customer loyalty and
+product penetration ratio. Thirdly, through constant improvement in wealth management scenarios and consumer
+finance scenarios, the Company will promote the connection between traffic growth and traffic conversion in an
+orderly manner, explore the new model for value realisation of closed-loop traffic management and fully exploit the
+potential value of customers.
+In 2019, the Company will continue to use MAU as the North Star Metric and implement the "mobile priority"
+development strategy. By focusing on building the capability of acquiring mass customers at low cost and the
+capacity of digital operation, the Company will fully exploit the potential value of customers and technology, so as
+to forge the new growth engines for the future.
+Advancement in monthly active users (MAU)
+As at the end of the reporting period, the percentage of the Company's risk-weighted assets under the weighted
+approach to total assets was 67.53%; the percentage of risk-weighted assets (having taken into consideration
+the floor requirements during the parallel run period) under the advanced approach to total assets was 58.21%,
+lowered by 9.32 percentage points as compared to that under the weighted approach, indicating an effective
+saving in capital. The risk-adjusted return on capital (RAROC) before tax under the advanced approach was 27.56%,
+significantly higher than the cost of capital.
+According to the Company's capital planning during the period from 2019 to 2021, our goals for core Tier 1 capital
+adequacy ratio, Tier 1 capital adequacy ratio and capital adequacy ratio will reach and be maintained at above 9.5%,
+10.5% and 12.5%, respectively. Despite the consecutive promulgation of the New Regulation on Asset Management
+and the "Guidelines on Improving the Supervision of Systemically Important Financial Institutions (
+24±1##ET)", the capital adequacy ratio of the Company is expected to achieve its goals. The
+Company will stick to the following principles in capital supplement: fund generation and accumulation are mainly
+from internal resources, with capital replenishment through external resources as additional assistance; fund-raising
+is achieved through various channels and ways. Currently, the Company does not have any share capital financing
+schemes. The Company will continue to enhance the concept of refined capital management, and promote the
+application of the risk adjusted return on capital (RAROC), the economic value added (EVA) and other valuation
+indicators. By closely following the progress of international capital regulatory reform, the Company will continue
+to implement the internal capital adequacy assessment procedures (ICAAP), keep a dynamic balance of supply and
+demand of capital, and plan the utilisation of various capital tools in a comprehensive way.
+III Report of the Board of Directors
+9.
+China Merchants Bank
+Annual Report 2018
+49
+49
+The 16 industries refer to coal, coal chemical, coal trade, iron and steel, steel trade, basic chemical, commonly used metal ore mining, nonferrous metal
+smelting and calendaring, shipbuilding, glass, water transport, textile and chemical fiber, photovoltaic, fertiliser, engineering machinery and machine
+tool.
+The Company adhered to the development strategies of marketisation, branding and internationalisation, and
+constantly promoted the innovation and development of assets securitisation business to provide extra capacity for
+capital saving. As at the end of the reporting period, the Company totally issued 32 phases of credit asset-backed
+securities, with the aggregate issuance volume of RMB179.206 billion, leading in the industry in terms of types of
+assets and market share.
+In 2018, by considering a series of factors such as macroeconomic trends, the capital planning objectives of
+the Company, business development, and redemption arrangement of existing Tier 2 capital instruments in a
+comprehensive manner, the Company completed the issuance of domestic Tier 2 capital bonds on 19 November
+2018. The RMB20 billion capital raised effectively replenished Tier 2 capital and increased the capital adequacy ratio
+of the Company.
+We enjoy an industry-leading capability in basic technologies. The Company preliminarily established a
+hybrid cloud-based infrastructure to accelerate the construction of cloud computing and a distributed trading
+platform, so that the total number of X86 servers installed was 2.71 times of that at the end of the previous
+year. One-third of the applications have been uploaded to cloud, and the process capacity of the distributed
+platform reached 32,000 per second, ranking top in the industry. Total capacity of data pool continued
+to expand. Data imported into the pool increased by 53.91% from the previous year. The Company has
+established a big data processing platform, strove to integrate all types of data and, by taking the customer-
+centric approach, integrated customer data through a nine-dimensional assessment to create 17,000 data
+items and establish the uniform customer profile on an ongoing basis. As a result, the Company has not only
+realised data intercommunication between credit cards and debit cards, but also connected the corporate
+customers and retail customers across different business lines. The Company has realised the integration
+and innovation of technology and businesses through agile development in 53 business areas, and the demand
+response speed has been greatly improved.
+China Merchants Bank
+Annual Report 2018
+In addition, since the reactivation of the pilot project of debt-to-equity conversion in 2016, in accordance with
+the State Council's "Guidelines for Marketisation of Debt-to-equity Conversion of Banks", the Company carefully
+selected qualified debt-to-equity conversion subjects, reasonably formulated debt-to-equity conversion plans, and
+actively and steadily promoted the implementation of the debt-to-equity conversion projects.
+Since 2018, on the one hand, with the gradual slowdown in the general demand, the pressure on economic
+fundamentals has gradually emerged, and the growth rate of effective financing demand of enterprises and
+residents has declined. On the other hand, the financial deleveraging effect since 2017 still exists, and the deposit
+derivation channels of financial institutions have also showed a certain degree of contraction. Under the influence
+of the above factors, the growth rate of deposits of financial institutions was generally slower than that of loans,
+and the loan-to-deposit ratio showed an overall upward trend. As of the end of the reporting period, the Company's
+total loans and advances increased by 10.45% as compared with the end of the previous year, the deposits from
+customers increased by 8.26%, and the domestic time-point loan-to-deposit ratio was up by 1.3 percentage points
+as compared with the previous year. At the same time, however, the Company seized the opportunity of loosening
+market liquidity from the second quarter of 2018 to replace some high-cost liabilities with the active liabilities with
+relatively lower costs which, while supporting the growth of loans, also maintained the stable operation of liabilities,
+effectively relieving the upward pressure on the liability costs.
+Proprietary deposits
+In 2019, affected by various factors such as the continuing deceleration of the macro economy, the complicated
+and volatile international situation and the transformation of asset management, the growth of net non-interest
+income of the Company will face greater pressure. The Company will firmly adhere to the "Light-operation Bank"
+strategy, return to the origin of customer service, reinforce the basic management of the intermediary business, and
+actively explore potential customers and businesses to increase income, so as to promote the growth of non-interest
+business. Specific measures to be implemented include: firstly, the Company will consolidate its advantages in retail
+business, by adhering to the customer-centric concept and the mission of value creation for customers, the Company
+will enhance its investment management capabilities, and establish an intelligent product and service system with
+the concept of asset allocation, so as to promote the sustainable growth of wealth management business. By further
+promoting retail digital transformation, focusing on key areas, and strengthening scenario expansion, the Company
+will promote the rapid growth of MAU, strengthen its own customer acquisition capacity, and tamp solid foundation
+for the growth of retail non-interest income business. Secondly, the Company will improve the customer service
+system, achieve in-depth customer base operations through comprehensive financial services, and optimise the
+business structure. Starting from the basic settlement, the Company will realise the recovery in the growth of trade
+finance; and by seizing the market opportunities of the bill business and grasping the structural opportunities of
+the custody business, the Company will realise the steady growth of non-interest income from wholesale business.
+Thirdly, the Company will adhere to the compliance bottom line, strengthen its internal control and compliance
+management, regulate fee collections, and promote the Company's non-interest business to further return to its
+origin and standardise its operation.
+III Report of the Board of Directors
+4.
+3.
+China Merchants Bank
+Annual Report 2018
+In 2019, the macroeconomy will continue to face the downward pressure, the growth of deposits in the financial
+system is expected not to be optimistic, and the competition for deposits will remain fierce. In addition, with an
+improvement in residents' investment awareness, the deposit costs will increase rigidly. Therefore, the increase in the
+proprietary deposits of the Company will also face some challenges. The Company will further improve the quality of
+liabilities in light of the macro operating environment. Firstly, the Company will actively promote the steady growth
+in general low-cost deposits, improve customers' cohesion through product innovation, and maintain a better deposit
+structure to keep deposit costs at a reasonable level. Secondly, the Company will constantly enrich the sources of
+liabilities and, while maintaining the steady growth of proprietary deposits, will flexibly make arrangements for
+active liabilities such as interbank certificates of deposits, so as to keep a "balance between quantity and price" of
+liabilities.
+44
+During the reporting period, the Company realised net non-interest income of RMB77.936 billion, up by 17.82%
+year-on-year, which accounted for 33.33% of the Company's net operating income, up by 1.40 percentage points
+year-on-year. The increase in net non-interest income was mainly due to: firstly, the impact of implementing the new
+financial instrument standard; secondly, benefiting from the growth in wealth of residents, the income from wealth
+management businesses such as agency funds and agency trust schemes increased gradually; thirdly, in line with
+the development trend of consumer finance, income from credit card business achieved steady growth; fourthly, the
+increase in bond valuations and exchange gains and losses driven by market yields and exchange rate fluctuations.
+During the reporting period, confronting the tightened regulatory policies, transformation of asset management,
+and the returning of wealth management to the fundamentals of businesses, the Company proactively seized the
+opportunities in the capital market at the beginning of the year and leveraged on the channel advantages to achieve
+recovery in the growth of agency funds. Meanwhile, driven by the increase of commission income of credit cards
+and instalment income from merchants, the Company recorded fee and commission income of RMB67.53 billion,
+representing a year-on-year increase of 4.86%. For key projects, the Company's fee and commission income from
+wealth management amounted to RMB25.147 billion, representing a year-on-year decrease of 3.67% (of which:
+income from entrusted wealth management services amounted to RMB7.642 billion, down by 37.50% year-on-year.
+Income from agency distribution of funds amounted to RMB6.668 billion, up by 32.20% year-on-year, which was
+mainly due to the recovery in the demand for agency distribution of funds, and the sales of funds recording a
+substantial year-on-year increase during the reporting period thanks to the Company's advantages in customer
+groups, channels and services. Income from agency distribution of trust schemes amounted to RMB5.988 billion,
+up by 66.10% year-on-year. Income from agency distribution of insurance policies amounted to RMB4.746 billion,
+down by 6.59% year-on-year, mainly due to the impact of insurance regulatory policies and the significant shrinkage
+of major single premium products sold in the bancassurance market. Income from agency distribution of precious
+metals amounted to RMB103 million); income from bank card fees amounted to RMB16.624 billion, up by 19.48%
+year-on-year; income from settlement and clearing fees amounted to RMB10.241 billion, up by 11.56% year-on-year
+calculated on the same statistical calibre; custodian fee income amounted to RMB4.439 billion, down by 8.57%
+year-on-year. Please refer to section 3.2.6 for an analysis of the changes in the Group's net non-interest income.
+Net non-interest income
+In 2019, the economic operation will remain under pressure, and the effective financing demand, especially that
+of enterprises, will generally remain weak. At the same time, the central bank will maintain market liquidity at a
+reasonably adequate level, and the market interest rates will still have room to drop further. Commercial banks will
+still face some pressure to effectively increase its interest-earning assets and stabilise its yields, and the risk-free
+margins of enterprises and residents will remain high, resulting in further increase in deposit costs. Therefore, the net
+interest margin of the Company will also face some narrowing pressure. The Company will persistently adhere to the
+"Light-operation Bank" strategy, make pre-judgments over the situation and policies, strengthen the predictability
+and flexibility in assets and liabilities management, further optimise the asset and liability structure and improve the
+risk-pricing management capabilities, striving to maintain its net interest margin at an optimal level.
+745,677
+2.
+1.
+3.9 Changes in external environment and corresponding measures
+3.9.1 Impacts of changes in operating environment and key business concerns
+Net interest margin
+43
+In 2019, there are still many uncertainties in the macro environment at home and abroad. The reduction and
+recovery of loans granted to the existing customers with high risks become increasingly difficult, and the downturn
+of asset prices has made the disposal of non-performing assets more difficult, therefore the asset quality control
+of the Company will face greater challenges. The Company will continue to promote the optimisation of industry
+and customer base structure, formulate more accurate credit access standards, apply Fintech to improve the risk
+pre-warning system, accelerate the disposal of risk assets through multi-channels, and strive to stabilise asset quality.
+Investment of corporate loans
+China Merchants Bank
+Annual Report 2018
+During the reporting period, the Company continued to strengthen the disposal of non-performing loans, and used
+a number of methods to manage risk assets. In 2018, the Company disposed of non-performing loans amounting to
+RMB39.064 billion, of which RMB20.202 billion was written off in a normal way, RMB11.072 billion was cleared and
+settled, RMB4.334 billion was securitised as non-performing assets, RMB1.349 billion was transferred at discount,
+and RMB2.107 billion was disposed of by restructuring, upward migration, repossession, remission and other means.
+In 2018, the Company relied on its efficient and sophisticated operating mechanism of asset securitisation to
+continue to accelerate the process of securitisation of the non-performing assets. During the reporting period, the
+Company launched three securitisation projects, for which non-performing assets with principal value in aggregate
+of RMB4.334 billion were disposed of, and the nominal value of securities issued amounted to RMB740 million. The
+Company holds 5% of each tranche of such securities in accordance with regulatory requirements. The remaining
+securities were subscribed for by investors in the open market. The securitisation of the non-performing assets of
+the Company concluded with a number of achievements, i.e. establishment of a market-based issuing and pricing
+mechanism, realisation of real sale and bankruptcy ringfencing of the assets, transmission from asset holding to
+asset services, optimisation of the assets and liabilities structure, and improvement on asset liquidity and revenue
+structure.
+As at the end of the reporting period, the non-performing loan ratio of the Company was 1.41%, representing a
+decrease of 0.26 percentage point as compared with the end of the previous year, while the proportion of special
+mention loans in total loans was 1.56%, down by 0.10 percentage point from the end of the previous year; the
+proportion of overdue loans in total loans was 1.65%, down by 0.12 percentage point from the end of the previous
+year. The loan allowance ratio was 5.14%, up by 0.70 percentage point from the end of the previous year. The
+allowance coverage ratio of non-performing loans was 363.21%, representing an increase of 98.17 percentage
+points as compared with the end of the previous year. The credit cost ratio was 1.68%, representing a decrease of
+0.20 percentage point as compared with the end of the previous year. The risk exposure was generally controllable.
+During the reporting period, both the ratio and amount of non-performing loan formation of the Company
+decreased. In general, the new formation of non-performing loans in 2018 amounted to RMB35.278 billion,
+representing a decrease of RMB1.259 billion or 3.45% as compared with the previous year, and the non-performing
+loan formation ratio was 1.01%, representing a decrease of 0.15 percentage point as compared with the previous
+year. Analysing by business segment, the amount and ratio of non-performing loan formation decreased in both
+corporate and retail loan businesses (excluding credit cards); analysing by geographic area, the amount and ratio of
+non-performing loan formation in the Yangtze River Delta, Western China and Central China continued to decline,
+while the non-performing loan formation in Northeastern Region increased; analysing by industry, both the amount
+and ratio of non-performing loan formation in the manufacturing, wholesale and retail industries declined as
+compared with the previous year; analysing by customer base, both the amount and ratio of non-performing loan
+formation in small and medium-sized enterprises also declined as compared with the previous year; the amount of
+non-performing loan formation in large-sized enterprises increased despite of a decrease in its non-performing loan
+formation ratio.
+6. The formation and disposal of non-performing assets
+III Report of the Board of Directors
+China Merchants Bank
+Annual Report 2018
+46
+46
+Since the second half of 2018, due to factors such as the downturn in general macroeconomic trend, the growth
+rate of corporate loans of the Company has slowed down. In 2019, the effective financing demand of enterprises
+will remain at low level, and the source of quality assets is expected to further decrease. At the same time, the
+monetary policy will continue to keep market liquidity at a reasonably sufficient level, and the overall market interest
+rate will remain at a low level. The effect of replacing corporate loans with corporate direct financing will also be
+more significant. It is expected that the growth rate of corporate loans of the Company will be slightly slower than
+that in 2018. In order to overcome the above challenges, the Company will further strengthen asset allocation and
+optimise asset structure. Firstly, the Company will set the reasonable growth rate of loans in light of the judgement
+over macro situation. It is expected that the overall loan growth will generally remain at the same level as in 2018.
+Meanwhile, by adhering to the strategic direction of "Light-operation Bank", the Company will constantly optimise
+the allocation of its asset portfolio, and moderately increase investment in retail credit resources. Secondly, the
+Company will strengthen the dynamic and flexible credit management mechanism, flexibly set the pace of credit
+supply based on its forward-looking judgments and the changes in situation, adjust the credit asset structure in
+a timely manner, and promote the steady growth of credit assets throughout the whole year. Thirdly, by focusing
+on the improvement of professional capabilities, enhancing industrial research capabilities, and strengthening
+specialised operation for different industries, the Company will seize the structural opportunities of shifting from old
+to new growth engines, and improve its comprehensive service capabilities towards customers, so as to make further
+breakthroughs in in-depth customer operations.
+55
+For further details of the Company's asset management business, please refer to section 3.10.2 "Asset Management
+Business".
+The Company highly recognises and firmly supports the New Regulation on Asset Management, the New Regulation
+on Wealth Management and the Administrative Measures for Wealth Management Subsidiaries. The Company
+believed that the duly implementation of the New Regulation on Asset Management will, on one hand, regulate
+the development of asset management business, and systematically address the issues in asset management industry
+accumulated during the process of rapid development. The New Regulation on Asset Management will play an
+important role in fostering the asset management business of banks to return to their business origin, mitigating
+the risk of the asset management business of banks, and contributing to the real economy in a better way, and
+will become a milestone for the standardised development of the asset management business across the industry.
+On the other hand, the asset management business of banks will gradually reduce the scale of non-qualified
+wealth management products during the transition period for implementation of the New Regulation on Asset
+Management, and cease to invest in non-qualified assets. Meanwhile, it also needs some time for customers
+to accept net-value products, which will pose great challenges to the transformation, development and income
+growth of the asset management business of various banks in the short term. The New Regulation on Wealth
+Management, as the supporting implementation rules for the New Regulation on Asset Management, has the same
+general requirements as the New Regulation on Asset Management, but appears more stringent in terms of the
+investment target of public funds, sales management, investment negative lists, non-standard credit investments,
+product grading and management of cooperative institutions. Meanwhile, it set forth the requirements on more
+stringent standards, richer contents and more specific operation in the aspects of centralised registration, related
+party transactions, staff management, sales management, stress test, custody of wealth management products,
+information disclosure, as well as supervision and management. Generally, the impact of the New Regulation on
+Wealth Management on the Company's wealth management business is expected to be limited. The main reasons
+are as follows: on the one hand, following the implementation of the New Regulation on Asset Management,
+the Company has been closely following its requirements and putting in place various countermeasures. Through
+continuous communication with the regulatory authorities, the Company has already obtained adequate knowledge
+of the main information of the New Regulation on Wealth Management. On the other hand, the arrangements for
+the transition period for implementation of the New Regulation on Wealth Management are in line with those for
+the New Regulation on Asset Management, and the Company may cease to apply the New Regulation on Wealth
+Management after the establishment of its wealth management subsidiaries, which also objectively helps to reduce
+or eliminate the impact of the New Regulation on Wealth Management on the business of the Company. The
+Administrative Measures for Wealth Management Subsidiaries is a supporting system of the New Regulation
+on Wealth Management, which is of great significance to put into practice the application for the establishment
+of the wealth management subsidiaries of banks. During the Reporting Period, the Board of Directors of the
+Company has reviewed and approved the proposal to establish its asset management subsidiary. With reference
+to the requirements of the Administrative Measures for Wealth Management Subsidiaries and the "Guidelines
+on Implementation of Administrative Approvals for Non-Bank Financial Institutions", the Company has formally
+submitted to the CBIRC a complete set of materials for the establishment of its wealth management subsidiaries,
+and is awaiting its approval. Meanwhile, the Company is also promoting various transformation works internally to
+ensure a smooth transition to the wealth management subsidiary.
+Subsidiaries").
+During the reporting period, the People's Bank of China ("PBOC"), the CBIRC, the CSRC and the State
+Administration of Foreign Exchange issued the Guidance on Regulating the Asset Management Business of Financial
+Institutions (UŒÂ·¤¤¤à¥¤¤¾DHA) (hereinafter referred to as the "New Regulation on Asset
+Management"). Subsequently, the CBIRC issued the Administrative Measures for Wealth Management Business of
+Commercial Banks (☀KKITI»)(hereinafter referred to as the "New Regulation on Wealth
+Management") and the Administrative Measures for Wealth Management Subsidiaries of Commercial Banks (
+*)(hereinafter referred to as the "Administrative Measures for Wealth Management
+New policies on asset management business and countermeasures
+III Report of the Board of Directors
+5.
+45
+12
+3.7 Other financial disclosures under the regulatory requirements
+3.7.1 Balance of off-balance sheet items that may have a material effect on the
+financial position and operating results and the related information
+Yangtze River Delta
+90,680
+248,444
+106,497
+9,639
+5,481
+13,306
+8,320
+103,015
+36,784
+109,295
+39,914
+108,383
+48,415
+125,843
+58,263
+Net
+operating
+income
+before tax
+by business
+segments
+221,037
+During the reporting period, the percentage of profit from retail finance of the Group increased. Profit before tax
+amounted to RMB58.263 billion, up by 20.34% from the previous year, accounting for 59.34% of the profit before
+tax of the business line; net operating income amounted to RMB125.843 billion, up by 16.11% from the previous
+year, accounting for 50.65% of the net operating income of the Group, representing an increase of 1.62 percentage
+points from the previous year. At the same time, the cost-to-income ratio of retail finance business was 35.47%,
+representing a decrease of 0.55 percentage point as compared with the previous year.
+Geographical segments
+The major outlets of the Group are located in the major economic centres of China and some large cities in other
+regions. The following table sets forth the segment results of the Group by geographical location in the periods
+indicated.
+777,607
+Yangtze River Delta
+11
+12,017
+44
+Percentage
+(%)
+Amount
+Percentage
+(%)
+income
+Amount
+2,739,929
+3,129,174
+Head Office
+Percentage
+(%)
+Amount
+(in millions of RMB, except for percentages)
+Total profit before tax
+2018
+Total liabilities
+31 December 2018
+Total assets
+31 December 2018
+46
+12
+segments
+Profit
+the reporting
+the reporting
+General risk
+value during
+Distressed risk
+value during
+Value at the end of the period
+Minimum value
+Average value
+Maximum value
+Item
+3
+4
+2
+1
+(in millions of RMB)
+No.
+The Group's market risk capital under the internal model approach was calculated using the market risk value
+based on 250 days of historical market data, a confidence coefficient of 99% and a holding period of 10 days. The
+following table sets forth the market risk value indicators of the Group as at the end of the reporting period:
+III Report of the Board of Directors
+China Merchants Bank
+Annual Report 2018
+40
+40
+period
+period
+1,328
+253
+Profit
+before tax
+by business
+2017
+2018
+Total
+Other businesses
+Wholesale finance
+Retail finance
+761,970
+Net
+operating
+Items
+Business segments
+3.6 Results of operating segments
+165
+889
+126
+668
+403
+2,038
+The principal businesses of the Group include retail finance and wholesale finance. The following table summarises
+the operating results of each business segment of the Group for the periods indicated.
+759,258
+(in millions of RMB)
+24,040
+Annual Report 2018
+III Report of the Board of Directors
+China Merchants Bank
+100
+106,497
+100
+6,202,124
+100
+6,745,729
+Total
+10
+10,337
+7
+376,424
+6
+465,295
+3
+Total assets
+31 December 2017
+Total liabilities
+31 December 2017
+12
+17
+15,387
+44
+2,557,785
+46
+2,908,217
+Head Office
+3,041
+Percentage
+(%)
+(%)
+Amount
+(%)
+Amount
+(in millions of RMB, except for percentages)
+Percentage
+Percentage
+Total profit before tax
+2017
+Amount
+4
+6
+4
+144,367
+North-eastern China
+18
+19,279
+11
+679,961
+10
+693,830
+2
+Taiwan Strait
+16,383
+8
+513,813
+8
+526,143
+Bohai Rim
+23
+234,741
+15
+146,060
+Pearl River Delta and West Side of
+(1,320)
+240,080
+2
+10,790
+6
+371,913
+380,152
+Subsidiaries
+Overseas
+6
+10
+11
+11,930
+6
+380,025
+6
+389,081
+Western China
+Central China
+(1)
+Transaction banking business and offshore banking business
+With respect to the settlement and cash management, the Company continued to promote the system construction
+of corporate account management as well as payment and settlement, optimised and upgraded basic settlement
+products from the perspective of enhancing customer experience, and enlarged customers' settlement flow and
+settlement activity in the Company. Thanks to its continuous efforts to consolidate the "C+ Cash Settlement
+Solution" brand, the Company recorded 298,400 newly opened accounts. During the reporting period, the
+Company launched "All-in-one Cards for Company ()" highlighting "integration of all functions" with
+a combination of identification, account management, deposit, withdrawal and transfer of funds. As at the end of
+the reporting period, the number of "All-in-one Cards for Company" customers reached 1,291,900, accounting for
+69.53% of the total number of corporate customers, and the total number of accounts opened reached 2,525,700.
+Focusing on the management of accounts with different tiers, accounts both onshore and offshore, as well as the
+management of capital liquidity and the value-added need of strategic corporate customers, the Company continued
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+Investment banking business
+In terms of trade finance, the Company actively promoted the "light capital" business model to optimise the business
+operation process, focused on serving strategic customers' international trade financing business, strengthened the
+promotion of key products such as "Making Payments on Behalf of Customers for Imports & Exports (1)",
+"Engineering Guarantee (IR)" business and packaged non-recourse export factoring, and innovated on "Export
+Pool Finance ()" products to promote the steady growth of international trade financing investment
+through various measures. During the reporting period, the on- and off-balance sheet financing for international
+trade of the Company amounted to USD18.953 billion, representing a year-on-year increase of 9.55%. At the same
+time, in domestic trade financing, the Company actively optimised business processes, promoted online factoring
+business and vigorously promoted featured factoring business to meet customers' deleveraging needs. Through
+buyer's non-recourse factoring, joint factoring, refactoring and other products, the Company improved its market
+penetration capability in the industries of pharmaceutical circulation and infrastructure. During the reporting period,
+the Company's domestic factoring business amounted to RMB233.067 billion, representing a year-on-year growth of
+33.50%, of which featured factoring business accounted for RMB44.565 billion.
+With respect to its offshore businesses, the Company returned to its origin of customer service, focused on
+customers from the new economic sectors, and explored sales to targeted unicorns and quasi-unicorn enterprises
+through a carefully compiled list; promoted business transformation and innovation, accelerated Fintech application,
+improved the ability to serve customers through system building, and promoted management refinement. As at
+the end of the reporting period, the balance of deposits from offshore customers of the Company amounted to
+USD14.260 billion, the balance of loans granted to offshore customers amounted to USD7.924 billion, and the
+non-performing loan ratio was 0.27%. During the reporting period, the international settlements amounted to
+USD287.896 billion.
+During the reporting period, the Company focused on the segmentation- and classification-based management, as
+well as the intensive management of corporate customer bases, refocused on its business origin, and centred on
+the two competitive product lines of transaction banking and investment banking to serve its customers, enhancing
+the overall contribution and loyalty of its customers while realising a steady growth in corporate deposits. As at
+the end of the reporting period, the balance of corporate customer deposits amounted to RMB2,774.696 billion,
+representing an increase of 4.36% as compared with the end of the previous year; the daily average balance
+amounted to RMB2,738.819 billion, representing an increase of 5.34% as compared with the previous year; the
+demand deposits accounted for 56.06% of the balance of the daily average deposits from our corporate customers.
+During the reporting period, the average cost ratio of deposits from corporate customers was 1.68%, up by 0.17
+percentage point year-on-year.
+to advance the optimisation and promotion of Innovative Settlement Deposits, Virtual Cash Pool, Multi-level Cash
+Pool, Global Cash Management (GCM) and other products. As at the end of the reporting period, the Company had
+a total of 1,709,800 customers using its cash management service, representing an increase of 22.48% as compared
+with the end of the previous year. The Company upgraded its cash management platform, enriched the product
+offering, launched a special Cross-bank Solution for Cash Management for small-sized and medium-sized enterprises
+(CBS mini), released unified version of the Treasury Management System (TMS) and CBS APP3.0 applicable to
+financial companies, and became the first bank in the industry to launch the CBS-TT cloud platform solution for
+global cash management. The Company offered its cash management services to 2,120 group customers in total, the
+number of member enterprises under management reached 50,800, and the transaction amount exceeded RMB10
+trillion. At the same time, the Company explored scenario operation of different demands from business customers,
+and launched various products including aggregated collection (A), "Transaction Keeper ()", "Yin Fa
+Tong ()", the e-payment system for aggregate tax payments with customs, "Cloud Bill ()" B2B payment
+system and others.
+With respect to its cross-border finance, the Company focused on five major scenarios covering enterprise
+cross-border procurement, sales, investment, financing and financial management, launched the comprehensive
+cross-border finance services for 10 industries, and promoted the transformation of marketing model from a single
+product portfolio to a comprehensive industry operation. At the same time, the Company continued to optimise
+the basic international business processes and promote online services, launched SWIFT GPI system, electronic
+bills system for trade in goods, etc., so as to promote paperless operation and real-time exchange of remittance
+information. As at the end of the reporting period, the onshore international settlements of the Company amounted
+to USD203.516 billion. The foreign exchange settlements amounted to USD134.945 billion.
+56
+With respect to discounted bill transfer business, the discounted bills transferred to other banks or financial
+institutions amounted to RMB717.649 billion, with a year-on-year decrease of 77.01% due to the implementation of
+the New Regulation on Asset Management during the reporting period. Business in central bank bill rediscounting
+amounted to RMB119.426 billion, with a year-on-year growth of 33.22%. The volume of both discounted bill
+transfer and bill rediscounting continued to stay ahead in the industry.
+During the reporting period, the Company had 66,533 customers of bill business, representing a year-on-year
+increase of 53.84%, and its bills direct discounting business amounted to RMB1,025.514 billion, representing a
+year-on-year increase of 30.95%, ranking second in the market in terms of business volume (data from the China
+Banking Association). As at the end of the reporting period, the bill discounting balance of the Company amounted
+to RMB145.633 billion, representing an increase of 28.11% from the end of the previous year.
+During the reporting period, the Company's bill business, by leveraging on its Fintech advantages and system
+advantages, further enhanced its market competitiveness and the customer experience through continuous product
+innovation and process optimisation. Firstly, in order to make the forward-looking preparations for the forward
+settlements of enterprises and the securitisation trend of short-term financing, the Company initially completed
+the development of "Bills Manager", a complete bills service platform, becoming the first large and medium-sized
+commercial bank in the market to provide enterprises with the non-stop comprehensive bills service. Secondly, our
+product innovation efforts have produced remarkable results. Thanks to the outward expansion in the service scope
+of the Bills Manager platform, the Company has become one of the first three pilot banks of the "Piao Fu Tong (
+1)" product and successfully completed the first transaction in the market. In addition, it has also gained its
+first-mover advantage in serving the bills settlement business of B2B e-commerce platforms, enhanced its industrial
+Internet service capability and created an opportunity for the expansion of corporate customers by batch in a cost-
+efficient way. The Company first launched the "Online Bills Discounting ()" service into the market based
+on its online banking service platform and mobile APP platform, which sets the bills discounting business free from
+the limitation of space and time and enables its customers to "get discounted at one click", thus serving the long-
+tail customers of bills discounting by batch in an efficient and low-cost way and effectively improving its capability
+to serve the real economy. Thirdly, the Company constantly enhanced customer experience and accelerated process
+optimisation, thereby significantly enhancing its product service efficiency and continuously improving its customer
+recognition.
+Bill business
+The main purpose of the Company's syndicated loan business is to enhance interbank cooperation and information
+sharing, and to spread the risks associated with large-amount loans. As at the end of the reporting period, the
+balance of syndicated loans amounted to RMB160.289 billion, up by 10.77% as compared with the end of the
+previous year.
+III Report of the Board of Directors
+China Merchants Bank
+Annual Report 2018
+55
+"Qian Ying Zhan Yi (F)" is a strategic brand of the Company to serve the emerging small and medium-sized
+innovative technology enterprises. The Company acquired target customers through continuous implementation of
+the name list marketing model. During the reporting period, the Company focused on the list of two categories of
+enterprises: "high-tech" and "capital market", and continued to further expand the customer base under "Qian Ying
+Zhan Yi (F)". Meanwhile, the Company initiated the establishment of "Fintech Cooperation Alliance under
+Qian Ying Zhan Yi (FERRÂñ½)" and provided comprehensive services to technology-based
+emerging enterprises with concerted efforts of various parties so as to build a service ecosystem. Also, the Company
+worked closely with external investment institutions, so as to provide diversified investment and loan linking services
+to enterprises registered under "Qian Ying Zhan Yi (F)". As at the end of the reporting period, the Company
+had a total of 23,607 registered customers under "Qian Ying Zhan Yi (F)", representing an increase of 1,586
+registered customers on the basis of customer base adjustment at the beginning of the year. During the reporting
+period, a total of 37 companies in the "Qian Ying Zhan Yi (FR)" customer base had successfully listed in
+Mainland China and each of them opened a special account with the Company for their proceeds from listing.
+The proportion of special accounts for proceeds from listing opened by small- and medium-sized enterprises and
+companies listed on the GEM was 40%, continued to rank first in the market. The total amount of the credit lines
+granted to such customers as at the end of the reporting period amounted to RMB154.013 billion with the balance
+of loans granted to such customers amounting to RMB30.281 billion.
+During the reporting period, the Company supported green industries, strategic emerging industries and the
+industries with distinct regional characteristics, accelerated the construction of customer service system for new
+growth engines, conducted in-depth research on 12 new growth engine industries, and formed a list of 2,174 target
+customers and credit policies; grasped market opportunities brought by the policy of "infrastructure to complement
+shortcomings", increased investment in high-quality medium-to-long term assets; and flexibly adjusted loans to
+real estate, local government financing platforms and other industries in response to the changes in external
+operating environment. As at the end of the reporting period, the balance of green loans was RMB166.033 billion,
+representing an increase of RMB8.930 billion as compared with the end of the previous year, and accounting for
+10.93% of the total corporate loans of the Company; the balance of loans to strategic emerging industries was
+RMB87.668 billion, representing an increase of RMB9.347 billion as compared with the end of the previous year
+and accounting for 5.77% of the total corporate loans of the Company. For further details of loans extended to
+the sectors which are subject to the strict regulation of the State, such as the real estate industry and the local
+government financing platforms, please refer to section 3.9.1.
+During the reporting period, the Company continued to adhere to the strategy of integrating investment banking
+and commercial banking, and actively capitalised on asset structuring and asset sales as the dual engines to achieve
+the steady development of investment banking business.
+Corporate customer deposits
+With respect to its bonds underwriting business, the Company further consolidated its professional management
+team and strengthened the relationship management with its bond investors to capture the market opportunities,
+thus achieving record high in terms of bonds underwriting and market ranking. Meanwhile, the Company actively
+responded to the call of the State by assisting state-owned enterprises to revitalise stock assets and deleverage, and
+launched the first bill backed with off-balance-sheet assets for the project receivables of state-owned enterprises,
+as well as the first secondary perpetual medium-term note. The Company also assisted private enterprises to resolve
+their financing difficulties, launched the first special bond backed by private enterprises in the interbank market,
+became the first joint-stock bank in the market to independently launch the credit risk release certificate for private
+enterprises, and so on. During the reporting period, the bonds with the Company as the lead underwriter amounted
+to RMB480.419 billion, representing a year-on-year growth of 69.32%, among which, its ranking in the debt
+financing instrument issuance market of non-financial enterprises up by one place as compared with the previous
+year, and ranking second among the lead underwriters of banks in the non-policy financial bonds market (as per the
+ranking by WIND public data).
+Firstly, the Company formulated a product transformation strategy, continued to promote the innovation and
+creation of wealth management products and compliance rectification, which further enriched wealth management
+product lines. During the reporting period, in compliance with the regulatory policy requirements, the Company took
+the following measures: first, after considering customers' risk-return preferences and the Company's strength in
+investment operation, the Company developed a product transformation strategy and implementation plan during
+the transition period; second, the Company reduced the wealth management products with principle guaranteed,
+products with expected returns and other products that did not meet the requirements of the New Regulation on
+Asset Management in a steady and orderly manner, while transferred the management functions regarding structured
+deposits to the department which is responsible for managing on-balance sheet items; third, the Company, adhering
+to the direction of wealth management product compliance transformation, took advantage from the Company's
+accumulated experience and customer base acquired from early implementation of transformation to net-value
+products, promoted the direct transition of net-worth products that meet the net-value management requirements
+under the New Regulation on Asset Management into compliant net-worth products, with a focus on promoting the
+transformation of existing quasi net-value products 12 into compliant net-value products, while introducing wealth
+management products in compliance with the new regulations, which led to initial success in the promotion of new
+products. As at the end of the reporting period, the Company's net-value products that meet the requirements of
+the New Regulation on Asset Management accounted for 14.04% of the balance of wealth management products.
+Secondly, the Company undertook inspection of wealth management assets and formulated special transitional
+rectification plan for wealth management assets. In accordance with the requirements of the relevant provisions
+of the New Regulation on Asset Management, the Company immediately initiated the inspection of wealth
+management assets during the reporting period, and initially formulated and optimised the overall plan for the
+transformation management during the transition period of the assets under the wealth management business. The
+plan confirmed the principal transformation and rectification models adopted for the Company's existing wealth
+management assets during the transition period for compliance with the new regulation, refined the progress plan
+and work schedule of asset transformation, put forward a clear management plan and suggestions for new assets
+acquired during the transition period, and formed the approval process and implementation procedure based on the
+principle of "different policy for each customer", so as to specify the post-investment management requirements
+during the duration of wealth management products.
+58
+59
+Quasi net-value products represent products launched by the Company during the reporting period that basically meet the new net-value product
+management requirements of the New Regulation on Asset Management. The Company's quasi net-value products can be transformed into net-value
+products that meet the requirements of the New Regulation on Asset Management following the independent custody transformation, rectification of
+maturity matching of underlying assets and investment concentration as well as adjustment of the valuation method to fair-value calculation of some
+underlying assets.
+12
+For the analysis of the new policy on asset management business, please refer to section 3.9.1.
+Fourthly, the Company constantly improved its risk management capability in asset management business according
+to the requirements of the new regulation. During the reporting period, the Company revised and improved the risk
+management systems of various asset management businesses, streamlined and optimised the asset management
+business process, strengthened the surveillance of market risk and credit risk at asset-end and product-end, and
+enhanced the independent liquidity management capability of the asset management business. By doing so, the
+Company continued to lay a strong foundation for post-investment management and improved the overall risk
+management capability of asset management business.
+Thirdly, the Company made appropriate allocation of various types of assets, gradually adjusted the asset allocation
+structure, and adhered to the purpose of serving the real economy. During the reporting period, aiming to raise
+the return-on-risk ratio of asset allocation, the Company increased its resources and investment in research and
+improved investment capabilities of standardised financial assets. Wealth management capital flows were directed
+towards the real economy resulting in positive social benefits. With respect to bonds assets, the Company adhered
+to the principle of "independent investment first, entrusted investment second" in the related investment. As at
+the end of the reporting period, wealth management funds invested in the bond market totalled RMB1,257.112
+billion, and the proportion of bond assets rose 7.36 percentage points as compared with the end of the previous
+year. With respect to credit assets, the Company grasped the trend towards investing in standardised assets in the
+market and vigorously supported standardised asset investments including asset securitisation programs. As at the
+end of the reporting period, balance of investment in asset securitisation products financed by wealth management
+funds amounted to RMB218.150 billion. While making non-standardised credit investments within the quota limit in
+strict compliance with the regulatory guidance, the balance of wealth management funds invested in non-standard
+assets of the Company amounted to RMB155.856 billion as at the end of the reporting period, and the quality of its
+non-standardised credit assets remained stable. With respect to equity assets, focusing on the strategic customers
+of the Company and the industrial leading companies, "Tou Rong Tong" business for listed companies was steadily
+carried out which catered to the full-range demand for investment and financing during the transformation and
+growth of enterprises with risk level being generally controllable.
+In 2018, the Company continued to optimise its asset structure. Since the underlying data is subject to adjustment
+or elimination as a result of change in classification of certain enterprises after they have grown larger in scale at the
+beginning of the year, the calibre of our large, medium and small-sized enterprises business at the beginning of the
+year was adjusted as compared to the end of the previous year. As at the end of the reporting period, the balance
+of the Company's loans granted to domestic large-sized enterprises amounted to RMB 1,166.060 billion, representing
+an increase of 10.73% (calculated on the Bank's calibre) as compared with the beginning of the year, accounting
+for 83.58% of our total loans granted to domestic enterprises, up by 3.71 percentage points as compared with
+the beginning of the year; the non-performing loan ratio was 2.04%, down by 0.21 percentage point as compared
+with the beginning of the year. The balance of the Company's loans granted to domestic medium-sized enterprises
+amounted to RMB126.319 billion, representing a decrease of 13.17% (calculated on the Bank's calibre) as compared
+with the beginning of the year, accounting for 9.05% of our total loans granted to domestic enterprises, down
+by 1.98 percentage points as compared with the beginning of the year; the a non-performing loan ratio was
+6.40%, down by 1.17 percentage points as compared with the beginning of the year. The balance of the loans
+granted to domestic small-sized enterprises amounted to RMB102.771 billion, representing a decrease of 14.32%
+(calculated on the Bank's calibre) as compared with the beginning of the year, accounting for 7.37% of our total
+loans granted to domestic enterprises, down by 1.73 percentage points as compared with the beginning of the year;
+the non-performing loan ratio was 3.54%, down by 0.24 percentage point as compared with the beginning of the
+year. The floating range of the weighted average interest rate of the Company's loans newly granted to small-sized
+enterprises was 16.00% for the year.
+III Report of the Board of Directors
+China Merchants Bank
+Annual Report 2018
+The balance of wealth management products (excluding structured deposits) is the sum of customers' principal in the on- and off-balance sheet wealth
+management products under management by the Company and the changes in net value of net-value products as at the end of the reporting period.
+11
+During the reporting period, the Company scored a number of achievements in terms of wealth management
+product transformation, asset management business transformation, asset allocation and risk management.
+As at the end of the reporting period, the balance of the Company's wealth management products (excluding
+structured deposits) 11 amounted to RMB1.96 trillion, representing an increase of 4.60% as compared with the end
+of the previous year calculated on the same statistical calibre. According to the information of the CBIRC, as at the
+end of the reporting period, the total fund values of the Company's wealth management products and off-balance
+sheet wealth management products ranked second among the commercial banks.
+Asset management business
+With respect to the businesses on "Zhao Ying Tong ()" Interbank Online Service Platform, as at the end of the
+reporting period, the number of financial institutions registered on our "Zhao Ying Tong ()" platform of the
+Company reached 2,043 and, during the reporting period, the online business volume amounted to RMB825.179
+billion, and the online trading replacement ratio of the platform exceeded 80%.
+With respect to interbank clearing, as at the end of the reporting period, the number of the cross-border RMB
+accounts opened by banks and other financial institutions with the Company accumulated to 232, ranking first
+among all small- and medium-sized banks in China (according to the data released by the PBOC). There were 170
+customers which participated indirectly in the RMB Cross-border Interbank Payment System (CIPS), ranking first
+among all small- and medium-sized banks in China and second in the industry (according to the data released by the
+CIPS).
+With respect to its depository service, during the reporting period, the Company's security and future margin
+depository service was in stable operation, with third-party depository services extended to 102 securities companies
+and 9,854,300 new customers secured at the end of the reporting period, representing an increase of 9.25%
+as compared with the end of the previous year. In addition, the Company entered into cooperation with 86
+securities companies on margin trading and short selling business, securing 373,000 new customers at the end
+of the reporting period, representing an increase of 5.34% as compared with the end of the previous year. Also,
+the Company entered into cooperation with 51 securities companies on stock options business, securing 18,900
+customers at the end of the reporting period, representing an increase of 36.96% as compared with the end of the
+previous year.
+With respect to its financial institutions asset and liability business, the Company continued to deepen the
+management of financial institution customers, optimised its financial institutions deposit structure and supported
+the liquidity management of the whole Bank. As of the end of the reporting period, the balance of financial
+institutions deposits of the Company amounted to RMB450.706 billion, representing an increase of 6.99% as
+compared with the end of the previous year. Among them, the total amount of financial institutions demand
+deposits in the areas of fund clearing, settlement and depository service reported a balance of RMB327.484 billion,
+representing an increase of 13.46% as compared with the end of the previous year and accounting for 72.66%
+of the total amount. The Bank maintained a leading position in terms of scale and percentage of demand deposits
+among the small and medium-sized banks in China.
+Financial institution business
+With respect to its equity capital market business, the Company actively adhered to the new regulatory policies.
+Through activating the stock assets and combining with the macro themes of the State-owned Enterprise Mixed
+Ownership Reform and industrial upgrading, the Company actively served the new economy and customers with
+new growth engines. During the reporting period, the equity capital market business of the Company amounted to
+RMB11.149 billion.
+With respect to its structural financing business, the Company actively complied with the regulatory requirements
+and adapted to changes in market trends, and took market deal matching business as a breakthrough. At the same
+time, a market trading system "Zhao Tou Xing ()" was launched, so as to establish a non-stop, integrated and
+intelligent investment and financing service platform for all processes. The Company also actively directed resources
+at both the asset and capital ends, to provide high quality services on asset structuring and sales and to drive the
+overall business development. During the reporting period, the Company realised structural financing of RMB13.889
+billion, of which market deal matching amounted to approximately RMB70.0 billion.
+With respect to its M&A financing business, on the basis of maintaining traditionally competitive businesses such
+as M&A financing, the Company actively developed M&A financial consultant and syndicated distribution business,
+which further enriched its M&A services. During the reporting period, despite a substantial decrease in the amount
+of domestic M&A transactions as compared with the previous year, our M&A business had managed to reverse
+the trend and realised M&A transaction of RMB101.718 billion. "Syndicated Loan Project for CIC International's
+Acquisition of Logicor Group under Blackstone" won the "Best Syndicated Loan Project Award" in 2018 issued by
+China Banking; "Syndicated Loan Project for the Privatisation of Global Logistic Properties Limited" won the "Best
+Financing Project in Asia-Pacific Region" issued by Thomson Reuters.
+III Report of the Board of Directors
+57
+As at the end of the reporting period, total corporate loans of the Company amounted to RMB1,518.685 billion,
+representing an increase of 6.32% as compared with the end of the previous year and accounting for 41.59% of
+total loans and advances to customers of the Company. Among them, the balance of the medium-to-long term loans
+to domestic enterprises amounted to RMB659.680 billion, accounting for 47.28% of the total loans to domestic
+enterprises, and representing an increase of 3 percentage points as compared with the end of the previous year. The
+non-performing loan ratio of our corporate loans was 2.37%, representing a decrease of 0.39 percentage point as
+compared with the end of the previous year. In 2018, the floating range of weighted average interest rates of newly
+granted corporate loans in RMB was 6.95%. As at the end of the reporting period, the weighted average default
+probability of the risk exposure of the domestic non-defaulting corporate customers was 1.00%, representing a
+decrease of 0.25 percentage point from the end of the previous year.
+As to business development, the Company actively supported the real economy in accordance with the requirements
+of the State policies and regulations and accelerated the development of micro-finance loans, in particular, with the
+guidance of inclusive finance. The Company developed its mortgage business in a steady manner under the local real
+estate control policies in the support of the residents' reasonable needs for their own homes. The Company strictly
+controlled the usage of consumption loans and guided a light development path of consumption loans towards
+the operation mode with online, small-value and customised features so as to realise the healthy development of
+retail loans business. As at the end of the reporting period, the Company recorded a balance of residential housing
+loans of RMB921.347 billion, representing an increase of 11.57% as compared with the end of the previous year.
+The balance of micro-finance loans amounted to RMB348.993 billion (calculated on the Bank's statistical calibre),
+representing an increase of 12.23% as compared with the end of the previous year, with its percentage in the
+balance of incremental retail loans (excluding credit cards) up by 9.15 percentage points as compared with the
+end of the previous year. The balance of consumption loans amounted to RMB105.433 billion, up by 15.39% as
+compared with the end of the previous year. As at the end of the reporting period, the Company had 4,735,100
+retail loan customers, representing an increase of 73.21% as compared with the end of the previous year. The
+rapid expansion of customer base was mainly attributable to the light customer acquisition model through online
+Corporate loans
+Annual Report 2018
+III Report of the Board of Directors
+China Merchants Bank
+52
+51
+During the reporting period, the Company enhanced the customer base operation, product design & development
+and refined management with deepened Fintech application. Through subdividing customer bases, the Company
+reconstructed the segmentation-based management service system in response to the changes in customers'
+demand for wealth management. The Company also upgraded frontline service expertise with "Human being +
+Intelligence", comprehensively solved the difficulty in selling complex products and expanded the differentiated and
+leading advantages of the Company in terms of wealth management business. As the leading smart investment
+advisory product in China, "Machine Gene Investment ()" has achieved a total sales volume of RMB12.233
+billion, maintained its outstanding performance with "low volatility and steady growth" during the reporting period,
+and effectively evaded the risks in contrast to the poor performance of capital market. While striving to secure
+stable investment performance, the Company has been continuously upgrading and iterating the related functions
+of Machine Gene Investment, so as to further enhance the customer experience. The Company actively responded
+to the implementation of the New Regulation on Asset Management and supporting policies, and conveyed the
+financial planning concept featuring scientific asset allocation through investor education to maintain a stable
+amount of wealth management asset. In addition, the Company continued to improve its customer experience and
+service efficiency by such technological means as artificial intelligence, big data and cloud computing. During the
+reporting period, the Company launched the Sunflower Financial Planning Service System (ER 19 A 19
+1) to provide household customers with a wealth management plan covering the whole life-cycle and unified
+management of assets and liabilities. In light of application of Fintech and big data, the Company constantly
+optimised wealth check services and offered full-asset management service to customers through online-offline
+integration so as to cater to customers' need for comprehensive wealth management.
+In 2018, the Company recorded RMB10,713.837 billion in sales of personal wealth management products,
+representing an increase of 16.73% as compared with the previous year; RMB767.858 billion in the agency
+distribution of listed open-ended funds (LOF), representing an increase of 8.84% as compared with the previous
+year; RMB322.306 billion in agency distribution of trust schemes, representing an increase of 43.35% as compared
+with the previous year; and RMB70.453 billion in premiums from agency distribution of insurance policies,
+representing a decrease of 17.18% as compared with the previous year. In 2018, the Company recorded a fee and
+commission income from retail wealth management business of RMB19.338 billion, among which, income from
+agency distribution of funds amounted to RMB6.650 billion, income from agency distribution of trust schemes
+amounted to RMB5.741 billion, income from agency distribution of insurance policies amounted to RMB4.744
+billion, and income from entrusted wealth management amounted to RMB2.104 billion. For the reasons of changes
+in fee and commission income from wealth management, please refer to the analysis of net non-interest income
+under section 3.9.1 of this report.
+Wealth management
+As at the end of the reporting period, the Company had 125.4144 million retail customers (including debit and
+credit card customers), representing an increase of 17.61% as compared with the end of the previous year, among
+which, the number of Sunflower-level and above customers (those with minimum daily average total assets of
+RMB500,000 for each month) reached 2,362,600, representing an increase of 11.09% as compared with the
+end of the previous year. The balance of total assets under management from our retail customers amounted to
+RMB6,802.105 billion, representing an increase of 10.35% as compared with the end of the previous year, among
+which, the balance of total assets under management from the Sunflower-level and above customers amounted
+to RMB5,508.235 billion, representing an increase of 8.83% as compared with the end of the previous year, and
+accounting for 80.98% of the balance of total assets under management from retail customers of the Bank. As
+at the end of the reporting period, the balance of deposits from retail customers of the Company amounted to
+RMB1,436.675 billion, representing an increase of 16.68% as compared with the end of the previous year, of
+which the percentage of demand deposits accounted for 70.56%. According to the data released by the PBOC, the
+Company ranked first among the joint stock banks in terms of the balance of retail deposits as at the end of the
+reporting period. As at the end of the reporting period, a total of 132,276,700 All-in-one Cards in aggregate have
+been issued by the Company for retail customers, up by 14.24% as compared with the end of the previous year.
+In 2018, the growth of M2 further slowed down. The leverage ratio of households gradually stabilised after 2017
+and the accumulation of wealth decelerated as the households entered into the phase of repayment. The wealth
+growth among mid-to-high end customers of retail finance sector was in line with the changes in the macro
+environment, but the overall growth of assets under management (AUM) outperformed the market. Facing of
+multiple challenges, the Company actively adjusted its operation modes. On the basis of further consolidating the
+retail customer base, the Company expanded its customer availability of CMB APP and CMB Life APP and enhanced
+the customer experience. In this way, the Company strived to form its core competitive advantage at the later stage
+of the transformation to ensure steady increase in the retail customer base and AUM.
+Retail customers and total assets under management from retail customers
+In order to adapt to the rapid development of technology-based finance, the Company took the initiative for its
+retail finance business to get out of the comfort zone of traditional business and formally moved towards the retail
+finance 3.0 Era, so as to embrace the evolution of service ecosystem through digital transformation of its operating
+organisations. In 2018, under the guidance of the "Mobile Priority ()" strategy and "MAU North Star
+Metric ()", the Company constantly empowered the retail finance by enhancing the functions of the
+digital platforms, which optimised the platform system, product system and service system towards a coverage of
+"full-customer, full-product and full-channel", further improved the customer classification operation based on the
+existing segmentation-based customer management and continually consolidated its retail customer foundation.
+While maintaining the systemic competitive edges of core retail businesses such as wealth management, private
+banking, credit card, retail loan, consumer finance and e-banking, the Company has vigorously marched towards the "APP
+Era".
+III Report of the Board of Directors
+During the reporting period, the profit of the retail finance business of the Company maintained its rapid growth,
+with the profit before tax amounting to RMB57.227 billion, representing an increase of 20.24% as compared with
+the previous year. It accounted for 57.22% of the total profit before tax of the whole business lines of the Company.
+The net operating income from the retail finance amounted to RMB123.253 billion, representing an increase of
+16.03% as compared with previous year, and accounting for 52.71% of the net operating income of the Company.
+Among the income of retail finance, the net interest income amounted to RMB80.537 billion, representing an
+increase of 16.17% as compared with previous year, and accounting for 65.34% of the net operating income from
+retail finance; the net non-interest income amounted to RMB42.716 billion, representing an increase of 15.76%
+as compared with previous year and accounting for 34.66% of the net operating income from retail finance, and
+54.81% of the net non-interest income of the Company. In 2018, the retail finance of the Company recorded a fee
+income of RMB16.515 billion from bank cards, representing an increase of 19.66% as compared with previous year;
+the fee and commission income from retail wealth management was RMB19.338 billion, accounting for 45.90% of
+the net fee and commission income from retail finance.
+Business overview
+3.10.1 Retail finance
+3.10 Business operation
+Thirdly, we will solve both symptomatic and fundamental problems to create a risk management system
+that supports high-quality development. We will prevent risks through "improving weakness", closely monitor
+the risks in the key areas, carefully prevent compliance risks, and continue to strengthen basic management. We will
+consolidate our risk management capabilities by focusing on the major aspects of customers and technologies. On
+the one hand, we will accelerate customer structure adjustment based on industry research, build a risk management
+system that supports, adapts to and serves the customer group under the new growth engine; on the other hand,
+with the extensive use of financial technologies, we will constantly optimise the risk management model.
+Fourthly, we will accelerate the pace of infrastructure construction to lay solid foundation for the
+sustainable development of CMB. We are committed to building a leading financial technology infrastructure,
+establishing a digitalised intelligent operating system, cultivating a team and culture that is compatible with the
+Digital Bank, and seeking to promote the systematic and continuous establishment of the Digital Bank.
+Secondly, we will focus on development of professional capacity and accelerate in cultivating the core
+competitiveness of our wholesale business. We will lay stress on the development of our own professional
+capabilities, and strive to achieve two major breakthroughs: quickly fitting in the rhythm of conversion from old
+growth engines to the new ones, and making breakthroughs in the professional service capabilities for the new
+growth engine; staying abreast of the transformation towards digitalised operation, and making breakthroughs in the
+industrial Internet.
+Firstly, we will adhere to the target of transformation towards retail digitalisation to create a bank with
+the best customer experience. Our retail business will continue to be oriented by the monthly active users (MAU)
+in order to solve the two major problems of acquiring a large number of customers at low cost and developing our
+digitalised operational capabilities. We will focus on improving operational capabilities and promote the formation of
+a virtuous cycle of business operation and customer acquisition.
+In 2019, China's macroeconomic regulation and control will focus more on policy coordination, emphasize more
+on counter-cyclical adjustment, and aim to stabilise the general demand. With the strength and effect of China's
+fiscal policy being increased, and the fiscal deficit rate being adjusted to 2.8%, the cuts in both inclusive taxes and
+structural taxes will be implemented simultaneously, aiming to reduce the tax burden of manufacturers and small-
+and micro-sized enterprises. Under the policy guidance of "legal compliance and risk prevention", new special bonds
+of local governments will reach RMB2.15 trillion, representing an increase of RMB800 billion as compared with the
+year of 2018. The monetary policy will be balanced with more emphasis on unblocking the credit facility transmission
+mechanism. The quantity and price approaches like deposit reserve ratio and interest rates will be applied in a timely
+manner to guide financial institutions to expand credit supply, reduce loan costs, and support the real economy in
+an accurate and effective manner. Market liquidity will remain reasonably abundant with a streamlined approach. On
+the whole, China's economy will maintain its resilient growth in 2019, and its macroeconomic policies will be more
+forward-looking, flexible, coordinated and effective. The economic and financial risks will be generally controllable.
+In view of the current environment, the Company's (time-point) proprietary loans are expected to increase by
+approximately 10% in 2019, with its (daily average) proprietary deposits expected to increase by 6% to 7%, and
+its active liabilities will be flexibly allocated based on the actual operations of the Company. Facing the complicated
+internal and external environment, the Company will maintain its strategic stability, return to the origin of customer
+service, and adhere to the orientation of "Light-operation Bank" and the positioning of "One Body with Two
+Wings". Adhering to its two cores, namely customers and technologies, the Company will focus on transforming
+towards retail digitalisation, developing the service capacity for new growth drivers of wholesale business, building a
+system that can root out the risks, and developing its basic capacity, so as to expedite the formation of new business
+models.
+III Report of the Board of Directors
+China Merchants Bank
+Annual Report 2018
+50
+Private banking
+III Report of the Board of Directors
+As at the end of the reporting period, the Company had 72,938 private banking customers (retail customers of
+the Company with minimum total daily average assets of RMB10 million per month), representing an increase
+of 8.19% as compared with the end of the previous year; total assets under management from private banking
+customers amounted to RMB2,039.290 billion, representing an increase of 7.03% as compared with the end of the
+previous year; total assets per account amounted to RMB27.9592 million. As at the end of the reporting period,
+the Company has established a high-end customer service network consisting of 68 private banking centers and 64
+wealth management centers in 63 domestic cities and 7 overseas cities.
+As at the end of the reporting period, the Company had issued an aggregate of 84.3044 million active credit cards,
+representing an increase of 34.98% as compared with the end of the previous year, and there were 58.0293 million
+active credit-card users, representing an increase of 23.61% as compared with the end of the previous year. The
+Company continued to improve the efficiency of customer operation. The credit card transactions of the Company in
+2018 amounted to RMB3,793.836 billion, representing an increase of 27.74% as compared with the previous year.
+The balance of credit card loans was RMB575.365 billion, representing an increase of 17.13% as compared with the
+previous year. The percentage of the revolving balances of credit cards was 23.42%. In 2018, interest income from
+credit cards amounted to RMB45.979 billion, representing an increase of 16.29% as compared with the previous
+year. Benefiting from the increased transaction volume, the non-interest income from credit cards amounted to
+RMB20.722 billion, representing an increase of 38.95% as compared with the previous year. As at the end of the
+reporting period, the non-performing loan ratio of the Company's credit cards was 1.11%, remaining at the same
+level as compared with the end of the previous year, the risk indicators were stable and controllable as a whole.
+During the reporting period, the Company actively explored and put into practice various Fintech and improved the
+efficiency of customer acquisition and operation, including: constantly focusing on upgrading the service capability
+of its mobile services and successfully launching Version 7.0 of CMB Life APP with essence of "creating quality life".
+For further details, please refer to the section headed "Distribution Channels". The Company deepened its service
+modules, such as intelligent flow redirection, intelligent flow distribution, intelligent operation and intelligent audit,
+and managed to set up a customer acquisition channel connecting fans, traffic and APP users so as to push forward
+the efficacy of customer acquisition driven by technology application. The Company completed the deep learning
+of Al technology in respect of three intelligent channels including WeChat, QQ and CMB Life APP, in an attempt
+to explore the new service model featuring "Terminal + Cloud Service" on the Internet. The Company has also
+established a customer experience lab known as "VLab", so as to understand the real needs of our customers, and
+inspire our product innovation. The Company constantly advanced our cooperation with generally popular fields and
+the Internet enterprises in promoting our credit cards by launching a variety of co-branded credit cards, e.g. Hema
+Fresh (E), Tmall Store (*), Today's Headline (B), etc.. The Company also actively explored
+the commercialisation system of the fan card products by launching collectible cards with themes like Hello Kitty and
+Teddy. The Company perfected the overall deployment of consumer financial products, completed the optimisation
+of the second iteration of "eLoan (e)", accomplished the breakthrough and innovation of channel operation, and
+expanded the regional scenarios for consumer finance, aiming to enhance our management expertise of diversified
+products.
+China Merchants Bank
+Annual Report 2018
+In order to better serve its customers, in 2018, the Company expanded the scope of strategic customers at the branch level horizontally and vertically,
+included the group member customers, as well as upstream and downstream supply chain customers based on the 2017 customer list.
+The number of strategic customers at the Head Office level is that of the group customers as the strategic customers at the Head Office level operated
+by the Company in 2018.
+The Company has fully implemented the centralised operation of strategic customers, and established the corporate
+customer service system featuring segmentation and classification-based management, as well as professional and
+dedicated operation in respect of institutional customers, small-sized enterprise customers, financial institution
+customers and offshore customers. With regards to its basic customers, the customer base of the Company
+continued to expand rapidly. As at the end of the reporting period, the total number of corporate depositors
+was 1,858,000, up by 18.10% as compared with the end of the previous year. The number of newly acquired
+corporate depositors of the Company during the reporting period was 433,500, contributing daily average deposits
+of RMB161.482 billion. Both the number of newly opened accounts and the deposit contribution recorded new
+high during the reporting period. With regards to its strategic customers, targeting its strategic customers under
+the Head Office, the Company used Fintech technology to delve the platform ecosphere of core customers, thus
+realising the in-depth operation of those customers. The Company enhanced its professional service capabilities by
+strengthening research on the industry in which customers operate; and increased support for strategic customers
+from emerging industry by adhering to integration of investment banking and commercial banking. As at the end
+of the reporting period, the number of the strategic customers under the Head Office of the Company was 2519,
+increasing by 85 as compared with the end of the previous year; the balance of daily average proprietary deposits
+amounted to RMB557.234 billion, increasing by 16.86% as compared with the beginning of the year; the balance
+of general loans amounted to RMB486.251 billion, increasing by 35.51% as compared with the beginning of the
+year. For the strategic customers at the branch level, the Company focused on professional operation and service
+upgrading. As at the end of the reporting period, the Company had 8,043 branch-level strategic customers 10. The
+balance of general loans amounted to RMB285.350 billion, increasing by 13.26% as compared with the beginning
+of the year. With regards to its institutional customers, the Company, by deepening the "Head Office-to-Head
+Office" strategic cooperation with the national ministries and commissions, the Company continued to innovate
+cooperation models and focus on fiscal, social security, public resource transactions, provident fund and other
+customer groups, fully exploited the low cost "liquid funds" and "incremental funds" of its customers while making
+remarkable efforts in developing the high-value scenarios and strengthening linkage with its retail business so as
+to promote the rapid growth of institutional customers. As at the end of the reporting period, the Company had
+30,900 institutional customers, up by 26.64% as compared with the end of the previous year, with an average
+daily deposit balance of RMB771.467 billion, representing an increase of 10.22% as compared with the end of
+the previous year. With regards to its small-sized enterprise customers, the Company continued to advance
+the construction of a segmentation-based operation service system for small-sized enterprise customers while
+focusing on three customer bases (Qian Ying Zhan Yi (F), supply chain and traditional enterprises with
+stable businesses) and building diversified customer acquisition channels. The Company offered financing products
+for small-sized enterprise customers based on their differentiated financing needs. The Company strengthened
+the capability to offer basic financial services and efficiently meet the diversified non-financial services needs of
+small-sized enterprise customers from various aspects such as optimising the account opening process, innovating
+payment and settlement products, and staffing the service advisors in the lobby. As at the end of the reporting
+period, the number of small-sized enterprise customers reached 1,752,000, representing an increase of 20.63% as
+compared with that at the beginning of the year. With regards to its financial institution customers, the Company
+persisted in improving the financial institution customer service system featuring "centralised management,
+segmentation-based and intensive management", determined the list of strategic customers at the Head Office
+and branches, carried out in-depth management of strategic financial institution customers based on the principle
+of "different policy for each customer" and managed basic customers by integrating online and offline services.
+With regards to its offshore customers, the Company's business operation targeted non-resident customers, fully
+implemented the operation philosophy of "customer-centric", comprehensively carried out the segmentation-based
+management of offshore strategic customers, value customers and basic customers, optimised the construction
+of offshore customer service system, and broadened the acquisition channels of customers. As at the end of the
+reporting period, the Company had 12,500 offshore customers.
+Wholesale customers
+During the reporting period, the Company achieved profit before tax from wholesale finance of RMB42.778 billion,
+accounting for 42.78% of profit before tax for the business lines of the Company. The net operating income from
+wholesale finance of the Company was RMB110.848 billion, representing an increase of 8.77% as compared with
+the previous year, and accounting for 47.41% of the net operating income of the Company. As for the income
+structure of wholesale finance business, net interest income amounted to RMB77.318 billion, representing an
+increase of 6.31% as compared with the previous year, and accounting for 69.75% of the net operating income of
+wholesale finance; net non-interest income of wholesale finance amounted to RMB33.530 billion, representing an
+increase of 14.89% as compared with the previous year and accounting for 30.25% of the net operating income of
+wholesale finance, and 43.02% of net non-interest income of the Company.
+Business overview
+10
+9
+3.10.2 Wholesale finance
+Annual Report 2018
+III Report of the Board of Directors
+China Merchants Bank
+54
+53
+As to risk management, driven by big data and quantitative model, based on the integration of internal and external
+data resources as well as the comprehensive application of risk models, the Company enhanced the professional
+level of its teams and the capability of quantitative analysis, and applied technological innovation in each aspect
+of risk management, so as to establish a standardised, systematic, data-based and modelised comprehensive risk
+management system. In response to the risk of "joint debts", the Company continued to enhance its capabilities
+to prevent multiple credit granting and credit fraud. With Fintech application, the Company integrated its internal
+and external data sources to portrait, verify and restore the real balance sheet status of the customers in a
+multi-dimensional manner, so as to form a unified view of risks associated with its customers and enhance its risk
+identification capability. The Company adhered to acquiring quality customers whose lion share are with stable jobs
+and source of income. The Company took into consideration the application scenarios of various real consumptions
+such as parking space purchase, decoration, education, etc.. The Company also established an automated
+post-lending monitoring system to continuously monitor the risk of "joint debts" and got prepared in advance.
+As to the quality of assets, the Company stabilised the quality of retail loan assets by constantly optimising its
+policies for retail loans and enhancing its risk management capabilities. As at the end of the reporting period, the
+balance of the special mention retail loans of the Company amounted to RMB26.470 billion, and its proportion
+of retail loans recorded a slight increase of 0.06 percentage point as compared with the end of the previous year.
+The balance of non-performing retail loans amounted to RMB15.719 billion, and its non-performing loan ratio
+was 0.79%, down by 0.11 percentage point as compared with the end of the previous year. Among retail non-
+performing loan portfolio, the non-performing ratio of micro-finance loans was 1.34%, down by 0.44 percentage
+point as compared with the end of the previous year due to an acceleration in the disposal of the non-performing
+micro-finance loans; the non-performing ratio of consumption loans was 1.13%, down by 0.03 percentage point
+as compared with the end of the previous year. Excluding credit cards, the mortgage and pledged loans accounted
+for 75.79% of the balance of the new non-performing retail loans of the Company in 2018, with a mortgage and
+pledge rate of 48.90%. Given that the vast majority of such new non-performing retail loans were fully secured by
+collaterals, the final loss was not substantial.
+resources.
+As at the end of the reporting period, the total retail loans of the Company amounted to RMB1,987.587 billion,
+representing an increase of 12.66% as compared with the end of the previous year and accounting for 54.43% of
+the total loans and advances to customers, up by 1.07 percentage points as compared with the end of the previous
+year. Total amount of the Company's retail loans (excluding credit card loans) reached RMB1,412.289 billion,
+representing an increase of 10.93% as compared with the end of the previous year, accounting for 38.67% of total
+loans and advances to customers of the Company, representing an increase of 0.16 percentage point as compared
+with the end of the previous year.
+Retail loans
+Confronting the competition brought by the quasi-credit cards launched by the Internet giants and the challenges
+from third-party payment, the Company deepened its integration with mobile Internet, strengthened its own
+platform and channel construction, while forging cooperation with Internet technology enterprises with respect
+to the traffic management. The Company constantly expanded its differentiated competitive edges by establishing
+a comprehensive intelligent customer acquisition system, innovating the consumer credit products, refining the
+platform operation management and building an intelligent risk management system. The Company launched the
+first "Fast Service Bank" service system in the industry, devoted to conducting the promotion and operation of new
+payment products, seized the payment portals in mobile Internet era and improved the open user system to build a
+complete financial ecological platform.
+III Report of the Board of Directors
+China Merchants Bank
+Annual Report 2018
+The private banking business of the Company is based on the operating philosophy of "It's our job to build your
+everlasting family fortune". In order to "foster a private bank with best customer experience (Ƒ/
+)", the Company has been committed to meeting the various demands of high-net-value customers consisting
+of individuals, families and enterprises. The Company continued to make asset deployment among the major
+categories including fixed income, cash and currencies, equity, alternative investments and assets with guarantee
+purpose for its customers and offer them professional, comprehensive and private financial services in investment,
+taxation, legal affairs, M&A, financing and clearing, thus benefiting both customers and the Company. Since 2018,
+due to the international situation and market fluctuations, the risk appetite of customers of private banking of the
+Company has been reduced and equity asset allocation has decreased as compared with the end of the previous
+year. At the same time, with the entry into the transition period of handover from the first-generation entrepreneurs
+to the second generation of entrepreneurs in China, the demand for wealth protection and inheritance has become
+increasingly important, which has led to an increase in assets allocation with guarantee purposes as compared
+with the end of the previous year. Under the New Regulation on Asset Management, the advantage that the
+private banking business of the Company has been striving to build, which was comprised of a professional system
+focusing on investment advisory services, has been increasingly prominent. The Company made the forward-looking
+deployment from the construction of professional team, the design of operating system to actual implementation.
+At the same time, with regard to the internal management, the Company strongly supported process reconstruction,
+system transformation and rule optimisation with a customer-oriented perspective in order to comprehensively
+enhance the customer service experience. The Company continued to deepen the five-dimensional customer
+acquisition system and by virtue of Fintech, made meaningful attempts in accurate identification of customer needs,
+provision of professional financial solutions, the cultivation of professional skills of relationship managers, and the
+improvement of internal operational efficiency, which promoted efficient operation. The Company continuously
+enriched and consolidated the financial services and non-financial services in terms of content and scope, and
+improved customer service capabilities to provide comprehensive and effective integrated solutions to customers.
+Credit cards
+China Merchants Bank
+Annual Report 2018
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+The Company provides instant, comprehensive, prompt and professional services to its customers through remote
+methods such as telephone, network and video to meet their needs.
+In 2018, the Company constantly improved its service capability and customer experience. As a result, the manual
+telephone access ratio reached 98.52%; the percentage of manual telephone responses within 20 seconds reached
+96.61%; and the satisfaction ratio of its telephone customer service reached 99.69%. In order to keep abreast
+with the trend of its customers increasingly moving to the mobile Internet, the Company actively strengthened
+its network service capabilities. In 2018, the online interactive services accounted for 85.15% (referring to the
+proportion of text online services in various types of remote consulting services), the text online interactive services
+have become the mainstream of remote consulting services. At the same time, the Company accelerated the pace of
+evolution into intelligent services, deepened the training and learning of intelligent robots, and enhanced algorithm
+optimisation. In 2018, the intelligent self-services accounted for 74.71% (referring to the proportion of services
+undertaken by intelligent robots in various remote consulting services). In 2018, our visual counters received an
+average of 2,550,000 incoming calls per month, with the highest number of single day transactions exceeding
+143,000, showing high replacement effect of in-branch non-cash transactions.
+In 2018, the Company continued to facilitate the maintenance of gold card and Sunflower customer base for its
+direct banking, serving 1,920,000 gold card and Sunflower customers, with the cost of customer maintenance
+effectively reduced. The Company also actively supported the quality micro-finance customers, with 56,500
+micro-finance loans renewed, totalling RMB15.625 billion, with a retention rate of 82.40%.
+Major wholesale e-banking channels
+Online Corporate Banking
+By fully leveraging the traditional advantages of online corporate banking and continually strengthening the
+construction of customer base of online corporate banking, the Company promoted initiating "online banking
+service refreshment" program distinguished by "user experience reshaping". As at the end of the reporting period,
+the number of online corporate banking customers of the Company had reached 1,688,900, representing an
+increase of 22.44% as compared with the end of the previous year, among which the number of monthly active
+customers was 823,400, representing an increase of 16.65% as compared with the end of the previous year. The
+total number of online corporate banking transactions of the Company reached 346,043,200 and total value of
+transactions amounted to RMB 124.09 trillion.
+CMB Corporate APP
+In August 2018, the Company launched "CMB Corporate APP", a new enterprise-level mobile service platform,
+which focused on customer acquisition through flow redirection and in-depth management of SMEs. The Company
+also shared the basic business innovation system with online corporate banking customers to promote the
+construction of an open service platform. Since its launch, the number of customers of corporate mobile payment
+and its total number of transactions have grown rapidly. As at the end of the reporting period, the number of
+customers of CMB Corporate APP had reached 533,900; the number of transactions had reached 26,626,800 and
+total value of transactions amounted to RMB1,693.920 billion.
+China Merchants Bank
+Annual Report 2018
+3.10.4IT and R&D
+During the reporting period, adhering to construction of the Fintech bank, the Company improved its infrastructure
+capacity, enhanced its system construction and operational support, increased its efforts in Fintech talent cultivation
+and recruitment, set up the Fintech college, and commenced the all-round cultivation of Fintech talents. The business
+development of the entire Bank is supported by three software centers in Shenzhen, Hangzhou and Chengdu and
+two data centers in Shenzhen and Shanghai.
+With respect to basic platform construction, the Company accelerated structural transformation through Mobile
+Internet, Big Data, Cloud Computing, Artificial Intelligence, Blockchain and other cutting-edge technologies, and
+enhanced the concurrent application, big data calculation, high openness and high agility of application systems.
+With respect to the development of application systems, the Company launched CMB APP 7.0, CMB Life APP
+7.0 during the reporting period, leading Retail 3.0 transformation reform; it launched CMB Corporate APP 5.0,
+establishing the non-stop corporate service ecosystem; CBS APP 3.0 was put online, which satisfied the demand of
+mobile cash management of conglomerates; CMB Huijin () APP was put online to provide an integrated
+trading and information service platform for retail customers. The Company promoted the construction of Outlet
+3.0 to improve the "network-based, digitised and intelligence-oriented" operation. The Company has formed a
+customer-centric financial service ecosystem through building a scenario development platform with some typical
+scenarios such as public transportation, parking, education and health-care and offering Fintech capabilities. With
+respect to overseas support, the Head Office managed and supported the construction and improvement of the
+core business systems and data warehouses of overseas branches, as well as the operation and maintenance of
+IT systems, which greatly reduced the IT costs of overseas branches, enhanced the capabilities of IT systems and
+effectively supported the business development of overseas branches. With respect to security and stability, the
+overall operation of the system was stable in the whole year, and the availability of the core accounting system
+and the backbone network kept ahead, with its system well-prepared and handling the transaction peaks with
+ease during the online shopping carnival of "Double 11 (11 November)" and the system support capability greatly
+improved. With respect to R&D management, the Company used technology agility to drive business agility and
+launched the Lean R&D Management System V1.0, so as to promote the in-depth integration of IT and businesses
+and constantly enhance its prompt response and delivery capability. With respect to "industry - university -
+science" partnership, the Company propelled "industry - university - science" partnership with Stanford University,
+The Wharton School, Tsinghua University, Chinese Academy of Science and Technology and Shanghai Jiaotong
+University to intensify research and innovation application of cutting-edge Fintech; it also joined hands with relevant
+partners to release the enterprise-level distributed database in an innovative way.
+3.10.5 Overseas branches
+Hong Kong Branch
+Established in 2002, our Hong Kong Branch is the first branch duly established overseas by the Group. As a
+full-licensed bank and a registered institution with SFC, the Hong Kong Branch may engage in comprehensive
+commercial banking businesses, including wholesale banking and retail banking. With regard to wholesale banking,
+the Hong Kong Branch provides enterprises located in Hong Kong with diversified corporate banking products and
+services, such as deposits, settlement, trade facilities, bilateral loans, syndicated loans, cross-border M&A portfolio
+solutions and asset custody, and engages in transaction of funds among financial institutions, bond trading and
+foreign exchange trading, and conducts funds clearing and asset transfer with financial institution customers.
+With respect to retail banking, the Hong Kong Branch proactively develops featured retail banking services and
+provides cross-border personal banking services and private wealth management services for individual customers
+in Hong Kong and Mainland China. These featured products are "Hong Kong All-in-one Card" and "Hong Kong
+Bank-Securities Express".
+63
+64
+In 2018, our London Branch carried on its innovative business development. It derived a considerable amount of
+foreign exchange trading business on behalf of customers through asset business besides proceeding traditional
+businesses such as accepting guarantees from domestic enterprise as security for loans granted to overseas entity
+and accepting guarantees from overseas entity as security for loans granted to domestic enterprise, but also in
+terms of new business offerings such as time deposits, mortgage loans, development loans, standby L/C re-issuance
+and confident letter issuance. During the reporting period, our London Branch realised an net operating income of
+USD19,290,000 and a profit before tax of USD8,950,000.
+Established in 2016, the London Branch of the Company is the first branch approved directly to be established in
+the United Kingdom among all the PRC joint-stock commercial banks and also the first branch established in the
+United Kingdom directly by a bank in Mainland China since the founding of the PRC. It mainly focuses on corporate
+banking business and provides customers with diversified corporate banking products and services, such as deposits,
+loans (including bilateral loans, syndicated loans and cross-border M&A financing), settlement and asset custody. It
+also engages in interbank transaction of funds, bonds and foreign exchange trading, and conducts funds clearing
+and asset transfer with other financial institution customers. For nearly three years since its establishment, our
+London Branch has operated in compliance with regulatory requirements. Its business has developed steadily.
+London Branch
+In 2018, the Luxembourg Branch adapted itself to changes in the relevant policies, grasped market opportunities
+and achieved steady business growth through efficient services and close cooperation with other banks and financial
+institutions at home and abroad. During the reporting period, our Luxembourg Branch realised net operating income
+of €15,470,000 and a profit before tax of €2,340,000.
+Established in 2015, the Luxembourg Branch of the Company is positioned as an important cross-border financial
+platform in European continent. It provides diversified services including corporate deposits, corporate loans,
+project financing, trade financing, M&A financing, M&A advisory, bond underwriting and asset management for the
+Chinese enterprises "going global" and the enterprises "brought in" from Europe. It is committed to establishing an
+operational platform of the Company in Europe on the basis of the superior businesses of the parent bank combined
+with the special advantages of Luxembourg.
+Luxembourg Branch
+Direct banking
+In 2018, the Singapore Branch adhered to the operating strategy of concurrent development of cross-border
+financing business and local business, and focused on the domestic strategic customers to "go global" from
+the Head Office and branches of the Company. Moreover, it actively studied the opportunities arising from the
+infrastructure construction projects of the countries involved in "The Belt and Road" initiative and seized the
+business opportunities. As a result, all its businesses achieved steady and healthy development. During the reporting
+period, our Singapore Branch realised the net operating income of USD22,960,000 and a profit before tax of
+USD2,450,000.
+Singapore Branch
+In 2018, our New York Branch adhered to the principle of "taking compliance as a priority and maintaining steady
+operation" and aimed to build a featured cross-border financial platform. The New York Board made positive
+progress in expanding Sino-US cross-border business, developing local business, product innovation and customer
+accumulation, enabling it to achieve a steady growth in business and profits, laying a solid foundation for the
+subsequent business transformation. During the reporting period, our New York Branch realised net operating
+income of USD128 million and a profit before tax of USD53,270,000.
+Established in 2008, the Company's New York Branch represents the first branch of a Chinese bank approved in the
+U.S. since the US Foreign Bank Supervision Enhancement Act in 1991. The New York Branch is located in the global
+financial center and is committed to establishing a cross-border financial platform characterised by coordination
+between China and the U.S., so as to offer diversified and all-round banking services for the companies and
+high-net-value private banking customers in China and the U.S..
+In 2018, by giving full play to its own characteristics and leveraging the advantages of Hong Kong's status as an
+international financial center, the Hong Kong Branch actively served the "going global" strategy and focused on the
+strategic opportunities such as "The Belt and Road" initiative, "Internationalisation of RMB" and "Guangdong-Hong
+Kong-Macao Greater Bay Area", greatly promoted cross-border business coordination, continually developed the
+local customer base, constantly expanded its market share, and provided customers with strong financial support
+and good service. Meanwhile, the Hong Kong Branch further strengthened risk compliance and internal basis
+management, constantly improved and innovated its product and service systems and strove to explore the asset
+operation model. As a result, all its businesses achieved healthy development. During the reporting period, the Hong
+Kong Branch realised net operating income of HK$3.323 billion and a profit before tax of HK$2.922 billion.
+New York Branch
+III Report of the Board of Directors
+China Merchants Bank
+Annual Report 2018
+Established in 2013, our Singapore Branch is positioned as a significant cross-border financial platform in Southeast
+Asia. Based in Singapore and expanding to Southeast Asia, the Singapore Branch takes two major businesses
+of cross-border finance and wealth management as its core and strives to provide all-round non-stop solutions
+for cross-border finance to the Chinese companies "going global" and the companies "brought in" located in
+Singapore and other Southeast Asian countries. Its major services and products include: funds settlement, deposit
+service, foreign exchange trading, coordination financing, trade financing, M&A loans, syndicated loans, real estate
+trust leveraged financing and delisting financing. With respect to wealth management business, the Private Banking
+(Singapore) Center was officially launched in April 2017 to provide private banking products and value-added
+services with integrated investment and financing solutions, such as cash management, asset allocation and heritage
+of wealth to high-net-value customers.
+China Merchants Bank
+Annual Report 2018
+As at the end of the reporting period, the Company gained a total of 122 million fans through third-party credit
+card channels (mainly from WeChat, Alipay service window and official QQ account). The Company continued to
+develop our smart service portfolio: promoting an upgrade of Al technology-driven smart services, introducing a new
+interactive form and Al core; launching the service traffic oriented decision engine, speeding up the efficiency of
+two-way coordination between intelligent robots and service specialists; achieving an innovative full-service coverage
+from traditional channels, third-party service channels to emerging service channels through the application of
+a leading voiceprint recognition system, an audio big data analysis platform, intelligent service robots and smart
+speaker service admission, so as to accelerate the formation of the APP service ecological closed loop and improve
+the integrated online service experience.
+Smart WeChat Customer Service
+60
+60
+China Merchants Bank
+III Report of the Board of Directors
+Annual Report 2018
+Asset custody business
+In 2018, with the implementation of the New Regulation on Asset Management and supporting policies, the asset
+management business was directed back to its origin. As a result, the growth rate of assets under custody of the
+Bank declined. As at the end of the reporting period, the balance of assets under custody of the Company was
+RMB12.35 trillion, 3.17% higher compared to the end of the previous year, and continued to rank second in the
+domestic custody industry (data from China Banking Association). During the reporting period, the Company realised
+a custodian fee income of RMB4.439 billion, down by 8.57% year-on-year, ranking the third in the domestic custody
+industry (data from China Banking Association).
+During the reporting period, the Company put more efforts into marketing custody products such as mutual fund
+under custody, insurance products and pensions. It obtained the qualification of depositary under the CBIRC's Pilot
+Program of Depositary Receipts, consolidating the market position of the Company in the domestic custody industry.
+Thanks to its continuous optimisation of functions of the custodian system and business processes, the Company
+became the first bank in the industry to officially release the custodian Big Data platform, and was also the first to
+achieve the robot process automation technology (RPA) for applications in the custody business, allowing its custody
+systems to outperform its industrial peers. The Company's "Risk Management System for Custodian Big Data
+Platform" was awarded the first prize in the "Golden Idea" program initiated by CBIRC. The Company implemented
+whole life cycle management of custody products, effectively guarded against risks to which custody business
+exposed to, and effectively fulfilled the responsibilities of custodian.
+Financial markets business
+In 2018, facing the complexity and difficulties of the global economy, the Chinese economy was under downward
+pressure and the interest rate of the RMB bond market fell sharply. The volatility of the foreign exchange market
+intensified, with the US dollar depreciating first and then appreciating while the RMB exchange rate experiencing the
+reverse trend subsequently, which made the annual fluctuation amplitude exceed 7,300 basis points and recorded
+the maximum fluctuation since the 1994 exchange rate reform. By adjusting the position structure, scaling up the
+duration, and vigorously carrying out innovative business and implementing other strategies to actively hedge and
+smooth out the market volatility, the Company has achieved good returns.
+With respect to RMB bond investment, the Company moderately extended the portfolio duration of RMB bonds
+investment through in-depth study of domestic monetary policies and macroeconomic situation and seized the
+opportunities brought by the downward trend of the RMB bond interest rate. Meanwhile, the Company actively
+adjusted the position structure of banking accounts in order to improve the portfolio return and prevent the
+occurrence of credit risk events. With respect to foreign currency bonds investment, in the context of the Fed's
+interest rate hike, the Company appropriately shortened the portfolio duration of foreign currency bonds investment
+through close tracking of the monetary policies of the major countries and based on logical judgment of the
+international economic situation and market trends, so as to avoid the impact of increased interest rate of foreign
+currency bond market. The Company also grasped the opportunities arising from fluctuation in the spread of credit
+bonds and increased their range trading operation to effectively improve portfolio yields.
+In 2018, the trading volume of RMB bonds of the Company reached RMB6.71 trillion, representing a year-on-year
+increase of 458.76%; the trading volume of RMB exchange rate swaps reached USD763.884 billion, basically
+remaining the same as the previous year; the trading volume of RMB-denominated options of the Company had
+reached USD158.356 billion in the interbank market, representing a year-on-year increase of 59.87%; the trading
+volume of wholesale customer derivatives had reached USD179.515 billion, representing a year-on-year increase of
+84.30%; the trading volume of interest rate swap business reached RMB4.83 trillion, representing a year-on-year
+increase of 170.86%. According to the data from the China Foreign Exchange Trade System, the percentage of the
+trading volume of RMB options of the Company ranked first in the interbank market.
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+3.10.3 Distribution channels
+The Company provides products and services via multiple distribution channels. Our distribution channels mainly
+consist of physical distribution channels and e-banking channels.
+Physical distribution channels
+Annual Report 2018
+III Report of the Board of Directors
+China Merchants Bank
+62
+61
+During the reporting period, the Company continued to focus on upgrading mobile service capabilities with
+a customer-oriented vision, CMB Life APP as the platform and technology as impetus, while focusing on
+high-frequency daily consumption scenarios and creating quality life so as to lead the transformation of the credit
+card industry. As at the end of the reporting period, the total number of CMB Life APP users was 70,027,300, of
+which non-credit card users accounted for 24.38%. During the reporting period, the maximum number of daily
+active users of CMB Life APP reached 7,944,100, the number of monthly active users was 39,538,700, among which
+young customers accounted for over 70%. In terms of the number and online activity of customers, CMB Life APP
+continued to outperform other credit card APPS in the banking industry. At the same time, the Company actively
+explored the mobile value output model with high-contribution and high-efficiency to facilitate customer acquisition
+and achieved breakthrough in operations. During the reporting period, the total number of credit card users of CMB
+Life APP reached 3,844,400, and consumer financial transactions successfully completed through CMB Life APP
+accounted for 49.47% of total consumer financial transactions, demonstrating further recognition of the strategic
+position of CMB Life APP.
+The Company launched the "China Merchants Bank" WeChat Official Account as an important front for brand
+marketing and promotion of product functions. By integrating with hot issues to facilitate marketing and
+continuously enhancing brand penetration in young customer groups, the trust and popularity of targeting
+costumers to our products and the transformation efficiency was improved. As at the end of the reporting period,
+the "China Merchants Bank" WeChat Official Account had accumulated 16,544,300 followers.
+CMB Life APP for Credit Card
+During the reporting period, the Company launched CMB APP 7.0 to build a leading financial technology ecosystem
+in the banking industry on the basis of "connectivity", "management" and "smart service". There were material
+upgradings in income and expenditure books, city services, fund channels, community upgrades and smart services,
+with up to 149 functions optimised to provide open and caring integrated financial services to nearly 80,000,000
+users, making it the most dynamic e-channel of the Company.
+CMB APP
+Major retail e-banking channels
+The Company values highly on the development, improvement and integration of e-banking channels, which serve to
+effectively relieve pressure on physical outlets of the Company. As at the end of the reporting period, the Company's
+replacement rate of comprehensive service counter through the retail electronic channel was 98.24%; the rate of
+rerouting customers from the service counters to visual counters was 88.10%; and the Company's replacement rate
+of transaction settlement through the whole-sale electronic channel was 92.96%.
+E-banking channels
+The efficiently operated distribution network of the Company is primarily located in the major economic centers
+of China such as Yangtze River Delta, Pearl River Delta and Bohai Rim, and certain large- and medium-sized cities
+in other regions. As at the end of the reporting period, the Company had 137 branches, 1,673 sub-branches, one
+dedicated branch-level operation center (credit card center), one representative office, 3,259 self-service centers,
+10,316 self-service machines (including 1,212 automatic teller machines and 9,104 deposit-taking and cash
+withdrawal machines) and 12,897 visual counters in more than 130 cities of Mainland China. The Company also
+has a branch in Hong Kong; a branch and a representative office in New York, the United States; a branch and a
+representative office in London, the UK; a branch in Singapore; a branch in Luxembourg; a representative office in
+Taipei and a branch in Sydney, Australia.
+As at the end of the reporting period, the number of CMB APP users in aggregate was 78,270,400, with 41,508,000
+monthly active users, a total number of 4.580 billion logins and the average monthly logins of 11.94 per user during
+the reporting period. Meanwhile, the CMB APP transaction volume has been increasing rapidly, with 1,382 million
+APP transactions and a total transaction amount of RMB30.76 trillion during the reporting period, up by 33.91%
+and 72.13% respectively, as compared with the previous year. Among all these transactions, the number of wealth
+management transactions originated by 5,075,000 wealth management customers using CMB APP accounted for
+79.37% of the Bank's total number of wealth management transactions, and a total wealth management sales value
+reached RMB6.26 trillion, representing an increase of 41.31% as compared with the previous year, and comprised
+59.11% of the Bank's total wealth management sales.
+Sydney Branch
+69
+Established in 2017, the Sydney Branch of the Company is the first branch approved to be established in Australia
+among all the PRC joint-stock commercial banks. Relying on the economic and trade exchanges between China and
+Australia, it proactively participates in the extensive cooperation between the two countries in the fields of energy,
+minerals, trade and infrastructure development, facilitates the cooperation between the enterprises of the two
+countries, proactively serves and promotes the economic exchange and development of the two countries, and offers
+its customers the diversified financial products and services such as cross-border corporate finance, funds clearing,
+financial market, trade finance and cash management. The establishment of the Sydney Branch further expanded
+and improved the Company's global presence, forming a global service network across four continents: Asia, Europe,
+America and Australia.
+Country risks represent the risks of economic, political and social changes and developments in a country or region
+that may cause borrowers or debtors in that country or region to be unable or unwilling to fulfil their obligations
+to banks, or incur loss to commercial presences of banks in that country or region, or other loss to banks in that
+country or region. Country risk may arise from deteriorating economic conditions, political and social upheavals,
+nationalisation or expropriation of assets, government repudiation of external indebtedness, foreign exchange
+controls and currency depreciation in a country or region.
+The Company has incorporated country risk management into its overall risk management system. In accordance
+with relevant regulatory requirements, the Company dynamically monitored the change in its country risk profile,
+used its sovereign rating model to set limit on its country risk with reference to external rating results, and evaluated
+its country risk and made allowances on a quarterly basis. As at the end of the reporting period, the assets of the
+Company exposed to the country risk remained insignificant, and this indicated low country risk ratings. Moreover,
+we have made adequate allowances for country risk according to the regulatory requirements. As a result, the
+country risk will not have material effect on the operations of the Company.
+67
+68
+China Merchants Bank
+III Report of the Board of Directors
+Annual Report 2018
+3.11.4 Market risk management
+The Company's market risk arises from trading book and banking book, and the interest rate risk and exchange rate
+risk are the major market risks facing the Company.
+Interest rate risk management
+Trading book
+The Company uses various risk indicators, including volume indicators, market risk value indicators (VaR, covering
+interest rate risk factors of various currencies and durations relating to trading book business), interest rate stress
+testing loss indicators, interest rate sensitivity indicators and accumulative loss indicators, to measure and manage
+the interest rate risk of trading book. The interest rate risk factors used for risk measurement cover all businesses
+under the trading book, and are comprised of around 110 yield curves of interest rates or bonds. VaR includes
+general VaR and stress VaR, which are both calculated using the historical simulation model and adopt a confidence
+coefficient of 99%, an observation period of 250 days and a holding period of 10 days. The interest rate stress
+testing scenario includes the parallel move, steep move and twisted change of interest rates at various degrees and
+various unfavorable market scenarios designed on the characteristics of investment portfolios. Among which, the
+extreme interest rate scenario may move up to 300 basis points and cover the extremely unfavorable conditions
+of the market. Major interest rate sensibility indicator reflects the duration of bonds and the change in the market
+value of bonds and interest rate derivatives when an interest rate fluctuates unfavorably by 1 basis point. As for daily
+risk management, the annual scope of authorisation and the market risk limits for the interest rate risk businesses
+under the trading book are set in accordance with the risk appetite, operation plan and risk prediction of the Board
+of Directors at the beginning of the year for which the market risk management department is responsible for daily
+monitoring and continuous reporting.
+Since 2018, domestic economic growth momentum has weakened; GDP growth rate has declined; corporate
+financing chains have tightened; credit bond defaults have increased. The international situation has become
+increasingly complicated. External factors such as Sino-US trade frictions, changes in the US economy and overseas
+stock markets have also increased market turbulence. Under this situation, the central bank maintained a reasonably
+sufficient level of funds through targeted interest rate cut and open market operations, and the short-term market
+interest rate decreased significantly. However, due to the overall downward pressure on the fundamental economy,
+the long-term interest rate had a relatively small downward trend. The differentiation in credit spread further
+intensified, and the medium and low rating credit spreads expanded significantly. In respect of overseas, the US
+macroeconomic performance was strong. The Federal Reserve raised interest rates four times during the year, and
+the yield of USD bonds showed an upward trend throughout the year.
+The investment scope of the trading book of the Company focused on RMB bonds, especially domestic interest rate
+bonds, and had strict control on credit bond investments. Under the general recovery of the domestic bond market,
+the investment portfolio for trading book of the Company received good returns, and various interest rate risk
+indicators were within the target range.
+Banking book
+The Company mainly adopts the re-pricing gap analysis, duration analysis, benchmark-correlated analysis, scenario
+simulation and other methods to measure and analyse the interest rate risk of banking book on a monthly basis. The
+re-pricing gap analysis mainly monitors the distribution of re-pricing duration and mismatch of assets and liabilities;
+the duration analysis monitors the duration of major product types and the change in the duration gap of assets
+and liabilities of the whole Bank; the benchmark-correlated analysis assesses the benchmark risk existing between
+different pricing benchmark interest rate curves, as well as between the different duration points on each of such
+curves based on the benchmark-correlated coefficients calculated using our internal models; the scenario simulation
+is the major approach for the Company to conduct interest rate risk analysis and measurement, which comprise a
+number of ordinary scenarios and stress scenarios, including the interest rate benchmark impact, the parallel move
+and the change in the shape of yield curves, the extreme changes in interest rates in history, and the most possible
+changes in interest rates in the future as judged by experts and other scenarios. The net interest income (NII) for the
+future one year and the changes in economic value (EVE) indicator are calculated through simulation of the scenario
+of changes in interest rates. The NII fluctuation ratio and the EVE fluctuation ratio of certain scenarios are included
+into the interest rate risk limit system of the whole Bank.
+In 2018, the central bank cut the benchmark interest rate four times, and the market yield rate showed a high-
+trend at the beginning and a low-trend at the end for the whole year. Among which, the medium-to-long term
+yields reduced significantly with narrowed spreads between interest rates with different durations. The Company
+closely monitored the change of external interest rate environment and conducted in-depth analysis and forecast
+on the market interest rate development through macro-modeling while making flexible adjustment to the strategy
+of the proactive management of interest rate risks. In terms of asset investment, the Company proactively extended
+the durations of RMB bonds investments; in terms of liability management, the Company fully utilised the favorable
+conditions of monetary policy to maintain "reasonably adequate", rationally arranged active liabilities, replaced
+high-cost liabilities, and effectively managed the interest rate risk of the Company during the interest cut period.
+The results of stress test also showed that the various indicators stayed within the limits and prewarning values, and
+the banking account interest rate risks were at a relatively low level.
+69
+For more information about the Company's market risk management, please refer to Note 61(b) to the financial
+statements.
+During the reporting period, the Company paid close attention to exchange rate movements, took initiative to
+analyse the impact of exchange rate changes in light of the macroeconomic conditions at home and abroad, and
+proposed a balance sheet optimisation plan as a reasonable reference for the management's decision-making. In
+2018, the exchange rate fluctuation range of the RMB increased significantly. In the face of the new international
+economic landscape, the Company strengthened its analysis of the macro-economy in the United States and Sino-U.
+S. trade frictions, and further optimised measurement of the exchange risks. The Company had a prudent exchange
+rate appetite, and the size of foreign exchange exposure was at a relatively low level. At present, the exchange rate
+risk of the Company is generally stable, with all the core limit indicators, general scenario and stress testing results
+satisfying the regulatory requirement.
+The Company regularly measures and analyses foreign exchange exposure of banking book and scenario simulation
+results, monitors and reports exchange rate risk on a monthly basis under its quota limit framework, and adjusts its
+foreign exchange exposure accordingly based on the trend of foreign exchange movements, so as to mitigate the
+relevant foreign exchange risk of banking book. The Audit Department of the Company is responsible for overall
+auditing of our exchange rate risk.
+The data for measurement of exchange rate risk of banking book of the Company was derived mainly from
+database, and the Company mainly uses foreign exchange exposure analysis, scenario simulation analysis, stress
+test, and other methods for measurement and analysis. The foreign exchange exposure measurement primarily uses
+the short-sided method and the correlation approach; scenario simulation and stress test analysis are two important
+exchange rate risk management tools of the Company for managing foreign exchange rate risk in respect of
+fluctuation of all currency exchange rates, including the standard scenario, historical scenario, forward scenario and
+stress scenario. Based on the forward exchange rate fluctuation and the scenario of historical extreme fluctuations,
+each scenario could simulate the impact on the Company's profit or loss. The effects of certain scenarios on the
+profit or loss and its percentage to net capital as a limit indicator are incorporated into daily management. The
+Company conducts back-testing and assessment on relevant model parameters on a regular basis to verify the
+effectiveness of measurement models.
+Banking book
+3.11.3 Country risk management
+Under this background, the Company mainly relied on foreign exchange trading business on behalf of customers to
+obtain stable spread income, and strengthened the control of the limit indicators such as the exposure of proprietary
+business, sensitivity index and stop-loss, and all exchange rate risk indicators of trading book were within the target
+range.
+The Company uses the risk indicators such as risk exposure indicator, market risk value indicator (VaR, covering
+foreign exchange rate risk factors of various currencies related to the trading book business), the loss indicator for
+exchange rate scenario stress test, exchange rate sensitivity indicator and accumulated loss indicator to conduct risk
+measurement and daily management. As for risk measurement, the selected exchange rate risk factor is applied on
+spot and forward prices in all transaction currencies under the trading book. VaR includes general VaR and stress
+VaR, which are both calculated using historical simulation model and adopt a confidence coefficient of 99%, an
+observation period of 250 days and a holding period of 10 days. Exchange rate stress test scenarios cover 5%, 10%,
+15% or more adverse changes in each of transaction currency against RMB, changed volatility of foreign exchange
+options. Major exchange rate sensitivity indicators are Delta, Gamma, Vega and other indicators for exchange rate
+derivatives. For daily management, we set annual limits on authority associated with exchange rate risks under the
+trading book and relevant market exposure at the beginning of the year according to the risk appetite, business
+planning and risk forecast of the Board of Directors, and delegated the Market Risk Management Department to
+perform daily monitoring and on-going reporting.
+Exchange rate risk management
+Trading book
+III Report of the Board of Directors
+III Report of the Board of Directors
+China Merchants Bank
+In 2018, in accordance with the Guidelines on the Management of Interest Rate Risk of Banking Book of Commercial
+Banks (Revised) issued by the CBIRC, the Company has completed the comprehensive consolidation and revision
+of the existing interest rate risk policy system and operating procedures for internal banking book, and has fully
+satisfied the regulatory requirements in measurement methods, quantitative risk level, system building and modeling.
+In 2018, the US economic data recorded strong performance, and the Federal Reserve raised interest rates several
+times, which constituted a strong driving force for the US Dollar index. Under the factors of Sino-US trade friction,
+overseas stock market turmoil, and downturns of emerging markets, the overall fluctuation of the exchange rate
+market intensified. For the whole year, the US Dollar index rose by 4.68%, and the USD RMB spot exchange rate fell
+by 5.43%. The volatility of the offshore and onshore exchange rate with various durations increased, and the daily
+maximum change of the USD RMB spot exchange rate reached 664bps.
+In accordance with the "Management Measures for Large-Scale Risk Exposure of Commercial Banks" (CBIRC Order
+2018 No. 1) (‹¤£í¯★¤¤¥¥¥¥¥Ì£) (20181)) issued by the CBIRC, large-scale risk
+exposure refers to the credit risk exposure (including various credit risk exposures in the banking book and trading
+book) to a single customer or a group of related customers of a commercial bank that exceeds 2.5% of its net Tier
+1 capital. The Company has incorporated large-scale risk exposure management into its overall risk management
+system, and measured and dynamically monitored changes in large-scale risk exposure, so as to effectively
+controlled customer concentration risks. As at the end of the reporting period, other than customers with regulatory
+exemption, single non-financial institution customers, group non-financial institution customers, single financial
+institution customers and group financial institution customers of the Company that reached the standards of
+large-scale risk exposure were all in compliance with the regulatory requirements.
+Annual Report 2018
+During the reporting period, the Company's non-performing loans have been further reduced and asset quality has
+been effectively controlled through the above-mentioned measures. For more information about the Company's
+credit risk management, please refer to Note 61(a) to the financial statements.
+China Merchants Bank
+Annual Report 2018
+66
+99
+95
+65
+As at the end of the reporting period, the total assets of CMB Financial Leasing amounted to RMB171.296 billion,
+and its net assets amounted to RMB17.944 billion. It realised net profit of RMB2.215 billion during the reporting
+period.
+III Report of the Board of Directors
+CMB Financial Leasing is one of the five pilot bank-affiliated financial leasing firms approved by the State Council.
+It was established in March 2008 and wholly owned by the Company with a registered capital of RMB6.0
+billion and 267 employees. CMB Financial Leasing has adhered to its operation and development strategy of
+"internationalisation, professionalisation and differentiation", carried out its international presence of aircraft and
+vessel assets, upgraded key national equipment manufacturing under the professional support, responded to the
+construction of "The Belt and Road" initiative by provision of differentiated service and launched the financial
+solutions for the ten sectors of aviation, shipping, urban transportation, high-end equipment, public utilities, energy
+saving and environmental protection, clean energy, health culture, emerging industries and leasing. It satisfies
+different needs in respect of procurement of equipment, promotion of sales, revitalisation of assets, balancing of tax
+liabilities and improvement of financial structure.
+As at the end of the reporting period, the total assets of CMB Wing Lung Group amounted to HK$314.478 billion.
+Total equity attributable to shareholders amounted to HK$35.432 billion. Total loans and advances to customers
+(including trade bills) amounted to HK$162.466 billion. Deposits from customers amounted to HK$221.329 billion.
+The loan-to-deposit ratio was 68.59%. The non-performing loan ratio (including trade bills) was 0.52%. The total
+capital ratio was 17.98%, and the average liquidity coverage ratio for the fourth quarter of 2018 was 166.28%, all
+above the regulatory requirements.
+In 2018, CMB Wing Lung Group posted an attributable profit to shareholders of HK$3.219 billion and achieved
+an operating income of HK$6.188 billion, of which net interest income was HK$4.765 billion and net non-interest
+income was HK$1.423 billion. The cost-to-income ratio was 35.05%.
+Founded in 1933, CMB Wing Lung Bank has a registered capital of HK$1.161 billion as at the end of the reporting
+period, and is a wholly-owned subsidiary of the Company in Hong Kong. The principal operations of CMB Wing
+Lung Bank and its subsidiaries comprise deposit-taking, lending, private banking and wealth management,
+investment, securities, credit cards, NET banking, mobile banking, global cash management, syndicated loans,
+corporate financing, documentary bills, leasing and hire purchase loans, foreign exchange, insurance agency,
+mandatory provident fund, insurance brokerage and general insurance underwriting, property management and
+trustee, nominee and asset management services. At present, CMB Wing Lung Bank has a total of 35 banking
+offices in Hong Kong, four branches and sub-branches in Mainland China, one branch in Macau, and two overseas
+branches, located respectively in Los Angeles and San Francisco, the United States. As at the end of the reporting
+period, the total number of employees of CMB Wing Lung Group is 1,935.
+3.10.6 CMB Wing Lung Group
+In 2018, on the basis of compliant operation, the Sydney Branch endeavored to promote various business
+developments, and proactively established a steady and sustainable development model with its own features.
+During the reporting period, the Sydney Branch realised the net operating income of AUD10,830,000 and recorded
+a pre-tax loss of AUD7,170,000.
+3.11.2 Management of large-scale risk exposure
+3.10.7 CMB Financial Leasing
+3.10.8 CMB International Capital
+For detailed financial information on CMB Wing Lung Group, please refer to the 2018 annual report of CMB Wing
+Lung Bank, which is published on the website of CMB Wing Lung Bank (www.cmbwinglungbank.com).
+As at the end of the reporting period, the total assets of CMB International Capital amounted to HK$23.571 billion,
+and its net assets amounted to HK$7.805 billion. It realised net profit of HK$756 million during the reporting period.
+During the reporting period, CMB International Capital had a market share of approximately 5.9% in terms of IPO
+underwriting in Hong Kong, ranking first (public data from Bloomberg).
+Firstly, making steady progress in the development of a comprehensive risk management system while
+improving the concentrated customer risk management mechanism. The Company has been optimising the
+risk preference conveyance and management mechanism; co-ordinating overall planning and steadily promoting
+the consolidated management of affiliated institutions; improving the cross-financial risk management structure
+and its mechanisms, establishing various market tracking and monitoring mechanisms; standardising product
+innovation management, fortifying the approval and management for counterparties and cooperative institutions;
+strengthening identification of major risk as well as assessment and management mechanisms. Secondly, building
+an industry research system for new growth engines while consolidating the customer base. The Company
+has set up an industry research center, built an industry research system, and formulated industrial credit policies,
+loan approval standards and targeted customer lists for 12 new growth engines, carried out name list management
+for the strategic customers of the Head Office and branches as well as customers of industries from which our
+loans should be reduced and recovered, and established a future-oriented, sustainable and health customer base.
+Thirdly, fully implementing the allowance policy for expected credit loss under IFRS 9. The Company has
+achieved the refined management of risk costs based on customer ratings and debt ratings, guided credit resource
+allocation and customer selection with risk pricing mechanism, and gradually established a customer-centric risk
+management perspective. Fourthly, consolidating the management foundation while constantly promoting
+the whole-process credit optimisation. By organising special group of experts, sorting out and optimising key
+processes of credit operation, the Company has reconstructed its credit process management system and completed
+the supporting system revision and authorisation adjustment, thus reinforcing the whole-process of risk management
+and control. Fifthly, using Fintech services to enhance the quality and efficiency of risk management. The
+Company introduced Big Data and Fintech, strengthened the knowledge graph system of internal and external
+data visualisation, stressed on customer risk control, enhanced capabilities of risk identification, and improved
+the automation, process, specialisation and centralisation of risk management processes. Sixthly, strengthening
+the control and follow up on asset quality and risk screening while preventing and controlling risks in a
+perspective manner. Adhering to careful screening of risks in respect of major corporate customers, the Company
+implemented the "different policy for each customer" control measures, and conducted regular inspections
+to achieve "early pre-warning and early disposal". Attaching importance to overdue loans and tightening its
+control on them, the Company optimised risk reporting mechanisms and strategies to enhance the sensitivity and
+perspectiveness of risk identification. Seventhly, increasing the channels for disposal of non-performing assets
+while accelerating the disposal of risk assets. The Company has been strengthening clearing and collection
+of non-performing assets in cash while continuously promoting the write-off of non-performing assets and
+securitisation of assets, proactively exploring debt-to-equity conversion, making use of a number of methods to
+manage risk assets and continuously improving its non-performing assets management capability.
+Established in 1993, CMB International Capital is a wholly-owned subsidiary of the Company in Hong Kong, with
+a registered capital of HK$4.129 billion and 436 employees. At present, the business scope of CMB International
+Capital and its subsidiaries mainly covers corporate finance, asset management, wealth management, stocks and
+structured finance.
+3.11.1 Credit risk management
+III Report of the Board of Directors
+During the reporting period, against the backdrop of complicated and volatile economic environment at home and
+abroad and the increasing risk in bank operations, the Company continued to improve its overall risk management
+system and proactively overcome and prevent all kinds of risk.
+The Company stepped up the construction of a risk management system focusing on risk-adjusted value creation
+under the principles of "Comprehensive, Professional, Independent and Balanced Management". The Risk and
+Compliance Management Committee of the Head Office is responsible for reviewing and determining the most
+significant bank-wide risk management policies on risk preferences, strategies, policies and authorisations approved
+by the Board of Directors.
+3.11 Risk management
+China Merchants Bank
+Annual Report 2018
+CIGNA & CMB Life Insurance was established in Shenzhen in August 2003, and is the first Sino-foreign joint venture
+life insurance company established after China's entry into the World Trade Organisation (WTO), with a registered
+capital of RMB2.8 billion and 3,266 employees. As at the end of the reporting period, the Company had 50%
+of equity interests in CIGNA & CMB Life Insurance. CIGNA & CMB Life Insurance is mainly engaged in insurance
+businesses such as life insurance, health insurance and accident injury insurance, as well as the reinsurance of the
+above insurances.
+3.10.10 CIGNA & CMB Life Insurance
+As at the end of the reporting period, the total assets of China Merchants Fund amounted to RMB6.612 billion,
+and its net assets amounted to RMB4.872 billion. The total size of the asset management business (including China
+Merchants Fund and its subsidiaries) amounted to RMB944.414 billion. It realised net profit of RMB894 million
+during the reporting period.
+Established on 27 December 2002, China Merchants Fund had a registered capital of RMB1.31 billion and 397
+employees (excluding those of its subsidiaries). As at the end of the reporting period, the Company had 55% of
+equity interests in China Merchants Fund. The business scope of China Merchants Fund covers fund establishment,
+fund management and other operations approved by the CSRC.
+3.10.9 China Merchants Fund
+As at the end of the reporting period, the total assets of CIGNA & CMB Life Insurance amounted to RMB45.332
+billion, and its net assets amounted to RMB5.783 billion. During the reporting period, CIGNA & CMB Life Insurance
+realised a premium income of RMB15.062 billion. It realised net profit of RMB1.045 billion during the reporting
+period.
+China Merchants Bank
+4.14 Explanation about the integrity profile of the Company
+IV Important Events
+78
+77
+According to the relevant requirements of China Securities Regulatory Commission, the Company considered and
+approved the "Resolution Regarding the Dilution of Current Returns by the Non-public Issuance of Preference
+Shares and the Remedial Measures" at its 2016 Annual General Meeting on 26 May 2017, and formulated the
+remedial measures in respect of the dilution of current returns of the holders of ordinary shares which may be
+caused by the non-public issuance of preference shares. The measures include adhering to the business strategies
+of "Light-operation Bank" and "One Body with Two Wings", creating differentiated competitive advantages,
+strengthening the awareness of capital constraints and return on capital, striving to reduce capital consumption,
+improving the efficiency of capital utilisation, strengthening the management of asset quality, and maintaining a
+stable return policy for the holders of ordinary shares. Meanwhile, the Directors and senior management of the
+Company also undertook to earnestly implement the remedial measures. So far as the Company is aware, as at the
+date of this report, neither the Company nor its Directors and senior management had breached any of the aforesaid
+undertakings.
+In the course of the rights issue of A shares and H shares in 2013, each of China Merchants Group Ltd., China
+Merchants Steam Navigation Co., Ltd. (AES) (now renamed as China Merchants Steam
+Navigation Co., Ltd. () and China Ocean Shipping (Group) Company (now renamed as China
+Ocean Shipping Company Limited) had undertaken that they would not seek for related party transactions on
+terms more favorable than those given to other shareholders; they would repay the principal and interest of the
+loans granted by the Company on time; they would not interfere with the daily operations of the Company. Should
+they participate in the subscription of the rights shares, they would neither transfer nor entrust others to manage
+the allocated shares within five years from the delivery of such shares, nor would they seek for a repurchase by
+the Company of the allocated shares held by them. Upon expiration of the lock-up period of the allocated shares,
+they would not transfer their allocated shares until they obtain the approval from the regulatory authorities on the
+share transfer and the shareholder qualification of transferees; and upon obtaining the approval from the Board
+of Directors and shareholders' general meeting of the Company, they would continue to support the reasonable
+capital needs of the Company; they would not impose unreasonable performance indicators on the Company. For
+details, please refer to the A Share Rights Issue prospectus dated 22 August 2013 on the websites of Shanghai Stock
+Exchange, Hong Kong Stock Exchange and the Company. So far as the Company is aware, as at the date of the
+report, the above shareholders had not violated the aforesaid undertakings.
+4.15 Undertakings made by the Company, Directors, Supervisors,
+senior management and other connected persons
+So far as the Company is aware, there has not been any significant court judgment with which the Company has
+not complied, nor has there been any outstanding debt of significant amount during the reporting period.
+So far as the Company is aware, during the reporting period, none of the Company, its Directors, Supervisors or
+senior management was subject to investigation by relevant authorities or to mandatory measures imposed by
+judicial organs or disciplinary inspection authorities. None of them had been referred or handed over to judicial
+authorities or prosecuted for criminal liability, under investigation or administrative sanction by the CSRC, nor
+had they been prohibited from engagement in the securities markets, determined as unqualified, or been publicly
+censured by any stock exchange. The Company has not been penalised by other regulatory bodies which have
+significant impact on the business of the Company.
+China Merchants Bank
+Annual Report 2018
+4.13 Disciplinary actions imposed on the Company, Directors,
+During the reporting period, the Directors and Supervisors of the Company have no material interests in contracts of
+significance to which the Company or any of its subsidiaries was a party. None of the Directors and Supervisors of
+the Company has entered into any service contract with the Company which is not determinable by the Company
+within one year without payment of compensation (excluding statutory compensation).
+4.12 Contractual rights and service contracts of Directors and
+Supervisors
+IV Important Events
+Save as disclosed herein, the Company is not aware that the Directors, Supervisors and senior management of the
+Company have any relations between each other with respect to financial, business, kinship or other material or
+connected relations.
+4.11 Financial, business and kinship relations among Directors,
+Supervisors and senior management
+So far as the Company is aware, none of the Directors of the Company has any interests in the businesses which
+compete or are likely to compete, either directly or indirectly, with those of the Company.
+Annual Report 2018
+Company
+Supervisors or senior management
+4.16 Significant connected transactions
+As at the end of the reporting period, the continuing connected transactions between the Company and CM
+Securities Group amounted to RMB254 million.
+A majority of the continuing connected transactions of the Company met the de minimis exemption and the
+non-exempt continuing connected transactions fulfilled the reporting and announcement requirements under the
+Hong Kong Listing Rules.
+4.10 Directors' interests in the businesses competing with those of the
+79
+As at the end of the reporting period, the continuing connected transactions between the Company and Anbang
+Insurance Group amounted to RMB1.270 billion.
+The annual cap for the continuing connected transactions between the Company and Anbang Insurance Group
+for 2018 was RMB2.0 billion, for which the relevant percentage ratios calculated in accordance with Rule 14.07 of
+the Hong Kong Listing Rules were not more than 5%. Therefore, these transactions would only be subject to the
+reporting, announcement and annual review requirements, and exempt from the independent shareholders' approval
+requirement under the Hong Kong Listing Rules.
+On 20 March 2018, the Company entered into a Business Co-operation Agreement with Anbang Insurance Group
+for a term commencing on 1 January 2018 and expiring on 31 December 2020. The agreement was entered into on
+normal commercial terms after an arm's length negotiation, pursuant to which Anbang Insurance Group shall pay
+the service fees to the Company at the normal market prices.
+As at the end of the reporting period, Anbang Insurance Group indirectly held more than 10% of the equity interest
+in the Company and is one of the Company's substantial shareholders. According to the Hong Kong Listing Rules,
+Anbang Insurance Group is a connected person of the Company. The insurance products agency sales services
+provided by the Company to Anbang Insurance Group constituted continuing connected transactions of the
+Company under the Hong Kong Listing Rules.
+Anbang Insurance Group
+The annual cap for the continuing connected transactions between the Company and CM Securities Group for 2018
+was RMB500 million, in respect of which the relevant percentage ratios calculated in accordance with Rule 14.07
+of the Hong Kong Listing Rules were not more than 5%. Therefore, these transactions would only be subject to the
+reporting, announcement and annual review requirements, and exempt from the independent shareholders' approval
+requirement under the Hong Kong Listing Rules.
+On 27 March 2018, the Company entered into a Business Co-operation Agreement with CM Securities for a term
+commencing on 1 January 2018 and expiring on 31 December 2020. The agreement was entered into on normal
+commercial terms after an arm's length negotiation, pursuant to which CM Securities Group shall pay the service
+fees to the Company at the normal market prices.
+At the end of the reporting period, China Merchants Group Ltd. indirectly held 29.97% of the equity interest in
+the Company (by way of equity interests held, right of control or relationship of parties acting in concert). As China
+Merchants Group Ltd. also held 44.09% of the equity interest in CM Securities, CM Securities Group is a connected
+person of the Company pursuant to the Hong Kong Listing Rules. The services relating to the provision of third
+parties custodian account, sales of funds, account custodian and agency sales for wealth management products
+and collective investment products and other services provided by the Company to CM Securities Group constituted
+continuing connected transactions of the Company under the Hong Kong Listing Rules.
+CM Securities Group
+IV Important Events
+China Merchants Bank
+Annual Report 2018
+As at the end of the reporting period, the continuing connected transactions between the Company and CMFM
+Group amounted to RMB1.333 billion.
+The annual cap for the continuing connected transactions between the Company and CMFM Group for 2018 was
+RMB3.8 billion, in respect of which the relevant percentage ratios calculated in accordance with Rule 14.07 of
+the Hong Kong Listing Rules were not more than 5%. Therefore, these transactions would only be subject to the
+reporting, announcement and annual review requirements under the Hong Kong Listing Rules, and exempt from the
+independent shareholders' approval requirement.
+On 13 December 2016, the Company entered into a Business Co-operation Agreement with CMFM for a term
+commencing on 1 January 2017 and expiring on 31 December 2019. The agreement was entered into on normal
+commercial principles after an arm's length negotiation. The agency service fees payable by CMFM Group will be
+calculated at the rates specified in the fund offering documents and/or the offering prospectuses and shall be settled
+to the Company under the agreement.
+At the end of the reporting period, the Company and CM Securities held 55% and 45% of the equity interest
+in CMFM, respectively. CMFM Group is a connected person of the Company under the Hong Kong Listing Rules.
+The fund distribution agency service provided by the Company to CMFM Group constituted continuing connected
+transactions of the Company under the Hong Kong Listing Rules.
+CMFM Group
+With the approval of the Board of Directors of the Company, on 13 December 2016, the Company announced that
+the annual caps for the continuing connected transactions with CMFM Group for the years of 2017, 2018 and
+2019 had been RMB2.5 billion, RMB3.8 billion and RMB5.8 billion, respectively. On 27 March 2018, the Company
+announced that the annual caps for the continuing connected transactions with CM Securities Group for the years
+of 2018, 2019 and 2020 had been RMB500 million. On 20 March 2018, the Company announced that the annual
+caps for the continuing connected transactions with Anbang Insurance Group for the years of 2018, 2019 and 2020
+had been RMB1.5 billion. On 24 August 2018, the Company announced that the annual cap for the continuing
+connected transactions with Anbang Insurance Group for the year of 2018 had been adjusted from RMB1.5 billion
+to RMB2.0 billion. Further details of the above continuing connected transactions, please refer to the relevant
+announcements issued by the Company on 13 December 2016, 20 March 2018, 27 March 2018 and 24 August
+2018, respectively.
+Pursuant to Chapter 14A of the Hong Kong Listing Rules, the non-exempt continuing connected transactions of the
+Company were those conducted by the Company with CMFM and its associates (hereinafter referred to as "CMFM
+Group"), CM Securities and its associates (hereinafter referred to as "CM Securities Group") and Anbang Insurance
+Group Co., Ltd. and its associates (hereinafter referred to as "Anbang Insurance Group"), respectively.
+4.16.2 Non-Exempt continuing connected transactions
+4.16.1 Overview of connected transactions
+financial
+0.00018
+45,000
+3.15 Management contracts
+No contracts concerning the management and administration of the whole or any substantial part of the business of
+the Company were entered into or existing during the year.
+3.16 Permitted indemnity provision
+The Company has maintained appropriate insurance coverage for Directors' and officers' liabilities in respect of legal
+actions against its Directors and senior management arising out of corporate activities.
+By order of the Board of Directors
+Li Jianhong
+Chairman of the Board of Directors
+22 March 2019
+China Merchants Bank
+IV Important Events
+Annual Report 2018
+Important Events
+4.1 Principal business activities
+The Company is engaged in banking and related financial services.
+4.2 Financial highlights
+Details are set out in Chapter II Summary of Accounting Data and Financial Indicators.
+4.3 Shareholders' equity
+For details of changes in shareholders' equity of the Company, please refer to the "Consolidated Statement of
+Changes in Shareholders' Equity" in the financial statements.
+4.4 Fixed assets
+Changes in fixed assets of the Company as at the end of the reporting period are detailed in Note 29 to the financial
+statements.
+So far as the Board of Directors is aware, during the reporting period, the Company has complied in all material
+respects with the relevant laws and regulations that have a significant impact on the operations of the Company.
+4.5 Purchase, sale or repurchase of listed securities of the Company
+3.14 Compliance with relevant laws and regulations
+reporting guide
+2.
+(1)
+profit appropriation of the Company shall focus on reasonable returns on investment of the investors,
+and such policies shall maintain continuity and stability;
+(2)
+(3)
+(4)
+(5)
+(6)
+(7)
+the Company may distribute dividends in cash, shares or a combination of cash and shares, and
+it shall distribute dividends mainly in cash. Subject to compliance with prevailing laws, regulations
+and the requirements of relevant regulatory authority on the capital adequacy ratio, as well as
+the requirements of general working capital, business development and the need for substantial
+investment, merger and acquisition plans of the Company, the cash dividend to be distributed by the
+Company to shareholders of ordinary shares each year in principle shall not be less than 30% of the
+net profit after taxation attributable to shareholders of ordinary shares audited in accordance with the
+PRC accounting standards for that year. The Company may pay interim cash dividend. Unless another
+resolution is passed at the shareholders' general meeting, the Board of Directors shall be authorized
+by the shareholder at a general meeting to approve the interim profit appropriation plan;
+if the Company generated profits in the previous accounting year but the Board of Directors did
+not make any cash profit appropriation proposal after the end of the previous accounting year, the
+Company shall state the reasons for not distributing the profit and the usage of the profit retained in
+the periodic report and the Independent Directors shall give an independent opinion in such regard;
+if the Board of Directors considers that the price of the shares of the Company does not match the
+size of share capital of the Company or where the Board of Directors considers necessary, the Board
+of Directors may propose a profit appropriation plan in the form of shares and implement the same
+upon consideration and approval at a general meeting, provided that the abovementioned cash profit
+appropriation requirements are satisfied;
+the Company shall pay cash dividends and other amounts to holders of domestic shares listed
+domestically and such sums shall be calculated, declared and paid in Renminbi. The Company shall
+pay cash dividends and other amounts to holders of H Shares and such sums shall be calculated and
+declared in Renminbi and paid in Hong Kong dollars. The foreign currencies required by the Company
+for payment of cash dividends and other sums to shareholders of overseas listed foreign shares shall
+be handled according to the relevant requirements of foreign exchange administration of the State;
+where appropriation of the Company's fund by a shareholder, which is in violation of relevant rules,
+has been identified, the Company shall make deduction against the cash dividend to be paid to such
+shareholder, and such amount shall be used as the reimbursement of the funds appropriated; and
+the Company shall disclose the implementation progress of the cash dividend policy and other
+relevant matters in its periodic reports in accordance with the applicable requirements.
+During the reporting period, the profit appropriation plan of the Company for 2017 was implemented in
+strict accordance with the relevant provisions of the Articles of Association of China Merchants Bank Co.,
+Ltd.. It was considered and approved by the 22nd meeting of the Tenth Session of the Board of Directors
+of the Company, and submitted for consideration and approval at the 2017 Annual General Meeting. The
+criteria and proportion of cash dividend were clear and specific, and the Board of Directors of the Company
+has implemented the profit appropriation plan. The profit appropriation plan of the Company for 2018
+will also be implemented in strict accordance with the relevant provisions of the Articles of Association
+of China Merchants Bank Co., Ltd.. It will be considered and approved by the 40th meeting of the Tenth
+Session of the Board of Directors of the Company, and submitted for consideration and approval at the 2018
+Annual General Meeting of the Company. The Independent Directors of the Company have expressed their
+independent opinions on the profit appropriation plans for 2017 and 2018 that the profit appropriation plans
+of the Company and their implementation process have provided adequate protection for the legitimate
+rights and interests of minority investors.
+73
+74
+China Merchants Bank
+III Report of the Board of Directors
+Annual Report 2018
+3.13 Requirements of the environmental, social and governance
+During the reporting period, adhering to the social responsibility principle of "Gain from society and contribute to
+society", the Company actively made contribution and fulfilled its social responsibilities on target poverty alleviation,
+green loans, support to SMEs, protection of consumers' interests, public welfare and employee care. For more
+details, please refer to the "Corporate Social Responsibility Report of China Merchants Bank for 2018", which is
+available on the websites of the Shanghai Stock Exchange, the Hong Kong Stock Exchange and the Company. The
+relevant disclosures are in compliance with the requirements of the Environmental, Social and Governance Reporting
+Guide issued by the Hong Kong Stock Exchange.
+1.
+Neither the Company nor its subsidiaries had purchased, sold or repurchased any of the Company's listed securities
+during the reporting period.
+There is no provision for pre-emptive rights under the Articles of Association of the Company and the shareholders
+of the Company have not been granted any pre-emptive rights.
+110,000
+0.00053
+0.00044
+and Chief Executive Officer
+Li Hao
+Executive Director, First
+A Share
+Long position
+Beneficial Owner
+100,000
+0.00048
+0.00040
+Executive Vice President
+and Chief Financial Officer
+Zhou Song
+Liu Yuan
+Non-Executive Director
+Chairman of Board of
+A Share
+A Share
+Long position
+Long position
+Interest of spouse
+Beneficial Owner
+Beneficial Owner
+4.6 Pre-emptive rights
+Percentage
+of total
+issued
+ordinary
+shares (%)
+shares
+4.7 Retirement and welfare
+Details about retirement and welfare provided by the Company to its employees are detailed in Note 40 to the
+financial statements.
+4.8 Principal customers
+As at the end of the reporting period, the net operating income contributed by the top 5 customers of the Company
+did not exceed 30% of the total net operating income of the Company.
+75
+76
+China Merchants Bank
+IV Important Events
+Annual Report 2018
+4.9 Interests and short positions of Directors, Supervisors and chief
+executives under Hong Kong laws and regulations
+As at 31 December 2018, the interests and short positions of the Directors, Supervisors and chief executives of
+the Company in the shares, underlying shares and debentures of the Company and its associated corporations
+(as defined in the SFO in Hong Kong), which are required to be notified to the Company and Hong Kong Stock
+Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, including interests and short positions which the
+Directors, Supervisors and chief executives of the Company are taken or deemed to have under such provisions of
+the SFO, or which are required to be and are recorded in the register required to be kept pursuant to Section 352
+of the SFO or as otherwise required to be notified to the Company and Hong Kong Stock Exchange pursuant to the
+Model Code set out in Appendix 10 to the Hong Kong Listing Rules, were as follows:
+Name
+Tian Huiyu
+Position
+Class of
+shares
+Executive Director, President
+A Share
+Long/short
+position
+Long position
+No. of
+Capacity
+Percentage
+of the
+relevant class
+of shares
+in issue (%)
+3.12.3 The formulation and implementation of the Company's cash dividend policies
+As specified in the Articles of Association of China Merchants Bank Co., Ltd., the profit appropriation policies
+of the ordinary shares of the Company are:
+III Report of the Board of Directors
+China Merchants Bank
+Annual Report 2018
+3.11.6 Liquidity risk management
+The Company's cautious attitude towards liquidity risk is more appropriate for the current development stage of
+the Company. The current liquidity risk management policies and systems of the Company are basically in line with
+regulatory requirements and its own management requirements.
+In 2018, the central bank maintained a prudent and neutral monetary policy and the liquidity remained reasonably
+adequate. The liquidity of the Company was basically in line with that of the market, and overall liquidity was
+relatively stable due to steady growth in deposits from customers and the progressive investment of assets. As at the
+end of the reporting period, the Company's liquidity coverage ratio was 137.99% 13, representing 37.99 percentage
+points higher than the minimum requirement of CBIRC. The stress test 14 conducted for local currency and foreign
+currencies at light, medium and heavy levels all reached their respective minimum sustainable requirements of no less
+than 30 days, leading to a better contingency buffer capacity for both local currency and foreign currencies. 11%
+(2017: 15%) of the total RMB deposits and 5% (2017: 5%) of the total foreign currency deposits were required to
+be placed with the PBOC.
+In response to the market environment and the liquidity profile of the Company, the Company implemented the
+following measures to enhance liquidity management. Firstly, the Company continued to optimise the asset and
+liability structure, promoted the growth of proprietary deposits through various measures, and increased the efforts
+in matching of growth in deposits and loans. Secondly, the Company strengthened active liability management,
+coordinated active liability instruments such as central bank financing instrument and financial bond issuance, and
+flexibly arranged active liability policy according to its own liquidity need and market trend. Thirdly, the Company
+conducted in-depth refined forward-looking liquidity risk management. By using quantitative modeling and dynamic
+measurement and calculation, the Company enhanced its research and judgment in macro-economy and the
+dynamic prediction on the liquidity of the whole Bank, so as to improve proactive risk management and proactively
+lay down investment and financing strategies. Fourthly, the Company continuously improved the management of
+treasurer's daily liquidity, optimised financing capability assessment mechanism and fund gap prediction measures,
+and further strengthened the refined management of funding positions. Fifthly, the Company strengthened
+liquidity risk management of business lines. Specifically, as for standalone business lines such as bills business and
+wealth management business, the Company set separate liquidity risk limit and enhanced the duration matching
+management of its assets and liabilities.
+In 2018, in accordance with the Administrative Measures on Liquidity Risk of Commercial Banks formally issued
+by the CBIRC, the Company has completed the comprehensive consolidation and revision of the liquidity risk
+management policy system, and has fully satisfied the regulatory requirements in internal management procedures,
+measurement and monitoring of risks.
+Please refer to Note 61(c) to the financial statements for more details of the liquidity risk management of the
+Company.
+13
+The liquidity coverage ratio is an external regulatory indicator - the legal person calibre
+14
+The stress test is the Company's internal management indicator - the domestic calibre
+China Merchants Bank
+Annual Report 2018
+III Report of the Board of Directors
+3.11.7 Reputational risk management
+Reputational risk refers to the risk that the Company might be negatively evaluated by relevant interested parties
+due to the Company's operations, management and other activities or external incidents.
+Reputational risk management is an important part of the corporate governance and the overall risk management
+system of the Company, covering all activities, operations and businesses undertaken by the Company and
+its subsidiaries. The Company established the reputational risk management system and formulated relevant
+requirements and took initiatives to effectively prevent the reputational risk and respond to any reputational
+incidents, so as to reduce loss and negative impact to the greatest extent.
+During the reporting period, the Company developed and launched domestic and overseas public opinion monitoring
+and management system, which realised 7*24 hours of network-wide public opinion monitoring and real-time
+dynamic data analysis, which effectively improved public opinion monitoring efficiency and optimised the linked
+responding process of the Head Office and branches. The Company strengthened forward-looking management
+of reputational risks, timely made pre-warning for incidents where reputational risks may occur, and formulated
+reputational risk plans in advance. Also, the Company carried out reputational risk management training and drills in
+line with new communication trends, and strengthened the awareness of reputational risks of all employees under
+the background of "everyone is media", so as to reduce the chances of occurrence of negative public opinions.
+3.11.8 Compliance risk management
+Compliance risk refers to the risk of the Company being subject to legal sanctions, regulatory punishments, material
+financial losses, and reputational loss as a result of the failure to observe the laws, rules and standards. The Board
+of Directors of the Company is ultimately responsible for the compliance of the operating activities, and delegates
+the Risk and Capital Management Committee under the Board of Directors to supervise the compliance risk
+management. The Risk and Compliance Management Committee of the Head Office is the supreme organisation
+to manage compliance risk of the whole company under the senior management. The Company has established
+a comprehensive and effective compliance risk management system, optimised the organisational management
+structure which comprises the risk and compliance management committees, compliance supervisors, compliance
+officers and Legal and Compliance Departments under the Head Office and its branches, and compliance supervisors
+at branch and sub-branch levels, improved the three lines of defense for compliance risk management and the
+double-line reporting mechanism, and achieved effective management and control of compliance risk by improving
+the operation mechanism of the compliance risk management and the risk management expertise and processes.
+During the reporting period, confronting the situation of stringent and strict regulatory requirements, the Company
+proactively adapted to the adjustments in regulatory policies, accurately grasped the direction of compliance, and
+ensured the dissemination of regulatory requirements. The Company vigorously promoted the implementation of
+various internal control and compliance management measures, and further improved the long-term mechanism
+of its internal compliance management. In accordance with the regulatory requirements and in line with the actual
+situation of the Company, the Company formulated and issued Guiding Opinions for 2018 Internal Control and
+Compliance Work of the Bank to effectively guide the internal compliance management throughout the whole
+Bank, completed in-depth rectification of "market disorders in the banking industry" and other rectification works
+assigned by the CBIRC in a timely and orderly manner, strengthened the understanding of polices and the circulation
+and delivery of new regulations, and identified, assessed, mitigated and dissolved the compliance risks associated
+with new products, new businesses and major projects. The Company adopted various measures to strengthen
+employee behavior management, proactively implemented multi-level compliance education and training, promoted
+the "Compliance Courses of Branch Leaders and Compliance Officers" and "Compliance Seminars of Sub-branch
+Leaders and Compliance Supervisors" activities in an orderly manner, formulated and issued training materials such
+as employee compliance and warning cases, enhanced the employee's compliance concept and awareness, continued
+to conduct comprehensive compliance inspections, thoroughly analysed the causes of problems, followed up and
+supervised the rectification, and continuously improved the internal compliance management at all levels.
+3.11.9 Anti-money laundering management
+During the reporting period, in order to prevent loss arising from systematic operational risk and material operational
+risk, the Company continued to improve its operational risk management. Firstly, the Company strengthened the
+control of risks associated with key areas. The Company continued with its risk monitoring and evaluation of key
+areas, made timely risk warnings for problems, and put forward management proposals. Secondly, the Company
+optimised and improved its management tools. Through the inspection of key risk indicators, the Company
+examined and adjusted indicators from various perspectives. Thirdly, the Company strengthened the management of
+outsourcing-related risk from the top-level deployment. The Company further improved its outsourcing-related risk
+management mechanism, standardised the management of outsourcing projects, conducted on-site risk assessment
+for outsourced suppliers in key areas, and urged them to implement the rectification. Fourthly, the Company
+strengthened the management of risks related to compliance in credit investigation. The Company organised the
+whole Bank to conduct self-inspection, self-correction and on-site inspection on credit investigation compliance, and
+further strengthened credit investigation compliance and information security management. Fifthly, the Company
+strengthened the management of information technology risk. New availability indicators of important systems were
+added so as to achieve full coverage monitoring of the Company's important system availability, conduct analysis on
+operation of important systems, IT project launches and external IT risk events, and strengthen information security
+management and control. Sixthly, the Company accelerated the establishment of business continuity management
+system. The Company promoted the development of business continuity drills and strengthened emergency
+switching drills for important operating systems.
+The Company has established a relatively sound anti-money laundering internal control system. The Company has
+formulated a full set of anti-money laundering management system based on the requirements of relevant laws
+and regulations on anti-money laundering and its own actual conditions. It has also developed and launched a
+comparatively sound anti-money laundering management system, established a comparatively sound anti-money
+laundering monitoring system, and had a dedicated anti-money laundering team to ensure the sound operation of
+business throughout the Bank.
+Operational risk refers to the risk of loss arising from inappropriate or failed internal procedures, incompetent
+personnel or IT systems of the Company, or external events.
+Annual Report 2018
+0.00024
+0.00029
+60,000
+0.00026
+0.00032
+65,800
+Beneficial Owner
+Beneficial Owner
+Beneficial Owner
+Long position
+Long position
+Long position
+A Share
+A Share
+A Share
+Employee Supervisor
+Supervisor
+External Supervisor
+Employee Supervisor
+Jin Qingjun
+Wang Wanging
+Huang Dan
+Supervisors, Employee
+0.00036
+0.00044
+90,000
+70
+China Merchants Bank
+III Report of the Board of Directors
+3.11.5 Operational risk management
+During the reporting period, the Company actively fulfilled its anti-money laundering duties and took various
+measures to ensure the compliance and effectiveness of its anti-money laundering. These measures included but not
+limited to accelerating the improvement of the anti-money laundering and anti-terrorism financing risk management
+system of the Company in accordance to the "Guidelines for Risk Management of Money Laundering and Terrorism
+Financing for Legal Entities of Financial Institutions (Trial)" (Yin Fan Xi Fa [2018] No. 19), continuously carrying out
+"risk elimination", conducting in-depth inspection on various types of money laundering risks; improving the due
+diligence procedures of customers, implementing Notice of the People's Bank of China on Strengthening the Work
+of Identifying Anti-Money Laundering Customers (Yin Fa [2017] 235) and other regulatory policies; continuously
+strengthening the management and control of high-risk customers, implementing the follow-up risk control
+measures for suspicious transactions reported; actively promoting the application of new technologies in the field of
+anti-money laundering, continuing to optimise the anti-money laundering system; and continuously strengthening
+anti-money laundering management of business and products to ensure that anti-money laundering risk control is
+effectively embedded in business systems and processes.
+71
+72
+bonus shares Cash dividend
+for every share for every share
+held (No. of held (inclusive
+shares) of tax, in RMB)
+0.74
+0.84
+0.94
+held (No. of
+shares)
+(inclusive of statements for
+tax, in millions
+0.00009
+the year (in
+of RMB) millions of RMB) statements (%)
+18,663
+21,185
+23,707
+62,081
+70,150
+78,901
+The profit appropriation plan for 2018 is subject to consideration and approval at the 2018 Annual General Meeting of the Company.
+30.06
+30.20
+30.05
+ཏི མནྟཱ ཨིཏི, སྨཱ ནྟི བྷི
+of ordinary
+shares in the
+consolidated
+to holders
+attributable
+China Merchants Bank
+III Report of the Board of Directors
+Annual Report 2018
+3.12 Profit appropriation
+3.12.1 The profit appropriation plan for 2018
+10% of the audited net profit of the Company for 2018 of RMB75.232 billion, equivalent to RMB7.523 billion,
+was allocated to the statutory surplus reserve, while 1.5% of the total balance of the risk assets, equivalent to
+RMB6.028 billion, was appropriated to the general reserve. Based on the then total share capital of A Shares and H
+Shares on the record date for implementation of the profit appropriation, the Company proposes to declare a cash
+dividend of RMB0.94 (tax included) for every share to all shareholders of the Company whose names appear on the
+register, payable in Renminbi for holders of A Shares and in Hong Kong Dollars for holders of H Shares. The actual
+appropriation amount in HKD will be calculated based on the average RMB/HKD benchmark rates to be released by
+the PBOC for the week before the date of the general meeting (inclusive of the day of the general meeting). The
+retained profit will be carried forward to the next year. In 2018, the Company did not transfer any capital reserve
+into share capital. The above proposal of profit appropriation is subject to consideration and approval at the 2018
+Annual General Meeting of the Company.
+For the other information on the closing date for registration, the period for closure of register of members and
+the profit appropriation plan for the shareholders who are entitled to attend the Company's 2018 Annual General
+Meeting and those who are entitled to receive the final dividends for 2018, the Company will make further
+announcement(s) at appropriate times. The Company expects that the distribution of final dividends to the H
+Shareholders will be completed by 27 August 2019.
+3.12.2 Profit appropriation for the last three years
+Year
+2016
+2017
+2018 (note)
+0.00022
+Note:
+Number of
+shares issued on
+capitalisation of
+surplus reserve
+for every share
+Total cash
+dividends
+Net profit
+attributable
+to holders
+of ordinary
+shares in the
+consolidated
+financial
+Proportion of
+cash bonus
+to net profit
+Number of
+23,282
+0.00011
+Short
+Long
+H
+Pagoda Tree Investment
+0.01
+0.04
+2,037,902 3
+Beneficial owner
+0.92
+5.03
+3
+231,052,446
+78,690,591
+Approved lending agent
+Long
+16,080
+Trustee
+Long
+125,880,225
+Investment manager
+Long
+26,465,550
+Beneficial owner
+Long
+H
+JPMorgan Chase & Co.
+Company Limited
+6.24
+Interest of controlled
+477,903,500
+4
+10.41
+China Merchants Bank
+Annual Report 2018
+IV Important Events
+Explanatory notes and independent opinions of the Independent Non-Executive
+Directors towards the guarantees of China Merchants Bank
+In accordance with the relevant requirements of the CSRC and Shanghai Stock Exchange, the Independent
+Non-Executive Directors of the Company carried out a due diligence review of the guarantees of the Company for
+2018 on an open, fair and objective basis, and their opinions are as follows:
+After review, it was ascertained that the guarantee business of CMB was approved by the CBIRC, and it was carried
+out in the ordinary course of business of the banks as a conventional business. As at 31 December 2018, the
+balance of the irrevocable guarantees of China Merchants Bank was RMB242.047 billion.
+89
+corporation
+1.89
+10.41
+4
+477,903,500
+Interest of controlled
+Long
+7.63
+H
+1.89
+10.41
+4
+477,903,500
+Interest of controlled
+corporation
+Limited
+Long
+H
+Compass Investment Company
+(中國華馨投資有限公司)
+corporation
+Company Limited
+1.89
+CNIC Corporation Limited
+1,574,729,111
+Beneficial owner
+Long
+A
+Anbang Life Insurance Co., Ltd.
+corporation
+0.91
+4.99
+2
+229,498,500
+Interest of controlled
+Long
+H
+corporation
+Ltd.
+10.72
+Long
+13.11
+2,704,596,216
+Interest of controlled
+Long
+A
+Anbang Insurance Group Co.,
+shares (%)
+issue (%)
+Notes
+No. of shares
+Capacity
+position
+shares
+Shareholder
+2
+Guarantee business falls within the Company's ordinary course of business. During the reporting period, save for
+the financial guarantees entered into in our normal business scope approved by the CBIRC, there was no other
+significant discloseable guarantees.
+Beneficial owner
+6.10
+A
+China Ocean Shipping
+4.99
+6.10
+2
+1,258,949,171
+Beneficial owner
+Long
+Hexie Health Insurance Co., Ltd. A
+0.91
+4.99
+229,498,500 2
+Beneficial owner
+1,258,949,100
+Long
+5.73
+7.01
+1,445,647,116 2
+corporation
+1,258,949,171
+Interest of controlled
+Long
+Insurance Company Ltd.
+186,697,945
+Beneficial owner
+Long
+Anbang Property & Casualty
+4.99
+H
+issued
+ordinary
+Significant guarantees
+Significant events in respect of holding in custody, contracting, hiring or
+leasing of assets
+31 December 2018
+Percentage
+No. of shares
+(%)
+No. of shares
+1.
+Shares subject to trading
+moratorium
+2.
+Shares not subject to trading
+moratorium
+25,219,845,601
+100.00
+25,219,845,601
+100.00
+(1) Ordinary shares in RMB
+(A Shares)
+20,628,944,429
+81.80
+20,628,944,429
+81.80
+(2) Foreign shares listed domestically
+(3) Foreign shares listed overseas
+(H Shares)
+4,590,901,172
+18.20
+4,590,901,172
+18.20
+(4) Others
+Changes in the
+No. of shares
+during the
+reporting period
+No. of shares
+Percentage
+(%)
+31 December 2017
+5.1 Changes in ordinary shares of the Company during the reporting
+period
+China Merchants Bank emphasizes risk management of the guarantee business. It has formulated specific
+management measures and operation workflow according to the risk profile of this business. In addition, China
+Merchants Bank has enhanced risk monitoring and safeguarded this business through management means such as
+on-site and off-site checks. During the reporting period, the guarantee business of China Merchants Bank was in
+normal operation and there were no non-compliant guarantees.
+4.19 Use of funds by related parties
+During the reporting period, neither the substantial shareholders of the Company nor their related parties had used
+any funds of the Company for non-operating purposes, and none of them had used the funds of the Company
+through (among others) any related transactions not entered into on an arm's length basis. Deloitte Touche Tohmatsu
+Certified Public Accountants LLP, being the auditor of the Company, has issued a special audit opinion in this regard.
+4.20 Information on significant equity investments
+In June 2018, the "Proposal on Capital Contribution of RMB2 billion to the National Financing Guarantee Fund"
+was considered and approved at the 26th meeting of the 10th Session of the Board of Directors of the Company,
+approving the Company to make a capital contribution of RMB2 billion to the National Financing Guarantee
+Fund. The capital contribution will be made in the coming four years from 2018. During the reporting period, the
+Company has completed the capital contribution of RMB500 million.
+In July 2018, CMB Financial Leasing, the wholly-owned subsidiary of the Company, had made a capital increment of
+RMB4.5 billion to its wholly-owned subsidiary, Zhaoyin Aviation and Shipping Financial Leasing Co., Ltd. (±
+運金融租賃有限公司).
+For the relevant details, please refer to the relevant announcements published by the Company on the websites of
+Shanghai Stock Exchange, Hong Kong Stock Exchange and the Company.
+81
+82
+32
+China Merchants Bank
+Annual Report 2018
+IV Important Events
+4.21 Appointment of accounting firms and sponsors
+3.
+According to the resolutions passed at the 2017 Annual General Meeting, the Company engaged Deloitte Touche
+Tohmatsu Certified Public Accountants LLP as the domestic accounting firm of the Company for 2018 and Deloitte
+Touche Tohmatsu as the international accounting firm of the Company for 2018. These two accounting firms have
+been engaged as auditors of the Company since 2016.
+The Company appointed UBS Securities Co., Ltd. and CM Securities as its sponsors for the non-public issuance
+of domestic preference shares. During the reporting period, the Company paid remuneration of RMB9.30 million
+(including sponsorship and underwriting fees) to UBS Securities Co., Ltd. and RMB8.70 million (including sponsorship
+and underwriting fees) to CM Securities, respectively.
+4.22 Review of annual results
+Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu, our external auditors,
+have audited the financial statements of the Company prepared in accordance with the PRC Generally Accepted
+Accounting Principles and the International Financial Reporting Standards respectively, and each has issued an
+unqualified audit report. The Audit Committee under the Board of Directors of the Company has reviewed the
+Company's annual report for 2018.
+4.23 Annual general meeting
+For the convening of its 2018 Annual General Meeting, the Company will make further announcement.
+4.24 Explanation on changes in accounting policies
+For details of the changes in the accounting policies of the Company during the reporting period, please refer to
+Note 3 "Adoption of newly effective IFRSS and their amendments" to the financial statements.
+4.25 Publication of annual report
+The Company prepared the annual report in both English and Chinese versions in accordance with the International
+Accounting Standards and the Hong Kong Listing Rules. These reports are available on the websites of Hong Kong
+Stock Exchange and the Company. In the event of any discrepancies in interpretation between the English and
+Chinese versions, the Chinese version shall prevail.
+The Company also prepared the annual report in Chinese version in accordance with the PRC Generally Accepted
+Accounting Principles and the preparation rules for annual reports, which is available on the websites of Shanghai
+Stock Exchange and the Company.
+China Merchants Bank
+Annual Report 2018
+V Changes in Shares and Information on Shareholders
+Changes in Shares and Information on Shareholders
+The financial statements of the Group for 2018 prepared under the PRC Generally Accepted Accounting Principles
+and the internal control of the Group as at the year end of 2018 were audited by Deloitte Touche Tohmatsu Certified
+Public Accountants LLP, and the financial statements for 2018 prepared under International Accounting Standards
+were audited by Deloitte Touche Tohmatsu. The total audit fees (including fees for the audit on the financial
+statements of our overseas branches, subsidiaries and their respective subsidiaries) amounted to approximately
+RMB23,344,100, among which the audit fees for internal control was approximately RMB1,206,600.
+Total shares
+25,219,845,601
+100.00
+Navigation Co., Ltd.
+legal person
+subject to trading
+moratorium
+3
+China Ocean Shipping
+Company Limited
+State-owned
+legal person
+1,574,729,111
+6.24
+A Shares not
+80
+China Merchants Bank
+Annual Report 2018
+IV Important Events
+A Shares not
+4.16.3 Confirmation from the Independent Non-Executive Directors and auditors
+1.
+The transactions were entered into in the ordinary and usual course of business of the Company;
+2.
+3.
+4.
+The terms of the transactions are fair and reasonable, and are in the interest of the Company and its
+shareholders as a whole;
+The transactions were entered into on normal commercial terms or better terms; and
+The transactions were conducted in accordance with the terms of relevant agreements.
+Furthermore, the Company has engaged Deloitte Touche Tohmatsu to review the continuing connected transactions
+of the Group in accordance with Hong Kong Standard on Assurance Engagements 3000 "Assurance Engagements
+Other Than Audits or Reviews of Historical Financial Information" and with reference to Practice Note 740 "Auditor's
+Letter on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong
+Institute of Certified Public Accountants. The Board of Directors has confirmed the findings, conclusions and the
+unqualified letter issued by Deloitte Touche Tohmatsu in respect of the aforesaid continuing connected transactions
+in accordance with Rule 14A.56 of the Hong Kong Listing Rules. A copy of the letter has been provided by the
+Company to SEHK.
+4.16.4 Significant transactions with related parties
+The significant transactions between the Company and related parties are set out in note 62 to the financial
+statements. These transactions comprised those between the Company and its related parties in its ordinary course
+of business, including borrowings, investments, deposits, securities trading, agency services, custody and other
+fiduciary operations as well as off-balance sheet transactions. These transactions were conducted in the ordinary
+course of business of the Company, which constituted connected transactions under the Hong Kong Listing Rules
+and complied with the applicable requirements thereof.
+4.17 Material litigations and arbitrations
+Several lawsuits were filed during the daily operation of the Company, most of which were filed proactively for the
+purpose of recovering non-performing loans. As at the end of the reporting period, there were 211 pending cases
+(including litigations and arbitrations) in which the Company was involved, with an aggregate of principal and
+interest of RMB870 million. The Company believes that none of the above litigation and arbitration cases would
+have a significant adverse impact on the financial position or operating results of the Company.
+4.18 Material contracts and their performance
+The Independent Non-Executive Directors of the Company had reviewed the above-mentioned non-exempt
+continuing connected transactions between the Company and each of CMFM Group, CM Securities Group and
+Anbang Insurance Group and confirmed that:
+During the reporting period, none of the material contracts of the Company involving holding in custody, contracting
+or hiring or leasing of any assets of other companies by the Company or vice versa was entered into beyond the
+normal business scope of the Bank.
+13.04
+State-owned
+25,219,845,601
+100.00
+As at the end of the reporting period, the Company had a total of 288,819 shareholders, including 255,217 holders
+of A Shares and 33,602 holders of H Shares. Neither the holders of A Shares nor the holders of H Shares are subject
+to trading moratorium.
+As at the end of the previous month prior to the disclosure date of this report (namely 28 February 2019), the
+Company had a total of 237,687 shareholders, including 204,204 holders of A Shares and 33,483 holders of H
+Shares. Neither the holders of A Shares nor the holders of H Shares are subject to trading moratorium.
+Based on the publicly available information and so far as the Directors were aware, as at the end of the reporting
+period, the Company had met the public float requirement of the Hong Kong Listing Rules.
+83
+84
+China Merchants Bank
+Annual Report 2018
+V Changes in Shares and Information on Shareholders
+5.2 Top ten holders of ordinary shares and top ten holders of
+ordinary shares whose shareholdings are not subject to trading
+moratorium
+Number
+Serial No. Name of shareholder
+Type of
+shareholder
+3,289,470,337
+1
+Shares held at
+the end of the
+period (share)
+4,546,479,669
+Percentage
+of total
+share
+capital (%)
+18.03
+Changes in
+of shares
+subject to
+trading
+the reporting
+moratorium
+Type of shares
+period (share)
+(share)
+H Shares
+2,470,137
+2
+China Merchants Steam
+HKSCC Nominees Ltd.
+of shares in
+A
+Name of Substantial
+100%
+China Merchants Finance
+Investment Holdings Co. Ltd.
+100%
+China Merchants Holdings (Hong Kong) Company Limited
+100%
+China Merchants
+Steam Navigation Co., Ltd.
+100%
+China Merchants Group Ltd.)
+The Company did not have any controlling shareholder and de facto controller. As at the end of the reporting
+period, the equity relationship among the Company, its largest shareholder and the controlling shareholder of its
+largest shareholder is illustrated as follows:
+China Merchants Group Ltd. directly holds 100% equity interests of China Merchants Steam Navigation Co., Ltd. and
+is the controlling shareholder of the Company's largest shareholder, with a registered capital of RMB16.7 billion. Its
+legal representative is Li Jianhong. China Merchants Group Ltd. is a state-owned enterprise under the direct control
+of State-owned Assets Supervision and Administration Commission of the State Council. Its predecessor, China
+Merchants Steam Navigation Company, was founded in 1872, when China was in its late Qing Dynasty and was
+undergoing the Westernisation Movement. It was one of the enterprises which played a significant role in promoting
+the modernisation of China's national industries and commerce at that time. Nowadays, it has developed into a
+diversified conglomerate, with its businesses focusing on three core industries, namely integrated transportation,
+featured finance and comprehensive development of cities and industrial zones. It is realising the transformation
+from three main businesses to three major platforms of industrial operation, financial services, investment and
+capital operation.
+China Merchants Steam Navigation Co., Ltd. is the largest shareholder of the Company. The company has a
+registered capital of RMB7.0 billion, and its legal representative is Li Jianhong. It mainly engages in passenger and
+cargo shipping businesses; dockyard, warehouse and vehicle transportation; sale, purchase and supply of various
+transportation equipments, spare parts and materials; ship and passenger/goods shipping agency, international
+maritime cargo, etc.; as well as investment and management of transportation-related financial businesses including
+banking, securities and insurance.
+5.3.1 Information on the Company's largest shareholder
+5.3 Information on substantial shareholders
+China Merchants International
+Finance Company Limited
+V Changes in Shares and Information on Shareholders
+The above shareholders do not hold the shares of the Company through credit securities accounts.
+(4)
+(3) During the reporting period, Anbang Property & Casualty Insurance Company Ltd. (hereinafter referred to as "Anbang Insurance")
+transferred its 1,258,949,171 A shares and 1,258,949,100 A shares in the Company to Hexie Health and Anbang Life, respectively. After
+the share transfer, Anbang Insurance, Hexie Health and Anbang Life together held 2,704,596,216 A shares and 229,498,500 H shares in
+the Company, which together accounted for 11.63% of the total share capital of the Company.
+Of the aforesaid top 10 shareholders, China Merchants Steam Navigation Co., Ltd., Shenzhen Yan Qing Investment and Development
+Company Ltd., China Merchants Finance Investment Holdings Co. Ltd. and Shenzhen Chu Yuan Investment and Development Company
+Ltd. are subsidiaries of China Merchants Group Ltd. China Ocean Shipping Company Limited and COSCO Shipping (Guangzhou) Co., Ltd.
+are controlled by China COSCO Shipping Corporation Limited. Hexie Health Insurance Co., Ltd. (hereinafter referred to as "Hexie Health")
+and Anbang Life Insurance Co., Ltd. (hereinafter referred to as "Anbang Life") are controlled by Anbang Insurance Group Co., Ltd. The
+Company is not aware of any affiliated relationships among other shareholders.
+Shares held by HKSCC Nominees Ltd. are the total shares in the accounts of holders of H Shares of the Company trading on the
+transaction platform of HKSCC Nominees Ltd.
+(2)
+Unknown
+(share)
+Shares
+pledged
+or frozen
+-106,265,358
+Notes: (1)
+A Shares not
+subject to trading
+moratorium
+legal person
+China Merchants Bank
+Annual Report 2018
+2.76
+50%
+China Merchants
+Union (BVI) Limited
+5.3.2 Information on other shareholders holding more than 5% shares of the
+Company
+V Changes in Shares and Information on Shareholders
+China Merchants Bank
+Annual Report 2018
+86
+85
+As at the end of the reporting period, China Merchants Group Ltd. indirectly held an aggregate of 29.97% of the
+total shares of the Company, consisting of 26.78% of A Shares and 3.20% of H Shares of the Company. There was
+no pledge of the shares of the Company. (In this report, any discrepancies between the total shown and the sum of
+the amounts listed are due to rounding.)
+China Merchants Bank Co., Ltd.
+0.22%
+3.74%
+4.55%
+13.04%
+1.53%
+4.99%
+100%
+China Merchants Industry
+Development (Shenzhen) Limited
+Shenzhen Chu Yuan Investment
+100%
+50%
+50%
+Class of Long/short
+and Development Company Ltd.
+China Merchants China
+49%
+Shenzhen Yan Qing Investment
+27.59%
+51%
+1.89%
+Best Winner
+Investment Limited
+and Development Company Ltd.
+1.
+696,450,214
+COSCO Shipping (Guangzhou)
+Co., Ltd.
+legal person
+and Development Company
+A Shares not
+4.99
+1,258,542,349
+State-owned
+Shenzhen Yan Qing Investment
+6
+moratorium
+subject to trading
+1,258,949,100
+A Shares not
+4.99
+Ltd.
+Domestic legal 1,258,949,100
+person
+Anbang Life Insurance Co., Ltd.
+5
+moratorium
+subject to trading
+1,258,949,171
+A Shares not
+4.99
+Domestic legal 1,258,949,171
+person
+-
+Hexie Health Insurance Co.,
+Ltd. Traditional Ordinary
+insurance products
+4
+moratorium
+subject to trading
+- Conservative Investment
+Portfolio
+State-owned
+subject to trading
+7
+10
+moratorium
+subject to trading
+A Shares not
+2.99
+Domestic legal 754,798,622
+person
+Corporation Limited
+China Securities Finance
+9
+moratorium
+subject to trading
+legal person
+Investment and Development
+Company Ltd.
+moratorium
+A Shares not
+944,013,171
+State-owned
+Shenzhen Chu Yuan
+8
+moratorium
+subject to trading
+legal person
+Investment Holdings Co. Ltd.
+A Shares not
+4.55
+1,147,377,415
+State-owned
+China Merchants Finance
+3.74
+2.
+Direct Investments Limited
+China Ocean Shipping Company Limited. As at the end of the reporting period, China Ocean Shipping
+Company Limited held 6.24% shares in the Company. China Ocean Shipping (Group) Company (the
+predecessor of China Ocean Shipping Company Limited) was established on 22 October 1983, with a
+registered capital of RMB16.191 billion. Its legal representative is Xu Lirong. The scope of its businesses
+includes: international shipping; ancillary business in international maritime transportation; acceptance
+of space booking, voyage charter and time charter from cargo owners at home and abroad; leasing,
+construction, trading and maintenance of vessels and containers and manufacture of related facilities; ship
+escrowing business; provision of ship materials, spare parts and communications services relating to shipping
+business at home and abroad; management of enterprises engaging in vessel and cargo agency business and
+seafarer assignment business.
+Best Winner Investment
+Limited
+13.50
+16.51
+1
+Anbang Insurance Group Co., Ltd.. As at the end of the reporting period, Anbang Insurance Group Co., Ltd.
+in aggregate held 11.63% shares in the Company through Anbang Insurance, Hexie Health and Anbang Life,
+all being its subsidiaries, and it did not pledge any of its shares in the Company. The controlling shareholder
+of Anbang Insurance Group Co., Ltd. is China Insurance Security Fund Co., Ltd.. The de facto controller of
+China Insurance Security Fund Co., Ltd. is the Ministry of Finance. Anbang Insurance Group Co., Ltd. was
+established on 15 October 2004, with a registered capital of RMB61.9 billion, and its legal representative
+is He Xiaofeng. The scope of its businesses includes: investments in establishment of insurance enterprises;
+supervision and management of various domestic and international businesses of the enterprises under
+control with its investment; the investment businesses permitted under the PRC laws and regulations; the
+insurance businesses permitted under the PRC laws and regulations; and other businesses approved by the
+CBIRC.
+55,196,540
+Others
+Long
+corporation
+2,202,555,520
+Interest of controlled
+Long
+Investment Holdings Co., Ltd.
+1,147,377,415
+Beneficial owner
+Long
+A
+Long
+Others
+55,196,540
+6,752,746,952
+1
+32.73
+A
+H
+Interest of controlled
+806,680,423 1
+17.57
+26.78
+3.20
+corporation
+China Merchants Finance
+Long
+corporation
+Long
+58,147,140
+of total
+Percentage
+relevant class
+Percentage
+of the
+V Changes in Shares and Information on Shareholders
+China Merchants Bank
+Annual Report 2018
+8.73
+10.68
+1
+2,202,555,520
+corporation
+Ltd.
+944,013,171
+Interest of controlled
+Long
+and Development Company
+1,258,542,349
+1
+0.28
+0.23
+H
+Long
+Beneficial owner
+Beneficial owner
+328,776,923
+7.16
+1.30
+Shenzhen Yan Qing Investment
+A
+Long
+Beneficial owner
+1
+3,408,080,075
+3,405,129,475
+Long
+Capacity
+Class of Long/short
+shares position
+Shareholder
+Name of Substantial
+of the
+relevant class
+Percentage
+Percentage
+As at 31 December 2018, as far as the Company is aware, the following persons (other than the Directors,
+Supervisors and chief executives (as defined in the Hong Kong Listing Rules) of the Company) had interests and short
+positions in the shares of the Company as recorded in the register required to be kept by the Company pursuant to
+Section 336 of the SFO (in the report, any discrepancies between the total shown and the sum of the amounts listed
+are due to rounding):
+5.4 Substantial shareholders' and other persons' interests and short
+positions in the Company under Hong Kong laws and regulations
+V Changes in Shares and Information on Shareholders
+China Merchants Bank
+Annual Report 2018
+China Merchants Group Ltd.
+88
+Hebei Port Group Co., Ltd.. As at the end of the reporting period, Hebei Port Group Co., Ltd. held 1.21%
+of the shares of the Company and is a shareholder which has appointed Supervisors in the Company. There
+was no pledge of the shares of the Company. Hebei Port Group Co., Ltd. was established on 28 August 2002
+with a registered capital of RMB8 billion. The legal representative is Cao Ziyu and the de facto controller is
+the State-owned Assets Supervision and Administration Commission of Hebei Province.
+SAIC Motor Corporation Limited. As at the end of the reporting period, SAIC Motor Corporation Limited held
+1.23% of the shares of the Company and is a shareholder which has appointed Supervisors in the Company.
+There was no pledge of the shares of the Company. SAIC Motor Corporation Limited was established on
+16 April 1984 and has a registered capital of RMB11.683 billion, and its legal representative is Chen Hong.
+As at the end of the reporting period, Shanghai Automotive Industry Corporation (Group) held 71.24% of
+the shares of SAIC Motor Corporation Limited, and therefore is its controlling shareholder, and its de facto
+controller is the State-owned Assets Supervision and Administration Commission of Shanghai City. Shanghai
+Automotive Industry Corporation (Group) was established on 1 March 1996 with a registered capital of
+RMB21.599 billion, and its legal representative is Chen Hong.
+China Communications Construction Company Limited. As at the end of the reporting period, China
+Communications Construction Company Limited held 1.78% of the shares of the Company and is a
+shareholder which has appointed Supervisors in the Company. China Communications Construction Company
+Limited was established on 8 October 2006 with a registered capital of RMB16.174 billion, and its legal
+representative is Liu Qitao. As at the end of the reporting period, China Communications Construction Group
+(Limited) held 63.84% of the equity interests of China Communications Construction Company Limited, and
+therefore is the controlling shareholder of China Communications Construction Company Limited, its de
+facto controller is the State-owned Assets Supervision and Administration Commission of the State Council.
+China Communications Construction Group (Limited) was established on 8 December 2005 with a registered
+capital of RMB5.855 billion, and its legal representative is Liu Qitao. As at the end of the reporting period,
+through its subsidiaries, namely China Communications Construction Company Limited, CCCC Guangzhou
+Dredging Co., Ltd., CCCC Fourth Harbor Engineering Co. Ltd., CCCC Shanghai Dredging Co., Ltd., Zhen
+Hua (Shenzhen) Engineering Co., Ltd. and CCCC Third Harbor Consultants Co. Ltd., China Communications
+Construction Group (Limited) held in aggregate 2.27% of the shares of the Company. There was no pledge
+of the shares of the Company.
+3.
+2.
+Interest of controlled
+5.3.3 Other substantial shareholders under the regulatory calibre
+Annual Report 2018
+V Changes in Shares and Information on Shareholders
+China Merchants Bank
+China COSCO Shipping Corporation Limited. As at the end of the reporting period, China COSCO
+Shipping Corporation Limited held 100% equity interests in China Ocean Shipping Company Limited and
+is its controlling shareholder. Its de facto controller is State-owned Assets Supervision and Administration
+Commission of the State Council. China COSCO Shipping Corporation Limited was established in February
+2016, with a registered capital of RMB11.0 billion. Its legal representative is Xu Lirong. As at the end of
+the reporting period, China COSCO Shipping Corporation Limited in aggregate held 9.97% shares in the
+Company through China Ocean Shipping Company Limited, COSCO Shipping (Guangzhou) Co., Ltd.,
+Guangzhou Haining Maritime Technology Consulting Co., Ltd. (NOTOKRT), COSCO
+Shipping (Shanghai) Co., Ltd. (+1(1)), COSCO Shipping Financial Holdings Co.,
+Limited and Shenzhen Sanding Oil Transport Trading Co., Ltd. (}|+=££££%), all being its
+subsidiaries. There was no pledge of the shares of the Company.
+87
+A
+1.
+Interest of controlled
+corporation
+6,752,746,952
+1
+32.73
+H
+Long
+806,680,423 1
+17.57
+55,196,540
+26.78
+3.20
+China Merchants Steam
+A
+Long
+Beneficial owner
+3,289,470,337
+Navigation Co., Ltd.
+Long
+corporation
+Others
+Interest of controlled
+Notes
+of shares in
+issue (%)
+of total
+issued
+ordinary
+shares (%)
+Long
+No. of shares
+6,697,550,412
+57
+3.10 Business Operation
+76
+3.11 Risk Management
+144
+82
+3.12 Outlook and Coping Tactics
+85
+96
+3.9
+137
+48
+Implementation of Development Strategies
+Other Financial Disclosures under the Regulatory Requirements
+Key Business Concerns in Operation
+Chapter IV Environmental, Social and Governance (ESG)
+153 Chapter VIII Financial Statements
+1
+Chapter VII Changes in Shares and Information on Shareholders
+China Merchants Bank
+Annual Report 2023 (H share)
+Definitions
+Definitions / Significant Risk Warning
+Chapter VI Important Events
+The Company, the Bank, CMB or China Merchants
+Bank:
+China Merchants Bank Co., Ltd.
+The Group:
+3.8
+China Merchants Bank and its subsidiaries
+CSRC:
+China Securities Regulatory Commission
+Hong Kong Stock Exchange or SEHK:
+The Stock Exchange of Hong Kong Limited
+Chapter V Corporate Governance
+43
+29
+43
+Annual Report 2023 (H share)
+Contents
+Contents
+2
+Definitions
+2 Significant Risk Warning
+3
+Important Notice
+4
+Chairman's Statement
+8
+President's Statement
+12
+Chapter I Company Information
+Hong Kong Listing Rules:
+China Merchants Bank
+3.7
+18
+Chapter II Summary of Accounting Data and Financial Indicators
+Results of Operating Segments
+3.6
+42
+Analysis of Capital Adequacy
+3.5
+39
+Analysis of Loan Quality
+3.4
+33
+3.3 Analysis of Balance Sheet
+3.2 Analysis of Income Statement
+22
+3.1 Analysis of Overall Operation
+22
+Chapter III Management Discussion and Analysis
+22
+The Rules Governing the Listing of Securities on the SEHK
+CHINA MERCHANTS BANK
+CMB Wing Lung Bank Limited
+Chairman's Statement
+Annual Report 2023 (H share)
+China Merchants Bank
+- We aim to promote a financial culture with Chinese characteristics. Carrying with the "China Merchants Inheritance,
+Hailiao Spirit () and Shekou Gene", CMB has cultivated an excellent corporate culture. Our entrepreneurial
+culture of "fighting spirit and dedication", service culture of "We are here just for you", innovative culture that honours
+"pioneering spirit", and risk culture prioritising "stability and prudence" have become the fundamental consensus among
+all employees of the Bank, contributing significantly to the formation of a positive brand image for CMB. We will effectively
+educate employees about the ideals and the financial culture with Chinese characteristics, establish righteous philosophies
+on business, performance and risk, solidify the foundation of financial culture, and safeguard the essence of the modern
+financial system with Chinese characteristics.
+- We aim to strengthen risk management and control in key areas. To maintain steady growth amidst a challenging
+and complex business environment, our greatest confidence lies in our prudent risk culture and effective risk management.
+We will stabilise the growth rate in scale, optimise the asset structure, and strive to form a new balance among the growth
+rate of risk-weighted asset, the growth rate of profit, as well as capital endogeneity. We will closely monitor risks in key
+areas such as real estate, industries with overcapacity, and extensive wealth management. We will also deepen science and
+technology security management and strengthen compliance risk management.
+- We aim to grow stronger, better, and bigger through differentiated development. With accurate positioning of
+our strategic direction, the Bank will unwaveringly adhere to our strategic goal of building a "world-class value creation
+bank", maintain our existing characteristics and competitiveness, build a new moat centred around intelligent banking, and
+further strengthen all cost management. The Bank will give full play to the differentiated competitive advantages in retail
+finance, extensive wealth management and digitalisation to deliver solid achievements in the "five priorities" of sci-tech
+finance, green finance, inclusive finance, retirement finance, and digital finance. In the national campaign to build global
+financial centre, the Bank will undauntedly shoulder responsibilities, grow and strengthen cross-border finance, consolidate
+and improve our business characteristics in syndicated loans, asset management, wealth management and other aspects in
+the Hong Kong market.
+The 2023 Central Financial Work Conference marked a new milestone in the development history of China's financial
+industry, calling for accelerated actions to make China a financial powerhouse in the new era. Finance is an important part
+of China's core competitiveness, and its high-quality development plays a pivotal role in the overall success of Chinese
+style modernisation. In 2024, CMB will unswervingly follow the path of financial development with Chinese
+characteristics and contribute to the transformation of China into a financial powerhouse. We will maintain stable
+operation, resolutely upholding the risk bottom line. We will forge ahead in a responsible and proactive manner,
+countering uncertainties of the environment with our own efforts. We will spearhead the trend, seizing the major
+development opportunities brought about by the large language model to establish an unassailable core competitiveness.
+We will shift paradigm, assessing and timely responding to the prevailing trends over interest rates, real estate, and
+population with forward-looking and strategic vision.
+Chairman's Statement
+Annual Report 2023 (H share)
+China Merchants Bank
+LO
+Chairman
+Miao Jianmin
+Chairman's Statement
+China Merchants Bank
+Annual Report 2023 (H share)
+Six All: all risks, all branches and subsidiaries, all customers, all assets, all processes and all factors.
+1
+We have taken solid steps towards building a "world-class value creation bank". In terms of customer value, the
+Bank focused on value creation and actively fulfilled its mission of "serving the nation and the people with finance".
+Through the steady growth in on-balance sheet and off-balance sheet businesses, the Bank supported the real economy
+at multiple levels, through multiple channels, and by multiple financing structures, with the balance of aggregate
+financing products to corporate customers (FPA) exceeding RMB5.5 trillion. The Bank employed a "people + digitalisation"
+mechanism to improve the breadth, depth, personal touch and precision of its services, and enhanced consumer rights
+protection, with 99.16% of customer complaints responded within one hour. In terms of employee value, CMB adopted
+a strict yet caring attitude in management of staff, and has been shortlisted as top ten "Best Employers of the Year" by
+Zhaopin.com for 13 consecutive years. In terms of shareholder value, the return on average equity (ROAE) attributable
+to ordinary shareholders of the Bank remained above 16%, creating good returns for shareholders. In terms of partner
+value, the Bank continued to expand the "circle of friends" in the wealth management ecosystem. Our "Zhao Cai Hao (
+)", an open platform of wealth management business, has onboarded in total 152 asset management institutions
+with industrial representativeness. In terms of social value, CMB actively practiced the concept of "blue waters and
+green mountains are indeed gold and silver mountains". Its balance of green loans was nearly RMB450 billion. The Bank
+has won wide international acclaim in recognition of its excellent performance. It ranked first in the award of "Best
+Performing Chinese Bank" released by The Banker (UK) for three consecutive years, and achieved the first "5 Consecutive
+Championship" in the history of the "Best Bank in China" selection by Euromoney.
+We have achieved initial success in building the "Malik Curve". CMB increased its input in technology, and
+comprehensively pushed forward a digital reshaping focusing on online, data-based, intelligent, platform-based and
+ecological operation. "Stepping out of its comfort zone and daring to embrace new challenges", the Bank gradually
+established a financial services ecosystem and explored scenario-based applications of artificial intelligence. The Bank
+released the CMB APP 12.0 version with upgraded core scenario-based services such as accounting, loans, etc. with the
+number of users exceeding 200 million. Intelligent operation were applied in scenarios such as intelligent customer service,
+intelligent process, quality inspection and the Conch RPA+ (Robotic Process Automation), and our staff were relieved from
+repetitive, time-consuming work equivalent to a workload of over 17,000 individuals.
+We have made remarkable achievements in building the "three capabilities". In terms of risk management
+capability, as of the end of 2023, the non-performing loan ratio was 0.95%, indicating overall stability in asset quality.
+The allowance coverage ratio remained at a high level, reaching 437.70%. The Bank further implemented the "Six All"¹ risk
+management system, consistently promoted risk prevention and mitigation in key areas such as real estate and credit cards,
+stepped up the management of risks associated with off-balance sheet businesses, launched the "dynamic rebalancing"
+asset allocation tactics, promoted risk management empowered by digitalisation, and resolutely upheld the risk bottom line.
+In terms of wealth management capability, the number of retail customers was 197 million, and the balance of total
+assets under management (AUM) from retail customers exceeded RMB13 trillion. In terms of Fintech capability, CMB
+took the lead in the industry in achieving a full-scale cloud deployment, and the "Project of Full-scale Cloud Deployment of
+CMB Banking System" won the first prize of Fintech Development Award of the People's Bank of China. The Bank initiated
+the construction of a large model ecosystem, and established a large model experience platform, connecting to multiple
+mainstream large models in China.
+on,
+The year 2024 marks the 75th anniversary of the founding of the People's Republic of China, and it is also a crucial year for
+implementing the "14th Five-Year" strategic plan. As the saying goes, “diligent ploughing in spring begets bountiful harvest
+in autumn". We will remain steadfast in our confidence, build on our capabilities, and work diligently with perseverance
+to achieve high-quality growth of CMB, thereby contributing to China's development into a financial powerhouse, while
+writing a new chapter for CMB on the journey of financial development with Chinese characteristics. Paying tribute to
+history with a commitment to carrying forward its legacy, and creating history with an ambition to write our own story, we
+will strive to achieve greater successes on the Chinese path to modernisation.
+China Merchants Bank Co., Ltd.
+Chairman
+廖建民
+무
+Management staff can be promoted or demoted; qualified talents can be recruited and those unqualified can be dismissed; remuneration can be
+increased or decreased.
+2
+Drawing a new blueprint in a new era, "high-quality development will be the top priority in the new stage". The
+goal of "Accelerating Construction of a Financial Powerhouse" was proposed at the Central Financial Work Conference,
+and CMB will stride in tandem with the times and align with the direction of the Chinese path to modernisation. Steadfast
+in its strategic determination, the Company will continue to explore and forge a new model for high-quality financial
+development. A new model for high-quality development is anchored in value creation. As the saying goes, "Only by
+taking the right path can we avoid going astray". We will adhere to the goal of creating greater comprehensive value for
+customers, employees, shareholders, partners and society, serve the real economy and people's aspiration for a better life,
+and follow the value creation logic of "volume growth - revenue growth - profit growth - value growth", resolutely forging
+ahead on the right path. A new model of high-quality development honours long-term success. Bank operation is a
+marathon, and it is about the determination and endurance to secure steady and sustainable growth. The path of extensive
+development driven by scale expansion has been proved unsustainable, and the "100-1=0" effect of risk will be more
+prominent, highlighting the logic of development determined by management and driven by innovation. We will adhere to
+the development philosophy which "takes quality as the foundation and profitability as priority, while maintaining moderate
+scale and reasonable structure" to achieve long-term sustainable development through intensive growth. A new model
+of high-quality development is rooted in differentiation and specialisation. As one of the first batch of joint-stock
+commercial banks established in the mid to late 1980s, the Bank has been making every effort to become a new force
+serving the real economy and people's livelihood, and a path-breaker for financial innovation and development. We will
+grow stronger, better and bigger through differentiated competition to serve a wider range of customers and cater for more
+diversified financial needs to integrate ourselves into a multi-layered, wide-covered, and differentiated modern financial
+service system. A new model of high-quality development emphasises balance and coordination. Individual business
+and institution will find it difficult to meet customer needs through its own efforts only, which is also unsustainable. We
+will uphold the philosophy of "One CMB" and provide customers with comprehensive, global and integrated services, thus
+achieving balanced, coordinated and complementary development of various business segments and regional branches and
+subsidiaries.
+CMB overcame difficulties and challenges in 2023. Under the strong leadership of the Board of Directors, and with the
+unwavering support of governments at all levels, regulatory departments, customers, investors, partners, and all walks
+of life, CMB spared no efforts to create greater value for all stakeholders. These hard-earned results have retained our
+fundamental stability of customers, market share and asset quality, demonstrating the resilience of sustainable development,
+as well as the strength and cohesion of the 110,000 CMBers. We would like to express our sincere gratitude to the people
+from all walks of life who care about and support the development of China Merchants Bank, and show our great respect
+to the 110,000 CMBers for their hard work!
+The Company continued to build up talent team and promote the CMB culture. We intensified the recruitment of
+talents with more than 10,000 people recruited throughout the year; we strengthened the selection and appointment
+of management staff and the development of talents across different organisational levels; we enhanced the career
+development path of employees, improved the talent training and cultivation system, boosted the professional quality
+of employees, and highlighted the application of the "Six Can-do"2 mechanism in order to stimulate the motivation and
+vitality of the talent team. We promoted the organic integration of financial culture with Chinese characteristics and CMB
+culture to inspire, unite and encourage our employees with such cultures, and enhance the soft power in competition.
+The Company continued to practice ESG philosophy and fulfill social responsibilities. We facilitated the green
+and low-carbon transformation, developed green finance and promoted green operation. We enhanced consumer rights
+protection, conducted the "Service Quality Improvement Year" campaign, promoted the banking service transformation
+to be more respectful, suitable, and accessible for the elderly customers, and focused on strengthening network security,
+data security, and privacy protection. In the performance appraisal for targeted assistance and poverty alleviation projects,
+we received the highest rating for three consecutive years, with an external donation of RMB115 million in the year,
+demonstrating our commitment to "benefiting from and giving back to society".
+The Company continued to create new advantages in digital transformation and accelerate the construction of
+"Digital CMB". We enhanced top-level design to develop a three-year plan of digital transformation, and sped up the
+transition from "Online CMB" to "Smart CMB". We increased input in technology with the information technology input
+reaching 4.60% of the Bank's net operating income, and R&D personnel accounting for 9.14% of our total employee
+headcount. We set our sights on the cutting edge technologies, robustly strengthened the research and development as
+well as comprehensive applications of Al technology, and launched brand new intelligent wealth assistant "Xiao Zhao (/\
+)". Al has relieved our staff from repetitive, time-consuming work equivalent to the workload of over 17,000 individuals.
+We improved our service capability of "people + digitalisation", serving over 200 million users via the CMB APP; the online
+rate of our basic corporate banking business and financing business exceeded 92%; the digital application capabilities of all
+employees of the Bank continued to improve, further enhancing the quality and efficiency for integrated online and offline
+services.
+President's Statement
+Annual Report 2023 (H share)
+China Merchants Bank
+In 2023, the Chinese economy sought progress while maintaining stability, with high-quality development being solidly
+promoted. However, it still faced difficulties and challenges, including insufficient effective demand, excess capacity in
+certain industries, relatively weak market expectations, and a variety of potential risks. Confronting these challenges head-
+CMB built a fortress-style balance sheet, continuously strengthened the management and control of all costs and risks,
+and maintained dynamically balanced development focusing on "Quality, Profitability and Scale", thereby ensuring steady
+growth of profits and maintaining the high-quality development momentum. In summary, the Bank's performance in 2023
+was primarily characterised by "unchanging fundamentals, solid foundation, and unwavering confidence".
+6
+The Company continued to strengthen the foundation of risk compliance management so as to uphold the
+bottom line of systemic risk. We reinforced the concept of "how far we can reach depends on our risk management
+capabilities" and advanced the establishment of the risk management system covering "all risks, all branches and
+subsidiaries, all customers, all assets, all processes and all factors", enhanced digital risk control capabilities and efficiency,
+and strengthened proactive risk prevention and control and differentiated management of the branches and subsidiaries.
+We actively prevented and mitigated risks in key areas, increased efforts to dispose of non-performing assets, and firmly
+upheld the risk bottom line. We comprehensively strengthened internal control compliance, and enhanced sanction and
+money laundering risk management.
+The Company continued to strengthen its featured and systematic competitive advantages and maintained the
+balanced and coordinated development. Our four major business segments kept steady growth momentum. We secured
+the dominant position of retail finance, while consolidating and expanding our systematic advantages. The number of retail
+customers we served reached 197 million, up by 7.07% from the end of the previous year, thanks to more retail customers
+choosing CMB. Total assets under management (AUM) from retail customers exceeded RMB13 trillion, and retail finance
+contributed more than 55% of total net operating income and total profit before tax. We consistently exceled in corporate
+finance, enhanced our services rendered to customers in terms of the breadth and depth, and established distinctive
+financial service systems including sci-tech finance, green finance, etc. The number of our corporate customers reached
+2,820,600, up by 11.66% from the end of the previous year, and the aggregate financing products (FPA) provided to real
+economy-based enterprise clients exceeded RMB5.5 trillion. We continued to pursue business specialisation and innovation
+in investment banking and financial markets business, and maintained a leading position in various specialised sectors such
+as M&A loans, bond underwriting, bond trading, bill business and asset custody. We continued to expand and strengthen
+our wealth management and asset management business, and our capability was constantly enhanced. The number of retail
+customers holding our wealth management products exceeded 50 million, representing an increase of 19.13% as compared
+with the end of the previous year. The total asset management business scale reached RMB4.48 trillion, up by 1.59% from
+the end of the previous year. We made further progress in comprehensive and international business operations, with
+subsidiaries and overseas branches continuing to enhance their competitiveness, and branches in key regions improving
+quality and efficiency of their development, further demonstrating the "flywheel effect" of coordinated development across
+the Bank.
+The Company continued to consolidate the fortress-style balance sheet, which boasted the financial indicators to
+maintain the good momentum featuring steady growth with improved quality. We saw steady growth in business
+scale. As of the end of 2023, our total assets reached a new milestone of RMB11 trillion. Our operating efficiency remained
+stable. Annual net operating income amounted to RMB339.078 billion. Net profit attributable to shareholders of the
+Bank amounted to RMB146.602 billion, with ROAA and ROAE being 1.39% and 16.22%, respectively. We maintained
+endogenous capital growth. The core Tier 1 capital adequacy ratio and capital adequacy ratio under the Advanced
+Measurement Approach were 13.73% and 17.88% respectively, up by 0.05 and 0.11 percentage point from the end of
+the previous year, respectively. Asset quality has improved overall with a non-performing loan ratio of 0.95%, down by
+0.01 percentage point from the end of the previous year. The allowance coverage ratio was 437.70% and allowance-to-
+loan ratio was 4.14%, maintaining strong risk compensation capability. We further consolidated structural advantages by
+strengthening our capital-heavy business while expanding capital-light business operations, and realised more balanced and
+stable management of customer structure, asset structure, regional structure and income structure, relentlessly reinforcing
+the foundation for sound operation.
+In the face of the complicated and volatile business environment at home and abroad in 2023, the management of the
+Bank led all employees to earnestly fulfill the work requirements outlined by the national macroeconomic policies as well as
+the regulatory departments, and accomplish the objectives and tasks set by the Board of Directors. The Bank made stability
+as its top priority, sought progress while maintaining stability, adhered to high-quality development with the strategic
+objectives of building a value creation bank, thereby achieving dynamically balanced development of "Quality, Profitability
+and Scale".
+President's Statement
+President's Statement
+Annual Report 2023 (H share)
+China Merchants Bank
+8
+25 March 2024
+The Company continued to improve refined management level and enhanced high-quality development
+capabilities. We tightened up internal management, optimised assets and liabilities management, performance
+management, cost management, capital management, pricing management, budget management, etc. and steadily
+promoted the implementation of the New Capital Rules. We aim to provide solid support for the implementation of the
+value creation bank strategy and achieve balance among multiple goals. We deepened organisational reform, steadily
+advanced the reform of branch operational systems, optimised the Head Office's organisational structure and improved
+service system, so at to further align our organisational structure with development strategies.
+Chairman's Statement
+Chairman's Statement
+Annual Report 2023 (H share)
+SFO:
+Deloitte Touche Tohmatsu Certified Public Accountants
+LLP (Special General Partnership)
+Deloitte Touche Tohmatsu Certified Public
+Accountants LLP:
+China Merchants Bank Network Technology (Shenzhen)
+Co., Ltd. with 100% equity interest held by the Company
+indirectly
+CMB YunChuang Information Technology Co., Ltd. with
+100% equity interest held by the Company indirectly
+CMB Network Technology:
+Merchants Union Consumer Finance Company Limited
+CMB YunChuang:
+MUCFC:
+CIGNA & CMB Life Insurance Co., Ltd.
+CIGNA & CMB Life Insurance:
+China Merchants Bank (Europe) Co., Ltd. ((&)
+有限公司)
+Securities and Futures Ordinance (Chapter 571 of the
+Laws of Hong Kong)
+CIGNA & CMB Asset Management Company Limited
+CMB Europe S.A.:
+China Merchants Fund Management Co., Ltd.
+China Merchants Fund or CMFM:
+CMB Wealth Management Company Limited
+CMB Wealth Management:
+CMB International Capital Holdings Corporation Limited
+CHINA MERCHANTS BANK CO., LTD.
+CMB Financial Leasing Co., Ltd.
+CMB Financial Leasing or CMBFL:
+CMB Wing Lung Bank and its subsidiaries
+CMB Wing Lung Group:
+CIGNA & CMAM:
+CMB Wing Lung Bank:
+Model Code:
+Significant Risk Warning
+China Merchants Bank
+3
+We have included in this report certain forward-looking statements with respect to the financial position, operating
+results and business development of the Group. We use words such as "will", "may", "expect", "try", "strive",
+"plan", "anticipate", "aim at", and similar expressions to indicate forward-looking statements. These statements
+are based on current plans, estimates and projections. Although we believe that the expectations reflected in these
+forward-looking statements are reasonable, we give no assurance that these expectations will turn into reality or
+prove to be correct. Therefore, they should not be deemed as the Group's commitments. Investors should not
+place undue reliance on such statements and should pay attention to investment risks. You are cautioned that such
+forward-looking statements are related to future events or future financial position, business, or other performances
+of the Group, and are subject to a number of uncertainties which may cause substantial differences from those in
+the actual results.
+The Board of Directors of the Company recommended the payment of a cash dividend of RMB1.972 (tax inclusive)
+for every ordinary share for the year of 2023. The implementation of the profit appropriation plan is subject to
+consideration and approval at the 2023 Annual General Meeting. In 2023, the Company did not transfer any capital
+reserve into share capital.
+Miao Jianmin, Chairman of the Company, Wang Liang, President and Chief Executive Officer, Peng Jiawen, Executive
+Vice President, Chief Financial Officer and Secretary of the Board of Directors and Zhang Dong, the person in charge
+of the Financial Accounting Department, hereby make representations in respect of the truthfulness, accuracy and
+completeness of the financial statements in this report.
+7.
+6.
+5.
+Unless otherwise stated, all monetary sums stated in this report are expressed in RMB.
+4.
+Model Code for Securities Transactions by Directors of
+Listed Issuers of Hong Kong Stock Exchange
+Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu (both being auditors
+of the Company) have separately audited the 2023 annual financial statements prepared in accordance with the
+PRC Generally Accepted Accounting Principles and International Financial Reporting Standards, and have separately
+issued standard auditing reports with unqualified opinions.
+contents.
+The Board of Directors, the Board of Supervisors, Directors, Supervisors and senior management of the Company
+confirm that the contents in this annual report are true, accurate, and complete and have no false representations,
+misleading statements or material omissions, and they will severally and jointly accept legal responsibility for such
+3.
+2.
+1.
+Important Notice
+Important Notice
+Annual Report 2023 (H share)
+China Merchants Bank
+The Company has disclosed herein the major risks involved in its operations and the proposed risk management measures.
+Please refer to Chapter III for the details in relation to risk management.
+The 31st meeting of the Twelfth Session of the Board of Directors of the Company was convened at the Head Office
+of the Company in Shenzhen on 25 March 2024. The meeting was presided by Miao Jianmin, Chairman of the
+Board of Directors. 12 out of 13 eligible Directors attended the meeting in person. Due to business engagement,
+Zhou Song, Non-Executive Director, was absent from the meeting and appointed Zhang Jian (Non-Executive Director)
+as his proxy to attend the meeting. 8 Supervisors of the Company were present at the meeting. The convening of
+the meeting complied with the relevant provisions of the Company Law of the People's Republic of China and the
+Articles of Association of China Merchants Bank Co., Ltd..
+3.li
+CMB International Capital or CMBIC:
+2023 Annual Report
+H Share Stock Code : 03968
+People's Republic of China with limited liability)
+ㅆ招商銀行
+☑
+(a joint stock company incorporated in the
+133,150
+169,550
+162.69
+No
+Cao Jian
+Male
+1970.10
+127,000
+2023.3-2025.6
+2021.12- (Note 3)
+158,400
+129.42
+No
+Yang Sheng
+Male
+1972.8
+Employee Supervisor
+Employee Supervisor
+No
+Cai Jin
+2019.6-2025.6
+40.00
+No
+Cai Hongping
+Male
+1954.12
+External Supervisor
+2022.6-2025.6
+40.00
+No
+Zhang Xiang
+Male
+1963.12
+External Supervisor
+2022.6-2025.6
+40.00
+Employee Supervisor
+Female 1970.7
+2023.6-2025.6
+197,700
+External Supervisor
+Zhong Desheng
+Male
+1967.7
+Executive Vice
+2023.10-2025.6
+177,300
+177,300
+262.59
+No
+Wang Xiaoqing
+Male
+1971.10
+Wang Ying
+Female
+1972.11
+President
+Executive Vice
+President
+Executive Vice
+2023.7-2025.6
+Committee
+Party Discipline
+No
+112.28
+96.66
+No
+Wang Yungui
+Male
+1963.6
+Executive Vice
+2019.6-2025.6
+210,000
+157,700
+210,000
+No
+President
+Zhao Weipeng
+Male
+1972.3
+Secretary of the
+2023.8-present
+56,800
+286.89
+1955.9
+Yes
+Xu Zhengjun
+Whether or
+Total
+not
+remuneration
+received
+before tax remuneration
+received from
+from the
+Shareholding
+at the Shareholding
+the Company
+Company's
+during the
+Date of
+Name
+Gender
+Birth (Y/M)
+Title
+Chapter V Corporate Governance
+Term of
+office
+Annual Report 2023 (H share)
+98
+50.00
+Li Menggang
+Male
+1967.4
+Liu Qiao
+Male
+1970.5
+Executive Director
+Independent Non-
+Executive Director
+Independent Non-
+Executive Director
+2018.11 (Note 2)
+50.00
+2018.11- (Note 2)
+50.00
+2 2 2
+No
+No
+No
+97
+China Merchants Bank
+Male
+beginning of
+the period
+(share)
+reporting
+period (RMB
+Shi Yongdong
+Male
+1968.11
+Independent Non-
+2021.8-2025.6
+50.00
+No
+Executive Director
+Luo Sheng
+Male
+1970.9
+Shareholder Supervisor 2022.6-2025.6
+Yes
+Wu Heng
+Male
+1976.8
+62,000
+Executive Director
+at the end
+No
+2021.8-2025.6
+of the period
+(share)
+in ten
+thousand)
+related
+parties
+during the
+reporting
+period
+Tian Hongqi
+Male
+1957.5
+Independent Non-
+2019.8-2025.6
+50.00
+No
+Executive Director
+Li Chaoxian
+Male
+1958.9
+Independent Non-
+50.00
+123.17
+200,000
+2023.11-2025.6
+Term of
+office
+the period
+of the period
+in ten
+(share)
+(share)
+thousand)
+related
+parties
+during the
+reporting
+period
+Former Employee
+2018.7-2023.3
+183,000
+191,800
+59.35
+No
+Supervisor
+Wang Jianzhong
+Title
+Male
+Birth (Y/M)
+1964.9
+Gender
+Total
+not
+remuneration
+received
+before tax remuneration
+Shareholding
+at the Shareholding
+the Company
+received from
+from the
+Company's
+during the
+reporting
+beginning of
+at the end
+period (RMB
+Date of
+Name
+Wang Wanging Male
+1962.10
+Former Executive Vice 2019.4-2023.2
+240,200
+168.89
+No
+2021.7-2023.7
+225,600
+225,600
+187.14
+No
+Notes:
+(1) Mr. Wong See Hong has tendered his resignation as an Independent Non-Executive Director to the Board of Directors of the Company due to
+expiry of his term of office. In accordance with the relevant laws and regulations and the relevant requirements of the Articles of Association of
+the Company, the resignation of Mr. Wong See Hong will become effective upon the election of a new Independent Non-Executive Director at the
+Shareholders' General Meeting of the Company followed by the approval of the qualifications of the new Independent Non-Executive Director by
+the National Financial Regulatory Administration (NFRA) to fill the vacancy.
+(2) According to the Management Measures for the Independent Directors of Listed Companies, the term of office of Independent Directors shall not
+exceed six years. Therefore, the actual term of office of the Independent Directors, Mr. Li Menggang and Mr. Liu Qiao, will expire earlier than the
+expiration time of the Twelfth Session of the Board of Directors of the Company.
+(3) Ms. Cai Jin has tendered her resignation as an Employee Supervisor to the Board of Supervisors of the Company due to her age. In accordance with
+the relevant laws and regulations and the relevant requirements of the Articles of Association of the Company, the resignation of Ms. Cai Jin will
+become effective upon the election of a new Employee Supervisor by the Employee Representative Meeting of the Company to fill the vacancy.
+(4) The remuneration received by the Directors, Supervisors and senior management who were newly appointed or resigned during the reporting
+period was calculated based on the length of their terms of office as the Directors, Supervisors and senior management of the Company during the
+reporting period.
+(5) The aggregate pre-tax remuneration of full-time Executive Directors, Chairman of the Board of Supervisors and senior management of the Company
+is still being verified. The remaining part will be disclosed separately upon the completion of confirmation and payment.
+(6) As at the end of the reporting period, the spouse of Mr. Zhou Song held 23,282 A Shares in the Company; the spouse of Mr. Yang Sheng held
+143,300 A Shares in the Company; and Ms. Cai Jin held 169,550 shares in the Company, which consisted of 165,000 A Shares and 4,550 H Shares.
+The shares held by others listed in the above table were all A Shares. The changes in the shareholding of the people listed in the above table during
+the reporting period were all resulting from shareholding increase.
+(7) None of the people listed in the above table has been punished by the securities regulator(s) over the past three years.
+(8) None of the people listed in the above table holds any share options of the Company or has been granted any of its restricted shares.
+99
+204,400
+204,400
+Former Executive Vice 2021.3-2023.7
+President
+Former Secretary of
+the Party Discipline
+Committee
+1971.4
+240,200
+55.57
+No
+President
+Shi Shunhua
+Male
+1962.12
+Former Executive Vice 2019.4-2023.2
+Whether or
+245,000
+55.23
+No
+President
+Li Delin
+Male
+1974.12
+Xiong Kai
+Male
+245,000
+No
+Chapter V Corporate Governance
+China Merchants Bank
+1974.9
+Executive Assistant
+2023.11-present
+197,700
+264,400
+14.91
+President
+Xu Mingjie
+Male
+1968.9
+Executive Assistant
+2023.11-present
+160,000
+200,000
+14.85
+President
+Jiang Chaoyang Male
+Male
+1967.12
+Lei Caihua
+2023.6-2025.6
+2017.2-(Note 1)
+230,000
+241.46
+No
+President
+Peng Jiawen
+Male
+1969.5
+Executive Vice
+President
+2023.11-2025.6
+167,700
+221,900
+240.52
+No
+Chief Financial Officer
+2023.2-2025.6
+Secretary of the Board
+of Directors
+Chief Information
+2019.11-present
+198,100
+2021.8-2023.6
+240,000
+240,000
+187.04
+22 223 224 2
+Yes
+Yes
+No
+of Supervisors,
+Employee Supervisor
+Peng Bihong
+Male
+1963.10
+Former Shareholder
+2019.6-2024.1
+Yes
+Supervisor
+Director
+Former Chairman
+of the Board
+1963.2
+Male
+Xiong Liangjun
+232,400
+276.78
+Officer
+Hu Jianhua
+1,388
+Male
+1962.11
+Former Non-Executive 2022.10-2024.1
+Annual Report 2023 (H share)
+Yes
+Hong Xiaoyuan Male
+1963.3
+Former Non-Executive 2007.6-2024.1
+Director
+Su Min
+Female
+1968.2
+Former Non-Executive 2014.9-2023.3
+Director
+Independent Non-
+Shareholder Supervisor 2016.6-2025.6
+Male
+Suzhou
+2,012
+Yantai
+1,041
+Quanzhou
+374
+Tianjin
+3,755
+Zhengzhou
+1,997
+Urumqi
+1,014
+Wenzhou
+315
+Shenyang
+4,353
+Xi'an
+391
+Haikou
+Guiyang
+520
+Nanjing
+4,927
+Changsha
+2,065
+Taiyuan
+3,130
+1,169
+439
+Hangzhou
+4,509
+Nanchang
+2,054
+Changchun
+1,067
+Yinchuan
+1,221
+Dalian
+Shijiazhuang
+In terms of career development paths, the Company has constantly improved a dual-channel development system for
+employees with management capabilities or professionalism, which has changed the single and narrow management
+staff promotion channel.
+In terms of performance assessment and evaluation, the Company has established a "performance + ability"
+two-dimensional performance assessment system covering all employees, and formed a full-process performance
+management system covering goal-setting, process guidance, performance appraisal and results communication
+through reasonable use of 360-degree evaluation and other assessment tools, which can evaluate employee
+performance scientifically and comprehensively.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter IV Environmental, Social and Governance (ESG)
+In terms of employee training, the Company innovated a training system with different levels and types of trainings,
+adopting diversified training methods through a combination of online and offline training to meet the needs of
+employees at different levels for professional development and to promote professional ability building across the
+Bank. In terms of new employee training, during the reporting period, a new employee empowerment platform was
+built, 11 mandatory courses for new employees were introduced, and new employees were organised to go to the
+subsidiaries for field studies so as to deepen their understanding of the Company's strategy. In terms of professional
+ability training for employees, the Company promoted the mechanism of "work permit", expanded the list of
+professional qualification certification beyond the Bank, enhanced the professional ability of the training team,
+optimised various talent development programmes, and strengthened the reserve and cultivation of international
+talents. In terms of training for management staff, the Company formulated training programmes for senior
+management and middle-level and front-line management staff targeting on different levels and classifications of
+management staff, covering leadership enhancement, digital innovation and so on.
+4.3.7 Rural revitalisation
+The Company continued to promote targeted rural revitalisation assistance programme, and formulated the "CMB
+2023 Rural Revitalisation Work Plan"
+2023 by focusing on the general
+approach of "pavement for education, healthcare security, industrial support, human settlements construction",
+which defines the objectives, targets of the assistance and work measures, exploring new assistance ways with the
+times and consolidating and expanding the results in poverty alleviation.
+The Company focused on industry, education, medical treatment, ecology, talent and other areas that are related to
+people's well-being. In line with the development plan of Wuding and Yongren counties in Yunnan, the Company
+focused on creating a new supporting model incorporating "products + platforms + cooperatives + farmers"
+and special brands such as "Sunny Yongren" and "Luowu Hometown" to help the development of characteristic
+agricultural products industry. The Company also helped improving local educational conditions, actively recruiting
+a team of distinguished teachers and increasing the level of education development. The Company increased the
+investment in medical infrastructure in the two counties, and established a sound medical service system; carried
+out the rural construction featuring "beauty of environment, production, life and culture" in seven villages; and
+organised various trainings to promote the construction of a talent pool for rural revitalisation and development in
+the two counties through talent assistance. During the reporting period, 65 projects were implemented in Wuding
+and Yongren counties in Yunnan, with a direct investment of RMB54.5800 million.
+3
+93
+94
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter IV Environmental, Social and Governance (ESG)
+4.4 Governance Information
+In terms of remuneration management, the Company adheres to the principle of gender equality in remuneration
+and benefits, and sticks to the notion that gender is not a factor affecting remuneration and benefits. The total
+annual remuneration of employees includes regular remuneration, contingent remuneration and benefits. The
+Company adjusts the salary standard of different posts according to the market situation and provides employees
+with competitive remuneration.
+In terms of recruitment management, the Company does not judge candidates on the basis of factors unrelated to
+their personal qualities and working abilities, such as gender, age, ethnicity, nationality, religion, family status, and
+stipulates that discriminatory descriptions such as image, gender, birthplace and marital and childbearing status are
+strictly prohibited in external recruitment announcements.
+4.3.6 Human resources development
+Including complaints from Head Office departments.
+978
+Tangshan
+279
+Jinan
+3,036
+Fuzhou
+1,494
+1,905
+Lanzhou
+916
+Xining
+167
+Notes:
+(1)
+Including complaints from credit card users.
+(2)
+Dongguan
+The Company continues to promote the improvement of the corporate governance mechanism, improve
+the corporate governance level and adhere to the concept of stable business development and prudent risk
+management. The Company proactively steps up efforts to support the real economy, serves the national strategies,
+fulfills social responsibilities, and serves the transformation and upgrading of the national economy and the people's
+aspirations for a better life with its own high-quality development. The core of the Company's corporate governance
+mechanism is to adhere to the leadership of the Party, and integrate the leadership of the Party into all aspects of
+corporate governance. The key to the Company's corporate governance mechanism is to adhere to the principle
+of president assuming full responsibility under the leadership of the Board of Directors, the market-based talent
+selection and employment mechanism, and the remuneration incentive mechanism. The Company has established
+a complete system of discussion and management authorisation, whereby the president is responsible to the Board
+of Directors and the Board of Directors is accountable to the Shareholders' General Meeting. The Company's
+shareholding structure is reasonable and the shareholders' behaviours are regulated. The Shareholders' General
+Meeting, the Board of Directors, the Board of Supervisors and the senior management maintain separate roles and
+responsibilities, clear division of labour and close collaboration among them as well as checks and balances on the
+other, which provides a fundamental guarantee for the long-term, healthy and sustainable development of the
+Company.
+Kunming
+Hefei
+91
+All of the above data excludes complaints in the account management, negotiated repayment, credit reporting and billing standards.
+26
+During the reporting period, the Company received a total of 160,33426 complaints from regulatory authorities
+transfer, 95555 customer complaints channel, Credit Card Centre as well as other channels within the whole bank,
+of which 45.98% of the complaints were related to debit card business, 18.73% were related to loan business,
+18.19% were related to credit card business, 5.16% were related to agency businesses, and 11.94% were related
+to payment and settlement, foreign exchange, precious metals, personal financial information and other business.
+During the reporting period, the Company advanced its digital transformation of consumer rights protection,
+introduced big data and artificial intelligence technologies to optimise the complaint monitoring system, developed
+multi-dimensional data analysis reports, improved the ability to trace and rectify complaint and the ability to improve
+business value; revised and issued the "Management Measures for Customer Complaint of China Merchants Bank
+(Seventh Edition)" (ƑŒ()), further improved the diversified mechanism for resolving
+disputes and continuously enhanced the efficiency of consumer complaint resolution.
+During the reporting period, the Company firmly carried out financial knowledge promotion and guidance activities,
+increased the relevance of education and publicity, and improved the financial literacy of consumers through daily
+and centralised promotion activities. The Company innovated working methods and reached "massive" consumer
+groups through its own promotional channels with over a hundred million monthly active users. During the reporting
+period, the Company carried out 18,300 online and offline promotion and guidance activities across the Bank,
+reaching consumers for 555 million times.
+During the reporting period, the Board of Directors and Related Party Transactions Management and Consumer
+Rights Protection Committee of the Company organised and held meetings to consider 17 issues of consumer rights
+protection, conducted one on-site investigation, reviewed reports on the development of consumer rights protection
+and the management of complaints, reviewed the annual work plan of consumer rights protection, supervised the
+management in implementing regulatory requirements, and continuously consolidated the management foundation
+of consumer rights protection. The management incorporated the guidance on the implementation of consumer
+rights protection work into the regular performance of duties, took the lead in listening to customer complaints and
+promoted the traceability and rectification of problems; reviewed the Bank's problem and complaint analysis reports
+monthly and held special meetings regularly to continuously promote the Company to include consumer rights
+protection into corporate governance, corporate culture construction and business development strategies.
+During the reporting period, the Company further improved the internal assessment mechanism for the consumer
+rights protection, built a "one horizontal aspect and four vertical aspects" assessment system for the consumer
+rights protection, which will be included in the comprehensive performance assessment of business organisation
+horizontally and included in the assessment of the company, retail, operation, consumer rights protection and other
+lines vertically, so as to carry out comprehensive, objective and fair evaluation on the consumer rights protection of
+all business departments and branches across the Bank, and give full play to the pulling effect of evaluation.
+During the reporting period, the Company incorporated the concept of consumer rights protection into the design
+stage of products and services. Throughout the year, a total of 144,500 consumer rights protection reviews were
+completed, with a coverage rate of products and services of 100% and an adoption rate of consumer rights
+protection suggestions of 99.47%. The Company identified and corrected the potential issues that may harm
+consumer rights in financial products and services timely before their launch, and effectively played the role in risk
+prevention.
+The Company attaches great importance to the protection of consumer rights, fulfills requirements of various
+laws and regulations, financial policies and regulatory bodies for the protection of consumer rights, constantly
+strengthens the construction of the consumer rights protection system and mechanism, improves the complaint
+handling mechanism, increases the promotion and guidance of financial knowledge, increases trainings on consumer
+rights protection, and exerts itself to build the work pattern of "comprehensive consumer rights protection" to
+promote the high-quality development of consumer rights protection.
+4.3.5 Consumer rights protection
+Chapter IV Environmental, Social and Governance (ESG)
+Annual Report 2023 (H share)
+China Merchants Bank
+During the reporting period, the Company did not have any major incident of internet security, information security
+or privacy leakage.
+For corporate customers, the Company has formulated the "Management Measures for Users of Wholesale
+Customer Relationship Management System", which requires users of wholesale customer relationship management
+system (CRM) to properly use customer-related information in the system, strictly abide by relevant national laws
+and regulations and the information security management system in the industry, and strictly prohibit the disclosure
+to unrelated personnel; strictly control sensitive information such as customer contact information, account balance,
+account transaction, customer marketing trajectory, and authorise the use of sensitive information on demand
+according to different levels and classifications. In the event of data leakage that results in severe consequences,
+the relevant parties will be punished according to the internal regulations, while direct supervisors will be held
+accountable. The Company has formulated the "Operating Procedures for Outsourcing of Online Business for
+Corporate Customers", which requires suppliers to safeguard the security of customer information. The Company
+will promptly terminate cooperation when customer information is unsafe or customer rights are affected.
+"I
+22
+92
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter IV Environmental, Social and Governance (ESG)
+2,847
+Qingdao
+38,847
+complaints
+Region
+complaints
+Region
+For retail customers, the Company attaches great importance to customer privacy protection and data security
+management, and actively implements national laws and regulations such as the Personal Information Protection
+Law of the People's Republic of China to make every effort to protect customer information security. In terms of the
+acquisition and use of personal information, the Company adheres to the principles of legal compliance, minimum
+necessity, openness and transparency, honesty and good faith, quality assurance and safety protection, and further
+improves the security protection system covering the whole life cycle of personal information processing, as well as
+the treatment mechanisms for supervision and inspection of personal information protection, personal information
+complaint channels and others, and effectively implements the tiered and classified authorisation management
+of users, strictly controlling the scope of authorisation for personal information inquiry, strengthening the safety
+impact assessment and management on the use of personal information, standardising the approval management
+of personal information use. The Company regularly evaluated the privacy compliance of CMB APP for individual
+customers to ensure that the "Privacy Policy for Retail Business and APP Users of CMB and business practices are
+in compliance with relevant laws and regulations. At the same time, the Privacy Policy is published on the relevant
+service pages of official website and the CMB APP, through which the customer is clearly informed of the type
+of information collected and the use of the information. In addition, the Company conducts internal control and
+compliance inspection, strengthens the publicity and education on personal information protection, and carries out
+emergency drills on personal information security incidents, so as to enhance the awareness of personal information
+protection of customers and employees, strictly prevent the risk of data leakage, and gradually improve the
+management of customer information protection.
+complaints
+complaints
+Region
+Shanghai (1)
+Number of
+Number of
+Number of
+Number of
+The distribution by region is shown in the table below.
+Region
+2,292
+The Information Security Management Committee of the Company is responsible for the overall planning and
+organisation of network security and data security across the Bank. The Information Security Management
+Committee has set up a data security team led by the Information Technology Department at the Head Office, which
+is composed of the leaders in charge of data security and data security administrators from over 40 departments
+at the Head Office, to oversee and implement various key areas of data security. The Information Technology
+Department at the Head Office, as a leading management department for network security, is responsible for the
+Group's network security management under the leadership of the Information Security Management Committee.
+The Information Technology Department at the Head Office, the Risk Management Department at the Head Office
+and audit departments at all levels assume the responsibilities of the first, second and third lines of defence for
+network and data security management.
+For customers working as Meituan food delivery riders, the Company, together with Meituan Financial Service
+Platform, created an exclusive bank card product for riders of Meituan to enhance riders' sense of achievement.
+The Company optimised the account opening process and customer information inquiry interface, and launched the
+"New Citizen Financial Service" to enable riders to quickly search for convenient entries such as payment of utilities
+fees, and conveniently access to wealth management, loan, insurance and other services.
+2,557
+Xiamen
+1,268
+Nanning
+712
+Wuhan
+7,093
+Harbin
+2,322
+Foshan
+1,227
+Nantong
+552
+Guangzhou
+5,231
+Chengdu
+1953.6
+Beijing
+750
+For customers with disabilities, the Company provided sign language service in visible counter service. The customers
+with disabilities can input passwords by themselves, then the special customer service personnel will verify
+information and provide business consultation and handling service in sign language.
+For elderly customers, the Company provided convenient and caring services, and introduced a personalised service
+menu and service process in 95555 hotline to help them quickly access to manual service lines for the elderly.
+During the reporting period, the Company provided elderly customers with 252,300 telephone and text quick-access
+services, with a dedicated telephone line access rate of 97.23% and a customer satisfaction rate of 98.63%. The
+Company provided one-to-one same-screen operation guidance service for elderly customers in the CMB APP "Elder
+Version" to make service more intuitive and convenient. As at the end of the reporting period, the customers using
+the CMB APP "Elder Version" reached 1.0925 million.
+Chapter IV Environmental, Social and Governance (ESG)
+4.3.4
+Annual Report 2023 (H share)
+China Merchants Bank
+90
+Information security and privacy protection
+Wuxi
+Shenzhen(2)
+29,396
+Chongqing
+2,676
+Ningbo
+1,343
+Hohhot
+762
+During the reporting period, the Board of Directors of the Company proactively performed its relevant duties
+in inclusive finance, green finance, data governance, human resources, consumer rights protection and social
+responsibilities. The Board of Directors officially renamed the "Strategy Committee of the Board of Directors" to the
+"Strategy and Sustainable Development Committee of the Board of Directors" to strengthen its role in coordinating
+the fulfillment of ESG responsibilities. During the reporting period, the Board of Directors and its relevant special
+committees reviewed the "2022 Sustainable Development Report", the "China Merchants Bank's '14th Five-Year'
+Strategic Plan (Revised Edition)", the "Inclusive Finance Development for 2022 and Work Plan for 2023", the
+"Human Resources Management and Talent Strategy Implementation Report for 2022", the "Data Governance
+Work Summary for 2022 and Work Plan for 2023", the "Employee Behaviour Evaluation Report for 2022", the
+"Report on the Development of Internet Loans for 2022 and Work Plan for 2023", the "Report on the Protection
+of Consumer Rights and Interests for 2022", the "2022 Consumer Complaint Analysis Report", the full text and
+summary of 2022 Annual Report, the full text and summary of 2023 Interim Report, and other relevant proposals to
+ensure the implementation of development strategy, inclusive finance, green finance, human capital, and consumer
+rights protection across the Bank. The Bank continued to deepen the practice of sustainable development, and
+worked together with stakeholders to achieve high-quality development in pursuit of higher quality, more efficiency,
+fairness, sustainability and security.
+13,943
+For more details on corporate governance, please refer to Chapter V.
+1965.12
+Male
+Wang Liang
+Yes
+Non-Executive Director 2022.10-2025.6
+1965.8
+Male
+Sun Yunfei
+2020.9-2025.6
+Non-Executive Director
+Yes
+2020.9-2025.6
+Chairman
+1965.1
+Male
+Miao Jianmin
+period
+reporting
+in ten
+thousand)
+(share)
+during the
+parties
+reporting
+period (RMB
+at the end
+of the period
+beginning of
+the period
+(share)
+Term of
+office
+Title
+Birth (Y/M)
+Gender
+Zhou Song
+Name
+Male
+Zhang Jian
+Wong See Hong
+Chief Risk Officer
+No
+282.08
+198,800
+198,800
+2023.8-2025.6
+2021.9-2025.6
+2020.7-2025.6
+During the reporting period, the Board of Supervisors of the Company studied and reviewed the "China Merchants
+Bank's '14th Five-Year' Strategic Plan (Revised Edition)", the "Inclusive Finance Development for 2022 and Work
+Plan for 2023", the "Data Governance Work Summary for 2022 and Work Plan for 2023", the "Employee Behaviour
+Evaluation Report for 2022", the "Report on the Development of Internet Loans for 2022 and Work Plan for 2023",
+the "Report on the Protection of Consumer Rights and Interests for 2022", the "2022 Consumer Complaint Analysis
+Report", the "2022 Sustainable Development Report", the full text and summary of 2022 Annual Report, the full
+text and summary of 2023 Interim Report, and other proposals to supervise key areas including inclusive finance,
+green finance, data governance, consumer rights protection and social responsibilities, while focusing on the Board
+of Directors and senior management's duty performance on the aforesaid issues, effectively fulfilling its supervisory
+responsibilities.
+Executive Vice
+Executive Director
+1972.12
+Male
+Zhu Jiangtao
+Yes
+Yes
+Yes
+煎煎煎
+Non-Executive Director 2022.10-2025.6
+1974.12
+Male
+Chen Dong
+No
+345.32
+300,000
+300,000
+2019.8-2025.6
+2022.6-2025.6
+Executive Director
+President and Chief
+Executive Officer
+Non-Executive Director 2018.10-2025.6
+Non-Executive Director 2016.11-2025.6
+1964.10
+Male
+1972.4
+Date of
+President
+Company's
+Shareholders' General Meeting
+Nomination Committee
+Board of Directors
+Board of Supervisors
+Related Party Transactions Management and
+Consumer Rights Protection Committee
+Executive Office of
+President
+Audit Committee
+Supervisory Committee
+Risk and Compliance Management
+Committee
+Anti-money Laundering, Sanction and
+Compliance Management Committee
+Shanghai Audit Division
+IT Management Committee
+Audit Department
+Shenzhen Audit Division
+Assets and Liabilities Management
+Committee
+Risk and Capital Management Committee)
+Remuneration and Appraisal Committee
+Nomination Committee
+related
+T
+www
+TUTURATE
+Never change our original
+inspiration
+We are here just for you
+96
+96
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+Corporate Governance
+5.1 Corporate Governance Structure
+Strategy and Sustainable Development
+Committee
+Xi'an Audit Division
+Business Continuity Management
+Committee
+Beijing Audit Division
+5.3 Information about Shareholders' General Meetings
+from the
+Nanjing Audit Division
+Shenyang Audit Division
+Wuhan Audit Division
+Digital Transformation Committee
+Chengdu Audit Division
+Fuzhou Audit Division
+During the reporting period, the Company convened 1 Shareholders' General Meeting, reviewed 10 proposals and
+heard 6 reports, as further described in "Information about Shareholders' General Meetings".
+During the reporting period, the Company convened 19 meetings of the Board of Directors, reviewed 99 proposals
+and heard 23 reports; convened 41 meetings of special committees under the Board of Directors, reviewed 133
+proposals and heard 41 reports; convened 1 meeting between Independent Non-Executive Directors and the
+Chairman, at which 1 report was heard. During the reporting period, the Twelfth Session of the Board of Directors
+of the Company convened the 11th meeting (17 January), the 12th meeting (16 February), the 13th meeting (3
+March), the 14th meeting (22 March), the 15th meeting (24 March), the 16th meeting (26 April), the 17th meeting
+(28 April), the 18th meeting (31 May), the 19th meeting (19 June), the 20th meeting (30 June), the 21st meeting
+(4 August), the 22nd meeting (23 August), the 23rd meeting (25 August), the 24th meeting (19 September), the
+25th meeting (26 September), the 26th meeting (19 October), the 27th meeting (27 October), the 28th meeting
+(1 December) and the 29th meeting (28 December), with priority giving to reviewing the Company's annual
+financial report, profit appropriation plan, strategic implementation evaluation report, comprehensive risk report,
+risk preference implementation report, capital adequacy report, human resources management and talent strategy
+implementation report, work report of the Board of Directors, performance of duties evaluation report of the Board
+of Directors and its members, work report of the President, the report on development of inclusive finance and its
+work plan, data governance work summary and work plan, related party transactions management report, consumer
+rights protection report, sustainable development report and other relevant proposals.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+5.2 Overview of Corporate Governance
+Having conducted thorough self-inspection, the Company was not aware of any material non-compliance of its
+corporate governance practice with laws, administrative regulations and the requirements of the CSRC regarding the
+corporate governance of listed companies during the reporting period.
+during the
+During the reporting period, the Company convened 16 meetings of the Board of Supervisors, at which 47
+proposals were reviewed and 25 reports were heard; and 10 meetings of the special committees under the Board of
+Supervisors, at which 15 proposals were reviewed.
+the Company
+at the Shareholding
+Shareholding
+received
+before tax remuneration
+received from
+Total
+remuneration
+Whether or
+not
+During the reporting period, the Company convened one Shareholders' General Meeting, namely the 2022 Annual
+General Meeting held in Shenzhen on 27 June 2023. The notice, convening, holding and voting procedures of
+the meeting were all in compliance with the relevant provisions of the Company Law of the People's Republic of
+China, the Articles of Association of China Merchants Bank Co., Ltd. and the Hong Kong Listing Rules. The meeting
+reviewed and approved 10 proposals, including the 2022 Work Report of the Board of Directors, the 2022 Work
+Report of the Board of Supervisors, the 2022 Annual Report (including the audited financial report), the 2022
+Financial Statement Report, the 2022 Profit Appropriation Plan (including the declaration of the final dividends),
+the appointment of accounting firm for the year 2023, the Related Party Transactions Report for 2022, Capital
+Management Plan for 2023-2027, the election of Mr. Huang Jian as the Non-Executive Director of the Twelfth
+Session of the Board of Directors of China Merchants Bank and the election of Mr. Zhu Jiangtao as the Executive
+Director of the Twelfth Session of the Board of Directors of China Merchants Bank. For the relevant details of the
+proposals reviewed at the meeting, please refer to the 2022 Annual General Meeting documents, meeting circulars
+and the announcement of meeting resolutions and other disclosure documents published by the Company on the
+websites of Shanghai Stock Exchange, Hong Kong Exchanges and Clearing Limited and the Company.
+For details of the proposals reviewed by the meetings of the Board of Directors and the Board of Supervisors, please
+refer to the disclosure documents including the announcements on resolutions published by the Company on the
+websites of Shanghai Stock Exchange, Hong Kong Exchanges and Clearing Limited and the Company.
+5.4 Directors, Supervisors and Senior Management
+Biography and positions of Directors, Supervisors and senior management
+Mr. Miao Jianmin is the Chairman and Non-Executive Director of the Company. Mr. Miao obtained a doctoral
+degree in Economics from Central University of Finance and Economics and is a senior economist. He is an
+alternate member of the nineteenth and twentieth Central Committee of the Communist Party of China. Mr. Miao
+is Chairman of China Merchants Group Ltd. and concurrently serves as Chairman of China Merchants Financial
+Holdings Co., Ltd. (±) and Chairman of China Merchants Life Insurance Company Limited.
+Mr. Miao was an Executive Director and the Deputy General Manager of China Insurance (Group) Limited Company
+in Hong Kong, the Vice Chairman and President of China Life Insurance (Group) Company, the Chairman of The
+People's Insurance Company (Group) of China Limited (a company listed on the Hong Kong Stock Exchange) and the
+Chairman of PICC Property and Casualty Company Limited (a company listed on the Hong Kong Stock Exchange).
+Mr. Sun Yunfei is a Non-Executive Director of the Company. He is a senior economist (researcher level) with a
+master's degree in Business Administration from the School of Management of Fudan University. He currently serves
+as the Deputy General Manager and Chief Accountant of China COSCO Shipping Corporation Limited. He served
+as the Deputy Chief of the Economic Planning and Statistics Division, the Director of the Planning Department and
+the Deputy Chief Accountant of Hudong Shipyard (), Chief Accountant of Hudong Shipbuilding (Group)
+Co., Ltd. (10)ĦRA), Director and Chief Financial Officer of Hudong-Zhonghua Shipbuilding (Group)
+Co., Ltd., Deputy Chief Accountant and Chief Accountant at China State Shipbuilding Corporation, Deputy General
+Manager of China State Shipbuilding Corporation, etc.
+Mr. Wang Liang is an Executive Director, President and Chief Executive Officer of the Company. Mr. Wang
+obtained a master's degree in Economics from Renmin University of China. He is a senior economist. He joined
+the Company in June 1995 and successively served as the Assistant General Manager, Deputy General Manager
+and General Manager of Beijing Branch of the Bank. He successively served as the Executive Assistant President,
+Executive Vice President and First Executive Vice President of the Company since June 2012, and started to preside
+over overall business of the Company since 18 April 2022. He has been the President of the Bank since 15 June
+2022. He concurrently serves as the Company's authorised representative in charge of matters in relation to listing
+in Hong Kong, the Chairman of CMB International Capital Holdings Corporation Limited, the Chairman of CMB
+International Capital Corporation Limited, Chairman of CMB Wing Lung Bank, Vice Chairman of Merchants Union
+Consumer Finance Company Limited, Director of China Merchants Financial Holdings Co., Ltd., Vice President of
+the Payment & Clearing Association of China, a Director of the Fourth Session of the Professional Committee for
+Intermediate Business of China Banking Association and Executive Director of the Sixth Session of the Financial
+Accounting Society of China, and a Deputy of the 14th Guangdong Provincial People's Congress. He had served as
+the Chief Financial Officer, Secretary of the Board of Directors, and Company Secretary of the Company.
+Mr. Zhou Song is a Non-Executive Director of the Company. Mr. Zhou obtained a master's degree of World
+Economics from Wuhan University. Mr. Zhou is the Chief Accountant of China National Petroleum Corporation, and
+concurrently a Director of China Merchants Financial Holdings Co., Ltd., the Chairman of Shenzhen China Merchants
+Ping An Asset Management Co., Ltd. (À¥ÌÂÌ϶), the Chairman of China Merchants
+Group Finance Co., Ltd. (!), the Chairman of China Merchants Investment Development Co.,
+Ltd. (¾§Â¬), the Chairman of the Board of Supervisors of China Merchants Shekou Industrial
+Zone Holdings Co., Ltd. (a company listed on Shenzhen Stock Exchange) and the Chairman of China Merchants
+Innovative Investment Management Co., Ltd.. He was the Deputy General Manager of the Planning and Finance
+Department of the Head Office of China Merchants Bank, the Deputy General Manager of Wuhan Branch, the
+Deputy General Manager (in charge of work) and General Manager of the Planning and Finance Department of
+the Head Office, the Employee Supervisor of China Merchants Bank, the Business Director and General Manager of
+the Assets and Liabilities Management Department of the Head Office, the President of the General Office of the
+Financial Institution Business and concurrently the General Manager of the Assets Management Department of the
+Head Office and the Business Director of the Head Office, the President of the General Office of Investment Banking
+and Financial Market Business and concurrently the General Manager of the Assets Management Department of the
+Head Office, the Business Director of the Head Office, and the Chief Accountant of China Merchants Group Ltd..
+Mr. Zhang Jian is a Non-Executive Director of the Company. Mr. Zhang obtained a bachelor's degree in Economics
+and Management from the Department of Economics of Nanjing University and a master's degree in Econometrics
+from the Business School of Nanjing University, and is a senior economist. He is the Chief Digital Officer of China
+Merchants Group Ltd., the Director of the Digital Centre, the Deputy General Manager of China Merchants Financial
+Holdings Co., Ltd. and a Director of China Merchants Finance Holdings Company Limited. He concurrently serves
+as the Non-Executive Director of China Merchants Securities Co., Ltd. (a company listed on the Shanghai Stock
+Mr. Li Menggang is an Independent Non-Executive Director of the Company. Mr. Li obtained a doctoral degree
+in Economics and a post-doctoral degree in both Transportation and Communication Engineering and Theoretical
+Economics from Beijing Jiaotong University. He has been serving as a professor and doctoral supervisor at Beijing
+Jiaotong University, the Dean of the National Academy of Economic Security (NAES) of Beijing Jiaotong University, the
+Director of the China Centre for Industrial Security Research, the Director of Beijing Laboratory of National Economic
+Security Pre-Warning Project and the Chief Expert of Major Bidding Projects of the National Social Science Fund. He
+concurrently serves as the Vice President of Guanghua Engineering Science and Technology Award Foundation (
+#INO). He served as an Independent Director of Sichuan Golden Summit (Group) Joint-stock Co.,
+Ltd. (a company listed on Shanghai Stock Exchange), an Independent Non-Executive Director of Yuxing InfoTech
+Investment Holdings Limited (a company listed on the Hong Kong Stock Exchange), the Chairman of the Professional
+Committee of the Logistics Informatisation and Industrial Security System of the Institute of Electrical and Electronics
+Engineers (IEEE), an Independent Director of Hunan Copote Science & Technology Co., Ltd. (a company listed on
+Shanghai Stock Exchange), an Independent Director of Daqin Railway Co., Ltd. (a company listed on Shanghai Stock
+Exchange), and an Independent Director of Huadian Power International Corporation Limited (a company listed
+on the Hong Kong Stock Exchange and Shanghai Stock Exchange), the Deputy Director of the Independent Board
+Committee of China Association for Public Companies, the Vice President and the Deputy Director of the Expert
+Committee of China Human Resource Development Association and the Director of the Human Capital Institute.
+Mr. Liu Qiao is an Independent Non-Executive Director of the Company. Mr. Liu obtained a bachelor's degree of
+science in Economics and Mathematics from Renmin University of China, a master's degree in Economics from the
+Institute of Finance of People's Bank of China and a Ph.D. in Economics from University of California, Los Angeles in
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+Exchange and Hong Kong Stock Exchange), the Chairman of China Merchants Financial Leasing Co., Ltd. (
+TRA) and the Vice Chairman of China Merchants Capital Investment Co., Ltd.. He served as a General
+Manager of Finance Department of China Merchants Group Ltd., a Deputy General Manager of China Merchants
+Finance Holdings Company Limited, a Deputy Director (Executive) of the Executive Committee of the China
+Merchants Financial Group/Platform, a Director of China Merchants Life Insurance Company Limited, and the Non-
+Executive Director and Chairman of the Board of Directors of China Merchants China Direct Investments Limited (a
+company listed on the Hong Kong Stock Exchange).
+Mr. Chen Dong is a Non-Executive Director of the Company. He is a senior accountant with a master's degree in
+Economics from Shanghai University of Finance and Economics. He currently serves as the General Manager of the
+Financial Management Division of China COSCO Shipping Corporation Limited. He concurrently serves as a Director
+of COSCO SHIPPING Specialized Carriers Co., Ltd. (a company listed on the Shanghai Stock Exchange), COSCO
+SHIPPING International (Hong Kong) Co., Ltd. (a company listed on the Hong Kong Stock Exchange) and COSCO
+SHIPPING Ports Limited (a company listed on the Hong Kong Stock Exchange). He served as Assistant Director and
+Deputy General Manager of the Finance and Accounting Department of China Shipping Development Co., Ltd.
+Tanker Company, Deputy Director of Risk Control Centre of Enterprise Management Department, Deputy Director
+of Risk Control Department of Accounting and Finance Department, Deputy Director of Finance Department, Senior
+Manager of Finance and Tax Management Office of Finance Department, Assistant General Manager and Deputy
+General Manager of Finance Department of China Shipping (Group) Company and Deputy General Manager of the
+Financial Management Division of China COSCO Shipping Corporation Limited, etc.
+Mr. Zhu Jiangtao is an Executive Director, Executive Vice President and Chief Risk Officer of the Company. Mr.
+Zhu holds a master's degree in Economics. He is a senior economist. He joined the Company in January 2003. He
+successively served as Assistant General Manager and Deputy General Manager of Guangzhou Branch, General
+Manager of Chongqing Branch, General Manager of Credit Risk Management Department of the Company, General
+Manager of Risk Management Department of the Company between December 2007 and July 2020. He served
+as Chief Risk Officer of the Company from July 2020. He has been Executive Vice President of the Company since
+September 2021.
+Mr. Wong See Hong is an Independent Non-Executive Director of the Company. Mr. Wong obtained a bachelor's
+degree in Business Administration from the National University of Singapore, a master's degree in Investment
+Management from Hong Kong University of Science and Technology, and a doctorate degree in Transformational
+Leadership (DTL) from Bethel Bible Seminary. He is an Independent Director of The Frasers Hospitality Assets
+Management Pte., Ltd. (¥¥ª§ÂÌζ), Frasers Property Limited (a company listed on the
+Singapore Stock Exchange) and EC World Asset Management Private Limited and a member of the Financial
+Management Commission of the Hong Kong Administration Society (U¾ÊUEQÂ). He previously
+served as the Deputy Chief Executive of BOCHK, the head, Managing Director and President for the Southeast
+Asia region, and the head of the Financial Market Department in Asia (»£ÂÂÌÌÌ) of ABN AMRO
+Bank, a Director of Bank of China Group Insurance Company Limited, the Chairman of the Board of BOC Group
+Trustee Company Limited, the Chairman of BOCI-Prudential MPF (+), the Chairman of BOCHK Asset
+Management Limited, a member of the Board of Directors of the Civil Servants Institute of Prime Minister's Office
+Singapore (新加坡總理辦公室公務員學院), and a member of the Client Consulting Commission (客戶諮詢委員會) of
+Thomson Reuters.
+Directors
+103
+China Merchants Bank
+Mr. Yang Sheng is an Employee Supervisor. Mr. Yang has obtained a master's degree in Economics from Renmin
+University of China and is a senior economist. He is currently the Director of the General Office of Head Office of
+the Company. He joined the Company in July 1998 and successively served as the Assistant General Manager, the
+Deputy General Manager and the General Manager of the Human Resources Department of the Head Office of the
+Company from September 2016 to November 2022.
+Senior management
+Mr. Wang Liang, please refer to Mr. Wang Liang's biography under the heading of "Directors" above.
+Mr. Wang Yungui is an Executive Vice President of the Company. Mr. Wang obtained a master's degree from the
+Party School of the Central Committee of the Communist Party of China and is a senior economist. He successively
+served as the General Manager of the Department of Education and the General Manager of the Human Resources
+Department of the Industrial and Commercial Bank of China from July 2008 to December 2016, and served as the
+Secretary of the Disciplinary Committee of China Development Bank from December 2016 to March 2019. He has
+served as an Executive Vice President of the Company since June 2019.
+Mr. Zhao Weipeng is the Secretary of the Party Discipline Commission of the Company. Mr. Zhao holds a
+master's degree in Management and is a senior accountant and a non-practicing member of Chinese Institute of
+Certified Public Accountants. He successively served as the Manager of Finance Department of China Merchants
+Shipping and Enterprises Company Limited, the Manager of Planning and Finance Department of Hong Kong
+Ming Wah Shipping Company Limited, the Chief Financial Officer, Deputy General Manager, Secretary of the Party
+Discipline Commission, and Deputy Secretary to the Party Committee of China Merchants Zhangzhou Development
+Zone Company Limited, Secretary of the Party Discipline Commission, Deputy Secretary to the Party Committee
+and Executive Deputy Director of the Management Committee of Zhangzhou China Merchants Economic and
+Technological Development Zone, Secretary to the Party Committee and General Manager of China Merchants
+Taipingwan Development & Investment Company Limited, Deputy General Manager (General Manager Level) of
+Finance Department (Property Rights Department) of China Merchants Group Ltd., Secretary to the Party committee
+and General Manager of China Merchants Group Finance Co., Ltd.. He has been the Secretary of the Party Discipline
+Commission of the Company since August 2023.
+Mr. Zhu Jiangtao, please refer to Mr. Zhu Jiangtao's biography under the heading of "Directors" above.
+Mr. Zhong Desheng is an Executive Vice President of the Company. He obtained a master's degree in the History
+of Foreign Economic Thoughts from Huazhong University of Science and Technology and is a senior economist.
+He joined the Company in July 1993 and successively served as an Assistant General Manager and Deputy General
+Manager of Wuhan Branch, the General Manager of International Business Department of the Head Office, the
+General Manager of Trade Finance Department of the Head Office and the General Manager of Offshore Finance
+Centre of the Head Office, the General Manager of Guangzhou Branch, the President of the General Office of
+Corporate Finance of the Head Office, the General Manager of the Strategic Customers Department and the
+Executive Assistant President of the Company. He has served as an Executive Vice President of the Company since
+October 2023, and he concurrently serves as the Chairman of CMB Financial Leasing.
+Mr. Wang Xiaoqing is an Executive Vice President of the Company. He obtained a doctoral degree in Political
+Economics from Fudan University and is an economist. He worked at PICC Asset Management Company Limited
+from March 2005 to March 2020, and successively served as the Deputy General Manager of Risk Management
+Department, the Deputy General Manager and General Manager of Portfolio Management Department, Assistant
+President and Vice President. In March 2020, he joined the Company and successively served as the General
+Manager and the Chairman of CMFM and the Executive Assistant President of the Company. He has served as
+an Executive Vice President of the Company since July 2023, and concurrently serves as the General Manager of
+Shenzhen Branch, the Chairman of CMFM, CIGNA & CMB Life Insurance and CIGNA & CMAM.
+Ms. Wang Ying is an Executive Vice President of the Company. She obtained a master's degree in Political
+Economics from Nanjing University and is an economist. She joined the Company in January 1997, successively
+served as the Assistant General Manager and Deputy General Manager of Beijing Branch, General Manager of
+Tianjin Branch, General Manager of Shenzhen Branch and the Executive Assistant President of the Company, and
+has been serving as an Executive Vice President of the Company since November 2023.
+Mr. Peng Jiawen is an Executive Vice President, the Chief Financial Officer and the Secretary of the Board of
+Directors of the Company. He obtained a bachelor's degree in National Economic Planning from Zhongnan University
+of Economics and Law and is a senior economist. He joined the Company in September 2001, and successively
+served as an Assistant General Manager and Deputy General Manager of the Planning and Finance Department of
+the Head Office, Deputy General Manager and General Manager of the Overall Retail Management Department of
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+the Head Office, Deputy General Manager and Vice President of the General Office of Retail Finance of the Head
+Office and concurrently General Manager of Retail Credit Business Department of the Head Office, General Manager
+of Zhengzhou Branch, General Manager of Asset and Liabilities Management Department of the Head Office and the
+Executive Assistant President of the Company. He has served as an Executive Vice President of the Company since
+November 2023, and concurrently serves as the Chief Financial Officer and the Secretary of the Board of Directors of
+the Company.
+Mr. Lei Caihua is an Executive Assistant President of the Company. He obtained a bachelor's degree in Investment
+Economics from Huazhong University of Science and Technology, a master's degree in National Economics from
+Zhongnan University of Economics and Law, and is an economist. He joined the Company in July 1995, and
+successively served as the Deputy General Manager of Corporate Banking Department and concurrently the
+General Manager of SME Finance Department of the Head Office, General Manager of Corporate Finance Product
+Department of the Head Office, General Manager of Strategic Customers Department of the Head Office, General
+Manager of Small Enterprise Finance Department of the Head Office, the General Manager of Chongqing Branch,
+Head of Topology Bank Preparatory Team, and the General Manager of Shanghai Branch. Since November 2023, he
+has served as an Executive Assistant President of the Company, and concurrently serves as the General Manager of
+Shanghai Branch.
+Mr. Xu Mingjie is an Executive Assistant President of the Company. He obtained a bachelor's degree in Engineering
+from Xi'an Jiaotong University, a bachelor's degree in Economics from Shanghai University of International Business
+and Economics, and is a chartered certified accountant. He joined the Company in September 1995, and successively
+served as the Assistant General Manager of Corporate Finance Product Department of the Head Office, Assistant
+General Manager of Investment Banking Department of the Head Office, Deputy General Manager of Investment
+Banking Department of the Head Office, General Manager of Credit Approval Department of the Head Office and
+General Manager of Risk Management Department of the Head Office. Since November 2023, he has served as an
+Executive Assistant President of the Company, and concurrently serves as the General Manager of Beijing Branch.
+Mr. Jiang Chaoyang is the Chief Information Officer (CIO) of the Company. He obtained a master's degree in
+Management Sciences from Shanghai Jiao Tong University and is a senior economist. He joined the Company in
+November 2013, successively served as the General Manager of Strategic Customers Department of the Head Office,
+General Manager of Retail Network Banking Department of the Head Office, Deputy General Manager and General
+Manager of Wealth Management Department of the Head Office, and has been serving as the Chief Information
+Officer (CIO) of the Company since November 2019.
+Joint company secretaries
+of the Audit Department of the Company, and concurrently serves as the Supervisor of CMB Wealth Management
+and a Member of the Professional Committee under the Board of Supervisors of China Association for Public
+Companies. He joined the Company in August 2003 and successively served as the Assistant General Manager and
+Deputy General Manager of the Audit Department of the Company. From November 2021 to March 2023, he served
+as the General Manager of the Shenzhen division of the Audit Department of the Company.
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+the United States and is a distinguished professor () of Changjiang Scholars Program. He has been serving
+as the Dean at the Guanghua School of Management of Peking University, professor of Finance and Economics
+and doctoral supervisor. He is also a member of Think Tank Committee of All-China Federation of Industry
+and Commerce (±), the Economic Research Centre of Chinese Kuomintang Revolutionary
+Committee, the expert panel of the Shenzhen Stock Exchange and the Listing Committee of ChiNext of Shenzhen
+Stock Exchange; an advisor of the post-doctoral stations of the CSRC, the Shenzhen Stock Exchange, the China
+Financial Futures Exchange and China Minsheng Banking Corp., Ltd. etc., the Vice Chairman of the China Enterprise
+Reform and Development Society (+¥ª¾¶¤ª), and an Independent Director of Beijing Capital
+Group Company Limited (a company listed on Shanghai Stock Exchange). Mr. Liu served as an assistant professor
+at School of Economics and Finance of the University of Hong Kong, a consultant of the Asia-Pacific Corporate
+Finance & Strategy Practice of McKinsey & Company, an assistant professor and associate professor (with tenure) at
+the Faculty of Business and Economics of the University of Hong Kong, an Independent Non-Executive Director of
+Zensun Enterprises Limited (formerly known as the ZH International Holdings Limited, a company listed on the Hong
+Kong Stock Exchange), and Independent Non-Executive Director of CSC Financial Co., Ltd, a company listed on the
+Hong Kong Stock Exchange and Shanghai Stock Exchange.
+Mr. Tian Hongqi is an Independent Non-Executive Director of the Company. Mr. Tian obtained a bachelor's degree
+in Finance and Accounting from the Faculty of Water Transportation Management of Shanghai Maritime University,
+and is a senior accountant. He concurrently serves as the Independent Director of Nanjing Tanker Corporation (
+BªÀ£Á, a company listed on Shanghai Stock Exchange). He previously served as the Chief Financial
+Officer and Chief Information Officer of COSCO SHIPPING Bulk Co., Ltd., the General Manager of the Finance
+Department of COSCO Container Lines Co., Ltd., the Director and the General Manager of the Financial Department
+of COSCO Japan, the Chief Financial Officer of COSCO Holdings (Singapore) Pte. Ltd. (+)),
+the General Manager of the Finance Department of the COSCO Container Transportation Operation Headquarter (+
+****), and the Deputy Director of the Finance Department of COSCO.
+Mr. Li Chaoxian is an Independent Non-Executive Director of the Company. Mr. Li obtained a doctoral degree
+in Industrial Economics and a master's degree in Statistics from Renmin University of China, respectively. He is
+currently a professor and doctoral supervisor of Beijing Technology and Business University, and concurrently serves
+as an Independent Director of China World Trade Centre Company Limited (a company listed on Shanghai Stock
+Exchange). He served as the Deputy Director and Director of the Finance Department of Beijing Business School,
+Deputy Dean and Dean of the School of Economics of Beijing Technology and Business University, Chief of the
+Academic Affairs Office of Beijing Technology and Business University, Vice President of Beijing Technology and
+Business University, and an Independent Director of Beijing HuaDaJian Ye Engineering Management Co., Ltd. (
+#U¤IETER) (a company listed on the National Equities Exchange and Quotations).
+Mr. Shi Yongdong is an Independent Non-Executive Director of the Company. Mr. Shi obtained a doctoral degree
+in Economics from Dongbei University of Finance and Economics and a master's degree in Applied Mathematics from
+Jilin University. He is a leading talent of the national high-level special support plan, one of the Cultural Masters
+and the Four First-Batch Talents, and the chief expert of the major projects under the National Social Science Fund
+of China. He is currently the Dean, Professor and Doctoral Supervisor of the School of Finance and Technology of
+Dongbei University of Finance and Economics, and concurrently serves as a council member of China Finance Society,
+a standing council member of the Chinese Finance Annual Meeting (+) and the Chinese Financial
+Projects Annual Meeting (+), and a standing council member of the International Symposium on
+Financial Systems Engineering and Risk Management (HAKTIK). He served as the Deputy
+Dean of the School of Finance, the Director of the Applied Finance Research Centre, Chief of the scientific research
+department and the Dean of the School of Applied Finance and Behavioural Sciences in Dongbei University of
+Finance and Economics, an Independent Director of Dalian Huarui Heavy Industry Group Co., Ltd. (a company listed
+on Shenzhen Stock Exchange), and an Independent Director of Bank of Anshan Co., Ltd..
+Supervisors
+104
+Mr. Luo Sheng is a Shareholder Supervisor of the Company. He graduated from the Business School of Nankai
+University majoring in corporate governance with a doctoral degree. Mr. Luo is currently the Deputy General
+Manager of Dajia Insurance Group Co., Ltd. and a Director of both Dajia Life Insurance Co., Ltd. and Gemdale
+Corporation (a company listed on Shanghai Stock Exchange). He successively served as the principal staff member
+of the Regulation Division under the Policy and Regulation Department, the principal staff member of the Market
+Analysis Division under the Development and Reform Department, the Deputy Director and Director of the Corporate
+Governance Division under the Development and Reform Department as well as the deputy director of the
+Regulation Department of the China Insurance Regulatory Commission. He has also served as an Executive Director,
+the Executive Vice President, Secretary to the Board of Directors, and General Manager of Shanghai Branch of China
+Insurance Information Technology Management Co., Ltd., and the Deputy Director of the Development and Reform
+Department of China Insurance Regulatory Commission, etc. He served as the Non-Executive Director of the Eleventh
+Session of the Board of the Company from June 2019 to June 2022.
+Chapter V Corporate Governance
+Mr. Wu Heng is a Shareholder Supervisor of the Company and a postgraduate from the Department of Accounting
+of Shanghai University of Finance and Economics. Mr. Wu obtained a master's degree in Management and is a
+senior accountant. He is the General Manager of Finance Affairs Department of SAIC Motor Corporation Limited
+(a company listed on Shanghai Stock Exchange), and concurrently serves as the General Manager of SAIC Motor
+Financial Holding Management Co., Ltd., a Non-executive Director of Bank of Chongqing Co., Ltd. (a company listed
+on the Hong Kong Stock Exchange and Shanghai Stock Exchange) and a Director of Wuhan Kotei Informatics Co.,
+Ltd. (a company listed on Shenzhen Stock Exchange). He consecutively served as a Deputy Manager and Manager of
+Planning and Finance Department as well as a Manager of Fixed Income Department of Shanghai Automotive Group
+Finance Company, Ltd. from March 2000 to March 2005. He consecutively served as a Section Chief, Assistant to
+Executive Controller and the Manager of Accounting Section of Finance Department of SAIC Motor Corporation
+Limited from March 2005 to April 2009, the Chief Financial Officer of Huayu Automotive Systems Co., Ltd. (a
+company listed on Shanghai Stock Exchange) from April 2009 to May 2015, and concurrently serving as the Director
+and General Manager of Huayu Automotive Systems (Shanghai) Co., Ltd. ((LO)ORA) during the
+period from May 2014 to May 2015, and the Deputy General Manager of the Finance Affairs Department of SAIC
+Motor Corporation Limited from May 2015 to August 2019.
+Mr. Xu Zhengjun is an External Supervisor of the Company. Mr. Xu obtained a master's degree in Maritime
+Transportation Management from Shanghai Maritime University and is a senior political engineer. He is currently
+an Independent Director of China Merchants Life Insurance Company Limited, and concurrently the Director of
+Shanghai Dongsheng Public Welfare Foundation. He previously served as the Section Chief and the Department
+Head of Shanghai Ocean Shipping Co., Ltd., the General Manager of the crew company and land property company
+of COSCO Container Lines Co., Ltd., the Assistant to General Manager of COSCO Container Lines Co., Ltd., the
+General Manager of Shanghai Ocean Shipping Co., Ltd., the Secretary of the Disciplinary Committee of COSCO
+Container Lines Co., Ltd., the General Manager of COSCO (HK) Industry & Trade Holdings Ltd., the Vice Chairman
+of Shenzhen Guangju Energy Co., Ltd. (a company listed on Shenzhen Stock Exchange), the Vice President and
+General Counsel of COSCO (Hong Kong) Group Limited and the Director of True Smart International Limited, the
+General Manager and Executive Director of COSCO International Holdings Limited, the Chairman of the Corporate
+Governance Committee of COSCO International and the Independent Director of Sinotrans Shipping Limited.
+Mr. Cai Hongping is an External Supervisor of the Company. He obtained a bachelor's degree in Journalism
+from Fudan University. He is the Chairman of AGIC Capital and concurrently serves as an Independent Director of
+China Eastern Airlines Corporation Ltd. (a company listed on Shanghai Stock Exchange and the Hong Kong Stock
+Exchange), Shanghai Pudong Development Bank Co., Ltd. (a company listed on Shanghai Stock Exchange), BYD
+Company Limited (a company listed on Shenzhen Stock Exchange and the Hong Kong Stock Exchange) and China
+Southern Airlines Company Limited (a company listed on Shanghai Stock Exchange and the Hong Kong Stock
+Exchange), and was an Independent Director of China Oceanwide Holdings Limited (a company listed on the Hong
+Kong Stock Exchange) and COSCO SHIPPING Development Co., Ltd. (a company listed on Shanghai Stock Exchange
+and the Hong Kong Stock Exchange). From 1996 to 1997, Mr. Cai Hongping served as the Senior Vice President and
+Managing Director of Peregrine Investments Holdings Limited. He served as the Chairman of China of BNP Paribas
+Capital (Asia Pacific) Limited from 1998 to 2005 and served as the Chairman of UBS AG in Asia from 2006 to 2010,
+and served as the Executive Chairman of Investment Banking Asia Pacific of Deutsche Bank from 2010 to 2015.
+Mr. Zhang Xiang is an External Supervisor of the Company. He obtained a doctoral degree in Mechanical
+Engineering from the University of California, Berkeley and a master's degree from the Department of Physics of
+Nanjing University. He is an elected member of the US National Academy of Engineering, a foreign member of the
+Chinese Academy of Sciences, an elected member of the Academia Sinica and the President of the University of
+Hong Kong. Mr. Zhang was the inaugural Ernest S. Kuh Endowed Chair Professor at the University of California,
+Berkeley, and the Director of the US National Science Foundation Nano-scale Science and Engineering Centre. He
+was an assistant professor at Pennsylvania State University in 1996, an associate professor and professor at the
+University of California, Los Angeles from 1999 to 2004, an associate professor and professor at the Mechanical
+Engineering Department and the Institute of Applied Science and Technology of the University of California, Berkeley
+from 2004 to 2018 and a director of Materials Science Division at the Lawrence Berkeley National Laboratory from
+2014 to 2016.
+Ms. Cai Jin is an Employee Supervisor of the Company. Ms. Cai obtained a bachelor's degree in Finance from Hunan
+University of Finance and Economics. She is an economist. She currently serves as the Inspector of the Head Office of
+the Company. In August 1992, she started her career in Shashi Branch of Industrial and Commercial Bank of China
+in Hubei Province. She joined the Company in May 1995. She successively served as the Assistant General Manager
+of the Human Resources Department, the Deputy General Manager of the Banking Department of the Head Office,
+the Deputy General Manager of the Asset Custody Department of the Head Office and the Director of the Labour
+Union of the Head Office of the Company from April 2010 to January 2024.
+Mr. Cao Jian is an Employee Supervisor of the Company. Mr. Cao obtained a master's degree in International
+Finance from the Graduate School of the Financial Research Institute of the People's Bank of China. He is a non-
+practicing member of Chinese Institute of Certified Public Accountants. He currently serves as the General Manager
+105
+106
+China Merchants Bank
+Annual Report 2023 (H share)
+5.4.4
+4.
+Chapter V Corporate Governance
+Chief Digital Officer and Director of
+Digital Centre
+Chief Accountant
+Deputy General Manager and Chief
+Accountant
+Major title
+Chairman
+Limited
+Dajia Insurance Group Co.,
+Ltd.
+SAIC Motor Corporation
+Wu Heng
+Luo Sheng
+Chen Dong
+China Merchants Financial
+Holdings Co., Ltd.
+China COSCO Shipping
+Corporation Limited
+Deputy General Manager
+China Merchants Group Ltd.
+Name of company
+Zhang Jian
+Zhou Song
+Name
+Miao Jianmin
+Sun Yunfei
+5.4.3 Current positions held by Directors and Supervisors in the shareholders'
+companies
+Ms. Cai Jin serves as the Inspector of the Head Office of the Company and ceased to serve as the Director of
+the Labour Union of the Head Office of the Company.
+Mr. Li Menggang serves as the Director of the China Centre for Industrial Security Research, and ceased to
+concurrently serve as the Vice President and the Deputy Director of the Expert Committee of China Human
+Resource Development Association and the Director of the Human Capital Institute.
+Mr. Zhang Jian concurrently serves as the Non-Executive Director of China Merchants Securities Co., Ltd. (a
+company listed on the Shanghai Stock Exchange and Hong Kong Stock Exchange) and the Vice Chairman of
+China Merchants Capital Investment Co., Ltd..
+Mr. Zhou Song serves as the Chief Accountant of China National Petroleum Corporation, and ceased to serve
+as the Chief Accountant of China Merchants Group Ltd..
+Mr. Wang Liang concurrently serves as the Chairman of CMB International Capital Holdings Corporation
+Limited, and ceased to concurrently serve as the Chief Financial Officer and the Secretary of the Board of
+Directors of the Company.
+5.
+China Merchants Group Ltd.
+China COSCO Shipping
+Corporation Limited
+China Merchants Group Ltd.
+Annual Report 2023 (H share)
+General Manager of Financial
+Management Headquarter
+Deputy General Manager
+Term of office
+3.
+In November 2023, the qualifications of Mr. Lei Caihua and Mr. Xu Mingjie as the Executive Assistant Presidents
+were approved by the National Financial Regulatory Administration (NFRA), respectively.
+For details of the new appointments and resignations on Directors, Supervisors and senior management, please refer
+to the relevant announcements published by the Company on the websites of Shanghai Stock Exchange, Hong Kong
+Exchanges and Clearing Limited and the Company.
+China Merchants Bank
+Annual Report 2023 (H share)
+Mr. Peng Jiawen, please refer to Mr. Peng Jiawen's biography under the heading of "Senior management" above.
+Ms. Ho Wing Tsz Wendy is a joint company secretary of the Company. Ms. Ho obtained an MBA degree from
+the Hong Kong Polytechnic University. She is a Chartered Secretary, a Chartered Governance Professional and a
+Fellow of both The Hong Kong Chartered Governance Institute and The Chartered Governance Institute in the
+United Kingdom and is a council member, the Chairlady of the Professional Development Committee of The Hong
+Kong Chartered Governance Institute and is a holder of the Practitioner's Endorsement issued by The Hong Kong
+Chartered Governance Institute. Ms. Ho is an Executive Director of Corporate Services of Tricor Services Limited,
+and her professional practice area covers business consulting, corporate services for private, offshore and listed
+companies. Ms. Ho has over 25 years of experience in the corporate secretarial and compliance service field and
+is currently the company secretary or joint company secretary of a few listed companies on the Hong Kong Stock
+Exchange.
+Chapter V Corporate Governance
+Changes in information of Directors and Supervisors
+5.4.2
+1.
+2.
+China Merchants Bank
+General Manager of Finance Affairs
+Department
+102
+now
+From August 2019 up to
+to now
+From September 2020 up
+From September 2016 up
+to now
+From September 2022 up
+to now
+now
+From January 2019 up to
+From October 2018 to
+December 2023
+now
+From July 2020 up to now
+From August 2018 up to
+101
+5.4.5
+Executive Officer
+The Company offers remuneration to Independent Directors and External Supervisors according to the "Resolution
+in Respect of Adjustment to Remuneration of Independent Directors" and the "Resolution in Respect of Adjustment
+to Remuneration of External Supervisors" considered and passed at the 2016 First Extraordinary General Meeting,
+in which the relevant Directors have abstained from the discussion of their remuneration; offers remuneration to
+Executive Directors, Chairman of Board of Supervisors and other senior management according to the "Policies
+on Remunerations of Senior Management of China Merchants Bank Co., Ltd.". The remuneration consists of
+basic remuneration and performance-based remuneration, which shall be provided by way of deferred payment in
+accordance with regulatory requirements. At the same time, the Company has established a mechanism related to
+performance-based remuneration deduction. The Company offers remuneration to Employee Supervisors (excluding
+Chairman of Board of Supervisors) in accordance with the policies on remunerations of employees of the Company.
+All of the Directors and Supervisors nominated by shareholders of the Company do not receive any remuneration
+from the Company. For details of the remuneration of the Directors and Supervisors and the five highest paid
+individuals of the Company, please refer to Notes 11 and 12 to the financial statements.
+In June 2023, Mr. Yang Sheng was elected as the Employee Supervisor of the Company by the Employee
+Representative Meeting of the Company. Mr. Xiong Liangjun ceased to be the Chairman of the Board of Supervisors
+and Employee Supervisor of the Company due to his age.
+In March 2023, Mr. Cao Jian was elected as the Employee Supervisor of the Company by the Employee
+Representative Meeting of the Company. Mr. Wang Wanqing ceased to be the Employee Supervisor of the Company
+due to his age.
+Supervisors
+In January 2024, Mr. Hu Jianhua and Mr. Hong Xiaoyuan ceased to be Non-Executive Directors of the Company due
+to their age.
+In June 2023, according to the resolutions passed at the 2022 Annual General Meeting of the Company, Mr. Zhu
+Jiangtao was elected as the Executive Director of the Company, whose qualification as the Director was approved
+by the National Financial Regulatory Administration (NFRA) in August 2023, and Mr. Huang Jian was elected as
+the Non-Executive Director of the Company, and his qualification as the Director is subject to the approval of the
+National Financial Regulatory Administration (NFRA).
+In March 2023, Ms. Su Min ceased to be a Non-Executive Director of the Company due to reaching the retirement
+age.
+Directors
+management
+5.4.1 New appointment and resignation of Directors, Supervisors and senior
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+China Merchants Bank
+100
+Employee Supervisor
+0.00063
+0.00077
+158,400
+Beneficial owner
+Long position
+A Share
+Employee Supervisor
+Cao Jian
+Yang Sheng
+0.00002
+In January 2024, Mr. Peng Bihong ceased to be the Shareholder Supervisor of the Company due to change of work
+arrangement.
+Senior management
+In January 2023, Mr. Zhong Desheng and Mr. Wang Xiaoqing were appointed as Executive Vice Presidents of
+the Company at the 11th meeting of the Twelfth Session of the Board of Directors of the Company, and their
+qualifications as the Executive Vice Presidents were approved by the National Financial Regulatory Administration
+(NFRA) in October and July 2023, respectively.
+In February 2023, Mr. Wang Jianzhong and Mr. Shi Shunhua ceased to be the Executive Vice Presidents of the
+Company due to reaching the retirement age.
+5.5 Board of Directors
+Chapter V Corporate Governance
+China Merchants Bank
+Annual Report 2023 (H share)
+0.00057
+0.00069
+143,300
+Interest of spouse
+0.00078
+0.00096
+197,700
+Beneficial owner
+0.00010
+Long position
+Long position
+The Board of Directors is an independent policy-making body of the Company, responsible for executing resolutions
+passed by the Shareholders' General Meetings; formulating the Company's major principles and policies, including
+development strategy, risk preference, internal control and internal auditing systems, and remuneration regulations;
+deciding on the Company's operating plans, investment and financing proposals; preparing annual financial budgets,
+final accounts and profit appropriation plans; and appointing and assessing members of senior management. The
+Company adopts a system in which the President assumes full responsibility under the leadership of the Board of
+Directors. The senior management team has discretionary powers in terms of operation and makes daily decisions
+on operation management within the scope of authorisation by the Board of Directors, and the Board of Directors
+would not intervene in any specific matters in the Company's daily operation and management.
+The Board of Directors of the Company facilitates scientific and reasonable decision-making through the
+establishment of a diversified directorship structure, and continues to improve the decision-making and operational
+efficiency through promoting the effective operation of special committees. The Board of Directors focuses on key
+issues, directions and strategies, and continues to strengthen the corporate philosophy of balanced, healthy and
+sustainable development. The Board of Directors ensures the Company to achieve dynamically balanced development
+in "Quality, Profitability and Scale" through effective management of its strategy, risks, capital, remuneration,
+internal control, related party transactions and protection of consumer rights, etc., thus providing a solid basis for
+the Company to enhance its operation and management capabilities.
+As at the end of the reporting period, the Board of Directors of the Company has fifteen members, including seven
+Non-Executive Directors, two Executive Directors, and six Independent Non-Executive Directors. All the seven Non-
+Executive Directors are seasoned management personnel such as the Chairman of the Board of Directors, General
+Manager, Deputy General Manager or Chief Financial Officer of large state-owned enterprises. They have extensive
+experience in corporate management, finance and accounting fields. The two Executive Directors have been engaged
+in financial management for a long time with extensive professional experience. Among the six Independent Non-
+Executive Directors, there are renowned experts in accounting and finance, university professors and financial experts
+with international vision, and they all have in-depth knowledge about the development of the banking industry at
+home and abroad. One Independent Non-Executive Director from Hong Kong is proficient in International Financial
+Reporting Standards and the requirements of Hong Kong capital market.
+The Company attaches great importance to maintaining the diversity characteristic of the members of the Board of
+Directors, and completed the revision of the Articles of Association of the Company during the year to incorporate
+the diversity policy into the Articles of Association of the Company. Among them, the new responsibilities of the
+Nomination Committee under the Board of Directors are to "promote the diversity of the members of the Board of
+Directors, including but not limited to gender, age, culture, educational background and professional experience,
+and regularly review the diversity implementation". The diversified director structure of the Company has brought
+broad vision and high-level professional experience to the Board of Directors, and also maintained the independent
+elements within the Board of Directors to ensure that the Board of Directors of the Company effectively make
+independent judgements and scientific decisions when studying and deliberating major issues.
+In March 2023, the Board of Directors of the Company received a letter of resignation from Ms. Su Min, the former
+Non-Executive Director of the Company, and the Company does not have any other female Directors for the time
+being following the resignation of Ms. Su Min. Pursuant to the Rule 13.92 of the Hong Kong Listing Rules, the Hong
+Kong Stock Exchange does not consider diversity is achieved for a single gender board. The Board of Directors of
+the Company attached high importance to promote the diversity of the Board members, including gender diversity,
+actively identified potential female Director candidates, and considered and approved the Resolution on Nomination
+of Ms. Li Jian as an Independent Director in August 2023, and considered and approved the Resolution on
+Nomination of Ms. Shi Dai as a Non-Executive Director and the Resolution on Nomination of Ms. Liu Hui as a Non-
+Executive Director in March 2024. The above Director candidates are subject to election at Shareholders' General
+Meeting of the Company and the approval of their qualifications for serving as Directors by the National Financial
+Regulatory Administration (NFRA) before their terms of office officially become effective. The Company intends to
+complete the election of female Director candidates at the Shareholders' General Meeting in the first half of 2024,
+and the Board of Directors is expected to have three female Directors upon the approval of the qualifications of the
+relevant candidates for serving as Directors by the National Financial Regulatory Administration (NFRA). The Board of
+Directors of the Company acknowledges that a diversified Board structure will bring wide-ranging ideas and insights
+to the Board of Directors and its special committees, contribute to improving the quality of decision-making by the
+Board of Directors and its special committees as well as the corporate governance level, while providing a strong
+guarantee for the high-quality development of the Company. The Company will continue to promote the diversified
+composition of the Board of Directors.
+109
+In July 2023, Mr. Xiong Kai ceased to be the Secretary of the Party Discipline Committee of the Company due to
+change of work arrangement.
+In July 2023, Mr. Li Delin ceased to be the Executive Vice President of the Company due to change of work
+arrangement.
+In April 2023, Mr. Peng Jiawen was appointed as the Secretary of the Board of Directors of the Company at the 17th
+meeting of the Twelfth Session of the Board of Directors of the Company. Mr. Wang Liang ceased to concurrently
+serve as the Secretary of the Board of the Company due to the change in assignment in the Bank. In June 2023, the
+qualification of Mr. Peng Jiawen as the Secretary of the Board of Directors was approved by the National Financial
+Regulatory Administration (NFRA).
+In February 2023, the qualifications of Ms. Wang Ying and Mr. Peng Jiawen as the Executive Assistant Presidents
+were approved by the former CBIRC.
+In February 2023, Mr. Peng Jiawen was appointed as the Chief Financial Officer of the Company at the 12th
+meeting of the Twelfth Session of the Board of Directors of the Company. Mr. Wang Liang ceased to concurrently
+serve as the Chief Financial Officer of the Company due to the change in assignment in the Bank.
+A Share
+A Share
+Remuneration policy and evaluation and incentive system for Directors,
+Supervisors and senior management
+4,550
+0.00065
+the relevant
+class of shares
+in issue (%)
+(shares)
+300,000
+Capacity
+Beneficial owner
+No. of
+Shares
+Long/short
+position
+Long position
+A Share
+Executive Director,
+Class of
+shares
+Position
+Name
+Wang Liang
+of
+Percentage
+As at 31 December 2023, the interests and short positions of the Directors, Supervisors and Chief Executives of
+the Company in the shares, underlying shares and debentures of the Company and its associated corporations
+(as defined in the SFO), which were required to be notified to the Company and Hong Kong Stock Exchange
+pursuant to Divisions 7 and 8 of Part XV of the SFO, including the interests and short positions which the Directors,
+Supervisors and Chief Executives of the Company were taken or deemed to have under such provisions of the SFO,
+or which were required to be and were recorded in the register kept by the Company pursuant to Section 352 of
+the SFO or as otherwise required to be notified to the Company and Hong Kong Stock Exchange pursuant to the
+Model Code set out in Appendix C3 to the Hong Kong Listing Rules, were as follows:
+5.4.7 Interests and short positions of Directors, Supervisors and Chief Executives
+under Hong Kong laws and regulations
+The Company has also set guidelines on the trading of the Company's securities by Directors, Supervisors and
+relevant employees, and the contents of the guidelines are no less exacting than the Model Code.
+The Company has adopted the Model Code set out in Appendix C3 to the Hong Kong Listing Rules as the code
+of conduct for Directors and Supervisors of the Company in respect of their dealings in the Company's securities.
+According to the enquiry, to the knowledge of the Company, all Directors and all Supervisors of the Company have
+been in compliance with the Model Code and the guidelines set by the Company during the reporting period.
+5.4.6 Securities transactions of Directors, Supervisors and relevant employees
+The Board of Directors of the Company evaluates the performance of the senior management according to the
+"Policies on Remunerations of Senior Management of China Merchants Bank Co., Ltd." and the "Assessment
+Standards of the H-Share Appreciation Rights Incentive Scheme for the Senior Management". According to the
+"Measures on Evaluation of Performance of Directors and Supervisors of China Merchants Bank", the Board of
+Supervisors evaluates the annual duty performance of the Directors and Supervisors through monitoring their
+duty performance in the ordinary course, conducting duty performance interviews, reviewing and evaluating their
+annual duty performance records (including but not limited to, attendance of meetings, participation of researches,
+provision of recommendations and the term of office in the Company), the "Duty Performance Self-Evaluation
+Questionnaire" completed by each Director and Supervisor, and then reports the same to the Shareholders'
+General Meeting and regulatory authorities. According to the "Measures on Evaluation of Duty Performance of
+Senior Management of China Merchants Bank", the Board of Supervisors evaluates the annual duty performance
+of senior management through monitoring their duty performance in the ordinary course and accessing to their
+duty performance information (including but not limited to, major speeches and major meeting minutes) and work
+reports, and then reports the same to the Shareholders' General Meeting and regulatory authorities.
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+China Merchants Bank
+108
+107
+Percentage
+of
+the total
+issued ordinary
+shares (%)
+0.00145
+0.00080
+165,000
+Beneficial owner
+Long position
+Long position
+H Share
+A Share
+Employee Supervisor
+Cai Jin
+Vice President, Chief
+Risk Officer
+0.00079
+0.00096
+Beneficial owner
+198,800
+0.00011
+23,282
+Interest of spouse
+Beneficial owner
+Long position
+Long position
+A Share
+A Share
+Executive Director,
+Zhu Jiangtao
+Non-Executive Director
+Zhou Song
+President and Chief
+0.00119
+0.00009
+5.5.1 Composition of the Board of Directors and diversity policy
+In August 2023, Mr. Zhao Weipeng was appointed as the Secretary of the Party Discipline Committee.
+In September 2023, Ms. Wang Ying and Mr. Peng Jiawen were appointed as the Executive Vice Presidents of the
+Company at the 24th meeting of the Twelfth Session of the Board of Directors of the Company. In November
+2023, their qualifications as the Executive Vice Presidents were approved by the National Financial Regulatory
+Administration (NFRA), respectively.
+The composition and duties of the six special committees under the Board of Directors of the Company and their
+work in 2023 are summarised as follows.
+4.
+Review the structure, size and composition of the Board of Directors (including their expertise, knowledge
+and experience) on regular basis and make recommendations on any proposed changes to the Board of
+Directors to implement the strategies of the Company according to the Company's business operation, asset
+scale and shareholding structure of the Company;
+Promote the diversity of the Board members, including but not limited to gender, age, culture, educational
+background and professional experience, and review the implementation of diversity on a regular basis;
+Study the standards and procedures for selection of Directors and senior management, and make
+recommendations to the Board of Directors;
+3.
+2.
+Conduct extensive searches for qualified candidates for Directors and senior management;
+1.
+As of the end of the reporting period, the majority of members of the Nomination Committee were Independent
+Non-Executive Directors, and the committee was chaired by an Independent Non-Executive Director. The members of
+the Nomination Committee include Wong See Hong (Chairman), Li Menggang and Liu Qiao (all being Independent
+Non-Executive Directors), Miao Jianmin (a Non-Executive Director) and Wang Liang (an Executive Director). The
+Nomination Committee is mainly responsible for formulating the procedures and standards for election of the
+Directors and senior management, conducting preliminary verification on the qualification for appointment of the
+Directors and senior management and making proposals to the Board of Directors and promoting the diversity of its
+Board members.
+Nomination Committee
+In 2023, the Strategy and Sustainable Development Committee under the Board of Directors of the Company
+convened six meetings, namely, the Strategy and Sustainable Development Committee under the Twelfth Session
+of the Board of Directors convened its 4th meeting (14 February), the 5th meeting (8 March), the 6th meeting (24
+March), the 7th meeting (18 August), the 8th meeting (16 October) and 9th meeting (29 December). The Strategy
+and Sustainable Development Committee focused on the Company's sustainable development report, inclusive
+financial development and annual work plan, human resources management and talent strategy implementation
+report, the use of Fintech innovation project funds, annual financial budget and final account report, annual profit
+appropriation plan, implementation of business plan, revised the "14th Five-Year" Strategic Plan (2021-2025),
+Financial Innovation Award Selection Program, and Administrative Measures for Fintech Innovation Project Fund,
+redefined the strategic vision of "building the best value creation bank with innovation-driven development, leading
+model and distinguished features", with the building of a value creation bank as the strategic goal, managing to
+maximise the comprehensive value of customers, employees, shareholders, partners and the society, aiming to
+become the best bank in customer service, the best bank in employee development, the best bank in shareholders'
+return, the most trusted bank by partners and the most socially responsible bank, while adjusting and optimising the
+value-oriented appraisal and evaluation system as well as incentive mechanism. In addition, in order to push forward
+the Company's major operation and management matters, the Strategy and Sustainable Development Committee
+under the Board of Directors also considered the resolutions on the issuance of capital bonds, the selection of site
+and land use for the construction of a new data centre, and the increase of the working capital of the Luxembourg
+Branch.
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+China Merchants Bank
+Any other task delegated by the Board of Directors.
+Main authorities and duties:
+5.
+Conduct preliminary examination on the candidates for Directors and senior management and make
+recommendations to the Board of Directors;
+6.
+3.
+Study and review the remuneration policies and proposals in respect of directors and senior management
+of the Bank, make recommendations to the Board of Directors and supervise the implementation of such
+proposals;
+Study the standards for assessment of Directors and senior management and make assessments and put
+forward proposals depending on the actual conditions of the Company;
+2.
+1.
+Main authorities and duties:
+As of the end of the reporting period, the majority of members of the Remuneration and Appraisal Committee
+were Independent Non-Executive Directors, and the committee was chaired by an Independent Non-Executive
+Director. The members of the Remuneration and Appraisal Committee currently include Li Menggang (Chairman),
+Liu Qiao, Li Chaoxian (all being Independent Non-Executive Directors), Hong Xiaoyuan and Chen Dong (both being
+Non-Executive Directors). The Remuneration and Appraisal Committee is mainly responsible for reviewing the
+remuneration management system and policies of the Company, formulating the remuneration package for the
+Directors and senior management, making proposals to the Board of Directors and supervising the implementation
+of such proposals.
+Review the ESG development strategy and basic management system, review the ESG-related work report,
+regularly evaluate the implementation of the ESG development strategy and promote the implementation of
+other ESG-related work required by the regulators;
+Remuneration and Appraisal Committee
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+China Merchants Bank
+116
+115
+In 2023, the Nomination Committee under the Board of Directors of the Company convened seven meetings,
+namely, the Nomination Committee under the Twelfth Session of the Board of Directors convened its 1st meeting
+(13 January), the 2nd meeting (14 February), the 3rd meeting (16 March), the 4th meeting (25 April), the 5th
+meeting (29 May), the 6th meeting (21 August) and the 7th meeting (18 September), at which the resolutions
+on the nomination of Mr. Huang Jian, Mr. Zhu Jiangtao and Ms. Li Jian as a Non-Executive Director, an Executive
+Director and an Independent Director, respectively, and the resolutions on the nomination of Mr. Zhong Desheng,
+Mr. Wang Xiaoqing, Ms. Wang Ying and Mr. Peng Jiawen as Executive Vice Presidents were successively considered
+and approved. In addition, the Nomination Committee under the Board of Directors considered and approved the
+resolutions on the appointment of the Chief Financial Officer and the Secretary of the Board of Directors, and
+regularly reviewed the members, structure and diversity implementation of the Board of Directors and its special
+committees, ensuring that the structure of the Board composition is in compliance with the relevant regulatory
+requirements.
+Any other task delegated by the Board of Directors.
+The specific process for the nomination and election of Directors of the Company is as follows: qualified nomination
+body recommends candidates for directorship to the Company, the Nomination Committee under the Board of
+Directors conducts a preliminary review of the qualifications and conditions of the candidates for directorship and
+proposes the qualified candidates to the Board of Directors for consideration, and upon consideration and approval
+by the Board of Directors, proposes the candidates for directorship to the Shareholders' General Meeting in a
+written proposal (for details, please refer to the section of "Board of Directors" set out in the Articles of Association
+of the Company). In the selection process of candidates for directorship, the Nomination Committee under the
+Board of Directors takes full consideration of the compliance of the candidates with laws, regulations and other
+relevant requirements, independence, cultural and educational background or professional experience, as well as
+the structure, number, composition and diversity of the Board of Directors, and will make recommendations on any
+proposed changes to the Board of Directors in line with the Company's strategy.
+8.
+7.
+Formulate data governance strategy and major issues related to data governance;
+114
+113
+Manage, control, monitor and assess the risks of the Company and evaluate the internal control status of the
+Company. The Board of Directors is of the opinion that the risk management and internal control systems of
+the Company are effective.
+Review the compliance of the Company with the Code of Corporate Governance and the disclosures in the
+Report of Corporate Governance;
+Formulate, evaluate and supervise the Code of Conduct and the Compliance Handbook applicable to the
+Directors and employees of the Company;
+Evaluate and supervise the policies and practices of the Company for compliance with laws and regulatory
+requirements;
+Evaluate and supervise the trainings and the improvement of professional competence of Directors and senior
+management;
+China Merchants Bank
+6.
+4.
+3.
+2.
+1.
+During the reporting period, the Board of Directors has performed the following duties on corporate governance:
+Formulate and evaluate the policies and practices on corporate governance of the Company and make certain
+amendments as it deems necessary, so as to ensure the validity of those policies and practices;
+5.5.7 Corporate governance functions
+Pursuant to the Corporate Governance Code, the Company has established a mechanism within the governance
+framework to ensure that the Board of Directors has access to independent views and opinions, and the
+implementation and effectiveness of the mechanism have been reviewed on an annual basis. According to the
+"Rules Governing Independent Directors' Work on Annual Reports" of the Company, the Independent Non-
+Executive Directors of the Company listened to the reports on the operation of the Company in 2023, believing that
+such reports had fully and objectively reflected the operation of the Company as well as the progress of significant
+matters in 2023. They recognised and were satisfied with the work performed and the results achieved in 2023.
+They also reviewed the unaudited financial statements of the Company, and discussed with the certified public
+accountants in charge of annual audit in respect of major matters and formed their written opinions; they reviewed
+the procedures for convening board meetings in the year, the decision-making procedures for matters on the agenda
+and the adequacy of information about such meetings; they reviewed the continuing connected transactions of the
+Company and made confirmations as required by the Hong Kong Listing Rules.
+5.
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+5.5.8 Statement made by the Directors about their responsibility for the financial
+statements
+6.
+Make recommendations and proposals on important issues for discussion and determination by the Board of
+Directors;
+5.
+Evaluate and monitor the implementation of the Board resolutions;
+4.
+Supervise and review the implementation of the annual operational and investment plans;
+3.
+2.
+Consider material investment and financing plans and make proposals to the Board of Directors;
+Formulate the operational goals and the medium- and long-term development strategies of the Company,
+and make an overall assessment on strategic risks;
+1.
+As of the end of the reporting period, the members of the Strategy and Sustainable Development Committee
+included Non-Executive Directors Miao Jianmin (Chairman), Hu Jianhua, Sun Yunfei, Zhou Song, Wang Liang
+(Executive Director) and Li Chaoxian (Independent Non-Executive Director). The Strategy and Sustainable
+Development Committee is mainly responsible for formulating the operation and management goals and the
+medium- and long-term development strategies of the Company, as well as supervising and examining the
+implementation of its annual operation plan, investment plan, data governance and ESG development strategy.
+Main authorities and duties:
+Strategy and Sustainable Development Committee
+In 2023, all the special committees under the Board of Directors of the Company gave full play to their professional
+advantages and earnestly performed various duties, actively offering advices to the Board of Directors on strategic
+guidance, Fintech, risk management, internal control and compliance, inclusive finance, green finance, related
+party transactions management, consumer rights protection, incentive and restrictive mechanisms and construction
+of the Board of Directors. During the year, these committees held a total of 41 meetings to study and review 174
+significant issues, and reported their review opinions and advices to the Board of Directors by submitting meeting
+minutes and giving presentations on-site at the meetings, hence fully performing their respective functions in
+assisting the Board of Directors to make scientific decisions.
+There are six special committees under the Board of Directors of the Company, namely the Strategy and Sustainable
+Development Committee, the Nomination Committee, the Remuneration and Appraisal Committee, the Risk and
+Capital Management Committee, the Audit Committee and the Related Party Transactions Management and
+Consumer Rights Protection Committee.
+5.5.9 Special committees under the Board of Directors
+The senior management of the Company provided the Board of Directors with adequate explanation and sufficient
+information to enable the Board of Directors to make informed assessment on the financial and other information
+submitted to it for approval. The Directors of the Company acknowledged their responsibility for preparing the
+financial statements for the year ended 31 December 2023 to present a true view of the operating results of the
+Company. So far as the Directors are aware, there is no material uncertainty related to events or conditions that
+I might have a significant adverse effect on the Company's ability of sustainable operation.
+4.
+Review the regulations and policies in respect of remuneration of the Bank;
+Any other task delegated by the Board of Directors.
+In 2023, the Remuneration and Appraisal Committee under the Board of Directors of the Company convened
+seven meetings, namely the Remuneration and Appraisal Committee under the Twelfth Session of the Board of
+Directors convened its 5th meeting (16 February), the 6th meeting (21 April), the 7th meeting (21 August), the 8th
+meeting (25 September), the 9th meeting (16 October), the 10th meeting (20 November) and the 11th meeting
+(23 November). The Remuneration and Appraisal Committee under the Board of Directors implements the medium-
+and long-term strategic objectives formulated by the Board of Directors, and further optimises the appraisal policy
+and incentive plan, guides management staff and employees to "base on the long-term development and grasp the
+present opportunities", regularly reviews the performance-based remuneration recovery and deduction throughout
+the Bank. The Committee deliberated and passed the proposals on the remuneration of new senior management,
+the annual performance-based remuneration recovery and deduction and other proposals. According to the
+provisions of the H-share Appreciation Rights Scheme, the granted appreciation rights have been subject to effective
+appraisal and grant price adjustment, ensuring the continuous operation of the Company's medium- and long-term
+incentive mechanism.
+Risk and Capital Management Committee
+As of the end of the reporting period, the majority of members of the Related Party Transactions Management
+and Consumer Rights Protection Committee were Independent Non-Executive Directors, and the committee was
+chaired by an Independent Non-Executive Director. The members of the Related Party Transactions Management
+and Consumer Rights Protection Committee are Li Chaoxian (Chairman), Wong See Hong and Tian Hongqi (all
+being Independent Non-Executive Directors) and Zhu Jiangtao (an Executive Director). The Related Party Transactions
+Management and Consumer Rights Protection Committee is mainly responsible for inspection, supervision and
+review of related party transactions of the Company and protection of the legitimate rights and interests of
+Related Party Transactions Management and Consumer Rights Protection Committee
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+China Merchants Bank
+Before the convening of the annual meeting of the Board of Directors, the Audit Committee reviewed and
+prepared a resolution on the Company's Annual Report for 2023 which was submitted to the Board of
+Directors for consideration and approval. Moreover, the Audit Committee reviewed and submitted to the
+Board of Directors the conclusion report prepared by the auditors in charge of annual audit in respect of the
+audit work of the Company in 2023.
+In the course of annual audit and after the issue of a preliminary audit opinion by the auditors in charge of
+annual audit, the Audit Committee heard the report on the operation of the Company for 2023, exchanged
+opinions on the significant matters and audit progress with the auditors in charge of annual audit, reviewed
+the financial statements of the Company, and then formed written opinions on the above issues;
+consumers.
+The Audit Committee considered and discussed the accounting firm's audit plan for 2023 and the unaudited
+financial statements of the Company;
+2.
+1.
+According to "Work Procedures on Annual Reports for Audit Committee under the Board of Directors" adopted by
+the Company, the Audit Committee under the Board of Directors of the Company performed the following duties in
+preparing and reviewing the annual report for 2023:
+In 2023, the Audit Committee under the Board of Directors of the Company convened eight meetings, namely, the
+Audit Committee under the Twelfth Session of the Board of Directors convened its 4th meeting and the meeting for
+Independent Directors' work on annual reports (9 March), the 5th meeting (20 March), the 6th meeting (24 April),
+the 7th meeting (18 May), the 8th meeting (11 July), the 9th meeting (21 August), the 10th meeting (18 September)
+and the 11th meeting (24 October). The Audit Committee, based on the quarterly meeting mechanism and by means
+of the regular report and internal and external audit work report, reviewed and approved the annual report, interim
+report and quarterly report, and supervised and verified the authenticity, accuracy, completeness and timeliness
+of the financial report information. The Company reviewed and passed the annual, interim and quarterly internal
+audit plan and work report, the annual internal control assessment report, the engagement of accounting firms and
+other proposals, reviewed the external auditor's audit plan, audit results, management recommendations and other
+reports, timely targeted the problems found in internal audit, strengthened the rectification and accountability of
+internal self-inspection and regulatory concerns, promoted the formation of an effective communication mechanism
+between internal audit and external audit by continuously strengthening the communication with internal and
+external audit. As the term of the external auditor will expire in 2024, the Audit Committee has considered the
+resolutions on the proposed change of accounting firms, the "Administrative Measures on the Selection and
+Appointment of Accounting Firms by China Merchants Bank", the procurement plan and bidding documents
+of the project for the selection and appointment of the accounting firm for 2024, and the proposal for the
+determination of the selection and engagement of the accounting firm for 2024, which fully played an important
+role in supervising operation and management, revealing risks and problems and improving management level and
+effectively fulfilled relevant responsibilities.
+Any other task delegated by the Board of Directors.
+Review and supervise the mechanism for employees to whistle blow any misconduct in respect of financial
+statements, internal control or otherwise, so as to ensure that the Bank always handles the whistle blowing
+issues in a fair and independent manner and takes appropriate actions;
+Examine the internal control system and put forward suggestions on the improvement of internal control;
+3.
+Coordinate the communications between internal auditors and external auditors;
+Main authorities and duties:
+Identify related parties according to relevant laws and regulations;
+5.6 Board of Supervisors
+In 2023, the Related Party Transactions Management and Consumer Rights Protection Committee of the Company
+convened four meetings, namely, the Related Party Transactions Management and Consumer Rights Protection
+Committee under the Twelfth Session of the Board of Directors convened its 4th meeting (9 March), the 5th
+meeting (6 June), the 6th meeting (13 October) and the 7th meeting (25 December). The Related Party Transactions
+Management and Consumer Rights Protection Committee focused on reviewing the fairness of related party
+transactions, assisting the Board of Directors to ensure the legality and compliance of related party transactions
+management, implementing the relevant responsibilities of consumer rights protection according to regulatory
+requirements and deliberated and passed the Related Party Transactions Report for 2022, the List of Related Parties
+in 2023 and other proposals, reviewed and approved the related party transactions between the Company and
+Gemdale Corporation, MUCFC, CMB Financial Leasing and other related parties, reviewed and approved the "Work
+Report on Consumer Rights Protection for 2022", the "2022 Consumer Complaint Analysis Report" and other
+resolutions, reviewed the regulatory notification document on consumer rights protection and the Company's main
+consumer rights protection system.
+Any other task delegated by the Board of Directors.
+8.
+Supervise and evaluate the comprehensiveness, timeliness and effectiveness of the consumer rights protection
+work of the Company, the duty performance of senior management in the protection of consumer rights,
+and the information disclosure of consumer rights protection work;
+Listen to the report on the consumer rights protection work of the Company and consider the relevant
+resolution, and make recommendations to the Board of Directors on related work;
+7.
+1.
+6.
+5.
+Review the announcements on related party transactions of the Company;
+4.
+Review the administrative measures on related party transactions of the Company, and monitor the
+establishment and improvement of the related party transactions management system of the Company;
+Inspect, supervise and review the major related party transactions and continuing connected transactions,
+and control the risks associated with related party transactions;
+3.
+2.
+Review the strategies, policies and objectives of the consumer rights protection work of the Company;
+Monitor the internal audit system and its implementation, and evaluate the work procedures and work
+effectiveness of the internal audit department;
+Propose to engage or replace an accounting firm for regular audit of financial reports, and supervise and
+evaluate its audit work;
+Examine the accounting policies, financial reporting procedures and financial position;
+6.
+Arrange and instruct risk prevention works in accordance with the authorisation of the Board of Directors;
+5.
+Submit opinions and proposals on perfecting the management of risks and capital;
+4.
+Perform relevant duties under the Advanced Measurement Approach for Capital Measurement pursuant to
+the authorisation given by the Board of Directors;
+Make regular assessment on the risk policies, management status, risk-withstanding ability and capital status
+of the Bank;
+7.
+Supervise the status of risk control by the senior management of the Company in relation to credit risk,
+market risk, operational risk, liquidity risk, strategic risk, compliance risk, reputational risk, country risk and
+other risks;
+2.
+1.
+Main authorities and duties:
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+China Merchants Bank
+As of the end of the reporting period, the members of the Risk and Capital Management Committee were Hong
+Xiaoyuan (Chairman), Zhang Jian, Chen Dong (all being Non-Executive Directors), Zhu Jiangtao (an Executive
+Director), Liu Qiao and Shi Yongdong (both being Independent Non-Executive Directors). The Risk and Capital
+Management Committee is mainly responsible for supervising the status of risk control by the senior management
+of the Company in relation to various major risks, making regular assessment on the risk policies, risk-withstanding
+ability and capital management status of the Company and submitting proposals on perfecting the management of
+risks and capital of the Company.
+3.
+Evaluate, supervise and govern the risk management policies and practices of relevant overseas entities of the
+Company, including those in the United States, in accordance with overseas regulatory requirements;
+Any other task delegated by the Board of Directors.
+In 2023, the Risk and Capital Management Committee under the Board of Directors of the Company convened nine
+meetings, namely the Risk and Capital Management Committee under the Twelfth Session of the Board of Directors
+convened its 5th meeting (13 March), the 6th meeting (16 March), the 7th meeting (24 May), the 8th meeting (15
+June), the 9th meeting (31 July), the 10th meeting (15 August), the 11th meeting (19 September), the 12th meeting
+(23 November) and the 13th meeting (22 December). The Risk and Capital Management Committee implemented
+the prudent risk management concept, adhered to the risk preference targets established by the Board of Directors,
+constantly strengthened the comprehensive risk management function by holding quarterly meetings, and actively
+implemented the objective requirements of the Board of Directors to "outperform the market and outperform the
+industry". The Risk and Capital Management Committee paid high attention to the risks and impacts associated with
+real estate, agency distribution of relevant products to private banking clients, financial asset management and local
+government businesses, and has carefully listened to special reports and actively advanced the risk mitigation works;
+adhered to long-term and reasonable capital planning by consistently enhancing the risk compensation capability,
+and regularly reviewing reports on the internal assessment on capital adequacy, capital adequacy ratio, and capital
+management planning; paid close attention to the international pattern and the changes in economic and financial
+situations, regularly reviewed reports on compliance with anti-money laundering and sanctions, risk assessment of
+money laundering and terrorist financing and compliance work of institutions in the United States, and effectively
+enhanced compliance management efforts and other various works.
+Audit the financial information and disclosure of such information, and is responsible for the annual audit
+work, including issue of a conclusive report on the truthfulness, accuracy, completeness and timeliness of the
+information contained in the audited financial statements;
+8.
+7.
+6.
+5.
+4.
+3.
+2.
+1.
+Main authorities and duties:
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+China Merchants Bank
+118
+117
+As of the end of the reporting period, the majority of members of the Audit Committee were Independent Non-
+Executive Directors, and the committee was chaired by an Independent Non-Executive Director. The members of the
+Audit Committee are Tian Hongqi (Chairman), Wong See Hong, Li Menggang, Shi Yongdong (all being Independent
+Non-Executive Directors) and Zhou Song (a Non-Executive Director). None of the above persons has ever served as
+a partner of the incumbent auditors of the Company. The Audit Committee is mainly responsible for examining
+the accounting policies and financial position of the Company; and is responsible for the annual audit work of the
+Company, proposing the appointment or replacement of external auditors and examining the status of the internal
+audit and internal control of the Company.
+Audit Committee
+During the reporting period, the Independent Non-Executive Directors of the Company expressed their independent
+opinions on significant matters such as the profit appropriation plan, nomination and election of Directors and
+senior management, engagement of accounting firms and related party transactions. They made no objection to the
+resolutions of the Board of Directors and others of the Company during the year.
+The Board of Supervisors is a supervisory body of the Company and is accountable to the Shareholders' General
+Meetings, and effectively oversees the strategic management, financial activities, internal control, risk management,
+legal operation, corporate governance, as well as the duty performance of the Board of Directors and senior
+management with an aim to protect the legitimate rights and interests of the Company, its shareholders, employees,
+creditors and other stakeholders.
+119
+Sun Yunfei
+19/19
+Zhou Song
+19/19
+Zhang Jian
+19/19
+-222
+7/7
+6/6
+6/6
+8/8
+9/9
+Chen Dong
+19/19
+7/7
+6/9
+Tian Hongqi
+Hu Jianhua (resigned)
+6/6
+Miao Jianmin
+and Consumer
+and
+Board of Development
+Nomination
+Appraisal
+Directors
+Committee
+Committee
+Capital
+Management
+Committee Committee Committee
+Actual times of attendance/Required times of attendance
+Rights Shareholders'
+Audit
+Protection
+Committee
+General
+Meeting
+Directors
+18/19
+Risk and
+16/19
+/
+Zhu Jiangtao
+8/8
+7/7
+7/7
+/
+2/2
+1/1
+2/2
+ང>
+Independent Non-
+Executive Directors
+Wong See Hong
+19/19
+Li Menggang
+19/19
+99
+5/6
+5/6
+Wang Liang
+Hong Xiaoyuan
+16/19
+7/7
+3/9
+རྔུངངངངངང
+0/1
+1/1
+1/1
+1/1
+(resigned)
+Su Min (resigned)
+4/5
+45
+1/1
+Executive Directors
+19/19
+Liu Qiao
+Remuneration
+Strategy
+and
+Sustainable
+7/7
+7/7
+1/1
+8/8
+7/7
+7/7
+9/9
+1/1
+8/8
+7/7
+9/9
+7/7
+19/19
+Shi Yongdong
+4/4
+1/1
+8/8
+4/4
+The Board of Directors of the Company currently has six Independent Non-Executive Directors, which meets the
+requirement that at least one third of the total Directors of the Company shall be Independent Directors. The
+qualification, number and proportion of Independent Non-Executive Directors are in compliance with the relevant
+requirements of the PRC banking regulatory authorities, the CSRC, Shanghai Stock Exchange and the Hong Kong
+Listing Rules. All the six Independent Non-Executive Directors of the Company are not involved in the circumstances
+set out in Rule 3.13 of the Hong Kong Listing Rules which would cause doubt on their independence. The Company
+has received from the Independent Non-Executive Directors their respective annual confirmation of independence.
+Therefore, the Company is of the opinion that all the Independent Non-Executive Directors have complied with
+the requirement of independence. The majority of members of the Nomination Committee, the Remuneration and
+Appraisal Committee, the Audit Committee and the Related Party Transactions Management and Consumer Rights
+Protection Committee under the Board of Directors of the Company are Independent Non-Executive Directors, and
+all of such committees are chaired by an Independent Non-Executive Director. During the reporting period, the six
+Independent Non-Executive Directors maintained communication with the Company through attendance at the
+meetings, special research and investigations and conferences. They effectively performed their roles as Independent
+Non-Executive Directors by diligently attending the meetings held by the Board of Directors and its various special
+committees, actively expressing their opinions and suggestions and attending to the interests and requests of
+minority shareholders. For details of the attendance of Independent Non-Executive Directors at the meetings
+convened by the Board of Directors and its special committees, please refer to "Attendance of Directors at relevant
+meetings" in this report.
+Performance of duties by Independent Non-Executive Directors
+Chapter V Corporate Governance
+5.5.6
+Annual Report 2023 (H share)
+China Merchants Bank
+During the reporting period, the Board of Directors of the Company held a total of 19 meetings, of which 6 were on-site meetings and
+thirteen were meetings convened in the form of written resolutions; the special committees under the Board of Directors held a total of 41
+meetings, of which 19 were on-site meetings and 22 were meetings convened in the form of written resolutions.
+Note:
+===
+HH
+1/1
+8/8
+1/1
+4/4
+1/1
+6/6
+Management
+19/19
+110
+During the reporting period, the Board of Supervisors of the Company made an appraisal on the annual duty
+performance of the Directors, and the annual duty performance and cross-appraisal of the Independent Non-
+Executive Directors, and reported the appraisal results to the Shareholders' General Meeting.
+5.5.4 Chairman of the Board of Directors and the President
+The positions of Chairman of the Board of Directors and the President of the Company have been held by different
+persons and their duties have been clearly defined in accordance with the requirements of the Hong Kong Listing
+Rules. Mr. Miao Jianmin serves as the Chairman of the Company and is responsible for leading the Board of
+Directors, ensuring that all the Directors are kept updated on issues arising at board meetings, managing the
+operation of the Board of Directors, and ensuring that all major issues are discussed by the Board of Directors in a
+constructive and timely manner. In order to enable the Board of Directors to discuss all major and relevant matters in
+time, the Chairman of the Board of Directors worked together with senior management to ensure that the Directors
+duly receive appropriate, complete and reliable information for their reference and review. Mr. Wang Liang serves as
+the President and is responsible for the business operation of the Company and implementation of its strategies and
+business plans.
+111
+112
+China Merchants Bank
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+5.5.5 Attendance of Directors at relevant meetings
+The following table sets forth the records of attendance of each Director at the meetings convened by the Board of
+Directors and the special committees under the Board of Directors and at the Shareholders' General Meeting during
+the reporting period. All Directors performed due diligence in their duties, capitalised on opportunities, tackled
+challenges and used their professional specialties and extensive experience to contribute their intelligence and
+strength to the operation and development of the Company. The Company has adopted the constructive opinions
+and suggestions raised by each of the Directors in aspects including strategy guideline, wealth management, Fintech,
+risk control and management, internal control and compliance, anti-money laundering, green finance development,
+inclusive finance development, ESG development, related party transactions management, protection of consumer
+rights and improvement of incentive and restrictive mechanisms, and no objection has been raised by any of the
+Directors on the matters reviewed.
+Special committees under the Board of Directors
+Directors
+Non-Executive
+Related Party
+Transactions
+The Company attached great importance to the continuous training of Directors, so as to ensure that they have
+a proper understanding of the operations and businesses of the Company, and that they are fully aware of
+their responsibilities under the relevant laws, regulations and systems, the regulatory requirements of the PRC
+banking regulatory authorities, the CSRC, Shanghai Stock Exchange and the Hong Kong Stock Exchange and the
+requirements of the Articles of Association of the Company. The Company has renewed the "Insurance for Liabilities
+of Directors, Supervisors and Senior Management" for all of its Directors.
+Li Chaoxian
+19/19
+The Independent Non-Executive Directors of the Company have presented their professional opinions on the
+resolutions reviewed by the Board of Directors, including offering independent written opinions on significant
+matters such as the profit appropriation plan, nomination and election of Directors, engagement of accounting
+firms and related party transactions. In addition, the Independent Non-Executive Directors of the Company also
+gave full play to their professional advantages in the relevant special committees under the Board of Directors, and
+provided professional and independent opinions regarding corporate governance and operation management of the
+Company, thereby providing effective guarantee on the scientific decision-making of the Board of Directors.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+The Nomination Committee under the Board of Directors shall evaluate the structure, number of members,
+composition and diversity implementation and effectiveness of the Board of Directors (including multiple aspects
+such as gender, skills, knowledge and experience) at least once a year according to the operating activities, asset
+size and equity structure of the Company, and advise on any changes to the Board of Directors to coordinate with
+the Company's strategy. To ensure that the Board of Directors maintains gender diversity in the long run, the
+Company will seek to identify potential female Director candidates whose skills, knowledge, experience, and other
+attributes satisfy the relevant requirements based on its own operating management and the structure of the Board
+of Directors, establishing and maintaining communication channels with potential Director candidates to enable
+timely selection when needed.
+The list of Directors of the Company is set out in "Directors, Supervisors and Senior Management" in this report. To
+comply with the Hong Kong Listing Rules, the Independent Non-Executive Directors have been clearly identified in all
+the corporate communication documents of the Company which disclose their names.
+5.5.2 Appointment, re-election and removal of Directors
+The Board of Directors of the Company reviewed its work during the reporting period, believing that it has
+effectively performed its duties and safeguarded the rights and interests of the Company and its shareholders. The
+Company is of the opinion that all the Directors have devoted sufficient time to perform their duties.
+In accordance with the Articles of Association of the Company, the Directors of the Company shall be elected or
+replaced by the shareholders at the Shareholders' General Meetings, and the term of office for the Directors shall
+be three years commencing from the date on which the approval from the PRC banking regulatory authority is
+obtained. A Director is eligible for re-election upon the expiry of his/her current term of office. The term of office for
+a Director shall not be terminated without any justification at a Shareholders' General Meeting before expiry of his/
+her term.
+The term of office for the Independent Non-Executive Directors of the Company shall be the same as that for other
+Directors of the Company. The term of office for the Independent Non-Executive Directors of the Company complies
+with the relevant laws and the requirements of the governing authority.
+The procedures for appointment, re-election and removal of Directors, candidates' qualification and other
+requirements of the Company are set out in the Articles of Association and the implementation rules of the
+Nomination Committee under the Board of Directors of the Company. The Nomination Committee under the
+Board of Directors of the Company shall carefully consider the qualifications and experience of every candidate for
+a Director and recommend suitable candidates to the Board of Directors. Upon passing the candidate nomination
+proposal, the Board of Directors shall propose election of the related candidates at a Shareholders' General Meeting
+and submit the relevant proposal at a Shareholders' General Meeting for consideration and approval.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+5.5.3 Responsibilities of Directors
+As of the end of the reporting period, all incumbent Directors of the Company cautiously, earnestly and diligently
+exercised their rights under the Articles of Association of the Company and the domestic and overseas regulatory
+rules, devoted sufficient time and attention to the business of the Company, ensured that the business practices
+of the Company were fully compliant with the requirements of the laws and administrative regulations and
+economic policies of the country, gave all shareholders fair treatment, readily reviewed the business operation
+and management of the Company, and fulfilled the responsibilities stipulated under the laws and administrative
+regulations, departmental regulations and other duties of diligence stipulated under the Articles of Association
+of the Company. All Directors of the Company were aware of their joint and individual responsibilities towards
+shareholders. During the year, the average attendance rate of Directors at meetings of the Board of Directors and
+the special committees under the Board of Directors was 91.01%.
+A Director may be removed by an ordinary resolution at a Shareholders' General Meeting before the expiry of his/
+her term of office in accordance with relevant laws and regulations (however, any claim made in accordance with
+contract shall not be affected).
+19/19
+2023 (Note)
+Annual Report 2023 (H share)
+43,832
+The Company shall pay cash dividends and other amounts to holders of domestic shares listed
+domestically and such sums shall be calculated, declared and paid in Renminbi. The Company shall
+pay cash dividends and other amounts to holders of H Shares and such sums shall be calculated and
+declared in Renminbi and paid in Hong Kong Dollars. The foreign currencies required by the Company
+for payment of cash dividends and other sums to shareholders of overseas listed foreign shares shall
+be handled according to the relevant requirements of foreign exchange administration of the State.
+Where appropriation of the Company's fund by a shareholder, which is in violation of relevant rules,
+has been identified, the Company shall make a deduction against the cash dividend to be paid to
+such shareholder, and such amount shall be used as the reimbursement of the funds appropriated.
+If the Board of Directors considers that the price of the shares of the Company does not match the
+size of the share capital of the Company or where the Board of Directors considers necessary, the
+Board of Directors may propose a profit appropriation plan in the form of shares and implement the
+same upon consideration and approval at a Shareholders' General Meeting, provided that the above-
+mentioned cash profit appropriation requirements are satisfied.
+128
+The Company may distribute dividends in cash, shares or a combination of cash and shares, and
+it shall distribute dividends mainly in cash. Subject to compliance with prevailing laws, regulations
+and the requirements of relevant regulatory authority on the capital adequacy ratio, as well as
+the requirements of general working capital, business development and the need for substantial
+investment, merger and acquisition plans of the Company, the cash dividend to be distributed by the
+Company to shareholders of ordinary shares each year in principle shall not be less than 30% of the
+net profit after taxation attributable to shareholders of ordinary shares audited in accordance with the
+PRC accounting standards for that year. The Company may pay interim cash dividend. Unless another
+resolution is passed at the Shareholders' General Meeting, the Board of Directors shall be authorised
+by the shareholders at a Shareholders' General Meeting to approve the interim profit appropriation
+plan.
+(6)
+(5)
+(4)
+(7) The Company shall disclose the implementation progress of the cash dividend policy and other
+relevant matters in its periodic reports in accordance with the applicable requirements.
+(3)
+2.
+Profit appropriation of the Company shall focus on reasonable returns on investment of shareholders,
+and such policies shall maintain continuity and stability.
+(1)
+As specified in the Articles of Association of China Merchants Bank Co., Ltd., the profit appropriation policies
+of the ordinary shares of the Company are:
+1.
+5.12.3 The formulation and implementation of the Company's cash dividend policies
+Chapter V Corporate Governance
+(2)
+During the reporting period, the profit appropriation plan of the Company for 2022 was implemented in
+strict accordance with the relevant provisions of the Articles of Association of China Merchants Bank Co.,
+Ltd. It was considered and approved by the 15th meeting of the Twelfth Session of the Board of Directors
+of the Company and submitted for consideration and approval at the 2022 Annual General Meeting. The
+minority shareholders were afforded opportunities to fully express their views and requests. The criteria
+and proportion of cash dividends were clear and specific, and the Board of Directors of the Company
+has implemented the profit appropriation plan. The profit appropriation plan of the Company and its
+implementation have provided adequate protection for the legitimate rights and interests of minority
+investors. The profit appropriation plan of the Company for 2023 will also be implemented in strict
+accordance with the relevant provisions of the Articles of Association of China Merchants Bank Co., Ltd..
+It will be considered and approved by the 31st meeting of the Twelfth Session of the Board of Directors of
+the Company and submitted for consideration and approval at the 2023 Annual General Meeting of the
+Company.
+China Merchants Bank
+Chapter V Corporate Governance
+1.972
+49,734
+142,044
+35.01
+Note:
+The profit appropriation plan for 2023 is subject to consideration and approval at the 2023 Annual General Meeting of the Company.
+127
+129
+For other A-share shareholders (including institutional investors) who are resident enterprises under the Law of the
+People's Republic of China on Enterprise Income Tax, the income tax shall be declared and paid by themselves.
+о✯✯)(Cai Shui [2014] No. 81), the dividends and bonuses shall be
+distributed in RMB by the Company through China Securities Depository and Clearing Corporation Limited Shanghai
+Branch to the account of the nominal holder of A shares. The Company will withhold income tax at the tax rate of
+10% and apply to the competent taxation authority for withholding declaration. For Northbound Trading investors
+who are tax residents of other countries or regions and the income tax rate for dividends and bonuses is lower than
+10% as stipulated in the tax treaty signed between its domicile country or region and China, the withholding of
+enterprise income tax shall be implemented in accordance with the Announcement of the State Administration of
+Taxation on Administrative Measures for Non-resident Taxpayers to Enjoy Treaty Benefits under Tax Treaty (State
+Administration of Taxation Announcement No.35 of 2019) and the Notice on the Tax Policies Related to the Pilot
+Program of the Shanghai-Hong Kong Stock Connect (Cai Shui [2014] No. 81).
+For investors (including enterprises and individuals) of The Stock Exchange of Hong Kong Limited (SEHK) investing
+in the Company's A shares listed on Shanghai Stock Exchange (referred to as Northbound Trading). According to
+the Notice on the Tax Policies Related to the Pilot Program of the Shanghai-Hong Kong Stock Connect (
+For qualified foreign institutional investor (QFII) shareholders who hold the Company's A shares, the Company shall,
+in accordance with the provisions as set forth in the Notice on the Issues Concerning Chinese Resident Enterprises'
+Withholding of Enterprise Income Tax for Payment of Dividends, Bonuses, and Interest to QFII (IFR^*
+AQFII • FU · FU¤¾¾¾¾HUK) (Guo Shui Han [2009] No.47), the Company
+shall withhold and pay the enterprise income tax at the tax rate of 10%. If qualified foreign institutional investor
+(QFII) shareholders are involved in enjoying tax treaty (arrangement) treatment, the withholding of enterprise
+income tax shall be implemented in accordance with the Announcement of the State Administration of Taxation on
+Administrative Measures for Non-resident Taxpayers to be Entitled to Benefits under Tax Treaty (HA
+R\‡ŹBÈÌ) (State Administration of Taxation Announcement No.35 of 2019)
+and the Notice on the Issues Concerning Chinese Resident Enterprises' Withholding of Enterprise Income Tax for
+Payment of Dividends, Bonuses, and Interest to QFII (關於中國居民企業向 QFII 支付股息、紅利、利息代扣代繳企業所
+A) (Guo Shui Han [2009] No.47).
+For natural person shareholders and securities investment fund shareholders holding the Company's A shares,
+according to relevant provisions of the Notice on the Issues Concerning the Implementation of the Policies for
+Differentiated Individual Income Tax Imposed upon the Dividends and Bonuses from Listed Companies (
+✯✯HA)(Cai Shui [2012] No.85) and the Notice on the Issues
+Concerning the Policies for Differentiated Individual Income Tax Imposed upon the Dividends and Bonuses from
+Listed Companies (UK) (Cai Shui [2015] No.101), if the
+holding period is within one month (including one month), the full amount of dividends and bonuses shall be
+included in the taxable income, and the actual tax burden is 20%; if the holding period is from 1 month to 1 year
+(including 1 year), 50% of the dividends and bonuses shall be included in the taxable income, and the actual tax
+burden is 10%; if the holding period exceeds one year, the dividends and bonuses shall be temporarily exempted
+from individual income tax.
+A-share shareholders
+The shareholders of the Company paid relevant taxes according to the following regulations and the tax laws
+updated from time to time, enjoyed possible tax deductions as the case may be, and shall consult with its
+professional tax and legal consultants for specific payment affairs. The laws, regulations, and rules cited as follows
+are relevant provisions promulgated as of 31 December 2023.
+5.13 Taxes and Tax Deductions
+Annual Report 2023 (H share)
+China Merchants Bank
+If the Company generated profits in the previous accounting year but the Board of Directors did not
+make any cash profit appropriation plan after the end of the previous accounting year, the Company
+shall state the reasons for not distributing the profit and the usage of the profit retained in the
+periodic report and the Independent Directors shall give an independent opinion in such regard.
+The Company has recorded the above-mentioned investor reception and communication activities in accordance
+with relevant regulatory requirements, and has properly kept the relevant documents.
+33.00
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+China Merchants Bank
+During the reporting period, the Board of Directors of the Company organised three investigations/surveys for
+the Directors, during which the Directors visited some of the province-level and city-level branches to have deep
+understanding of the operation and management of the branches and sub-branches, reviewed reports of the
+branches on operation and management, risk management and control, internal control management, cost
+management and protection of consumers' rights and interests and put forward targeted opinions and suggestions.
+The Board of Supervisors of the Company conducted one collective investigation, involving three branches and sub-
+branches. The investigation was carried out based on the problem-oriented approach. By having deep understanding
+of problems in operation faced by the branches, the Board of Supervisors provided advices to the branches on-
+site, actively coordinated with the Head Office to respond to the demands of branches, and provided guidance
+and supervisory opinions to the branches in terms of adhering to the guidance of Party building, deepening the
+implementation of strategies, fulfilling social responsibilities and strengthening the operational management and
+risk management. Through the supervisory mechanism, the Board of Supervisors provided feedback to the senior
+management and the Head Office on the demands and suggestions of the branches, and promoted the resolution
+of relevant issues at the system and mechanism level, thus effectively improving the quality and efficiency of the
+investigation of the Board of Supervisors.
+During the reporting period, the Board of Directors and the Board of Supervisors of the Company organised four
+investigations/surveys, through which the duty performance, decision-making ability and effectiveness of supervision
+of our Directors and Supervisors continued to improve.
+5.7 Investigations/Surveys and Trainings Conducted by Directors and
+Supervisors during the Reporting Period
+During the reporting period, all Directors and Supervisors of the Company participated in the training of "Anti-
+Money Laundering and Sanctions Compliance" according to the requirements on duty performance, systematically
+studied the external situation of anti-money laundering, risk trends of money laundering, the use of anti-money
+laundering technology and new regulations on anti-money laundering, continuously enhancing the ability of
+the Board of Directors and the Board of Supervisors to fulfill their duties in the areas of anti-money laundering
+and sanctions compliance. The Non-Executive Directors and all Supervisors of the Company reviewed the report
+on "Sustainable Information Disclosure and Governance Practices of Commercial Banks", to have an in-depth
+understanding of the risks of climate changes, trends in sustainable information disclosure and the low-carbon
+transition practices of industry peers, thereby enhancing their own ESG governance capabilities. The Company
+conducted confidentiality training for all Directors and Supervisors to strengthen the sense of confidentiality of
+Directors and Supervisors in their daily work and to implement confidentiality management requirements. The
+new Directors and Supervisors of the Company attended the initial training for Directors and Supervisors held by
+Shanghai Stock Exchange, during which they had systematic study on the concept of regulation of listed companies,
+highlights of management of changes in shareholdings, corporate governance and duty performance to be
+discharged by Supervisors, regulatory cases, etc. In addition, the Directors and Supervisors of the Company studied
+the course of "Interpretation on the Reform of the Independent Director System of Public Companies" delivered
+by China Association for Public Companies, so as to keep abreast of the update on the reform of the independent
+director system in a timely manner.
+The Board of Supervisors had reviewed the "Report on Assessment of Internal Control of China Merchants Bank
+Co., Ltd. for 2023", and concurred with the Board of Directors' representations regarding the completeness,
+reasonableness and effectiveness of the internal control system of the Company as well as its implementation.
+1.738
+Implementation of Resolutions Passed at Shareholders' General Meeting(s)
+In terms of the related party transactions to be disclosed during the reporting period, the Board of Supervisors was
+not aware of any conduct in contravention of the Arm's Length Principle or were detrimental to the interests of the
+Company and its shareholders.
+Related Party Transactions
+During the reporting period, the Company was not aware of any insider trading in its acquisition and sale of assets
+which would damage shareholders' interests or cause loss in the assets of the Company.
+Purchase and Disposal of Assets
+Internal Control
+During the reporting period, the use of proceeds of the Company was consistent with such usages as committed in
+the Prospectus of the Company.
+The aforesaid investigation and training would be conducive to promoting the improvement of duty performance by
+the Directors and Supervisors of the Company, ensuring that the Directors and Supervisors get the full picture of the
+information required for their duty performance and continuing to make contributions to the Board of Directors and
+the Board of Supervisors of the Company.
+Mr. Peng Jiawen and Ms. Ho Wing Tsz Wendy of Tricor Services Limited, an external services provider, were the
+joint company secretaries of the Company under the Hong Kong Listing Rules. Mr. Peng Jiawen is the major contact
+person of the Company on internal issues.
+During the reporting period, the Company participated in investment strategy meetings held by a total of 48
+investment banks and securities companies. The Company received 102 online researches of securities analysts and
+investors and met with more than 1,200 institutional investors. The Company also answered hundreds of phone
+calls from our investors and processed hundreds of messages from our investors on the Company's official website,
+investors' mailbox, and "SSE E-interaction" platform.
+During the reporting period, the Company held one on-site annual general meeting, held one annual results press
+conference, one interim results exchange meeting and two quarterly results exchange meetings in the form of on-
+site meeting + video livestreaming; more than 4,000 investors, analysts and media reporters at home and abroad
+participated in the annual results press conference in person or online. At the press conference, the Chairman
+and senior management made in-depth presentations on the results achieved by the Company in constantly
+realising the "Malik Curve" for transformation and development, maintaining dynamically balanced development
+of "Quality, Profitability and Scale", building the three major capabilities of "wealth management, Fintech and
+risk management", and consolidating the "fortress-style" balance sheet, and elaborated on the meaning of "value
+creation bank". At the same time, they gave detailed answers to other market and media concerns such as the
+impact of the real estate risk, credit demand and net interest margin outlook and other matters. The Company
+released the records of investor exchanges on its official website in a timely manner after the meeting. During the
+reporting period, the Company completely resumed offline road show activities, with senior management leading
+the team to conduct overseas road shows in Europe, the United States, Singapore, the Middle East and Hong Kong,
+China, as well as to conduct domestic road shows in Shenzhen, Shanghai and Beijing, so as to provide an in-depth
+introduction of the Company's performance highlights, long-term strategy and investment value to domestic and
+overseas investment institutions.
+Investor relations
+The Board of Directors of the Company has reviewed and inspected the implementation of shareholder
+communication policies such as investor relations management and information disclosure during the reporting
+period of the Company, and believes that the above work of the Company is positive and effective. As of the end
+of the reporting period, the price-to-book ratio of the Company's A shares and H shares remained among the top
+in the domestic banking industry. The Company has obtained the highest rating of A in the annual information
+disclosure evaluation of listed companies on Shanghai Stock Exchange for the tenth consecutive year.
+The Company attaches great importance to communication with its shareholders, and has established an effective
+communication mechanism with investors. The Board of Directors has always adhered to strict compliance with
+regulatory requirements, performed the obligation to disclose information in compliance with the law, and constantly
+improved the quality of the disclosed information of the Company. The Company provided communication channels
+for investors through the Company's official website, investors' mailbox, hotline and "SSE E-interaction" platform,
+and in the form of shareholders' meetings, investor briefings, results road shows, investor research, securities analyst
+research, etc., which fully satisfied the needs of our investors and analysts at home and abroad to communicate
+with the Company.
+5.10 Communication with Shareholders
+5.8 Company Secretary under Hong Kong Listing Rules
+Chapter V Corporate Governance
+China Merchants Bank
+124
+123
+To further improve the corporate governance system and reflect its concept of compliance and prudent operation,
+sustainable operation and quality development in a full, accurate and comprehensive manner, the Company,
+according to the Company Law of the People's Republic of China, the Securities Law of the People's Republic of
+China and other laws and regulations and the latest regulatory requirements of domestic and overseas regulatory
+authorities, has made all-around review and revision on the Articles of Association of the Company. The amended
+Articles of Association had been approved by the PRC banking regulatory authorities during the reporting period.
+For details, please refer to the announcement dated 24 April 2023 published by the Company on the websites of
+Shanghai Stock Exchange, Hong Kong Exchanges and Clearing Limited and the Company.
+5.9 Major Amendments to the Articles of Association
+During the reporting period, Mr. Peng Jiawen and Ms. Ho Wing Tsz Wendy attended the relevant professional
+trainings for not less than 15 hours in compliance with the requirements of Rule 3.29 of the Hong Kong Listing
+Rules.
+Annual Report 2023 (H share)
+Use of Proceeds
+Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu separately audited the
+2023 annual financial report prepared in accordance with the PRC Generally Accepted Accounting Principles and
+International Financial Reporting Standards and have separately issued standard auditing reports with unqualified
+opinions. The financial reports truthfully, objectively and accurately reflect the financial status and operating results
+of the Company.
+Authenticity of Financial Statements
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+China Merchants Bank
+During the reporting period, the Board of Supervisors of the Company had no objection to each of the supervisory
+matters.
+During the reporting period, all the three External Supervisors were able to perform their supervisory duties
+independently. The External Supervisors discharged their supervisory duties by attending Shareholders' General
+Meetings, meetings of the Board of Supervisors, and special committee meetings of the Board of Supervisors,
+participating in meetings of the Board of Directors or any of its related special committees, proactively familiarising
+themselves with the operation and management and the implementation of strategies of the Company, and actively
+participating in studies and reviews on significant matters. During the adjournment of the meetings of the Board
+of Directors and the Board of Supervisors, the External Supervisors reviewed various documents and reports of the
+Company, and exchange opinions with the Board of Directors and senior management in respect of the problems
+concerned in a timely manner, thereby playing an active role in enabling the Board of Supervisors to perform their
+supervisory duties.
+5.6.3 Duty performance of the Board of Supervisors during the reporting period
+During the reporting period, the Board of Supervisors convened a total of 16 meetings, of which three were on-site
+meetings and 13 were meetings convened in the form of written resolutions. 47 proposals regarding development
+strategies, business operation, financial activities, internal control, risk management, related party transactions,
+consolidation management, corporate governance, data governance, social responsibilities, anti-money laundering
+work, consumer rights protection, evaluation of the duty performance of Directors, Supervisors and senior
+management and audit on the resignation of senior management were considered, and 25 special reports involving
+implementation of risk appetite, disposal of non-performing assets, capital adequacy ratio, equity management,
+internal audit, prevention and control of crimes, green finance, were delivered or reviewed at those meetings.
+During the reporting period, the Company convened one Shareholders' General Meeting and six on-site board
+meetings. Supervisors attended the Shareholders' General Meeting and were present at all the on-site board
+meetings and supervised the legitimacy and compliance of convening the Shareholders' General Meeting and the
+board meetings, voting procedures, the Directors' attendance at those meetings, expression of opinions and voting
+details.
+5.6.4
+The Board of Supervisors performs its supervisory duties primarily by: holding regular meetings of Board of
+Supervisors and its related special committees, attending Shareholders' General Meetings, board meetings and
+its special committee meetings, attending major meetings on operation and management held by the senior
+management, reviewing various documents of the Company, reviewing work reports and specific reports of the
+senior management, conducting opinion exchanges and discussions, carrying out special investigations and surveys at
+branches of the Company and having talks with Directors and the senior management over their duty performance
+during the year, communicating with external auditors regularly, etc. By doing so, the Board of Supervisors
+comprehensively monitors the development strategy, operation and management status, risk management status
+and internal control and compliance status of the Company as well as duty performance of the Directors and the
+senior management, and puts forward constructive and targeted operation and management advice and supervision
+opinions.
+As of the end of the reporting period, the Board of Supervisors of the Company consists of nine members,
+including three Shareholder Supervisors, three Employee Supervisors and three External Supervisors. The proportion
+of Employee Supervisors and External Supervisors in the members of the Board of Supervisors each meets the
+regulatory requirements. The three Shareholder Supervisors are from large state-owned enterprises where they serve
+important posts and have extensive experiences in business management and professional knowledge in finance
+and accounting; the three Employee Supervisors have long participated in banking operation and management,
+and thus accumulated rich professional experience in finance; and the three External Supervisors have professional
+expertise and rich practical experience in corporate governance, investment management, applied science and other
+areas. Members of the Board of Supervisors of the Company have professional ethics and professional competence
+required for their performance of duties which ensures the effective supervision by the Board of Supervisors.
+A Nomination Committee and a Supervisory Committee are established under the Board of Supervisors.
+5.6.1 Composition of the Board of Supervisors
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+China Merchants Bank
+120
+5.6.2 How the Board of Supervisors performs its supervisory duties
+Operation of the special committees under the Board of Supervisors
+The Nomination Committee and the Supervisory Committee are established under the Board of Supervisors, and
+as at the end of the reporting period, each consisting of four Supervisors, and both committees were chaired by
+External Supervisors.
+The Nomination Committee under the Board of Supervisors
+During the reporting period, the business activities of the Company complied with the Company Law of the People's
+Republic of China, Law of the People's Republic of China on Commercial Banks and the Articles of Association
+of the Company, the internal control system was improved, and the decision-making procedures were lawful and
+valid. None of the Directors and senior management of the Company were found to have non-disclosed behaviours
+relating to the violation of relevant laws, regulations or the Articles of Association of the Company or causing
+detriment to the interests of the Company and shareholders when performing their duties.
+Lawful Operation
+Independent opinions on relevant matters from the Board of Supervisors are as follows:
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+China Merchants Bank
+122
+121
+During the reporting period, the Board of Supervisors has proactively and effectively carried out supervision on the
+financial activities, internal control, risk management, lawful operation as well as the duty performance of the Board
+of Directors and the senior management of the Company pursuant to the Company Law of the People's Republic
+of China, the Articles of Association of the Company and the supervisory duties delegated by relevant supervisory
+authorities.
+Independent opinions from the Board of Supervisors
+5.6.5
+As at the end of the reporting period, the members of the Supervisory Committee under the Board of Supervisors
+included Xu Zhengjun (Chairman), Luo Sheng, Wu Heng and Cao Jian. The major duties of the Supervisory
+Committee are as follows: to formulate the supervisory plans for performance of supervisory duties by the Board
+of Supervisors; to formulate the supervisory plans for financial activities of the Company and conduct relevant
+examinations; to supervise the adoption by the Board of Directors of prudent business philosophy and value
+standards and its formulation of suitable development strategies in line with the actual situations of the Company;
+to conduct supervision and assessment on the important financial decisions of the Board of Directors and the senior
+management and their implementations, the establishment and improvement of the internal control governance
+structure and the overall risk management governance structure and the division of duties of relevant parties and
+their duty performance; to formulate the specific plans for reviewing the operation decisions, internal control and
+risk management of the Company under the authorisation of the Board of Supervisors when necessary; to formulate
+the plans for conducting resignation audit on Directors, President and other senior management when necessary.
+During the reporting period, the Supervisory Committee under the Board of Supervisors convened a total of eight
+meetings, at which it reviewed and considered the work plan of the Board of Supervisors for 2023 and the audit on
+the resignation of senior management, amendments to the "Measures for the Audit on the Resignation of Senior
+Management of China Merchants Bank" and other issues. In addition, members of the Supervisory Committee
+under the Board of Supervisors were also present at various on-site meetings convened by the Risk and Capital
+Management Committee and Audit Committee under the Board of Directors. They also reviewed the consideration
+and discussion of the above special committee on the financial decisions, risk management, capital management,
+internal control compliance, internal and external audit and other aspects of the Company, and offered comments
+and suggestions on some of the issues.
+The Supervisory Committee under the Board of Supervisors
+During the reporting period, the Nomination Committee under the Board of Supervisors held a total of two
+meetings, at which it reviewed and considered the report of the Board of Supervisors on the duty performance
+of the Directors, Supervisors and the senior management in 2022, and reviewed and approved the "Measures on
+Evaluation of Duty Performance of Senior Management of China Merchants Bank". In addition, the Nomination
+Committee under the Board of Supervisors also supervised the final accounts of total staff costs for 2022 and the
+performance-based remuneration recovery and deduction for 2022.
+As at the end of the reporting period, the members of the Nomination Committee under the Board of Supervisors
+included Cai Hongping (Chairman), Peng Bihong, Zhang Xiang and Cai Jin. The major duties of the Nomination
+Committee are as follows: to make proposals to the Board of Supervisors on the size and composition of the Board
+of Supervisors; to study the standards and procedures for the election of Supervisors and deliver relevant proposals
+to the Board of Supervisors; to conduct extensive searches for qualified candidates for Supervisors; to undertake
+preliminary examination on the qualifications of the candidates for Supervisors nominated by Shareholders and
+provide relevant recommendations; to supervise the procedures for election of Directors; to evaluate the duty
+performance of the Directors, Supervisors and senior management, and submit reports to the Board of Supervisors;
+to supervise whether the remuneration management system and its implementation among the whole Bank and the
+remuneration package for its senior management are scientific and reasonable.
+33.01
+China Merchants Bank
+The Board of Supervisors lodged no objections to the reports and proposals submitted by the Board of Directors to
+the Shareholders' General Meeting in 2023, supervised the implementation of the resolutions of the Shareholder's
+General Meeting(s), and concluded that the Board of Directors had duly implemented relevant resolutions passed at
+the Shareholders' General Meeting(s).
+Chapter V Corporate Governance
+reserve for
+every share
+of surplus
+Number of
+shares
+issued on
+capitalisation
+(inclusive of
+share held
+for every
+held
+for every share
+5.12.2 Profit appropriation of the Company for the last three years
+For the other information on the closing date for registration, the period for closure of register of members and
+the profit appropriation plan for the shareholders who are entitled to attend the Company's 2023 Annual General
+Meeting and those who are entitled to receive the final dividends for 2023, the Company will make further
+announcement(s) at appropriate times. The Company expects that the distribution of final dividends to the H
+Shareholders will be completed by 30 August 2024.
+Ten percent of the audited net profit of the Company for 2023 of RMB137.521 billion, equivalent to RMB13.752
+billion, was allocated to the statutory surplus reserve, while 1.5% of the balance of the end-of-period assets with
+the Company bearing risks and losses, equivalent to RMB7.787 billion, was appropriated to the general reserve.
+2.5% of the Company's mutual fund custody fee income for 2023, equivalent to RMB68 million, was appropriated
+to the risk reserve for the mutual fund custody business. Based on the total share capital of A Shares and H Shares
+on the record date for implementation of the profit appropriation, the Company proposed to declare a cash dividend
+of RMB1.972 (tax included) for every share to all shareholders of the Company whose names appear on the register,
+denominated and declared in Renminbi, payable in Renminbi for holders of A Shares and in Hong Kong Dollars for
+holders of H Shares. The actual appropriations amount in HKD would be calculated based on the average RMB/
+HKD benchmark rate to be released by the People's Bank of China for the previous week (including the day of the
+Shareholders' General Meeting) before the date of the Shareholders' General Meeting. The retained profits will be
+carried forward to the next year. In 2023, the Company did not transfer any capital reserve into share capital. The
+above profit appropriation plan is subject to consideration and approval at the 2023 Annual General Meeting of the
+Company.
+5.12.1 The profit appropriation plan for 2023
+5.12 Profit Appropriation
+Chapter V Corporate Governance
+Number of Cash dividend
+bonus shares
+tax, in RMB) (No. of shares)
+Total cash
+dividends
+(inclusive of
+tax, in
+millions
+of RMB)
+116,309
+38,385
+1.522
+2021
+2022
+(%)
+RMB)
+Annual Report 2023 (H share)
+Year
+financial
+statements
+cash dividend
+to net profit
+attributable
+to holders
+of ordinary
+shares in the
+consolidated
+Proportion of
+for the year
+(in millions of
+financial
+statements
+to holders
+of ordinary
+shares in the
+consolidated
+Net profit
+attributable
+Annual Report 2023 (H share)
+China Merchants Bank
+held
+(No. of shares)
+The ordinary shareholders of the Company are entitled to receive distributable profits and other forms of profit
+appropriation based on their shareholdings. The preference shareholders of the Company are entitled to preferential
+profit appropriation.
+An extraordinary Shareholders' General Meeting shall be convened by the Board of Directors upon request in writing
+by shareholders individually or jointly holding more than 10% of the Company's voting shares at such meeting.
+The Board of Directors shall, in accordance with the laws, administrative regulations and the Articles of Association
+of the Company, provide a written reply of approval or disapproval for convening an extraordinary Shareholders'
+General Meeting within 10 days upon receiving the request. If the Board of Directors agrees to convene an
+extraordinary Shareholders' General Meeting, a notice of such meeting shall be issued within 5 days upon the
+approval for a resolution from the Board of Directors.
+Convening of extraordinary Shareholders' General Meetings
+5.11 Shareholders' Rights
+Contact Us" on the Company's official
+website (www.cmbchina.com) and click the URL link "Email" thereon to leave a message for us.
+-
+Investors may login onto the page of "CMB Info - Investor Relations
+Fax: +86 755 8319 5109
+Tel: +86 755 8319 8888 (Transfer to the investor relations management team of the Office of the Board of
+Directors)
+Address: 7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province, China
+Office of the Board of Directors of China Merchants Bank
+Investor inquiries
+During the reporting period, the Company strictly complied with statutory obligations of information disclosure,
+and disclosed all major information in a truthful, accurate, complete, timely and fair manner. At the same time,
+the Company attached importance to enhancing proactiveness and transparency in information disclosure in the
+light of investors' needs and further strengthened the disclosure of information of concern to investors and hot
+market issues in periodic reports. In accordance with regulatory rules and internal rules and systems, the Company
+effectively managed inside information and insiders, and organised the registration of insiders and other related
+work in a timely manner. In order to enhance the reading experience of investors, the Company produced a short
+video named "CMB Remaining Hopeful Despite Adversity in 2022 for the annual report, which achieved good
+communication effects.
+As a company listed on both Shanghai Stock Exchange and the Hong Kong Stock Exchange, the Company has
+established a relatively sound system of information disclosure management in accordance with the domestic and
+overseas regulatory rules, which provides systematic safeguards and a basis for coordinating the Group's information
+disclosure work. The "Management System for Information Disclosure of China Merchants Bank Co., Ltd." and
+the "Management System for Inside Information and Insiders of China Merchants Bank Co., Ltd." specify the
+internal control procedures and management measures for the disclosure of relevant material information, including
+inside information. Meanwhile, the Company has also established a series of targeted operation mechanisms and
+workflows based on specific work requirements to ensure that internal and external information is circulated in an
+efficient, orderly and confidential manner, so as to guarantee the compliant operation of information disclosure to
+the greatest extent.
+Information disclosure
+Other rights conferred by laws, administrative regulations and the Articles of Association of the Company.
+If the Board of Directors does not agree to convene an extraordinary Shareholders' General Meeting or fails to
+make a reply within 10 days upon receiving the request, the proposers are entitled to propose to the Board of
+Supervisors in writing to convene an extraordinary Shareholders' General Meeting. If the Board of Supervisors agrees
+to convene an extraordinary Shareholders' General Meeting, a notice of such meeting shall be issued within 5 days
+upon receiving the request. If the Board of Supervisors fails to give such notice of the meeting within the specified
+timeframe, the shareholders individually or jointly holding more than 10% of the Company's voting shares for more
+than 90 consecutive days may convene and preside over an extraordinary Shareholders' General Meeting on their
+own.
+132,775
+126
+125
+Other rights
+In the event of any of the following circumstances, the Company shall notify the preference shareholders of the
+convening of a Shareholders' General Meeting and follow the procedures for notifying the ordinary shareholders
+set forth in the Articles of Association of the Company. The preference shareholders of the Company shall be
+entitled to attend the Shareholders' General Meeting and the classified voting with ordinary shareholders on the
+following matters: (1) amendments to the Articles of Association in relation to preference shares; (2) reduction of
+the registered capital of the Company by more than 10% at one time or in the aggregate; (3) merger, division,
+dissolution or change of corporate form of the Company; (4) issuance of preference shares; and (5) other
+circumstances as specified by laws, administrative regulations or the Articles of Association.
+Special provisions on rights of holders of preference shares
+Shareholders are entitled to supervise the operation of the Company and put forward suggestions or inquiries on it,
+please refer to Chapter V "Investor Inquiries" for details of the relevant contacts.
+Shareholders are entitled to inquire the information on the Company in accordance with the provisions of the
+Articles of Association of the Company upon the submission of written documents certifying the class and quantity
+of shares of the Company held by the shareholders, on condition that the identity of whom has been verified by the
+Company. For shareholders who need to inquire relevant information on the Company or have any inquiries about
+their shareholdings in the Company, please refer to sections 1.1.4 and 1.1.9 in Chapter I "Company Information"
+for details of the relevant contacts.
+Making inquiries and suggestions to the Board of Directors
+If the Company fails to pay dividends on preference shares as agreed for a total of three fiscal years or two
+consecutive fiscal years, the voting rights of the preference shareholders shall be restored, and the preference
+shareholders shall have the right to attend the Shareholders' General Meeting and vote with ordinary shareholders
+from the day following the date on which the Shareholders' General Meeting resolves not to distribute the dividends
+of the preference shares as agreed for that year. The voting rights of the aforesaid preference shareholders shall
+remain in effect until such time as the Company pays the dividends in full for that year.
+Convening of extraordinary board meeting
+Please refer to section 1.1.4 in Chapter I "Company Information" for the relevant contact details of making interim
+proposals to the Shareholders' General Meetings.
+If the Company convenes a Shareholders' General Meeting, shareholders individually or jointly holding more than
+3% of the total voting shares of the Company may submit interim proposals in writing to the Company at least 15
+working days before the convening of the Shareholders' General Meeting and submit the same to the convenor.
+The convenor shall issue a supplemental notice of the Shareholders' General Meeting within 2 working days upon
+receiving the interim proposals, and announce the contents of such proposals.
+Making interim proposals at the Shareholders' General Meetings
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+An extraordinary board meeting may be held if it is requisitioned by shareholders representing more than 10% of
+the voting rights. The Chairman shall convene the extraordinary board meeting within 10 days upon receiving such
+proposal requisitioned by shareholders representing more than 10% of the voting rights.
+China Merchants Bank
+6.3 Reserve Available for Distribution
+For details of changes in the reserve available for distribution of the Company, please refer to the "Statement of
+Changes in Equity" in the financial statements.
+6.4 Fixed Assets
+Changes in fixed assets of the Company as at the end of the reporting period are detailed in Note 28 to the
+financial statements.
+6.5 Purchase, Sale or Repurchase of Listed Securities of the Company
+There is no provision for pre-emptive rights under the Articles of Association of the Company and the shareholders
+of the Company have not been granted any pre-emptive rights.
+6.6 Pre-emptive Rights
+6.7 Retirement and Welfare
+Details about retirement welfare provided by the Company to its employees are detailed in Note 39 to the financial
+statements.
+6.8 Principal Customers
+Neither the Company nor its subsidiaries had purchased, sold or repurchased any of the Company's listed securities
+during the reporting period.
+Details are set out in Chapter II Summary of Accounting Data and Financial Indicators.
+Annual Report 2023 (H share)
+The Company is engaged in banking and related financial services.
+6.1 Principal Business Activities
+Important Events
+137
+Chapter VI Important Events
+As at the end of the reporting period, the net operating income contributed by the top 5 customers of the Company
+did not exceed 30% of the total net operating income of the Company.
+China Merchants Bank
+to grow together
+Focusing on the core
+needs of customers,
+accompanying customers
+135
+The Company has applied the principles set out in the Corporate Governance Code set out in Appendix C1 to the
+Hong Kong Listing Rules to its corporate governance structure and practices, and the application of such principles
+is set out in this report. During the reporting period, the Company had complied with the principles and code
+provisions of the Corporate Governance Code and adhered to the majority of the recommended best practices
+thereunder.
+5.19 Compliance with the Corporate Governance Code
+6.2 Financial Highlights
+138
+Save as disclosed herein, the Company is not aware that there has been any financial, business, kinship or other
+material or connected relations among the Directors, Supervisors and senior management of the Company.
+Chapter VI Important Events
+139
+Both "connected transactions" and "connected parties" in this section are terms used in Hong Kong Listing Rules.
+28
+During the reporting period, the continuing connected transactions between the Company and CMFM Group
+amounted to RMB1,016 million.
+On 28 December 2022, the Company entered into a Business Co-operation Agreement with CMFM on normal
+commercial principles after arm's length negotiation for a term commencing on 1 January 2023 and expiring on
+31 December 2025. CMFM Group shall calculate fees based on the rates specified in the fund offering documents
+and/or the offering prospectuses, and shall pay agency service fees to the Company according to the agreement.
+Meanwhile, the Company has announced the annual caps of RMB1.5 billion, RMB1.8 billion and RMB2.2 billion for
+the continuing connected transactions with CMFM Group for 2023, 2024 and 2025, respectively as approved by the
+Board of Directors. The annual caps for the service fees were not more than 5% of the relevant percentage ratios
+calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules. Therefore, these transactions would only
+be subject to the reporting, announcement and annual review requirements under the Hong Kong Listing Rules,
+and exempt from the independent shareholders' approval requirement. For details, please refer to the relevant
+announcement of the Company dated 28 December 2022.
+As at the end of the reporting period, the Company and China Merchants Securities Co., Ltd. held 55% and 45%
+of the equity interest in CMFM, respectively. Therefore, in accordance with the Hong Kong Listing Rules, CMFM
+and its associates ("CMFM Group") are connected parties of the Company, and the fund agency distribution service
+provided by the Company to CMFM Group constituted non-exempt continuing connected transactions of the
+Company under the Hong Kong Listing Rules.
+6.16.2 Non-exempt continuing connected transactions
+Pursuant to Chapter 14A of the Hong Kong Listing Rules, a majority of continuing connected transactions of the
+Company met de minimis exemption and the non-exempt continuing connected transactions fulfilled the relevant
+reporting and announcement required by the Hong Kong Listing Rules.
+6.16.1 Overview of connected transactions
+6.16 Significant Connected Transactions28
+According to the relevant requirements of the CSRC, the Company considered and approved the "Resolution
+Regarding the Dilution of Current Returns by the Non-public Issuance of Preference Shares and the Remedial
+Measures" at its 2016 Annual General Meeting, and formulated the remedial measures in respect of the dilution
+of current returns of the holders of ordinary shares which may be caused by the non-public issuance of preference
+shares. Meanwhile, the Directors and senior management of the Company also undertook to earnestly implement
+the remedial measures. For details, please refer to the documents of the 2016 Annual General Meeting of the
+Company published on the website of the Shanghai Stock Exchange, Hong Kong Exchanges and Clearing Limited
+and the Company. So far as the Company is aware, as at the end of the reporting period, neither the Company nor
+its Directors and senior management had breached any of the aforesaid undertakings.
+In the course of the rights issue of A shares and H shares in 2013, each of China Merchants Group Ltd., China
+Merchants Steam Navigation Co., Ltd. (KESĦRA) (now renamed as China Merchants Steam
+Navigation Co., Ltd. () and China Ocean Shipping (Group) Company (now renamed as China
+Ocean Shipping Company Limited) had undertaken that they would not seek for related party transactions on
+terms more favourable than those given to other shareholders; they would repay the principal and interest of
+the loans granted by the Company on time; they would not interfere with the daily operations of the Company.
+Upon expiration of the lock-up period of the allocated shares, they would not transfer their allocated shares until
+they obtain the approval from the regulatory authorities on the share transfer and the shareholder qualification of
+transferees; and upon obtaining the approval from the Board of Directors and the Shareholders' General Meeting
+of the Company, they would continue to support the reasonable capital needs of the Company; they would not
+impose unreasonable performance indicators on the Company. For details, please refer to the A Share Rights Issue
+Prospectus dated 22 August 2013 on the websites of Shanghai Stock Exchange, Hong Kong Exchanges and Clearing
+Limited and the Company. So far as the Company is aware, as at the end of the reporting period, the above
+shareholders had not violated the aforesaid undertakings.
+China Merchants Bank
+Chapter VI Important Events
+During the reporting period, there were no circumstances where the Company failed to fulfill any obligation under
+effective court judgements or repay any due debt of a significant amount.
+6.14 Explanation on the Integrity of the Company
+During the reporting period, the Company was not subject to criminal investigations for suspected crimes. The
+Company, its Directors, Supervisors and senior management members were not subject to criminal punishment, or
+subject to investigations by the CSRC or administrative punishment by the CSRC for suspected violations of laws and
+regulations, or subject to administrative punishments by other competent authorities that have major impact on the
+operation of the Company. None of the Directors, Supervisors and senior management members of the Company
+was subject to compulsory measures in accordance with the law for suspected crimes, or subject to detention by
+the disciplinary inspection and supervision authorities for suspected serious violations of laws and regulations or
+duty-related crimes that affected the performance of their duties, or subject to compulsory measures taken by other
+competent authorities for suspected violations of laws and regulations that affected the performance of their duties.
+6.13 Disciplinary Actions Imposed on the Company, Directors,
+Supervisors or Senior Management
+During the reporting period, the Directors and Supervisors of the Company have no material interests in contracts
+of significance to which the Company or any of its subsidiaries was a party. None of the Directors and Supervisors
+of the Company has entered into any service contract with the Company which is not terminable by the Company
+within one year without payment of compensation (excluding statutory compensation).
+6.12 Contractual Rights and Service Contracts of Directors and
+Supervisors
+6.11 Financial, Business and Kinship Relations among Directors,
+Supervisors and Senior Management
+During the reporting period, none of the Directors of the Company has any interests in the businesses which
+compete or are likely to compete, either directly or indirectly, with those of the Company.
+6.10 Directors' Interests in the Businesses Competing with Those of
+the Company
+During the reporting period, the Company has complied in all material aspects with the relevant laws and
+regulations that would have a material impact on the operations of the Company.
+6.9 Compliance with Laws and Regulations
+Annual Report 2023 (H share)
+China Merchants Bank
+Annual Report 2023 (H share)
+6.15 Undertakings
+130
+During the reporting period, the Company further strengthened internal control, risk management, and internal
+audit. The Company focused on the implementation of national economic and financial policies, followed the key
+points of strategy, risk and supervision, adhered to the value and problem orientation, carried out audit inspection
+around serving the real economy, green finance, inclusive finance and other aspects, prevented risks, promoted
+rectification, consolidated the foundation, promoted the construction of digital audit, and effectively promoted the
+steady development of bank-wide operation and management.
+1
+3,182,493
+Credit Card Centre
+686 Lai'an Road, Pudong New Area,
+Shanghai
+1
+893,692
+Global Markets
+Centre
+Yangtze River Delta Shanghai Branch
+7088 Shennan Boulevard, Futian District,
+Shenzhen
+Shanghai Pilot
+Floor 6, Building 2, No. 1088, Lujiazui Ring
+Road, Pudong New Area, Shanghai
+1088 Lujiazui Ring Road, Pudong New
+Area, Shanghai
+1
+977,988
+102
+442,813
+56 Bohang Road, Pudong New Area,
+Shanghai
+4
+10,477
+Free Trade Zone
+Branch
+Nanjing Branch
+Hangzhou Branch
+199 Lushan Road, Jianye District, Nanjing
+300 Fuchun Road, Shangcheng District,
+Hangzhou
+Head Office
+branches
+Cloud Data Centre*
+Security Department*
+Anti-money Laundering and
+Sanction Compliance Management Centre"
+Office of the Labour Union
+Administration Department
+Representative Offices (United States and Taipei)
+Project Management Department*
+Note "secondary department
+of RMB)
+*independent secondary department
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+5.16 Head Office and Branches and Representative Offices
+Asset scale
+No. of (in millions
+Region
+Head Office
+Name of branch
+Business address
+China Merchants Bank
+Testing Centre"
+85
+78
+156 Fuxingmen Nei Dajie, Xicheng District,
+129
+515,074
+Beijing
+Qingdao Branch
+65 Hai'er Road, Laoshan District, Qingdao
+54
+77,123
+38,327
+Tianjin Branch
+44
+106,417
+Hexi District, Tianjin
+Jinan Branch
+7000 Jingshi Road, High-tech Zone, Jinan
+64
+136,831
+Yantai Branch
+255 Guangdong Road and 9 Qianjin Road,
+281,062
+18
+Nantong Branch
+Beijing Branch
+279,521
+Ningbo Branch
+342 Min' an East Road, Yinzhou District,
+Ningbo
+34
+105,030
+Suzhou Branch
+36 Wansheng Street, Industrial Park,
+Suzhou
+34
+111 Gongnong Road, Nantong
+156,045
+20
+71,093
+District, Wuxi
+Wenzhou Branch
+464 Fudong Road, Lucheng District,
+Wenzhou
+15
+39,404
+Bohai Rim
+Wuxi Branch
+Data Asset and Platform R&D Centre*
+Infrastructure R&D Centre*
+Wholesale Application R&D Centre*
+The Company has established a multi-level, professional and digital talent training system, and adopts a diversified
+training method that combines online and offline training. The contents of training mainly focus on knowledge of its
+business and products, professional ethics and risk compliance, cultural values and leadership, covering employees'
+needs for career growth at different levels.
+For details of the Company's human resources development, please refer to section 4.3.6 "Human resources
+development" in this report.
+27
+Including employees of the Company, CMB Wing Lung Bank and its subsidiaries, CMB Financial Leasing, CMB International Capital and its subsidiaries, CMB
+Wealth Management, China Merchants Fund and its subsidiaries, CIGNA & CMB Life Insurance, CIGNA & CMAM, MUCFC, CMB Network Technology and
+CMB YunChuang.
+131
+132
+China Merchants Bank
+Chapter V Corporate Governance
+The Company's remuneration policy is in line with its cultural concepts, operation targets and corporate values.
+It aims to "improve its market-based remuneration incentive and restrictive mechanisms, serve its strategic and
+business development and fully mobilise the enthusiasm of its teams". The remuneration policy adheres to the
+remuneration management principles featuring "value guidance, performance base, Six Can-do mechanism and risk
+control" and reflects the remuneration concept of "get more pay for more work in a flexible way". At the same
+time, in order to mitigate various operating and management risks, the Company has established a mechanism
+related to remuneration deferred payment and performance-based remuneration recovery and deduction in
+accordance with regulatory requirements and operational management needs. During the reporting period, the
+Company implemented the performance-based remuneration recovery and deduction against 4,415 people, with the
+performance-based remuneration recovery and deduction amount of RMB43.29 million.
+Annual Report 2023 (H share)
+China Merchants Bank
+Head Office
+Branches
+Sub-branches
+Office of the Board of Directors
+Office of the Board of Supervisors
+General Office
+Consumer Rights Protection Centre (Customer Service Centre)#
+5.15 Organisational Structure of the Company as at the End of the Reporting Period
+Human Resources Department
+Staff remuneration policy and training
+The classification of the Group's employees in research and development by educational background is: 5,087
+employees with master's degrees or above, 5,453 employees with bachelor's degrees and 110 employees with junior
+college degrees or below. The age structure is as follows: 5,424 employees aged 30 and below, 4,263 employees
+aged 30-40 (excluding 30, but including 40), 813 employees aged 40-50 (excluding 40, but including 50) and 150
+employees aged 50-60 (excluding 50, but including 60).
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+H-share shareholders
+According to relevant provisions of the Notice on Matters Concerning the Levy and Administration of Individual
+Income Tax after the Repeal of Guo Shui Fa [1993] No. 045 ([1993]045¾Ð
+(Guo Shui Han [2011] No. 348) and the Notice on the Issues Concerning Chinese Resident Enterprises'
+Withholding of Enterprise Income Tax for Distribution of Dividends to H-share Shareholders Who Are Foreign Non-
+resident Enterprises (關於中國居民企業向境外 H 股非居民企業股東派發股息代扣代繳企業所得稅有關問題的通知)
+(Guo Shui Han [2008] No.897), the Company withholds dividend income tax at the tax rate of 10% for individual
+and enterprise shareholders of the Company's H shares. However, if otherwise set forth in relevant tax laws,
+regulations, and treaties, the Company shall handle specifically in accordance with the collection and administration
+requirements of the taxation authorities.
+For investors investing in the Company's H shares through Southbound Trading, according to the relevant
+requirements of the Notice on the Tax Policies Related to the Pilot Program of the Shanghai-Hong Kong Stock
+Connect (Cai Shui [2014] No. 81) and the Notice on the Tax Policies Related to the Pilot Program of the Shenzhen-
+Hong Kong Stock Connect (Cai Shui [2016] No. 127), the Company shall withhold individual income tax at the tax
+rate of 20% for dividends received by individual investors in the Chinese mainland from investing in the Company's
+H shares through Southbound Trading; dividends received by securities investment funds in the Chinese mainland
+from investing in the Company's H shares through Southbound Trading shall be taxed as individual investors; the
+Company will not withhold income tax on dividends for corporate investors in the Chinese mainland, and the tax
+payable shall be declared and paid by the relevant enterprises themselves.
+Shareholders of domestic preferred shares
+The Company is committed to eliminating gender discrimination in recruitment. In terms of remuneration
+management, the Company adheres to the principle of gender equality in remuneration and benefits, and provides
+employees with equal training and career development opportunities. For details, please refer to 4.3.6 "Human
+resources development" in this report. The Company will continue to take steps to promote diversity among
+employees at all levels.
+The individual income tax payment matters related to the dividends of domestic preferred shares obtained by
+individuals through non-public issuance shall be handled in accordance with relevant taxation laws and regulations
+of China.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+5.14 Information on Employees
+As of 31 December 2023, the Group had a total of 116,529 employees 27 (including dispatched employees).
+The classification of the Group's employees by gender is: 49,864 males and 66,665 females, with a relatively
+balanced gender ratio.
+The classification of the Group's employees by profession is: 19,746 employees in corporate finance, 52,834
+employees in retail finance, 6,844 employees in risk management, 17,377 employees in operation and management,
+10,650 employees in research and development, 983 employees in administrative and logistics support and 8,095
+employees in comprehensive management.
+The classification of the Group's employees by educational background is: 28,352 employees with master's degrees
+and above, 74,849 employees with bachelor's degrees and 13,328 employees with junior college degrees or below.
+The distribution of the Group's employees by regions is: 29,066 employees in the Yangtze River Delta, 14,471
+employees in the Bohai Rim, 36,176 employees in the Pearl River Delta and the Western Taiwan Straits Economic
+Zone, 5,217 employees in the Northeast, 12,361 employees in the Central, 16,029 employees in the West and 3,209
+employees outside the Chinese mainland.
+According to the Law of the People's Republic of China on Enterprise Income Tax and the Regulations for
+Implementation of the Law on Enterprise Income Tax, the dividend income of domestic preferred shares among
+eligible resident enterprises shall be tax-free income. The dividend income of domestic preferred shares obtained
+by non-resident enterprises shall be tax-deductible, and the enterprise income tax shall be levied at the tax rate of
+10%.
+Fintech Office
+Assets and Liabilities Management Department
+Financial Accounting Department
+Retail Credit Business Department
+Credit Card Centre
+Risk Management Department
+Consumer Finance Centre*
+Operational Risk Management Department*
+Market Risk Management Department*
+Credit Approval Department
+Asset Security Department
+Private Banking Department
+Operation Management Department
+Audit Department
+Inspection Department
+Party Committee Inspection Leading Team Office
+Legal Compliance Department
+CMB Research Institute
+Training Centre
+Operation Centre*
+Retail Application R&D Centre"
+Information Technology Department
+Network Operation Service Centre*
+Wealth Management Platform Department
+Offshore Business Department*
+General Office of Corporate Finance
+Strategic Customers Department
+Institutional Customers Department
+Investment Management Department*
+Overseas Branch Management Department*
+Procurement Management Department*
+Pension Finance Department
+Financial Institutions Department
+Transaction Banking Department
+Cross-border Finance Department
+Inclusive Finance Department
+General Office of Investment Banking and Financial Markets
+Investment Banking Department
+Global Markets Centre
+Asset Management Department
+Asset Custody Department
+Bills Business Department
+Bill Brokerage Department*
+General Office of Retail Finance
+117 Changjiang Road, Economic &
+17
+6-107, 6-108 1st Financial Street, Binhu
+Technological Development Area, Yantai
+9 Chilechuan Avenue, Saihan District,
+Hohhot
+24
+33,349
+Nanning Branch
+No. 136-5 Minzu Avenue, Qingxiu District,
+Nanning
+20
+20
+40,499
+Hohhot Branch
+32,305
+18
+34,433
+Yinchuan Branch
+Centre, Guanshanhu District, Guiyang
+138 Beijingzhong Road, Jinfeng District,
+15
+16,982
+Yinchuan
+Xining Branch
+West 2nd Tower, International Finance
+79 Haiyan Road, Chengxi District, Xining
+74,485
+1 Chongren Street, Wuhua District,
+Kunming
+10
+34,585
+Chengdu Branch
+1, the 3rd section of Renmin Road South,
+Wuhou District, Chengdu
+59
+121,684
+9 Qingyang Road, Chengguan District,
+Lanzhou
+45
+56
+25
+1 Gaoxin No.2 Road, Gaoxin District, Xi'an
+88 Xingguang Road, New North District,
+Chongqing
+69
+141,213
+53
+130,442
+2 Huanghe Road, Urumchi
+18
+34,294
+43,304
+10
+10,570
+Overseas
+1
+13,476
+1
+10,936
+1
+12,283
+Total
+/
+20 Boulevard Royal, L-2449, Luxembourg
+18/F, 20 Fenchurch Street, London, UK
+L39, GPT, 1 Farrer Place, Sydney, NSW
+/
+10,317,223
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter V Corporate Governance
+5.17 Internal Control
+During the reporting period, the Company continued to conduct educational program in respect of compliance,
+case study and code of conduct while constantly strengthening employees' awareness of risks, compliance, policies
+and the big picture, actively carried out the culture publicity activity of "Compliance 2023". By organising various
+compliance publicity activities such as the compliance image publicity video exhibition, writing competition on
+compliance, selection for excellent compliance teaching, online learning of "compliance short video", etc., the
+Company further enhanced the compliance awareness and red-line mentality of all management staff and employees,
+and deeply cultivated the compliance culture of "observing laws and disciplines", providing long-term compliance
+guarantee for the healthy development of various businesses. Meanwhile, the Company further strengthened the
+internal supervision and inspection work, organised the Head Office departments and domestic branches to prepare
+annual inspection plans based on the weak management areas and problem-prone aspects while supervising the
+implementation of these plans, and promoted the establishment of inspection and supervision teams at all domestic
+branches to ensure that the management of branches can proactively, comprehensively and effectively grasp the
+problems and deficiencies in risk management and internal control of their respective branches. In addition, the
+Company fully implemented the rectification work of the problems found in the internal and external inspection and
+effectively guaranteed the compliance operation and stable development of the Company's businesses.
+During the reporting period, the Company organised evaluation campaigns on the status of internal control of the
+whole Bank in 2023. As reviewed by the Board of Directors of the Company, no significant defects in terms of
+completeness, reasonableness and effectiveness were found in the Company's internal control system. For details,
+please refer to the "Report of Evaluation on Internal Control of China Merchants Bank Co., Ltd. in 2023", and
+the "Auditors' Report on Internal Control of China Merchants Bank Co., Ltd. in 2023" issued by Deloitte Touche
+Tohmatsu Certified Public Accountants LLP with standard unqualified opinions.
+5.18 Internal Audit
+The Company implements an independent and vertical internal audit system. The Board of Directors shall take the
+ultimate responsibility for the independence and effectiveness of the internal audit, review and approve the internal
+audit charter, audit organisation system, medium- and long-term audit plan and annual audit plan, appoint the
+head of the Audit Department, provide necessary guarantees for the independent and objective implementation
+of internal audit and assess the independence and effectiveness of internal audit. The Head Office has set up an
+Audit Department to undertake specific internal audit responsibilities, accept the leadership of the Head Office
+Party Committee, be responsible for and report to the Board of Directors and its Audit Committee and accept the
+guidance of the Board of Supervisors. The Head Office Audit Department has nine audit divisions to strengthen the
+audit, inspection and rectification follow-up of regional branches and institutions. The Head Office Audit Department
+has set up nine teams to increase support and guidance to the audit division and four corresponding audit teams to
+strengthen the audit of Head Office departments, overseas institutions, credit card business, etc.
+1,935
+Taipei
+Sydney Branch
+Luxembourg Branch
+London Branch
+Hong Kong Branch
+31/F, Three Exchange Square, 8 Connaught
+Place, Central, Hong Kong
+1
+108,116
+USA Representative
+Office
+535 Madison Avenue, 18th Floor, New
+York, U.S.A
+1
+New York Branch
+535 Madison Avenue, 18th Floor, New
+York, U.S.A
+1
+61,224
+Singapore Branch
+Taipei
+1 Raffles Place, Tower 2, #32-61, Singapore
+333, Section 1, Jilong Road, Xinyi District,
+1
+14,799
+1
+/
+Representative
+Office
+1 Shimao Road North, Haikou
+37,794
+Guiyang Branch
+265 Nan Zhong Huan Road, Xiaodian
+District, Taiyuan
+Quanzhou Branch
+China SCE⚫ International Finance Centre (+
+17
+32,445
+•), South of Eastern Section of
+Northeast
+Dongguan Branch
+Foshan Branch
+80,627
+Shenyang Branch
+Dalian Branch
+Harbin Branch
+Changchun Branch
+Baozhou Road, Fengze District, Quanzhou
+200 Hongfu Road, Nancheng District,
+Dongguan
+29
+74,215
+36
+84,347
+12 Shiyiwei Road, Heping District, Shenyang
+17 Renmin Road, Zhongshan District, Dalian
+3 Zhongyang Avenue, Daoli District, Harbin
+9999 Renmin Avenue, Nanguan District,
+Changchun
+51
+50,799
+12 Denghu Road East, Nanhai District,
+Foshan
+35
+33
+Xiamen Branch
+Shijiazhuang Branch 172 Zhonghua South Street, Qiaoxi District,
+20
+36,123
+Shijiazhuang
+Pearl River Delta
+and the Western
+Taiwan Straits
+Economic Zone
+Tangshan Branch
+Guangzhou Branch
+Shenzhen Branch
+45 Beixinxi Road, Lubei District, Tangshan
+11
+18 Lingshiguan Road, Siming District,
+Xiamen
+12,987
+23
+267,947
+121
+551,106
+Fuzhou Branch
+316 Jiangbinzhong Boulevard, Taijiang
+District, Fuzhou
+41
+82,835
+5 Huasui Road, Tianhe District, Guangzhou
+2016 Shennan Boulevard, Futian District,
+Shenzhen
+44,465
+74
+46,617
+98,245
+District, Nanchang
+Changsha Branch
+39 Chazishan East Road, Yuelu District,
+50
+97,834
+Changsha
+West
+Hefei Branch
+Zhengzhou Branch
+Taiyuan Branch
+Haikou Branch
+Lanzhou Branch
+Xi'an Branch
+Chongqing Branch
+Urumchi Branch
+Kunming Branch
+42
+97,690
+96 Nongye Road East, Zhengzhou
+53
+40
+101,307
+51
+1111 Huizhan Road, Honggutan New
+169 Funan Road, Hefei
+210,665
+26,806
+Nanchang Branch
+133
+China Merchants Bank
+Chapter V Corporate Governance
+Annual Report 2023 (H share)
+Asset scale
+No. of
+(in millions
+134
+Region
+Central
+99
+188 Yunxia Road, Jianghan District, Wuhan
+Wuhan Branch
+of RMB)
+23
+Business address
+Name of branch
+branches
+in shares
+14,530,768
+Trustee
+180
+Approved lending agent
+86,536,612
+Long
+4
+corporation
+1.22
+Short
+Interest of controlled
+37,148,259
+308,250,977
+6.71
+42,214,647
+Long
+164,968,770
+Investment manager Person
+Long
+corporation
+Long
+Interest of controlled
+Long
+H
+JPMorgan Chase & Co.
+(BVI) Limited
+1.89
+Short
+10.41
+having a security interest
+Investment manager
+(3) Pagoda Tree Investment Company Limited was deemed to hold interests in the 477,903,500 H shares in the Company held by China Merchants
+Union (BVI) Limited by virtue of its wholly owned subsidiary Compass Investment Company Limited:
+37,469,112
+3
+149
+- through physically settled unlisted derivatives
+-through cash settled unlisted derivatives.
+- through physically settled listed derivatives
+-through cash settled listed derivatives
+2,868,500 H shares (long position) and 4,922,000 H shares (short position)
+29,500 H shares (long position) and 782,722 H shares (short position)
+2,945,279 H shares (long position) and 7,517,347 H shares (short position)
+7,669,780 H shares (long position) and 5,439,064 H shares (short position)
+(4) JPMorgan Chase & Co. was deemed to hold a total of 308,250,977 H shares (long position) and 37,469,112 H shares (short position) in the
+Company by virtue of its control over a number of companies. The equity interests and short positions of JPMorgan Chase & Co. in the Company
+included a lending pool of 86,536,612 H shares. Besides, 13,513,059 H shares (long position) and 18,661,133 H shares (short position) were held
+through derivatives as follows:
+The 477,903,500 H shares referred to in (3) and (3.1) to (3.3) above represented the same shares.
+Compass Investment Company Limited was deemed to hold interests in the 477,903,500 H shares in the Company which was deemed to
+be held by CNIC Corporation Limited by virtue of holding 90% interest in CNIC Corporation Limited.
+Verise Holdings Company Limited was wholly-owned by CNIC Corporation Limited. Therefore, CNIC Corporation Limited was deemed to
+hold interests in the 477,903,500 H shares in the Company which was deemed to be held by Verise Holdings Company Limited.
+China Merchants Union (BVI) Limited held 477,903,500 H shares (long position) in the Company. Verise Holdings Company Limited was
+deemed to hold interests in the 477,903,500 H shares in the Company held by China Merchants Union (BVI) Limited by virtue of holding
+50% interest in China Merchants Union (BVI) Limited.
+(3.3)
+(3.2)
+(3.1)
+(2) New China Asset Management Co., Ltd. is the trustee of all the A shares in the Company held by Hexie Health Insurance Co., Ltd., by virtue of
+which New China Asset Management Co., Ltd. was deemed to hold interests in all the A shares in the Company held by Hexie Health Insurance
+Co., Ltd..
+(1) For details of China Merchants Group Ltd. and its subsidiaries' interests in the Company, please refer to section 7.3.1 "Information on the
+Company's largest shareholder" in this report.
+0.003
+0.02
+4
+0.82
+0.15
+BlackRock, Inc.
+H
+Long
+320,853
+Short
+271,479,387
+5
+5.91
+1.08
+752,500
+5
+Interest of controlled
+corporation
+Interest of controlled
+corporation
+477,903,500
+Merchants Finance
+Long
+State-owned legal 1,258,542,349
+person
+4.99
+A Shares not subject to
+trading restrictions on
+sales
+5
+China Merchants Financial Holdings State-owned legal 1,147,377,415
+Co., Ltd.
+4.55
+A Shares not subject to
+person
+trading restrictions on
+sales
+6
+Hexie Health Insurance Co., Ltd. -
+Traditional Ordinary insurance
+Domestic legal 1,130,991,537
+person
+4.48
+A Shares not subject to
+trading restrictions on
+products
+sales
+7
+Hong Kong Securities Clearing
+Company Limited
+Overseas legal 1,060,494,391
+person
+4.20
+A Shares not subject to
+-446,296,795
+Shenzhen Yan Qing Investment and
+Development Company Ltd.
+trading restrictions on
+4
+A Shares not subject to
+(%)
+Type of shares
+(share)
+(share)
+(share)
+1
+HKSCC Nominees Ltd.
+Overseas legal
+person
+4,554,053,841
+18.06
+H Shares not subject to
+796,918
+Unknown
+trading restrictions on
+sales
+2
+China Merchants Steam Navigation
+Co., Ltd.
+State-owned legal 3,289,470,337
+person
+13.04
+A Shares not subject to
+trading restrictions on
+sales
+3
+China Ocean Shipping Company
+Limited
+State-owned legal 1,574,729,111
+person
+6.24
+trading restrictions on
+sales
+(share)
+sales
+Shenzhen Chu Yuan Investment and
+Development Company Ltd.
+7.3.1 Information on the Company's largest shareholder
+As at the end of the reporting period, China Merchants Group Ltd., through its subsidiaries, namely China
+Merchants Steam Navigation Co., Ltd., China Merchants Financial Holdings Co. Ltd., Shenzhen Yan Qing Investment
+and Development Company Ltd., Shenzhen Chu Yuan Investment and Development Company Ltd., China Merchants
+Union (BVI) Limited, Best Winner Investment Limited and China Merchants Industry Development (Shenzhen) Limited,
+indirectly held an aggregate of 29.97% shares in the Company. There was no pledge of the shares of the Company.
+Specifically, China Merchants Steam Navigation Co., Ltd. directly held 13.04% shares in the Company, and is
+the largest shareholder of the Company with a registered capital of RMB17 billion as at the end of the reporting
+period, and its legal representative is Miao Jianmin. China Merchants Steam Navigation Co., Ltd. mainly engages
+in passenger and cargo shipping businesses; dockyard, warehouse and vehicle transportation; investment and
+management of tugboat and barge transportation business; repair, construction and trading of ships and offshore
+oil drilling equipment; sale, purchase and supply of various transportation equipment, spare parts and materials; ship
+and passenger/goods shipping agency; construction of water and land-based construction projects; and businesses
+such as investment and management of finance, insurance, trust, securities and futures industries.
+As at the end of the reporting period, China Merchants Group Ltd. directly holds 100% equity interests in China
+Merchants Steam Navigation Co., Ltd. and is the controlling shareholder of the Company's largest shareholder,
+with a registered capital of RMB16.9 billion. Its legal representative is Miao Jianmin. China Merchants Group Ltd. is
+a central enterprise under the direct control of State-owned Assets Supervision and Administration Commission of
+the State Council. Its predecessor, China Merchants Steam Navigation Company, was founded in 1872, when China
+was in its late Qing Dynasty and was undergoing the Westernisation Movement. It was one of the enterprises which
+played a significant role in promoting the modernisation of China's national industries and commerce at that time.
+Nowadays, it has developed into a diversified conglomerate, with its businesses focusing on three core industries,
+namely integrated transportation, featured finance and comprehensive development of cities and industrial zones. It
+is realising the transformation from three main businesses to three major platforms of industrial operation, financial
+services, investment and capital operation.
+The Company did not have any controlling shareholder and de facto controller. As at the end of the reporting
+period, the equity relationship among the Company, its largest shareholder and the controlling shareholder of its
+largest shareholder is illustrated as follows (in this report, any discrepancies between the total shown and the sum
+of the amounts listed are due to rounding):
+100%
+China Merchants Holdings
+(Hong Kong) Company Limited
+Note:
+50%
+China Merchants
+Union (BVI) Limited
+100%
+Shenzhen Yan Qing Investment
+and Development Company Ltd
+1.89%
+4.99%
+China Merchants Group Ltd.
+Beneficial Owner
+100%
+China Merchants Steam
+Navigation Co., Ltd.
+100%
+China Merchants Financial Holdings Co., Ltd.
+100%
+27.59%
+China Merchants Financial Holdings
+(Hong Kong) Company Limited
+China Merchants China
+Direct Investments Limited
+7.3 Information on Substantial Ordinary Shareholders
+8
+Chapter VII Changes in Shares and Information on Shareholders
+China Merchants Bank
+State-owned legal 944,013,171
+person
+3.74
+A Shares not subject to
+trading restrictions on
+sales
+9
+Dajia Life Insurance Co., Ltd. -
+Universal products
+Domestic legal
+person
+776,574,735
+3.08
+A Shares not subject to
+-28,333,100
+trading restrictions on
+sales
+10
+COSCO Shipping (Guangzhou) Co.,
+Ltd.
+State-owned legal 696,450,214
+person
+2.76
+A Shares not subject to
+trading restrictions on
+sales
+Notes:
+(1) Shares held by HKSCC Nominees Ltd. are the total shares in the accounts of holders of H Shares of China Merchants Bank trading on the
+transaction platform of HKSCC Nominees Ltd. Hong Kong Securities Clearing Company Limited is an institution designated by others to hold
+shares on behalf of them as a nominal holder, and the shares held by it are the shares of China Merchants Bank acquired by investors through
+Northbound Trading.
+(2) As at the end of the reporting period, among the aforesaid top ten shareholders, HKSCC Nominees Ltd. is a subsidiary of Hong Kong Securities
+Clearing Company Limited; China Merchants Steam Navigation Co., Ltd., Shenzhen Yan Qing Investment and Development Company Ltd., China
+Merchants Financial Holdings Co., Ltd. and Shenzhen Chu Yuan Investment and Development Company Ltd. are all subsidiaries of China Merchants
+Group Ltd.; and China Ocean Shipping Company Limited and COSCO Shipping (Guangzhou) Co., Ltd. are both subsidiaries of China COSCO
+Shipping Corporation Limited. The Company is not aware of any affiliated relationship or action in concert among other shareholders.
+(3) There were no cases of proxy, trustee nor waiver of voting rights for the above holders of A Shares.
+(4) During the reporting period, the above holders of A Shares did not participate in the margin trading and short selling business. The number of
+outstanding A Shares of the Company lent out through securities lending by the above holders of A Shares at the beginning and the end of the
+reporting period was zero.
+145
+146
+Annual Report 2023 (H share)
+frozen
+on sales
+period
+The financial statements of the Company for 2023 prepared under the PRC Generally Accepted Accounting Principles
+and the internal control of the Company as at the year end of 2023 were audited by Deloitte Touche Tohmatsu
+Certified Public Accountants LLP, and the financial statements for 2023 prepared under International Financial
+Reporting Standards were audited by Deloitte Touche Tohmatsu. The total audit fees of the Group amounted to
+approximately RMB33.75 million, among which the audit fees for internal control were approximately RMB1.59
+million. The Company paid the total non-audit fees of approximately RMB18.74 million to Deloitte Touche Tohmatsu
+Certified Public Accountants LLP and Deloitte Touche Tohmatsu for 2023. Deloitte Touche Tohmatsu Certified Public
+Accountants LLP and Deloitte Touche Tohmatsu confirmed that the provision of such non-audit services would not
+compromise their audit independence.
+6.21 Explanation of Changes of Accounting Policies and Accounting
+Estimates
+For details of the changes of accounting policies and accounting estimates of the Company during the reporting
+period, please refer to Note 3 "Application of new and amendments to IFRSS" to the financial statements.
+141
+142
+China Merchants Bank
+Chapter VI Important Events
+Annual Report 2023 (H share)
+6.22 Review of Annual Results
+Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu, both being the external
+auditors of the Company, have audited the financial statements of the Company prepared in accordance with the
+PRC Generally Accepted Accounting Principles and the International Financial Reporting Standards, respectively, and
+each has issued an unqualified audit report. The Audit Committee under the Board of Directors of the Company has
+reviewed the Company's annual report for 2023.
+6.23 Annual General Meeting
+For the convening of its 2023 Annual General Meeting, the Company will make further announcement.
+6.24 Management Contracts
+No contracts concerning the management and administration of the whole or any substantial part of the business of
+the Company were entered into or existing during the reporting period.
+6.25 Permitted Indemnity Provision
+The Company has maintained appropriate insurance coverage for the liabilities of the Directors, Supervisors and
+senior management in respect of legal actions against its Directors, Supervisors and senior management arising out
+of corporate activities.
+6.26 Publication of Annual Report
+The Company prepared its annual report in both English and Chinese versions in accordance with the International
+Financial Reporting Standards and the Hong Kong Listing Rules, which are available on the websites of Hong Kong
+Exchanges and Clearing Limited and the Company. In the event of any discrepancies in interpretation between the
+English and Chinese versions, the Chinese version shall prevail.
+The Company also prepared its annual report in Chinese version in accordance with the PRC Generally Accepted
+Accounting Principles and the preparation rules for annual reports, which is available on the websites of Shanghai
+Stock Exchange and the Company.
+Improving the elderly care
+service system to promote
+stable happiness of the
+elderly
+144
+China Merchants Bank
+Chapter VII Changes in Shares and Information on Shareholders
+Annual Report 2023 (H share)
+Upon the approval at the 2022 Annual General Meeting of the Company, the Company engaged Deloitte Touche
+Tohmatsu Certified Public Accountants LLP as the domestic accounting firm of the Company and its domestic
+subsidiaries for 2023, and engaged Deloitte Touche Tohmatsu et al., the overseas related member organisations of
+Deloitte Touche Tohmatsu Certified Public Accountants LLP as the international accounting firms of the Company
+and its overseas subsidiaries for 2023. The term of each of the engagements is one year. The above-mentioned
+accounting firms have been engaged as auditors of the Company since 2016. Wu Lingzhi and Sun Weiqi are the
+certified public accountants who signed the audit report on the Company's financial statements for 2023 prepared
+in accordance with the PRC Generally Accepted Accounting Principles, who have been serving as the public
+accountants signing the financial statements of the Company since 2021 and 2022, respectively. Upon completion
+of the annual audit work for the year 2023 of the Company, Deloitte Touche Tohmatsu Certified Public Accountants
+LLP and its overseas related member organisations Deloitte Touche Tohmatsu et al., have been providing audit
+services for the Company for eight consecutive years.
+Changes in Shares and Information on Shareholders
+6.20 Engagement of Accounting Firms
+6.19 Use of Funds by Related Parties
+140
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VI Important Events
+6.16.3 Confirmation from the Independent Non-Executive Directors and auditors
+The Independent Non-Executive Directors of the Company have reviewed the above-mentioned non-exempt
+continuing connected transactions between the Company and CMFM Group and confirmed that:
+1. The transactions were entered into in the ordinary and usual course of business of the Company;
+2.
+The terms of the transactions are fair and reasonable, and are in the interest of the Company and its
+shareholders as a whole;
+3.
+The transactions were entered into on normal commercial terms or better terms;
+4.
+The transactions were conducted in accordance with the terms of relevant agreements.
+Furthermore, pursuant to rule 14A.56 of the Hong Kong Listing Rules, the Company has engaged Deloitte Touche
+Tohmatsu to perform relevant assurance procedures on the continuing connected transactions of the Group in
+accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) "Assurance Engagements Other
+Than Audits or Reviews of Historical Financial Information" and with reference to Practice Note 740 (Revised)
+"Auditor's Letter on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the Hong
+Kong Institute of Certified Public Accountants. The Board of Directors confirmed that the auditor has reported the
+results of its performing procedures to the Board of Directors.
+Regarding the disclosed continuing connected transactions, nothing of these transactions has come to the attention
+of the auditor as to the circumstances described under rule 14A.56 of the Hong Kong Listing Rules. Deloitte Touche
+Tohmatsu has issued an assurance letter in respect of the findings of the above continuing connected transactions.
+6.16.4 Significant transactions with related parties
+The significant transactions between the Company and related parties are set out in note 61 to the financial
+statements. These transactions were entered into between the Company and its related parties in its ordinary course
+of business on normal commercial terms and with the principle of fairness, including borrowings, investments,
+deposits, securities trading, agency services, custody and other fiduciary operations as well as off-balance sheet
+transactions, and those which constituted connected transactions under the Hong Kong Listing Rules were in
+compliance with the applicable requirements thereof.
+6.17 Material Litigations and Arbitrations
+Several litigations were filed during the daily operation of the Company, most of which were filed proactively for
+the purpose of recovering non-performing loans. As at the end of the reporting period, there were 288 pending on
+final judgement cases (including litigations and arbitrations) in which the Company was involved, with an aggregate
+principal and interest of RMB3,307 million. The Company believes that none of the above litigation and arbitration
+cases would have a material adverse impact on the financial position or operating results of the Company.
+6.18 Material Contracts and Their Performance
+Significant events in respect of holding in custody, contracting, hiring or
+leasing of assets
+During the reporting period, the Company did not have any material contract signed in connection with holding
+in custody, contracting, hiring or leasing of any assets of other companies outside the normal scope of banking
+businesses, or vice versa.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VI Important Events
+Significant guarantees
+Guarantee business falls within the Company's ordinary course of business. During the reporting period, save
+for the financial guarantees entered into in our normal business scope approved by the PRC banking regulatory
+authorities, the Company did not have any other significant discloseable guarantees, nor was the Company a party
+to any guarantee contract in violation of the resolution procedures of external guarantees as required by laws,
+administrative regulations and the CSRC.
+During the reporting period, no related parties used any funds of the Company for non-operating purposes, and
+none of them used the funds of the Company through, among others, any related party transactions not entered
+into on an arm's length basis. Deloitte Touche Tohmatsu Certified Public Accountants LLP, being the auditor of the
+Company, has issued a special audit opinion in this regard.
+7.1 Changes in Ordinary Shares of the Company During the
+Reporting Period
+31 December 2022
+Changes in the
+No. of shares
+As at the end of the reporting period, the Company had a total of 676,450 shareholders of ordinary shares,
+including 647,881 holders of A Shares and 28,569 holders of H Shares. Neither the holders of A Shares nor the
+holders of H Shares are subject to trading restrictions on sales.
+As at the end of the previous month prior to the disclosure date of this report (i.e., 29 February 2024), the Company
+had a total of 608,227 holders of ordinary shares, including 579,752 holders of A Shares and 28,475 holders of H
+Shares. Neither the holders of A Shares nor the holders of H Shares are subject to trading restrictions on sales.
+Based on the publicly available information and to the knowledge of the Directors, as at the end of the reporting
+period, the Company had maintained the public float in compliance with the requirement of the Hong Kong Listing
+Rules.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VII Changes in Shares and Information on Shareholders
+7.2 Top Ten Holders of Ordinary Shares and Top Ten Holders of
+Ordinary Shares Whose Shareholdings Are Not Subject to Trading
+Restrictions on Sales
+Number of
+shares held
+Number of
+subject to
+shares
+Shares held at
+the end of the
+Percentage of
+the total share
+Changes in
+trading
+pledged,
+the reporting
+restrictions
+marked or
+Serial No. Name of shareholders
+Type of
+shareholders
+period
+capital
+100.00
+25,219,845,601
+18.20
+4,590,901,172
+31 December 2023
+during the
+reporting
+No. of shares
+(share)
+Percentage
+(%)
+period
+(share)
+No. of shares Percentage
+(share)
+(%)
+1. Shares subject to trading restrictions on sales
+2.
+Shares not subject to trading restrictions on sales
+100%
+25,219,845,601
+20,628,944,429
+100.00
+81.80
+(2) Foreign shares listed domestically
+(3) Foreign shares listed overseas (H Shares)
+(4) Others
+4,590,901,172
+18.20
+3.
+Total shares
+25,219,845,601
+100.00
+25,219,845,601
+20,628,944,429
+100.00
+81.80
+(1) Ordinary shares in RMB (A Shares)
+Shenzhen Chu Yuan Investment
+Notes:
+and Development Company Ltd.
+Holdings Co., Ltd.
+1,147,377,415
+Beneficial owner
+Long
+China Merchants Financial A
+corporation
+3.20
+17.57
+1
+806,680,423
+Interest of controlled
+Long
+H
+26.78
+32.73
+1
+6,752,746,952
+55,196,540
+Other
+Long
+corporation
+3,408,080,075
+Interest of controlled
+Long
+Navigation Co., Ltd.
+Long
+3,289,470,337
+Interest of controlled
+(former name: China
+0.23
+0.28
+1
+58,147,140
+Interest of controlled
+Long
+China Merchants Financial A
+1.30
+7.16
+1
+328,776,923
+corporation
+Long
+H
+Interest of controlled
+Co., Ltd.)
+13.73
+16.79
+1
+3,463,276,615
+Investment Holdings
+55,196,540
+Other
+Long
+corporation
+2,260,702,660
+Holdings (Hong Kong)
+Beneficial owner
+A
+No. of shares
+Long/short
+Class of
+substantial
+Name of
+As at 31 December 2023, substantial shareholders had interests and short positions in the shares of the Company
+under Hong Kong laws and regulations as recorded in the register required to be kept by the Company pursuant to
+Section 336 of the SFO (in this report, any discrepancies between the total shown and the sum of the amounts listed
+are due to rounding) as follows:
+7.3.4 Substantial shareholders' interests and short positions in the Company under
+Hong Kong laws and regulations
+Chapter VII Changes in Shares and Information on Shareholders
+Annual Report 2023 (H share)
+China Merchants Bank
+148
+147
+As at the end of the reporting period, SAIC Motor Corporation Limited held 1.23% shares in the Company
+and has appointed a Supervisor in the Company. There was no pledge of the shares of the Company. SAIC
+Motor Corporation Limited was established on 16 April 1984, with a registered capital of RMB11.683 billion
+as at the end of the reporting period, and its legal representative is Chen Hong. Its de facto controller is the
+State-owned Assets Supervision and Administration Commission of Shanghai.
+As at the end of the reporting period, China Communications Construction Group Ltd. through its holding
+subsidiaries, namely China Communications Construction Company Limited, CCCC Capital Holdings Limited,
+CCCC Guangzhou Dredging Co., Ltd., CCCC Fourth Harbour Engineering Co., Ltd., CCCC Shanghai
+Dredging Co., Ltd., Zhen Hua (Shenzhen) Engineering Co., Ltd. and CCCC Third Harbour Consultants Co.,
+Ltd., indirectly held an aggregate of 1.68% shares in the Company. As at the end of the reporting period,
+China Communications Construction Group has appointed a Supervisor in the Company. There was no
+pledge of the shares of the Company. China Communications Construction Group Ltd. was established on
+8 December 2005, with a registered capital of RMB7.274 billion as at the end of the reporting period, and
+its legal representative is Wang Tongzhou. Its de facto controller is the State-owned Assets Supervision and
+Administration Commission of the State Council.
+As at the end of the reporting period, Dajia Life Insurance Co., Ltd. held 3.08% shares in the Company,
+and has appointed a Supervisor in the Company. There was no pledge of the shares of the Company. The
+controlling shareholder of Dajia Life Insurance Co., Ltd. is Dajia Insurance Group Co., Ltd.. Dajia Insurance
+Group Co., Ltd. was established on 25 June 2019, with a registered capital of RMB20.36 billion as at the end
+of the reporting period, and its legal representative is He Xiaofeng. Its controlling shareholder and de facto
+controller is China Insurance Security Fund Co., Ltd..
+3.
+2.
+1.
+7.3.3 Other substantial shareholders under the regulatory calibre
+China COSCO Shipping Corporation Limited held 100% equity interests in China Ocean Shipping Company Limited
+and is its controlling shareholder. Its de facto controller is the State-owned Assets Supervision and Administration
+Commission of the State Council. China COSCO Shipping Corporation Limited was established on 5 February
+2016, with a registered capital of RMB11.0 billion as at the end of the reporting period. Its legal representative is
+Wan Min. The scope of its businesses includes: international shipping; ancillary business in international maritime
+transportation; imports and exports of goods and technology; marine, land, aviation international freight forwarding
+business; ship leasing; sales of ships, containers and steel products; offshore engineering equipment design; terminal
+and port investment; communication equipment sales, information and technical services; warehousing (except
+hazardous chemicals); engaged in technology development, technology transfer, technical consulting, technical
+services and equity investment funds in the field of shipping and spare parts.
+), COSCO Shipping (Shanghai) Co., Ltd. (TL)ĦRA), COSCO Shipping Investment
+Holdings Co., Limited (ì) and Guangzhou Tri-Dynas Oil & Shipping Co., Ltd. (
+BRA). There was no pledge of the shares of the Company. Specifically, China Ocean Shipping Company
+Limited held 6.24% shares in the Company. China Ocean Shipping (Group) Company (the predecessor of China
+Ocean Shipping Company Limited) was established on 22 October 1983. The registered capital of China Ocean
+Shipping Company Limited was RMB16.191 billion as at the end of the reporting period. Its legal representative is
+Wan Min. The scope of its businesses includes: international shipping; ancillary business in international maritime
+transportation; acceptance of space booking, voyage charter and time charter from cargo owners at home and
+abroad; leasing, construction, trading and maintenance of vessels and containers and manufacture of related
+facilities; ship escrowing business; provision of ship materials, spare parts and communications services relating to
+shipping business at home and abroad; management of enterprises engaging in vessel and cargo agency business
+and seafarer assignment business.
+As at the end of the reporting period, China COSCO Shipping Corporation Limited indirectly held an aggregate of
+9.97% shares in the Company through its holding subsidiaries, namely China Ocean Shipping Company Limited,
+COSCO Shipping (Guangzhou) Co., Ltd., Guangzhou Haining Maritime Technology Consulting Co., Ltd. (
+7.3.2 Information on other shareholders holding more than 5% shares of the
+Company
+Chapter VII Changes in Shares and Information on Shareholders
+100%
+shareholder
+Long
+shares position
+China Merchants Group
+China Merchants Steam
+corporation
+3.20
+17.57
+1
+806,680,423
+Interest of controlled
+Long
+H
+26.78
+32.73
+1
+6,752,746,952
+55,196,540
+Others
+Long
+corporation
+Ltd.
+ordinary
+shares (%)
+Percentage
+of the
+total issued
+Percentage
+of the
+relevant class
+of shares
+in issue (%)
+(shares) Notes
+6,697,550,412
+Interest of controlled
+Long
+A
+Capacity
+corporation
+China Merchants Bank
+Annual Report 2023 (H share)
+H
+Percentage
+of the
+total issued
+Percentage
+of the
+relevant class
+Interest of controlled
+Long
+CNIC Corporation Limited H
+Capacity
+Long/short
+position
+Class of
+shares
+shareholder
+Name of
+substantial
+Chapter VII Changes in Shares and Information on Shareholders
+China Merchants Bank
+Annual Report 2023 (H share)
+1.89
+10.41
+3
+477,903,500
+Interest of controlled
+corporation
+Company Limited
+Long
+H
+Company Limited
+(中國華馨投資有限公司)
+1.89
+10.41
+3
+No. of shares
+of shares
+(shares)
+Notes
+Best Winner
+Investment Limited
+100%
+China Merchants Industry
+Development (Shenzhen) Limited
+3.74%
+4.55%
+1.53%
+China Merchants Bank Co., Ltd.
+China Merchants Financial Holdings (Hong Kong) Company Limited was renamed from CMF Holdings Limited.
+0.22%
+13.04%
+H
+China Merchants Union
+477,903,500
+1.89
+3
+477,903,500
+Interest of controlled
+corporation
+Long
+Verise Holdings Company H
+Limited
+corporation
+1.89
+10.41
+3
+477,903,500
+ordinary
+shares (%)
+in issue (%)
+10.41
+Interest of controlled
+corporation
+Compass Investment
+Long
+1.30
+7.16
+1
+328,776,923
+Company Limited
+Long
+H
+Limited
+0.23
+0.28
+1
+58,147,140
+Beneficial owner
+Long
+A
+Best Winner Investment
+Holdings Limited)
+corporation
+(former name: CMF
+1.30
+7.16
+1
+328,776,923
+Interest of controlled
+Long
+Shenzhen Yan Qing
+A
+Beneficial owner
+Beneficial owner
+Pagoda Tree Investment H
+Co. Ltd.
+4.48
+5.48
+2
+Long
+Beneficial owner
+Long
+A
+Hexie Health Insurance
+Company Limited
+6.24
+1,130,991,537
+1,574,729,111
+1,258,542,349
+7.63
+1
+6.10
+4.99
+Investment and
+Company Ltd.
+China Ocean Shipping
+A
+Long
+Beneficial owner
+Development
+Pursuant to the approvals by the regulatory authorities, the Company made a non-public issuance of 275,000,000
+domestic preference shares on 22 December 2017. The issuance price is RMB100 each and the coupon dividend rate
+per annum is 4.81% (including tax). The domestic preference shares of the issuance have been listed and traded on
+the integrated business platform of Shanghai Stock Exchange since 12 January 2018 (abbreviated name of shares:
+"Zhao Yin You 1 (1)"; stock code: 360028; number of listed shares: 275,000,000). The total proceeds from
+the issuance of the domestic preference shares amounted to RMB27.5 billion and, after deduction of the expenses
+relating to the issuance, has fully been used to replenish the Company's additional Tier 1 Capital. On 18 December
+2022, five years after the issuance of the domestic preference shares, the Company adjusted the coupon dividend
+rate per annum to 3.62% (including tax) in accordance with market rules. For details, please refer to the relevant
+announcements published by the Company on the websites of the Shanghai Stock Exchange, Hong Kong Exchanges
+and Clearing Limited and the Company, respectively.
+For issuance of bonds of the Company and its subsidiaries, please refer to Note 43 to the financial statements.
+During the reporting period, the use of proceeds of the Company was consistent with such usages as committed in
+the Prospectus of the Company.
+7.5.1 Issuance and listing of preference shares
+7.5 Preference Shares
+During the reporting period, the Company did not issue any new ordinary shares. The Company did not have
+any internal staff shares. Save for the disclosure related to "Preference Shares" in this chapter, no equity-linked
+agreements of the Company were entered into during the reporting period or subsisted at the end of the reporting
+period.
+China Merchants Bank
+Save as disclosed above, the Company is not aware of any other person (other than the Directors, Supervisors
+and Chief Executives (as defined in the Hong Kong Listing Rules) of the Company) who has any interests or short
+positions in the shares of the Company as at 31 December 2023 as recorded in the register required to be kept by
+the Company pursuant to Section 336 of the SFO.
+(5) BlackRock, Inc. was deemed to hold a total of 271,479,387 H shares (long position) and 752,500 H shares (short position) in the Company by virtue
+of its control over a number of companies. The equity interests of BlackRock, Inc. in the Company included 2,411,500 H shares (long position) and
+752,500 H shares (short position) which were held through cash settled unlisted derivatives.
+Chapter VII Changes in Shares and Information on Shareholders
+Annual Report 2023 (H share)
+150
+China Merchants Bank
+7.4 Issuance and Listing of Securities
+Annual Report 2023 (H share)
+Number of
+7.5.2 Number of shareholders of preference shares and their shareholdings
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+Independent Auditor's Report
+Deloitte.
+To the shareholders of China Merchants Bank Co., Ltd.
+(A joint stock company incorporated in the People's Republic of China with limited liability)
+德勤
+Opinion
+We have audited the consolidated financial statements of China Merchants Bank Co., Ltd. (the "Bank") and its subsidiaries
+(collectively referred to as the "Group") set out on pages 160 to 303, which comprise the consolidated statement of
+financial position as at 31 December 2023, and the consolidated statement of profit or loss, consolidated statement of
+profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of
+cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy
+information and other explanatory information.
+In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the
+Group as at 31 December 2023, and of its consolidated financial performance and its consolidated cash flows for the year
+then ended in accordance with International Financial Reporting Standards ("IFRSS") and have been properly prepared in
+compliance with the disclosure requirements of Hong Kong Companies Ordinance.
+Basis for Opinion
+We conducted our audit in accordance with International Standards on Auditing ("ISAS"). Our responsibilities under those
+standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
+section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for
+Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards)
+(the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit
+evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
+Key Audit Matters
+Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
+consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
+consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
+opinion on these matters.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+Key Audit Matters (continued)
+Key audit matter
+Expected credit loss allowances of loans and advances
+to customers at amortised cost, debt investments at
+amortised cost, and financial guarantees and loan
+commitments
+We identified expected credit loss ("ECL") allowance of
+loans and advances to customers at amortised cost, debt
+investments at amortised cost and financial guarantees
+and loan commitments as a key audit matter due to
+the materiality of these items' balance and significant
+management judgement and estimates involved in deriving
+the ECL estimates.
+As at 31 December 2023, as set out in Note 22(a), the
+Group reported loans and advances to customers at
+amortised cost of RMB5,924,766 million and expected
+credit loss allowances of RMB267,620 million; in Note 23(b),
+the Group reported debt investments at amortised cost of
+RMB1,788,806 million and expected credit loss allowances
+of RMB39,782 million; in Note 42, the Group reported the
+expected credit loss allowances of financial guarantees and
+loan commitments of RMB17,404 million.
+Key judgements and estimates in respect of the
+measurement of ECLs include: the significant management
+judgement and estimates of model design and its
+application; the identification of a significant increase in
+credit risk (SICR); the identification of credit impairment
+events; the determination of inputs used in the ECL model,
+as well as the determination of the forward-looking
+information to incorporate.
+How our audit addressed the key audit matter
+Our audit procedures in relation to the expected credit loss
+allowances of loans and advances to customers at amortised
+cost, debt investments at amortised cost and financial
+guarantees and loan commitments included the following:
+China Merchants Bank
+We understood management's process and tested the
+design and operating effectiveness of key controls across the
+processes relevant to the ECL estimation of the Group. These
+controls included the development, validation and review
+of the ECL model; the controls over the model data input,
+including manual input controls and automated transmission
+controls; the automated controls over the ECL model
+calculation process; the controls over the identification of
+SICR indicators and credit impairment events.
+154
+304
+(1) The shareholdings of holders of domestic preference shares are presented under separate account according to the register of members of
+preference shares of the Company.
+(2) China National Tobacco (Henan Province) Company, China National Tobacco (Anhui Province) Company and China National Tobacco (Sichuan
+Province) Company are all subsidiaries of China National Tobacco Corporation; there exists an affiliated relationship between "BOC Asset - Bank
+of China - Bank of China Limited, Shenzhen Branch" and "BOCI Securities - Bank of China - BOCI Securities China Hong-Hui Zhong No. 32
+Collective Asset Management Scheme". Save for the above, the Company is not aware of any affiliated relationship or action in concert among the
+above holders of preference shares or between the above holders of preference shares and the Company's top ten holders of ordinary shares.
+7.5.3 Dividend distribution of preference shares
+Dividend distribution of domestic preference shares
+In accordance with the relevant requirements under the "Resolution Regarding the Plan for the Non-public Issuance
+of Domestic Preference Shares of the Company", which was considered and approved at the 2016 Annual General
+Meeting, the first class meeting of the holders of A Shares for 2017 and the first class meeting of the holders of H
+Shares for 2017, the Company fully paid the dividends for domestic preference shares on 18 December 2023, which
+was in compliance with the relevant distribution conditions and distribution procedures.
+The dividends for domestic preference shares of the Company are paid once a year in cash. The domestic preference
+shares adopt non-cumulative dividend payment method. After the dividends are distributed to the holders of
+domestic preference shares in accordance with the agreed dividend rate, these shareholders will not participate in
+the remaining profit appropriation with the ordinary shareholders. Pursuant to the terms of dividends payment for
+domestic preference shares, based on the coupon dividend rate of 3.62% for domestic preference shares, the cash
+dividends per preference share paid were RMB3.62 (including tax), and based on 275 million of domestic preference
+shares in issue, the total amount of the dividends paid was RMB995.5 million (including tax).
+For the details of dividend distribution for domestic preference shares, please refer to the relevant announcement
+published by the Company on the websites of Shanghai Stock Exchange, Hong Kong Exchanges and Clearing Limited
+and the Company on 6 December 2023.
+7.5.4
+7.5.5
+7.5.6
+Repurchase or conversion of preference shares
+During the reporting period, there were no repurchases or conversions of preference shares of the Company.
+Restored voting rights of preference shares
+During the reporting period, the voting rights of the Company's preference shares in issue had not been restored.
+Accounting policies for preference shares and the reason of adoption
+The Company made accounting judgements on the preference shares issued and outstanding of the Company
+in accordance with the requirements of the relevant accounting principles, including the "International Financial
+Reporting Standard 9 - Financial Instruments" and the "International Accounting Standard 32 - Financial
+Instruments: Presentation" issued by the International Accounting Standards Board. As the preference shares
+issued and outstanding of the Company carry no obligation to deliver cash and cash equivalents, nor have they
+any contractual obligations to deliver a variable number of its own equity instruments for settlement, they were
+therefore measured as equity instruments.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+Financial Statements
+Independent Auditor's Report
+Financial Statements and Notes Thereto
+Unaudited Supplementary Financial Information
+154
+160
+153
+We assessed whether the ECL model applied by the
+Group has covered all the exposures that should be taken
+into consideration. In respect of different portfolios of
+loans and advances to customers at amortised cost, debt
+investments at amortised cost and financial guarantees
+and loan commitments, we involved our internal modelling
+specialist to assist us in assessing the appropriateness of
+the Group's methodology of ECL modelling. We reviewed
+relevant documents and evaluated the appropriateness and
+application of the ECL model.
+155
+156
+Responsibilities of Directors and Those Charged with Governance for
+the Consolidated Financial Statements
+The directors of the Bank are responsible for the preparation of the consolidated financial statements that give a true and
+fair view in accordance with IFRSS and the disclosure requirements of the Hong Kong Companies Ordinance, and for such
+internal control as the directors of the Bank determine is necessary to enable the preparation of consolidated financial
+statements that are free from material misstatement, whether due to fraud or error.
+In preparing the consolidated financial statements, the directors of the Bank are responsible for assessing the Group's ability
+to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
+basis of accounting unless the directors of the Bank either intend to liquidate the Group or to cease operations, or have no
+realistic alternative but to do so.
+Those charged with governance are responsible for overseeing the Group's financial reporting process.
+Auditor's Responsibilities for the Audit of the Consolidated Financial
+Statements
+Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
+free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion
+solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other
+person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an
+audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise
+from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
+influence the economic decisions of users taken on the basis of these consolidated financial statements.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+Auditor's Responsibilities for the Audit of the Consolidated Financial
+Statements (continued)
+As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism
+throughout the audit. We also:
+Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
+or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
+and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
+fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
+misrepresentations, or the override of internal control.
+Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
+appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
+Group's internal control.
+Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
+disclosures made by the directors of the Bank.
+Conclude on the appropriateness of the directors of the Bank's use of the going concern basis of accounting and,
+based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
+may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material
+uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the
+consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
+based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions
+may cause the Group to cease to continue as a going concern.
+Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
+disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
+manner that achieves fair presentation.
+Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
+within the Group to express an opinion on the consolidated financial statements. We are responsible for the
+direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
+We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
+the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
+audit.
+We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
+regarding independence, and to communicate with them all relationships and other matters that may reasonably be
+thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
+From the matters communicated with those charged with governance, we determine those matters that were of most
+significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
+matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the
+matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
+because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
+such communication.
+The engagement partner on the audit resulting in the independent auditor's report is Shi Chung Fai.
+Deloitte Touche Tohmatsu
+Certified Public Accountants
+Hong Kong
+25 March 2024
+159
+In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
+and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial
+statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work
+we have performed, we conclude that there is a material misstatement of this other information, we are required to report
+that fact. We have nothing to report in this regard.
+The directors of the Bank are responsible for the other information. The other information comprises the information
+included in the annual report, but does not include the consolidated financial statements and our auditor's report thereon.
+Our opinion on the consolidated financial statements does not cover the other information and we do not express any form
+of assurance conclusion thereon.
+Other Information
+Annual Report 2023 (H share)
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+Key Audit Matters (continued)
+Key audit matter
+Expected credit loss allowances of loans and advances
+to customers at amortised cost, debt investments at
+amortised cost, and financial guarantees and loan
+commitments
+Principal accounting policies and significant accounting
+estimates and judgement applied in determining the
+expected credit loss allowances of loans and advances to
+customers at amortised cost, debt investments at amortised
+cost and financial guarantees and loan commitments are
+set out in Notes 4(5) and 5(4) to the consolidated financial
+statements.
+How our audit addressed the key audit matter
+With the support of our internal modelling specialist, we
+assessed the key definitions and application of parameters
+and assumptions in the ECL model. This included
+assessing stage determination, probability of default,
+loss given default, exposure at default and forward-
+looking information. We selected samples to check
+whether the calculation in the ECL model is consistent
+with the methodology. We selected samples to conduct
+credit reviews in order to assess the appropriateness of
+the significant judgements made by the management
+regarding the occurrence of SICR and credit impairment
+events, and whether the identification of such events are
+proper and timely. In addition, we selected samples and
+tested their data input into the ECL model to evaluate the
+completeness and accuracy of the data input. For loans
+and advances at amortised cost and debt investments at
+amortised cost at stage 3, we selected samples to test the
+reasonableness of future cash flows from the borrowers
+estimated by the Group, including the expected recoverable
+amount of collateral, to assess whether there were material
+misstatements in credit loss allowances.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+Chapter VII Changes in Shares and Information on Shareholders
+Key Audit Matters (continued)
+Consolidation of structured entities
+We identified consolidation of structured entities as a
+key audit matter since significant judgement is applied by
+management to determine whether or not the Group has
+control over certain structured entities.
+The structured entities of the Group include wealth
+management products, asset management schemes, trust
+beneficiary rights, assets-backed securities and funds,
+as disclosed in Note 64 to the consolidated financial
+statements.
+As described in Note 4(1), the consolidation of structured
+entities is determined based on control. Control is
+achieved when the investor has power over the investee,
+the investor is exposed, or has rights, to variable returns
+from its involvement with the investee; and the investor
+has the ability to use its power to affect its returns. When
+performing the assessment on whether the Group has
+control over the structured entities, the Group considers
+several factors including, the scope of its decision-making
+authority over the structured entities, the rights held by
+other parties, the remuneration for managing the structured
+entities and the Group's exposure to variability of returns
+from interests that it holds in the structured entities.
+How our audit addressed the key audit matter
+Our audit procedures in relation to consolidation of
+structured entities included the following:
+We understood and tested the design and operating
+effectiveness of key controls over the management process
+in determining the consolidation scope for interests in
+structured entities as well as understood the purpose for
+setting up the structured entities.
+We reviewed the relevant contract terms, on a sample basis,
+and assessed the power of the Group over the structured
+entities, the rights of the Group to variable returns of the
+structured entities and the ability of the Group to use its
+power to affect its return, and evaluated management
+judgement on whether the Group has control over the
+structured entities and the conclusion about whether or not
+the consolidation criteria are met.
+157
+158
+China Merchants Bank
+Chapter VIII Financial Statements
+Key audit matter
+Chapter VII Changes in Shares and Information on Shareholders
+Notes:
+China Merchants Bank
+2
+Suyin Wealth Management Co., Ltd. Others
+- No. 1 Hengyuan Rongda (
+Domestic
+23,000,000
+8.36 23,000,000
+preference
+) of Suyin Wealth Management
+share
+3
+China National Tobacco (Henan
+State-owned
+Domestic
+20,000,000
+7.27
+Province) Company
+legal person
+preference
+share
+Ping An Property & Casualty
+Others
+Domestic
+20,000,000
+7.27
+Insurance Company of China, Ltd.
+share
+preference
+preference
+(share)
+As at the end of the reporting period, the Company had a total of 22 holders of preference shares (or their
+nominees), and all of them were domestic shareholders of preference shares. As at the end of the previous month
+before the disclosure date of this report (i.e., 29 February 2024), the Company had a total of 22 holders of
+preference shares (or their nominees), and all of them were domestic shareholders of preference shares.
+As at the end of the reporting period, the shareholdings of the Company's top ten holders of domestic preference
+shares were as follows:
+Number of
+shares subject
+Shares held
+at the end of
+to trading
+shares
+pledged,
+Percentage of
+restrictions on
+marked or
+Serial Name of
+Type of
+No. shareholders
+shareholders
+Type of
+shares
+the period shareholdings
+(share)
+1
+China Mobile Communications
+Group Co., Ltd.
+State-owned
+Domestic
+106,000,000
+(%)
+38.55
+Changes
+(share)
+sales
+frozen
+(share)
+legal person
+- traditional - ordinary insurance
+share
+products
+Domestic
+9,000,000
+3.27
+Management - China Everbright
+Bank Xinyou () No. 2
+preference
+share
+Collective Asset Management
+Scheme of Everbright Securities
+Asset Management
+9
+BOCI Securities - Bank of China -
+Others
+BOCI Securities China Hong - Hui
+Zhong No. 32 Collective Asset
+Domestic
+preference
+share
+8,600,000
+3.13 8,600,000
+10
+Management Scheme
+CCB Capital "Qianyuan - Private
+(-)", an open private
+banking RMB wealth management
+product (daily calculated) of China
+Construction Bank - Anxin Private
+(4) No.2 Special Asset
+Management Scheme of CCB
+Capital
+Others
+Domestic
+preference
+share
+8,570,000
+3.12 -31,430,000
+151
+152
+Others
+Everbright Securities Asset
+8
+preference
+share
+5
+BOC Asset Bank of China - Bank
+Others
+Domestic
+15,900,000
+5.78
+-9,100,000
+of China Limited, Shenzhen
+preference
+Branch
+6
+China National Tobacco (Anhui
+Annual Report 2023 (H share)
+State-owned
+15,000,000
+5.45
+Province) Company
+legal person
+preference
+China National Tobacco (Sichuan
+State-owned
+share
+Domestic
+15,000,000
+5.45
+Province) Company
+legal person
+share
+Domestic
+(3) "Percentage of shareholdings" represents the percentage of the number of domestic preference shares held by the holders of preference shares to
+the total number of domestic preference shares.
+13,752 9,010
+78,666
+13,416
+19,649
+23(d)
+comprehensive income
+Equity investments designated at fair value through other
+1,555,457
+780,349
+Interests in joint ventures
+899,102
+Debt investments at fair value through other comprehensive income
+1,749,024
+23(b)
+Debt investments at amortised cost
+18,671
+18,733
+23(c)
+60(f)
+25
+14,247
+99,919
+115,348
+28
+1,268
+1,160
+27
+15,707
+9,597
+26
+Intangible assets
+Right-of-use assets
+Property and equipment
+Investment properties
+Interests in associates
+10,883
+Derivative financial assets
+423,467
+526,145
+2,321
+15,209
+14,931
+Amounts held under resale agreements
+Placements with banks and other financial institutions
+Balances with banks and other financial institutions
+2,329
+Balances with central banks
+Cash
+Assets
+2022
+2023
+Notes
+(Expressed in millions of Renminbi unless otherwise stated)
+Precious metals
+18
+667,871
+587,818
+23(a)
+Financial investments at fair value through profit or loss
+5,807,154
+6,252,755
+22
+Loans and advances to customers
+276,676
+172,246
+21
+264,209
+287,694
+20
+91,346
+100,769
+19
+29(a)
+At 31 December 2023
+17,041
+30
+7,590,579
+8,240,498
+38
+Deposits from customers
+107,093
+135,078
+Salaries and welfare payable
+37
+18,636
+17,443
+60(f)
+Derivative financial liabilities
+49,144
+43,958
+Amounts sold under repurchase agreements
+36
+Tax payable
+Lease liabilities
+Surplus reserve
+Hedging reserve
+Investment revaluation reserve
+Capital reserve
+- Perpetual bonds
+- Preference shares
+Contract liabilities
+Other equity instruments
+Equity
+Total liabilities
+Other liabilities
+Deferred tax liabilities
+Debt securities issued
+Provisions
+Share capital
+Financial liabilities at fair value through profit or loss
+207,027
+247,299
+55,978
+53,884
+33
+90,848
+90,557
+32
+Total assets
+9,999
+31
+Other assets
+Deferred tax assets
+Goodwill
+3,402
+2,709
+9,954
+11,028,483
+10,138,912
+The notes form part of these consolidated financial statements.
+35
+645,674
+508,378
+34
+Deposits from banks and other financial institutions
+Placements from banks and other financial institutions
+129,745
+378,621
+Borrowing from central banks
+Liabilities
+2022
+2023
+Notes
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+17,553
+Consolidated Statement of Financial Position
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+815
+616
+26
+Share of profits of associates
+1,710
+1,860
+Profit before taxation
+25
+(815)
+(191)
+Impairment losses on other assets
+(56,751)
+(41,278)
+14
+Share of profits of joint ventures
+Expected credit losses
+Income tax
+Attributable to:
+1,404
+138,012
+146,602
+Basic and diluted (RMB Yuan)
+Earnings per share
+Non-controlling interests
+Profit for the year
+Equity holders of the Bank
+148,006
+(25,819)
+(28,612)
+15
+165,113
+176,618
+139,294
+220,154
+215,611
+Operating profit before impairment losses and taxation
+Fee and commission expense
+103,372
+92,834
+8
+218,235
+214,669
+(8,726)
+(135,145)
+7
+353,380
+375,610
+6
+Fee and commission income
+Net interest income
+(160,941)
+(9,097)
+Net fee and commission income
+84,108
+(122,061)
+(120,991)
+10
+Operating expenses
+342,215
+336,602
+Operating income
+170
+967
+- Disposal of financial instruments at amortised cost
+29,705
+37,825
+9
+Other net income
+94,275
+1,282
+17
+5.63
+5.26
+Equity holders of the Bank
+Attributable to:
+1,323
+2,731
+16
+Other comprehensive income for the year, net of tax
+Non-controlling interests
+(10)
+48
+354
+38
+358
+· Net fair value gain on equity instruments designated at
+fair value through other comprehensive income
+Remeasurement of defined benefit scheme
+Items that will not be reclassified to profit or loss
+4
+Total comprehensive income for the year
+Attributable to:
+Equity holders of the Bank
+China Merchants Bank
+162
+161
+1,552
+1,477
+139,065
+149,260
+140,617
+150,737
+270
+73
+1,053
+2,658
+The notes form part of these consolidated financial statements.
+Non-controlling interests
+45
+39(a)
+(45)
+4,429
+-
+-
+Items that may be reclassified subsequently to profit or loss
+Other comprehensive income for the year after tax
+Profit for the year
+2022
+· Share of other comprehensive income/(expense) from
+equity-accounted investees
+2023
+For the year ended 31 December 2023
+(Expressed in millions of Renminbi unless otherwise stated)
+Consolidated Statement of Profit or Loss and Other Comprehensive Income
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+The notes form part of these consolidated financial statements.
+Note
+Net fair value gain/(loss) on debt instruments measured at
+fair value through other comprehensive income
+- Net changes in expected credit losses of debt instruments
+148,006
+983
+- Exchange difference on translation of financial statements of
+foreign operations
+112
+(59)
+- Net movement in cash flow hedge reserve
+3,471
+(2,045)
+measured at fair value through other comprehensive income
+(5,617)
+3,337
+(1,155)
+202
+1,285
+2,373
+139,294
+- Other
+Interest expense
+28,679
+40
+(14,959)
+Net cash used in financing activities
+(72,989)
+(297,032)
+Net increase/(decrease) in cash and cash equivalents
+29,657
+(7,210)
+(240,815)
+567,198
+801,754
+Effect of foreign exchange rate changes
+2,164
+6,259
+Cash and cash equivalents as at 31 December
+Cash and cash equivalents as at 1 January
+55(a)
+55(b)
+(7,482)
+(182)
+(202)
+Payment for dividends distribution
+55(b)
+(44,120)
+(38,664)
+(12,400)
+Distribution paid on preference shares
+Distribution paid on perpetual bonds
+Interest paid on financing activities
+Payment for other financing activities
+(996)
+(1,675)
+55(b)
+(3,562)
+(3,562)
+55(b)
+55(b)
+599,019
+567,198
+Cash flows from operating activities include:
+China Merchants Bank Co., Ltd. (the "Bank") is a commercial bank incorporated in Shenzhen, the People's Republic
+of China (the "PRC"). With the approval of the China Securities Regulatory Commission (the "CSRC") of the PRC,
+the A-Shares of the Bank were listed on Shanghai Stock Exchange on 9 April 2002. On 22 September 2006, the
+Bank's H-Shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "HKEX").
+As at 31 December 2023, apart from the Head Office, the Bank had 51 branches in the Chinese mainland, Hong
+Kong, New York, Singapore, Luxembourg, London and Sydney. In addition, the Bank has two representative offices
+in New York and Taipei.
+(2) Principal activities
+The principal activities of the Bank and its subsidiaries (the "Group") are providing corporate and personal banking
+services, conducting treasury business, providing asset management and other financial services.
+2.
+Basis of preparation of consolidated financial statements
+Organisation
+(1) Statement of compliance and basis of preparation
+(2) Basis of measurement
+These consolidated financial statements are presented in Renminbi ("RMB") and unless otherwise stated, rounded
+to the nearest million. RMB is the functional currency of the domestic operations of the Group. The functional
+currencies of overseas branches and subsidiaries are determined in accordance with the primary economic
+environment in which they operate, and are translated into RMB for the preparation of these financial statements
+according to Note 4(15).
+The consolidated financial statements have been prepared on the historical cost basis except for financial instruments
+that are measured at fair values at the end of each reporting period and the measurement principles as explained
+below.
+Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
+between market participants at the measurement date, regardless of whether that price is directly observable or
+estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes
+into account the characteristics of the asset or liability if market participants would take those characteristics into
+account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure
+purposes in these consolidated financial statements is determined on such a basis, except for share-based payment
+transactions that are within the scope of IFRS 2 Share-based Payment, leasing transactions that are within the scope
+of IFRS 16 Leases, and measurements that have some similarities to fair value but are not fair value, such as net
+realisable value in IAS 2 Inventories or value in use in IAS 36 Impairment of Assets.
+In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on
+the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to
+the fair value measurement in its entirety, which are described as follows:
+Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
+access at the measurement date;
+These consolidated financial statements have been prepared in accordance with International Financial Reporting
+Standards ("IFRSS") and its interpretations promulgated by the International Accounting Standards Board ("IASB"),
+and the disclosure requirements of the Hong Kong Companies Ordinance. These consolidated financial statements
+also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock
+Exchange of Hong Kong Limited.
+Organisation and principal activities
+(1)
+1.
+Interest received
+293,467
+285,050
+121,178
+108,496
+Interest paid
+The notes form part of these consolidated financial statements.
+167
+168
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+Notes to the Consolidated Financial Statements
+For the year ended 31 December 2023
+(Expressed in millions of Renminbi unless otherwise stated)
+55(b)
+China Merchants Bank
+Distribution paid on perpetual debt capital
+Payment for redemption of perpetual debt capital
+(30,161)
+(484)
+(34,892)
+(255,107)
+(513,926)
+China Merchants Bank
+Chapter VIII Financial Statements
+(34,786)
+Annual Report 2023 (H share)
+2023
+2022
+Financing activities
+Proceeds from the issuance of negotiable interbank certificates
+of deposit
+55(b)
+Notes
+68,608
+(37,423)
+357,753
+Payment for the acquisition of subsidiaries, associates or joint ventures
+Payment for the purchases of property and equipment and other assets
+Net cash used in investing activities
+(1,898,898)
+(2,282,035)
+463
+79,122
+6,750
+97,963
+4,950
+154
+Net cash generated from operating activities
+Proceeds from the disposals of subsidiaries, associates or joint ventures
+Payment for the purchases of investments
+Investment income received
+1,334,013
+1,954,061
+Proceeds from disposals and redemptions of investments
+Investing activities
+570,143
+Proceeds from the disposals of property and equipment and other assets
+Income tax paid
+Proceeds from the issuance of certificates of deposit and
+other debt securities
+Repayment of certificates of deposit and other debt securities
+55(b)
+(48,267)
+(16,504)
+Repayment of debt securities
+55(b)
+(250,996)
+(51,146)
+Payment for lease liabilities
+55(b)
+(5,053)
+(4,932)
+Payment for redemption of preference shares
+(7,196)
+(78,735)
+(112,584)
+55(b)
+Repayment of negotiable interbank certificates of deposit
+55(b)
+66,504
+20,287
+Proceeds from the issuance of debt securities
+55(b)
+25,201
+21,481
+Proceeds from the issuance of perpetual bonds
+29,997
+Proceeds from non-controlling interests of subsidiaries
+2,667
+Proceeds from other financing activities
+55(b)
+17,303
+10,796
+(1,104)
+Annual Report 2023 (H share)
+2.
+(2)
+49
+11,815
+13,656
+48
+65,435
+65,432
+92
+47
+122,978
+46(b)
+27,468
+27,468
+46(a)
+120,446
+92,978
+150,446
+151
+108,737
+945,503
+1,076,370
+2,009
+2,934
+53
+43,832
+50
+49,734
+449,139
+518,638
+132,471
+141,481
+51
+94,985
+52(b)
+46
+25,220
+25,220
+223,821
+176,578
+43
+22,491
+19,662
+42
+32
+13,013
+29(b)
+6,679
+5,486
+41
+19,458
+13,597
+12,675
+1,607
+1,510
+44
+45
+Total equity
+- Perpetual debt capital
+- Non-controlling interest
+-
+Non-controlling interests
+Total equity attributable to shareholders of the Bank
+Exchange reserve
+Proposed profit appropriation
+Retained earnings
+General reserve
+9,184,674
+9,942,754
+125,938
+113,195
+9,359
+8,735
+6,521
+5,948
+International Tax Reform-Pillar Two model Rules
+IFRS 17 Insurance Contracts and its amendments
+IFRS 17 Insurance Contracts and its amendments ("New Insurance Contract Standard") establishes the principles
+of recognition, measurement, presentation and disclosure of insurance contracts and replaces IFRS 4 Insurance
+Contracts.
+The definition of insurance contract has been elaborated in the New Insurance Contract Standard which specified
+the combination and separation of insurance contract, introduced the concept of insurance contract group and
+refined the measurement model of insurance contract. It also made an adjustment to the principle of revenue
+recognition for insurance services and refined the measurement methods of contract service margins. The New
+Insurance Contract Standard outlines a general model, which is modified for insurance contracts with direct
+participation features, described as the variable fee approach. The general model is simplified if certain criteria are
+met by measuring the liability for remaining coverage using the premium allocation approach. The general model
+uses current assumptions to estimate the amount, timing and uncertainty of future cash flows and it explicitly
+measures the cost of that uncertainty. It takes into account market interest rates and the impact of policyholders'
+options and guarantees. The adoption of IFRS 17 has had no material impact on the financial position and financial
+performance of the Group.
+169
+Deferred Tax related to Assets and Liabilities arising from a Single
+Transaction
+1,841
+30,000
+449,139
+132,471
+94,985
+151
+65,435 11,815
+(3)
+Definition of Accounting Estimates
+Disclosure of Accounting Policies
+Insurance Contracts
+Chapter VIII Financial Statements
+Basis of preparation of consolidated financial statements (continued)
+Basis of measurement (continued)
+Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
+liability, either directly or indirectly; and
+Level 3 inputs are unobservable inputs for the asset or liability.
+The preparation of the financial statements in conformity with IFRSS requires management to make judgements,
+estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities,
+income and expenses. The estimates and associated assumptions are based on historical experience and various
+other factors that are believed to be reasonable under the circumstances, the results of which form the basis of
+making the judgements about carrying values of assets and liabilities that are not readily apparent from other
+sources. Actual results may differ from these estimates.
+The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
+recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of
+the revision and future periods if the revision affects both current and future periods.
+Judgements made by management in the application of IFRSS that have significant effect on the consolidated
+financial statements and estimates with a significant risk of material adjustment in the future periods are discussed
+in Note 5.
+3. Application of new and amendments to IFRSS
+Standards and amendments to IFRSS effective in current year applied by the
+Group
+IFRS 17 (including the June 2020 and
+December 2021 Amendments to IFRS 17)
+Amendments to IAS 1 and IFRS Practice
+Statement 2
+Amendments to IAS 8
+Amendments to IAS 12
+Amendments to IAS 12
+reserve
+23,866
+General Retained Proposed profit Exchange
+reserve earnings appropriation
+reserve
+163
+Wang Liang
+Director
+Director
+Miao Jianmin
+Approved and authorised for issue by the Board of Directors on 25 March 2024.
+The notes form part of these consolidated financial statements.
+164
+Total equity and liabilities
+11,028,483
+954,238
+1,085,729
+2,787
+2,838
+62(a)
+10,138,912
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+reserve
+reserve
+capital shares bonds
+25,220 27,468 92,978
+Notes
+Surplus
+Investment
+Capital revaluation Hedging
+Share Preference Perpetual
+Non-controlling interests
+Other equity instruments
+Total equity attributable to equity holders of the Bank
+2023
+Changes in equity for the year
+At 1 January 2023
+For the year ended 31 December 2023
+(Expressed in millions of Renminbi unless otherwise stated)
+Consolidated Statement of Changes in Equity
+reserve
+Interest income
+2022
+2023
+2,934 1,076,370
+6,521
+2,838 1,085,729
+The notes form part of these consolidated financial statements.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+2022
+49,734
+Total equity attributable to equity holders of the Bank
+Other equity instruments
+Investment
+Non- Perpetual
+Notes
+capital
+Share Preference Perpetual
+shares bonds
+reserve
+reserve
+Non-controlling interests
+518,638
+108,737 141,481
+92
+(e) Transfers within equity
+upon disposal of
+equity instruments
+designated at fair
+(49,734)
+49,734
+(996)
+(996)
+(996)
+(3,562)
+(3,562)
+(3,562)
+value through other
+comprehensive income
+49
+(49)
+At 31 December 2023
+25,220
+27,468 122,978 65,432 13,656
+reserve
+perpetual bonds
+Capital revaluation Hedging Surplus General Retained
+reserve reserve earnings
+controlling debt
+(849) 88,557
+138,012
+1,080
+202 139,294
+At 1 January 2022
+Changes in equity for the year
+(a) Net profit for the year
+(b) Other comprehensive
+2,648
+income for the year
+Total comprehensive income for
+the year
+(c) Capital movement from
+equity holders
+(6,597)
+(2,088)
+(i) Capital invested
+by non-controlling
+16
+4,153 86,758
+5,447
+17,183 58,932
+138,012
+appropriation
+reserve
+Subtotal interest capital Total
+25,220
+34,065
+92,978
+67,523
+15,047
+39
+82,137
+115,288 390,207
+38,385 (2,144) 858,745
+3,300
+3,636 865,681
+(6,597)
+(2,088)
+(3,232)
+112
+12,848
+Proposed profit Exchange
+(vii) Distribution to
+preference shares
+(vi) Dividends to
+(c) Capital movement from
+30,000
+(3)
+equity holders
+(i) Decrease in
+non-controlling
+interests
+(ii) Issue of perpetual
+the year
+bonds
+(i) Appropriations to
+statutory surplus
+1,792
+(59)
+925
+2,658
+22
+51
+(d) Profit appropriations
+Total comprehensive income for
+16
+income for the year
+(59)
+69,499
+5,902
+43,832 2,009 945,503
+925
+Non- Perpetual
+controlling debt
+Subtotal interest capital
+5,948
+Total
+2,787
+954,238
+130,867
+573
+51
+131,491
+146,602
+146,602
+1,222
+182
+148,006
+(a) Net profit for the year
+(b) Other comprehensive
+2,731
+1,792
+(59)
+146,602
+general reserve
+51
+(iii) Dividends paid for
+the year 2022
+52(a)
+13,752
+(13,752)
+9,010
+(9,010)
+(43,832)
+(43,832)
+(288)
+(44,120)
+(iv) Distribution to
+perpetual debt
+62 (182) (182)
+capital
+(v) Proposed dividends
+for the year 2023 52(b)
+The notes form part of these consolidated financial statements.
+shareholders
+50
+(288) (182) (48,860)
+925
+149,260
+1,244
+233
+150,737
+29,997
+(383)
+29,614
+(383)
+(383)
+46(b)
+30,000
+(3)
+29,997
+29,997
+13,752
+9,010 (77,054)
+5,902
+(48,390)
+reserve
+(ii) Decrease in
+(ii) Appropriations to
+interests
+(386)
+- Depreciation of property and equipment and investment properties
+11,008
+10,279
+- Depreciation of right-of-use assets
+4,205
+4,151
+- Amortisation of other assets
+(257)
+1,170
+- Net gains on debt securities and equity investments
+(18,149)
+(14,722)
+- Interest income on investments
+- Interest expense on issued debt securities
+(80,836)
+(65,808)
+7,781
+1,193
+- Unwinding of discount on loans and advances
+12,409
+(5,166)
+5,948 2,787 954,238
+The notes form part of these consolidated financial statements.
+166
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+Consolidated Statement of Cash Flows
+For the year ended 31 December 2023
+(Expressed in millions of Renminbi unless otherwise stated)
+2023
+2022
+Operating activities
+Profit before taxation
+Adjustments for:
+- Impairment losses on loans and advances
+176,618
+165,113
+46,635
+45,157
+- Impairment losses on investments and other
+9,662
+- Share of profits of associates
+(616)
+(815)
+(13,744)
+(46,825)
+Borrowing from central banks
+247,751
+(30,073)
+Other liabilities
+(45,862)
+(39,251)
+Cash generated from operating activities before income tax payment
+392,539
+607,566
+160
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+Consolidated Statement of Profit or Loss
+For the year ended 31 December 2023
+(Expressed in millions of Renminbi unless otherwise stated)
+non-controlling
+Notes
+original maturity over 3 months
+945,503
+Amounts due from banks and other financial institutions with
+(69,249)
+- Share of profits of joint ventures
+(1,860)
+(1,710)
+- Net gains on disposal of properties and equipment and other assets
+(168)
+(282)
+- Interest expense on lease liabilities
+480
+510
+Changes in:
+Balances with central banks
+(48,851)
+(508,891)
+Loans and advances to customers
+Other assets
+Deposits from customers
+(5,004)
+(482,711)
+817
+63,611
+619,696
+Amounts due to banks and other financial institutions
+1,188,664
+(135,569)
+2,009
+(39)
+151 94,985 132,471 449,139
+(7,196)
+(10)
+(7,196)
+preference shares
+(6,597)
+(599)
+(iv) Redemption of
+perpetual debt
+capital
+62(a)
+(1,104) (1,104)
+165
+(d) Profit appropriations
+(i) Appropriations to
+statutory surplus
+reserve
+(ii) Appropriations to
+general reserve
+(iii) Dividends paid for
+the year 2021
+.......(10) - (1
+(iv) Distribution to
+353
+(1,489)
+43,832
+(iii) Redemption of
+(1,489)
+(3,212)
+112
+4,153
+1,053
+15
+255
+1,323
+(3,212)
+112
+138,012
+4,153
+139,065
+1,095
+457 140,617
+(8,685)
+(1,104) (7,957)
+1,842
+perpetual debt
+capital
+1,832
+12,848
+(e) Transfers within equity
+upon disposal of
+equity instruments
+designated at fair
+value through other
+comprehensive income
+(43,832)
+43,832
+(1,675)
+(1,675)
+(3,562)
+(3,562)
+(3,562)
+(20)
+20
+50
+92,978 65,435 11,815
+25,220 27,468
+At 31 December 2022
+perpetual bonds
+(vii) Distribution to
+(1,675)
+(vi) Dividends to
+5,447
+(79,100)
+(43,622)
+preference shares
+(279) (202) (44,103)
+12,848
+52(a)
+29
+(12,848)
+(17,183)
+51--...... 17,183
+(38,385)
+I
+(38,385)
+for the year 2022 52(b)
+(279)
+(38,664)
+17,183
+(v) Proposed dividends
+62 (202) (202)
+Significant increase in credit risk
+For the above financial instruments that apply the ECL model, except for the purchased or originated credit-impaired
+financial assets, an assessment of whether credit risk has increased significantly since initial recognition is performed
+at each reporting period by the Group to determine whether to recognise lifetime ECL. When the credit risk of
+these financial instruments does not increase significantly after the initial recognition, the Group recognises a loss
+allowance for the financial instrument at an amount equal to 12-month ECL; in the event of a significant increase in
+credit risk, the Group recognises a loss allowance at an amount equal to lifetime ECL. The Group recognises the loss
+allowance of receivables that result from transactions that are within the scope of IFRS 15 Revenue from contracts
+with customers at an amount equal to lifetime ECL.
+The Group performs impairment assessment under expected credit loss ("ECL") model on financial assets which
+are subject to impairment under IFRS 9 Financial Instruments, including financial assets at amortised cost, debt
+instrument assets at fair value through other comprehensive income, leases receivable, loan commitments and
+financial guarantee contracts. The amount of ECL is updated at each reporting date to reflect changes in credit risk
+since initial recognition.
+Annual Report 2023 (H share)
+Impairment under ECL model
+(5) Financial instruments (continued)
+4. Material accounting policy information (continued)
+In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk
+of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on
+the financial instrument as at the date of initial recognition. In making this assessment, the Group considers both
+quantitative and qualitative information that is reasonable and supportable, including historical experience and
+forward-looking information that is available without undue cost or effort. The assessment of whether the credit risk
+has increased significantly is detailed in Note 60(a).
+The Group assesses the ECL of financial assets with forward-looking information. 12-month ECL ("12m ECL")
+represents the portion of lifetime ECL that is expected to result from default events that are possible within 12
+months after the reporting date. In contrast, lifetime ECL represents the ECL that will result from all possible default
+events over the expected life of the relevant instrument. Assessment are done based on the factors that are specific
+to the debtors, general economic conditions and an assessment of both the current conditions at the reporting date
+as well as the forecast of future conditions.
+Credit-impaired financial assets
+(5) Financial instruments (continued)
+China Merchants Bank
+Annual Report 2023 (H share)
+4.
+Chapter VIII Financial Statements
+Material accounting policy information (continued)
+Impairment under ECL model (continued)
+Measurement and recognition of ECL
+ECL is measured based on the probability of default, loss given default and the exposure at default. The
+measurement and recognition of ECL are detailed in Note 60(a).
+Generally, ECL is estimated as the difference between all contractual cash flows that are due to the Group in
+accordance with the contract and all the cash flows that the Group expects to receive, discounted at the effective
+interest rate determined at initial recognition.
+Chapter VIII Financial Statements
+For a lease receivable, the cash flows used for determining the ECL is consistent with the cash flows used in
+measuring the lease receivable in accordance with IFRS 16 Leases.
+The Group defines whether there is credit impairment based on the internal evaluation results of the credit risk
+management system for relevant financial assets. The Group considers that financial assets have been credit impaired
+when its loan classification is substandard, doubtful or loss or is more than 90 days overdue.
+China Merchants Bank
+on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
+together and has a recent actual pattern of short-term profit-taking; or
+175
+For a financial guarantee contract, the Group is required to make payments only in the event of a default by the
+debtor in accordance with the terms of the instrument that is guaranteed. Accordingly, the expected credit losses is
+the present value of the expected payments to reimburse the holder for a credit loss that it incurs less any amounts
+that the Group expects to receive from the holder, the debtor or any other party.
+Debt instruments that meet the following conditions are subsequently measured at fair value through other
+comprehensive income ("FVTOCI"):
+the financial asset is held within a business model whose objective is achieved by both collecting contractual
+cash flows and selling; and
+the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
+of principal and interest on the principal amount outstanding.
+All other financial assets are subsequently measured at fair value through profit or loss ("FVTPL"), except that at
+the date of initial application/initial recognition of a financial asset the Group may irrevocably elect to present
+subsequent changes in fair value of an equity investment, which is not held for trading, in other comprehensive
+income ("OCI").
+A financial asset is classified as held for trading if:
+.
+it has been acquired principally for the purpose of selling in the near term; or
+it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective
+hedging instrument.
+In addition, the Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria
+as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+4. Material accounting policy information (continued)
+(5) Financial instruments (continued)
+Classification and measurement of financial assets (continued)
+Financial assets at amortised cost
+Financial assets measured at amortised cost are subsequently measured with the effective interest method, and the
+gains or losses arising from amortisation or impairment are recognised in profit or loss. Interest income is calculated
+by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets
+that have subsequently become credit-impaired. For financial assets that have subsequently become credit-impaired,
+interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset from
+the next reporting period. If the credit risk on the credit-impaired financial instrument improves so that the financial
+asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the gross
+carrying amount of the financial asset from the beginning of the reporting period following the determination that
+the asset is no longer credit-impaired.
+Debt instruments classified as at FVTOCI
+Subsequent changes in the carrying amounts for debt instruments classified as at FVTOCI as a result of interest
+income calculated using the effective interest method, foreign exchange gains and losses are recognised in profit
+or loss. All other changes in the carrying amount of debt instruments are recognised in OCI and accumulated
+under the heading of investment revaluation reserve. Impairment allowances are recognised in profit or loss with
+corresponding adjustment to OCI without reducing the carrying amounts of debt instruments. The amounts that are
+recognised in profit or loss are the same as the amounts that would have been recognised in profit or loss if debt
+instruments had been measured at amortised cost. When debt instruments are derecognised, the cumulative gains
+or losses previously recognised in investment revaluation reserve are reclassified to profit or loss.
+Equity instruments designated as at FVTOCI
+At the date of initial application/initial recognition, the Group may make an irrevocable election (on an instrument-
+by-instrument basis) to designate investments in equity instruments which are not held for trading as at FVTOCI.
+Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently,
+they are measured at fair value with gains and losses arising from changes in fair value recognised in OCI and
+accumulated in the investment revaluation reserve; and are not subject to impairment assessment. The cumulative
+gain or loss will not be reclassified to profit or loss on disposal of the equity investments, and will be transferred to
+retained earnings.
+Dividends from these investments in equity instruments are recognised in profit or loss when the Group's right
+to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the
+investment. Dividends are included in the "other net income" line item in profit or loss.
+Financial assets at FVTPL
+Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as
+FVTOCI are measured at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting
+period, with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or
+loss includes fair value gains or losses, any dividend or interest earned on the financial asset, and is included in
+"other net income".
+176
+For undrawn loan commitments, ECL is the present value of the difference between the contractual cash flows that
+are due to the Group:
+For hedge effectiveness assessment, the Group considers whether the hedging instrument is effective in offsetting
+changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging
+relationships meet all of the following hedge effectiveness requirements:
+•
+Cash flow hedge
+The effective portions of changes in the fair value of derivatives that are designated and qualified as cash flow
+hedge are recognised in other comprehensive income and accumulated separately in hedging reserve. Any gain or
+loss relating to an ineffective portion is recognised immediately in the consolidated statement of profit or loss.
+For cash flow hedge of a recognised asset or liability, the associated cumulative gain or loss is reclassified from
+hedging reserve to the consolidated statement of profit or loss in the same period during which the hedged cash
+flows affect profit and loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the
+criteria for hedge accounting, any cumulative gain or loss at that time remains in hedging reserve until the forecast
+transaction is ultimately recognised in the consolidated statements of profit or loss. When a forecast transaction is
+no longer expected to occur, the cumulative gain or loss is immediately reclassified to the consolidated statement of
+profit or loss.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+4. Material accounting policy information (continued)
+(5)
+Financial instruments (continued)
+Hedge accounting (continued)
+Hedge effectiveness testing
+The Group has elected to adopt the general hedge accounting in IFRS 9 Financial Instruments. This requires the
+Group to ensure that hedge accounting relationships are aligned with its risk management objectives and strategy
+and to apply a more qualitative and forward-looking approach to assessing hedge effectiveness.
+The carrying amount of the hedged item not already measured at fair value is adjusted for the gain or loss
+attributable to the risk being hedged and is taken to consolidated statement of profit or loss. The adjustment to the
+carrying amount of the hedged item is based on a recalculated effective interest rate at the date that amortisation
+begins and shall be amortised to consolidated statement of profit or loss if the hedged item is a financial
+instrument measured at amortised cost. Amortisation begins as soon as an adjustment exists but no later than
+when the hedged item ceases to be adjusted for hedging gains and losses. If the hedged item is debt instruments
+measured at FVTOCI, the amounts previously recorded as cumulative adjustments of hedging gains or losses are
+amortised in similar method and recognised in the consolidated statement of profit or loss. The carrying amount of
+the hedged item is not adjusted.
+the financial asset is held within a business model whose objective is to collect contractual cash flows; and
+the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
+of principal and interest on the principal amount outstanding ("SPPI").
+•
+there is an economic relationship between the hedged item and the hedging instrument;
+the effect of credit risk does not dominate the value changes that result from that economic relationship;
+and
+the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged
+item that the Group actually hedges and the quantity of the hedging instrument that the entity actually uses
+to hedge that quantity of hedged item.
+If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the
+risk management objective for that designated hedging relationship remains the same, the Group adjusts the hedge
+ratio of the hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again.
+Specific items
+Cash equivalents
+Cash equivalents comprise investments that are short term, highly liquid, readily convertible into known amounts of
+cash and subject to insignificant risk of changes in value, and unrestricted balances with the central banks, banks
+and other financial institutions, and amounts held under resale agreements, with original maturity of 3 months or
+less.
+Balances and placements with banks and other financial institutions
+Banks refer to those institutions approved by the People's Bank of China ("PBOC") and other authorities. Other
+financial institutions represent finance companies, insurance companies, investment trust companies and leasing
+companies which are registered with the National Administration of Financial Regulation ("NAFR") and under the
+supervision of the NAFR and securities firms and investment fund companies which are registered with and under
+the supervision of other regulatory authorities. Balances and placements with banks and other financial institutions
+are measured at amortised cost.
+Resale and repurchase agreements
+•
+The gains or losses on the hedging instrument are recognised in consolidated statement of profit or loss. When the
+hedging for the risk exposure relates to an non-trading equity instrument designated as at FVTOCI, the gains or
+losses on the hedging instrument are recognised in other comprehensive income.
+Fair value hedge
+The Group designates certain derivatives as hedging instruments for fair value hedge and cash flow hedge.
+The Group documents the relationship between the hedging instruments and hedged items, along with its risk
+management objective and its strategy for undertaking the hedge, at the inception of a hedging relationship. The
+Group also requires documentation of the assessment, both at hedge inception and on an ongoing basis, of whether
+the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash
+flows of hedged items attributable to the hedged risks.
+the cash flows that the Group expects to receive if the loan is drawn down.
+The loss allowance for loan commitments and financial guarantee contracts is recognised in profit or loss and
+accumulated in provisions. As for debt instruments measured at FVTOCI, the loss allowance is recognised in OCI and
+accumulated in the investment revaluation reserve without reducing the carrying amounts of these financial assets.
+The loss allowance for other financial assets which are subject to impairment under IFRS 9 Financial Instruments is
+recognised in profit or loss through a loss allowance account.
+Classification and measurement of financial liabilities
+Financial liabilities at FVTPL
+Financial liabilities are classified as at FVTPL when the financial liability is (i) held for trading (including derivatives
+belonging to financial liabilities) or (ii) designated as at FVTPL. Except for hedging accounting, financial liabilities
+measured at FVTPL are subsequently measured at fair value and all changes in fair value are recognised in profit or
+loss.
+A financial liability is classified as held for trading if:
+.
+it has been acquired principally for the purpose of repurchasing it in the near term; or
+on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
+together and has a recent actual pattern of short-term profit-taking; or
+it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective
+hedging instrument.
+A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial
+recognition if:
+such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
+otherwise arise; or
+the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed
+and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk
+management or investment strategy, and information about the grouping is provided internally on that basis;
+or
+it forms part of a contract containing one or more embedded derivatives, and IFRS 9 Financial Instruments
+permits the entire combined contract to be designated as at FVTPL.
+177
+178
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+4. Material accounting policy information (continued)
+(5) Financial instruments (continued)
+Classification and measurement of financial liabilities (continued)
+Other financial liabilities
+Except for financial liabilities at FVTPL, financial liabilities formed by the transfer of financial assets that do not
+meet the conditions for derecognition or by continued involvement in transferred financial assets and financial
+liabilities, financial guarantee contract and loan commitment, other financial liabilities are classified as financial
+liabilities at amortised cost, which are subsequently measured at amortised cost and the gains or losses arising from
+derecognition or amortisation are included in profit or loss.
+Hedge accounting
+if the holder of the loan commitments draws down the loan, and
+•
+The consolidated statement of profit or loss includes post-tax results of the joint ventures for the year, including any
+impairment loss on goodwill relating to the investment in the joint ventures recognised for the year (see Notes 4(4)
+and 4(10)).
+The Group classifies its financial assets into the following measurement categories at initial recognition: financial
+assets at amortised cost, financial assets at fair value through other comprehensive income and financial assets at
+fair value through profit or loss.
+the date to be
+determined
+The amendments to IFRSS mentioned above are not expected to have material impact on the consolidated financial
+statements in the foreseeable future.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+4. Material accounting policy information
+(1)
+Business combination
+Financial statements include financial statements of the Bank and its subsidiaries. Subsidiaries are entities controlled
+by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement
+with the entity and has the ability to affect those returns through its power over the entity. When assessing whether
+the Group has power, only substantive rights (held by the Group and other parties) are considered.
+An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control
+commences until the date that control ceases. Intra-group balances, transactions and cash flows and any profits
+arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. If the
+intra-group transaction indicates that the relevant assets have impairment losses, the losses shall be recognised in
+full.
+When necessary, adjustments are made by the Group to the financial statements of subsidiaries to bring their
+accounting policies in line with the Group's accounting policies.
+Sale or Contribution of Assets between an Investor
+and its Associate or Joint Venture
+Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Bank, and
+in respect of which the Group has not agreed any additional terms with the holders of those interests which would
+result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition
+of a financial liability. Non-controlling interests are presented in the consolidated statement of financial position and
+consolidated statement of changes in equity within equity, separately from equity attributable to the equity holders
+of the Bank. Non-controlling interests in the results of the Group are presented in the consolidated statement of
+profit or loss and the consolidated statement of profit or loss and other comprehensive income as an allocation of
+the net profit or loss and total comprehensive income for the year between non-controlling interests and the equity
+holders of the Bank.
+When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that
+subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former
+subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value
+on initial recognition of a financial asset (see Note 4(5)) or, when appropriate, the cost on initial recognition of an
+investment in a joint venture (see Note 4(2)) or, an associate (see Note 4(3)).
+Business combinations or asset acquisitions
+Optional concentration test
+The Group can elect to apply an optional concentration test, on a transaction-by-transaction basis, that permits a
+simplified assessment of whether an acquired set of activities or assets is not a business. The concentration test is
+met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or
+group of similar identifiable assets. The gross assets under assessment exclude cash and cash equivalents, deferred
+tax assets, and goodwill resulting from the effects of deferred tax liabilities. If the concentration test is met, the set
+of activities or assets is determined not to be a business and no further assessment is needed.
+Asset acquisitions
+When the Group acquires a group of assets and liabilities that do not constitute a business, the Group identifies
+and recognises the individual identifiable assets acquired and liabilities assumed by allocating the purchase price
+first to financial assets/financial liabilities at the respective fair values, the remaining balance of the purchase price
+is then allocated to the other identifiable assets and liabilities on the basis of their relative fair values at the date of
+purchase. Such a transaction does not give rise to goodwill or bargain purchase gain.
+171
+172
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+Changes in the Group's interests in a subsidiary that do not result in a loss of control are accounted for as equity
+transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within
+consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain
+or loss is recognised.
+Amendments to IFRS 10 and IAS 28
+1 January 2025
+Lack of Exchangeability
+170
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+3.
+Application of new and amendments to IFRSS (continued)
+Standards and amendments to IFRSS effective in current year applied by the
+Group (continued)
+Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities Arising from a Single Transaction
+The amendments mainly relate to the scope of exemption for the initial recognition of deferred income tax in the
+International Accounting Standards IAS 12 - Income Taxes, and clarifies that the individual transaction 1) that is not
+arising from business combination; 2) that affects neither the accounting profit nor taxable profits (or deductible
+losses) at the time of transaction; and 3) that the equivalent taxable temporary differences and deductible temporary
+differences are generated due to the initially recognised assets and liabilities is not applicable to the regulations
+on the exemptions from initially recognised deferred tax liabilities and deferred tax assets. With this amendment,
+the Group has been required to recognise one deferred tax asset (to the extent that taxable income is likely to be
+obtained to offset the deductible temporary difference) and one deferred tax liability for all deductible and taxable
+temporary differences relating to right-of-use assets and lease liabilities. The adoption of the amendments to IAS 12
+has had no material impact on the financial position and financial performance of the Group.
+Amendments to IAS 12 - International Tax Reform-Pillar Two model Rules
+IAS 12 is amended to add the exception to recognising and disclosing information about deferred tax assets and
+liabilities that are related to tax law enacted or substantively enacted to implement the Pillar Two model rules
+published by the Organisation for Economic Co-operation and Development (the "Pillar Two legislation"). The
+amendments require that entities apply the amendments immediately upon issuance and retrospectively. The
+amendments also require that entities to disclose separately its current tax expense/income related to Pillar Two
+income taxes in periods which the Pillar Two legislation is in effect, and the qualitative and quantitative information
+about its exposure to Pillar Two income taxes in periods in which the Pillar Two legislation is enacted or substantially
+enacted but not yet in effect in annual reporting periods beginning on or after 1 January 2023. The adoption of the
+amendments to IAS 12 has had no material impact on the financial position and financial performance of the Group
+for the current and prior year.
+The adoption of the above other amendments to IFRSS has had no material impact on the financial position and
+financial performance of the Group for the current and prior year or on the disclosures set out in these consolidated
+financial statements.
+Amendments to IFRSS that are issued but not yet effective and have not been
+adopted by the Group
+Effective for
+annual period
+beginning on or after
+Amendments to IFRS 16
+Lease Liability in a Sale and Leaseback
+1 January 2024
+Amendments to IAS 1
+Classification of Liabilities as Current or Non-current
+1 January 2024
+Amendments to IAS 1
+Non-current Liabilities with Covenants
+1 January 2024
+Amendments to IAS 7 and IFRS 7
+Supplier Finance Arrangements
+Amendments to IAS 21
+4. Material accounting policy information (continued)
+Debt instruments that meet the following conditions are subsequently measured at amortised cost:
+(1)
+Business combinations or asset acquisitions (continued)
+Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the
+extent of the Group's interest in the associates, except where unrealised losses provide evidence of an impairment
+of the asset transferred, in which case they are recognised immediately in profit or loss.
+When the Group ceases to have significant influence over an associate entity, it is accounted for as a disposal of the
+entire interest in that investee, with a resulting gain or loss being recognised in the consolidated statement of profit
+or loss, previous other comprehensive income would be reclassified to profit or loss. Any interest retained in that
+former investee at the date when significant influence is lost is recognised at fair value and this amount is regarded
+as the fair value on initial recognition of a financial asset (see Note 4(5)).
+Goodwill
+Goodwill represents the excess of
+(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest
+based on the fair value of net assets acquired in the acquiree and the fair value of the Group's previously
+held equity interests in the acquiree; over
+(ii)
+the net fair value of the acquiree's identifiable assets and liabilities measured as at the acquisition date.
+When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain
+purchase.
+Goodwill is stated at cost less accumulated impairment. Goodwill arising on a business combination is allocated
+to each cash-generating unit ("CGU") or group of CGUs, that is expected to benefit from the synergies of the
+combination and tested at least annually for impairment (see Note 4(10)).
+On disposal of a CGU during the year, any attributable amount of purchased goodwill is included in the calculation
+of the profit or loss on disposal.
+173
+174
+When the Group's share of losses exceeds its interest in the associates, the Group's interest is reduced to nil and
+recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive
+obligations or made payments on behalf of the associates. For these purposes, the Group's interest in the associates
+is the carrying amount of the investment under equity method together with the Group's interests that in substance
+form part of the Group's net investment in the associates.
+China Merchants Bank
+Annual Report 2023 (H share)
+4.
+(5)
+Material accounting policy information (continued)
+Financial instruments
+Initial recognition
+A financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial liability or
+equity instrument of another enterprise.
+All regular way purchases or sales of financial assets are recognised or derecognised on a trade date basis. Regular
+way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame
+established by regulation or convention in the market place.
+At initial recognition, financial assets and financial liabilities are initially measured at fair value except for trade
+receivables arising from contracts with customers which are initially measured in accordance with IFRS 15 Revenue
+from Contracts with Customers. Transaction costs that are directly attributable to the acquisition or issue of financial
+assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss)
+are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial
+recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
+value through profit or loss are recognised immediately in profit or loss.
+The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability
+and of allocating interest income and interest expense over the relevant period. The effective interest rate is the
+rate that exactly discounts estimated future cash receipts and payments (including all fees and points paid or
+received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
+through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the
+net carrying amount on initial recognition. When determining the effective interest rate, the Group estimates the
+future cash flow on the basis of considering all contract terms of financial assets or financial liabilities, but does not
+consider the expected credit loss.
+Classification and measurement of financial assets
+Chapter VIII Financial Statements
+The consolidated statement of profit or loss includes the Group's post-tax results of the associates for the year,
+including any impairment loss on goodwill relating to the investment in the associates recognised for the year (see
+Notes 4(4) and 4(10)).
+Investments in associates are accounted for in the consolidated financial statements under the equity method.
+Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group's share
+of the acquisition-date fair value of the investee's identifiable net assets over the cost of the investment (if any).
+Thereafter, the investment is adjusted for the post acquisition change in the Group's share of the associates' net
+assets. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of
+the investments, is recognised immediately in profit or loss in the period in which investment is acquired.
+material transactions between the entity and its investee.
+Business combination
+Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a
+business combination is measured at fair value, which is calculated as the sum of the acquisition date fair value of
+the assets transferred by the Group, liabilities incurred or assumed by the Group, and any equity interests issued by
+the Group. Acquisition related costs are recognised in the consolidated statement of profit or loss as incurred.
+At the acquisition date, irrespective of non-controlling interests, the identifiable assets acquired and liabilities and
+contingent liabilities assumed are recognised at their fair values; except that deferred tax assets or liabilities, and
+assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS
+12 Income Taxes and IAS 19 Employee Benefits, respectively.
+Non-controlling interests that represent ownership interests in the acquiree, and entitle their holders to a
+proportionate share of the entity's net assets in the event of liquidation are initially recognised at either fair value or
+the non-controlling interests' proportionate share in the recognised amounts of the acquiree's identifiable net assets.
+The choice of measurement basis is made on a transaction-by-transaction basis.
+(2) Joint ventures
+A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net
+assets of the arrangement, rather than rights to its assets and obligation for its liabilities.
+Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions
+about the relevant activities require the unanimous consent of the parties sharing control.
+When judging whether there is a joint control, the Group usually considers the following cases:
+whether any party within the joint arrangement cannot control the relevant activities of the joint ventures;
+whether the decisions about the joint ventures' relevant activities require the unanimous consent of the
+parties sharing control.
+The consolidated statement of profit or loss includes the Group's share of the results of joint ventures for the
+year and the consolidated statement of financial position includes the Group's share of the net assets of the joint
+ventures.
+Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group's share
+of the acquisition-date fair value of the investee's identifiable net assets over the cost of the investment (if any).
+Thereafter, the investment is adjusted for the post acquisition change in the Group's share of the joint ventures' net
+assets. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of
+the investments, is recognised immediately in profit or loss in the period in which investment is acquired.
+When the Group's share of losses exceeds its interest in the joint ventures, the Group's interest is reduced to nil and
+recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive
+obligations or made payments on behalf of the joint ventures. For these purposes, the Group's interest in the joint
+ventures is the carrying amount of the investment under equity method together with the Group's interests that in
+substance form part of the Group's net investment in the joint ventures.
+Unrealised profits and losses resulting from transactions between the Group and its joint ventures are eliminated
+to the extent of the Group's interest in the joint ventures, except where unrealised losses provide evidence of an
+impairment of the asset transferred, in which case they are recognised immediately in profit or loss.
+When the Group ceases to have joint control over a joint venture and has no significant influence on it, it is
+accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in
+the consolidated statement of profit or loss, previous other comprehensive income would be reclassified to profit
+or loss. Any interest retained in that former investee at the date when joint control is lost is recognised at fair value
+and this amount is regarded as the fair value on initial recognition of a financial asset (see Note 4(5)).
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+4. Material accounting policy information (continued)
+(3)
+(4)
+Associates
+Associate is an entity in which the Group has significant influence, but not control, or joint control. Significant
+influence is the power to participate in the financial and operating policy decisions of the investee but is not control
+or joint control of those policies.
+When judging whether there is any significant influence, the Group usually considers the following cases:
+representation on the Board of Directors or equivalent governing body of the investee;
+participation in policy-making processes;
+Business combination (continued)
+1 January 2024
+The difference between the purchase and resale consideration or sale and repurchase consideration is amortised
+over the period of the transaction using the effective interest method and is included in interest income or expense
+(as appropriate).
+Amounts for purchase of financial assets under resale agreements are accounted for under "amounts held under
+resale agreements". Amounts from sale of financial assets under repurchase agreements are accounted for under
+"amounts sold under repurchase agreements".
+179
+Investment properties
+(5) Financial instruments (continued)
+Material accounting policy information (continued)
+4.
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+182
+181
+The Group writes off a financial asset (if any) when there is information indicating that the counterparty is in
+severe financial difficulty and there is no realistic prospect of recovery. A write-off constitutes a derecognition
+event. Any subsequent recoveries are recognised in profit or loss.
+Where the Group has transferred its rights to receive cash flows from an asset or has retained its rights
+to receive cash flows from the asset but has entered into a pass-through arrangement, and has neither
+transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the
+asset, the asset and liability are recognised to the extent of the Group's continuing involvement in the asset.
+When the Group's continuing involvement takes the form of guaranteeing the transferred asset, the extent of
+the Group's continuing involvement at the time of transfer is the lower of (i) the amount of the asset and (ii)
+the guarantee amount (the maximum amount that the Group could be required to repay in the consideration
+received). When the Group continues to recognise an asset to the extent of its continuing involvement, the
+Group also recognises an relevant liability as the sum of the guarantee amount and the fair value of the
+guarantee contract (usually the consideration received for the provision of security).
+the Group has transferred its rights to receive cash flows from the asset; or
+•
+the rights to receive cash flows from the asset have expired; or
+A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)
+is derecognised when:
+Financial assets
+(a)
+Derecognition of financial instruments
+When the Group classifies preference shares issued as an equity instrument, fees, commissions and other transaction
+costs of preference shares issuance are deducted from equity. The dividends on preference shares are recognised as
+profit distribution at the time of declaration.
+has retained its rights to receive cash flows from the asset but has assumed an obligation to pay them
+in full without material delay to a third party under a "pass-through" arrangement; and either the
+Group has transferred substantially all the risks and rewards of ownership of the financial asset; or
+the Group has neither transferred nor retained substantially all the risks and rewards of ownership of
+the financial asset, but has transferred control of the asset.
+Derecognition of financial instruments (continued)
+(b)
+Securitisation
+Annual Report 2023 (H share)
+China Merchants Bank
+Financial assets and liabilities are offset and the net amount is presented in the consolidated statement of financial
+position when, and only when, the Group currently has there is a legally enforceable right to offset the recognised
+amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
+Offsetting financial instruments
+A financial liability (or part of it) is derecognised when the obligation under the liability (or part of it) is
+discharged, cancelled or expired.
+Financial liabilities
+(d)
+Derecognition of financial assets sold on condition of repurchase is determined by the economic substance
+of the transaction. If a financial asset is sold under an agreement to repurchase the same or substantially
+the same asset at a fixed price or at the sale price plus a reasonable return, the Group will not derecognise
+the asset. If a financial asset is sold together with an option to repurchase the financial asset at its fair value
+at the time of repurchase (in case of transferor sells such financial asset), the Group will derecognise the
+financial asset.
+At initial recognition of preference shares, the Group classifies the preference shares issued or their components
+as financial liabilities or equity instruments based on their contractual terms and their economic substance after
+considering the definition of financial liabilities and equity instruments.
+Sales of assets on condition of repurchase
+When the securitisation results in derecognition or partial derecognition of financial assets, the Group
+allocates the carrying amount of the transferred financial assets between the financial assets derecognised
+and the retained interests based on their relative fair values at the date of transfer. Gains or losses on
+securitisation, which is the difference between the consideration received and the allocated carrying amount
+of the financial assets derecognised, are recorded in "other net income". The retained interests continue to
+be recognised on the same basis before the securitisation.
+When a securitisation of financial assets does not qualify for derecognition, the relevant financial assets are
+not derecognised, and the consideration collected from third parties are recorded as a financial liability.
+when the Group neither transfers nor retains substantially all the risks and rewards of ownership
+of the financial assets, the Group would determine whether it has retained control of the financial
+assets. If the Group has not retained control, it shall derecognise the financial assets and recognise
+separately as assets or liabilities any rights and obligations created or retained in the transfer. If the
+Group has retained control, it shall continue to recognise the financial assets to the extent of its
+continuing involvement in the financial assets.
+when the Group retains substantially all the risks and rewards of ownership of the financial assets,
+the Group shall continue to recognise the financial assets; and
+when the Group transfers substantially all the risks and rewards of ownership of the financial assets,
+the Group shall derecognise the financial assets;
+•
+When applying the accounting policies on securitised financial assets, the Group has considered both the
+degree of transfer of risks and rewards on the transferred financial assets and the degree of control exercised
+by the Group over the transferred financial assets:
+As part of its operational activities, the Group securitises credit assets, generally through the sale of these
+assets to structured entities which issue securities to investors. Interests in the securitised financial assets may
+be retained in the form of senior or junior tranches, or other residual interests (retained interests).
+(c)
+For perpetual bonds and perpetual debt capitals issued that classified as equity instruments, any distribution
+of interests during the instruments' duration is treated as profit appropriation. When the perpetual bonds and
+perpetual debt capitals are redeemed, the redeemed amount is charged to equity. Relevant transaction expenses are
+deducted from equity.
+if the financial instrument will or may be settled in the Group's own equity instruments, it is a non-derivative
+instrument that includes no contractual obligations for the Group to deliver a variable number of its own
+equity instruments; or a derivative that will be settled only by the Group exchanging a fixed amount of cash
+or another financial asset for a fixed number of its own equity instruments.
+Chapter VIII Financial Statements
+Specific items (continued)
+Financial instruments (continued)
+Material accounting policy information (continued)
+(5)
+4.
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+Financial investments
+180
+the lease term has changed or there is a change in the assessment of exercise of a purchase option, in
+which case the lease liability is remeasured by discounting the revised lease payments using a revised
+discount rate; or
+the lease payments change due to changes in an index or rate or a change in expected payment
+under a guaranteed remaining value, in which cases the lease liability is remeasured by discounting
+the revised lease payments using the initial discount rate. But if the change in lease payments results
+from a change in floating interest rates, the lessee shall use a revised discount rate that reflects
+changes in the interest rate.
+As a lessor
+Leases for which the Group is a lessor are classified as finance or operating leases. When the terms of the lease
+transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease.
+All other leases are classified as operating leases.
+Where the Group is a lessor under finance leases, an amount representing the net investment in the lease is included
+in the consolidated statement of financial position as "loans and advances to customers". Unrecognised finance
+income under finance leases are amortised using the effective interest method over the lease term. Accounting
+policy for impairment losses are disclosed in Note 4(5).
+When the Group is a lessor of an operating lease, income derived from operating lease is recognised in the
+consolidated statement of profit or loss using the straight-line method over the lease term. If initial direct costs
+incurred in respect of the assets leased out are material, the costs are initially capitalised and subsequently amortised
+in profit or loss over the lease term on the same basis as the lease income. Contingent lease income is charged to
+profit or loss in the accounting period in which it is incurred.
+When a contract includes lease and non-lease components, the Group applies IFRS 15 Revenue from Contracts with
+Customers to allocate the consideration under the contract to each component.
+185
+After the commencement date, the Group remeasures the lease liability according to the present value
+calculated by the revised lease payment amount and the revised discount rate and makes a corresponding
+adjustment to the related right-of-use asset whenever:
+Equity investments are accounted for as financial assets at fair value through profit or loss or equity investments
+designated at fair value through other comprehensive income. Debt investments are classified as financial assets at
+fair value through profit or loss, debt investments at amortised cost, debt investments at fair value through other
+comprehensive income in accordance with the entity's business model, contractual cash flow characteristics and the
+fair value option.
+Loans and advances to customers
+Loans and advances directly granted by the Group to customers and finance leases receivables are accounted for as
+loans and advances to customers.
+the financial instrument includes no contractual obligation to deliver cash or another financial asset to
+another entity, or to exchange financial assets or financial liabilities with another entity under conditions that
+are potentially unfavorable to the Group; and
+(ii)
+(i)
+A financial instrument is an equity instrument if, and only if, both conditions (i) and (ii) below are met:
+The consideration received from the issuance of equity instruments net of transaction costs is recognised in
+shareholders' equity. Consideration and transaction costs paid by the Group for repurchasing self-issued equity
+instruments are deducted from shareholders' equity.
+Equity instruments
+Specific items (continued)
+Financial instruments (continued)
+(5)
+4. Material accounting policy information (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+Derivatives embedded in hybrid contracts that contain financial asset hosts within the scope of IFRS 9 Financial
+Instruments are not separated. The entire hybrid contract is classified and subsequently measured in its entirety as
+either amortised cost or fair value as appropriate. Derivatives embedded in non-derivative host contracts that are not
+financial assets within the scope of IFRS 9 Financial Instruments are treated as separate derivatives with the same
+terms when they meet the definition of a derivative, their risks and characteristics are not closely related to those
+of the host contracts and the hybrid contracts are not measured at FVTPL. Separated embedded derivatives are
+measured at fair value, with all changes in fair value recognised in profit or loss unless they form part of a qualifying
+cash flow hedging relationship.
+Embedded derivatives
+Derivative financial instruments are stated at fair value. Except for the gains or losses arising from the effective
+hedging portion of those derivatives in cash flow hedge and the gains or losses on the hedging instrument that
+hedges an non-trading equity instrument designated as at FVTOCI are recognised in other comprehensive income, all
+other gains or losses are recognised in the consolidated statement of profit or loss.
+The Group's derivative financial instruments mainly include forward, foreign currency swaps, interest rate swaps and
+option contracts undertaken in response to customers' needs or for the Group's own risk management purposes.
+The Group enters into derivative contracts with other banks and financial institutions that can conduct such business
+to hedge against risks arising from derivative transactions undertaken for customers.
+Derivative financial instruments
+Loans and advances to customers are classified as loans and advances to customers at fair value through profit or
+loss (loans and advances to customers at FVTPL), loans and advances to customers at amortised cost, loans and
+advances to customers at fair value through other comprehensive income (loans and advances to customers at
+FVTOCI) in accordance with the entity's business model, contractual cash flow characteristics and the fair value
+option.
+At initial recognition, the Group classifies the perpetual bonds and perpetual debt capitals issued or their
+components as financial liabilities or equity instruments based on their contractual terms and their economic
+substance after considering the definition of financial liabilities and equity instruments.
+4. Material accounting policy information (continued)
+(6)
+Property, equipment, investment property and depreciation
+Accounting policy for any identified right-of-use asset impairment loss are disclosed in Note 4(10).
+After the commencement date, the right-of-use assets are measured at cost (subject to certain exceptions)
+less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability.
+The Group recognises the depreciation of right-of-use assets as an operating expense on a straight-line basis.
+Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying
+asset. If a lease transfers the ownership of the underlying asset or the cost of the right-of-use asset reflects
+that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the
+useful life of the underlying asset.
+whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the
+site on which it is located or restore the underlying asset to the condition required by the terms and
+conditions of the lease, a provision is recognised and measured under IAS 37 Provisions, Contingent
+Liabilities and Contingent Assets. The costs are included in the related right-of-use asset, unless those
+costs are incurred to produce inventories.
+(d)
+any lease payments made at or before the commencement date, less any lease incentives received;
+any initial direct costs incurred by the lessee; and
+•
+•
+the amount of the initial measurement of the lease liability;
+Leasehold land and building
+•
+Right-of-use assets
+(c)
+Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-
+line basis over the lease term.
+The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease
+arrangements in which it is the lessee, except for short-term leases (lease term of 12 months or less and
+do not contain a purchase option) and leases of low value assets (the value of assets is equivalent to below
+RMB35,000).
+Short-term leases and leases of low-value assets
+(b)
+For a contract that contains a lease component and one or more additional lease or non-lease components,
+the Group allocates the consideration in the contract to each lease component on the basis of the relative
+stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
+Allocation of consideration to components of a contract
+The right-of-use assets are presented as a separate line in the consolidated statement of financial position.
+The right-of-use asset is initially measured at cost. This cost includes:
+(a)
+For payments of a property interest which includes both leasehold land and building elements, the entire
+property is presented as property and equipment of the Group when the payments cannot be allocated
+reliably between the leasehold land and building elements, except for those that are classified and accounted
+for as investment properties.
+Annual Report 2023 (H share)
+variable lease payments that depend on an index or rate, initially measured using the index or rate at
+the commencement date;
+fixed lease payments (including in-substance fixed payments), less any lease incentives;
+•
+•
+•
+•
+•
+Lease payments refer to the payment made by the lessee to the lessor in connection with the right to use
+the leased assets during the lease term. Lease payments included in the measurement of the lease liability
+comprise:
+China Merchants Bank
+Except for short-term leases and leases of low-value asset, lease liability is initially measured at the present
+value of the lease payments that are not paid at the commencement date using lessee's incremental
+borrowing rate as the discount rate.
+Lease liabilities
+(e)
+As a lessee (continued)
+Leases (continued)
+Material accounting policy information (continued)
+Chapter VIII Financial Statements
+(9)
+4.
+Lease liability is presented as a separate line in the consolidated statement of financial position.
+As a lessee
+A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a
+period of time in exchange for consideration. The Group assesses whether a contract is or contains a lease based on
+the definition under IFRS 16 Leases at inception or modification date. Such contract will not be reassessed unless the
+terms and conditions of the contract are subsequently changed.
+Definition of a lease
+Subsequent expenditure relating to a property, equipment and investment property is capitalised only when it is
+probable that future economic benefits associated with the property and equipment will flow to the Group. All other
+expenditure is recognised in the consolidated statement of profit or loss as an expense as incurred.
+Construction in progress represents property under construction and is stated at cost less impairment losses. Cost
+comprises the direct and indirect cost of construction. Construction in progress is transferred to an appropriate class
+of property or other asset when the asset is ready for its intended use. No depreciation is provided for construction
+in progress.
+3-5 years
+no more than 25 years
+the estimated useful lives
+the estimated useful lives
+3 years
+20 years
+Profits or losses on disposal of property, equipment and investment property are determined as the difference
+between the net disposal proceeds and the carrying amount of the property, equipment and investment property,
+and are accounted for in the consolidated statement of profit or loss as they arise.
+20 years
+Aircraft, vessels and professional equipment
+Leasehold improvements (self-owned property)
+Leasehold improvements (leased property)
+Computer equipment
+After the beginning date of the lease term, the Group calculates the interest expense of the lease liability in
+each period of the lease term at a fixed periodic interest rate, and recognised it in the current profit and loss
+or related asset costs.
+Land and buildings
+Depreciation is calculated to write off the cost of property, equipment and investment property over the following
+estimated useful lives, after taking into account an estimated residual value on a straight-line basis:
+Property, equipment and investment property, are stated at cost or deemed cost less accumulated depreciations and
+accumulated impairment losses. These also include land held under operating leases and buildings thereon, where
+the fair value of the leasehold interest in the land and buildings cannot be measured separately at the inception of
+the lease and the building is not clearly held under an operating lease.
+Other
+(7) Repossessed assets
+(8)
+In the recovery of impaired loans and advances, the Group may take possession of assets held as collateral through
+court proceedings or voluntary delivery of possession by the borrowers. Repossessed assets other than equity
+instrument are reported in "other assets".
+Leases
+Material accounting policy information (continued)
+(9)
+4.
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+184
+183
+Both the periods and method of amortisation are reviewed annually.
+28 years
+Core deposit
+2 - 20 years
+Software and Other
+The amortisation period of intangible assets is as follows:
+Intangible assets are not amortised while their useful lives are assessed to be indefinite. The Group does not have
+intangible assets with useful lives assessed to be indefinite as at the end of the reporting period.
+Intangible assets are stated at cost less accumulated amortisation (only intangible assets with finite useful lives) and
+accumulated impairment losses (see Note 4(10)). Amortisation of intangible assets with finite useful lives is charged
+to profit or loss on a straight-line basis over the assets' estimated useful lives.
+Intangible assets
+Repossessed assets of equity instruments are detailed in Note 4(5).
+186
+China Merchants Bank
+4.
+the exercise price of purchase options, if the lessee is reasonably certain to exercise the options;
+payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to
+terminate the lease; and
+Material accounting policy information (continued)
+Chapter VIII Financial Statements
+4.
+Annual Report 2023 (H share)
+China Merchants Bank
+If the revenue is recognised over time, the Group recognises revenue in accordance with the progress towards
+complete satisfaction of a performance obligation. The progress towards complete satisfaction of a performance
+obligation is measured based on output method, which is to recognise revenue on the basis of direct measurements
+of the value of the goods or services transferred to the customer to date relative to the remaining goods or services
+promised under the contract, that best depicts the Group's performance in transferring control of goods or services.
+Otherwise, revenue is recognised at a point in time.
+(13) Income recognition (continued)
+the Group's performance does not create an asset with an alternative use to the Group and the Group has
+an enforceable right to payment for performance completed to date.
+the Group's performance creates and enhances an asset that the customer controls as the Group performs;
+the customer simultaneously receives and consumes the benefits provided by the Group's performance as the
+Group performs;
+For each performance obligation identified, the Group determines at contract inception whether it satisfies the
+performance obligation over time or satisfies the performance obligation at a point in time. Control is transferred
+over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the
+relevant performance obligation if one of the following criteria is met:
+The estimated amount of variable consideration is included in the transaction price only to the extent that it is highly
+probable that such an inclusion will not result in a significant revenue reversal in the future when the uncertainty
+associated with the variable consideration is subsequently resolved. At the end of each reporting period, the Group
+updates the estimated transaction price (including updating its assessment of whether an estimate of variable
+consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and
+the changes in circumstances during the reporting period.
+For contracts that contain variable consideration, the Group estimates the amount of consideration to which it will
+be entitled using either (a) the expected value method or (b) the most likely amount, depending on which method
+better predicts the amount of consideration to which the Group will be entitled.
+The stand-alone selling price of the distinct goods or service underlying each performance obligation is determined
+at contract inception. It represents the price at which the Group would sell a promised goods or service separately
+to a customer. If a stand-alone selling price is not directly observable, the Group estimates it using appropriate
+techniques such that the transaction price ultimately allocated to any performance obligation reflects the amount of
+consideration to which the Group expects to be entitled in exchange for transferring the promised goods or services
+to the customer.
+A performance obligation represents a good and service (or a bundle of goods or services) that is distinct or a series
+of distinct goods or services that are substantially the same. For contracts that contain more than one performance
+obligation, the Group allocates the transaction price to each performance obligation on a relative stand-alone selling
+price basis, except for the allocation of discounts and variable consideration.
+or
+Fee and commission income (continued)
+If revenue is recognised at a point in time, the Group recognises the revenue when the customer obtains control
+of the distinct good or service. To determine the point in time at which a customer obtains control of a promised
+service, the following indicators of the transfer of control should also be considered. They include, but are not
+limited to:
+•
+Annual Report 2023 (H share)
+189
+A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
+against which the asset can be utilised. Deferred tax assets are reduced by the extent that it is no longer probable
+that the related tax benefit will be realised.
+Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the
+consolidated financial statements and the corresponding tax base used in the computation of taxable profit. Deferred
+tax assets also arise from unused tax losses and unused tax credits. Such deferred tax assets and liabilities are not
+recognised if the temporary difference arises from the initial recognition (other than in a business combination) of
+assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit and at the time
+of the transaction does not give rise to equal taxable and deductible temporary differences. The amount of deferred
+tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and
+liabilities, using tax rates of expected returns of the assets or the repayment of the liabilities. Deferred tax assets and
+liabilities are not discounted.
+Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially
+enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.
+Current income tax and movements in deferred tax balances are recognised in the consolidated statement of profit
+or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in
+equity.
+(14) Taxation
+A contract liability represents the Group's obligation to transfer goods or services to a customer for which the Group
+has received consideration (or an amount of consideration is due) from the customer.
+A contract asset represents the Group's right to consideration in exchange for goods or services that the Group has
+transferred to a customer that is not yet unconditional. In contrast, a receivable represents the Group's unconditional
+right to consideration, i.e. only the passage of time is required before payment of that consideration is due.
+When another party is involved in providing goods or services to a customer, the Group determines whether the
+nature of its promise is a performance obligation to provide the specified goods or services itself (i.e. the Group is a
+principal) or to arrange for those goods or services to be provided by the other party (i.e. the Group is an agent).
+The Group is a principal if it can control the goods or service before transferring it to customers. The Group is an
+agent if its performance obligation is to arrange for the provision of the specified goods or service by another party.
+In this case, the Group does not control the specified goods or service provided by another party before that goods
+or service is transferred to the customer. When the Group acts as an agent, it recognises revenue in the amount
+of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or
+services to be provided by the other party.
+the customer has accepted the goods or services.
+•
+the customer has the significant risks and rewards of ownership of the goods;
+•
+the Group has transferred physical possession of the goods;
+•
+the Group has a present right to payment for the goods or services;
+Under IFRS 15 Revenue from Contracts with Customers, the Group recognises revenue when (or as) a performance
+obligation is satisfied, i.e. when "control" of the goods or services underlying the particular performance obligation
+is transferred to the customer.
+Fee and commission income
+the amount expected to be payable by the lessee under remaining value guarantees.
+4. Material accounting policy information (continued)
+Annual Report 2023 (H share)
+China Merchants Bank
+Precious metals that are not related to the Group's trading activities are initially measured at acquisition cost
+and subsequently measured at the lower of cost and net realisable value. Precious metals that are related to the
+Group's trading activities are initially recognised at fair value, with changes in fair value arising from remeasurement
+recognised directly in the consolidated statement of profit or loss in the period in which they arise.
+(11) Precious metals
+An impairment loss is recognised in the consolidated statement of profit or loss whenever the carrying
+amount of an asset, or the cash-generating unit to which it belongs exceeds its recoverable amount.
+Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying
+amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the
+carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the
+carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use,
+if determinable.
+Impairment losses recognised
+The recoverable amount of an asset or a CGU is the greater of its fair value less disposal expense and the
+present value of future cash flows. In assessing value in use, the estimated future cash flows are discounted
+to their present values using a pre-tax discount rate that reflects current market assessments of time value of
+money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent
+of those from other assets, the recoverable amount is determined for the smallest group of assets that
+generates cash inflows independently (i.e. a cash-generating unit).
+Calculation of recoverable amount
+Internal and external sources of information are reviewed at the end of the reporting period to identify any
+indications that other assets may be impaired.
+The carrying amount of tangible and intangible assets including property and equipment, right-of-use assets,
+intangible assets, investment properties, interests in joint ventures, interests in associates, goodwill and other non-
+current assets are reviewed periodically in order to assess whether the recoverable amount has declined below the
+carrying amount. When such a decline has occurred, the carrying amount is reduced to the recoverable amount. The
+amount of impairment loss is recognised in the consolidated statement of profit or loss. The recoverable amount
+of an asset is the greater of its fair value less disposal expense and present value of future expected cash flows. In
+assessing value in use, the estimated future cash flows are discounted to their present values.
+(10) Impairment on tangible and intangible assets other than impairment under
+ECL model
+For a transfer of asset that does not meet the requirements of IFRS 15 Revenue from Contracts with Customers
+to account for a sale of asset, the Group acting as a buyer-lessor does not recognise the transferred asset and
+recognises loan and advance to customers at an amount that equals the transfer proceed within the scope of IFRS 9
+Financial Instruments.
+As a buyer-lessor in a sale and leaseback transactions
+(9) Leases (continued)
+Material accounting policy information (continued)
+Chapter VIII Financial Statements
+(13) Income recognition (continued)
+Chapter VIII Financial Statements
+4. Material accounting policy information (continued)
+If any such indication exists, the asset's recoverable amount is estimated. In addition, for goodwill, intangible assets
+that are not yet available for use and intangible assets that have indefinite useful lives, the recoverable amount is
+estimated by the Group at the end of the reporting period whether or not there is any indication of impairment.
+Financial guarantees issued
+Annual Report 2023 (H share)
+(12) Financial guarantee issued, provisions and contingent liabilities
+China Merchants Bank
+188
+187
+Chapter VIII Financial Statements
+Rental income
+Dividend income from investments is recognised when the dividend is declared and approved by the investee.
+Dividend income
+Income derived from operating leases is recognised in the consolidated statement of profit or loss using the straight-
+line method over the lease term.
+Interest income and expense for all financial instruments except for those classified as at FVTPL are recognised in
+"Interest income" and "Interest expense" in the profit or loss account using the effective interest method. Interest
+on financial instruments measured as at FVTPL is included within the fair value movement during the period, which
+is recognised in "Other net income".
+Net interest income
+Revenue is the inflow of economic benefits that the Group has formed in its daily activities that will result in an
+increase in shareholders' equity and have nothing to do with the capital invested by shareholders.
+(13) Income recognition
+Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated
+reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is
+remote.
+Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive
+obligation arising as a result of a past event, it is highly probable that an outflow of economic benefits will be
+required to settle the obligation and a reliable estimate can be made. Where the time value of money is material,
+provisions are stated at the present value of the expenditures expected to settle the obligation.
+Provisions and contingent liabilities
+Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to
+reimburse the beneficiary of the guarantee (the holder) for a loss the holder incurs because a specified debtor fails to
+make payment when due in accordance with the terms of a debt instrument. The provision of financial guarantees
+issued is recognised in the consolidated statement of financial position in accordance with accounting policy set out
+in Note 4(5).
+9.41
+Increased by 0.43
+percentage point
+Non-performing loan ratio
+Decreased by 0.01
+0.95
+0.96
+Asset quality indicators
+9.84
+Increased by 0.26
+percentage point
+Increased by 0.11
+17.77
+17.88
+Capital adequacy ratio
+percentage point
+15.75
+16.01
+Tier 1 capital adequacy ratio
+Allowance coverage ratio (5)
+Equity to total assets
+437.70
+Net interest spread = average yield of the total interest-earning assets - average cost ratio of total interest-bearing liabilities.
+percentage point
+Decreased by 13.09
+Cost-to-income ratio = operating expenses/net operating income. The numerator does not include taxes and surcharges, provisions for
+insurance claims and the depreciation charges on fixed assets under operating lease and investment properties and others.
+(4)
+(3)
+Net interest margin = net interest income/average balance of total interest-earning assets.
+(2)
+percentage point
+(1)
+Notes:
+Decreased by 0.04
+percentage point
+Changes
+percentage point
+0.78
+0.74
+2022
+2023
+Credit cost ratio (7)
+Decreased by 0.18
+4.32
+4.14
+Allowance-to-loan ratio (6)
+percentage points
+450.79
+Increased by 0.05
+- Net non-interest income
+13.73
+Decreased by 0.25
+2.40
+2.15
+Net interest margin (2)
+percentage point
+percentage point
+Decreased by 0.25
+2.28
+2.03
+Net interest spread(1)
+shareholders of the Bank
+percentage point
+Decreased by 0.84
+17.06
+Return on average equity attributable to ordinary
+Decreased by 0.03
+1.42
+1.39
+Return on average assets attributable to shareholders of
+the Bank
+Profitability indicators
+Changes
+2022
+2023
+percentage point
+13.68
+As percentage of net operating income
+Net interest income
+Core Tier 1 capital adequacy ratio
+Measurement Approach (4)
+Capital adequacy indicators under the Advanced
+(%)
+Changes over
+2022 year-end
+31 December
+2022
+2023
+31 December
+percentage point
+Increased by 0.08
+32.89
+32.97
+Cost-to-income ratio (3)
+percentage point
+Decreased by 0.01
+36.70
+36.69
+percentage point
+Increased by 0.01
+63.30
+63.31
+-
+16.22
+Allowance coverage ratio = allowances for impairment losses/balance of non-performing loans.
+(%)
+website of the Company (www.cmbchina.com)
+website of Shanghai Stock Exchange (www.sse.com.cn)
+"China Securities Journal" (www.cs.com.cn), "Securities Times" (www.stcn.com),
+"Shanghai Securities News" (www.cnstock.com)
+Hong Kong:
+The Chinese mainland:
+1.1.10 Newspapers and Websites Designated for Information Disclosure:
+Registrar for Domestic Preference Shares: China Securities Depository & Clearing Corporation Ltd.,
+Shanghai Branch
+Address: Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, the PRC
+Tel: +852 2862 8555
+Computershare Hong Kong Investor Services Ltd.
+website of Hong Kong Exchanges and Clearing Limited (www.hkex.com.hk)
+Share Register and Transfer Office as to H Shares:
+China Securities Depository & Clearing Corporation Ltd., Shanghai Branch
+Address: 188 South-Yanggao Road, Pudong New Area, Shanghai, the PRC
+1.1.9 Registrar for A Shares:
+Legal Advisor as to Hong Kong Law: Herbert Smith Freehills
+1.1.8 Legal Advisor as to PRC Law: JunHe LLP
+Office Address: 35th Floor, One Pacific Place, 88 Queensway, Hong Kong, the PRC
+International Auditor: Deloitte Touche Tohmatsu
+Office Address: 30th Floor, Bund Centre, 222 Yan'an Road East, Shanghai, China
+Certified Public Accountants for Signature: Wu Lingzhi, Sun Weiqi
+1.1.7 Domestic Auditor: Deloitte Touche Tohmatsu Certified Public Accountants LLP
+Chapter I Company Information
+Tel: +86 4008 058 058
+Annual Report 2023 (H share)
+website of the Company (www.cmbchina.com)
+13
+Being customer-centric and creating values for customers.
+The Company upholds the philosophy of win-win in business and business for common
+good to grow into a value creation bank in pursuit of maximising the comprehensive value
+of customers, employees, shareholders, partners and the society, aiming to become a
+world-class commercial bank.
+Building a value creation bank.
+We are committed to building the best value creation bank with innovation-driven
+development, leading model and distinguished features.
+Strategic focus:
+Core Value:
+Strategic objectives:
+Strategic vision:
+1.3 Development Strategies
+Place for maintenance of periodic reports: Office of the Board of Directors of the Company and principal
+place of business of the Company
+Chapter I Company Information
+China Merchants Bank
+The Company has come up with the strategic vision of "building the best value creation bank with innovation-driven
+development, leading model and distinguished features" based on the internal and external situation and its own
+development. In line with the trend of the acceleration in the construction of China's modern industrial system, the
+Company consistently enhances its quality and efficiency in serving the real economy and social well-being, and
+strives to create more value for customers, employees, shareholders, partners and society, with the aim of making
+greater contributions to the modernisation process with Chinese characteristics.
+The Company provides customers with various wholesale and retail banking products and services, and maintains
+treasury businesses for proprietary purpose and on behalf of customers. Many innovative products and services of
+the Company have been well accepted by the market. Retail banking services include the account, payment and
+settlement service based on the "All-in-one" multifunction debit card and credit card, segmented and classified
+wealth management services including the "Sunflower Wealth Management" services and private banking services,
+retail credit services, CMB APP, CMB Life APP, "All-in-one Net" comprehensive online banking service platform, and
+other online services. Wholesale banking services include payment and settlement, wealth management, investment
+and financing and digital services, cash management, sci-tech finance, green finance, inclusive finance, retirement
+finance, digital finance, supply chain finance and cross-border finance services, asset management, asset custody
+and investment banking services etc. The Company continues to tap further into the living and business circles of
+customers to provide customers with customised, intelligent and comprehensive solutions for their supply chains and
+investment chains.
+Founded in 1987, the Company headquartered in Shenzhen, China. The Company mainly focuses on the market
+in China with branches primarily covering major cities in the Chinese mainland, as well as international financial
+centres such as Hong Kong of China, New York, London, Singapore, Luxembourg and Sydney. The Company was
+listed on the Shanghai Stock Exchange in April 2002 and the SEHK in September 2006.
+1.2 Corporate Business Overview
+Chapter I Company Information
+Annual Report 2023 (H share)
+China Merchants Bank
+14
+Annual Report 2023 (H share)
+Adhering to the concept of dynamically balanced development of "Quality, Profitability
+and Scale", the Company focuses on the building of three core capacities of "wealth
+management, Fintech and risk management" to promote the evolution of organisational
+culture consistently. Based on the needs of the country and enterprises and the ability of
+China Merchants Bank, we practically implement the ESG concept, serve the real economy
+and meet the needs of people's livelihood to create a new stage for high-quality growth.
+Enlarging wealth management business and accelerating the transformation of the business model. By
+adopting a customer-centric approach to business operations and focusing on the value creation chain of "volume
+growth - revenue growth - profit growth - value growth", the Company aims to foster a flywheel effect by fully
+integrating its four major business segments: retail finance, corporate finance, investment banking and financial
+markets, wealth management and asset management, and will strive to deliver sustained growth in both total assets
+under management (AUM) from retail customers and the aggregate financing products to corporate customers (FPA).
+Optimising Fintech and accelerating comprehensive digital transformation. Focusing on the goal of online,
+data-based, intelligent, platform-based and ecological operation, we will comprehensively promote the digital
+reshaping of financial infrastructure and capability system, customers and channels, businesses and products,
+management and decision-making. In particular, we are actively exploring the new mode of "Al + Finance" to make
+artificial intelligence a more important part of China Merchants Bank's intelligence, and build a value creation bank
+through the "Digital CMB".
+China Merchants Bank
+Domestic Preference Shares: Shanghai Stock Exchange
+1.1.1 Registered Company Name in Chinese:
+1.1 Company Profile
+Company Information
+Annual Report 2023 (H share)
+Chapter I Company Information
+China Merchants Bank
+12
+11
+25 March 2024
+ØRSOR(Abbreviated Name in Chinese: )
+2
+China Merchants Bank Co., Ltd.
+In the new year, the Bank will insist on leveraging management and innovation as the two pivotal drivers for the new model
+of high-quality development. Holding strict management as a shield, the Company will strengthen the foundation,
+improve quality, reduce costs, increase efficiency, and establish a standardised, refined, empowering, systematic, and
+scientific management system to expand the breadth and depth of risk management, cost management, institutional
+management and talent management in all aspects, and improve the level of intensive development. Upholding
+fundamental principles and breaking new ground (), the Company will seize the great opportunities along the
+Chinese path to modernisation, ride the wave of scientific and technological progress, and focus on the needs of the real
+economy and people's livelihood to strive for breakthroughs in scientific and technological innovation, product innovation,
+business innovation, model innovation, and management innovation, and create new advantages in more segment markets.
+We must "attain to the broad and great while addressing the delicate and minute". Every bit of management
+improvement and micro-innovation, if sustained over time, will produce a compound effect in value creation and turn
+quantitative changes into qualitative changes. Lofty aspirations grounded in persevered actions will lead to great
+success. High-quality development is not only extolled in the grand narrative of the revolution of the banking operational
+philosophy, but also embedded in the perseverance of little efforts that lead to remarkable success. This year marks the
+37th anniversary of the establishment of CMB. CMB was born out of reform and has risen with the times. Adhering to the
+spirit of "making our country flourish by solid work", the courage of "breaking new ground", and the original aspiration
+of "creating a real commercial bank", CMB sailed from Shekou, towards the whole country and towards the world. We
+will remain true to our original aspiration and forge ahead on the path of high-quality development to achieve the strategic
+goal of becoming a value creation bank and to build a world-class commercial bank. We will explore the CMB example
+for financial development with Chinese characteristics, and contribute to the efforts of the construction of a financial
+powerhouse.
+President's Statement
+Annual Report 2023 (H share)
+China Merchants Bank
+President and Chief Executive Officer
+Wang Liang
+President's Statement
+Annual Report 2023 (H share)
+President and Chief Executive Officer
+Abbreviated Name of Shares: Zhao Yin You 1 (1)
+Stock Code: 360028
+Registered Company Name in English: China Merchants Bank Co., Ltd.
+Authorised Representatives: Wang Liang, Peng Jiawen
+Stock Code: 03968
+Abbreviated Name of H Shares: CM BANK
+H Shares: SEHK
+Stock Code: 600036
+Abbreviated Name of A Shares: CMB
+A Shares: Shanghai Stock Exchange
+1.1.6 Share Listing:
+1.1.5 Principal Place of Business in Hong Kong: 31/F, Three Exchange Square, 8 Connaught Place, Central,
+Hong Kong, the PRC
+Credit card complaint hotline: +86 400 820 5555-7
+1.1.2 Legal Representative: Miao Jianmin
+Customer complaint hotline: 95555-7
+E-mail: cmb@cmbchina.com
+Fax: +86 755 8319 5555
+Tel: +86 755 8319 8888
+Postcode: 518040
+Address: 7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province, China
+1.1.4 Contact Details:
+1.1.3 Registered and Office Address: 7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province,
+China
+Joint Company Secretaries: Peng Jiawen, Ho Wing Tsz Wendy
+Securities Representative: Xia Yangfang
+Secretary of the Board of Directors: Peng Jiawen
+Website: www.cmbchina.com
+As at the end of the reporting period, the Group's Core Tier 1 capital adequacy ratio, Tier 1 capital adequacy ratio and capital adequacy ratio
+under the Weighted Approach were 11.86%, 13.82% and 14.96% respectively.
+Strengthening risk management and building a fortress-style overall risk and compliance management
+system. Adhering to the prudent risk management principle, using Fintech as the tool, and taking a prudent risk
+appetite as a safeguard measure, we will create a "Six All" risk management system covering all risks, all branches
+and subsidiaries, all customers, all assets, all processes, and all factors to support the operation of the value creation
+bank.
+15
+6,051,459
+6,508,865
+8.77
+10,138,912
+11,028,483
+Total liabilities
+of which: total loans and advances to customers(3)
+Total assets
+Volume Indicators
+7.56
++/-%
+31 December
+2022
+2023
+(in millions of RMB, unless otherwise specified)
+31 December
+7.03
+5.26
+5.63
+Diluted earnings attributable to ordinary shareholders
+of the Bank
+7.03
+Changes
+5.26
+9,942,754
+8.25
+2.2 Financial Ratios of the Group
+Chapter II Summary of Accounting Data and Financial Indicators
+China Merchants Bank
+Annual Report 2023 (H share)
+Unless otherwise stated, the balance of the relevant financial instrument items herein and set out below exclude accrued interest.
+The Company issued non-cumulative preference shares in 2017, and issued perpetual bonds in 2020, 2021 and 2023, all of which were
+classified as other equity instruments. In addition, the Company paid dividends on preference shares and interests on perpetual bonds in 2023.
+Therefore, when calculating the indicators such as basic earnings per share attributable to ordinary shareholders, return on average equity
+attributable to ordinary shareholders and net assets per share attributable to ordinary shareholders, dividends on the preference shares and
+interests on perpetual bonds have been deducted from "net profit attributable to shareholders of the Bank", while the preference shares and
+perpetual bonds shall be deducted from both the "average equity" and the "net assets".
+Net operating income is the sum of net interest income, net fee and commission income, other net income as well as share of profits of joint
+ventures and associates.
+(3)
+(2)
+(1)
+9,184,674
+Notes:
+32.71
+36.71
+13.84
+945,503
+1,076,370
+8.22
+7,535,742
+8,155,438
+of which: total deposits from customers (3)
+Total equity attributable to shareholders of the Bank
+Net assets per share attributable to ordinary
+shareholders of the Bank (RMB yuan)(2)
+12.23
+Pursuing the core values and building the cultural and organisational foundation for a value creation bank.
+Firstly, we will uphold and enhance China Merchants Bank's corporate culture focusing on entrepreneurship, service
+quality, innovation, risk management, compliance, management excellence, and people-orientation, with an aim
+to create a vibrant and evolving cultural system. Secondly, we will establish an organising team for supporting our
+service strategies and creating value together, providing organisational support and talent foundations for a value
+creation bank. Thirdly, we will actively implement sustainable development principles in serving the real economy,
+actively fulfilling environmental and social responsibilities, and enhancing the standard of our corporate governance.
+5.63
+Per Share (RMB yuan)
+18
+to open a new chapter by
+riding on the momentum
+transformation of enterprises
+Facilitating digital
+In December 2023, the Company won "Top 10 Best Employers 2023", "Most Socially Responsible Employer"
+and "Most Admired Employer by Women" at the awards ceremony for the "Best Employer in China 2023"
+jointly organised by Zhaopin.com and Institute of Social Science Survey, Peking University, and has been
+shortlisted in the top 10 list of "Best Employers of the Year" for 13 consecutive years.
+In November 2023, the Company ranked among China's Most Admired Companies by Fortune magazine.
+In September 2023, in the selection of the "2023 China Star" organised by the US-based Global Finance
+magazine, the Company was honoured with three awards, namely, "Best Wealth Management Provider",
+"Best Corporate Governance Bank" and "Best Transaction Service Bank".
+In August 2023, the Company was recognised as the "Best CSR Bank in China" and "Best Investment Bank
+in China" at the awards ceremony for the "Best Banks in China 2023" hosted by Asiamoney.
+The list of Fortune Global 500 was officially released in August 2023, on which the Company ranked 179th
+and making the list for 12 consecutive years.
+China Merchants Bank
+In July 2023, the Company received the award of "Best Bank in China" at the "2023 Awards for Excellence"
+ceremony staged by Euromoney (UK) for the fifth consecutive year, marking the first "5-year championship
+streak" in its awarding history, and was also the only Chinese bank to receive the "Awards for Excellence" in
+that year.
+In June 2023, the US-based Institutional Investor magazine released the results of the "2023 All-Asia
+Executive Team", recognising the Company as the bank with the highest overall ranking and the most
+awards in the Asian region. The Company won several awards, including "Best Board of Directors", "Asia's
+Most Respected Company", "Best IR Company" and "Best ESG Company".
+In March 2023, the Company was awarded the "Best Retail Bank in China" in "Asia Trailblazer Awards
+2023" hosted by Retail Banker International.
+The Company ranked 10 th globally in "The Top 500 Banking Brands 2023" released by The Banker (UK) in
+February 2023, with a brand value of USD24.536 billion.
+In 2023, the Company received a number of honours and awards from organisations both at home and abroad,
+including:
+1.4 Honors and Awards
+Annual Report 2023 (H share)
+Chapter I Company Information
+China Merchants Bank
+16
+In July 2023, the Company ranked 11th on the list of "Top 1,000 World Banks 2023" released by The Banker
+(UK), ranking first in the best performing Chinese banks for three consecutive years.
+Basic earnings attributable to ordinary shareholders of
+the Bank (2)
+Annual Report 2023 (H share)
+Summary of Accounting Data
+6.22
+138,012
+146,602
+Net profit attributable to shareholders of the Bank
+6.97
+165,113
+176,618
+-1.64
+344,740
+Chapter II Summary of Accounting Data and Financial Indicators
+339,078
+Net operating income (1)
+Operating Results
++/-%
+Changes
+2022
+2023
+(in millions of RMB, unless otherwise specified)
+2.1 Key Accounting Data and Financial Indicators of the Group
+and Financial Indicators
+Profit before tax
+(5)
+China Merchants Bank
+(6)
+Allowance-to-loan ratio = allowances for impairment losses/total loans and advances to customers.
+(7)
+Credit cost ratio = expected credit losses of loans and advances to customers/the average of total loans and advances to customers, the
+average of total loans and advances to customers = (total loans and advances to customers at the beginning of the period + total loans and
+advances to customers at the end of the period)/2.
+19
+10
+104
+- derivatives instruments
+(2,204)
+1,797
+- financial instruments at fair value through profit or loss
+Net gain/(loss) from fair value change
+1,846
+(120)
+2022
+2023
+9. Other net income
+Annual Report 2023 (H share)
+(2,675)
+- precious metals
+Net investment income
+(351)
+1,551
+- of which: gain on disposal of bills
+5,161
+3,661
+- gain on disposal of debt instruments at FVTOCI
+170
+(55)
+967
+12,443
+14,523
+- financial instruments at FVTPL
+18,013
+19,700
+Chapter VIII Financial Statements
+- gain on disposal of financial assets at amortised cost
+China Merchants Bank
+103,372
+195
+510
+160,941
+135,145
+8.
+Fee and commission income
+2023
+2022
+Commissions from wealth management
+28,466
+30,903
+Commissions from asset management
+11,474
+12,457
+Bank cards fees
+196
+19,525
+Clearing and settlement fees
+15,492
+15,051
+Commissions from credit commitment and lending business
+Commissions on custodian business
+4,997
+5,753
+5,328
+5,791
+Other
+7,552
+12,018
+Total
+92,834
+3,291
+21,399
+- dividend income from equity investments designated at FVTOCI
+- other
+153
+6,589
+Tax and surcharges
+2,963
+3,005
+Depreciation of property and equipment and investment properties
+11,008
+10,279
+Amortisation of intangible assets
+930
+1,061
+Depreciation of right-of-use assets
+4,205
+4,151
+Short-term leases expense and leases of low-value assets expense
+7,522
+216
+Charge for insurance claims
+360
+Other general and administrative expenses (note)
+31,321
+32,319
+Total
+120,991
+122,061
+Note:
+Auditors' remuneration amounting to RMB34 million for the year ended 31 December 2023 (2022: RMB31 million) is included in other general
+and administrative expenses.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+11. Directors' and supervisors' emoluments
+229
+317
+8,421
+- Social insurance and corporate supplemental insurance
+- Other
+480
+232
+86
+Foreign exchange gain
+4,132
+3,600
+Other income
+- rental income
+- insurance income
+Other
+Total
+11,418
+9,702
+11,352
+7,349
+9,181
+521
+729
+1,065
+37,825
+29,705
+10. Operating expenses
+2023
+2022
+Staff costs
+- Salaries and bonuses
+70,348
+70,657
+55,477
+55,647
+66
+Total
+7,781
+9,662
+Significant accounting estimates and judgements
+In determining the carrying amounts of some assets and liabilities, the Group makes assumptions for the effects
+of uncertain future events on the assets and liabilities at the end of the reporting period. These estimates involve
+assumptions about cash flows and the discount rates used. The Group's estimates and assumptions are based on
+historical experience and expectations of future events and are reviewed periodically. In addition to the assumptions
+and estimations of future events, judgements are also made during the process of applying the Group's accounting
+policies.
+(1) Control over structured entity
+(2)
+(3)
+Where the Group acts as asset manager of structured entities, the Group makes judgement on whether it is the
+principal or an agent to assess whether the Group controls the structured entities and should consolidate them.
+When performing this assessment, the Group considers several factors including, among others, the scope of its
+decision-making authority over the structured entities, the rights held by other parties, the remuneration to which it
+is entitled in accordance with the related agreements for the assets management services, the Group's exposure to
+variability of returns from interests that it holds in the structured entities.
+Classification of financial assets
+Business model assessment: Classification and measurement of financial assets of the Group involves significant
+judgement on business model. The Group determines the business model at a level that reflects how groups of
+financial assets are managed together to achieve a particular business objective. Specific considerations include how
+the performance of the assets is evaluated and measured, the risks that affect the performance of the assets and
+how these are managed and how the managers of the assets are compensated.
+Derecognition of financial assets transferred
+In its normal course of business, the Group transfers its financial assets through various types of transactions
+including regular way sales and transfers, securitisation, financial assets sold under repurchase agreements. The
+Group applies significant judgement and estimate in assessing whether it has transferred these financial assets and
+qualified for a full derecognition.
+Where the Group enters into structured transactions by which it transfers financial assets to structured entities, the
+Group analyses whether the substance of the relationship between the Group and these structured entities indicates
+that it controls these structured entities and the Group needs to consolidate them. This will determine whether the
+following derecognition analysis should be conducted at the consolidated level or at the entity level from which the
+financial assets are transferred.
+The Group analyses the contractual rights and obligations in connection with such transfers to determine whether
+derecognition criteria are met based on the following considerations:
+whether it has transferred the rights to receive contractual cash flows from the financial assets or the transfer
+qualifies for the "pass through" of those cash flows to independent third parties;
+the extent to which the associated risks and rewards of ownership of the financial assets are transferred.
+Significant judgement and estimate is applied in the Group's estimation with regard to the cash flows before
+and after the transfers and other factors that affect the outcomes of the Group's assessment on the extent
+that risks and rewards are transferred.
+Chapter VIII Financial Statements
+193
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+5. Significant accounting estimates and judgements (continued)
+(4) Impairment under ECL model
+Significant increase in credit risk: ECL is measured as an allowance equal to 12-month ECL for stage 1 assets,
+or lifetime ECL for stage 2 or stage 3 assets. An asset moves to stage 2 when its credit risk has increased
+significantly since initial recognition. In assessing whether the credit risk of an asset has significantly
+increased, the Group takes into account qualitative and quantitative reasonable and supportable forward-
+looking information. Refer to Note 60(a)(ii) for more details.
+Establishing groups of assets with similar credit risk characteristics: When ECLS are measured on a collective
+basis, the financial instruments are grouped on the basis of shared risk characteristics. Refer to Note 60(a)(v)
+for details of the characteristics considered in this judgement. The Group monitors the appropriateness of the
+credit risk characteristics on an ongoing basis to assess whether they continue to be similar. This is required
+in order to ensure that should credit risk characteristics change there is appropriate re-segmentation of the
+assets. This may result in new portfolios being created or assets moving to an existing portfolio that better
+reflects the similar credit risk characteristics of that group of assets.
+Models and assumptions used: The Group uses various models and assumptions in estimating ECL. Judgement
+is applied in identifying the most appropriate model for each type of asset, as well as for determining the
+assumptions used in these models, including assumptions that relate to key drivers of credit risk. Refer to
+Note 60(a)(iii) for more details.
+Forward-looking information: When measuring ECL the Group uses reasonable and supportable forward-
+looking information, which is based on assumptions for the future movement of different economic drivers
+and how these drivers will affect each other. Refer to Note 60(a)(iv) for more details.
+Probability of Default ("PD"): PD constitutes a key input in measuring ECL. PD is an estimate of the likelihood
+of default over a given time horizon, the calculation of which includes historical data, assumptions and
+expectations of future conditions. Refer to Note 60(a) (iii) for more details.
+Loss Given Default ("LGD"): LGD is an estimate of the loss arising on default. It is based on the difference
+between the contractual cash flows due and those that the lender would expect to receive, taking into
+account cash flows from collateral and integral credit enhancements. Refer to Note 60(a)(iii) for more details.
+(5) Fair value of financial instruments
+For a number of financial instruments, no quoted prices in an active market exist. The fair value for these financial
+instruments are established by using valuation techniques. These techniques include using recent arm's length
+market transactions, reference to the current fair value of similar instruments, discounted cash flow analysis or
+option pricing models. The Group has established a process to ensure that valuation techniques are constructed by
+qualified personnel and are validated and reviewed by personnel independent of the business unit that constructed
+the valuation techniques. Valuation techniques are certified before being implemented for valuation and are
+calibrated to ensure that outputs reflect actual market conditions. Valuation models established by the Group make
+the maximum use of market inputs and rely as little as possible on the Group's specific data. However, it should be
+noted that some inputs, such as credit and counterparty risk and risk correlations, require management estimates.
+Management estimates and assumptions are reviewed periodically and adjusted if necessary. If the fair value is
+measured using third party information such as broker quotes or pricing services, the valuation team will evaluate
+the evidence obtained from third party to support the conclusion that the relevant valuation meets the requirements
+of IFRS, including the category of the relevant valuation at the appropriate level in the fair value hierarchy.
+(6) Income taxes
+Determining income tax provisions involves judgement on the future tax treatment of certain transactions. The
+Group carefully evaluates tax implications of transactions and tax provisions are set up accordingly. The tax
+treatment of such transactions is reviewed periodically to take into account all changes in tax legislations. Deferred
+tax assets are recognised for tax losses not yet used and temporary deductible differences. As those deferred tax
+assets can only be recognised to the extent that it is probable that future taxable profit will be available against
+which the unused tax credits can be utilised, management's judgement is required to assess the probability of future
+taxable profits. Management's assessment is constantly reviewed and additional deferred tax assets are recognised if
+it becomes probable that future taxable profits will allow the deferred tax asset to be recovered.
+194
+China Merchants Bank
+5.
+China Merchants Bank
+4. Material accounting policy information (continued)
+(16) Employee benefits
+Salaries and staff welfare
+Salaries, bonuses and other benefits are accrued in the period in which the associated services are rendered by
+employees.
+Post-employment benefits
+The Group participates in a number of defined contribution retirement benefit schemes managed by different
+provincial governments or independent insurance companies. Obligation for contributions to these schemes are
+jointly borne by the Group and the staff, and contributions paid by the Group are recognised as an expense in the
+consolidated statement of profit or loss as incurred.
+The Group's net obligation in respect of defined benefit plans is calculated separately for each plan by estimating
+the amount of future benefit that employees have earned in the current and prior periods, discounting that amount
+and deducting the fair value of any plan assets.
+The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit
+credit method. When the calculation results in a potential asset for the Group, the recognised asset is limited to
+the present value of economic benefits available in the form of any future refunds from the plan or reductions in
+future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any
+applicable minimum funding requirements.
+Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan
+assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately
+in other comprehensive income. The Group determines the net interest expense (income) on the net defined benefit
+liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the
+beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes
+in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net
+interest expense and other expenses related to defined benefit plans are recognised in personnel expenses in the
+consolidated statement of profit or loss.
+When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to
+past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gains
+and losses on the settlement of a defined benefit plan when the settlement occurs.
+Share-based payment
+The Group offers H share appreciation rights to its employee, namely H Share Appreciation Rights Scheme for the
+Senior Management ("the Scheme"), which is settled in cash. Cash-settled share-based payments are measured
+at the fair value of the liabilities incurred by the Group, which are determined based on the shares. The Group
+recognises the services for the period as related costs or expenses, with a corresponding increase in liability, at an
+amount equal to the fair value of the liability based on the best estimate of the outcome of vesting at the end of
+each reporting period within the vesting period. Until the liability is settled, the Group remeasures the fair value of
+the liability at each reporting period end and at the date of settlement, with any changes in fair value recognised in
+profit or loss for the period.
+The fair value of the H share appreciation rights is using Black-Scholes model, taking into account the terms and
+condition upon which the H share appreciation rights were granted.
+191
+Annual Report 2023 (H share)
+192
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+4.
+Material accounting policy information (continued)
+(17) Related parties
+For the purposes of these consolidated financial statements, parties are considered to be related to the Group if the
+Group has the ability, directly, indirectly or jointly, to control the party or exercise significant influence over the party
+in making financial and operating decisions, or vice versa, or where the Group and the party are subject to control,
+common control or common significant influence (except that the Group and the party are subject to common
+significant influence of the other party). Related parties may be individuals (being members of key management
+personnel, significant shareholders and/or their close family members) or other entities and include entities which
+are under the significant influence of related parties of the Group where those parties are individuals, and post-
+employment benefit plans which are for the benefit of employees of the Group or of any entity that is a related
+party of the Group.
+(18) Segmental reporting
+Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are
+identified from the financial information provided regularly to the Group's most senior executive management for
+the purposes of allocating resources to, and assessing the performance of, the Group's various lines of business and
+geographical locations. Individually material operating segments are not aggregated for financial reporting purposes
+unless the segments have similar economic characteristics and are similar in respect of the nature of products and
+services, the nature of production processes, the type or class of customers, the methods used to distribute the
+products or provide the services, and the nature of the regulatory environment. Operating segments which are not
+individually material may be aggregated if they meet most of these criteria.
+(19) Fiduciary activities
+The Group acts in a fiduciary capacity in entrusted loan and entrusted investment business. Assets held by the Group
+and the related undertakings to return such assets to customers are excluded from the consolidated statement of
+financial position as the risks and rewards of the assets reside with the customers. The Group only charges a relevant
+commission.
+(20) Dividends or profit distributions
+Dividends or profit distributions are recognised as a liability in the year in which they are approved and declared.
+(21) General reserve
+The general reserve is an integral part of equity. According to the relevant regulations, in addition to the impairment
+allowances, the Bank maintains a general reserve to make up for unidentified potential losses. In principle, the
+balance of general reserve shall not be less than 1.5% of the ending balance of risk assets. In addition, the general
+reserve includes 2.5% of the income of mutual fund custody businesses. The general reserve of the Group also
+includes the general reserve maintained by the subsidiaries of the Group according to the applicable laws and
+regulations of their industry or region.
+China Merchants Bank
+Lease liabilities
+Annual Report 2023 (H share)
+5. Significant accounting estimates and judgements (continued)
+(7) Impairment of goodwill
+26,201
+19,654
+- Debt investments at amortised cost
+54,635
+46,154
+Total
+375,610
+353,380
+Note:
+For the year ended 31 December 2023, included in the above is the interest income of RMB10,577 million accrued on loans and advances to
+customers at fair value through other comprehensive income (2022: RMB12,668 million).
+7.
+Interest expense
+2023
+2022
+- Debt investments at FVTOCI
+Deposits from customers
+105,836
+Borrowing from central banks
+4,005
+2,828
+Deposits from banks and other financial institutions
+Placements from banks and other financial institutions
+8,307
+9,782
+8,931
+4,567
+Amounts sold under repurchase agreements
+2,628
+1,960
+Debt securities issued
+The emoluments of the Directors and Supervisors during the year were as follows:
+128,809
+Chapter VIII Financial Statements
+-
+80,836
+The Group determines whether goodwill is impaired at least on an annual basis and when circumstances indicate
+that the carrying value may be impaired. This requires an estimation of the recoverable amount of the CGU or
+group of CGUs to which the goodwill is allocated. Estimating the recoverable amount requires the Group to make
+an estimate of the expected future cash flows from CGU or group of CGUS and also to choose a suitable discount
+rate in order to calculate the present value of those cash flows. Where the actual future cash flows are less than
+expected, or change in facts and circumstances which results in downward revision of future cash flows or upward
+revision of discount rate, a material impairment loss or further impairment loss may arise.
+6.
+Interest income
+2023
+2022
+Loans and advances to customers
+- Corporate loans
+- Retail loans
+- Discounted bills
+Balances with central banks
+268,240
+265,601
+94,526
+86,754
+65,808
+166,104
+7,610
+10,673
+9,977
+8,482
+Balances with banks and other financial institutions
+2,101
+1,242
+Placements with banks and other financial institutions
+10,596
+7,760
+Amounts held under resale agreements
+3,860
+4,487
+Financial investments
+168,174
+Executive directors
+Subtotal
+Zhu Jiangtao (ii)
+500
+Li Menggang
+Liu Qiao
+Tian Hongqi
+Li Chaoxian
+500
+500
+500
+500
+500
+500
+500
+500
+Shi Yongdong
+500
+500
+Xiong Liangjun
+3,317
+2,098
+211
+5,626
+Luo Sheng (iii)
+Peng Bihong
+Wu Heng
+Xu Zhengjun
+Cai Hongping (iii)
+Zhang Xiang (iii)
+Wang Wanging
+500
+Wong See Hong
+directors and supervisors
+|| | ||
+bonuses
+RMB'000
+Retirement
+scheme
+contributions
+RMB'000
+Total
+RMB'000
+(i)
+(i)
+-
+-
+Wang Liang
+2,580
+2,580
+220
+220
+6,425
+Cai Jin
+6,425
+The executive director's emoluments shown above were for his services in connection with the management of the affairs
+of the Bank and the Group.
+Non-executive directors
+Miao Jianmin
+Hu Jianhua (ii)
+Sun Yunfei (ii)
+Zhou Song
+Hong Xiaoyuan
+Zhang Jian
+Su Min
+Chen Dong (ii)
+Subtotal
+The non-executive directors shown above did not receive remuneration from the Bank.
+Independent non-executive
+199
+in kind
+RMB'000
+Subtotal
+202
+The former executive, non-executive directors' and supervisors' emoluments shown above were for their services as
+directors or supervisors of the Bank.
+Total
+4,138
+11,140
+4,678
+431
+20,387
+China Merchants Bank
+On the disposal of a foreign operation, all of the exchange differences accumulated in exchange reserve in respect
+of that operation attributable to the owners of the Bank are reclassified to the consolidated statement of profit or
+loss.
+For the purposes of presenting these consolidated financial statements, the assets and liabilities of the Group's
+foreign operations are translated into currency units using exchange rates prevailing at the end of each reporting
+period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates
+fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used.
+Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in exchange
+reserve (and attributed to non-controlling interests as appropriate).
+exchange differences on monetary items receivable from or payable to a foreign operation for which
+settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign
+operation), which are recognised initially in other comprehensive income and reclassified from equity to profit
+or loss on repayment of the monetary items.
+exchange differences on transactions entered into as part of the effective portion of a hedge on certain
+foreign currency risks; or
+Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:
+In preparing the financial statements of each individual group entity, transactions in currencies other than the
+entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the
+transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated
+at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign
+currencies are retranslated at the rates prevailing at the date when the fair value is determined. Non-monetary items
+that are measured in terms of historical cost in a foreign currency are not retranslated.
+(15) Foreign currencies translations
+different taxable entities, which, in each future period in which significant amounts of deferred tax
+liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and
+settle the current tax liabilities on a net basis or realise and settle simultaneously.
+the same taxable entity; or
+in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation
+authority on either:
+in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realise
+the asset and settle the liability simultaneously; or
+Current tax balances and deferred tax balances, and movements therein, are presented separately from each other
+and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against
+deferred tax liabilities if the Group has the legally enforceable right to set off current tax assets against current tax
+liabilities and the following additional conditions are met:
+The Group shall recognise a deferred tax asset for all deductible temporary differences associated with investments
+in subsidiaries and interests in associates and joint ventures that both of the following conditions are satisfied: the
+temporary differences are likely to be reversed in the foreseeable future; and it is probably to obtain the taxable
+income used to offset the deductible temporary difference in the future. The Group shall recognise a deferred tax
+liability for all taxable temporary differences associated with investments in subsidiaries and interests in associates
+and joint ventures, except where both of the following conditions are satisfied: the investor is able to control the
+timing of the reversal of the temporary difference; and it is probable that the temporary difference will not reverse
+in the foreseeable future.
+(14) Taxation (continued)
+4. Material accounting policy information (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+190
+334
+167
+167
+334
+202
+2,650
+1,548
+3,804
+7,515
+2,098
+211
+400
+202
+202
+2,650
+1,548
+13,628
+400
+The independent non-executive directors' and supervisors' emoluments shown above were for their services as directors or
+supervisors of the Bank.
+directors and supervisors
+Fu Gangfeng (iv)
+Tian Huiyu (v)
+Wang Daxiong (v)
+Luo Sheng (v)
+Guo Xikun (vi)
+| | | |
+| | | |
+Ding Huiping (vi)
+Han Zirong (vi)
+Subtotal
+167
+167
+Former executive, non-executive
+RMB'000
+3,625
+3,625
+and benefits
+500
+Li Menggang
+Liu Qiao
+Tian Hongqi
+Li Chaoxian
+Shi Yongdong
+500
+500
+500
+500
+500
+Luo Sheng
+Peng Bihong (iv)
+Wu Heng
+Xu Zhengjun
+Cai Hongping
+Zhang Xiang
+Cai Jin
+400
+400
+Discretionary
+1,627
+Cao Jian (v)
+Yang Sheng (vi)
+Subtotal
+1,294
+967
+4,200
+Wong See Hong
+directors and supervisors
+Independent non-executive
+The non-executive directors shown above did not receive remuneration from the Bank.
+Annual Report 2023 (H share)
+2023
+Salaries,
+allowances
+Retirement
+Directors'
+fees
+RMB'000
+and benefits Discretionary
+in kind
+RMB'000
+bonuses
+RMB'000
+scheme
+contributions
+RMB'000
+Total
+RMB'000
+3,453
+3,888
+- 3,453
+2,821
+6,274
+6,274
+The executive director's emoluments shown above were for their services in connection with the management of the
+affairs of the Bank and the Group.
+Non-executive directors
+Miao Jianmin
+Hu Jianhua (iii)
+Sun Yunfei
+Zhou Song
+Hong Xiaoyuan (iii)
+Zhang Jian
+Chen Dong
+Subtotal
+2,821
+I
+400
+500
+Annual Report 2023 (H share)
+11. Directors' and supervisors' emoluments (continued)
+Notes:
+(i)
+(!!)
+(iii)
+(iv)
+(v)
+500
+(vii)
+(viii)
+The total remuneration before tax for the full-time directors, supervisors and executive officers of the Group is not yet finalised. Details of their
+remaining compensation will be disclosed separately when their total remuneration is confirmed.
+In June 2023, according to the relevant resolution passed at the 2022 Annual General Meeting of the Bank, Mr. Zhu Jiangtao was elected as
+the Executive Director of the Bank, whose qualification as the Director was approved by the NAFR in August 2023. The emolument of Mr. Zhu
+Jiangtao shown above included the portion for his services before his qualification as the Director was approved by the NAFR during the year.
+Chapter VIII Financial Statements
+In January 2024, Mr. Hu Jianhua and Mr. Hong Xiaoyuan ceased to be Non-Executive Directors of the Bank due to their age.
+In March 2023, Mr. Cao Jian was elected as the Employee Supervisor of the Bank at the employee representative meeting of the Bank.
+Mr. Wang Wanqing ceased to be the Employee Supervisor of the Bank due to his age.
+In June 2023, Mr. Yang Sheng was elected as the Employee Supervisor of the Bank at the employee representative meeting of the Bank. At
+the same time, Mr. Xiong Liangjun ceased to be the Chairman of the Board of Supervisors and Employee Supervisor of the Bank due to his
+age.
+In March 2023, Ms. Su Min retired and resigned as the Non-Executive Director of the Bank.
+As of 31 December 2023, the Group had offered 10 phases of H share appreciation rights under the Scheme. Details of the Scheme are set
+out in Note 39 (a)(iii).
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+11. Directors' and supervisors' emoluments (continued)
+Executive director
+Wang Liang
+Subtotal
+2022
+Salaries,
+allowances
+Directors'
+fees
+In January 2024, Mr. Peng Bihong ceased to be the Shareholder Supervisor of the Bank due to change of work arrangement.
+China Merchants Bank
+(vi)
+197
+500
+500
+500
+198
+400
+400
+400
+1,627
+1,294
+967
+8,088
+The independent non-executive directors' and supervisors' emoluments shown above were for their services as directors or
+supervisors of the Bank.
+Former executive, non-executive
+directors and supervisors
+500
+Xiong Liangjun (vi)
+Su Min (vii)
+16,825
+12,625
+4,200
+Total
+The former executive, non-executive directors' and supervisors' emoluments shown above were for their services as
+directors or supervisors of the Bank.
+Chapter VIII Financial Statements
+-- 593
+1,870
+2,463
+1,870
+593
+Subtotal
+Wang Wanqing (v)
+2,463
+3,500,001 -4,000,000
+4,000,001 -4,500,000
+4
+2022
+12
+2023
+3,000,001 3,500,000
+2,500,001 -3,000,000
+HKD
+These highest paid individuals who were neither directors nor supervisors of the Bank whose emoluments fell within
+the following bands is set out below:
+Total
+8,263
+842
+Contributions to defined contribution retirement schemes
+7,455
+11,764
+2022
+RMB'000
+2023
+RMB'000
+8,263
+Salaries and other emoluments
+20,061
+Discretionary bonuses
+3
+128
+37,207
+268
+235
+91,078
+100,534
+(509)
+(223)
+91,587
+2022
+Net carrying amount
+- Other financial institutions
+100,769
+Less: Impairment allowances
+- Banks
+- Banks
+Outside the Chinese mainland
+Other financial institutions
+- Banks
+In the Chinese mainland
+(a) Analysed by nature of counterparties
+Total
+Interest receivable
+Subtotal
+Impairment allowances (a)(b)
+- Other financial institutions
+Total
+91,346
+2023
+2022
+(b) Movements of allowances for impairment losses are as follows:
+91,078
+100,534
+(19)
+(27)
+(490)
+(196)
+(509)
+(223)
+91,587
+100,757
+388
+504
+33,390
+37,872
+33,778
+38,376
+3,001
+4,994
+54,808
+57,387
+57,809
+62,381
+Principal (a)
+2023
+2023
+100,757
+Annual Report 2023 (H share)
+25,220
+132,775
+142,044
+(3,562)
+(3,562)
+(1,675)
+(996)
+138,012
+146,602
+2022
+25,220
+2023
+Less: Net profit attributable to preference shareholders of the Bank
+Net profit attributable to equity holders of the Bank
+The calculation of basic earnings per share is based on the net profit attributable to ordinary shareholders of the
+Bank and the weighted average number of shares in issue for the year.
+17. Earnings per share
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2023 (H share)
+112
+(59)
+Net movement in hedging reserve during the year recognised in other
+comprehensive income
+(1)
+Net profit attributable to holders of perpetual bonds
+Net profit attributable to ordinary shareholders of the Bank
+Weighted average number of shares in issue (in million shares)
+Basic and diluted earnings per share (in RMB Yuan)
+5.63
+5.26
+Note:
+Chapter VIII Financial Statements
+China Merchants Bank
+204
+203
+Other deposits with central banks primarily represent fiscal deposits and foreign exchange reserve placed with the PBOC.
+(iii)
+Surplus deposit reserve maintained with the PBOC and central banks outside the Chinese mainland are mainly for clearing and settlement
+purposes.
+The Group places statutory deposit reserves with the PBOC and overseas central banks where it has operations. The statutory deposit reserves
+are not available for the Group's daily operations. The statutory deposit reserve funds of the Bank's institutions located in the Chinese
+mainland are calculated at 7% and 4% of eligible RMB deposits and foreign currency deposits respectively as at 31 December 2023 (31
+December 2022: 7.5% and 6% of eligible RMB deposits and foreign currency deposits respectively). Eligible deposits include deposits from
+government authorities and other organisations, retail deposits, corporate deposits, and net credit balances of entrusted business and RMB
+deposits placed by financial institutions outside the Chinese mainland. The amounts of statutory deposit reserves placed with the central banks
+of overseas countries are determined by local jurisdictions.
+587,818
+285
+2022
+534,232
+50,846
+2,455
+125,878
+5,054
+302
+667,871
+2023
+536,637
+(ii)
+(i)
+Notes:
+Total
+Other deposits with central banks (note (iii))
+Interest receivable
+Surplus deposit reserve (note (ii))
+Statutory deposit reserve (note (i))
+18. Balances with central banks
+The conversion feature of preference shares is considered to be contingently issuable ordinary shares. The triggering events of conversion did not occur
+as of 31 December 2023 and 2022. Therefore the conversion feature of preference shares has no effect on the diluted earnings per share calculation for
+both years.
+The Bank issued non-cumulative preference shares in 2017 and non-cumulative perpetual bonds in 2020, 2021 and 2023. For the purpose of calculating
+basic earnings per share, dividends on non-cumulative preference shares and interests on non-cumulative perpetual bonds declared during the year
+should be deducted from the amounts attributable to equity holders of the Bank.
+19. Balances with banks and other financial institutions
+112
+2022
+509
+285,728
+14,670
+2,815
+90,001
+158,086
+175,523
+107,390
+2022
+2023
+262,757
+285,728
+262,757
+(2,495)
+(163)
+(2,658)
+(519)
+(92)
+265,415
+286,247
+521
+741
+61,880
+70,625
+62,401
+(427)
+(c)
+Movements of allowances for impairment losses are as follows:
+2023
+Interest receivable
+Subtotal
+Impairment allowances (a)(d)
+Principal (a)
+21. Amounts held under resale agreements
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+206
+205
+2,658
+519
+33
+4
+Balance as at the end of the year
+Exchange difference
+(235)
+(2,143)
+Release for the year (note 14)
+2,860
+2,658
+Balance as at the beginning of the year
+2022
+71,366
+Balance as at the beginning of the year
+137,363
+65,651
+2022
+2023
+286,247
+Note:
+Total
+Interest receivable
+Subtotal
+Impairment allowances (a)(c)
+Principal (a)
+20. Placements with banks and other financial institutions
+Chapter VIII Financial Statements
+265,415
+Annual Report 2023 (H share)
+509
+223
+Balance as at the end of the year
+11
+1
+Exchange difference
+120
+(287)
+(Release)/charge for the year (note 14)
+378
+China Merchants Bank
+(519)
+(2,658)
+285,728
+42,041
+203,014
+2022
+2023
+214,881
+Total
+- Over one year
+- Between one month and one year (inclusive)
+- Within one month (inclusive)
+Maturing
+(b) Analysed by remaining maturity
+Net carrying amount
+- Other financial institutions
+Less: Impairment allowances
+- Banks
+- Other financial institutions
+Total
+Outside the Chinese mainland
+- Banks
+- Other financial institutions
+- Banks
+In the Chinese mainland
+Pursuant to the relevant provisions in the "Interim Measures for the Administration of Gold Leasing Business" (Yin Ban Fa [2022] No. 88)
+issued by the General Office of the PBOC in July 2022, with respect to the gold leasing business of the Group with financial institutions since
+2023, gold leased out by the Group to other financial institutions is presented under "placements with banks and other financial institutions",
+a change from "precious metal" in prior years. The comparative figures are re-presented accordingly.
+1,966
+287,694
+264,209
+1,452
+262,757
+172,840
+(58)
+Effective portion of changes in fair value of hedging instruments
+Reclassification adjustment for realised gain to profit or loss
+Net movement in cash flow hedge reserve
+(15,542)
+41,278
+44,154
+Tax at the PRC statutory income tax rate of 25% (2022: 25%)
+Tax effects of the following items:
+165,113
+176,618
+Profit before taxation
+2022
+2023
+(b) A reconciliation of income tax expense in the consolidated statement of profit
+or loss and that calculated at the applicable statutory tax rate is as follows:
+(15,459)
+25,819
+(83)
+28,612
+170
+174
+973
+1,155
+33,133
+27,366
+34,276
+28,695
+2022
+(8,457)
+- Effects of non-taxable income
+(18,872)
+(17,114)
+(a)
+16. Other comprehensive income
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+202
+201
+Taxation for Hong Kong and overseas operations are charged at the applicable rates of tax prevailing in relevant regions.
+Note:
+25,819
+28,612
+Income tax expense
+264
+(24)
+(942)
+(937)
+- Tax effect of perpetual bond/perpetual debt capital interest expense
+- Other
+(215)
+(260)
+- Effects of different applicable rates in other jurisdictions
+2,548
+4,551
+- Effects of costs, expenses and losses not deductible for tax purpose
+2023
+Income tax effects relating to each component of other comprehensive income
+Total
+Overseas
+45,157
+46,635
+Loans and advances to customers
+2022
+2023
+14. Expected credit losses
+47
+50
+Maximum aggregate amount of relevant loans made by the Group
+outstanding during the year
+34
+- Loans and advances at amortised cost (Note 22(c)(i))
+- Loans and advances at FVTOCI (Note 22(c)(ii))
+Amounts due from banks and other financial institutions
+Financial investments
+35
+2022
+2023
+Loans to directors, supervisors and executive officers of the Group are as follows:
+13. Loans to directors, supervisors and executive officers
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+During the years of 2023 and 2022, no emoluments were paid by the Group to any of the persons who are five
+highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.
+4,500,001 - 5,000,000
+During the year ended 31 December 2023, the five highest paid individuals included five persons in total. During
+the year ended 31 December 2022, the five highest paid individuals included six persons in total, two of them
+were with the same emoluments and being the third highest paid individuals, and two of them were with the same
+emoluments and being the fourth highest paid individuals. Of these highest paid individuals, two (2022: two) were
+directors or supervisors of the Bank whose emoluments were included in Note 11 above. The aggregate emolument
+of the remaining three (2022: four) highest paid individuals who were neither directors nor supervisors of the Bank
+is as follows:
+Aggregate amount of relevant loans made by the Group outstanding
+at year end
+50,470
+40,175
+(3,835)
+- Hong Kong
+- Chinese mainland
+Current income tax expense
+(a) Income tax in the consolidated statement of profit or loss represents:
+15. Income tax
+56,751
+3,887
+557
+41,278
+7,112
+(2,761)
+(355)
+1,009
+Total
+Other
+- Debt investments at FVTOCI (Note 23(c)(ii))
+Financial guarantees and loan commitments.
+4,234
+(1,227)
+- Debt investments at amortised cost (Note 23(b)(iii))
+3,879
+(218)
+(3,284)
+(2,935)
+4,982
+Deferred taxation
+2023
+2022
+Before-tax
+amount
+772
+2,731
+(475)
+3,206
+Other comprehensive income
+(10)
+2
+(12)
+4
+(1)
+551
+5
+48
+(4)
+52
+354
+(81)
+435
+-Net fair value gain on equity instruments designated at
+FVTOCI
+38
+40
+358
+- Remeasurement of defined benefit scheme
+1,323
+(b)
+Movements relating to components of other comprehensive income are as
+follows:
+48
+354
+Net movement in investment revaluation reserve during the year
+recognised in other comprehensive income
+48
+354
+Net fair value gain on equity instruments designated at FVTOCI
+Changes in fair value recognised during the year
+3,471
+(2,045)
+3,471
+(2,045)
+Changes in expected credit losses recognised during the year
+Net movement in investment revaluation reserve during the year
+recognised in other comprehensive income
+Net changes in expected credit losses of debt instruments measured at
+FVTOCI
+(5,617)
+3,337
+Net movement in investment revaluation reserve during the year
+recognised in other comprehensive income
+(3,871)
+(2,746)
+Reclassification adjustments for amounts transferred to profit or loss
+upon disposal
+(1,746)
+6,083
+Net fair value gain/(loss) on debt instruments measured at FVTOCI
+Changes in fair value recognised during the year
+2022
+2023
+(82)
+440
+Items that will not be reclassified to profit or loss
+45
+- Net changes in expected credit losses of debt instruments
+measured at FVTOCI
+(5,617)
+1,736
+(7,353)
+3,337
+(1,133)
+4,470
+- Net fair value gain/(loss) on debt instruments measured
+at FVTOCI
+1,285
+553
+732
+2,373
+(393)
+2,766
+Items that may be reclassified subsequently to profit or loss
+amount
+(expense)
+amount
+amount
+(expense)
+Net-of-tax
+Tax benefit/
+Tax benefit/ Net-of-tax Before-tax
+(2,775)
+Total
+730
+4,631
+45
+(45)
+(45)
+- Other
+4,429
+4,429
+983
+983
+- Exchange difference on translation of financial statements
+of foreign operations
+(1,155)
+(1,155)
+202
+202
+- Share of other comprehensive income/(expense) from
+equity-accounted investees
+112
+(23)
+135
+(59)
+10
+(69)
+- Net movement in cash flow hedge reserve
+3,471
+(1,160)
+(2,045)
+Gross amount of loans and advances to customers
+(a) Analysed by nature of counterparties
+- Banks
+133
+9,383
+8,671
+159,781
+171,571
+5,414
+4,782
+110
+419
+1,772
+124
+623
+4,945
+Other
+Micro-finance loans
+Credit cards
+Residential mortgage
+Subtotal of corporate loans and advances
+Water, environment and public utilities management
+Other
+Construction
+Mining
+3,430
+6,074
+1,278
+55,846
+1,181
+43,425
+Analysed by overdue term:
+(iii)
+Gross amount of loans and advances to customers
+Discounted bills
+Subtotal
+Pledged loans
+Collateralised loans
+Guaranteed loans
+Credit loans
+Analysed by type of guarantees:
+(ii)
+(b) Analysis of loans and advances to customers (continued)
+22. Loans and advances to customers (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+As at 31 December 2023, over 90% of the Group's loans and advances to customers were conducted in the Chinese
+mainland (31 December 2022: over 90%).
+213,894
+237,499
+Gross amount of loans and advances to customers
+54,113
+65,928
+Subtotal of retail loans and advances
+6,207
+Credit loans
+Leasing and commercial services
+8,323
+11,374
+7,806
+Other
+202,225
+301,538
+Consumer loans
+629,857
+750,019
+Micro-finance loans
+884,395
+Subtotal of retail loans and advances
+935,777
+1,379,825
+1,376,815
+Residential mortgage
+514,054
+471,127
+Discounted bills
+2,215,835
+2,428,284
+Subtotal of corporate loans and advances
+67,677
+Credit cards
+3,371,955
+3,107,676
+Gross amount of loans and advances to customers
+Telecommunications, software and IT services
+8,923
+10,002
+9,023
+12,359
+Production and supply of electric power, heating power, gas and water
+Wholesale and retail
+20,494
+19,335
+Manufacturing
+26,298
+22,960
+Property development
+30,814
+36,248
+Transportation, storage and postal services
+36,521
+45,368
+Finance
+2022
+2023
+Operations outside the Chinese mainland
+5,837,565
+6,271,366
+10,908
+76,400
+Guaranteed loans
+Pledged loans
+Collateralised loans
+18,413
+762
+3,581
+7,537
+6,533
+Guaranteed loans
+37,887
+880
+2,365
+5,180
+12,382
+Credit loans
+loans
+3 years
+3 years
+year
+up to 1
+3 months
+overdue
+Total
+Overdue
+more than
+22,260
+6,177
+2,913
+1,696
+26,669
+9,810
+4,599
+78,285
+Note: Loans are classified as overdue when the principal or interest is overdue more than one day.
+Among the above-mentioned overdue loans and advances to customers, collateralised loans and pledged loans that
+are overdue but not impaired at the reporting date are as follows:
+Collateralised loans that are overdue but not impaired
+Pledged loans that are overdue but not impaired
+Total
+2023
+2022
+5,448
+4,198
+2,565
+1,819
+8,013
+6,017
+209
+951
+573
+3,234
+Pledged loans
+15,966
+year up to
+Collateralised loans
+1
+Overdue
+within
+more than
+3 years
+Overdue
+1 year up to
+3 years
+from
+Overdue
+2023
+up to 1 year
+3 months
+from
+Overdue
+Total
+3 months
+514,054
+6,051,459
+348,883
+5,537,405
+6,508,865
+471,127
+6,037,738
+379,457
+822,059
+2,244,129
+2022
+2,219,635
+836,550
+2,132,337
+2023
+2,592,093
+Gross amount of loans and advances to customers
+Overdue
+within
+11111
+20,486
+13,310
+Overdue
+from
+2022
+Overdue
+from
+4,360
+81,983
+5,077
+17,671
+23,074
+36,161
+6,142
+39,362
+19,002
+17,477
+1,549
+1,249
+1,556
+766
+2,571
+5,157
+4,638
+6,133
+6,971
+overdue
+loans
+618
+1,661
+3,905
+7,053
+3 months
+Other
+34,421
+42,326
+(a) Loans and advances to customers
+22. Loans and advances to customers
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+1,094
+589
+(3,169)
+(505)
+4,263
+2023
+1,094
+2023
+Balance as at the end of the year
+Release for the year (note 14)
+Balance as at the beginning of the year
+(d) Movements of allowances for impairment losses are as follows:
+276,467
+20,338
+256,129
+2022
+2023
+164,702
+7,417
+172,119
+2022
+2022
+Gross amount of loans and advances to customers at amortised cost (i)
+Interest receivable
+5,913,324
+5,807,154
+6,252,755
+614,481
+4,994
+70,430
+Loans and advances to customers at FVTPL (iii)
+Total
+525,179
+Loans and advances to customers at FVTOCI (ii)
+5,187,679
+5,657,146
+Loans and advances to customers at amortised cost
+(255,759)
+(267,620)
+Subtotal
+(846)
+(254,913)
+(266,805)
+(815)
+Loss allowances of interest receivable
+at amortised cost (i)
+Less: Loss allowances of loans and advances to customers
+11,326
+5,443,438
+11,442
+5,924,766
+Subtotal
+5,432,112
+Total
+(i)
+Bonds
+Bills
+276,467
+2022
+2023
+276,676
+172,246
+209
+127
+276,467
+172,119
+(1,094)
+277,561
+172,334
+9,961
+162,373
+172,708
+(589)
+2023
+(b) Analysed by remaining maturity
+Net carrying amount
+- Other financial institutions
+- Banks
+Less: Impairment allowances
+- Other financial institutions
+Total
+- Banks
+Outside the Chinese mainland
+Other financial institutions
+2022
+277,382
+42,077
+235,305
+172,119
+268,890
+7,577
+- Between one month and one year (inclusive)
+Total
+172,119
+- Within one month (inclusive)
+Maturing
+2022
+2023
+276,467
+172,119
+(878)
+(441)
+(216)
+(148)
+(1,094)
+(589)
+277,561
+172,708
+179
+286
+88
+179
+374
+(c) Analysed by underlying assets
+Loans and advances to customers at amortised cost
+2023
+2022
+Transportation, storage and postal services
+445,218
+557,691
+Manufacturing
+2022
+2023
+Operations in the Chinese mainland
+Analysed by industry sector and category:
+(i)
+(b) Analysis of loans and advances to customers
+477,016
+22. Loans and advances to customers (continued)
+Chapter VIII Financial Statements
+China Merchants Bank
+208
+207
+4,994
+4,863
+2022
+2023
+3,661
+66,701
+68
+70,430
+Total
+Interest receivable
+Annual Report 2023 (H share)
+461,434
+Property development
+303,707
+Mining
+64,886
+42,813
+Water, environment and public utilities management
+75,593
+88,296
+Finance
+78,950
+95,394
+Telecommunications, software and IT services
+103,998
+110,577
+Construction
+158,320
+186,463
+Leasing and commercial services
+171,786
+187,737
+Wholesale and retail
+203,870
+259,864
+Production and supply of electric power, heating power, gas and water
+349,682
+Discounted bills
+Corporate loans and advances
+Loans and advances to customers at FVTPL
+(iii)
+(50,083)
+(53,210)
+Stage 3 (Lifetime ECL - credit-impaired)
+(44,898)
+(47,729)
+- Stage 2 (Lifetime ECL - not credit-impaired)
+(159,932)
+(165,866)
+- Stage 1 (12-month ECL)
+(254,913)
+(266,805)
+Less: Loss allowances
+5,432,112
+5,913,324
+Gross amount of loans and advances to customers at amortised cost
+9
+Discounted bills
+3,161,789
+3,437,883
+Retail loans and advances
+2,270,323
+2,475,432
+Corporate loans and advances
+Net amount of loans and advances to customers at amortised cost
+In the Chinese mainland
+5,646,519
+(ii)
+No loss allowance is recognised in the consolidated statement of financial position for loans and advances to
+customers at FVTOCI as the carrying amount is at fair value.
+(252)
+(3)
+(6,311)
+(2,726)
+(6,563)
+(2,729)
+614,481
+525,179
+514,051
+404,417
+100,430
+120,762
+2022
+2023
+· Stage 3 (Lifetime ECL - credit-impaired)
+· Stage 2 (Lifetime ECL - not credit-impaired)
+Stage 1 (12-month ECL)
+Loans and advances to customers at FVTOCI
+Loss allowances
+Discounted bills
+Corporate loans and advances
+Loans and advances to customers at FVTOCI
+5,177,199
+12. Five highest paid individuals
+(a) Analysed by nature of counterparties
+During the years of 2023 and 2022, no emoluments were paid by the Group to any of the persons who are directors
+or supervisors as an inducement to join or upon joining the Group or as compensation for loss of office.
+During the years of 2023 and 2022, there was no arrangement under which a director or a supervisor waived or
+agreed to waive any remuneration.
+6,019
+200
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+11. Directors' and supervisors' emoluments (continued)
+Notes:
+(i)
+(!!)
+(iii)
+1,261
+(v)
+(vi)
+(vii)
+On 27 September 2023, the Board of Directors approved the discretionary bonuses of the Bank's directors, supervisors and executive officers
+for 2022.
+In June 2022, according to the relevant resolutions passed at the 2021 Annual General Meeting of the Bank, Mr. Hu Jianhua, Mr. Sun Yunfei
+and Mr. Chen Dong were elected as Non-Executive Directors of the Bank, whose qualifications as the Directors were approved by the former
+China Banking and Insurance Regulatory Commission (the "former CBIRC") in October 2022.
+In June 2022, according to the relevant resolutions passed at the 2021 Annual General Meeting of the Bank, Mr. Luo Sheng was elected as
+the Shareholder Supervisor of the Bank, and Mr. Cai Hongping and Mr. Zhang Xiang were elected as External Supervisors of the Bank.
+In November 2022, Mr. Fu Gangfeng ceased to be the Vice Chairman and Non-Executive Director of the Bank due to change of work
+arrangement.
+In June 2022, Mr. Wang Daxiong and Mr. Luo Sheng ceased to be Non-Executive Directors of the Bank after the end of the 2021 Annual
+General Meeting due to the expiry of their terms of office, and Mr. Tian Huiyu ceased to be an Executive Director of the Bank after the end of
+the 2021 Annual General Meeting.
+In June 2022, Mr. Guo Xikun ceased to be the Shareholder Supervisor of the Bank due to the expiry of his terms of office, and Mr. Ding
+Huiping and Mr. Han Zirong ceased to serve as External Supervisors of the Bank due to the expiry of their terms of office.
+As of 31 December 2022, the Group had offered 10 phases of H share appreciation rights under the Scheme. Details of the Scheme are set
+out in Note 39 (a)(iii).
+(iv)
+2022
+Bonds:
+Classified by issuer
+- Government bonds
+81,781
+182,416
+128,894
+2023
+- Bonds issued by policy banks
+251,189
+Financial investments held for trading
+23. Financial investments (continued)
+Financial investments at fair value through profit or loss (continued)
+(a)
+20,502
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+423,467
+526,145
+Total
+11,876
+(i) Financial investments measured at FVTPL
+21,871
+61,202
+- Bonds issued by commercial banks and other financial institutions
+Other debt securities
+17
+257
+1,971
+4,347
+– Equity investments
+Classified by underlying assets
+2,203
+2,296
+12,215
+12,787
+-
+167,998
+Other investments:
+Listed outside the Chinese mainland
+Unlisted
+- Listed in the Chinese mainland
+182,416
+251,189
+Classified by listing
+42,765
+12,879
+35,999
+40,591
+236,106
+(ii)
+2022
+411,591
+(717)
+(600)
+(1,646)
+(1,368)
+Net carrying amount of finance leases receivable
+· Stage 3 (Lifetime ECL - credit-impaired)
+- Stage 2 (Lifetime ECL - not credit-impaired)
+(1,308)
+(661)
+Stage 1 (12-month ECL)
+45,397
+(3,671)
+Less: Impairment allowances
+48,164
+48,026
+Present value of minimum leases receivable
+(9,665)
+(10,491)
+Unearned finance income
+57,829
+58,517
+Subtotal
+(2,629)
+44,493
+23. Financial investments
+Notes
+513,266
+(i)
+Financial investments measured at FVTPL
+-
+2023
+Notes
+(a) Financial investments at fair value through profit or loss
+2,772,689
+3,193,920
+Total
+780,349
+13,416
+899,102
+19,649
+23(d)
+Equity investments designated at FVTOCI
+23(c)
+Debt investments at FVTOCI
+2022
+423,467
+1,555,457
+526,145
+1,749,024
+23(b)
+Debt investments at amortised cost
+23(a)
+Financial investments at fair value through profit or loss
+2023
+Financial assets designated at fair value through profit or loss
+Fund investments
+- Long position in precious metal contracts
+814
+247,111
+817
+1,511
+1,683
+336
+199,725
+206,415
+4,362
+4,228
+240,864
+247,111
+Total financial investments measured at FVTPL
+Total other financial investments measured at FVTPL
+206,415
+- Unlisted
+- Listed in the Chinese mainland
+Classified by listing
+Other
+Wealth management products
+Fund investments
+-
+-
+– Equity investments
+Classified by underlying assets
+Other investments:
+- Listed outside the Chinese mainland
+990
+330
+972
+7,327
+Bonds issued by commercial banks and other financial institutions
+- Other debt securities
+4,559
+4,492
+- Bonds issued by policy banks
+218
+228
+Government bonds
+11,876
+12,879
+Classified by issuer
+Bonds:
+2022
+2023
+Financial investments designated at fair value through profit or loss
+(ii)
+411,591
+513,266
+227,204
+257,730
+205,432
+245,149
+653
+701
+1,440
+359
+2,777
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+214
+213
+184,387
+255,536
+Total financial investments held for trading
+1,837
+2,743
+23. Financial investments (continued)
+134
+― Listed outside the Chinese mainland
+- Unlisted
+1,971
+4,347
+Classified by listing
+108
+1,604
+17,448
+1,032
+1,046
+- Wealth management products
+1,604
+(a)
+Financial investments at fair value through profit or loss (continued)
+(i) Financial investments measured at FVTPL (continued)
+18,216
+7,483
+- Listed outside the Chinese mainland
+Unlisted
+- Listed in the Chinese mainland
+-
+20,789
+10,619
+Classified by listing
+6,750
+6,098
+14,039
+3,781
+- Bonds issued by commercial banks and other financial institutions
+Other debt securities
+-
+740
+- Bonds issued by policy banks
+20,789
+10,619
+Classified by issuer
+Bonds:
+2022
+2023
+Other financial investments measured at FVTPL
+1,872
+19,145
+4,755
+3,729
+22. Loans and advances to customers (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+(6,563)
+(252)
+(6,311)
+at FVTOCI
+Loss allowances of loans and advances to customers
+614,481
+(c)
+1,821
+Loans and advances to customers at FVTOCI
+5,177,199
+7,921
+111,342
+5,057,936
+Net amount of loans and advances to customers at
+amortised cost
+(254,913)
+(50,083)
+(44,898)
+(159,932)
+612,660
+(i)
+Movements of allowance for expected credit loss
+Reconciliation of allowance for expected credit loss for loans and advances to customers measured at
+amortised cost:
+- Stage 3
+(575)
+6,382
+(5,807)
+- Stage 2
+(171)
+(7,309)
+7,480
+- Stage 1
+Transfer to
+254,913
+50,083
+44,898
+159,932
+Balance as at the beginning of the year
+Total
+impaired)
+impaired)
+- Stage 3
+(Lifetime
+ECL - credit-
+credit-
+- Stage 2
+(Lifetime
+ECL - not
+2023
+- Stage 1
+(12-month
+ECL)
+5,432,112
+58,004
+156,240
+5,217,868
+(165,866)
+5,913,324
+61,560
+165,105
+5,686,659
+Loans and advances measured at amortised cost
+Less: Loss allowances of loans and advances to
+customers at amortised cost
+Total
+impaired)
+impaired)
+ECL)
+ECL - credit-
+- Stage 3
+(Lifetime
+- Stage 2
+(Lifetime
+ECL - not
+2023
+credit-
+- Stage 1
+(12-month
+(iv)
+(b) Analysis of loans and advances to customers (continued)
+Analysed by ECL
+22. Loans and advances to customers (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+210
+(47,729)
+(1,625)
+(53,210)
+Net amount of loans and advances to customers at
+amortised cost
+Loans and advances measured at amortised cost
+Less: Loss allowances of loans and advances to
+customers at amortised cost
+Total
+impaired)
+impaired)
+ECL)
+ECL - credit-
+credit-
+- Stage 3
+(Lifetime
+- Stage 2
+(Lifetime
+ECL - not
+Stage 1
+(12-month
+2022
+(2,729)
+(3)
+(2,726)
+Loss allowances of loans and advances to customers
+at FVTOCI
+525,179
+555
+524,624
+Loans and advances to customers at FVTOCI
+5,646,519
+8,350
+117,376
+5,520,793
+(266,805)
+3,860
+(14,547)
+Charge for the year (note 14)
+(3,835)
+1,581
+6,563
+2022
+2023
+Balance as at the end of the year
+Exchange difference
+(Release)/charge for the year (note 14)
+Balance as at the beginning of the year
+FVTOCI:
+4,982
+(ii)
+254,913
+50,083
+44,898
+159,932
+Balance as at the end of the year
+330
+(378)
+76
+632
+Exchange and other differences
+Reconciliation of allowance for expected credit loss for loans and advances to customers measured at
+1
+2,729
+6,563
+Over 4 years but within 5 years (inclusive)
+Over 5 years
+6,089
+6,370
+6,074
+7,573
+11,035
+8,010
+13,323
+15,305
+Over 1 year but within 2 years (inclusive)
+Over 2 years but within 3 years (inclusive)
+Over 3 years but within 4 years (inclusive)
+Within 1 year (inclusive)
+Total minimum leases receivable
+2022
+2023
+The table below provides an analysis of finance leases receivable included in loans and advances to customers for
+leases of assets in which the Group is a lessor:
+Finance leases receivable
+(d)
+22. Loans and advances to customers (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+212
+211
+8,972
+8,972
+Recovery of loans and advances written off
+(39,087)
+ECL - credit-
+credit-
+impaired)
+- Stage 1
+(12-month ECL)
+- Stage 3
+(Lifetime
+- Stage 2
+(Lifetime
+ECL - not
+2022
+266,805
+525
+(178)
+53,210
+47,729
+165,866
+Balance as at the end of the year
+91
+612
+Exchange and other differences
+8,819
+50,470
+(47,922)
+(47,922)
+8,819
+Recovery of loans and advances written off
+Write-offs/disposals
+26,982
+18,214
+5,274
+impaired)
+16,172
+Total
+169,347
+(39,016)
+(71)
+Write-offs/disposals
+40,175
+29,216
+12,653
+(1,694)
+(Release)/charge for the year (note 14)
+8,374
+(4,681)
+(3,693)
+- Stage 3
+(74)
+(180)
+7,879
+(7,699)
+- Stage 2
+(2,965)
+3,039
+- Stage 1
+Transfer to
+244,523
+43,169
+32,007
+Balance as at the beginning of the year
+832
+- Listed in the Chinese mainland
+Classified by listing
+68,195
+119,602
+149,397
+- Bonds issued by commercial banks and other financial institutions
+- Other debt securities
+74,072
+35,519
+- Bonds issued by policy banks
+524,651
+636,625
+Government bonds
+52,946
+771,271
+Classified by issuer
+Bonds:
+2022
+2023
+Debt investments at FVTOCI:
+(i)
+No impairment allowances are recognised in the consolidated statement of financial position for debt investments at
+FVTOCI as the carrying amount is at fair value.
+(6,620)
+(6,960)
+(80)
+889,736
+Classified by listing
+889,736
+771,271
+(d) Equity investments designated at FVTOCI
+Balance as at the end of the year
+Exchange difference
+Write-offs/disposals
+Charge/(release) for the year (note 14)
+Balance as at the beginning of the year
+(ii)
+(c) Debt investments at FVTOCI (continued)
+Movements of allowances for expected credit loss
+23. Financial investments (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+218
+217
+70,013
+107,999
+- Unlisted
+90,148
+105,084
+- Listed outside the Chinese mainland
+611,110
+676,653
+Listed in the Chinese mainland
+(148)
+2023
+(6,540)
+780,349
+Write-offs/disposals
+4,234
+8,390
+518
+(4,674)
+(Release)/charge for the year (note 14)
+451
+(298)
+(153)
+- Stage 3
+(531)
+27
+- Stage 2
+- Stage 1
+Transfer to:
+Total
+39,707
+impaired)
+24,021
+712
+14,974
+credit-
+impaired)
+ECL)
+Balance as at the beginning of the year
+(27)
+(531)
+Recovery of debt previously written off
+28
+899,102
+9,078
+9,366
+771,271
+889,736
+2022
+2023
+Total
+Impairment losses of debt investments at FVTOCI (ii)
+Impairment losses of interest receivable
+Total
+Interest receivable
+Debt investments at FVTOCI (i)
+(c) Debt investments at FVTOCI
+43,448
+32,368
+960
+10,120
+Balance as at the end of the year
+10
+9
+1
+Exchange difference
+28
+(6,812)
+- Stage 3
+(Lifetime
+ECL credit-
+2022
+6,622
+Beijing
+EUR100
+Luxembourg
+Limited liability
+Asset management
+90%
+RMB5,556
+Shenzhen
+CMB Wealth Management Co., Ltd (note (v))
+China Merchants Europe S.A. (note (vi))
+Cigna & CMB Asset Management Company
+Limited (note (vii))
+(note (iv))
+RMB500
+Wang Liang
+Wang Xiaoqing
+Fund management
+55%
+Limited liability
+Banking
+100%
+HKD1,161
+RMB1,310
+Hong Kong
+Shenzhen
+CMB Wing Lung Bank Limited (note (iii))
+China Merchants Fund Management Co., Ltd.
+Zhong Desheng
+Limited liability
+Limited liability
+100%
+(note (vii))
+Banking
+Limited liability
+219
+Cigna & CMB Asset Management Company Limited ("CIGNA & CMAM") was registered and established on 18 October 2020 with the
+approval for setting up by the former CBIRC with Yin Bao Jian Fu [2020] No. 708. CIGNA & CMAM is an indirectly controlled subsidiary of the
+Bank, with 87.3458% held by CIGNA & CMB Life Insurance Co., Ltd., a joint venture of the Bank, and 12.6542% held by CMBIC, a subsidiary
+of the Bank.
+CMB Wealth Management Co., Ltd. ("CMBWM") is a wholly-owned subsidiary of the Bank, approved for setting up by the former CBIRC with
+Yin Bao Jian Fu [2019] No. 981. It was formally established on 1 November 2019. In accordance with the approval of former CBIRC (Yin Bao
+Jian Fu [2021] No. 920)", JPMorgan Asset Management (Asia Pacific) Limited (" JPMorgan Asset Management ") has subscribed for a 10%
+stake in CMBWM in 2022 with an investment of RMB2,667 million. After the completion of capital injection, CMBWM's registered capital has
+been increased to approximately RMB5,556 million from RMB5,000 million and the Bank's and JPMorgan Asset Management's shareholdings
+are 90% and 10% respectively. The legal representative of CMBWM was changed from Chen Yisong to Wu Jianbing on 22 January 2024.
+China Merchants Europe S.A. ("CMB Europe S.A.") is a wholly-owned subsidiary of the Bank approved by the former CBIRC with Yin Jian
+Fu [2016] No. 460. The Bank received an approval from the European Central Bank (ECB) for the establishment of CMB Europe S.A. in
+Luxembourg in May 2021. In June 2023, the Bank made an additional capital contribution of EUR 50 million in CMB Europe S.A. The capital of
+CMB Europe S.A. increased to EUR 100 million, and the Bank's shareholding percentage remained unchanged.
+In 2012, the Bank acquired 21.60% equity interests in China Merchants Fund Management Co., Ltd. ("CMFM"), its former associate, from
+ING Asset Management B.V. at a consideration of EUR63,567,567.57. Following the settlement of the above consideration in cash, the Bank's
+shareholding in CMFM increased from 33.40% to 55.00% in 2013. As a result, the Bank obtained the control over CMFM, which became
+the Bank's subsidiary on 28 November 2013. In December 2017, the Bank made an additional capital contribution of RMB605 million in
+CMFM, and other shareholders of CMFM also made capital contribution of RMB495 million proportionally. The capital of CMFM increased to
+RMB1,310 million, and the Bank's shareholding percentage remained unchanged.
+CMB Wing Lung Bank Limited ("CMB WLB") was formerly known as Wing Lung Bank Limited. On 30 September 2008, the Bank acquired
+a 53.12% equity interests in CMB WLB. CMB WLB became a wholly owned subsidiary of the Bank on 15 January 2009. CMB WLB had
+withdrawn from listing on the HKEx as of 16 January 2009.
+CMB Financial Leasing Company Limited ("CMBFL") is a wholly-owned subsidiary of the Bank approved for setting up by the former CBIRC
+through its Yin Jian Fu [2008] No. 110 and commenced its operation in April 2008. In 2014, the Bank made an additional capital contribution
+of RMB2,000 million in CMBFL. The capital of CMBFL increased to RMB6,000 million and the Bank's shareholding percentage remained
+unchanged. In August 2021, CMBFL converted RMB6,000 million of its retained earnings into share capital, and the capital of CMBFL increased
+to RMB12,000 million. The Bank's shareholding percentage remained unchanged.
+CMB International Capital Holdings Corporation Limited ("CMBIC"), formerly known as Jiangnan Finance Company Limited and CMB
+International Capital Corporation Limited, is the Bank's wholly-owned subsidiary approved for setting up by the PBOC through its Yin Fu [1998]
+No. 405. In 2014, the Bank made an additional capital contribution of HKD750 million in CMBIC. The capital of CMBIC increased to HKD1,000
+million, and the Bank's shareholding percentage remained unchanged. The Board of Directors passed "The Resolution regarding the Capital
+Increase and Restructuring of CMBIC" which agreed that the Bank made capital contribution of USD400 million (or its equivalent) to CMBIC
+on 28 July 2015. The capital contribution was completed on 20 January 2016.
+(vii)
+(vi)
+(v)
+(iv)
+(iii)
+(ii)
+(i)
+Notes:
+24. Particulars of principal subsidiaries of the bank (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+Wang Xiaoqing
+Limited liability
+Asset management
+Chen Yisong
+Xue Fei
+Finance leasing
+6,540
+100%
+Shanghai
+13,416
+19,649
+10,150
+16,792
+3,266
+2,857
+2022
+2023
+Total
+- Listed outside the Chinese mainland
+Unlisted
+926
+- Listed in the Chinese mainland
+Total
+Other
+Repossessed equity instruments
+6,540
+6,812
+273
+70
+(807)
+(355)
+1,009
+Classified by listing
+1,412
+9,515
+2,744
+CMB Financial Leasing Company Limited
+(note (ii))
+management
+Wang Liang
+Limited liability
+Investment bank
+and investment
+100%
+Legal
+representative
+Economic
+nature
+the Bank Principal activities
+paid up capital
+(in millions)
+HKD4,129
+Hong Kong
+CMB International Capital Holdings
+Corporation Limited (note (i))
+% of
+ownership
+held by
+Particulars of
+the issued and
+Place of
+incorporation
+and operation
+Name of company
+The following list contains particulars of subsidiaries which principally affect the financial results, assets or liabilities
+of the Group. Unless otherwise stated, the class of all shares held is ordinary. All of these companies are subsidiaries
+as defined under Note 4(1) and have been included in the scope of the consolidated financial statements of the
+Group.
+24. Particulars of principal subsidiaries of the bank
+During the year ended 31 December 2023, the Group disposed part of the equity investments designated at
+FVTOCI. The fair value of the equity investments disposed at the date of derecognition was RMB1,226 million (2022:
+RMB2,879 million). The cumulative net of tax loss of RMB49 million (2022: cumulative net of tax gain of RMB20
+million) was transferred from investment revaluation reserve to retained earnings on disposal.
+13,416
+19,649
+9,260
+9,208
+RMB12,000
+- Stage 2
+(Lifetime
+ECL - not
+2022
+- Stage 1
+(12-month
+- Other
+5,500
+12,582
+9,622
+- Non-standard assets - Other
+3,738
+- Non-standard assets - Creditor's beneficiary rights to other
+commercial banks
+108,616
+73,709
+- Non-standard assets - Loans and advances to customers
+127,346
+679
+87,748
+1,708,448
+23,996
+30,915
+Classified by underlying assets
+Other investments:
+Fair value for the listed bonds
+Unlisted
+33,319
+41,533
+1,395,184
+1,457,373
+648
+-
+Classified by listing
+1,536,397
+1,728,620
+(32,368)
+(25,711)
+(960)
+(486)
+(10,120)
+(13,193)
+(43,448)
+(39,390)
+1,579,845
+1,768,010
+Net debt investments at amortised cost
+Stage 3 (Lifetime ECL - credit-impaired)
+Stage 2 (Lifetime ECL - not credit-impaired)
+Stage 1 (12-month ECL)
+Less: Loss allowances
+Total
+127,346
+87,748
+127,346
+87,748
+Unlisted
+1,607,814
+215
+– Listed outside the Chinese mainland
+1,452,499
+1,579,845
+1,768,010
+20,796
+1,788,806
+2022
+2023
+Debt investments at amortised cost:
+Total
+Subtotal
+Impairment losses of principal (i)(ii)(iii)
+Impairment losses of interest receivable
+Subtotal
+Debt investments at amortised cost (i)(ii)
+Interest receivable
+19,294
+1,599,139
+(i)
+23. Financial investments (continued)
+Chapter VIII Financial Statements
+China Merchants Bank
+220
+242
+Listed outside the Chinese mainland
+11,656
+12,637
+11,876
+12,879
+(b) Debt investments at amortised cost
+(39,390)
+(43,448)
+(392)
+1,680,262
+Classified by listing
+7,836
+7,251
+Other debt securities
+56,913
+51,732
+Bonds issued by commercial banks and other financial institutions
+394,126
+442,206
+- Bonds issued by policy banks
+993,624
+1,179,073
+1,452,499
+1,680,262
+- Government bonds
+Classified by issuer
+Bonds:
+2022
+2023
+(234)
+(43,682)
+1,555,457
+1,749,024
+(39,782)
+Listed in the Chinese mainland
+729
+216
+Annual Report 2023 (H share)
+(484)
+- Stage 3
+37
+(37)
+Stage 2
+Stage 1
+43,448
+32,368
+Total
+impaired)
+Charge/(release) for the year (note 14)
+960
+- Stage 2
+(Lifetime
+ECL - not
+credit-
+impaired)
+ECL)
+- Stage 1
+(12-month
+2023
+ECL credit-
+Stage 3
+(Lifetime
+1,536,397
+1,752
+1,113
+1,533,532
+10,120
+3,111
+(25)
+484
+(4,313)
+(iii)
+(b) Debt investments at amortised cost (continued)
+Movements of allowances for expected credit loss (continued)
+23. Financial investments (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+39,390
+25,711
+486
+13,193
+Balance as at the end of the year
+13
+66
+66
+10
+(1)
+4
+Exchange difference
+Recovery of debt previously written off
+(1,227)
+(2,910)
+(2,904)
+(1)
+(5)
+Write-offs/disposals
+(43,448)
+(32,368)
+(960)
+(10,120)
+impaired)
+impaired)
+ECL)
+ECL - credit-
+- Stage 3
+(Lifetime
+- Stage 2
+(Lifetime
+ECL - not
+2023
+credit-
+- Stage 1
+(12-month
+Transfer to:
+Balance as at the beginning of the year
+Movements of allowances for expected credit loss
+(iii)
+Net debt investments at amortised cost
+Less: Loss allowances of debt investments
+at amortised cost
+Debt investments at amortised cost
+Net debt investments at amortised cost
+Less: Loss allowances of debt investments
+at amortised cost
+Debt investments at amortised cost
+(ii) Analysed by stage of ECL:
+(b) Debt investments at amortised cost (continued)
+23. Financial investments (continued)
+Chapter VIII Financial Statements
+Total
+China Merchants Bank
+1,738,945
+27,548
+1,579,845
+34,120
+2,073
+1,543,652
+Total
+impaired)
+impaired)
+ECL)
+Stage 3
+(Lifetime
+ECL - credit-
+credit-
+- Stage 2
+(Lifetime
+ECL - not
+- Stage 1
+(12-month
+2022
+1,728,620
+1,837
+1,031
+1,725,752
+(39,390)
+(25,711)
+(486)
+(13,193)
+1,768,010
+1,517
+Annual Report 2023 (H share)
+12,399
+8
+Principal activity
+31 December
+as at
+Fair Value
+4,432
+2,396
+2,036
+2,396
+2,396
+2,036
+2,036
+Total
+Located overseas
+Located in the Chinese mainland
+Level 1
+2023
+Level 2
+Level 1
+31 December
+as at
+Fair Value
+The fair value hierarchy of the investment properties of the Group are listed as follows:
+1,243
+1,028
+Total
+275
+225
+Over 5 years
+102
+Level 3
+79
+Level 2
+2022
+Total
+Other
+equipment improvements equipment
+in progress
+buildings
+professional
+Computer Leasehold
+Construction
+Land and
+vessels and
+Aircraft,
+28. Property and equipment
+Annual Report 2023 (H share)
+Level 3
+Chapter VIII Financial Statements
+224
+223
+In estimating the fair value of the properties, the highest and best use of the properties is their current use.
+5,534
+2,394
+3,140
+Total
+2,394
+2,394
+Located overseas
+3,140
+3,140
+Located in the Chinese mainland
+China Merchants Bank
+4 year to 5 years (inclusive)
+153
+136
+3,097
+153
+34
+(79)
+13
+(159)
+3,135
+3,301
+2022
+2023
+Net carrying amount:
+At 31 December
+Exchange difference
+3,301
+Disposals
+Depreciation
+At 1 January
+Accumulated depreciation:
+At 31 December
+Exchange difference
+Disposals
+Transfers (out)/in
+At 1 January
+Cost:
+27. Investment properties
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+Transfers (out)/in
+2,033
+1,763
+140
+3 year to 4 years (inclusive)
+184
+165
+2 year to 3 years (inclusive)
+240
+196
+1 year to 2 years (inclusive)
+289
+227
+Within 1 year (inclusive)
+2022
+2023
+The Group's total future minimum leases receivable under non-cancellable operating leases are as follows:
+Investment properties of the Group mainly represent the leased properties of CMB WLB and the Bank that have
+been leased out under operating leases. The fair value of the Group's investment properties is determined by the
+market approach and the method of capitalisation of net rental income. As at 31 December 2023, the fair value of
+these properties was RMB4,432 million (31 December 2022: RMB5,534 million).
+As at 31 December 2023, no impairment allowance was considered necessary for investment properties by the
+Group (31 December 2022: Nil).
+At 1 January
+At 31 December
+1,372
+1,268
+1,268
+1,160
+2,033
+1,937
+105
+25
+(57)
+33
+(204)
+132
+Cost:
+At 1 January 2023
+30,501
+3,787
+183
+(175)
+(175)
+Disposals
+183
+1,152
+1,132
+20
+Charge
+At 1 January 2023
+Impairment loss:
+60,597
+4,270
+16,815
+Exchange difference
+8,946
+15,984
+At 31 December 2023
+259
+4
+183
+7
+22
+43
+Exchange difference
+(5,364)
+(595)
+(2,400)
+(40)
+14,582
+At 31 December 2023
+20
+19
+Computer
+Construction
+Land and
+vessels and
+Aircraft,
+28. Property and equipment (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+99,919
+1,134
+71,498
+3,633
+3,725
+3,787
+16,142
+At 1 January 2023
+115,348
+940
+86,829
+3,821
+2,756
+3,980
+17,022
+At 31 December 2023
+Net carrying amount:
+1,179
+19
+1,159
+(2,319)
+(12,264)
+(312)
+(10)
+204
+Exchange difference
+(10,079)
+(625)
+(6,983)
+(82)
+(2,374)
+(15)
+Disposals
+159
+(8)
+380
+28
+(2,686)
+55
+2,445
+29,888
+360
+24,689
+775
+1,145
+2,879
+40
+Additions
+155,701
+5,478
+85,741
+11,678
+18,516
+Reclassification and transfers
+23
+16
+1,356
+(24)
+24
+204
+Reclassification and transfers
+10,868
+541
+5,921
+934
+2,064
+1,408
+Depreciation
+54,630
+4,344
+13,111
+8,045
+14,791
+14,339
+At 1 January 2023
+Accumulated depreciation:
+177,124
+5,210
+104,803
+12,767
+17,338
+3,980
+33,026
+At 31 December 2023
+1,455
+5
+Disposals
+(123)
+(189)
+Group's effective interest
+536
+(661)
+(997)
+336
+1,071
+(1,266)
+(1,996)
+730
+9,613 31,841
+4,543 15,921
+121,145
+60,573
+130,758
+65,116
+Group's effective interest
+CIGNA & CMB Life
+བs
+2022
+75
+1,295
+198
+31
+167
+(944)
+149
+492
+63
+429
+20,331
+429
+9,855 40,661
+4,616
+(472)
+147 (475)
+74 (238)
+(ii)
+MUCFC
+2022
+267
+22
+2,085
+1,800
+1,800
+9,801
+10,184
+533
+44
+4,170
+3,600
+3,600
+156,054 20,367 19,602
+78,027
+176,421
+88,211
+Group's effective interest
+MUCFC
+2023
+tax
+income equivalents amortisation
+Equity Revenue profit
+Assets Liabilities
+and Income
+and cash
+Net comprehensive
+Cash Depreciation
+Total
+MUCFC:
+165,340 155,485
+82,359 77,743
+164,346
+Group's effective interest
+2023
+RMB2,800
+Shenzhen
+CIGNA & CMB Life Insurance Co., Ltd. (note(i)) Limited liability
+(in millions)
+by the Bank
+interest
+paid up capital
+Percentage of
+ownership held
+effective
+Group's
+Particulars of
+issued and
+Place of
+incorporation
+and operation
+Economic nature
+50.00%
+Name of joint ventures
+1,860
+31
+14,247
+2022
+2023
+15,707
+Details of the Group's interests in major joint ventures are as follows:
+Share of other comprehensive income/(expense) for the year
+Share of profits for the year
+Share of net assets
+25. Interests in joint ventures
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+220
+1,710
+(997)
+50.00%
+Merchants Union Consumer Finance Company Joint stock limited
+Limited (note(ii))
+Shenzhen
+tax
+(expense) equivalents amortisation
+and Income
+income/ and cash
+Cash Depreciation
+comprehensive
+Total
+Other
+comprehensive
+income/
+(expense)
+profit
+Assets Liabilities Equity Revenue
+Net
+CIGNA & CMB Life:
+(i)
+Summarised financial information with necessary adjustments in accordance with the Group's accounting policies of
+the joint ventures which are individually material to the Group is as follows:
+25. Interests in joint ventures (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+In July 2023, MUCFC completed the registration of the change of its Chinese name from “2” to “XOA⠀✰ARGO
+公司”.
+In July 2021, CMB WLB transferred all its shares of MUCFC to the Bank. After the transfer, the Bank and CUNC each held 50% of equity
+interests in MUCFC, and the Group's total shareholding percentage remained unchanged. In October 2021, MUCFC converted RMB1,331
+million of its capital reserve and RMB4,800 million of its retained earnings into share capital, and the share capital of MUCFC increased to
+RMB10,000 million after the conversion.
+The Group holds 50.00% equity interests in CIGNA & CMB Life Insurance Co., Ltd., ("CIGNA & CMB Life") and Cigna Health and Life
+Insurance Company ("CHLIC") holds the other 50.00% equity interests. The Bank and CHLIC share the joint venture's risk, profits and losses
+based on their shareholding proportionally. The Bank's investment in CIGNA & CMB Life is accounted for as an investment in a joint venture.
+CMB WLB, one of the Group's wholly-owned subsidiaries, and China United Network Communications Limited ("CUNC"), a subsidiary
+of China Unicom Limited, jointly set up Merchants Union Consumer Finance Company Limited ("MUCFC"). Former CBIRC approved the
+operation of MUCFC on 3 March 2015. CMB WLB and CUNC each held 50% equity interests in MUCFC and share the risks, profits and
+losses proportionally based on their shareholdings. In December 2017, the Bank and CUNC made a capital contribution of RMB600 million in
+MUCFC respectively. After the capital injection, the capital of MUCFC increased to RMB2,859 million, with the Bank's shareholding percentage
+becoming 15%, CMB WLB's shareholding percentage becoming 35%, and the Group's total shareholding percentage remained at 50%. In
+December 2018, the Bank made another capital contribution of RMB 1,000 million in MUCFC, and CUNC made the same amount of capital
+injection. After that, the share capital of MUCFC has reached RMB3,869 million. The Bank and CMB WLB then held 24.15% and 25.85% of
+equity interests in MUCFC, respectively, and the Group's total shareholding percentage remained at 50%.
+(ii)
+(i)
+Notes:
+company
+Life insurance
+business
+Consumer finance
+50.00%
+50.00%
+RMB10,000
+CIGNA & CMB Life
+Leasehold
+147,279
+17,501
+522 1,099
+1330
+2,376
+1,098
+46
+1,052
+9,561
+4,823
+184
+4,639
+402,413 369,702 32,711 12,552
+98,881 91,893 6,988 3,120
+Group's effective interest
+2022
+Bank of Taizhou Co.,
+Ltd.
+273
+2023
+Total Cash Depreciation
+Net comprehensive comprehensive and cash
+and Income
+income
+income equivalents amortisation
+Equity Revenue profit
+Assets Liabilities
+Other
+Summarised financial information of the associate which is individually material to the Group is as follows:
+The Bank, which originally held a 10% stake in Bank of Taizhou, acquired a total of 14.8559% stake from Ping An Trust Co., Ltd. and Ping An
+Life Insurance Company of China, Ltd. at a total consideration of RMB3,121 million on 31 May 2021. Upon the completion of the transaction,
+the Bank held 24.8559% stake of Bank of Taizhou. The Bank can exercise significant influence on Bank of Taizhou and therefore this
+investment is included in interests in associates.
+Note:
+Commercial Bank
+24.8559%
+24.8559%
+RMB 1,800
+Taizhou
+Joint stock limited
+company
+tax
+Bank of Taizhou Co.,
+Ltd.
+Group's effective interest
+372,578 343,254 29,324 11,034
+91,509 85,319 6,190 2,743
+(737)
+(11,527)
+Other associates
+2022
+(4,527)
+(311)
+781
+125
+(436)
+Group's effective interest
+(5,308)
+Other associates
+2023
+expense
+comprehensive
+Total
+Net loss income/(expense)
+comprehensive
+Other
+Summarised financial information of the associates that are not individually material to the Group is as follows:
+297
+130
+5,063
+969
+(35)
+1,004
+522 1,196
+20,368
+4,307
+(138)
+4,445
+Bank of Taizhou Co., Ltd. (Note)
+17,067
+(in millions)
+Percentage of
+ownership held
+by the Bank
+(2,874)
+Other joint ventures
+2022
+(107)
+Group's effective interest
+(1,197)
+Other joint ventures
+2023
+expense
+Net loss
+comprehensive
+Other
+Summarised financial information of the joint ventures that are not individually material to the Group is as follows:
+Group's effective interest
+250
+2,713
+1,665
+1,665
+8,751
+8,534
+73,640
+82,174
+Group's effective interest
+500
+47
+5,425
+3,329
+3,329
+24
+(291)
+Total
+comprehensive
+interest
+paid up capital
+effective
+Group's
+Particulars of
+issued and
+Place of
+incorporation
+and operation
+Economic nature
+(158)
+171
+815
+616
+9,597
+2022
+2023
+10,883
+Details of the Group's interest in major associate are as follows:
+Share of other comprehensive income/(expense) for the year
+Share of profits for the year
+Share of net assets
+26. Interests in associates
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+222
+221
+(291)
+(2,874)
+(107)
+(1,197)
+expense
+Principal activity
+professional
+2,590
+in progress
+10,577
+1,203
+11,780
+Accumulated amortisation:
+At 1 January 2023
+7,572
+Charge for the year (note 10)
+Disposals
+888
+600
+42
+8,172
+930
+(46)
+26
+-
+Exchange difference
+At 31 December 2023
+Net carrying amount:
+At 31 December 2023
+At 1 January 2023
+4
+11
+15
+8,418
+653
+9,071
+2,159
+550
+(46)
+22
+4
+(73)
+4,612
+1,082
+1,178
+12,675
+13,013
+Short-term lease expense and leases of low-value assets expense are disclosed in note 10. The Group entered into
+short-term leases for buildings, computer equipment, motor vehicles and other.
+During the year of 2023, total cash outflow of the Group's leases amounted to RMB5,053 million (2022: RMB4,932
+million).
+(e)
+As at 31 December 2023 and 2022, the leases committed but not yet commenced were not significant.
+227
+228
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+30. Intangible assets
+Software
+and other
+Core deposits
+Total
+Cost/appraisal value:
+At 1 January 2023
+Additions
+Disposals
+Exchange difference
+At 31 December 2023
+10,393
+253
+1,181
+11,574
+253
+(73)
+2,709
+4,672
+2,821
+3,402
+(10)
+Exchange difference
+11
+48
+59
+At 31 December 2022
+7,572
+600
+8,172
+Net carrying amount:
+At 31 December 2022
+At 1 January 2022
+2,821
+(10)
+581
+3,495
+571
+4,066
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+31. Goodwill
+CMB WLB (note (i))
+CMFM (note (ii))
+CMI (note (iii))
+Zhaoyin Internet (note (iv))
+Total
+Less: Impairment allowances - CMB WLB
+Net carrying amount
+3,402
+Disposals
+1,061
+40
+Software
+and other
+Core deposits
+Total
+Cost/appraisal value:
+At 1 January 2022
+Additions
+Disposals
+Exchange difference
+10,045
+1,083
+11,128
+347
+347
+(13)
+(13)
+14
+98
+112
+At 31 December 2022
+10,393
+1,181
+11,574
+Accumulated amortisation:
+At 1 January 2022
+6,550
+512
+7,062
+Charge for the year (note 10)
+1,021
+581
+As at
+3,038
+3,091
+23,070
+Additions
+3,656
+Decrease
+(2,848)
+74 €
+16
+29,078
+7
+3,667
+(12)
+(2,861)
+Exchange difference
+5,985
+15
+63
+At 31 December 2022
+6,000
+23,926
+10
+11
+29,947
+Accumulated depreciation:
+At 1 January 2022
+1,190
+9,414
+3
+10,616
+48
+At 1 January 2022
+Cost:
+Total
+buildings
+3
+13,967
+Impairment loss:
+At 1 January 2023
+At 31 December 2023
+59
+59
+59
+59
+Net carrying amount:
+At 31 December 2023
+4,386
+12,645
+2
+8
+17,041
+At 1 January 2023
+4,566
+12,973
+5
+9
+17,553
+Motor
+Land
+use rights
+Buildings
+Computer
+equipment
+vehicles
+and other
+Depreciation (note 10)
+3,085
+181
+3
+4
+7
+18,403
+The Group mainly leases land use rights and buildings for its operations. Lease terms are negotiated on an individual
+basis and contain a wide range of different terms and conditions. In determining the lease term and assessing the
+length of the non-cancellable period, the Group reassesses whether it is reasonably certain to exercise an extension
+option, or not to exercise a termination option, upon the occurrence of either a significant event or a significant
+change in circumstances that is within the control of the lessee.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+29. Lease contracts (continued)
+(b) Lease liabilities
+Analysis of the Group's lease liabilities by remaining maturity is as follows:
+Within 1 month (inclusive)
+1 month to 3 months (inclusive)
+3 months to 1 year (inclusive)
+13,656
+1 year to 2 years (inclusive)
+Over 5 years
+Total
+Interest expense on lease liabilities is set out in note 7.
+(c)
+(d)
+Short-term leases and leases of low-value assets
+2023
+2022
+454
+503
+578
+591
+2,804
+2 years to 5 years (inclusive)
+4,736
+17,553
+9
+2
+4,151
+Decrease
+Exchange difference
+At 31 December 2022
+Impairment loss:
+At 1 January 2022
+At 31 December 2022
+Net carrying amount:
+(2,458)
+(1)
+(9)
+(2,468)
+4
+32
+36
+1,375
+10,953
+5
+2
+12,335
+559
+59
+59
+At 31 December 2022
+At 1 January 2022
+4,566
+12,973
+5
+3,965
+Addition
+9
+As at
+Impairment loss:
+54,630
+4,344
+13,111
+8,045
+14,791
+14,339
+At 31 December 2022
+935
+13
+686
+(16)
+77
+At 1 January 2022
+175
+(2,885)
+(578)
+(1,653)
+(70)
+(497)
+(87)
+Disposals
+(33)
+(113)
+113
+(33)
+Reclassification and transfers
+10,147
+Exchange difference
+20 ---
+Charge
+Disposals
+51,778
+3,897
+3,936
+3,502
+15,858
+99,919
+1,134
+71,498
+3,633
+3,725
+3,787
+16,142
+1,152
+1,132
+50
+50
+(194)
+(194)
+778
+778
+518
+498
+(a)
+At 1 January 2022
+At 31 December 2022
+Net carrying amount:
+20
+At 31 December 2022
+Exchange difference
+557
+1,444
+5,027
+2,174
+122
+162
+(1,625)
+1,490
+Reclassification and transfers
+31,710
+357
+26,872
+649
+1,898
+1,910
+24
+Additions
+(162)
+127,399
+61,327
+10,925
+16,860
+3,502
+28,876
+At 1 January 2022
+Cost:
+Total
+Other
+equipment
+improvements
+Decrease
+equipment
+5,909
+(13)
+Disposals
+(150)
+1,286
+Depreciation
+46,466
+4,465
+9,051
+7,028
+12,924
+12,998
+At 1 January 2022
+Accumulated depreciation:
+155,701
+5,478
+85,741
+11,678
+18,516
+3,787
+30,501
+At 31 December 2022
+5,927
+17
+5,454
+82
+113
+261
+Exchange difference
+(9,322)
+(643)
+(7,912)
+(100)
+1,103
+80,415
+(517)
+(b)
+The recoverable amounts of the CGUS are determined based on value in use calculations. These calculations use
+cash flow projections based on financial forecasts approved by management covering a 5-year period. Cash flows
+beyond the 5-year period are extrapolated using a steady growth rate. The growth rate does not exceed the long-
+term average growth rate for the business in which the CGU operates.
+In assessing the impairment of goodwill, the Group assumed that the terminal growth rate is comparable to the
+forecast long-term economic growth rate issued by authoritative institutions. The discount rate adopted by the
+Group is the before-tax rate and reflects the specific risk associated with the CGU. A pre-tax discount rates of CMB
+WLB and CMFM adopted by the Group are 10% and 9% (2022: 11% and 10%). The Group believes any reasonably
+possible change in the key assumptions on which recoverable amounts are based would not cause the carrying
+amounts of the CGUS to exceed their recoverable amounts.
+229
+1,557
+12
+(2,585)
+(1)
+4,205
+2
+12,335
+2
+53 II
+12
+Impairment test for goodwill
+(2,584)
+182
+10,953
+1,375
+Accumulated depreciation:
+31,067
+11
+10
+25,044
+6,002
+14
+12
+2
+(3,057)
+4,018
+On 1 April 2015, CMBIC acquired the 100% equity interests in Zhaoyin Internet Technology (Shenzhen) Corporation Limited ("Zhaoyin
+Internet"). On the acquisition date, the fair value of Zhaoyin Internet's identifiable net assets was RMB3 million. A sum of RMB1 million, being
+the excess of acquisition cost over the fair value of the identifiable net assets, was recognised as goodwill.
+On 30 December 2022, CMB Wing Lung Insurance Company Limited ("CMB WLI"), a subsidiary of CMB WLB, issued shares to purchase the
+business of China Merchants Insurance Company Limited ("CMI"). On the acquisition date, the fair value of CMI 's identifiable net assets was
+RMB357 million. A sum of RMB45 million, being the excess of acquisition cost of RMB402 million over the fair value of the identifiable net
+assets, was recognised as goodwill. On 29 June 2023, CMI injected capital into CMB WLI. The Group's shareholding of CMB WLI changed to
+45% and lost control of CMB WLI. The Group converted it into an associate and derecognised the goodwill of RMB45 million.
+On 28 November 2013, the Bank acquired a 55.00% equity interests in CMFM. On the acquisition date, the fair value of CMFM's identifiable
+net assets was RMB752 million, of which the Bank accounted for RMB414 million. A sum of RMB355 million, being the excess of acquisition
+cost of RMB769 million over the fair value of the identifiable net assets, was recognised as goodwill. The details about CMFM are set out in
+Note 24.
+during
+As at 31 December 2023, the process of obtaining the registration certificate for the Group's properties with an aggregate net carrying value
+of RMB2,476 million (31 December 2022: RMB1,108 million) was still in progress. Management is of the view that the aforesaid matter would
+neither affect the rights of the Group to these assets nor have any significant impact on the business operation of the Group.
+31 December
+during
+31 December
+2022
+the year
+the year
+2023
+10,177
+10,177
+355
+355
+45
+(45)
+1
+1
+10,578
+(45)
+(579)
+9,999
+(579)
+(45)
+9,954
+Notes:
+(i)
+(ii)
+(iii)
+(iv)
+On 30 September 2008, the Bank acquired a 53.12% equity interests in CMB WLB. On the acquisition date, the fair value of CMB WLB's
+identifiable net assets was RMB12,898 million, of which the Bank accounted for RMB6,851 million. A sum of RMB10,177 million, being the
+excess of acquisition cost over the fair value of the identifiable net assets, was recognised as goodwill. The details about CMB WLB are set out
+in Note 24.
+(2)
+4,163
+10,533
+(3,055)
+China Merchants Bank
+226
+225
+62,155
+62,735
+19,876
+21,954
+6,151
+6,363
+7,087
+6,808
+Total
+4 year to 5 years (inclusive)
+Over 5 years
+3 year to 4 years (inclusive).
+Chapter VIII Financial Statements
+8,134
+9,601
+11,306
+10,711
+2 year to 3 years (inclusive)
+1 year to 2 years (inclusive)
+Within 1 year (inclusive)
+2022
+2023
+The Group's total future minimum lease receivables under non-cancellable operating leases are as follows:
+(d)
+As at 31 December 2023, the carrying value of mortgaged aircraft and vessels for placements from banks and other financial institutions of
+the CMBFL was RMB24,508 million (31 December 2022: RMB24,512 million).
+2
+As at 31 December 2023, the Group had no significant unused property and equipment (31 December 2022: None).
+(c)
+7,906
+Annual Report 2023 (H share)
+8,993
+29. Lease contracts
+4,161
+29,947
+11
+10
+23,926
+6,000
+and other
+equipment
+Buildings
+use rights
+vehicles
+Computer
+Land
+Motor
+Total
+-
+Exchange difference
+At 1 January 2023
+Depreciation (note 10)
+Decrease
+At 31 December 2023
+Exchange difference
+Decrease
+Additions
+Right-of-use assets
+At 1 January 2023
+(a)
+At 31 December 2023
+Cost:
+Total
+Other long-term employee benefits (iii)
+- cash settled share-based transactions
+in the year
+Short-term employee benefits (i)
+Post-employment benefits - defined
+balance
+for the year
+combination
+contribution plans (ii)
+18,065
+67
+58,583
+(53,724)
+1,629
+5,110
+151
+(5,974)
+19,761
+balance
+765
+151
+23,075
+4
+transfers
+(5,944)
+Other long-term employee benefits (iii)
+- cash settled share-based transactions
+(41)
+63,652
+5,540
+26
+(18)
+Total
+23,866
+66,893
+Ending
+(4)
+(62,047)
+(33)
+28,679
+2022
+Charge
+for the year
+Beginning
+arising from
+765
+Charge/
+(Decrease)
+Payment/
+361
+26
+Welfare expense
+23,866
+23,592
+Social insurance
+Medical insurance
+17
+2,883
+(2,885)
+15
+371
+1,809
+(1,818)
+362
+353
+1,679
+(1,687)
+345
+contribution plans (ii)
+- Injury insurance
+6
+41
+6
+(41)
+(33)
+(47,303)
+52,040
+18,888
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+39. Staff welfare scheme (continued)
+(a) Salaries and welfare payable (continued)
+(i)
+Short-term employee benefits
+2023
+Decrease
+for the year
+(59,698)
+Beginning
+Payment/
+transfers
+arising from
+disposal of
+Ending
+balance
+for the year
+in the year
+subsidiaries
+balance
+Salaries and bonus
+Charge
+Post-employment benefits - defined
+4,431,553
+(33)
+Retail customers
+-
+- Demand deposits
+- Time deposits
+Total
+2023
+2022
+8,155,438
+85,060
+7,535,742
+8,240,498
+54,837
+7,590,579
+2023
+2022
+4,660,522
+2,644,685
+2,762,671
+2,015,837
+1,668,882
+3,494,916
+3,104,189
+1,829,612
+1,983,364
+- Time deposits
+1,665,304
+-Demand deposits
+(a) Analysed by nature of counterparties
+6,592
+3,476
+- Bonds issued by commercial banks and other financial institutions
+- Maternity insurance
+-
+- Other debt securities
+8,736
+3,858
+Discounted bills
+17,831
+11,025
+Total
+134,863
+107,024
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+38. Deposits From Customers
+Principal (a)
+Interest payable
+Total
+Corporate customers
+1,120,825
+8,155,438
+7,535,742
+39. Staff welfare scheme
+(a) Salaries and welfare payable
+2023
+Decrease
+for the year
+Beginning
+Charge/
+(Decrease)
+Payment/
+arising from
+transfers
+disposal of
+Ending
+balance
+for the year
+in the year
+subsidiaries
+balance
+Short-term employee benefits (i)
+23,075
+61,371
+(56,099)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+236
+(b) The deposits taken from customers as collateral or for the purpose of
+guarantees are as follows:
+Guarantee for acceptance bills
+Guarantee for loans
+Guarantee for issuing letters of credit
+Deposit for letters of guarantee
+Other
+Total
+2023
+2022
+240,613
+28,314
+199,384
+6,888
+23,843
+29,366
+47,694
+44,732
+27,788
+42,490
+350,730
+322,860
+235
+10,792
+12
+151
+(90)
+2,221
+(3,080)
+591
+22
+1,629
+68
+(67)
+23
+5,110
+(5,974)
+765
+In accordance with the regulations in the PRC, the Group participates in statutory pension schemes organised by
+the municipal and provincial governments for its employees (endowment insurance). During the year ended 31
+December 2023, the Group's contributions to these pension schemes are determined by local governments and vary
+at a range of 14% to 16% (2022: 14% to 16%) of the staff salaries and bonuses.
+In addition to the above statutory pension schemes, the Group has established a supplementary defined contribution
+plan for its employees (annuity insurance) in accordance with relevant annuity policies for corporate entities in the
+PRC. During the year ended 31 December 2023, the Group's annual contributions to this plan are determined based
+on 0% to 8.33% of the staff salaries and bonuses (2022: 0% to 8.33%).
+For its employees outside the Chinese mainland, the Group participates in defined contribution retirement schemes
+at funding rates determined in accordance with the local practices and regulations.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+39. Staff welfare scheme (continued)
+(a)
+Salaries and welfare payable (continued)
+(iii)
+Other long-term employee benefits
+1,450
+(1)
+(2,827)
+157
+Payment/
+transfers
+in the year
+Ending
+balance
+1111
+3,465
+(3,437)
+(2,426)
+179
+(81)
+21
+(5,944)
+361
+2022
+Beginning
+Charge
+Payment/
+transfers
+Ending
+balance
+for the year
+in the year
+balance
+2,821
+The Group has offered 10 phases of H share appreciation rights under the Scheme, the remaining ninth to tenth
+phases have not been exercised as of 31 December 2023. The share appreciation rights of the Scheme vest after 3
+years from the grant date and are then exercisable within a period of 7 years. Each of the share appreciation right is
+linked to one H share.
+All share appreciation rights shall be settled in cash. The terms and conditions of the Scheme are listed below:
+(2)
+1.76
+Exercised during the year
+12.81
+(0.16)
+Forfeited during the year
+13.65
+(1.15)
+Outstanding at the end of the year
+15.11
+0.45
+15.91
+0.61
+Exercisable at the end of the year
+15.11
+0.45
+15.25
+0.55
+The share appreciation rights outstanding at 31 December 2023 had a weighted average exercise price of HKD15.11
+(2022: HKD15.91) and a weighted average remaining contractual life of 3.12 years (2022: 3.70 years).
+15,330
+Pursuant to the requirements set out in the Scheme, if there are any dividends distributed, capital reserve converted
+into shares, share split or dilution, adjustments to the exercise price will be applied.
+239
+16.21
+0.61
+15.91
+Outstanding as at the beginning of the year
+Share appreciation rights granted on 24 Aug 2016 (Phase IX)
+Share appreciation rights granted on 25 Aug 2017 (Phase X)
+Number of
+unexercised share
+appreciation rights
+at the end of 2023
+(in millions)
+0.210
+0.240
+Contract period of
+share appreciation
+Exercise conditions
+rights
+3 years after the grant date
+3 years after the grant date
+10 years
+10 years
+The number and weighted average exercise prices of share appreciation rights are as follows:
+2023
+2022
+2023
+Weighted
+average
+Weighted
+average
+Number
+of share
+appreciation
+exercise price
+(HKD)
+rights
+(in million)
+exercise price
+rights
+(HKD)
+(in million)
+Number
+of share
+appreciation
+89
+Charge
+for the year
+5,540
+transfers
+Ending
+balance
+combination
+for the year
+in the year
+balance
+Salaries and bonus
+Welfare expense
+14,318
+151
+48,682
+(44,263)
+18,888
+19
+2,310
+(2,312)
+17
+Social insurance
+530
+3,311
+Charge
+(3,470)
+arising from
+Payment/
+11
+Housing reserve
+157
+2,602
+(2,618)
+141
+Labour union and employee
+education expenses
+3,642
+2,037
+(1,475)
+4,204
+Total
+23,075
+61,371
+(56,099)
+(33)
+28,314
+2022
+Charge
+for the year
+Beginning
+371
+- Medical insurance
+515
+151
+58,583
+(53,724)
+23,075
+237
+238
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+39. Staff welfare scheme (continued)
+(a) Salaries and welfare payable (continued)
+Post-employment benefits-defined contribution plans
+(ii)
+Basic retirement insurance
+Supplementary pension
+Unemployment insurance
+Total
+Basic retirement insurance
+Supplementary pension
+Unemployment insurance
+Total
+591
+1,996
+23
+79
+765
+18,065
+Total
+3,642
+(1,361)
+3,192
+(3,354)
+353
+- Injury insurance
+6
+34
+(34)
+6
+- Maternity insurance
+9
+Beginning
+balance
+85
+12
+Housing reserve
+166
+2,309
+(2,318)
+157
+Labour union and employee
+education expenses
+3,032
+1,971
+(82)
+17,266
+No deferred tax liability has been recognised in respect of temporary differences associated with investments in subsidiaries because the Group
+is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not be reversed in
+the foreseeable future.
+73,335
+Total
+ཀིཾ ཝུཏྟཱ ཝཱ''ནྟི
+75,278
+(1,045)
+(1,012)
+(730)
+237
+89,338
+83
+14,835
+(592)
+2,450
+-
+(493)
+9
+(484)
+18
+3
+(8)
+13
+74,251
+Other
+(2,232)
+at FVTPL
+at FVTOCI
+7,744
+6,552
+Deferred tax liabilities after offsetting qualifying amounts
+(1,607)
+(1,510)
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+32. Deferred tax assets and deferred tax liabilities (continued)
+(b)
+Movements of deferred tax
+At 1 January 2023
+Recognised in profit or loss
+Recognised in other comprehensive income
+Exchange difference
+At 31 December 2023
+Impairment
+allowances
+on loans and
+advances to
+customers and
+other assets at
+amortised cost
+Financial
+assets
+Financial
+instruments
+(8,062)
+(363)
+88,950
+8,457
+578
+(21)
+557
+26
+75,278
+14
+(1,012)
+(2)
+38
+237
+14,835
+89,338
+231
+232
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+33. Other assets
+2023
+2022
+Amounts pending for settlement
+13,842
+2,993
+17,294
+243
+11,863
+Impairment
+allowances
+- Bonds issued by policy banks
+customers and
+other assets at
+Financial
+assets
+At 1 January 2022
+Recognised in profit or loss
+Recognised in other comprehensive income
+Exchange difference
+At 31 December 2022
+Note:
+Financial
+instruments
+amortised cost
+71,191
+4,061
+at FVTOCI
+at FVTPL
+Other
+Total
+(2,764)
+1,160
+(4)
+80,286
+15,387
+(9,351)
+90,848
+(taxable)
+temporary
+difference
+Deferred
+tax
+qualifying amounts
+Impairment allowances on loans and advances to
+customers and other assets at amortised cost
+297,564
+74,251
+302,062
+75,278
+Financial assets at FVTOCI
+1,605
+264
+2,170
+359
+Financial instruments at FVTPL
+451
+113
+1,839
+461
+Lease liabilities
+tax
+12,543
+Deferred
+2022
+230
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+32. Deferred tax assets and deferred tax liabilities
+Deferred tax assets
+Deferred tax liabilities
+Net amount
+2023
+90,557
+2022
+90,848
+(1,607)
+88,950
+(1,510)
+89,338
+(a) Deferred tax assets/(liabilities) and related temporary differences are
+attributable to the following items:
+Deferred tax assets before offsetting
+2023
+Deductible/
+(taxable)
+temporary
+difference
+Deductible/
+Deferred tax liabilities before offsetting qualifying amounts
+Offsetting amounts
+3,135
+3,156
+(12,641)
+(3,160)
+Other
+(19,476)
+(3,246)
+(19,669)
+(3,307)
+Total
+(43,682)
+(9,351)
+(38,691)
+(8,062)
+2023
+2022
+Deferred tax assets before offsetting qualifying amounts
+Offsetting amounts
+98,301
+97,400
+(7,744)
+(6,552)
+Deferred tax assets after offsetting qualifying amounts
+90,557
+(3,133)
+12,624
+(12,317)
+(224)
+Salaries and welfare payable and other
+84,873
+20,538
+75,077
+18,146
+Total
+397,036
+98,301
+393,772
+97,400
+Deferred tax liabilities before offsetting
+qualifying amounts
+Financial assets at FVTOCI
+(9,985)
+(2,496)
+(5,487)
+(1,371)
+Financial instruments at FVTPL
+(1,904)
+(476)
+(894)
+Right-of-use assets
+Continuing involvement assets
+Interest receivable
+on loans and
+advances to
+5,274
+613
+18,247
+(b)
+Financial liabilities designated at fair value through profit or loss
+2023
+2022
+In the Chinese mainland
+- Other
+Outside the Chinese mainland
+21,865
+22,047
+21,865
+22,047
+5,965
+8,850
+Certificates of deposit issued
+- Debt securities issued
+212
+383
+5,179
+5,274
+- Other
+380
+16,128
+Total
+2022
+17,634
+Total
+69,780
+88,512
+69,571
+213
+209
+246,085
+206,015
+36. Financial liabilities at fair value through profit or loss
+2023
+2022
+Financial liabilities held for trading (a)
+16,128
+18,247
+Financial liabilities designated at fair value through profit or loss (b)
+Total
+27,830
+30,897
+43,958
+49,144
+(a) Financial liabilities held for trading
+Financial liabilities related to precious metal
+Short position on bonds
+2023
+15,748
+88,725
+As at 31 December 2023 and 2022, the difference between the fair values of the Group's financial liabilities
+designated at fair value through profit or loss and the contractual payable amount at maturity is not significant. The
+amounts of changes in the fair value of these liabilities that are attributable to changes in credit risk of the Group
+are not significant during the years ended 31 December 2023 and 2022 and as at 31 December 2023 and 2022.
+758
+117,668
+2022
+103,452
+108,366
+103,446
+9,302
+6
+17,195
+3,572
+10,316
+2,801
+6,879
+771
+134,863
+107,024
+2023
+2022
+Debt securities
+117,032
+95,999
+- Government bonds
+84,438
+2023
+574
+27,830
+107,093
+69
+30,897
+233
+234
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+37. Amounts sold under repurchase agreements
+Principal (a)(b)
+Interest payable
+Total
+(a) Analysed by nature of counterparties
+In the Chinese mainland
+- Banks
+- Other financial institutions
+Outside the Chinese mainland
+- Banks
+- Other financial institutions
+Total
+(b) Analysed by underlying assets
+2023
+134,863
+215
+2022
+107,024
+135,078
+599
+7,709
+135,636
+(a) Repossessed assets
+Land and buildings
+Other repossessed assets
+Total
+Less: Impairment allowances
+Net repossessed assets
+2023
+2022
+551
+606
+5
+6
+556
+612
+(139)
+(156)
+417
+456
+Note: In 2023, the Group disposed of repossessed assets with a total carrying value of RMB56 million (2022: RMB44 million).
+34. Deposits from banks and other financial institutions
+Principal (a)
+Interest payable
+21,889
+55,978
+Total
+53,884
+Total
+4,526
+1,765
+Prepaid lease payments
+203
+209
+Repossessed assets (a)
+417
+456
+Guarantee deposits
+563
+465
+Receivable from reinsurers
+329
+Prepayment for leasehold improvement and other miscellaneous items
+Premium receivables
+7,436
+7,569
+196
+Post-employment benefits: defined benefit plan (note 39(b))
+50
+50
+Other
+21,573
+2023
+507,460
+918
+508,378
+4,154
+1,056
+645,674
+35. Placements from banks and other financial institutions
+Principal (a)
+Interest payable
+2023
+246,085
+1,214
+2022
+206,015
+1,012
+207,027
+Total
+Note:
+247,299
+Pursuant to the relevant provisions in the "Interim Measures for the Administration of Gold Leasing Business" (Yin Ban Fa [2022] No. 88)
+issued by the General Office of the PBOC in July 2022, with respect to the gold leasing business of the Group with financial institutions
+since 2023, gold leased in by the Group from other financial institutions is presented under "placements from banks and other financial
+institutions", a change from "financial liabilities at fair value through profit or loss" in prior years. The comparative figures are re-presented
+accordingly.
+(a) Analysed by nature of counterparties
+In the Chinese mainland
+- Banks
+- Other financial institutions
+Outside the Chinese mainland
+- Banks
+- Other financial institutions
+Total
+2023
+157,360
+2022
+136,235
+2022
+644,618
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+155,595
+644,618
+China Merchants Bank
+- Banks
+In the Chinese mainland
+Other financial institutions
+Outside the Chinese mainland
+- Banks
+- Other financial institutions
+Total
+2023
+2022
+496,795
+(a) Analysed by nature of counterparties
+32,286
+103,250
+464,509
+529,928
+10,665
+11,440
+9,884
+781
+10,779
+661
+507,460
+633,178
+247
+248
+China Merchants Bank
+Perpetual Bonds (continued)
+Annual Report 2023 (H share)
+46. Other equity instruments (continued)
+(b)
+Chapter VIII Financial Statements
+The coupon rate will be reset on each benchmark rate reset date (i.e. the date of every five years from the issuance date). The adjusted coupon rate
+will be determined based on the benchmark interest rate at adjustment date plus the fixed spread as determined at the time of issuance. The Perpetual
+Bonds do not contain interest rate step-up mechanism or any other redemption incentives. The Bank has the right to cancel, in whole or in part,
+distributions on the Perpetual Bonds and any such cancellation will not constitute an event of default. The bond interests are non-cumulative, and any
+cancelled distribution is not carried to the following year. The Bank will fully consider the interests of bondholders when exercising this right. The Bank
+can use the cancelled bond interest for the current period at its discretion to repay other due debts. Cancellation of any distributions to the Perpetual
+Bonds, no matter in whole or in part, will not impose any other restriction on the Bank, except in relation to dividend distributions to ordinary shares.
+With the approval of the relevant regulatory authorities in China, the Bank issued RMB50,000 million of 2020 China Merchants Bank Co., Ltd.
+Undated Additional Tier-1 Capital Bonds (Series 1) (the "Perpetual Bonds 2020") in the national inter-bank bond market on 9 July 2020. The
+unit face value is RMB100. The coupon rate adjusted period is every 5 years from the issuance of the Perpetual Bonds 2020. In any coupon
+rate adjusted period, the coupon rate of the Perpetual Bonds will remain at a prescribed fixed rate. The Perpetual Bonds 2020 will continue to
+be outstanding so long as the Bank continues to operate.
+From the fifth anniversary since the issuance of the Perpetual Bonds, the Bank has the right to redeem in whole or in part the Perpetual Bonds on the
+annual interest payment date (including the interest payment date on the fifth year since the issuance date) subject to the approval of the NAFR and the
+satisfaction of the redemption preconditions. If, after the issuance, the Perpetual Bonds no longer qualify as additional Tier 1 capital as a result of an
+unforeseeable change to relevant provisions of supervisory regulation, the Bank has the right to redeem the whole but not part of the Perpetual Bonds.
+The investors do not have the right to sell back the Perpetual Bonds to the Bank.
+With the approval of the relevant regulatory authorities in China, the Bank issued RMB30,000 million of 2023 China Merchants Bank Co.,
+Ltd. Undated Additional Tier-1 Capital Bonds (the "Perpetual Bonds 2023, together with Perpetual Bonds 2020 and Perpetual Bonds 2021,
+Perpetual Bonds") in the national inter-bank bond market on 1 December 2023. The unit face value is RMB100. The coupon rate adjusted
+period is every 5 years from the issuance of the Perpetual Bonds 2023. In any coupon rate adjusted period, the coupon rate of the Perpetual
+Bonds will remain at a prescribed fixed rate. The Perpetual Bonds 2023 will continue to be outstanding so long as the Bank continues to
+operate.
+With the approval of the relevant regulatory authorities in China, the Bank issued RMB43,000 million of 2021 China Merchants Bank Co., Ltd.
+Undated Additional Tier-1 Capital Bonds (the "Perpetual Bonds 2021") in the national inter-bank bond market on 7 December 2021. The unit
+face value is RMB100. The coupon rate adjusted period is every 5 years from the issuance of the Perpetual Bonds 2021. In any coupon rate
+adjusted period, the coupon rate of the Perpetual Bonds will remain at a prescribed fixed rate. The Perpetual Bonds 2021 will continue to be
+outstanding so long as the Bank continues to operate.
+(iii)
+(ii)
+(i)
+Notes:
+122,978
+Notes: (continued)
+The claims in respect of the Perpetual Bonds will be subordinated to the claims of depositors, general creditors, and subordinated debts that rank senior
+to the Perpetual Bonds, and will rank in priority to all classes of shares held by the Bank's shareholders and rank pari passu with the claims in respect of
+any other additional Tier-1 capital instruments of the Bank that rank pari passu with the Perpetual Bonds.
+1,230
+- Equity attributed to other equity instrument holders of the Bank
+Including: Net profit
+After deducting the issuance expenses, the funds raised by the bonds issuances have been used to supplement additional Tier 1 capital of the Bank in
+accordance with applicable laws and the approval of the relevant authorities.
+30,000
+Equity attributed to non-controlling interests
+Cumulative undistributed dividends
+(5,237)
+(4,558)
+5,237
+4,558
+Total comprehensive income
+Distributions in current year
+5,237
+4,558
+120,446
+150,446
+825,057
+925,924
+- Equity attributed to ordinary shareholders of the Bank
+945,503
+1,076,370
+Equity attributed to shareholders of the Bank
+2022
+2023
+(c) Relative Information Attributed to Equity Instrument Holders
+Upon the occurrence of a Non-Viability Trigger Event, the Bank has the right to write off in whole or in part, without the need for the consent of the
+bond holders, the principal amount of the Perpetual Bonds. A Non-Viability Trigger Event refers to the earlier of the following events: (i) NAFR having
+concluded that without a write-off, the Bank would become non-viable; (ii) the relevant authorities having concluded that without a public sector
+injection of capital or equivalent support, the Bank would become non-viable. The write-off will not be restored.
+300
+(RMB in
+million)
+930
+(millions of
+(RMB in
+(millions of
+Issuance
+date
+Amount
+No.
+Amount
+No.
+Increase
+units)
+1 January 2023
+122,978
+1,230
+None
+None
+30,000 Perpetual existence
+300
+None
+9,359
+3.41% RMB100/Unit
+The changes of Perpetual Bonds issued were as follows:
+92,978
+million)
+31 December 2023
+No.
+(millions of
+30,000
+300
+30,000
+300
+1 Dec 2023
+42,989
+430
+42,989
+430
+units)
+7 Dec 2021
+500
+49,989
+500
+9 Jul 2020
+Domestic Perpetual Bonds (note (i))
+Domestic Perpetual Bonds (note (ii))
+Domestic Perpetual Bonds (note (iii))
+Total
+million)
+units)
+(RMB in
+Amount
+49,989
+8,735
+China Merchants Bank
+6,521
+132,471
+2022
+2023
+- cash dividend: RMB1.972 per share (2022: RMB1.738 per share)
+Total
+Dividends
+General reserve
+Statutory surplus reserve
+(b) Proposed profit appropriations
+Ordinary share dividends in 2021, approved and declared:
+RMB1.522 per share
+115,288
+Ordinary share dividends in 2022, approved and declared:
+RMB1.738 per share
+52. Profit appropriations
+At 31 December
+Appropriation for the year
+At 1 January
+The general reserve is an integral part of equity. According to the relevant regulations, in addition to the impairment
+allowances, the Bank maintains a general reserve to make up for unidentified potential losses. In principle, the
+balance of general reserve shall not be less than 1.5% of the ending balance of risk assets. In addition, the general
+reserve includes 2.5% of the income of mutual fund custody businesses. The general reserve of the Group also
+includes the general reserve maintained by the subsidiaries of the Group according to the applicable laws and
+regulations of their industry or region.
+51. General reserve
+94,985
+108,737
+12,848
+(a) Dividends approved/declared by shareholders
+13,752
+9,010
+141,481
+132,471
+240
+None
+249
+Exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements
+of operations outside the Chinese mainland.
+53. Exchange reserve
+2023 final dividends is proposed in accordance with the resolution passed at the meeting of the Board of Directors
+held on 25 March 2024 and will be submitted to the 2023 Annual General Meeting for approval.
+73,863
+72,496
+43,832
+17,183
+49,734
+9,010
+12,848
+13,752
+2022
+2023
+38,385
+43,832
+2022
+2023
+17,183
+82,137
+94,985
+2022
+2022
+2023
+65,435
+65,432
+(2,088)
+(3)
+67,523
+65,435
+2022
+Debt instruments measured at FVTOCI: investment revaluation reserve
+Fair value gain on equity instruments designated at FVTOCI
+Remeasurement of defined benefit scheme
+2023
+At 31 December
+Decrease
+At 1 January
+Capital reserve primarily represents share premium of the Bank.
+47. Capital reserve
+2,787
+2,838
+- Equity attributed to non-controlling holders of perpetual debt
+capital (note 62(a))
+5,948
+48. Investment revaluation reserve
+10,596
+9,319
+3,009
+2023
+At 31 December
+Appropriation for the year
+At 1 January
+Statutory surplus reserve is calculated according to the requirements of the Accounting Standards for Business
+Enterprises and other relevant regulations issued by the Ministry of Finance ("MOF") and is provided at 10% of the
+audited profit after tax of the Bank.
+50. Surplus reserve
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging
+instruments used in cash flow hedges. Subsequent recognition of the hedged cash flow is accounted for in
+accordance with the accounting policy adopted for cash flow hedge in Note 4(5).
+49. Hedging reserve
+11,815
+13,656
+Total
+45
+(233)
+(31)
+Share of other comprehensive expense of equity-accounted investees
+Other
+78
+82
+2,606
+· Equity attributed to non-controlling holders of ordinary shares
+42,989 Perpetual existence
+802
+None
+1 Sep 2022
+36 months
+Fixed rate bond
+4,999
+4,999
+RMB5,000
+2.65
+11 May 2022
+2,847
+45
+(2,179)
+87
+2,130
+42
+224
+4
+2,798
+USD400
+2.00
+2 Mar 2022
+5
+2,087
+USD300
+SOFR+0.50
+1 Sep 2021
+(1)
+2,089
+2.40
+RMB10,000
+9,997
+9,998
+Chapter VIII Financial Statements
+China Merchants Bank
+244
+243
+Financial bonds issued by the Bank that were held by CMB WLB amounted to a total of 354 million RMB equivalent as of 31 December 2023
+(31 December 2022: 555 million RMB equivalent).
+Note:
+Libor represents London InterBank Offered Rate. SOFR represents Secured Overnight Financing Rate.
+67,813
+(17,296)
+415
+17
+7,850
+76,827
+USD300
+Total
+(4)
+2,850
+USD400
+SOFR+0.65
+13 Jun 2023
+36 months
+Medium term note
+4,999
+5,000
+RMB5,000
+27 Mar 2023 2.77
+36 months
+Fixed rate bond
+2,846
+Annual Report 2023 (H share)
+1.25
+60 months
+24 months
+36 months
+36 months
+(2,193)
+103
+3
+2,087
+USD300
+(2,924)
+142
+2
+2,780
+USD400
+3M LIBOR+0.85
+0.95
+25 Sep 2020
+25 Sep 2020
+36 months
+36 months
+36 months
+Fixed rate bond
+Medium term note
+Medium term note
+balance
+the year
+Ending
+during
+Repayment
+Discount or
+premium Exchange
+amortisation difference
+the year
+Issue
+during
+(in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million)
+Beginning
+balance
+Nominal
+value
+6 Nov 2020 3.48
+RMB10,000
+9,999
+1
+Fixed rate bond
+Medium term note
+Medium term note
+Medium term note
+9,998
+9,998
+RMB10,000
+2.90
+24 Aug 2021
+36 months
+Fixed rate bond
+19,997
+2
+1 Sep 2021
+19,995
+3.18
+3 Jun 2021
+36 months
+Fixed rate bond
+9,999
+1
+9,998
+RMB10,000
+3.40
+11 Mar 2021
+36 months
+Fixed rate bond
+(10,000)
+RMB20,000
+43. Debt securities issued (continued)
+(b) Debt securities issued (continued)
+As at the end of the reporting period, debt securities issued by CMBFL and its subsidiary were as follows:
+4 Feb 2021
+120 months
+2,834
+47
+2
+2,785
+USD400
+2.00
+4 Feb 2021
+60 months
+4,000
+4
+3,996
+RMB4,000
+3.60
+26 Jan 2021
+36 months
+Fixed rate bond
+Fixed rate bond
+Fixed rate bond
+Fixed rate bond
+Fixed rate bond
+(4,000)
+3
+3,997
+RMB4,000
+3.85
+17 Nov 2020
+36 months
+Fixed rate bond
+2,821
+2.88
+USD400
+2,765
+3
+USD300
+1.75
+16 Sep 2021
+60 months
+4,255
+71
+5
+4,179
+USD600
+1.25
+16 Sep 2021
+36 months
+Fixed rate bond
+Fixed rate bond
+47
+141
+138
+USD20
+24 Mar 2021 2.00
+60 months
+2,000
+2
+1,998
+RMB2,000
+3.58
+22 Mar 2021
+36 months
+2,815
+47
+3
+3
+2,771
+USD400
+3 Jul 2019
+60 months
+500
+500
+RMB500
+4.00
+13 Mar 2019
+60 months
+Fixed rate bond
+Fixed rate bond
+Fixed rate bond
+(in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million)
+(%)
+balance
+the year
+3.00
+Ending
+Exchange
+premium
+amortisation difference
+Repayment
+Discount or
+Issue
+during
+the year
+Beginning
+balance
+Nominal
+value
+interest rate
+issuance
+Annual
+Date of
+Term to
+maturity
+Debt type
+during
+Annual
+interest rate
+(%)
+USD900
+11
+2.75
+12 Aug 2020
+120 months
+5,670
+94
+5
+5,571
+USD800
+1.88
+12 Aug 2020
+60 months
+1,995
+1
+6
+1,994
+4.25
+14 Jul 2020
+120 months
+Fixed rate bond
+Fixed rate bond
+Fixed rate bond
+706
+11
+694
+USD100
+3.63
+3 Jul 2019
+120 months
+6,382
+106
+RMB2,000
+issuance
+Date of
+Term to
+maturity
+2023
+2022
+Credit card points
+4,132
+5,319
+Other deferred fee and commission income
+1,354
+1,360
+Total
+5,486
+6,679
+42. Provisions
+2023
+2022
+Expected credit loss on provisions
+17,404
+20,217
+Other
+2,258
+2,274
+Total
+19,662
+22,491
+The expected credit loss for loan commitments and financial guarantee contracts by stages are as follows:
+2023
+2022
+Expected credit loss provisions
+19,458
+13,597
+1,925
+2,261
+Discount rate
+- Defined benefit scheme
+- Defined benefit pension scheme
+Long-term average rate of salary increase for the plan
+Pension increase rate for the defined benefit pension plan
+2023
+2022
+%
+%
+3.1
+3.3
+4.1
+4.6
+Stage 1 (12-month ECL)
+4.5
+In 2023 and 2022, there were no significant change in the amount of retirement benefit plan liabilities due to
+changes in the above-mentioned actuarial assumptions.
+40. Tax payable
+Corporate income tax
+Value added tax
+Other
+Total
+41. Contract liabilities
+2023
+2022
+7,301
+13,392
+4,035
+4,141
+5.0
+Stage 2 (Lifetime ECL - not credit-impaired)
+Stage 3 (Lifetime ECL - credit-impaired)
+17,404
+Note:
+Other debt securities issued are notes issued by overseas subsidiaries of the Bank.
+(a) Subordinated bonds issued
+As at the end of the reporting period, subordinated bonds issued by the Bank were as follows:
+Issue
+Discount or
+Debt type
+Term to
+maturity
+Date of
+issuance
+Annual
+interest rate
+Nominal
+value
+(%)
+223,821
+Fixed rate bond
+Total
+15 Nov 2018 4.65
+Beginning
+balance
+(in million) (RMB in million)
+RMB20,000
+19,994
+19,994
+during
+premium
+Repayment
+during
+Ending
+the year
+amortisation
+the year
+balance
+(RMB in million)
+(RMB in million) (RMB in million)
+(RMB in million)
+120 months
+The principal actuarial assumptions adopted in the valuation are as follows:
+176,578
+1,533
+20,217
+15,200
+1,341
+863
+12,082
+7,569
+566
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+43. Debt securities issued
+Notes
+2023
+Total
+2022
+19,994
+Debt securities issued
+(b)
+119,193
+120,971
+Negotiable interbank certificates of deposit issued
+430
+21,443
+65,719
+Certificates of deposit and other debt securities issued (note)
+Interest payable
+34,128
+15,604
+1,814
+Subordinated bonds issued
+2,081
+As at 31 December 2023, deposit with the Bank included in the amount of the plan assets was RMB61 million (2022:
+RMB58 million).
+53.7
+17.5
+28.8
+Fair value of the plan assets
+Present value of the funded defined benefit obligation
+Net asset recognised in the consolidated statement of financial position
+2023
+267
+(217)
+50
+2022
+285
+(235)
+50
+A portion of the above asset is expected to be recovered after more than one year. However, it is not practicable
+to segregate this amount from the amounts receivable in the next twelve months, as future contributions will
+also relate to future services rendered and future changes in actuarial assumptions and market conditions. No
+contribution to the plan is expected to be paid in 2024.
+There was no plan amendment, curtailment or settlement impact for the years ended 31 December 2023 and 2022.
+The amounts recognised in the consolidated statement of profit or loss are as follows:
+2023
+2022
+Current service cost
+(8)
+(9)
+Net interest income
+1
+1
+Net expense for the year included in retirement benefit costs
+(7)
+(8)
+The actual gain on the plan assets for the year ended 31 December 2023 was RMB9 million (2022: loss of RMB42
+million).
+The movements in the defined benefit obligation during the year are as follows:
+2023
+The amounts recognised in the consolidated statement of financial position as at 31 December 2023 and 2022 are
+analysed as follows:
+The latest actuarial valuation of the plan as at 31 December 2023 was performed by Towers Watson Hong Kong
+Limited, a professional actuarial firm in accordance with IAS 19 Employee Benefits. The present values of the defined
+benefit obligation and current service cost of the plan are calculated based on the projected unit credit method. At
+the valuation date, the plan had a funding level of 123% (2022: 121%).
+The Group's subsidiary CMB WLB operates a defined benefit plan (the "plan") for the staff, which includes a
+defined benefit scheme and a defined benefit pension scheme. Contributions to the plan are determined based on
+periodic valuations by qualified actuaries on the assets and liabilities of the plan. The plan provides benefits based
+on members' final salary. The costs are solely funded by CMB WLB.
+Post-employment benefits - defined benefit plan
+Debt type
+As at the end of the reporting period, debt securities issued by the Bank were as follows:
+(b) Debt securities issued
+(20,000)
+6
+Accumulated
+Exercised/
+Phase VIII
+(in thousands)
+Phase IX
+(in thousands)
+Phase X
+(in thousands)
+Total
+(in thousands)
+Forfeited
+(in thousands)
+1,230
+2022
+157
+157
+240
+607
+203
+210
+240
+607
+1,433
+In 2023, senior management had exercised 0.16 million shares of appreciation rights (2022: None) and the weighted average exercise price
+was HKD12.81 (2022: None).
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+39. Staff welfare scheme (continued)
+(b)
+210
+Present value of obligation at 1 January
+235
+284
+Exchange difference
+Fair value of the plan assets at 31 December
+(33)
+(49)
+6
+27
+267
+285
+241
+242
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+Actual benefits paid
+39. Staff welfare scheme (continued)
+Post-employment benefits - defined benefit plan (continued)
+The major categories of the plan assets are as follows:
+Equities
+Bonds
+Cash
+Total
+2023
+Amount
+Amount
+2022
+7111
+54.3
+19.5
+26.2
+100.0
+(b)
+100.0
+(47)
+5
+Current service cost
+8
+9
+Interest cost
+8
+4
+Actual benefits paid
+(33)
+(49)
+Actuarial gains or losses due to liability experience
+(4)
+Actuarial gains or losses due to financial assumption changes
+(31)
+Expected return on plan assets
+Actuarial gains or losses due to demographic assumption changes
+4
+22
+Actual obligation at 31 December
+217
+235
+The movements in the fair value of the plan assets during the year are as follows:
+2023
+2022
+Fair value of the plan assets at 1 January
+285
+349
+Interest income
+9
+Exchange difference
+4
+6,265
+2,120
+- A Shares
+- H Shares
+Total
+2023 and 2022
+No. of shares
+(in million)
+20,629
+4,591
+By type of shares:
+25,220
+2022
+360
+450
+240
+360
+450
+All H Shares are ordinary shares and rank pari passu with the A Shares. There is no restriction on these shares.
+240
+45. Share capital
+125,938
+20,845
+31,534
+48,950
+45,500
+5,274
+5,274
+Salary risk allowances are specific funds withheld from the employees' annual remunerations of which the payments are delayed for the
+purpose of risk management. The allocation of the funds is based on performance assessment and risk management results, taking into
+account the short term and long term benefit. In the event of a decline in the asset quality, a sharp deterioration of risk profiles and
+profitability, the occurrence of legal case, or a significant regulatory violation identified by any regulatory authorities, the relevant employees
+will be restricted from the allocation of these allowances.
+2,902
+827
+7
+39
+37,454
+39,862
+113,195
+665
+2022
+210
+210
+(in thousands)
+1.43%
+1.43%
+2.93%
+2.93%
+2.93%
+4.58
+Risk-free interest rate
+3.58
+Share appreciation rights remaining life (year)
+Expected dividends yield
+48.34%
+48.34%
+48.34%
+Expected volatility
+21.92
+2.50
+(in thousands)
+1.43%
+Share appreciation rights were granted under service conditions. The conditions have not been taken into account in
+the grant date fair value measurement of the services received. There were no market conditions associated with the
+share appreciation rights granted.
+Forfeited
+Total
+Phase X
+(in thousands)
+(in thousands)
+Phase IX
+Exercised/
+The expected volatility is based on the historical volatility (calculated based on the weighted average remaining
+life of the share appreciation rights) and adjusted for any expected changes to future volatility based on publicly
+available information. Expected dividend yield is based on historical dividend yields. Changes in the subjective input
+assumptions could materially affect the fair value estimate.
+Accumulated
+Note:
+Tian Huiyu
+Wang Liang
+Total
+Total
+Wang Liang
+The number of share appreciation rights granted:
+(4)
+2023
+11.38
+2023
+Total
+Total
+45,847
+18,378
+15
+655
+(12,895)
+3,990
+52,000
+Financial bonds issued by CMBFL that were held by the Bank amounted to a total of 600 million RMB equivalent as of 31 December 2023
+(31 December 2022: 1,370 million RMB equivalent). Financial bonds issued by CMB International Leasing Management Limited (CMBILM), a
+wholly-owned subsidiary of CMBFL, that were separately held by the Bank, CMB WLB and CMBIC amounted to a total of 3,212 million RMB
+equivalent, 563 million RMB equivalent and 70 million RMB equivalent as of 31 December 2023 (31 December 2022: 2,268 million RMB
+equivalent, 1,602 million RMB equivalent and Nil).
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+43. Debt securities issued (continued)
+(b)
+Note:
+Debt securities issued (continued)
+355
+2,494
+532
+729
+(357)
+700
+(20)
+708
+348
+(9)
+(59)
+2,122
+(19)
+709
+142
+156
+353
+Note:
+As at the end of the reporting period, debt securities issued by CMBIC's subsidiary was as follows:
+Term to
+maturity
+1.38
+USD600
+4,166
+4,166
+19
+19
+69
+36 months 2 June 2021
+69
+4,254
+Note:
+Financial bond issued by Legend Fortune Limited, a wholly-owned subsidiary of CMBIC, that was held by CMB WLB amounted to a total of 75
+million RMB equivalent as of 31 December 2023 (31 December 2022: 74 million RMB equivalent).
+44. Other liabilities
+Clearing and settlement accounts
+Salary risk allowances (note)
+Continuing involvement liability
+Insurance liabilities
+Collecting on behalf of customers
+Cheques and remittances returned
+Other payable
+4,254
+Debt type
+Fixed rate bond
+Total
+(%)
+Date of
+Annual
+issuance
+interest rate
+Nominal
+value
+Beginning
+balance
+(in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million)
+Issue
+during
+the year
+Repayment
+premium Exchange
+amortisation difference
+during
+Ending
+the year
+balance
+Discount or
+12.81
+Exercise price (in HKD)
+43.30
+No.
+(millions of
+shares)
+Amount
+(RMB in
+million)
+No.
+(millions of
+shares)
+Amount
+(RMB in
+million)
+Domestic Preference Shares (note (i))
+Total
+million)
+22 Dec 2017
+27,468
+275
+27,468
+275
+27,468
+275
+275
+27,468
+shares)
+(RMB in
+3.62% RMB100/Share
+275
+27,468
+Perpetual existence
+Note (ii)
+None
+Issuance date
+275
+The changes of Preference Shares issued were as follows:
+1 January 2023
+No.
+Increase/decrease
+31 December 2023
+Amount
+(millions of
+27,468
+22 Dec 2017 Equity instruments
+Notes:
+(ii)
+Conversion
+Issue price
+No.
+Amount Due date
+(millions of units) (RMB in million)
+conditions Conversion
+Domestic Perpetual Bonds (note (i))
+Interest
+rate
+9 Jul 2020
+Domestic Perpetual Bonds (note (ii)) 7 Dec 2021
+Domestic Perpetual Bonds (note (iii)) 1 Dec 2023
+Total
+Equity instruments
+Equity instruments
+3.95% RMB100/Unit
+3.69% RMB100/Unit
+500
+49,989 Perpetual existence
+None
+Equity instruments
+(i)
+Accounting
+classification
+(b) Perpetual Bonds
+Pursuant to the approvals by the relevant regulatory authorities in China, the Bank issued non-cumulative Domestic Preference Shares in
+the aggregate nominal value of RMB27,500 million on 22 December 2017. Each Domestic Preference Share has a nominal value of RMB100
+and 275 million Domestic Preference Shares were issued in total. The dividend rate is initially at 4.81% and subject to reset per agreement
+subsequently, but not exceeds 16.68%. On 18 December 2022, five years after the issuance of the Domestic Preference Shares, the Bank
+adjusted the dividend rate per annum to 3.62% in accordance with market rules.
+Domestic Preference Shares have clauses that state certain events would trigger mandatory conversion, those clauses are as follows:
+(1)
+(2)
+Upon the occurrence of any additional Tier-1 Capital Instrument Trigger Event, that is, the Core Tier-1 Capital Adequacy Ratio drops
+to 5.125% or below, the Bank shall have the right to convert, without the consent of the holders of Preference Shares, all or part
+of the Preference Shares then issued and outstanding into Ordinary A Shares based on the total nominal value of the Preference
+Shares in order to restore the Core Tier-1 Capital Adequacy Ratio of the Bank to above 5.125%. In the case of partial conversion, the
+Preference Shares shall be converted on a pro rata basis and on identical conditions.
+Upon the occurrence of a Tier-2 Capital Trigger Event, the Bank shall have the right to convert, without the consent of the holders of
+Preference Shares, all or part of the Preference Shares then issued and outstanding into Ordinary A Shares based on the total nominal
+value of the Preference Shares. A Tier-2 Capital Trigger Event refers the earlier of the following events: 1) NAFR having concluded
+that without a conversion or write-off, the Bank would become non-viable, and 2) the relevant authorities having concluded that
+without a public sector injection of capital or equivalent support, the Bank would become non-viable.
+Issuance
+date
+Upon the occurrence of the above mandatory conversion events, the Bank shall report to the NAFR for review and determination. The Bank
+shall fulfill the relevant information disclosure requirements of the Securities Law, the CSRC and Hong Kong's relevant laws and regulations
+such as making provisional reports or announcements in accordance with relevant regulatory requirements.
+The Domestic Preference Shares have no maturity date. However, after the fifth anniversary of the issuance date, subject to the satisfaction of the
+redemption conditions and having obtained the prior approval of the NAFR, the Domestic Preference Shares may be redeemed in whole or in part at the
+discretion of the Bank, but the Bank does not have the obligation to redeem the Preference Shares. The holders of Preference Shares do not have the
+right to demand the Bank to redeem the Preference Shares and shall not expect that Preference Shares will be redeemed.
+After deducting the issuance expenses from the Preference Shares above, the total net proceeds of RMB27,468 million have been included in additional
+Tier 1 capital of the Bank.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+46. Other equity instruments (continued)
+Dividends on the Domestic Preference Shares shall be paid in cash. Save for such dividend at the agreed dividend rate, the holders of the above
+Preference Shares are not entitled to share the remaining profits of the Bank with the ordinary shareholders. Dividend is non-cumulative. The Bank has
+the right to cancel any dividend on Preference Shares, and such cancellation shall not be deemed as a default. After the cancellation of all or part of the
+dividend to preference shareholders, the Bank shall not make any ordinary shares distribution, until the Preference Shares dividend is resumed in full.
+As the dividends on the Domestic Preference Shares are non-cumulative, the Bank will not distribute the dividends that were cancelled in prior years to
+Preference Shares holders.
+Domestic Preference Shares (note (i))
+Total
+million)
+shares)
+35.40%
+Risk-free interest rate
+Expected dividends yield
+Share appreciation rights remaining life (year)
+Expected volatility
+20.03
+35.40%
+9.49
+25.80
+6.34
+12.74
+Exercise price (in HKD)
+Share price (in HKD)
+Fair value at measurement date (in RMB Yuan)
+25.80
+Phase X
+2.58
+4.45%
+43.30
+43.30
+Share price (in HKD)
+17.75
+25.27
+24.94
+3.58
+Fair value at measurement date (in RMB Yuan)
+Phase IX
+Phase VIII
+2022
+1.43%
+1.43%
+4.45%
+Phase X
+2023
+Phase IX
+The fair value of services received in return for share appreciation rights granted are measured by reference to the
+fair value of share appreciation rights granted. The estimate of the fair value of the share appreciation rights granted
+is measured based on the Black-Scholes model. The contractual life of the rights is used as an input to the model.
+Fair value of share appreciation rights and assumptions
+46. Other equity instruments
+(a)
+Preference Shares
+Issuance Accounting
+date
+classification
+Dividend
+Conversion Con-
+Annual Report 2023 (H share)
+rate
+No.
+Amount
+Due date
+conditions version
+(millions of
+(RMB in
+Issue price
+Chapter VIII Financial Statements
+China Merchants Bank
+246
+(3)
+Other long-term employee benefits (continued)
+(iii)
+Salaries and welfare payable (continued)
+(a)
+39. Staff welfare scheme (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+At 31 December 2023 and 2022
+Capital
+No. of shares
+(in million)
+Amount
+25,220
+25,220
+245
+(1)
+35
+(20,000)
+USD75
+700
+16 Aug 2023
+SOFR+0.95
+USD100
+729
+18 Aug 2023
+SOFR+1.30
+USD50
+RMB700
+364
+23 Aug 2023
+SOFR+1.00
+USD300
+2,188
+24 months
+25 Aug 2023
+SOFR+0.95
+USD100
+36 months
+729
+3.05
+361
+15 Mar 2023
+SOFR+0.75
+USD80
+552
+HKD750
+667
+Floating rate bond
+Floating rate bond
+Floating rate bond
+Floating rate bond
+Floating rate bond
+Fixed rate bond
+Fixed rate bond
+Floating rate bond
+Fixed rate bond
+24 months
+36 months
+6 months
+18 months
+24 months
+60 months
+10 Jul 2023
+31 May 2023
+533
+13 Jun 2023
+SOFR+1.05
+USD103
+737
+27 Jun 2023
+SOFR+0.70
+USD50
+SOFR+1.00
+1,382
+6 months
+12 months
+36 months
+36 months
+36 months
+36 months
+USD20
+(300)
+9
+(323)
+11
+709
+21
+(443)
+499
+(344)
+10
+51
+(1,057)
+71
+(1,453)
+31
+(583)
+30
+(697)
+426
+27 Oct 2023 SOFR+0.70
+(5)
+31
+146
+27 Oct 2023
+SOFR+0.75
+USD22
+161
+16 Nov 2023
+2.80
+RMB2,500
+(624)
+2,500
+3.35
+SOFR+1.10
+2.90
+RMB350
+350
+USD50
+RMB4,000
+357
+4,000
+(10)
+-E2E26E2O
+27 Nov 2023
+30 Nov 2023
+5 Dec 2023
+USD200
+16 May 2023 4.40
+2 Mar 2023
+6 May 2022
+SOFR+0.85
+USD45
+314
+(3)
+(311)
+Floating rate bond
+Floating rate bond
+Fixed rate bond
+Floating rate bond
+Fixed rate bond
+Floating rate bond
+Floating rate bond
+Fixed rate bond
+Fixed rate bond
+Floating rate bond
+Floating rate bond
+Floating rate bond
+Floating rate bond
+Fixed rate bond
+Floating rate bond
+Floating rate bond
+Floating rate bond
+Fixed rate bond
+Floating rate bond
+12 months
+12 months
+6 May 2022
+USD75
+523
+(5)
+(518)
+SOFR+0.75
+13 Jun 2022
+SOFR+0.95
+USD120
+SOFR+1.00
+(792)
+(10)
+USD115
+Fixed rate bond
+Fixed rate bond
+Floating rate bond
+Floating rate bond
+36 months
+16 Sep 2021
+0.50
+EUR100
+741
+1
+47
+789
+24 months
+22 Dec 2021
+0.50
+EUR30
+222
+14
+(236)
+12 months
+2 Mar 2022
+SOFR+0.80
+837
+20
+12 months
+12 months
+2.90
+EUR57
+421
+(857)
+3.50
+RMB500
+500
+28 Feb 2023
+SOFR+0.75
+USD60
+416
+6 months
+28 Feb 2023
+SOFR+0.75
+USD145
+1,006
+6 months
+6 months
+6 months
+16 Dec 2022
+698
+17 Feb 2023
+SOFR+1.40
+14 Sep 2022
+1.95
+EUR80
+592
+USD100
+6 months
+12 months
+12 months
+60 months
+12 months
+24 months
+12 months
+20 Oct 2022
+USD50
+SOFR+0.75
+25 Nov 2022
+3.21
+RMB300
+300
+14 Dec 2022
+16 Dec 2022
+SOFR+0.83
+USD45
+314
+349
+38,544
+12,859
+38,675
+8,025
+Total
+259
+30,519
+25,816
+Operating lease commitments
+2022
+2023
+Financial lease commitments
+Other
+Of which: Financial guarantees
+81,225
+2,547,913
+245
+81,470
+26,360
+857
+2,575,130
+As at 31 December 2023, the Group's irrevocable letters of credit included sight letters of credit of RMB22,254
+million (31 December 2022: RMB22,525 million), usance letters of credit of RMB9,361 million (31 December 2022:
+RMB6,965 million), and other commitments of RMB 197,004 million (31 December 2021: RMB203,703 million).
+Irrevocable loan commitments include credit limits granted to offshore customers by overseas branches, subsidiaries
+and onshore and offshore syndicated loans etc.
+Apart from the irrevocable loan commitments, the Group had loan commitments of RMB5,878,801 million at 31
+December 2023 (31 December 2022: RMB5,159,127 million) which are unconditionally cancellable by the Group
+or automatically cancellable due to deterioration in the creditworthiness of the borrower as stipulated in respective
+lending agreements. The Group will not assume any risks on the unused credit limits for these loan customers. As a
+result, such balances are not included in the above contingent liabilities and commitments.
+Credit risk weighted amounts of contingent liabilities and commitments
+2023
+650,343
+2022
+595,977
+Operating lease commitments and financial lease commitments where the Group is a lessor at the end of the
+reporting period are as follows:
+Total
+44,570
+(e) Lease commitments
+2022
+27,401
+20,931
+Overseas
+213,303
+194,412
+217,502
+193,651
+618
+Subsidiaries
+801,511
+708,265
+642,893
+572,814
+95,462
+707 2,438 2,046 4,474 3,557
+80,148 16,853 15,924 35,736 32,714
+Total
+1,104
+10,138,912
+9,942,754 9,184,674
+172,802
+155,985 176,618 165,113 336,602 342,215
+Note:
+20,579
+Non-current assets include interests in joint ventures, interests in associates, property and equipment, investment properties, right-of-use
+assets, intangible assets and goodwill.
+3
+Non-financing letters of guarantees
+23,560
+1
+23,559
+- with an original maturity within 1 year (inclusive)
+173,578
+95
+2,285
+171,198
+Irrevocable loan commitments
+488,187
+500
+2,294
+485,393
+Bills of acceptances
+228,619
+1,505
+Irrevocable letters of credit
+278,711
+275
+2,836
+275,600
+45,677
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+604,300
+254,090
+Assets pledged
+The transactions under repurchase or placement agreements are conducted under terms that are usual and
+customary to standard borrowing and placing activities.
+58. Contingent liabilities and commitments
+(a)
+Credit commitments
+At any given time the Group has outstanding commitments to extend credit. These commitments take the form of
+approved loans and credit card limits.
+The Group provides financial guarantees and letters of credit to guarantee the performance of customers to third
+parties. Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group
+expects most acceptances to be settled simultaneously with the reimbursement from the customers.
+The contractual amounts of commitments and contingent liabilities are set out in the following table by category.
+The amounts reflected in the table for commitments assume that amounts are fully advanced. The amounts reflected
+in the table for guarantees and letters of credit represent the maximum potential loss that would be recognised at
+the end of the reporting period if counterparties default.
+2023
+- Stage 2
+(Lifetime
+ECL - not
+credit-
+- Stage 1
+(12-month
+ECL)
+impaired)
+- Stage 3
+(Lifetime
+ECL - credit-
+impaired)
+Total
+Irrevocable guarantees
+320,170
+3,940
+278
+324,388
+105,531
+130,616
+- Loans and advances to customers
+Total
+25,267
+57. Assets pledged as security
+The following assets have been pledged as collateral for borrowing from central banks and liabilities under
+repurchase or placement arrangements:
+Borrowing from central banks
+Placements from banks and other financial institutions
+Amounts sold under repurchase agreements
+Total
+2023
+377,189
+9,099
+2022
+129,438
+8,620
+- with an original maturity over 1 year
+134,863
+521,151
+245,082
+- Financial assets at fair value through profit or loss
+98,223
+24,093
+- Debt investments at amortised cost
+333,718
+99,199
+- Debt investments at fair value through other comprehensive income
+41,743
+107,024
+147,639
+2,284
+95
+The Group calculated the credit risk weighted amount of its contingent liabilities and commitments in accordance
+with the requirements of the Administrative Measures on Capital of Commercial Banks (Provisional) issued by the
+former CBIRC. The amount within the scope approved by the former CBIRC in April 2014 is calculated using the
+Internal Ratings-Based Approach, and the Weighted Approach is used for those items that are not eligible for the
+Internal Ratings-Based Approach.
+1,416,609
+85
+9,613
+1,406,911
+134,740
+1,603
+133,137
+- with an original maturity over 1 year
+Credit card unused commitments
+22,642
+22,638
+- with an original maturity within 1 year (inclusive)
+157,382
+1,607
+155,775
+Irrevocable loan commitments
+431,383
+500
+3,733
+427,150
+Bills of acceptances
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+58. Contingent liabilities and commitments (continued)
+2023
+29,144
+Redemption obligations
+The redemption obligations below represent the nominal value of government bonds underwritten and sold by the
+Group, but not yet matured at the end of the reporting period:
+As an underwriting agent of PRC government bonds, the Group has the responsibility to make advances to bond
+holders if the holders decide to early redeem the bonds held. The redemption price for the bonds at any time before
+their maturity date is based on the nominal value plus any interest unpaid and accrued up to the redemption date.
+Accrued interest payables to the bond holders are calculated in accordance with relevant requirements set by the
+MOF or the PBOC. The redemption price may be different from the fair value of similar instruments traded at the
+redemption date.
+(d) Redemption obligations
+At 31 December 2023, the Bank or other group entities was a defendant in certain outstanding litigations with total
+gross claims of RMB3,205 million (2022: RMB1,910 million). The Group considers that no material losses would be
+incurred by the Group as a result of these outstanding litigations and therefore no provision has been made in the
+consolidated financial statements.
+(c) Outstanding litigations
+The lease commitments of the Group as a lessor are detailed in note 58(e).
+559
+410
+233,193
+189
+370
+219
+Total
+Authorised but not contracted for
+Contracted for
+2022
+2023
+The authorised capital commitments of the Group were as follows:
+(b)
+Capital commitments
+191
+The Group expects that the amount of redemption before the maturity date of these government bonds through the
+Group will not be material.
+1,344
+Irrevocable letters of credit
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+258
+257
+2,817,969
+894
+16,580
+2,800,495
+87,523
+-
+156
+87,367
+Total
+Other
+1,515,674
+21
+6,400
+1,509,253
+Credit card unused commitments
+150,018
+58. Contingent liabilities and commitments (continued)
+(a) Credit commitments (continued)
+- Stage 1
+(12-month
+ECL)
+202,944
+269
+2,477
+200,198
+Non-financing letters of guarantees
+52,149
+3
+7,341
+44,805
+Of which: Financial guarantees
+231,849
+255,093
+9,818
+245,003
+Irrevocable guarantees
+Total
+impaired)
+ECL - credit-
+- Stage 3
+(Lifetime
+- Stage 2
+(Lifetime
+ECL - not
+2022
+credit-
+impaired)
+272
+11,028,483
+227,114
+3,051
+Redemption of preference shares
+236 127,028
+128,484
+(1,456)
+236
+(1,692)
+(1,692)
+Total comprehensive income for the year
+Other comprehensive income for the year
+128,484
+(6,597)
+76,210
+5,447
+(1,722) 12,848 15,289 51,308
+128,484
+Net profit for the year
+(599)
+(6,597)
+Changes in equity for the year
+144 810,688
+38,385
+reserve Total
+236
+appropriation
+(599)
+Profit appropriations
+equity instruments designated at FVTOCI
+Transfers within equity upon disposal of
+(3,562)
+(3,562)
+Distribution to perpetual bonds
+(1,675)
+(1,675)
+Dividends to preference shares
+43,832
+(7,196)
+(43,832)
+(38,385)
+(38,385)
+Dividends paid for the year 2021
+15,289 (15,289)
+Appropriation to general reserve
+(43,622)
+5,447
+12,848 15,289 (77,206)
+12,848
+(12,848)
+Appropriation to statutory surplus reserve
+Proposed dividends for the year 2022
+(30)
+profit Exchange
+92,978 76,681
+(3,562)
+Distribution to perpetual bonds
+(996)
+(996)
+49,734
+(49,734)
+Dividends to preference shares
+Proposed dividends for the year 2023
+(43,832)
+(3,562)
+(43,832)
+(13,752)
+13,752
+5,902
+7,855 (75,899)
+13,752
+137,521
+(48,390)
+29,997
+(3)
+7,855 (7,855)
+Surplus General Retained
+earnings
+14,866 82,137 105,941 340,271
+Transfers within equity upon disposal of
+33
+34,065
+25,220
+At 1 January 2022
+reserve reserve reserve
+bonds reserve
+shares
+capital
+Share Preference Perpetual Capital revaluation
+Proposed
+equity instruments designated at FVTOCI
+Investment
+360 1,007,194
+49,734
+11 108,737 129,085 453,168
+14,354
+122,978 76,079
+27,468
+25,220
+At 31 December 2023
+(33)
+Other equity
+instruments
+30,000
+30
+25,220
+25,201
+66,504
+68,608
+Proceeds from the issue
+Cash changes:
+267,671
+13,013
+22,719
+26
+17,303
+1,533
+15,987
+65,719
+At 1 January 2023
+Total
+liabilities
+liabilities
+payable
+Lease
+financial
+148,674
+Dividend
+177,616
+(112,584)
+48,860
+48,860
+Dividend declared
+6,157
+480
+5,677
+Accrued interest
+4,235
+4,235
+Repayment
+Additions of lease liabilities
+(56,342)
+(48,860)
+(5,396)
+(2,086)
+Interest/dividend paid
+(224,260)
+(5,053)
+(7,210)
+(48,267) (51,146)
+Non-cash changes:
+At 31 December 2022
+Other
+(Note)
+2023
+Reconciliation of liabilities arising from financing activities
+Debt securities investments and discounted bills
+Total
+Placements with banks and other financial institutions
+Amounts held under resale agreements
+Balance with banks and other financial institutions
+Cash and Balances with central banks
+(b)
+(a) Analysis of the balances of cash and cash equivalents (including assets with
+original maturity within 3 months):
+55. Notes to consolidated cash flow statement
+2022
+Annual Report 2023 (H share)
+China Merchants Bank
+252
+251
+380 886,898
+43,832
+94,985 121,230 391,579
+13,144
+92,978 76,082
+27,468
+Chapter VIII Financial Statements
+Interest
+payable
+on bonds
+140,809
+84,593
+(Note)
+of deposit
+issued
+issued
+certificates
+securities
+of deposit
+interbank
+Debt
+66,055
+Negotiable Certificates
+567,198
+599,019
+50,460
+96,122
+275,051
+171,542
+93,704
+105,953
+81,928
+The table below details changes in the Group's liabilities from financing activities, including both cash and non-cash
+changes. Liabilities arising from financing activities are those for which cash flows were classified in the Group's
+consolidated cash flows statement as cash flows from financing activities.
+Discount or premium amortisation
+(20) 138,689
+1,177
+2,422
+1,720
+16,764
+16,321
+26,541
+26,690
+907
+836
+6,190
+87,177
+6,991
+15,111
+50,767
+54,731
+Liabilities
+Total assets
+Other assets
+Deferred tax assets
+Intangible assets
+Property and equipment
+Right-of-use assets
+13,341
+Interests in associates
+Investment properties
+88,056
+41,440
+95,970
+114,008
+Amounts sold under repurchase agreements
+18,207
+16,653
+Derivative financial liabilities
+25,865
+21,281
+Financial liabilities at fair value through profit or loss
+37,470
+57,489
+Placements from banks and other financial institutions
+621,621
+484,620
+Deposits from banks and other financial institutions
+129,745
+378,504
+Borrowing from central banks
+9,510,556
+10,317,223
+71,077
+Deposits from customers
+Interests in joint ventures
+10,724
+261,190
+247,973
+169,450
+276,292
+5,916,313
+5,482,692
+465,708
+369,391
+Derivative financial assets
+47,791
+18,014
+Debt investments at amortised cost
+1,707,032
+1,533,546
+Debt investments at fair value through other comprehensive income
+783,051
+675,484
+Equity investments designated at fair value through other
+comprehensive income
+10,956
+17,859
+Investments in subsidiaries
+55,168
+2,251
+3,497 8,554 11,755
+250
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+54. The bank's statement of financial position and changes in the
+bank's equity
+Assets
+2023
+585,338
+2022
+Precious metals
+Balances with central banks
+Balances with banks and other financial institutions
+Placements with banks and other financial institutions
+Amounts held under resale agreements
+Loans and advances to customers
+Financial assets at fair value through profit or loss
+14,499
+2,245
+666,550
+14,787
+Cash
+11
+7,953,958
+Salaries and welfare payable
+25,220
+At 1 January 2023
+reserve Total
+Proposed
+profit Exchange
+Share Preference Perpetual Capital revaluation Hedging Surplus General Retained
+shares bonds reserve reserve reserve reserve reserve earnings appropriation
+capital
+Investment
+Other equity
+instruments
+54. The bank's statement of financial position and changes in the
+bank's equity (continued)
+27,468
+Chapter VIII Financial Statements
+China Merchants Bank
+9,510,556
+380
+886,898
+43,832
+360
+49,734
+10,317,223
+Total equity and liabilities
+1,007,194
+Annual Report 2023 (H share)
+Total equity
+92,978 76,082
+94,985 121,230 391,579
+Appropriation to general reserve
+Appropriation to statutory surplus reserve
+Issue of perpetual bonds
+Profit appropriations
+Total comprehensive income for the year
+(20) 1,168
+11
+1,177
+Other comprehensive income for the year
+137,521
+13,144
+137,521
+(20) 120,296
+5,902
+13,752 7,855 61,589
+11
+1,210
+30,000 (3)
+Changes in equity for the year
+380 886,898
+43,832
+Net profit for the year
+7,327,974
+Exchange reserve
+94,985
+121,230
+391,579
+89,220
+172,402
+107,858
+22,410
+19,530
+12,285
+12,039
+6,653
+5,466
+96,680
+17,221
+Total liabilities
+Other liabilities
+Debt securities issued
+Provisions
+Lease liabilities
+Contract liabilities
+Tax payable
+19,136
+23,911
+11,904
+Proposed profit appropriation
+9,310,029
+Equity
+453,168
+Retained earnings
+129,085
+General reserve
+108,737
+Surplus reserve
+11
+Hedging reserve
+13,144
+8,623,658
+14,354
+76,082
+76,079
+Capital reserve
+120,446
+150,446
+Other equity instruments
+25,220
+25,220
+Share capital
+Investment revaluation reserve
+1,786
+Dividends paid for the year 2022
+53
+1,325,116
+2022
+2023
+2022
+3,081,290
+2023
+3,358,721
+2022
+5,633,640
+5,671,256
+Reportable segment liabilities
+joint ventures
+1,314,820
+Of which: Interest in associates and
+Reportable segment assets
+2023
+31 December
+31 December 31 December
+31 December 31 December 31 December 31 December 31 December
+Total
+Other business
+Retail finance business
+Wholesale finance business
+6,236,513
+32,057
+2023
+10,920,350
+26,590
+31 December 2023 31 December 2022
+2022
+342,215
+165,113
+2023
+336,602
+176,618
+Total profit before income tax for reportable segments
+Operating income for reportable segments
+(b) Reconciliations of reportable segment revenue, profit or loss, assets, liabilities
+and other material items
+56. Operating segments (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+2022
+10,029,750
+China Merchants Bank
+9,099,733
+9,862,051
+446,949
+628,708
+3,157,321
+3,562,087
+23,844
+26,590
+23,844
+Note: Capital expenditure represents the amount incurred for acquiring segment assets which are expected to be used for more than one year.
+Assets
+30,141
+702
+(22,671) (30,459)
+(10,640)
+losses on other assets
+Expected credit losses and impairment
+215,611 220,154
+2,190
+1,834
+128,144
+89,820 130,372
+(33,966)
+83,405
+Reportable segment profit before
+(105,778) (107,631)
+(6,057)
+(5,106)
+(58,079)
+(58,860)
+(43,495)
+(41,812)
+- Other
+impairment losses
+513
+(370)
+(41,469)
+2,660
+2,809
+28,884
+26,630
+Capital expenditure (note)
+165,113
+176,618
+3,786
+3,940
+(929)
+94,178
+67,149
+72,765
+Reportable segment profit before taxation
+2,525
+2,476
+2,525
+2,476
+Share of profits of associates and joint ventures
+(57,566)
+99,913
+(4,205) (4,151)
+Total assets for reportable segments
+Intangible assets
+168,687
+170,632
+166,551
+166,486
+1,440
+1,505 2,808
+Central region
+676,618
+636,801
+Northeast region
+670,811
+3,299
+3,602
+18,491 26,479 34,947 37,583
+4,075 6,444 6,485
+9,358 10,740 19,953 20,989
+Western region
+681,255
+632,766
+674,635
+623,631
+Operating income
+628,361
+265
+4,232
+1,063,334
+31 December
+Geographical information
+Headquarter
+Yangtze River Delta region
+Bohai Rim region
+Pearl River Delta and West Coast region
+31 December 31 December
+2023
+2022
+2023
+4,985,615 4,580,315 4,107,566
+1,417,890 1,304,806 1,404,463
+916,860 827,394
+1,166,744 1,083,521
+31 December 31 December
+2022
+2023
+3,841,548
+31 December
+4,125
+2022
+54,625
+52,166
+1,283,400
+5,995
+902,114
+811,449
+4,187
+2023 2022
+77,737 51,396 135,401 140,083
+5,774 21,578 22,939 45,485 45,768
+4,354 18,801 19,759 33,583 34,105
+1,156,219
+2023 2022
+Goodwill
+Profit before tax
+Total liabilities
+Other unallocated liabilities
+Deferred tax liabilities
+Tax payable
+9,099,733
+9,862,051
+Total liabilities for reportable segments
+Liabilities
+10,138,912
+11,028,483
+Consolidated total liabilities
+Consolidated total assets
+7,072
+Other unallocated assets
+581
+90,848
+90,557
+Deferred tax assets
+550
+9,999
+10,029,750
+10,920,350
+9,954
+7,734
+Non-current assets
+13,597
+1,607
+65,499
+9,942,754
+1,510
+Total assets
+"Subsidiaries" refers to subsidiaries wholly owned or controlled by the Group, including CMB WLB, CMBIC,
+CMBFL, CMFM, CMBWM, CMB Europe S.A. and CIGNA & CMAM.
+"Overseas" refers to overseas branches in Hong Kong, New York, Singapore, Luxembourg, London, Sydney
+and representative offices in New York and Taipei; and
+"Western region" refers to branches in Sichuan province, Chongqing municipality, Guizhou province, Yunnan
+province, Shaanxi province, Gansu province, Ningxia Hui Autonomous region, Xinjiang Uyghur autonomous
+region, Guangxi Zhuang autonomous region, Inner Mongolia autonomous region, Qinghai province and Tibet
+autonomous region;
+"Pearl River Delta and West Coast region" refers to branches in Guangdong province and Fujian province;
+"Northeast region" refers to branches in Liaoning province, Heilongjiang province and Jilin province;
+"Central region" refers to branches in Henan province, Anhui province, Hunan province, Hubei province,
+Jiangxi province, Shanxi province and Hainan province;
+"Bohai Rim region" refers to branches in Beijing municipality, Tianjin municipality, Shandong province and
+Hebei province;
+"Yangtze River Delta region" refers to branches in Shanghai municipality, Zhejiang province and Jiangsu
+province;
+To support the Bank's operations and management's assessments, the geographical segments are defined as follows:
+"Headquarter" refers to the Group headquarter, credit card centres and fund operation centres;
+In presenting information on the basis of geographical segments, operating income is allocated based on the
+location of the branches and subsidiaries that generate the revenue. Segment assets and non-current assets are
+allocated based on the location of the underlying assets.
+19,458
+The Group operates principally in the PRC with branches located in major provinces, autonomous regions and
+municipalities directly under the central government in the Chinese mainland. The Group also has branches
+operating in Hong Kong, New York, Singapore, Luxembourg, London and Sydney, subsidiaries operating in Hong
+Kong, Shenzhen, Shanghai, Beijing and Luxembourg and representative offices in New York and Taipei.
+(c)
+56. Operating segments (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+256
+255
+9,184,674
+63,973
+Geographical segments
+(225)
+5,495,463
+(2,250)
+(44,103)
+(6,686)
+(5,714)
+Interest/dividend paid
+(366,126)
+(4,932)
+(14,959)
+(16,504) (78,735)
+(250,996)
+(56,503)
+Repayment
+21,481
+20,287
+78,666
+Proceeds from the issue
+Cash changes:
+495,110
+13,812
+26,650
+26
+10,796
+2,104
+Non-cash changes:
+3,623
+(9)
+241
+5,293
+1,107
+Exchange difference
+(544)
+(26)
+Fair value adjustments
+3,547
+37
+Additions of lease liabilities
+31
+Discount or premium amortisation
+44,103
+44,103
+Dividend declared
+6,625
+510
+6,115
+Accrued interest
+3,623
+3,479
+201,142
+11,092
+(283)
+227,286
+12,675
+32,616
+26
+1,814
+124,372
+34,340
+21,443
+At 31 December 2023
+Negotiable
+1,287
+1,399
+(152)
+Exchange difference
+(42)
+(236)
+191
+3
+Fair value adjustments
+2,104
+40
+Certificates
+Debt
+interbank
+240,284
+At 1 January 2022
+Total
+liabilities
+liabilities
+payable
+on bonds
+(Note)
+(Note)
+of deposit
+Lease
+financial
+Dividend
+payable
+issued
+issued
+certificates
+Other
+Interest
+securities
+of deposit
+(579)
+6,641
+131,230
+65,719
+2,794
+863
+29,705
+134,625
+142,094
+194,315 191,415
+At 31 December 2022
+7,662
+16,710
+11,456
+8,706 336,602 342,215
+(7,798) (7,103) (2,771) (2,942)
+(439)
+131,389
+(234)
+(11,008) (10,279)
+- Right-of-use assets depreciation
+(1,610)
+(1,676) (2,312)
+(6,111)
+properties depreciation
+90,459 136,754
+10,979
+25,540
+0004
+(68,631) (53,240)
+(9,054)
+7,679
+28,165 129,075 140,443 62,520 49,627 214,669 218,235
+2022
+Total
+2023
+Retail finance business
+(3,613) 214,669 218,235
+2,747
+26,095
+33,889
+57,279
+56,419
+94,275
+Other business
+2022
+2023
+2022
+1,142
+84,026
+84,108
+37,825
+60,952
+56. Operating segments (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+254
+253
+The accounting policies of the operating segments are the same as the Group's accounting policies as stated in Note
+4. Operating segment income represents income generated from external customers, inter-segment transactions are
+offset. No customer contributed 10% or more to the Group's revenue for 2023 and 2022. Internal transactions are
+conducted at fair value.
+For the purpose of operating segment analysis, external net interest income/expense represents the net interest
+income earned or expense incurred on banking services provided to external parties. Internal net interest income/
+expense represents the assumed profit or loss by the internal funds transfer pricing mechanism which has taken into
+account the structure and market returns of the assets and liabilities portfolio. Cost allocation is based on direct
+costs attributable to each reporting segment and apportion according to the relevant factors.
+Other business covers investment properties, subsidiaries except for CMB WLB and CMBFL, associates and joint
+ventures. None of these segments meet any of the quantitative thresholds so far for segment division.
+(3) Other Business
+The financial services provided to retail customers include: loan and deposit service, bank card service, wealth
+management services, private banking and other services.
+(2) Retail finance business
+The financial services for corporate clients, government agencies, and financial institutions include: loan and deposit
+service, settlement and cash management service, trade finance and offshore business, investment banking business,
+inter-bank business such as placement and repurchase, asset custody business, financial market business, and other
+services.
+(1) Wholesale finance business
+(a) Segment results, assets and liabilities
+The Group manages its businesses by divisions, which are organised by both business lines and geography.
+56. Operating segments
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+There were no significant non-cash transactions during the years ended 31 December 2023 and 2022.
+(c) Significant non-cash transactions
+Note: Including financial liabilities designated at fair value through profit or loss.
+267,671
+13,013
+22,719
+26
+1,533
+148,674
+15,987
+The Group's principal activities are providing corporate and personal banking services, conducting treasury business,
+providing asset management and other financial services.
+62,294
+External net interest income
+Internal net interest income/(expense)
+Net fee and commission income
+23,074
+Other net income
+Operating income
+Operating expenses
+- Property and equipment and investment
+Wholesale
+finance business
+2023
+2022
+2023
+Net interest income
+A+ to A-
+In respect of asset quality classification, the Group adopts a risk based asset quality classification methodology.
+Currently, the Group categorises its loans on a ten-grade loan classification basis to refine internal risk classification
+management (normal (grades 1-5), special mention (grades 1-2), substandard, doubtful and loss).
+To mitigate risks, the Group requests customers to provide collateral and guarantees when necessary. Certain
+guidelines have been set for the acceptability of specific types of collateral or risks mitigating measures. Collateral
+portfolio and legal covenants are reviewed regularly to ensure that they remain sufficient for the given risks and be
+consistent with market practices.
+With respect to credit risk management of retail financial business, the Group mainly relies on the credit assessment
+of applicants as the basis for loan approval, which takes into consideration the income level, credit history, and
+repayment ability of the applicant. The Group monitors post-lending conditions by focusing on borrowers' repayment
+ability, the status of collateral and any changes to collateral value. Once a loan becomes overdue, the Group starts
+the collection process according to standard retail loans collection procedures.
+Chapter VIII Financial Statements
+The Group designs its organisation framework, credit policies and processes with an objective to identify, evaluate
+and manage its credit risk effectively. The Risk and Capital Management Committee, set up and appointed by the
+Board of Directors is responsible for supervising and evaluating the set-up, organisational structure, work process
+and effectiveness of various risk management functions.
+Credit risk represents the potential losses that may arise from the failure of a counterparty or a debtor to meet its
+obligation or commitment to the Group. Credit risk increases when all counterparties are concentrated in a single
+industry or a geographical region, as different counterparties in the same region or industry may be affected by the
+same economic factors, which may eventually affect their repayment abilities.
+(a) Credit risk
+60. Risk management
+With respect to daily operations, the Risk Management Department, as directed by the Risk and Capital Management
+Committee, participates in, coordinates and monitors the work of other risk management functions, including each
+business unit and the Legal and Compliance Department. The Group manages credit risk throughout the entire
+credit process including pre-lending evaluations, credit approval and post-lending monitoring. The Group has also
+further optimised the foundation related to the implementation of ECL measures during the year in accordance with
+the Implementation Rules on Expected Credit Loss Approach of Commercial Banks (Yin Bao Jian Gui [2022] No. 10).
+With respect to the credit risk management of wholesale financial business, the Group formulates credit policy
+guidelines, enhances the standards on credit acceptance and management requirements for corporate, interbank
+and institutional clients, and implements limits in key risk areas to improve the quality of credit exposure.
+Concentration of credit risk: when certain number of customers carry out the same business activities, locate in
+the same geographical region or their industries share similar economic characteristics, their ability to meet their
+obligations may be affected by the same economic factors. The level of concentration of credit risk reflects the
+sensitivity of the Group's operating result to a specific industry or geographical region. To prevent concentration of
+credit risk, the Group has formulated a limit management policy to monitor and analyse its loan portfolio.
+Analysis of loans and advances by industry and loan portfolio are presented in Note 22.
+China Merchants Bank
+262
+China Merchants Bank
+Annual Report 2023 (H share)
+AA+ to AA-
+Chapter VIII Financial Statements
+60. Risk management (continued)
+(a) Credit risk (continued)
+(i)
+(ii)
+Internal credit risk rating
+The Group classifies credit risk based on probability of default. The internal credit risk rating is based on the
+forecasted default risk, taking into consideration qualitative and quantitative factors. For customers of wholesale
+business, such factors include net profit growth rate, sales growth rate, industry, etc. For customers of retail
+business, such factors include maturity, ageing, collateral ratio, etc.
+Annual Report 2023 (H share)
+261
+The risks involved in contingent liabilities and commitments are essentially the same as the credit risk involved in
+loans and advances to customers. These transactions are, therefore, subject to the same credit application, post-
+lending monitoring and collateral requirements as for customers applying for loans.
+Chapter VIII Financial Statements
+As describe in Note 4(5), the Group recognises lifetime ECL if there are significant increases in credit risk.
+264
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+60. Risk management (continued)
+(a)
+Credit risk (continued)
+(vii)
+(viii)
+Renegotiated loans and advances to customers
+263
+The carrying amount of loans and advances that were credit impaired and the terms had been renegotiated was
+RMB13,007 million as at 31 December 2023 (31 December 2022: RMB12,076 million).
+Under the 5-tier loan classification system, non-performing loans of the Group are divided into substandard loans,
+doubtful loans and loss loans. As at 31 December 2023, the Group had balance of non-performing loans of
+RMB61,579 million (31 December 2022: RMB58,004 million).
+(ix)
+Credit quality of bond investments rating results
+At the end of the reporting period, the analysis of the credit quality of bond investments by designated external
+credit assessment institution, Standard & Poor's, is as follows:
+Impaired gross amount of debt investments
+Impairment allowances
+Subtotal
+Neither overdue nor impaired
+108,868
+AAA
+Non-performing loans
+Significant increase in credit risk
+The Group's maximum exposure to credit risk without taking into account any collateral held or other credit
+enhancements is the carrying amount of the relevant financial instruments as disclosed in the consolidated statement
+of financial position and the contract amount of the off balance sheet items disclosed in Note 58(a). At 31 December
+2023, the amount of the Group's maximum credit risk exposure was RMB13,537,727 million (31 December 2022:
+RMB12,440,947 million).
+(vi)
+In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk
+of default occurring on the financial instrument and other items at the reporting date with that at the date of initial
+recognition. In making this assessment, the Group considers an actual or expected significant deterioration in the
+financial instrument's internal credit risk rating (Note 60(a)(i)), as well as internal early warning signal, the result
+of 5-tier classification and overdue information. The Group regularly reviews whether the evaluation criteria are
+applicable to the current situation.
+For wholesale business, credit risk is considered as significantly increased if any of the following conditions is met:
+the 5-tier classification is special mention; more than 30 days (inclusive) overdue; the internal credit risk rating of
+the customer has been downgraded to certain level; the early warning signal of the customer has reached a certain
+level; or the customer has other significant risk signals identified by the Group.
+For retail and credit card business, credit risk is considered as significantly increased if any of the following
+conditions is met: the 5-tier classification is special mention; more than 30 days (inclusive) overdue; the customer
+or the debt has credit risk early warning signal; or the customer has other significant risk signals identified by the
+Group.
+A debt instrument is determined to have low credit risk if i) it has a low risk of default, ii) the borrower has a strong
+capability to meet its contractual cash flow obligations in the near term and iii) adverse changes in economic and
+business conditions in the longer term may not necessarily reduce the ability of the borrower to fulfill its contractual
+cash flow obligations.
+For loan commitment and financial guarantee, the date when the commitment becomes irrevocable is considered as
+the initial recognition date.
+The Group considers that a debt instrument is impaired and classified as stage 3 when the debt instrument is more
+than 90 days (inclusive) overdue or the 5-tier classification of this debt instrument is substandard, doubtful or loss
+(these three categories include debt instruments with more than 90 days (inclusive) overdue).
+(iii)
+Measurement of ECL
+The key inputs used for measuring ECL are:
+probability of default (PD): is an estimate of the likelihood of default over 12 months or lifetime horizon;
+loss given default (LGD): is the proportion of the loss arising on default to the exposure at default;
+exposure at default (EAD): is the risk exposure on a debt.
+Maximum exposure
+These figures are generally derived from internally developed statistical models and other historical data and they are
+adjusted to reflect forward-looking information.
+Annual Report 2023 (H share)
+60. Risk management (continued)
+(a) Credit risk (continued)
+(iv)
+(v)
+Incorporation of forward-looking information
+The Group divides financial assets into different asset groups based on their different risk characteristics. According
+to the risk characteristics of the asset group, the Group collects external data released by authoritative institutions
+and internal risk data without undue cost or effort for modelling. Apart from the common economic indicators
+such as Gross Domestic Product ("GDP"), Consumer Price Index ("CPI"), Producer Price Index and Broad Money
+Supply, various other categories of indicators such as industry index, interest and exchange rate, and survey index
+are also included. Based on statistical analysis and expert judgements, the Group sets up multiple forward-looking
+scenarios to predict macroeconomic indicators and risk parameters. The Group sets the forecasts issued by external
+authoritative institutions as the forecasts of economic indicators under the baseline scenario, with reference to
+the professionals of the Bank and the outputs of the models. For the forecasts of economic indicators under the
+remaining scenarios, the Group will refer to the actual historical data for analysis and forecast. Taking GDP (year-on-
+year growth rate) and CPI (month-on-month increase) as an example, the forecasts for the next year adopted by the
+Group for 2024 under the baseline scenario are 4.80% (2023: 4.80%) and 1.50% (2023: 2.80%) respectively.
+Combined with quantitative measurement and expert judgement, the Group sets the weighting of multiple scenarios
+based on the principle of taking the baseline scenario as the main and the other scenarios as supplement. The
+weight of the baseline scenario of the Group as at 31 December 2023 is the highest. According to the sensitivity
+test results of the Group, when the weighting of the optimistic scenario increases by 10% and the weighting of the
+baseline scenario decreases by 10%, the ECL amount at 31 December 2023 will decrease by approximately 2.8%
+compared to the current result (at 31 December 2022: will decrease by approximately 3.1%). When the weighting
+of the pessimistic scenario increases by 10% and the weighting of the baseline scenario decreases by 10%, the ECL
+amount at 31 December 2023 will increase by approximately 5.6% compared to the current result (at 31 December
+2022: will increase by approximately 5.2%).
+The Group periodically forecasts macroeconomic indicators, and calculates the ECL based on a weighted 12-month
+expected credit loss (stage 1) or a weighted lifetime expected credit loss (stage 2 and stage 3).
+Groupings based on shared risk characteristics
+The Group divides the primary business into wholesale business, retail business and credit card business. The models
+are divided based on shared risk characteristics, and the reference indicators include the 5-tier classification, business
+type and collateral type.
+China Merchants Bank
+144,963
+(12-month
+2023
+impaired)
+ECL)
+Total
+impaired)
+impaired)
+ECL)
+credit- ECL credit-
+impaired)
+(12-month
+credit
+(Lifetime
+ECL-not
+Stage 1
+(Lifetime
+ECL - not
+Stage 1
+ECL credit-
+Stage 3
+Total
+667,569
+Amounts held under resale agreements
+(519)
+Lower than A-
+(518)
+286,247
+201
+286,046
+Balances with central banks
+Placements with banks and other financial institutions
+(211)
+100,757
+11
+1
+100,745
+Balances with banks and other financial institutions
+667,569
+(223)
+Stage 2
+(Lifetime
+Stage 3
+Expected credit loss
+At the end of the reporting period, the entrusted assets and liabilities were as follows:
+Entrusted loans
+Entrusted funds
+2023
+221,292
+2022
+231,266
+(221,292)
+(231,266)
+Entrusted lending are not assets of the Group and are not recognised in the consolidated statement of financial
+position. Income received and receivable for providing these services are recognised in the consolidated statement of
+profit or loss as fee and commission income.
+(b)
+The Group's wealth management services to customers mainly represent sales of wealth management products to
+corporate and personal banking customers by the Bank and CMBWM. The funds obtained from wealth management
+services are invested in investment products, including government bonds, policy bank bonds, short term corporate
+debt instruments and trust loans. The Group initiated the launch of wealth management products. The investment
+risk associated with these products is borne by the customers who invest in these products. The Group does not
+consolidate these wealth management products. The Group earns commission which represents the charges on
+customers in relation to the provision of custody, sales and management services.
+The wealth management products and funds obtained are not assets and liabilities of the Group and are not
+recognised in the consolidated statement of financial position. The funds received from customer for wealth
+management business that yet to be invested are recorded under other liabilities.
+At the end of the reporting period, funds received from customers under unconsolidated wealth management
+services were RMB2,403,038 million as at 31 December 2023 (31 December 2022: RMB2,552,408 million).
+(c)
+Entrusted management of insurance funds
+The entrusted management of insurance funds mainly refers to the business that the Group carries out investment
+activities on funds entrusted by insurance companies according to the regulatory policies and the investment
+guidelines from insurance companies, and charges fees for providing such services.
+At the end of the reporting period, the balances of entrusted funds were as follows:
+Entrusted management of insurance funds
+Wealth management services
+The Group's entrusted lending business refers to activities where principals such as government departments,
+business entities and individuals provide capital for loan advances through the Group to their specified targets
+on their behalf in accordance with specific terms and conditions, with the help of the Group in monitoring loan
+usage and seeking loan recovery. The entrusted lending business does not expose the Group to any credit risk. As
+instructed by these principals, the Group holds and manages underlying assets and liabilities only in the capacity of
+an agent, and charges handling fees for related services.
+Entrusted lending business
+(a)
+Principal
+Stage 2
+(Lifetime
+2023
+The staging analysis for loans and advances to customers and debt investments at amortised cost are disclosed in
+note 22, note 23(b) and note 60(a)(xi) respectively. The staging analysis for credit commitments and the expected
+credit loss allowances of financial guarantees and loan commitments are disclosed in notes 58(a) and 42 respectively.
+The staging analysis for other financial instruments is as follows:
+Credit quality of financial instruments
+(xii)
+(a) Credit risk (continued)
+60. Risk management (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+1,579,845
+34,120
+260
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+59. Transactions on behalf of customers
+2022
+Unrated
+655
+(2,904)
+27,548
+Subtotal
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+60. Risk management (continued)
+(a) Credit risk (continued)
+(xi)
+Movements of loans and advances and debt investments measured at amortised cost (continued)
+Debt investments at amortised cost:
+2023
+- Stage 1
+(12-month
+ECL)
+- Stage 2
+(Lifetime
+ECL - not
+credit-
+impaired)
+- Stage 3
+(Lifetime
+ECL - credit-
+impaired)
+Balance as at the beginning of the year
+Net changes for the year
+1,543,652
+2,073
+34,120
+195,645
+(238)
+(4,323)
+266
+265
+5,432,112
+58,004
+(1,831)
+Total
+5,075,052
+396,221
+Transfer to
+- Stage 1
+18,758
+(18,644)
+(114)
+- Stage 2
+(103,532)
+103,794
+Total
+1,579,845
+191,084
+(262)
+(35,248)
+(13,117)
+48,365
+Write-offs
+(145)
+(39,016)
+(39,161)
+Balance as at the end of the year
+5,217,868
+156,240
+- Stage 3
+(27,002)
+Transfer to
+1
+1,209,359
+Net changes for the year
+Transfer to
+361,916
+(275)
+9,395
+371,036
+- Stage 1
+3
+(3)
+Write-offs
+- Stage 2
+- Stage 3
+Balance as at the end of the year
+1,543,652
+(1,276)
+1,276
+(311)
+(887)
+1,198
+(550)
+172,568
+24,077
+1,962
+1,183,320
+Balance as at the beginning of the year
+(1)
+- Stage 2
+(339)
+339
+- Stage 3
+(655)
+Write-offs
+(14)
+(1)
+Balance as at the end of the year
+- Stage 1
+1,738,945
+(2,919)
+1,768,010
+2022
+- Stage 1
+(12-month
+-Stage 2
+(Lifetime
+ECL - not
+credit-
+- Stage 3
+(Lifetime
+ECL - credit-
+ECL)
+impaired)
+impaired)
+Total
+1,517
+Impairment allowances
+425,054
+50,862
+2,833,525
+2,432,650
+Bonds issued by the governments and policy banks held by the Group amounted to RMB2,448,279 million as at 31 December 2023 (31
+December 2022: RMB2,094,902 million).
+The impairment allowances above is for debt investments at amortised cost only.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+60.
+Risk management (continued)
+(a) Credit risk (continued)
+(x)
+Collateral
+An estimate of the fair value of collateral and other credit enhancements held against financial assets that are
+overdue but not impaired is as follows:
+(xi)
+Estimate of the fair value of collateral and other credit enhancements
+held against following financial assets
+- Loans and advances to customers
+2023
+2022
+20,797
+25,148
+2,432,495
+2,833,216
+(5,958)
+(10,661)
+Total
+Notes:
+(i)
+(!!)
+2023
+2022
+808
+398
+(499)
+(243)
+Movements of loans and advances and debt investments measured at amortised cost
+Loans and advances measured at amortised cost:
+309
+2,577,388
+2,187,978
+65,894
+53,526
+132,191
+124,554
+27,220
+33,429
+41,184
+38,966
+155
+Net changes for the year
+2023
+- Stage 2
+(Lifetime
+ECL - not
+(24,861)
+(28,910)
+53,771
+Write-offs
+(47,922)
+Balance as at the end of the year
+5,686,659
+165,105
+61,560
+(47,922)
+5,913,324
+2022
+- Stage 1
+(12-month
+- Stage 2
+(Lifetime
+ECL - not
+credit-
+- Stage 3
+(Lifetime
+ECL - credit-
+ECL)
+impaired)
+impaired)
+Balance as at the beginning of the year
+4,912,836
+111,354
+- Stage 3
+(743)
+95,148
+(94,405)
+- Stage 3
+(Lifetime
+ECL)
+credit-
+impaired)
+ECL - credit-
+impaired)
+Total
+Balance as at the beginning of the year
+Net changes for the year
+Transfer to
+5,217,868
+- Stage 1
+(12-month
+156,240
+5,432,112
+557,973
+(27,551)
+(1,288)
+529,134
+- Stage 1
+30,084
+(29,822)
+(262)
+- Stage 2
+58,004
+140
+2,073
+(449)
+230,949
+Liabilities
+Borrowing from central banks and
+amounts due to banks and other
+financial institutions
+1,132,441
+117,899
+Deposits from customers
+7,562,175
+384,719
+5,676
+154,568
+9,581
+53,976
+1,265,597
+8,155,438
+92,852
+16,624
+54,247
+170,253
+Financial liabilities at FVTPL
+(including derivative financial
+liabilities)
+52,624
+8,368
+206
+203
+61,401
+1,180
+227
+Debt securities issued
+6,252
+63,852 11,028,483
+209,674
+658,508
+16,400
+4,316
+Loans and advances to customers
+5,938,668
+133,774
+147,467
+22,151
+6,242,060
+18,862
+162,431
+Financial investments (including
+derivative financial assets)
+2,883,787
+244,690
+40,754
+13,652
+3,182,883
+34,502
+44,888
+Other assets (note (i))
+216,402
+117,867
+16,161
+12,229
+362,659
+16,620
+17,802
+Total
+10,096,449
+101,849
+67,474
+3,366
+2,075
+11,755
+27,961
+Derivatives (nominal amounts):
+-forward purchased
+-forward sold
+418,103
+(386,228) (440,704)
+431,449
+34,270
+(13,642)
+- net currency option position
+(76,687)
+67,549
+357
+Total
+(44,812)
+58,294
+20,985
+34,929 918,751
+(22,002) (862,576)
+(4,250)
+8,677
+60,836
+37,747
+(62,141)
+(15,026)
+(13,031)
+9,525
+393
+43,144
+8,220
+23,114
+269
+(550)
+2,817,969
+558,381
+20,081
+83,364
+174,764
+9,514
+3,708
+Other liabilities (note (i))
+258,062
+18,858
+172,708
+1,531
+285,554
+2,658
+7,824
+Total
+9,107,151
+597,318
+170,919
+67,366
+9,942,754
+84,223
+188,264
+Net position
+989,298
+61,190
+38,755
+(3,514) 1,085,729
+8,629
+42,685
+Off-balance sheet position:
+Credit commitments (note (ii))
+2,689,139
+25,385
+12,757
+7,103
+116,308
+impaired)
+impaired)
+Total
+ECL)
+impaired)
+impaired)
+Total
+Balances with central banks
+587,533
+587,533
+Balances with banks and other financial institutions
+91,574
+2
+ECL)
+11
+(497)
+(509)
+Placements with banks and other financial institutions
+265,415
+265,415
+(2,658)
+(2,658)
+Amounts held under resale agreements
+277,421
+140
+277,561
+(954)
+(140)
+91,587
+ECL-credit-
+credit-
+(12-month
+3,919
+(140)
+(589)
+Debt investments at FVTOCI
+889,105
+390
+241
+889,736
+(5,586)
+(132)
+(1,094)
+(6,812)
+2022
+Principal
+Expected credit loss
+Stage 2
+Stage 2
+(Lifetime
+Stage 3
+(Lifetime
+Stage 3
+Stage 1
+ECL-not
+(Lifetime
+Stage 1
+ECL-not
+(Lifetime
+(12-month
+ECL-credit-
+(1,094)
+Debt investments at FVTOCI
+credit-
+3,211
+(3)
+Banking book
+The Group's foreign exchange risk under the banking book is centrally managed by the Head Office. The
+Asset and Liability Management Department, as the treasurer of the Bank is in charge of the banking book
+foreign exchange risk management. The Internal Audit Department is responsible for auditing this. The
+treasurer is responsible for managing the foreign exchange risk under the banking book with a prudent
+approach and compliance with the regulatory requirements, and through approaches such as transaction
+limits and adjustment of plans.
+The banking book foreign exchange risk of the Group arises from the mismatch of the non-RMB financial
+assets and liabilities. The Group stringently monitors its foreign exchange risk exposures to control it within
+an acceptable range.
+The Group has adopted foreign exchange exposure analysis, scenario simulation analysis and stress testing
+for the measurement and analysis of foreign exchange risk. The Group regularly measures and analyses the
+foreign exchange risk exposure fluctuations, monitors and reports foreign exchange risk on a monthly basis
+under the limit control framework, and adjusts the foreign exchange exposures based on the trend of foreign
+exchange rate movements to mitigate the foreign exchange risk on its banking book.
+The Group continues to strengthen banking book exchange rate risk monitoring and authorisation
+management of limits to ensure that risks are controlled within a reasonable range.
+Assets and liabilities by original currency are shown as follows:
+2023
+RMB
+USD
+In RMB Equivalent
+HKD
+Main original currency
+Other
+Total
+HKD
+Assets
+Cash and balances with central
+banks
+632,195
+45,869
+1,373
+3,063
+682,500
+6,468
+1,512
+Amounts due from banks and other
+financial institutions
+767,905
+425,397
+(2)
+Foreign exchange risk (continued)
+USD
+Market risk (continued)
+155
+771,271
+(i)
+(4,472)
+(479)
+(1,589)
+(6,540)
+Note: The balances disclosed above do not include interest receivable.
+267
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+60. Risk management (continued)
+(b)
+Market risk
+268
+Market risk refers to the risk of loss due to changes in observable market factors such as interest rates, exchange
+rates, commodity prices and stock prices, resulting in changes in the fair value or future cash flows of the Group's
+financial instruments. Interest rate and foreign exchange rate are the two major market risk factors relevant to the
+Group. The Group is exposed to market risk through the financial instruments under the trading book and banking
+book. The financial instruments and positions under the trading book are held for trading purposes or for the
+purposes of hedging the risks arising from the trading book position, and these financial instruments can be traded
+without any restriction. The financial instruments under the banking book are assets and liabilities held by the Group
+for determinable return with relative stable market value or for the purposes of hedging the risks, which include
+both the Group's on-balance sheet and off-balance sheet exposure.
+(b)
+60. Risk management (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+The Group adopts quantitative indicators such as exposure indicator, market value at risk indicator (VaR,
+covers interest rate, foreign exchange rate, and commodity risk factors), exchange rate scenario stress test
+loss index, exchange rate sensitivity index, and cumulative loss index in its management of foreign exchange
+risk. The management methods include delegation, setting limits, daily monitoring and continuous reporting,
+etc.
+Trading book
+(1)
+Foreign exchange risk arises from the holding of foreign currency assets, liabilities and equity items, and the foreign
+currency and foreign currency derivative positions, which expose the Group to potential losses in the event of
+unfavourable foreign exchange rate movement. The financial assets and liabilities of the Group are denominated in
+RMB, and the other currencies are mainly in USD and HKD. The Group segregates the policy setting, execution and
+supervision of foreign exchange risk management, and establishes a foreign currency risk management governance
+structure. This structure specifies the roles, responsibilities and reporting lines of the Board of Directors, the Board of
+Supervisors, senior management, designated committees and relevant departments of the Bank in the management
+of foreign exchange risk. The Group is prudent in its foreign exchange risk appetite, and would not voluntarily take
+foreign exchange risk, which suits the current development stage of the Group. The current foreign exchange risk
+management policies and procedures of the Group meet the regulatory requirements and the requirements of the
+Group.
+Foreign exchange risk
+(i)
+The Group has established a market risk structure and system of the trading book, which covers exchange
+rate risk, to quantify the exchange rate risk of the trading book to facilitate centralised management. The
+structure, process and method of exchange rate risk management of trading book are consistent with that of
+the interest rate risk of trading book.
+7,125
+4,847,726
+Deposits from customers
+7,535,742
+7,794,971
+389,687
+49,336
+36,261
+Financial liabilities at FVTPL
+227
+49,144
+4,390
+12,085
+26,391
+1,223,242
+152,122
+1 month to 3 months
+270,368
+1 month
+4,626
+3 months
+1 year
+to 1 year
+to 5 years
+Over
+5 years
+Indefinite
+Overdue
+Non-derivative financial liabilities
+and lease liabilities
+Borrowing from central banks and
+amounts due to banks and other
+financial institutions
+1,087,095 1,098,720 515,448
+127,266
+7,988
+1,573,991
+Lease liabilities
+28,897
+31,154
+242
+Total
+9,069,718 9,355,411 5,438,055
+697,154
+11,623
+571,721 1,160,252 1,393,864
+Gross loan commitments
+1,573,991
+Note:
+Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
+279
+Within
+94,365
+27,724
+62,796
+162,436 162,436
+13,013
+14,292
+505
+599
+3,328
+8,386
+1,474
+Debt securities issued
+222,288 235,656
+4,480
+28,783
+76,447
+96,703
+29,243
+Other liabilities
+20,020
+Repayable
+on demand
+2,744,551
+Carrying
+amount
+788
+- Financial investments at FVTPL
+423,467
+439,231
+4,102
+76,314
+38,048
+96,166
+161,826
+57,052
+5,723
+-Debt investments at amortised
+cost
+1,536,397
+1,919,576
+19,139
+17,387
+1,413,650
+415,839
+Loans and advances to customers
+5,796,546
+7,132,934
+26,024
+516,746
+433,106
+1,694,961
+2,071,922
+2,365,750
+24,425
+Financial investments
+3,251,681
+4,102
+101,509
+112,634
+1,184,020
+Total
+42,650 166,559
+1,103,949
+Total
+9,862,933 11,707,905 193,726
+15,434
+997,800 646,262 2,229,211
+17,310
+1,534
+605
+4,296
+4,154
+3,272,600
+3,780,018 558,921
+29,367
+2022
+Over
+Over
+Over
+10,381
+588,262
+35,078
+88,792
+-Debt investments at FVTOCI
+771,271
+879,458
+7,808 31,936
+153,114
+433,932
+252,649
+1989
+769
+- Equity investments designated
+at FVTOCI
+13,416
+13,416
+13,416
+Other assets
+88,792
+403,223 894,832
+Deposits from customers
+15,124
+Amounts due from banks and other
+financial institutions
+26,810
+575,932
+602,742
+Cash and balances with central
+banks
+Assets
+bearing
+interest
+Over
+5 years
+Over 1 year
+to 5 years
+Non-
+Over 3
+months
+to 1 year
+3 months
+or less
+(include
+overdue)
+Total
+2022
+(4)
+(3) The following tables indicate the expected next repricing dates (or maturity dates whichever are
+earlier) for assets and liabilities at the end of the reporting period. (continued)
+Interest rate risk (continued)
+(ii)
+(b) Market risk (continued)
+60. Risk management (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+274
+273
+118,152
+1,332,817
+328,966
+630,302
+36,918
+516,942
+14,059
+1,087,095
+financial institutions
+amounts due to banks and other
+Borrowing from central banks and
+Liabilities
+422,795
+1,223,398
+1,463,404
+3,484,110
+3,545,205
+10,138,912
+Total assets
+346,100
+346,100
+Other assets (note (ii))
+49,885
+1,164,031
+975,413
+356,451
+217,442
+2,763,222
+derivative financial assets)
+Financial investments (including
+59,354
+473,932
+2,234,889 3,028,371
+5,796,546
+Loans and advances to customers
+(note (i))
+13
+99,288
+Deposits from customers
+1,453,021
+263,234
+Asset-liability gap
+1,013,853
+1,265,597
+financial institutions
+amounts due to banks and other
+Borrowing from central banks and
+Liabilities
+447,118
+1,369,735
+1,716,255
+3,568,986
+3,926,389
+11,028,483
+Total assets
+362,659
+362,659
+Other assets (note (ii))
+60,740
+1,307,233
+358,289 1,104,825
+351,796
+3,182,883
+derivative financial assets)
+Financial investments (including
+62,489
+605,016
+3,076,798
+2,497,757
+6,242,060
+Loans and advances to customers
+(note (i))
+Deposits from customers
+1,613,582
+1,085,729 (2,583,878) 1,955,404
+8,155,438
+231,786
+1,300,112
+9,942,754 6,510,267
+Total liabilities
+269,803
+2,889
+7,376
+43,959
+78,880
+44,549
+187
+272,879
+Other liabilities (note (ii))
+174,764
+Debt securities issued
+1,082
+7,757
+2,804
+1,032
+12,675
+Lease liabilities
+55,492
+5,321
+588
+61,401
+liabilities)
+(including derivative financial
+Financial liabilities at FVTPL
+3,671
+28,172
+288
+19,670
+1,373,425
+5,450,058
+13
+7,535,742
+143,285
+860,746
+Overdue
+Indefinite
+5 years
+to 5 years
+1 year
+3 months
+1 month
+Over
+Over 1 year
+1 month to 3 months to
+Within
+Repayable
+on demand
+Over
+Over
+2023
+Analysis of the Group's assets and liabilities by contractual remaining maturity is as follows:
+Liquidity risk (continued)
+(c)
+60. Risk management (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+276
+275
+The Group regularly conducts stress testing to assess its liquidity risk resistance under extreme circumstances. Except
+for the annual stress testing required by the regulatory authorities, the Group conducts monthly stress testing on
+the liquidity risk of local and foreign currencies. The Group sets up liquidity contingency plans and conducts liquidity
+contingency drills to continuously improve its capability to handle any liquidity crisis.
+The Group measures, monitors and identifies liquidity risk by short-term reserves as well as medium and long-term
+structures. It monitors the limit indicators closely at fixed intervals.
+The Group is prudent in managing its liquidity risk, which suits its current development stage. The Group's existing
+liquidity risk management policies and systems meet regulatory requirements and suit its own management needs.
+The Group's liquidity risk management is coordinated by Head Office with branches acting in concert. The Asset
+and Liability Management Department acting as the treasurer of the Group is in charge of daily liquidity risk
+management. According to a prudent basis under regulatory requirements, the treasurer is conducting centralised
+liquidity management through limits management, budget control, initiative debt management as well as internal
+fund transfer pricing.
+According to the liquidity risk management policy, the Group segregates the policy setting, execution and supervision
+of liquidity risk management, and puts in place a governance framework which defines the roles, responsibilities and
+reporting lines of the Board of Directors, the Board of Supervisors, senior management, designated committees and
+relevant departments to ensure the effectiveness of the liquidity risk management. The Board of Directors takes the
+ultimate responsibility for liquidity risk management, ensures the Group can effectively identify, measure, monitor
+and control liquidity risk and is responsible for determining liquidity risk level which the Group can tolerate. The Risk
+and Capital Management Committee under the Board of Directors shall perform its responsibilities in liquidity risk
+management according to the requirements of the Board of Directors. The Board of Supervisors is responsible for
+the supervision and evaluation of the performance of the Board of Directors and senior management in the liquidity
+risk management and reports to the general meeting of shareholders. The senior management is responsible for the
+liquidity risk management work and develops a timely understanding of changes in liquidity risks, and reports the
+same to the Board of Directors. The Asset and Liability Management Committee (ALCO) exercises specific liquidity risk
+management functions as required by the senior management. The Assets and Liabilities Management Department
+of the Head Office is a day-to-day working body of ALCO and responsible for various concrete management work
+including formulating policies and procedures relating to liquidity risk management and conducting qualitative and
+quantitative analysis of liquidity risk. The Internal Audit Department of the Head Office conducts comprehensive
+audit on the Group's liquidity risk management.
+Liquidity risk is the risk that the Group is not able to obtain sufficient funds at a reasonable cost and in a timely
+manner to deal with the appreciation of asset growth, to meet its maturity obligations, or to perform other payment
+obligations.
+Total
+(c) Liquidity risk
+Cash and balances with central banks (note (i))
+255
+1,158,573
+360,604
+149,778
+182,087
+2,756
+assets (note (ii))
+Financial investments and derivative financial
+6,242,060
+23,672
+1,734,232
+1,843,531
+1,520,502
+497,465
+583,687
+38,971
+Loans and advances to customers
+558,381
+13
+7,308
+133,647
+51,889
+301,382
+64,142
+institutions
+Amounts due from banks and other financial
+682,500
+539,350
+1,863
+223
+140,809
+931,481
+5,528,249
+60. Risk management (continued)
+Chapter VIII Financial Statements
+Total liabilities
+255,801
+2,752
+203
+258,756
+Other liabilities (note (ii))
+27,519
+89,565
+69,617
+35,587
+222,288
+Debt securities issued
+1,178
+7,650
+3,091
+1,094
+13,013
+Lease liabilities
+59,470
+73
+5,231
+3,006
+67,780
+liabilities)
+(including derivative financial
+Financial liabilities at FVTPL
+3,799
+1,828
+31,365
+10,501
+1,111,583
+9,184,674
+Annual Report 2023 (H share)
+6,496,614
+1,227,282
+China Merchants Bank
+The above-mentioned interest rate sensitivity analysis shows the changes in net interest income and equity
+in the next 12 months under the assumption of changes in interest rates in the above table. As the actual
+situation and assumptions may be different, the actual changes in the Group's net interest income and
+equity caused by the increase or decrease in interest rates may be different from the results of this sensitivity
+analysis.
+4,118
+9,477
+8,586
+4,412
+(4,412)
+(8,462)
+(4,118)
+(9,319)
+Down by 25
+Up by 25
+Down by 25
+Up by 25
+Change in interest rates (in basis points)
+(Decrease)/increase in net interest income
+(Decrease)/increase in equity
+2022
+2023
+The Group uses sensitivity analysis to measure the potential effect of changes in interest rates on the
+Group's net interest income and equity. The following table sets forth the results of the Group's interest rate
+sensitivity analysis on the assets and liabilities as at 31 December 2023 and 31 December 2022.
+Sensitivity analysis
+Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities"
+respectively.
+(ii)
+For loans and advances to customers, the "3 months or less" category includes overdue amounts as at 31 December 2023
+and 31 December 2022 net of allowances for impairment losses. Overdue amounts represent loans of which the whole or
+part of the principals or interests were overdue.
+Notes: (i)
+103,725
+1,161,435
+236,122
+2,404,365
+(2,951,409)
+954,238
+Asset-liability gap
+319,070
+61,963
+1,079,745
+1,298,096
+6,414
+418,055
+52,044
+liabilities)
+(including derivative financial
+Financial liabilities at FVTPL
+180,029
+51,967
+7,535,742
+49,807
+160,496
+361,242
+6,964,197
+Deposits from customers
+4,443
+13,704
+1,087,095
+5,507
+3,961
+95,258
+982,369
+financial institutions
+amounts due to banks and other
+Borrowing from central banks and
+Liabilities
+243,502
+82,709
+10,138,912
+54,193
+217,081
+574,949
+15,280
+9,292,689
+421
+67,780
+39,469
+33,483
+884,264
+Net position
+199,228
+77,895
+57,171 9,184,674
+177,612
+541,466
+8,408,425
+Total
+13,397
+1,619
+271,769
+917
+11,944
+11,239
+247,669
+Other liabilities (note (i))
+886
+8,408
+222,288
+905
+790
+58,447
+162,146
+Debt securities issued
+473
+2,197
+35
+(2,978)
+Total
+13,653
+6,039
+602,742
+2,170
+2,766
+41,978
+555,828
+banks
+Cash and balances with central
+Assets
+HKD
+USD
+Main original currency
+Total
+Other
+HKD
+USD
+RMB
+In RMB Equivalent
+2022
+(3) Assets and liabilities by original currency are shown as follows: (continued)
+Foreign exchange risk (continued)
+(i)
+Market risk (continued)
+(b)
+60. Risk management (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+270
+3,103
+3,716
+Amounts due from banks and other
+491,188
+346,100
+3,544
+3,313
+94,908
+244,335
+Other assets (note (i))
+34,920
+27,073
+2,763,222
+9,233
+31,130
+188,200
+2,534,659
+derivative financial assets)
+Financial investments (including
+176,812
+21,433
+5,796,546
+23,246
+157,628
+148,993
+5,466,679
+Loans and advances to customers
+24,951
+14,511
+630,302
+16,000
+22,244
+100,870
+financial institutions
+133,899
+954,238
+13
+According to the business practices and market risk governance organisation structure, the Group establishes
+the trading book market risk limits management system. A top level limit is set based on the risk appetite
+determined by the Board of Directors, and is transmitted from top to bottom level by level. Within the
+scope of their authorisation, management departments at all levels allocate and set limits according to risk
+characteristics, product types and trading strategies, etc. The business departments carry out the business
+according to the authorisation and limits requirements, and the supervisory and administrative departments
+at all levels continuously monitor and report according to the limits management regulations.
+Trading book (continued)
+(1)
+Interest rate risk (continued)
+(ii)
+Market risk (continued)
+(b)
+60. Risk management (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+272
+271
+The trading book market risk governance organisation structure defines the responsibilities, division of labour
+and reporting lines of the Board of Directors, Risk and Capital Management Committee under the Board of
+Directors, senior management and relevant departments of the Bank, and safeguards the achievement of
+management objectives. The Market Risk Management Department is responsible for the Group's trading
+book market risk, and undertakes the task of risk policy formulation and management.
+According to the basic principles of risk management, the Group has built and continuously improved the
+market risk management system, and established the management process of market risk identification,
+measurement, monitoring, control and reporting, covering interest rate risk, exchange rate risk, commodity
+and other risks involved in the trading book business. Under the market risk preference formulated by the
+Board of Directors, the Group manages the trading book by clearly identifying, accurately measuring and
+effectively managing the trading book market risk, to ensure that the trading book risk exposure is within an
+acceptable range and achieves a reasonable balance of risk and return. The Group constantly improves the
+risk-adjusted return level to maximise the shareholders' value.
+Trading book
+(1)
+Interest rate risk arises from unfavourable changes in interest rates and maturity profiles which may result in loss to
+the income and decline in market value of financial instruments and positions held by the Group.
+Interest rate risk
+Actual changes in the Group's net profit and equity resulting from increases or decreases in foreign exchange
+rates may be different from the results of this sensitivity analysis.
+284
+(284)
+334
+(334)
+(Decrease)/increase in equity
+64
+(64)
+101
+(101)
+The trading book market risk management adopts the scale index, stop loss index, sensitivity index, value at
+risk index, stress test index and other risk measurement indices as the limits index, and sets the limit value
+by comprehensively considering the risk appetite, risk tolerance, business operation strategy, risk return,
+management conditions and other factors.
+(Decrease)/increase in net profit
+The Group uses valuation, sensitivity analysis, value-at-risk analysis, stress test and other measurement
+methods to identify and quantify risk factors in the interest rate market. The Group applies the market
+risk measurement model in its daily risk management and takes market risk measurement as the basis for
+business planning, resource allocation, financial market business operation and risk management.
+Banking book
+558,381
+financial institutions
+Amounts due from banks and other
+23,719
+658,781
+682,500
+Cash and balances with central
+banks
+interest
+bearing
+Over
+5 years
+Over 1 year
+to 5 years
+Non-
+Over 3
+months
+to 1 year
+3 months
+or less
+(include
+overdue)
+Total
+2023
+Assets
+(3) The following tables indicate the expected next repricing dates (or maturity dates whichever are
+earlier) for assets and liabilities at the end of the reporting period.
+Interest rate risk (continued)
+(ii)
+Market risk (continued)
+(b)
+60. Risk management (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+The Group has mainly adopted scenario simulation analysis, re-pricing exposure analysis and duration analysis
+for the regular measurement and analysis of interest rate risk under the banking book. Stress test is a form
+of scenario simulation used to assess the changes in net interest income at risk and economic value of equity
+indicators when there is an extreme fluctuation in interest rates. The Group measures and monitors the
+interest rate risk of banking book through the asset-liability management system, and the main models and
+parameter assumptions used in the measurement process are independently verified before being adopted
+and are regularly reviewed and verified after being adopted. The various indicators of interest rate risk during
+the reporting period showed that the interest rate risk of banking book of the Bank was generally stable and
+stay within the set limits.
+The preference of the Group in respect of the interest rate risk in the banking book is prudent. The Group
+establishes a banking book interest rate risk limit management system based on the actual business and
+the banking book interest rate risk governance structure. The quantitative index of risk appetite set by the
+Board of Directors is the highest level limit, which is transmitted through the limit level from top to bottom
+and level by level. Within the scope of their authorisation, all levels set limits and continuously monitor and
+report according to risk tolerance, business operation strategy and risk management objectives. The Group
+formulates interest rate risk management strategies and regularly tracks and reviews them based on risk
+measurement and monitoring results and in combination with macroeconomic and interest rate environment.
+The key measures for risk management of the Group include the adjustment in business volume, duration
+structure and interest rate structure of on-balance sheet asset and liability business and off-balance sheet
+derivative to offset risk exposure.
+The Group's governance and management framework specifies the responsibilities, division of labor
+and reporting lines of the Board of Directors, senior management, designated committees and relevant
+departments to ensure the effectiveness of interest rate risk management. Interest rate risk of the banking
+book is managed by the Asset and Liability Management Department of the Head Office. Internal Audit
+Department of the Head Office is responsible for independent audit.
+According to the external regulatory requirements and the internal banking book interest rate risk
+management policy, the Group has built and continuously improved the banking book interest rate risk
+management system, established the management process of interest rate risk identification, measurement,
+monitoring, control and reporting, and covered all on- and off-balance sheet business of the Bank. The Group
+clearly identifies, accurately measures and effectively manages the interest rate risk of the banking book
+under the interest rate risk appetite of the banking book formulated by the Board of Directors to ensure that
+the net interest income (NII) and the economic value of shareholders' equity (EVE) increase steadily within the
+acceptable range of the banking book risk.
+(2)
+4,814
+Up by 1%
+Up by 1%
+(32,690)
+29,143
+- net currency option position
+(21,831)
+(42,335)
+(582,326)
+(14,878)
+(19,462)
+(294,290)
+(253,696)
+- forward sold
+29,623
+41,486
+616,620
+20,844
+26,409
+288,388
+280,979
+- forward purchased
+Derivatives (nominal amounts):
+24,634
+11,885
+2,575,130
+14,504
+21,961
+82,618
+2,456,047
+Credit commitments (note (ii))
+Off-balance sheet position:
+(10)
+Down by 1%
+41
+(4,703)
+Down by 1%
+Change in foreign currency exchange rate
+2022
+2023
+Under the existing managed floating exchange rate regime, the Group uses sensitivity analysis to measure
+the potential effect of changes in foreign currency exchange rates on the Group's net profit and equity. The
+following table sets forth the results of the Group's foreign exchange risk sensitivity analysis on the assets
+and liabilities of all foreign currencies involved at 31 December 2023 and 31 December 2022.
+(4)
+(ii)
+Sensitivity analysis
+Foreign exchange risk (continued)
+(i)
+Market risk (continued)
+(b)
+60. Risk management (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
+Credit commitments generally expire before they are drawn down, therefore the above net position does not represent the future
+cash outflows.
+(!!)
+(i)
+Notes:
+7,781
+(5,552)
+30,778
+6,007
+6,937
+(38,592)
+56,426
+Total
+(11)
+(3,516)
+28,673
+44,274
+3,182,883
+28,673
+23,672
+2,350,857
+2,267,026
+1,373,493 1,598,622
+539,585 1,708,061
+184,830 159,063 408,936
+56,151 134,875
+134,391
+2,676
+530,575
+526,145
+- Financial investments at FVTPL
+2,676
+3,758,609
+3,164,150
+Financial investments
+602,390
+38,971
+6,242,060 7,530,562
+Loans and advances to customers
+13
+7,889
+52,393 136,751
+301,674
+64,150
+562,870
+558,381
+financial institutions
+Amounts due from banks and other
+539,350
+1,863
+2,316
+223
+156,588
+9,024
+20,884
+15,314
+11,445
+31,314
+90,873
+90,873
+Other assets
+19,649
+19,649
+19,649
+at FVTOCI
+- Equity investments designated
+10
+339,046
+504,793
+140,137
+52,440
+16,810
+1,053,236
+889,736
+- Debt investments at FVTOCI
+2,306
+1,222,706
+50,472 133,924 712,112
+33,629
+2,155,149
+1,728,620
+cost
+- Debt investments at amortised
+36,870
+1,975
+55
+140,809
+Notes:
+954,238
+29,206
+2,788,279 793,520
+33,623 882,575 1,379,802
+286,291
+(5,239,058)
+(Short)/long position
+9,184,674
+90,575
+1,122,739 1,273,510
+571,061
+692,538
+5,434,251
+Total liabilities
+258,756
+242
+28,868
+23,694
+19,358
+26,774
+159,820
+Other liabilities (note (iii))
+222,288
+27,519
+89,565
+73,379
+27,886
+3,939
+(i)
+255
+(ii)
+For financial investments at FVTPL included in financial investments, their maturity dates do not represent the Group's intention to hold them
+to maturity.
+682,500
+682,500
+banks
+Cash and balances with central
+Non-derivative financial assets
+Indefinite Overdue
+Over
+5 years
+Over
+1 year
+to 5 years
+3 months
+to 1 year
+3 months
+1 month to
+Within
+1 month
+Repayable
+on demand
+Total
+Carrying
+amount
+Over
+Over
+2023
+The following table provides an analysis of the contractual undiscounted cash flow of the non-derivative financial
+assets, non-derivative financial liabilities, and loan commitments of the Group as at the end of the reporting period.
+The Group's actual cash flows on these instruments may vary significantly from this analysis.
+Liquidity risk (continued)
+(c)
+60. Risk management (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+278
+277
+Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
+(iii)
+For cash and balances with central banks, the amounts with indefinite maturities represent statutory deposit reserve and fiscal deposit
+balances.
+Debt securities issued
+427
+4,485
+Carrying
+Over
+Over
+Over
+2022
+Liquidity risk (continued)
+(c)
+60. Risk management (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+1,689,252 1,689,252
+Gross loan commitments
+67,080
+1,644,097
+768,074 1,746,221
+856,009
+9,827,567 10,150,110 5,068,629
+Total
+416
+31,439
+44,377
+18,080
+30,287
+50,536
+175,135 175,135
+Other liabilities
+7,938
+53,672
+Repayable
+84,324
+Within
+3 months
+85,088
+99,900
+2,316
+369,164
+62,467
+631,756
+630,302
+financial institutions
+Amounts due from banks and other
+535,486
+1,201
+66,055
+602,742
+602,742
+banks
+Cash and balances with central
+Non-derivative financial assets
+Overdue
+Indefinite
+5 years
+to 5 years
+to 1 year
+3 months
+1 month
+on demand
+Total
+amount
+Over
+1 year
+1 month to
+5,029
+26,108
+182,443
+Borrowing from central banks and
+and lease liabilities
+Non-derivative financial liabilities
+Overdue
+Indefinite
+5 years
+to 5 years
+to 1 year
+3 months
+1 month
+Total on demand
+Over
+1 year
+Over
+Over
+3 months
+1 month to
+Within
+Repayable
+Carrying
+amount
+Over
+2023
+30,473
+3,949,919 573,052
+3,650,383
+2,276,495
+766,578
+1,100,594
+10,737,964 12,625,414 277,920
+Total
+amounts due to banks and other
+10,401
+financial institutions
+449,843
+174,764
+Debt securities issued
+1,280
+8,461
+2,880
+457
+13,664
+12,675
+Lease liabilities
+19,617
+7,146
+2,996
+1,053
+4,696
+8,566
+44,074
+43,958
+Financial liabilities at FVTPL
+29,936
+1,496,187
+1,360,396
+554,142
+434,432
+8,155,438 8,434,777 4,559,684
+7,893
+47,192
+251,248
+168,105
+375,736
+1,265,597 1,300,017
+13,013
+586
+7,650
+31,190
+145,327
+Other liabilities (note (iii))
+174,764
+7,376
+50,176
+82,023
+25,288
+9,901
+Debt securities issued
+12,675
+1,082
+18,236
+7,757
+578
+454
+Lease liabilities
+61,401
+19,662
+12,077
+8,601
+4,731
+7,753
+8,577
+derivative financial liabilities)
+Financial liabilities at FVTPL (including
+2,804
+45,907
+31,803
+416
+Over
+1 month to
+Within
+Repayable
+2022
+Liquidity risk (continued)
+(c)
+60. Risk management (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+1,085,729
+30,473
+824,283
+2,973,124
+1,505,577
+(34,003) 353,805
+(4,798,085) 230,555
+(Short)/long position
+9,942,754
+64,372
+1,519,101
+1,684,329
+748,740
+848,329
+5,077,883
+Total liabilities
+272,879
+8,155,438
+28,991
+1,375,860
+1,301,368
+- Equity investments designated at FVTOCI
+889,736
+10
+258,481
+444,953
+123,446
+48,148
+14,698
+- Debt investments at FVTOCI
+1,728,620
+2,306
+1,003,589
+554,608
+96,841
+41,940
+29,336
+- Debt investments at amortised cost
+544,878
+9,024
+36,026
+159,012
+59,690 140,317
+138,053
+1,178
+2,756
+derivative financial assets)
+-Financial investments at FVTPL (including
+19,649
+Over
+19,649
+33,120
+542,828
+432,094
+4,474,297
+Deposits from customers
+1,265,597
+6,845
+41,428
+157,079 243,626
+366,937
+449,682
+due to banks and other financial institutions
+Borrowing from central banks and amounts
+11,028,483
+30,473
+824,283
+3,024,678 3,037,496
+1,078,884
+279,798
+Total assets
+362,659
+4,485
+256,260
+5,155
+15,266
+21,518
+15,382
+11,473
+Other assets (note (iii))
+3 months to
+714,737 2,038,134
+Over
+793,520
+2,653,312
+2,005,314
+604,684
+978,829
+195,193
+Total assets
+346,100
+4,154
+238,895
+5,798
+15,859
+18,475
+15,526
+10,932
+36,461
+3,091
+Other assets (note (iii))
+13,416
+13,416
+- Equity investments designated at FVTOCI
+771,271
+19
+210,303
+138,723 387,873
+28,329
+6,024
+29,206 10,138,912
+- Debt investments at FVTOCI
+Borrowing from central banks and amounts
+515,446
+Lease liabilities
+503
+Over 1 year
+591
+67,780
+20,131
+11,457
+11,555
+4,271
+7,416
+12,950
+derivative financial liabilities)
+Financial liabilities at FVTPL (including
+7,535,742
+35,082
+1,115,153
+861,631
+393,284
+384,557
+4,746,035
+Deposits from customers
+1,087,095
+6,423
+20,817
+149,389
+125,671
+269,349
+due to banks and other financial institutions
+1,536,397
+2,878,854
+904,281
+15,072
+13
+630,302
+Loans and advances to customers
+26,008
+499,842
+1,626,514
+99,288
+1,706,378
+5,796,546
+Financial investments and derivative financial
+assets (note (ii))
+4,213
+99,154
+105,394
+372,002
+24,264
+995,867
+84,572
+62,456
+1 month
+3 months
+1 year
+769
+to 5 years
+5 years
+Indefinite
+368,901
+Overdue
+Cash and balances with central banks (note (i))
+66,055
+1,201
+535,486
+602,742
+Amounts due from banks and other financial
+institutions
+Total
+1,166,665
+399,192 1,514,348
+788
+449,002
+133,748
+35,043
+13,554
+- Debt investments at amortised cost
+19,139
+5,723
+52,081
+158,992
+99,531
+on demand
+442,138
+- Financial investments at FVTPL (including
+derivative financial assets)
+4,213
+2,763,222
+79,576
+42,022
+16,175
+390,702
+- Debt securities
+15,497
+187,349
+4,714
+359
+411,591
+203,205
+- Long position in precious metal contracts
+60. Risk management (continued)
+108
+- Equity investments
+494
+392
+3,493
+4,379
+- Fund investments
+76
+199,665
+The following tables present the fair value information and the fair value hierarchy, at the end of the reporting
+period, of the Group's assets and liabilities which are measured at fair value on a recurring basis at each reporting
+date: (continued)
+798
+Financial investments measured at FVTPL
+108
+Total
+200,539
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+286
+285
+61,401
+1,825
+38,649
+20,927
+17,443
+17,443
+22,439
+1,825
+20,614
+(g) Fair value information (continued)
+(ii) Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+2022
+5,179
+Level 1
+Level 2
+Level 3
+Assets
+- Wealth management products
+Loans and advances to customers at FVTOCI
+2,543
+5,179
+Total
+157,118
+514,051
+2,862
+1,580,735
+100,430
+614,481
+7,390
+117,525
+13,416
+1,855,378
+7,709
+Liabilities
+Financial liabilities held for trading
+17,917
+330
+18,247
+- Financial liabilities related to precious metal
+17,634
+17,634
+- Short position on bonds
+283
+Financial liabilities designated at FVTPL
+3,164
+2,543
+Equity investments designated at FVTOCI
+643,518
+- Other
+753
+64
+817
+Financial investments designated at FVTPL
+948
+10,928
+11,876
+- Debt securities
+948
+10,928
+11,876
+Derivative financial assets
+18,671
+18,671
+Loans and advances to customers at FVTPL
+3
+4,991
+4,994
+Debt investments at FVTOCI
+136,831
+780,349
+212
+- Other
+Total
+246,526
+359
+261,808
+- Long position in precious metal contracts
+1,604
+1,604
+- Equity investments
+1,752
+- Fund investments
+32
+341
+241,091
+2,392
+4,485
+1,181
+242,304
+- Wealth management products
+2,729
+2,729
+108
+228
+336
+14,923
+513,266
+4,160
+490,795
+Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity
+can access at the measurement date;
+Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset
+or liability, either directly or indirectly;
+•
+Level 3 inputs are unobservable inputs for the asset or liability.
+The Group recognises transfers among levels of the fair value hierarchy at the end of the reporting period during
+which the transfer takes place.
+The Group's assets and liabilities measured at fair value are measured on a recurring basis. The Group does not have
+assets nor liabilities measured at fair value on a non-recurring basis.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+60. Risk management (continued)
+Financial investments designated at FVTPL
+(g) Fair value information (continued)
+The following tables present the fair value information and the fair value hierarchy, at the end of the reporting
+period, of the Group's assets and liabilities which are measured at fair value on a recurring basis at each reporting
+date:
+2023
+Level 1
+Level 2
+Level 3
+Total
+Assets
+Financial investments measured at FVTPL
+- Debt securities
+330
+20,541
+18,311
+(ii) Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis
+756
+12,123
+12,879
+19,649
+2,059,238
+Liabilities
+Financial liabilities held for trading
+15,748
+380
+16,128
+- Financial liabilities related to precious metal
+15,748
+15,748
+7,338
+135,989
+- Short position on bonds
+380
+Financial liabilities designated at FVTPL
+5,179
+20,826
+1,825
+27,830
+- Certificates of deposit issued
+- Debt securities issued
+- Other
+Derivative financial liabilities
+380
+212
+1,753,307
+Total
+- Debt securities
+756
+12,123
+12,879
+Derivative financial assets
+18,733
+18,733
+Loans and advances to customers at FVTPL
+66,701
+3,729
+169,942
+70,430
+140,869
+758,233
+899,102
+Loans and advances to customers at FVTOCI
+404,417
+120,762
+525,179
+Equity investments designated at FVTOCI
+10,006
+2,305
+Debt investments at FVTOCI
+613
+Risk-adjusted discount
+30,897
+(3)
+Valuation techniques used and the qualitative information of key parameters for recurring fair value
+measurements categorised as Level 3: (continued)
+Fair value
+as at
+31 December
+2022
+Valuation techniques
+Unobservable inputs
+Equity investments designated at
+2,725
+Market approach
+FVTOCI
+Equity investments designated at
+FVTOCI
+101
+Discounted cash flow
+approach
+Equity investments designated at
+FVTOCI
+4,564
+Net asset value approach
+Loans and advances to customers
+4,991
+Discounted cash flow
+Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+at FVTPL
+(ii)
+60. Risk management (continued)
+- Other
+Financial liabilities designated at
+44
+1,825
+FVTPL
+Discounted cash flow
+Net fund value approach
+Market approach
+Discounted cash flow
+approach
+Net fund value approach
+Net fund value approach
+Liquidity discount
+Risk-adjusted discount
+rate, cash flow
+Net assets, liquidity
+discount
+rate
+Net assets
+Liquidity discount
+Risk-adjusted discount
+rate, cash flow
+Net assets
+Net assets, liquidity
+discount
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+(g) Fair value information (continued)
+approach
+rate
+Loans and advances to customers
+Net fund value approach
+Net assets
+Liquidity discount
+Net assets
+rate
+Risk-adjusted discount
+discount
+rate, cash flow
+Net assets, liquidity
+Liquidity discount
+Risk-adjusted discount
+Discounted cash flow
+approach
+FVTPL
+Net fund value approach
+2,647
+Net fund value approach
+64
+Financial liabilities designated at
+- Other
+Market approach
+1
+•
+- Fund investments
+797
+- Fund investments
+approach
+Discounted cash flow
+100,430
+at FVTOCI
+Discounted cash flow
+approach
+Liquidity discount
+Risk-adjusted discount
+rate, cash flow
+Net assets, liquidity
+discount
+Risk-adjusted discount
+Risk-adjusted discount
+rate
+184
+Financial investments measured at
+- Equity investments
+2,950
+Market approach
+- Equity investments
+528
+- Equity investments
+15
+Net asset value approach
+- Debt securities
+359
+FVTPL
+- Other
+1,180
+1
+- Fund investments
+(1)
+(2) Valuation techniques used and the qualitative information of key parameters for recurring fair value
+measurement categorised as Level 2
+Fair value of RMB denominated bonds whose value is available on China Bond website on the valuation date
+is measured using the latest available valuation results.
+Fair value of foreign currency bonds without quoted prices in an active market is measured by using the
+comprehensive valuations provided by Bloomberg, etc.
+Fair value of foreign exchange forwards contracts in derivative financial instruments is measured by
+discounting the differences between the contract prices and market future prices of the foreign exchange
+forwards contracts. The discount rates used are the applicable RMB denominated swap yield curve as at the
+end of the reporting period.
+Fair value of option contracts such as foreign exchange options, commodity options and equity options are
+measured by using the Black-Scholes model, based on market data such as risk-free interest rate, underlying
+market prices and price volatility of foreign exchange, commodities, and equity contract. The above market
+data used are quoted price in an active market, provided by Bloomberg, Refinitiv, Wind and other market
+information providers.
+Fair value of interest rate swaps, foreign exchange swaps, and non-option commodity contracts in derivative
+financial instruments is measured by discounting the expected receivable or payable amounts under the
+assumption that these swaps had been terminated at the end of the reporting period. The discount rates
+used are the related currency denominated swap yield curve as at the end of reporting period.
+Observable quoted price in market is used as the basis of determining the value of equity investments
+measured at FVTPL, investment funds and wealth management products.
+The fair value of discounted bills at FVTOCI and at FVTPL in the Chinese mainland is measured based on
+the rate of rediscounted bills announced by the Shanghai Commercial Paper Exchange Corporation Ltd.
+The Group uses 10-day average discount rate as the basis for calculating the value of discounted bills; or
+is measured by discounted cash flow approach. The discount rates used are determined by factors such as
+credit rating of the loan customer provided by S&P, Moody's or Fitch, customer industry, term to maturity of
+the loan, loan currency and the issuer credit spread.
+The fair value of equity investments designated at FVTOCI is measured by using the comprehensive valuations
+on Bloomberg or discounted cash flow approach using the relevant yield curve of China Bond at the end of
+the reporting period.
+The fair value of certificates of deposit issued is measured by using the comprehensive valuations on
+Bloomberg.
+The fair value of "Other" under financial investments measured at FVTPL is measured based on the net asset
+values.
+The fair value of other financial liabilities designated at FVTPL is measured based on the net asset values of
+the funds, determined with reference to observable (quoted) prices of underlying investment portfolio and
+adjustments of related expenses.
+287
+288
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+60. Risk management (continued)
+(g) Fair value information (continued)
+(ii)
+Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+(ii)
+(g) Fair value information (continued)
+60. Risk management (continued)
+- Certificates of deposit issued
+383
+383
+- Debt securities issued
+7,709
+7,709
+- Other
+20,158
+2,647
+22,805
+Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+Derivative financial liabilities
+18,636
+Total
+25,626
+39,507
+2,647
+67,780
+During the years ended 31 December 2023 and 2022, there were no significant transfers of financial instruments
+between Level 1 and Level 2 of the fair value hierarchy.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+18,636
+2,647
+(3)
+Fair value
+rate, cash flow
+Net assets, liquidity
+discount
+Risk-adjusted discount
+Risk-adjusted discount
+rate
+Financial investments measured at
+FVTPL
+- Equity investments
+1,520
+Market approach
+- Equity investments
+642
+approach
+- Equity investments
+230
+Net asset value approach
+- Debt securities
+359
+Discounted cash flow
+approach
+- Fund investments
+Risk-adjusted discount
+Discounted cash flow
+approach
+at FVTOCI
+120,762
+as at
+31 December
+2023
+Valuation techniques
+Unobservable inputs
+Equity investments designated at
+FVTOCI
+2,742
+Market approach
+Liquidity discount
+Equity investments designated at
+FVTOCI
+Valuation techniques used and the qualitative information of key parameters for recurring fair value
+measurements categorised as Level 3:
+71
+Equity investments designated at
+FVTOCI
+4,525
+Net asset value approach
+Loans and advances to customers
+3,729
+Discounted cash flow
+at FVTPL
+approach
+rate
+Loans and advances to customers
+Discounted cash flow
+approach
+The level in which fair value measurement is categorised is determined by the level of the fair value hierarchy of the
+lowest level of input that is significant to the entire fair value measurement. The levels are defined as follows:
+(123)
+The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party
+information, such as broker quotes or pricing services, is used to determine fair value, then the valuation team
+assesses the evidence obtained from the third parties to support the conclusion that such valuation meets the
+requirements of IFRSS, including the classification of levels in the fair value hierarchy.
+63,675
+293
+63,968
+(876)
+Commodity trading swaps
+7,769
+Credit default swaps
+649
+327
+52
+8,148
+375
+(354)
+640
+640
+(70)
+Fair value hedge derivatives
+Interest rate derivatives
+513
+2,838
+3,351
+Equity options written
+(123)
+1,110
+35
+1,949
+3,503
+5,452
+Options
+201,197
+301,816
+9,108
+512,121
+2,464
+(2,068)
+Other derivatives
+135,119
+1,553
+52
+35
+136,759
+1,485
+(1,300)
+Equity options purchased
+63,675
+293
+64,003
+Interest rate swaps
+513
+2,838
+8,696
+105
+(38)
+8,696
+105
+(38)
+Derivatives managed in
+conjunction with financial
+instruments designated at FVTPL
+Interest rate derivatives
+213
+213
+(1)
+Interest rate swaps
+213
+213
+(1)
+Total
+1,125,316
+1,528,318
+727,386
+369
+369
+2,890
+3,685
+3,351
+Currency derivatives
+I
+753
+7,529
+8,282
+123
+(295)
+Foreign exchange swaps
+753
+Futures
+7,529
+123
+(295)
+Cash flow hedge derivatives
+Interest rate derivatives
+1,752
+3,685
+2,890
+369
+Interest rate swaps
+1,752
+8,282
+(7,824)
+8,853
+851,510
+Since 1 January 2013, the Group has calculated its capital adequacy ratio in accordance with the former CBIRC's
+Administrative Measures on the Capital of Commercial Banks (Provisional) and other relevant regulations. On 18
+April 2014, former CBIRC approved the Bank to adopt the Advanced Measurement Approach. Within the approved
+scope, the Bank could calculate corporation and financial institutions risk exposure using the Foundation Internal
+Ratings-Based Approach, retail risk exposure using the Advanced Internal Ratings-Based Approach, market risk using
+the Internal Model-Based Approach, and operational risk using the Standardised Measurement Approach. At the
+same time, former CBIRC implemented a transition period for commercial banks that were approved to adopt the
+Advanced Measurement Approach. During the transition period, commercial banks should use both the Advanced
+Measurement Approach and other approaches to calculate capital adequacy ratios, and comply with the capital floor
+requirements.
+The Group's capital management focuses on the capital adequacy ratio management. The capital adequacy
+ratio reflects the Group's capability of sound operations and risk resistance. The Group's capital adequacy ratio
+management's objective is to carefully determine capital adequacy ratio, as legally required by regulators, according
+to actual risk profiles and with reference to capital adequacy ratio levels of globally leading market peers and the
+Group's operating conditions.
+The Group adopts the scenario simulation and stress testing methods to forecast, plan and manage its capital
+adequacy ratio with considerations of factors such as strategic development planning, business expansion status,
+and risk movement trends.
+(f) Use of derivatives
+Derivatives include forwards, swaps and option transactions undertaken by the Group in the foreign exchange and
+interest rate markets.
+The Group enters into interest rate, foreign currency and other financial derivative transactions for treasury business
+and its assets and liabilities management purpose. The Group's derivatives can be divided into financial instruments
+that are held for fair value hedge and cash flow hedging purpose and that are at fair value through profit or loss.
+The Group formulates appropriate hedging strategies and uses proper tools in light of the risk profile of interest
+rates or foreign exchange rates associated with its assets and liabilities, as well as its analysis and judgement
+regarding future movements of interest rates or foreign exchange rates.
+The Group is exposed to foreign exchange risk when assets or liabilities are denominated in foreign currencies. Such
+risk can be offset through the use of foreign exchange forwards or foreign exchange options.
+281
+282
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+60. Risk management (continued)
+(f)
+Use of derivatives (continued)
+In cash flow hedges, the Group uses interest rate swaps as hedging instruments to hedge the interest rate risks
+arising from RMB loans and interbank assets or liabilities. In fair value hedge, the Group uses interest rate swaps as
+hedging instruments to hedge the interest rate risks arising from bond investments measured at fair value through
+other comprehensive income.
+The following tables provide an analysis of the notional amounts and the corresponding fair values of derivatives
+of the Group by remaining maturities at the end of the reporting period. The notional amounts of the derivatives
+indicate the transaction volume that has not been delivered at the end of the reporting period, and do not represent
+the amounts at risk.
+Derivatives at fair value through
+2023
+Notional amounts with remaining life
+Fair value
+The Group's capital adequacy ratio calculation covers the Bank and its subsidiaries. The Bank's capital adequacy ratio
+calculation covers all branches of the Bank. As at 31 December 2023, the Group's subsidiaries that were within the
+capital adequacy ratio calculation included: CMB WLB, CMBIC, CMBFL, CMFM, CMBWM, CIGNA & CMAM and CMB
+Europe S.A.
+Capital management (continued)
+Risk management (continued)
+(e)
+China Merchants Bank
+The Group manages its capital structure and adjusts it based on the economic condition and the risk characteristics
+of its operations. To maintain or adjust its capital structure, the Group may modify its profit distribution policy,
+issue or repurchase shares, additional tier-1 capital instruments, eligible tier-2 capital instruments, and convertible
+debentures. The Group's management regularly monitors capital adequacy ratio under the approaches stipulated by
+regulators. The Group and the Bank submit required information to the NAFR every quarter.
+Reasonably use all kinds of capital instruments, continue to upgrade capital strengths, improve capital
+structures, raise capital quality, lower capital costs, and create the best returns for shareholders.
+Put in place an economic capital-centred banking value management system by fully applying various risk-
+specific quantitative deliverables, enhance decision-making processes and management application regimes,
+strengthen capital restraint and capital incentive mechanisms, reinforce capabilities to facilitate customer
+pricing and decision-making, and increase capital deployment efficiency;
+Comply with capital regulatory requirements, perform procedures to assess internal capital adequacy, openly
+disclose information related to capital management, fully cover all risks and ensure safe operation of the
+entire group;
+Keep capital adequacy ratios at reasonable levels, satisfy capital-specific regulatory provisions and policy
+requirements on an ongoing basis, and maintain a solid capital base in support of its business expansion,
+social responsibility and strategic planning implementation to achieve a comprehensive, coordinated and
+sustainable growth;
+The objectives of the Group's capital management are to:
+(e) Capital management
+In view of the challenges from internal and external operations and management, the Group will, based on its risk
+appetite, continue to upgrade its risk management capabilities and strengthen operational risk monitoring and
+controls, in order to prevent and reduce operational risk losses.
+During the reporting period, through stepping up the identification, evaluation and monitoring of operational risk in
+key areas, and by focusing on process, policy, employee system, and existing problems of critical control segments,
+the Group further improves the risk management method, appraisal and assessment mechanism, and strengthens
+economic capital allocation mechanism with the goal of enhancing the ability and effectiveness of operational risk's
+management of the Group. All major indexes meet the requirements of the Group's risk preference.
+Within
+Operational risk arises from the loss due to deficiency in internal procedures, staffing or IT structure, as well as
+external events which have effect on operation, including legal risk but not strategy risk and reputation risk.
+(d)
+60. Risk management (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+280
+Net assets, liquidity
+discount
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+60.
+Operational risk
+6,232
+3 months
+Between
+1 year
+and 5 years
+10
+Currency derivatives
+664,819
+717,287
+39,675
+1,199
+1,422,980
+11,692
+(10,372)
+Forwards
+35,148
+17,293
+257
+1,199
+53,897
+375
+(480)
+Foreign exchange swaps
+426,525
+394,675
+30,310
+10
+-
+Interest rate options
+1
+Over
+5 years
+Total
+Assets
+Liabilities
+profit or loss
+Interest rate derivatives
+323,413
+805,040
+676,727
+1,791
+Between
+3 months
+and 1 year
+Interest rate swaps
+805,030
+676,727
+1,791
+1,806,971
+1,806,787
+5,328
+5,327
+(5,314)
+(5,314)
+Bond futures
+174
+174
+323,239
+3,387,252
+18,733
+(17,443)
+100
+1,804
+709
+4,986
+182
+Interest rate options
+20
+20
+Derivatives managed in
+conjunction with financial
+instruments designated at FVTPL
+Interest rate derivatives
+Interest rate swaps
+Currency derivatives
+Foreign exchange swaps
+Total
+667,038
+1,068,990
+3,085
+717
+3,802
+2,373
+Interest rate swaps
+8
+182
+Fair value hedge derivatives
+Currency derivatives
+1,316
+781
+Foreign exchange swaps
+1,316
+781
+881
+2,097
+2,097
+3,085
+228
+(153)
+28
+(153)
+Cash flow hedge derivatives
+Interest rate derivatives
+2,393
+100
+1,804
+709
+5,006
+28
+(54)
+717
+728
+Total
+2023
+2,586
+2022
+1,500
+88
+137
+2,375
+1,242
+123
+121
+2,187
+2,410
+4,996
+3,687
+The Group has calculated the exposure of derivatives according to the Notice of the Measures on Default Risk
+Weighted Assets of Counterparties in Respect of Derivatives and the related requirements issued by the former
+CBIRC. These amounts have taken the effects of bilateral netting arrangements into account. The risk weighted
+amounts in respect of derivatives are calculated in accordance with the Administrative Measures on Capital of
+Commercial Banks (Provisional). The amounts within the scope approved by the former CBIRC in April 2014 are
+calculated using the Internal Ratings-Based Approach, and the Weighted Approach is adopted to calculate those
+amounts that are not eligible for the Internal Ratings-Based approach.
+(g)
+Fair value information
+(i)
+Methods of determining fair value of financial instruments
+Several of the Group's accounting policies and disclosure requirements stipulate the measurement of fair values, for
+both financial and non-financial assets and liabilities.
+The Group has established a control framework to govern the measurement of fair values. This includes a valuation
+team that takes the responsibility for overseeing all significant fair value measurements including the three levels of
+fair values.
+Credit valuation adjustment risk weighted assets
+Other derivatives
+Currency derivatives
+Interest rate derivatives
+728
+728
+728
+767,036
+6,661
+2,509,725
+18,671
+(47)
+(47)
+(69)
+3,802
+(69)
+There was no ineffective portion of cash flow hedges during the years ended 31 December 2023 and 2022.
+283
+284
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+60. Risk management (continued)
+(f) Use of derivatives (continued)
+The credit risk weighted amounts in respect of these derivatives are as follows:
+Default risk weighted assets of counterparties
+(18,636)
+When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible.
+Fair values are categorised into different levels in the fair value hierarchy based on the inputs used in the valuation
+techniques.
+640
+Credit default swaps
+6,246
+(6,062)
+Interest rate swaps
+60,013
+734,241
+735,046
+4,720
+1,534,020
+6,246
+(6,062)
+Bond futures
+409
+409
+Currency derivatives
+513,568
+329,319
+27,320
+1,198
+871,405
+11,348
+(11,449)
+1,534,429
+4,720
+735,046
+734,650
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+60. Risk management (continued)
+(f) Use of derivatives (continued)
+2022
+Notional amounts with remaining life
+Fair value
+Between
+Within
+Forwards
+3 months
+Between
+1 year
+and 5 years
+Over
+5 years
+Total
+Assets
+Liabilities
+Derivatives at fair value through
+profit or loss
+Interest rate derivatives
+60,013
+3 months
+and 1 year
+640
+21,443
+645
+34
+92,258
+867
+(856)
+Equity options purchased
+42,889
+57
+34
+42,980
+554
+Equity options written
+42,909
+57
+42,966
+(472)
+Commodity trading swaps
+5,266
+406
+5,672
+313
+(330)
+640
+520
+91,064
+Other derivatives
+1,198
+28,098
+487
+(328)
+Foreign exchange swaps
+347,432
+226,332
+17,724
+591,488
+9,263
+4,812
+(7,304)
+1,043
+81
+1,124
+Options
+143,650
+98,094
+8,951
+250,695
+1,598
+(3,817)
+Futures
+289
+Basis of determining the market prices for recurring fair value measurements categorised as Level 1
+Bloomberg etc. are used for financial instruments with quoted prices in an active market.
+Loans and advances to customers
+807
+(1,881)
+Borrowings from the central bank
+1,373
+(196)
+1,177
+Lease liabilities
+(26)
+(4)
+(30)
+Changes in interest expense
+Changes in net interest income
+18,977
+15,701
+6,819
+(19,267)
+25,796
+(3,566)
+The following table sets out the average balances, interest income/interest expense and annualised average yield/
+cost ratio of assets and liabilities items of the Group for the periods indicated.
+October to December 2023
+July to September 2023
+Annualised
+Annualised
+(in millions of RMB,
+Average
+Interest
+except for percentages)
+balance
+income
+(2,688)
+Debt securities issued
+3,557
+4,486
+20,263
+(17,624)
+2,639
+Investments
+15,434
+(406)
+15,028
+Balances with the central bank
+492
+1,003
+1,495
+Balances and placements with banks and other financial
+institutions
+average
+yield (%)
+(1,511)
+3,068
+Changes in interest income
+34,678
+(12,448)
+22,230
+Interest-bearing liabilities
+Deposits from customers
+21,247
+1,726
+22,973
+Deposits and placements from banks and other financial
+institutions
+(929)
+4,579
+Net increase
+(decrease)
+Average
+balance
+average
+yield (%)
+555,602
+10,018,381
+3,315
+2.37
+93,841
+3.72
+Annualised
+Annualised
+(in millions of RMB,
+except for percentages)
+Average
+balance
+Interest
+expense
+average
+cost ratio
+(%)
+average
+Average
+balance
+Interest
+cost ratio
+expense
+(%)
+Interest-bearing liabilities
+Deposits from customers
+8,116,797
+33,543
+1.64
+7,954,311
+32,811
+1.64
+Deposits and placements from
+3.68
+94,435
+10,194,712
+3.23
+Interest-earning assets
+Loans and advances to customers
+6,434,844
+66,170
+4.08
+6,317,543
+67,478
+4.24
+Investments
+2,611,336
+21,151
+3.21
+2,555,495
+Interest
+income
+20,487
+Balances with the central bank
+601,670
+2,657
+1.75
+589,741
+2,561
+1.72
+Balances and placements with
+banks and other financial
+institutions
+Total
+546,862
+4,457
+3.18
+banks and other financial
+Interest rate
+Loans and advances to customers
+557,031
+8,482
+1.52
+Balances and placements with banks
+and other financial institutions
+591,320
+16,557
+2.80
+644,938
+13,489
+2.09
+Total
+9,987,796
+375,610
+3.76 9,081,822
+353,380
+3.89
+Average
+Average
+(in millions of RMB,
+except for percentages)
+balance
+Average Interest
+expense
+cost ratio Average
+Interest
+cost ratio
+(%) balance
+1.70
+9,977
+586,797
+Balances with the central bank
+During the reporting period, the Group's net interest income amounted to RMB214.669 billion, representing a year-
+on-year decrease of 1.63%.
+The following table sets out the average balances, interest income/interest expense and average yield/cost ratio of
+assets and liabilities items of the Group for the periods indicated.
+2023
+2022
+(in millions of RMB,
+Average
+100.00
+Average
+Average
+except for percentages)
+balance
+income
+yield (%) balance
+expense
+Interest
+income
+yield (%)
+Interest-earning assets
+Loans and advances to customers
+6,299,905
+268,240
+Investments
+2,509,774
+80,836
+4.26 5,850,275
+3.22 2,029,578
+265,601
+4.54
+65,808
+3.24
+Average
+Volume
+(%)
+Deposits from customers
+510
+3.80
+Total
+9,322,842
+160,941
+1.73
+8,410,862
+135,145
+1.61
+Net interest income
+214,669
+218,235
+Net interest spread
+Net interest margin
+2.03
+2.15
+2.28
+2.40
+During the reporting period, the average yield of the interest-earning assets of the Group was 3.76%, representing
+a year-on-year decrease of 13 basis points; the average cost ratio of our interest-bearing liabilities was 1.73%,
+representing a year-on-year increase of 12 basis points; the net interest spread was 2.03%, representing a year-on-
+year decrease of 25 basis points and the net interest margin was 2.15%, representing a year-on-year decrease of 25
+basis points. For the analysis of the reasons behind the decrease in the net interest margin, please refer to 3.9.1 "Net
+interest margin" in this Chapter.
+25
+26
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+The following table sets forth the breakdown of changes in interest income and interest expense due to changes in
+volumes and interest rates of the Group for the periods indicated. Changes in volume were measured by changes
+in average balances, while changes in interest rates were measured by changes in the average interest rates; the
+changes in interest income and interest expense due to changes in both volumes and interest rates have been
+included in the amounts of changes in interest income and interest expense due to changes in volume.
+2023 compared to 2022
+Increase (decrease) due to
+(in millions of RMB)
+Interest-earning assets
+13,408
+3.77
+480
+12,718
+7,933,026
+128,809
+1.62 6,955,657
+105,836
+1.52
+Deposits and placements from banks
+and other financial institutions
+950,595
+19,866
+2.09
+996,819
+16,309
+1.64
+Interest-bearing liabilities
+Debt securities issued
+7,781
+3.24
+322,784
+9,662
+2.99
+Borrowings from the central bank
+186,340
+4,005
+2.15
+122,194
+2,828
+2.31
+Lease liabilities
+240,163
+institutions
+931,173
+5,268
+360
+2,963
+3,005
+120,991
+122,061
+3.2.8
+3
+Expected credit losses
+During the reporting period, the expected credit losses of the Group were RMB41.278 billion, representing a year-
+on-year decrease of 27.26%.
+The following table sets forth, for the periods indicated, the principal components of expected credit losses of the
+Group.
+(in millions of RMB)
+100.00
+Financial investments
+2023
+2022
+46,635
+45,157
+(218)
+3,879
+Amounts due from banks and other financial institutions
+(2,935)
+(3,284)
+Expected credit losses relating to financial guarantees and loan
+commitments
+(2,761)
+7,112
+Others
+Total expected credit losses
+32,319
+31,321
+15,720
+16,359
+2,476
+2,525
+-1.94
+124,409
+126,505
+-1.66
+Note:
+Fees and commissions from wealth management include income from agency distribution of funds, income from agency distribution of
+insurance policies, income from agency distribution of trust schemes, income from agency distribution of wealth management products,
+income from securities brokerage and income from agency distribution of precious metals. Fees and commissions from asset management
+mainly include the income from the issuance and management of various asset management products such as funds, wealth management and
+asset management plans of our subsidiaries, namely China Merchants Fund, CMB International Capital, CMB Wealth Management and CIGNA
+& CMAM. Commissions from custody businesses include income from basic asset custody services and value-added services. Others mainly
+include income from underwriting of bonds and equity, income from service fees from securitisation of credit assets, income from consultancy
+and advisory services and income from other intermediate businesses.
+27
+28
+China Merchants Bank
+Annual Report 2023 (H share)
+3.2.7
+557
+41,278
+Chapter III Management Discussion and Analysis
+During the reporting period, the Group's operating expenses amounted to RMB120.991 billion, representing a year-
+on-year decrease of 0.88%, among which staff costs amounted to RMB70.348 billion, representing a year-on-
+year decrease of 0.44%. Other operating expenses amounted to RMB50.643 billion³, representing a year-on-year
+decrease of 1.48%. The cost-to-income ratio of the Group was 32.97%, representing an increase of 0.08 percentage
+point as compared with the corresponding period of the previous year. The Group has maintained the scale of
+input in Fintech construction and key strategic businesses, reduced traditional costs with technological innovation,
+strengthened the management and control of input-output monitoring, and improved the efficiency of the resource
+usage. Furthermore, the Group adhered to cost management. Through various measures, the Group has further cut
+back on venue operating costs and daily expenses, and refined the allocation of expenses and resources so as to
+continuously promote the optimisation of cost structure.
+The following table sets forth, for the periods indicated, the principal components of the operating expenses of the
+Group.
+(in millions of RMB)
+Staff costs
+Depreciation, amortisation and rental expenses
+Other general and administrative expenses
+Allowances for insurance claims
+Taxes and surcharges
+Total operating expenses
+2023
+2022
+70,348
+70,657
+Operating expenses
+Total net non-interest income
+3,887
+According to the Recognition and Measurement Standards for Financial Instruments, the Group conducted
+impairment accounting for credit risk exposures on- and off-balance sheet and recognised the allowances for
+credit risk losses by using the expected credit loss model and the risk quantification parameters such as the
+probability of customer defaults and the loss given defaults, after taking into consideration the adjustments in
+macro perceptiveness. During the reporting period, the expected credit losses of loans and advances to customers
+of the Group were RMB46.635 billion, representing a year-on-year increase of RMB1.478 billion; the total expected
+credit losses relating to financial investment, amounts due from banks and other financial institutions and financial
+guarantees and loan commitments amounted to RMB-5.914 billion, representing a year-on-year decrease of
+RMB13.621 billion, which was due to, on the one hand, the change in the scale of assets, on the other hand,
+the relative stability of the asset quality, and the decrease in the risk of individual customers and asset collection,
+reversing the amount provided in the previous period. The expected credit losses relating to others amounted
+to RMB557 million, representing a year-on-year decrease of RMB3.330 billion, mainly due to the relatively large
+allowances for credit risk losses of assets such as lease receivable, fees receivable and other receivables in the
+corresponding period of the previous year.
+Investment securities and other financial assets
+Cash, precious metals and balances with
+3,209,473
+29.10
+2,787,066
+27.49
+the central bank (2)
+684,821
+6.21
+605,068
+5.97
+Inter-bank transactions (2)
+558,381
+5.06
+630,302
+6.22
+Goodwill
+Other assets (3)
+9,954
+0.09
+9,999
+0.10
+323,794
+2.94
+309,931
+3.04
+Total assets
+11,028,483
+57.18
+5,796,546
+56.60
+6,242,060
+Other operating expenses include depreciation, amortisation, leases, taxes and surcharges, allowances for insurance claims and various other administrative
+expenses.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+3.3 Analysis of Balance Sheet
+3.3.1 Assets
+As at the end of the reporting period, the total assets of the Group amounted to RMB11,028.483 billion, up by
+8.77% from the end of the previous year, which was mainly attributable to the increase in loans and advances to
+customers and bond investments of the Group.
+The following table sets forth, as at the dates indicated, the components of the total assets of the Group.
+3.3.1.1
+31 December 2023
+31 December 2022
+Percentage of
+the total
+Percentage of
+56,751
+the total
+Amount
+amount (%)
+Amount
+amount (%)
+6,508,865
+59.02
+6,051,459
+59.69
+(266,805)
+(2.42)
+(254,913)
+(2.51)
+Net loans and advances to customers
+(in millions of RMB, except for percentages)
+Total loans and advances to customers
+Allowances for impairment losses on loans (1)
+Share of profits of joint ventures and associates
+12.82
+10,767
+Net interest income
+52,383
+53,290
+Net interest spread
+1.93
+2.04
+1.99
+2.11
+Net interest margin
+In the fourth quarter of 2023, the net interest margin of the Group was 2.04%, representing a quarter-to-quarter
+decrease of 7 basis points, and its net interest spread was 1.93%, representing a quarter-to-quarter decrease of 6
+basis points.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+3.2.6 Net non-interest income
+During the reporting period, the Group recorded a net non-interest income of RMB124.409 billion, representing a
+year-on-year decrease of 1.66%. The components are as follows:
+Net fee and commission income amounted to RMB84.108 billion, representing a year-on-year decrease of 10.78%.
+Among the fee and commission income, fee and commission income from wealth management amounted to
+RMB28.466 billion, representing a year-on-year decrease of 7.89%; fee and commission income from asset
+management amounted to RMB11.474 billion, representing a year-on-year decrease of 7.89%; income from bank
+card fees amounted to RMB19.525 billion, representing a year-on-year decrease of 8.76%; income from settlement
+and clearing fees amounted to RMB15.492 billion, representing a year-on-year increase of 2.93%; commission
+income from credit commitment and loan business amounted to RMB4.997 billion, representing a year-on-year
+decrease of 13.14%; commission income from custody businesses amounted to RMB5.328 billion, representing a
+year-on-year decrease of 8.00%; and income from others amounted to RMB7.552 billion, representing a year-on-
+year decrease of 37.16%. For analysis of the main reasons for changes in fee and commission income, please refer
+to "Net non-interest income" in 3.9.2 under this chapter.
+Other net non-interest income amounted to RMB40.301 billion, representing a year-on-year increase of 25.04%,
+of which net investment income amounted to RMB19.700 billion, representing a year-on-year increase of 9.37%,
+which was mainly due to the increase of bond investment income; net profit from changes in fair value amounted
+to RMB1.846 billion, representing a year-on-year increase of RMB4.521 billion, mainly due to the increase in fair
+value of bond investment and non-money-market fund investment; the net exchange gain amounted to RMB4.132
+billion, representing a year-on-year increase of 14.78%, mainly due to the increase in gains arising from the foreign
+currencies transactions; and other net income amounted to RMB12.147 billion, representing a year-on-year increase
+of 12.82%, mainly due to a year-on-year increase of 23.85% in income generated from operating leasing business
+of CMB Financial Leasing, which amounted to RMB10.880 billion.
+In terms of business segments, the net non-interest income from retail finance amounted to RMB57.561 billion,
+representing a year-on-year decrease of 4.11% and accounting for 46.27% of the Group's net non-interest income;
+the net non-interest income from wholesale finance amounted to RMB50.599 billion, representing a year-on-
+year decrease of 2.01% and accounting for 40.67% of the Group's net non-interest income; the net non-interest
+income from other businesses amounted to RMB16.249 billion, representing a year-on-year increase of 9.47% and
+accounting for 13.06% of the Group's net non-interest income.
+(in millions of RMB, except for percentages)
+Fee and commission income (note)
+Fees and commissions from wealth management
+Changes
+2023
+2022
++/-%
+92,834
+103,372
+-10.19
+1.73
+40,551
+9,303,113
+1.75
+2.24
+926,136
+4,634
+1.99
+Debt securities issued
+204,148
+1,776
+3.45
+252,778
+2,137
+3.35
+Borrowings from the central bank
+249,237
+28,466
+1,350
+157,011
+853
+2.16
+Lease liabilities
+12,234
+115
+3.73
+12,877
+116
+3.57
+Total
+9,513,589
+42,052
+2.15
+30,903
+-7.89
+Fees and commissions from asset management
+Other net non-interest income
+Other net income
+Net investment income
+Net profit/(loss) from fair value change
+Net exchange gain
+Other net income
+(8,726)
+(9,097)
+-4.08
+84,108
+94,275
+-10.78
+40,301
+Net fee and commission income
+32,230
+37,825
+29,705
+27.34
+19,700
+18,013
+9.37
+1,846
+(2,675)
+N/A
+4,132
+3,600
+14.78
+12,147
+25.04
+3.2.5 Net interest income
+Fee and commission expense
+12,018
+11,474
+12,457
+-7.89
+Bank card fees
+19,525
+21,399
+-8.76
+Settlement and clearing fees
+15,492
+15,051
+2.93
+Commissions from credit commitment and loan business
+4,997
+-37.16
+5,753
+Commissions from custody businesses
+5,328
+5,791
+-8.00
+29
+As at the end of the reporting period, total loans and advances to customers of the Group amounted to
+RMB6,508.865 billion, representing an increase of 7.56% as compared with the end of the previous year; total loans
+and advances to customers accounted for 59.02% of the total assets, representing a decrease of 0.67 percentage
+point as compared with the end of the previous year. For details of the loans and advances to customers of the
+Group, please refer to 3.4 "Analysis of Loan Quality" in this chapter.
+Loans and advances to customers
+(3) "Other assets" include fixed assets, right-of-use assets, intangible assets, investment properties, deferred tax assets, interest receivable and other
+assets.
+(2) "Inter-bank transactions" include deposits and placements with banks and other financial institutions and amounts held under resale agreements.
+According to the relevant provisions of the Interim Measures for the Administration of Gold Leasing Business (Yin Ban Fa [2022] No. 88) issued
+by the General Office of the People's Bank of China in July 2022, since 2023, for the gold leasing business carried out between the Group and
+financial institutions, the lease-out side was adjusted from "precious metals" to "placements with banks and other financial institutions", and the
+comparative figures are re-presented accordingly.
+(1) The allowances for impairment losses on loans represent the allowance for impairment losses on loans and advances to customers measured at
+amortised cost.
+Notes:
+Others
+7,552
+-13.14
+Chapter III Management Discussion and Analysis
+Interest
+China Merchants Bank
+1.36
+1.23
+1.31
+Return on average equity attributable to
+ordinary shareholders of the Bank
+16.22
+17.06
+1.42
+16.96
+16.84
+Cost-to-income ratio
+32.97
+32.89
+33.11
+33.33
+32.08
+15.73
+1.39
+shareholders of the Bank
+Return on average assets attributable to
+25,220
+954,238
+730,354
+25,220
+617,707
+7,631,094
+6,799,533
+5,628,336
+4,844,422
+9,249,021
+8,361,448
+7,417,240
+Total loans and advances to customers
+(%)
+6,508,865 6,051,459
+5,570,034
+5,029,128
+4,490,650
+Key Financial Ratios
+Non-performing loan ratio
+0.95
+0.96
+0.91
+12.69
+Capital adequacy ratio under the
+Advanced Measurement Approach
+17.88
+17.77
+17.48
+16.54
+15.54
+Piecing every small dream
+together to fill-in the
+development blueprint
+*
+22
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+Management Discussion and Analysis
+3.1 Analysis of Overall Operation
+In 2023, the Group adhered to the concept of dynamically balanced development of "Quality, Profitability and
+Scale", took the strategic target of building a value creation bank and carried out various businesses in a sound
+manner. Both the scale of assets and liabilities and net profit grew steadily, and the overall asset quality was stable.
+During the reporting period, the Group realised the net operating income of RMB339.078 billion, representing
+a year-on-year decrease of 1.64%; realised a net profit attributable to shareholders of the Bank of RMB146.602
+billion, representing a year-on-year increase of 6.22%; realised the net interest income of RMB214.669 billion,
+representing a year-on-year decrease of 1.63%; and realised the net non-interest income of RMB124.409 billion,
+representing a year-on-year decrease of 1.66%. The return on average asset (ROAA) attributable to shareholders of
+the Bank and return on average equity (ROAE) attributable to ordinary shareholders of the Bank were 1.39% and
+16.22%, down by 0.03 percentage point and 0.84 percentage point year-on-year, respectively.
+13.98
+25,220
+14.94
+16.01
+1.07
+1.16
+Credit cost ratio
+0.74
+0.78
+0.70
+0.98
+1.29
+Core Tier 1 capital adequacy ratio under
+the Advanced Measurement Approach
+13.73
+13.68
+12.66
+12.29
+11.95
+Tier 1 capital adequacy ratio under the
+Advanced Measurement Approach
+15.75
+25,220
+865,681
+8,383,340
+8,155,438 7,535,742 6,347,078
+11,028,483 10,138,912
+Total assets
+Deposits from customers
+116,879
+102,814
+91,497
+Impairment losses
+41,469
+57,566
+66,355
+65,025
+61,159
+Profit before tax
+176,618
+165,113
+148,173
+122,440
+117,132
+Net profit attributable to shareholders of
+the Bank
+122,061
+146,602
+120,991
+269,788
+20
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter II Summary of Accounting Data and Financial Indicators
+2.3 Five-year Financial Summary of the Group
+2023
+2022
+2021
+2020
+2019
+(in millions of RMB)
+Results for the year
+Net operating income
+339,078
+344,740
+331,407
+290,279
+Operating expenses
+As at the end of the reporting period, the Group's total assets amounted to RMB11,028.483 billion, representing
+an increase of 8.77% as compared with the end of the previous year. The total loans and advances to customers
+amounted to RMB6,508.865 billion, representing an increase of 7.56% as compared with the end of the previous
+year. Total liabilities amounted to RMB9,942.754 billion, representing an increase of 8.25% as compared with
+the end of the previous year. Total deposits from customers amounted to RMB8,155.438 billion, representing an
+increase of 8.22% as compared with the end of the previous year.
+138,012
+97,342
+3.79
+3.62
+Year-end net assets attributable to
+ordinary shareholders of the Bank
+36.71
+32.71
+Annual Report 2023 (H share)
+25.36
+22.89
+(in millions of RMB)
+Year end
+Share capital
+25,220
+Total shareholders' equity
+1,085,729
+Total liabilities
+9,942,754 9,184,674
+4.61
+119,922
+5.26
+shareholders of the Bank
+92,867
+(RMB yuan)
+Per Share
+Dividend (tax inclusive)
+1.972
+1.738
+1.522
+1.253
+1.20
+Basic earnings attributable to ordinary
+shareholders of the Bank
+5.63
+5.26
+4.61
+3.79
+3.62
+Diluted earnings attributable to ordinary
+5.63
+As at the end of the reporting period, the Group had a balance of non-performing loans of RMB61.579 billion,
+representing an increase of RMB3.575 billion as compared with the end of the previous year. The non-performing
+loan ratio was 0.95%, representing a decrease of 0.01 percentage point as compared with the end of the previous
+year. The allowance coverage ratio was 437.70%, representing a decrease of 13.09 percentage points as compared
+with the end of the previous year; the allowance-to-loan ratio was 4.14%, representing a decrease of 0.18
+percentage point as compared with the end of the previous year.
+29.01
+3.2.1 Financial highlights
+2022
+(in millions of RMB,
+Average
+except for percentages)
+balance
+Interest
+expense
+Average
+cost ratio
+(%)
+Average
+balance
+Interest
+expense
+Average
+cost ratio
+(%)
+Deposits from corporate customers
+Demand
+2,670,778
+29,002
+Time
+1,989,200
+53,186
+2023
+Subtotal
+The following table sets forth the average balances, interest expense and average cost ratios of the deposits from
+corporate and retail customers of the Group for the periods indicated.
+Interest expense on deposits from customers
+268,240
+4.26
+5,850,275
+265,601
+4.54
+During the reporting period, from the perspective of the maturity structure of loans and advances to customers of
+the Group, the average balance of short-term loans was RMB2, 189.539 billion with the interest income amounting
+to RMB102.214 billion, and the average yield reached 4.67%; the average balance of medium- and long-term
+loans was RMB4, 110.366 billion with the interest income amounting to RMB166.026 billion, and the average yield
+reached 4.04%. The average yield of short-term loans was higher than that of medium- and long-term loans, which
+was mainly attributable to the higher yield of credit card loans and consumer loans (as short-term loans) and the
+higher proportion thereof.
+Interest income from investments
+During the reporting period, the interest income from investments of the Group was RMB80.836 billion, representing
+a year-on-year increase of 22.84%, which was mainly influenced by the investment volume. The average yield of
+investments was 3.22%, representing a year-on-year decrease of 2 basis points, which was mainly attributable to
+the impact of the downward market interest rates.
+Interest income from balances and placements with banks and other financial institutions
+During the reporting period, the interest income of the Group from balances and placements with banks and other
+financial institutions was RMB16.557 billion, representing a year-on-year increase of 22.74%, and the average yield
+of balances and placements with banks and other financial institutions was 2.80%, representing a year-on-year
+increase of 71 basis points, which was primarily attributable to the increase in yield of balances and placements with
+banks and other financial institutions denominated in foreign currencies because of the effect of the rate hikes by
+the US Federal Reserve.
+23
+24
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2023 (H share)
+3.2.4 Interest expense
+During the reporting period, the interest expense of the Group was RMB160.941 billion, representing a year-on-year
+increase of 19.09%, mainly due to the increase in the scale of the interest-bearing liabilities and the increase of the
+cost ratio of interest expense.
+During the reporting period, the Group's interest expense on deposits from customers was RMB128.809 billion,
+representing a year-on-year increase of 21.71%, mainly due to the sustained rapid growth of deposits from
+customers as well as the increase in the cost ratio of deposits.
+6,299,905
+4,659,978
+1.09 2,631,389
+2.67 1,755,394
+1.76 4,386,783
+3,273,048
+46,621
+1.42
+2,568,874
+31,389
+1.22
+Total
+7,933,026
+128,809
+1.62
+6,955,657
+105,836
+1.52
+Interest expense on deposits and placements from banks and other financial institutions
+During the reporting period, the interest expense on deposits and placements from banks and other financial
+institutions of the Group amounted to RMB19.866 billion, representing a year-on-year increase of 21.81%, which
+was primarily attributable to the year-on-year increase of cost ratio of deposits and placements from banks and
+other financial institutions denominated in foreign currencies resulting from the US Federal Reserve's interest rate
+hike.
+Interest expense on debt securities issued
+During the reporting period, the interest expense on debt securities issued of the Group amounted to RMB7.781
+billion, representing a year-on-year decrease of 19.47%, mainly due to the sound growth in deposits from
+customers, resulting in the decrease in daily average scale of debt securities issued.
+3.2 Analysis of Income Statement
+Subtotal
+82,188
+2.77
+913,786
+27,749
+1.05
+46,698
+2.66
+74,447
+1.70
+Deposits from retail customers
+Demand
+1,857,291
+7,337
+0.40 1,655,088
+6,073
+0.37
+Time
+1,415,757
+39,284
+2.77
+25,316
+customers
+10,138,912
+2.09
+2,476
+2,525
+176,618
+165,113
+Income tax
+(28,612)
+(25,819)
+Net profit
+148,006
+139,294
+Net profit attributable to shareholders of the Bank
+146,602
+138,012
+Impairment losses on other assets
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+3.2.2 Net operating income
+Share of profits of joint ventures and associates
+Profit before tax
+During the reporting period, the Group realised net operating income of RMB339.078 billion, representing a year-
+on-year decrease of 1.64%, of which net interest income accounted for 63.31% and net non-interest income
+accounted for 36.69% with a year-on-year decrease of 0.01 percentage point.
+(815)
+(41,278)
+Loans and advances to
+During the reporting period, the Group realised a profit before tax of RMB176.618 billion, representing a year-on-
+year increase of 6.97%. The effective income tax rate was 16.20%, representing a year-on-year increase of 0.56
+percentage point. The following table sets out the major income/loss items of the Group for the periods indicated.
+(in millions of RMB)
+Net interest income
+Net fee and commission income
+Other net income
+Operating expenses
+Expected credit losses
+2023
+2022
+214,669
+218,235
+84,108
+94,275
+37,825
+29,705
+(120,991)
+(122,061)
+(191)
+3.2.3 Interest income
+(56,751)
+Interest income from loans and advances to customers
+3.75
+2,250,662
+86,754
+3.85
+Retail loans
+3,308,043
+166,104
+3,089,371
+168,174
+5.44
+Discounted bills
+468,652
+7,610
+1.62
+During the reporting period, the Group recorded an interest income of RMB375.610 billion, representing a year-
+on-year increase of 6.29%, mainly due to the increase in interest-earning assets. Interest income from loans and
+advances to customers continued to be the largest component of the interest income of the Group.
+10,673
+510,242
+94,526
+2,523,210
+5.02
+Interest
+Corporate loans
+2022
+(in millions of RMB,
+Average
+During the reporting period, the interest income from loans and advances to customers of the Group was
+RMB268.240 billion, representing a year-on-year increase of 0.99%.
+Average
+Average
+The following table sets forth the average balance (daily average balance, same as below), interest income and
+average yield of each component of loans and advances to customers of the Group for the periods indicated.
+Interest
+Average
+except for percentages)
+balance
+income
+yield (%)
+balance
+income
+yield (%)
+2023
+995
+27,070
+4,302
+- Irrevocable letters of credit
+600
+- Financial investments
+- Loans and advances to customers
+38,949
+- Deposits from banks and other financial institutions
+- Lease liabilities
+2,929
+- Deposits from customers
+20,537
+14,872
+27
+40
+Off-balance sheet:
+- Irrevocable guarantees
+- Placements with banks and other financial institutions
+3,908
+On-balance sheet:
+896
+2023
+Operating expenses
+14,675
+5,771
+6,848
+894
+731
+331
+432
+306
+2022
+(26)
+2,307
+2,498
+(1)
+(8)
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+61. Material related party transactions (continued)
+(f) Other major shareholders holding more than 5% shares of the Bank and
+exercising significant influence over the Bank
+(19)
+Net fee and commission income/(expenses)
+8,511
+Interest income
+(138)
+(291)
+2,242
+114
+(633)
+(510)
+913
+1,616
+5,125
+(1)
+6,325
+3,530
+17,500
+12,146
+On-balance sheet
+(g) Subsidiaries
+Other net expense
+Operating expenses
+Net fee and commission income
+Interest expense
+1,835
+2023
+2022
+- Balances with banks and other financial institutions
+- Bills of acceptances
+- Irrevocable letters of credit
+- Irrevocable guarantees
+Off-balance sheet
+- Deposits from customers
+5,206
+6,056
+4,630
+3,578
+- Deposits from banks and other financial institutions
+3,415
+3,711
+- Financial investments
+1,396
+12,442
+- Loans and advances to customers
+32,438
+26,404
+- Placements with banks and other financial institutions
+958
+2,204
+Interest expense
+2022
+1,683
+Operating expenses
+1,848
+(1,475)
+(1,376)
+1,282
+1,027
+(211)
+(177)
+(10)
+297
+2,364
+298
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+61. Material related party transactions (continued)
+(d) Companies that share common directors, supervisors or senior management
+with the Bank (other than those disclosed in Note 61(c)) and they can control
+or exercise significant influence over the companies
+2023
+2022
+-
+On-balance sheet:
+- Placements with banks and other financial institutions
+China Merchants Bank
+- Amounts held under resale agreements
+285
+All significant balances and transactions between the Bank and its subsidiaries have been eliminated in the
+consolidated financial statements.
+3,510
+5,087
+971
+318
+289
+Other net income
+38
+1,289
+4,599
+299
+1,009
+1,360
+943
+(129)
+254
+(93)
+(1,455)
+(1,797)
+232
+150
+222
+2023
+- Loans and advances to customers
+- Deposits from banks and other financial institutions
+580
+6
+601
+1,035
+(460)
+(475)
+9
+133
+(283)
+310
+(274)
+(e) Associates and joint ventures other than those disclosed in Note 61(c)
+On-balance sheet:
+- Placements with banks and other financial institutions
+- Loans and advances to customers
+- Deposits from banks and other financial institutions
+- Deposits from customers
+Interest income
+Interest expense
+Net fee and commission income
+(129)
+- Financial investments
+Other net expenses
+Net fee and commission income
+2,277
+3,770
+9,360
+28,103
+2,116
+770
+4,346
+- Placements from banks and other financial institutions
+300
+Operating expenses
+6,047
+12,304
+13,447
+- Lease liabilities
+65
+Off-balance sheet:
+- Irrevocable guarantees
+- Irrevocable letters of credit
+Interest income
+Interest expense
+Deposits from customers
+(115)
+Level 1
+41,700
+Other net expenses
+Miao Jianmin
+Limited
+Invest and set up industries, Shareholder
+4.55%
+RMB7,778 1,147,377,415
+million
+Financial Holdings
+Shenzhen
+- China Merchants
+marketing business, etc.
+materials supply and
+Development Co., Ltd.
+liability
+domestic commerce,
+million
+Investment and
+Sun Xian
+Limited
+Invest and set up industries, Shareholder
+3.74%
+944,013,171
+RMB600
+-Shenzhen Chu Yuan Shenzhen
+marketing business, etc.
+domestic commerce,
+materials supply and
+liability
+materials supply and
+Limited
+Shareholder
+1.89%
+477,903,500
+USD0.06
+million
+USD10 55,196,540
+million
+Industry Development
+Shenzhen
+- China Merchants
+Islands
+(BVI) Limited
+British Virgin
+- China Merchants Union
+company
+limited
+Islands
+Ltd.
+Joint stock
+Shareholder
+1.53%
+386,924,063
+USD 1
+- Best Winner Investment British Virgin
+marketing business, etc.
+Co., Ltd.
+liability
+Development Co., Ltd.
+domestic commerce,
+Miao Jianmin
+Limited
+Legal
+representative
+Legal form
+Relationship
+with the Bank
+29.97%
+(note (i)(vii))
+7,559,427,375
+RMB16,900
+million
+(CMG)
+China Merchants Group Beijing
+Company
+Company
+capital
+held by
+by the
+Company
+Bank held
+the Bank
+held by the
+paid
+Registered
+location
+Company name
+and fully
+of the
+shareholder's
+liability
+liability
+the Bank Business
+Sun Xian
+Limited
+Invest and set up industries, Shareholder
+4.99%
+RMB600 1,258,542,349
+million
+Investment and
+Shenzhen
+-Shenzhen Yan Qing
+agency services, etc.
+and distribution, shipping
+supply chain management
+Miao Jianmin
+Limited
+liability
+shareholder
+The largest
+(CMSN)
+13.04%
+(note (ii))
+RMB17,000 3,289,470,337
+million
+-China Merchants Steam Beijing
+Navigation Co., Ltd.
+The largest
+and facility, repair
+and contracting, sales
+operating management
+service, etc.
+Transportation, building
+and repair, procurement,
+agency, warehousing
+and storage, leasing,
+manufacturing building
+Transportation, shipping
+parent company
+of the
+0.22%
+Limited
+liability
+million
+(Guangzhou) Co., Ltd.
+Shou Jian
+Limited
+Shareholder
+Shipping business
+2.76%
+696,450,214
+RMB3,191
+Guangzhou
+-COSCO Shipping
+business, etc.
+business, warehousing
+purchasing and marketing
+Wan Min
+Limited
+liability
+leasing business, ship
+Shareholder
+Transportation business,
+6.24%
+RMB16,191 1,574,729,111
+million
+-China Ocean Shipping Beijing
+Co., Ltd.
+- Guangzhou Haining
+etc.
+Guangzhou
+103,552,616
+Hong Kong
+-COSCO Shipping
+and building etc.
+liability
+business, ship repairing
+Zhao Bangtao
+Limited
+Shipping business, leasing Shareholder
+0.30%
+75,617,340
+RMB1,399
+million
+(Shanghai) Co., Ltd.
+Shanghai
+- COSCO Shipping
+Consulting Co., Ltd.
+liability
+million
+Maritime Technology
+Chen Jianyao
+Limited
+Shareholder
+Business services
+0.41%
+RMB52
+Invest and set up industries, Shareholder
+freight forwarding agent,
+exports of goods and
+Registered
+location
+Company name
+of the
+Proportion
+Proportion
+of the
+Bank held
+the Bank
+and fully
+Issued No.of shares of
+Details of the Bank's major shareholders and their parent companies are as follows: (continued)
+Material connected person information (continued)
+(a)
+61. Material related party transactions (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+294
+293
+consulting, etc.
+consulting and investment
+(Shenzhen) Ltd.
+liability
+enterprise management
+Wang Xiaoding
+paid
+technology, international
+held by the
+Company
+held by
+shipping, imports and
+services to international
+liability
+Wan Min
+Limited
+Shareholder's
+parent company
+International shipping
+business, supporting
+9.97%
+(note(iii))
+million
+Corporation Limited.
+2,515,193,034
+RMB11,000
+Shanghai
+China COSCO Shipping
+representative
+Legal form
+Legal
+Relationship
+with the Bank
+Business
+the Bank
+Company
+Company
+capital
+by the
+Issued No.of shares of
+Proportion Proportion
+Details of the Bank's major shareholders and their parent companies are as follows:
+Profit or loss
+73,599
+4,726
+Total
+at FVTOCI
+designated
+Equity
+investments
+Loans and
+advances to
+customers
+at FVTOCI
+56,713
+Loans and
+advances to
+customers
+at FVTPL
+7,281
+4,879
+At 1 January 2022
+at FVTPL
+Assets
+Financial
+investments
+(84)
+14
+(98)
+Total unrealised gains and losses included in the
+consolidated statement of profit or loss for assets
+held at the end of the reporting period
+68
+135,989
+7,338
+120,762
+3,729
+4,160
+- In profit or loss
+3
+(14)
+744
+At 31 December 2022
+27
+100
+Exchange difference
+(145)
+(145)
+Transfer out of level 3
+199,951
+(156,530)
+(129)
+(153,218)
+(2,036)
+(1,147)
+Disposals or settlement on maturity
+2,527
+196,298
+85
+1,041
+Addition for the year
+(56)
+51
+(107)
+- In other comprehensive income
+364
+(366)
+4,714
+2
+At 31 December 2023
+Equity
+investments
+designated
+at FVTOCI
+Loans and
+advances to
+customers
+at FVTOCI
+Loans and
+advances to
+customers
+at FVTPL
+at FVTPL
+Addition for the year
+- In other comprehensive income
+- In profit or loss
+At 1 January 2023
+Assets
+Profit or loss
+Financial
+investments
+The following tables show the movements from the beginning balances to the ending balances for Level 3
+financial instruments:
+Valuation of financial instruments with significant unobservable inputs
+Valuation techniques used and the qualitative information of key parameters for recurring fair value
+measurements categorised as Level 3: (continued)
+(3)
+Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+(ii)
+(g) Fair value information (continued)
+60. Risk management (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+290
+Total
+63
+4,714
+100,430
+Exchange difference
+(560)
+(560)
+Transfer out of level 3
+(306,977)
+(1)
+(304,929)
+(1,451)
+(596)
+Disposals or settlement on maturity
+326,209
+77
+325,509
+70
+553
+(276)
+(131)
+(145)
+(103)
+117
+(14)
+117,525
+7,390
+4,991
+4,991
+100,430
+215
+7,390
+Level 2 Level 3
+Level 1
+Fair value
+Carrying
+amount
+2022
+2023
+Financial liabilities that are not measured at fair value mainly include deposits from customers, amounts due
+to banks and other financial institutions, amounts sold under repurchase agreements, and debts securities
+issued by the Group. The carrying value of financial liabilities approximate their fair value at the end of the
+reporting period, except for the financial liabilities set out below:
+Financial Liabilities
+(2)
+The above financial assets do not include interest receivable.
+Note:
+94,005
+1,434,070
+Level 2 Level 3
+Carrying
+Level 3 amount Fair value
+70,340 1,536,397 1,569,775
+Level 1 Level 2
+61,918 1,659,705
+Carrying
+amount Fair value
+Debt investments at amortised cost 1,728,620 1,791,963
+2022
+2023
+The Level 1 fair value measurement is based on unadjusted quoted prices in active markets using Bloomberg
+etc. For Level 2, the latest valuation results released by China Bond website are used to measure fair value of
+bonds denominated in RMB. The Level 2 category also includes foreign currency bonds without active quoted
+price, which are measured using the published comprehensive valuation by Bloomberg. The Level 3 fair value
+is measured using discounted cash flow valuation technique.
+The carrying value, fair value and fair value hierarchy of debt investments at amortised cost not measured at
+fair value are listed as below:
+Debt investments measured at amortised cost are carried at amortised cost less allowances for impairment
+losses. The fair value of the listed bonds is disclosed in Note 23(b).
+Loans and advances are stated at amortised costs less allowances for impairment loss (Note 22). Loans and
+advances at amortised cost are mostly priced at floating rates with reference to Loan Prime Rates (LPRs) and
+repriced at least annually, and impairment allowances are made to reduce the carrying amounts of impaired
+loans to estimated recoverable amounts. Accordingly, the carrying value of loans and advances is close to
+their fair value.
+Carrying
+amount
+Except for loans and advances measured at amortised cost and debt instrument investments measured
+at amortised cost, most of the financial assets not measured at fair value mature within 1 year, and their
+carrying values approximate their fair values.
+Fair value
+Level 2 Level 3
+Material connected person information
+(a)
+61. Material related party transactions
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+Note: The above financial liabilities do not include interest payable.
+138,708
+138,708
+140,965
+118,924
+118,924
+119,193
+Total
+118,416
+118,416
+120,971
+118,924
+119,193 118,924
+20,292
+20,292
+19,994
+Subordinated bonds issued
+Debt securities issued
+Level 1
+The Group's financial assets that are not measured at fair value mainly include balances with central banks,
+balances and placements with banks and other financial institutions, amounts held under resale agreements,
+loans and advances to customers at amortised cost and investments at amortised cost.
+Financial Assets
+(1)
+8,147
+2,647
+Balance as at 1 January
+2022
+2023
+Financial liabilities at fair value through profit or loss
+Valuation of financial instruments with significant unobservable inputs (continued)
+Valuation techniques used and the qualitative information of key parameters for recurring fair value
+measurements categorised as Level 3: (continued)
+(3)
+Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
+basis (continued)
+(ii)
+(g) Fair value information (continued)
+60. Risk management (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+(240)
+(191)
+(49)
+consolidated statement of profit or loss for assets
+held at the end of the reporting period
+Total unrealised gains and losses included in the
+117,525
+342
+In loss
+Addition for the year
+Exchange difference
+(122)
+Financial assets and financial liabilities that are not measured at fair value
+(iii)
+(g) Fair value information (continued)
+60. Risk management (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+292
+291
+During the years ended 31 December 2023 and 2022, the Group did not change the valuation techniques for
+the financial assets and liabilities disclosed above which are measured at fair value on a recurring basis.
+During the years ended 31 December 2023 and 2022, there were no significant transfers among different
+levels for financial instruments which are measured at fair value on a recurring basis.
+Investment Holdings
+148
+Total unrealised gains and losses included in the consolidated
+statement of profit or loss for liabilities held at the end of the
+reporting period
+2,647
+1,825
+Balance as at 31 December
+241
+39
+(5,695)
+(739)
+Disposals and settlement on maturity
+96
+(142)
+(122)
+Interest income
+HKD500 54,721,930
+million
+Leasing business, financing Shareholder
+Guangzhou Tri-Dynas Oil & Shipping Co., Ltd.
+500,000,000
+500,000,000 HKD
+HKD
+COSCO Shipping Investment Holdings Co., Ltd.
+1,398,941,000
+52,000,000
+3,191,200,000
+16,191,351,300
+11,000,000,000
+11,000,000,000 RMB
+16,191,351,300 RMB
+3,191,200,000 RMB
+52,000,000 RMB
+1,398,941,000 RMB
+RMB
+COSCO Shipping (Shanghai) Co., Ltd.
+RMB
+Guangzhou Haining Maritime Technology Consulting Co., Ltd.
+RMB
+COSCO Shipping (Guangzhou) Co., Ltd.
+RMB
+RMB
+China Ocean Shipping Co., Ltd.
+China COSCO Shipping Corporation Limited
+30,790,000,000
+RMB 30,790,000,000 RMB
+Dajia Life Insurance Co., Ltd
+RMB
+100,000,000
+299,020,000 RMB
+China Communications Construction Group Limited
+1,160,950,575 HKD
+HKD
+CMB WLB
+12,000,000,000
+4,129,000,000
+11,683,461,365
+11,683,461,365 RMB
+4,129,000,000 HKD
+12,000,000,000 RMB
+RMB
+CMBFL
+HKD
+CMBIC
+RMB
+21,749,175,737
+21,749,175,737 RMB
+RMB
+Shanghai Automotive Industry Corporation (Group)
+SAIC Motor Corporation Limited
+16,165,711,425
+16,165,711,425 RMB
+RMB
+China Communications Construction Company Limited
+7,274,023,830
+7,274,023,830 RMB
+RMB
+299,020,000
+1,160,950,575
+100,000,000 RMB
+China Insurance Security Fund
+16,900,000,000 RMB
+RMB
+CMG
+2022
+2023
+Name of related party
+The registered capital of the Group's related parties as at 31 December 2023 and 2022 are as follows:
+Material connected person information (continued)
+(a)
+61. Material related party transactions (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+296
+295
+The sum of the direct holding percentage of CMG's shareholdings in the Bank and the sum of the above-mentioned relevant percentages may
+differ slightly due to rounding.
+(vii)
+Shanghai Automotive Industry Corporation (Group) ("Shanghai Automotive Industry Group") holds 1.23% of the Bank through its subsidiaries
+(SAIC Motor Corporation Limited) (2022: 1.23%).
+(vi)
+China Communications Construction Group Limited ("China Communications Construction Group") holds 1.68% of the Bank through its
+subsidiaries (2022: 1.68%).
+China Insurance Security Fund Co., Ltd ("China Insurance Security Fund") holds 3.08% of the Bank (2022: 3.19%) through its 98.23% holding
+in Dajia Insurance Group Co., Ltd.
+(v)
+(iv)
+16,900,000,000
+RMB
+CMSN
+17,000,000,000 RMB
+10,000,000
+10,000,000 USD
+USD
+China Merchants Industry Development (Shenzhen) Ltd.
+60,000
+60,000 USD
+USD
+China Merchants Union (BVI) Limited
+1
+1 USD
+USD
+Best Winner Investment Ltd.
+7,778,000,000
+600,000,000
+600,000,000 RMB
+7,778,000,000 RMB
+RMB
+China Merchants Financial Holdings Co., Ltd.
+RMB
+600,000,000
+600,000,000 RMB
+RMB
+Shenzhen Yan Qing Investment and Development Co., Ltd.
+Shenzhen Chu Yuan Investment and Development Co., Ltd.
+17,000,000,000
+RMB
+CMFM
+CMBWM
+RMB
+- Placements with banks and other financial institutions
+2022
+2023
+On-balance sheet:
+The Bank's largest shareholder CMG and its related companies held 29.97% (2022: 29.97%) of the Bank's shares as
+at 31 December 2023 (among them 13.04 % of the shares were directly held by CMSN (2022: 13.04%)).
+The Group's transactions and balances with CMSN and its related companies are disclosed as follows:
+Shareholders and their related companies
+(c)
+There were no loans and advances granted to related parties that were credit impaired during the year (2022:
+None).
+2022
+3.65% to 3.80%
+3.65% to 4.65%
+0.35%
+1.10% to 2.75%
+3.55% to 3.65%
+3.55% to 4.30%
+0.35%
+1.10% to 2.75%
+2023
+Time deposits
+Demand deposits
+Medium to long-term loans
+Short-term loans
+The Group enters into transactions with related parties in the ordinary course of its banking business including
+lending, investing, deposit taking, securities trading, providing agency and trust services, and off-balance sheet
+transactions. In the opinion of the directors, the Group enters into such material related-party transactions under
+normal commercial terms. Interest rates on loans and deposits are strictly set in accordance with the deposit and
+loan interest rate management regulations published by the PBOC, and such banking transactions are priced based
+on the market prices at the time of transactions:
+(b) Terms and conditions for related-party transactions
+61. Material related party transactions (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+As of 31 December 2023, other than those disclosed above, there were 92 companies that shared common
+directors, supervisors and senior management including their close family members with the Bank and they can
+control or exercise significant influence over these companies (31 December 2022: 142).
+This information is detailed in note 24.
+2,000
+Note:
+- Amounts held under resale agreements
+2,589
+Operating expenses
+Net fee and commission income
+Interest expense
+Interest income
+- Bills of acceptances
+- Irrevocable letters of credit
+- Irrevocable guarantees
+Off-balance sheet:
+210
+170
+- Lease liabilities
+45,342
+59,227
+- Deposits from customers
+29,726
+26,119
+- Deposits from banks and other financial institutions
+7,626
+12,159
+- Financial investments
+40,772
+46,466
+- Loans and advances to customers
+2,942
+3,289,470,337 13.04 4,129,000,000 100.00 12,000,000,000 100.00 1,160,950,575 100.00 1,310,000,000 55.00 5,555,555,555 90.00 50,000,000 100.00 500,000,000 note
+At 31 December 2022
+CIGNA & CMAM
+CMB WLB
+The subsidiaries held by the Bank
+%
+HKD
+CMBFL
+CMBIC
+At 31 December 2023
+At 1 January 2023
+No. of shares
+CMSN
+The Bank held by the
+largest shareholder
+The proportion of the Bank held by the largest shareholder and the portion of the subsidiaries held by the
+Bank
+500,000,000
+100,000,000 EUR
+500,000,000 RMB
+EUR
+RMB
+CIGNA & CMAM
+50,000,000
+CMB Europe S.A.
+5,555,555,555
+5,555,555,555 RMB
+RMB
+1,310,000,000
+1,310,000,000 RMB
+CMFM
+CMBWM
+HKD
+%
+CMB Europe S.A.
+EUR %
+RMB %
+RMB %
+%
+HKD
+CMBWM
+The subsidiaries held by the Bank
+CMFM
+CMB WLB
+HKD %
+RMB %
+RMB %
+3,289,470,337 13.04 4,129,000,000 100.00 12,000,000,000 100.00 1,160,950,575 100.00 1,310,000,000 55.00 5,000,000,000 100.00 50,000,000 100.00 500,000,000 note
+At 1 January 2022
+No. of shares %
+China COSCO Shipping Corporation Ltd. holds 9.97% of the Bank (2022: 9.97%) through its subsidiaries.
+CMBFL
+CMSN
+The Bank held by the
+largest shareholder
+%
+RMB %
+3,289,470,337 13.04 4,129,000,000 100.00 12,000,000,000 100.00 1,160,950,575 100.00 1,310,000,000 55.00 5,555,555,555 90.00 50,000,000 100.00 500,000,000
+3,289,470,337 13.04 4,129,000,000 100.00 12,000,000,000 100.00 1,160,950,575 100.00 1,310,000,000 55.00 5,555,555,555 90.00 100,000,000 100.00 500,000,000
+note
+note
+%
+RMB
+CIGNA & CMAM
+CMB Europe S.A.
+EUR %
+RMB %
+RMB %
+CMBIC
+0.22%
+(iii)
+(ii)
+Legal
+Relationship
+with the Bank
+the Bank Business
+Company
+Company
+capital
+held by
+by the
+held by the
+paid
+Registered
+location
+Company name
+Company
+of the
+Proportion
+Proportion
+of the
+Bank held
+the Bank
+and fully
+Issued No.of shares of
+Details of the Bank's major shareholders and their parent companies are as follows: (continued)
+Material connected person information (continued)
+(a)
+61. Material related party transactions (continued)
+Legal form representative
+Chapter VIII Financial Statements
+China Communications Beijing
+422,770,418
+and repair, technical
+Company Limited
+Wang Tongzhou
+Joint stock
+limited
+construction, leasing
+million
+Construction
+Shareholder
+General contractor for
+0.80%
+201,089,738
+RMB16,166
+- China Communications Beijing
+Limited
+liability
+Wang Tongzhou
+Limited
+Shareholder's
+parent company
+General contractor for
+construction
+(note(v))
+million
+Construction Group
+1.68%
+RMB7,274
+Annual Report 2023 (H share)
+China Merchants Bank
+company
+China Insurance Security Beijing
+Fund Co., Ltd
+business etc.
+business, shipping
+shipping agency, leasing
+Ltd.
+liability
+marketing business,
+million
+Oil & Shipping Co.,
+Lin Rui
+Limited
+Shareholder
+Ship purchasing and
+0.04%
+10,121,823
+RMB299
+- Guangzhou Tri-Dynas Guangzhou
+business etc.
+Co., Ltd.
+liability
+business, insurance
+Liu Chong
+Limited
+RMB100 776,574,735
+million
+3.08%
+(note(iv))
+Investing and establishing Shareholder's
+Limited
+He Xiaofeng
+Joint stock
+limited
+Shareholder
+services, etc.
+personal insurance
+insurance, and other
+insurance, accident
+Life insurance, health
+3.08%
+(note(iv))
+776,574,735
+RMB30,790
+million
+company
+Ltd
+and regulations, etc.
+permitted by national laws
+investment business
+enterprises, and
+of holding investment
+international businesses
+various domestic and
+supervising and managing
+parent company liability
+insurance companies,
+Ji Yuhua
+- Dajia Life Insurance Co., Beijing
+As the largest direct shareholder, CMSN, a subsidiary of CMG, holds 13.04% of the Bank as at 31 December 2023 (2022: 13.04%).
+consulting service, imports
+Production and sale
+Limited
+Subsidiary
+90% Asset management
+RMB5,556
+CMB Wealth Management Shenzhen
+Ltd. (CMFM)
+liability
+million
+Management Co.,
+Wang Xiaoqing
+Limited
+Subsidiary
+55% Fund Management
+RMB1,310
+Shenzhen
+China Merchants Fund
+liability
+million
+Limited (CMB WLB)
+Wang Liang
+Limited
+Subsidiary
+100% Banking
+Chen Yisong
+HKD1,161
+Co., Ltd
+liability
+CMG held 29.97% of the Bank indirectly (31 December 2022: 29.97%) through its subsidiaries as at 31 December 2023.
+(i)
+Notes:
+liability
+million
+Management
+Company Limited
+(CIGNA & CMAM)
+Wang Xiaoqing
+Limited
+Subsidiary
+Note 24 Asset management
+RMB500
+Beijing
+Cigna & CMB Asset
+S.A.)
+liability
+million
+S.A. (CMB Europe
+Xue Fei
+Limited
+Subsidiary
+100% Banking
+EUR100
+China Merchants Europe Luxembourg
+million
+and exports, investment
+and management business
+Hong Kong
+(CMBFL)
+Joint stock
+Shareholder
+Production and sale of
+1.23%
+310,125,822
+RMB11,683
+million
+Limited
+-SAIC Motor Corporation Shanghai
+domestic trade business,
+consulting service
+management business,
+(Group)
+liability
+parent company
+of vehicles, asset
+Chen Hong
+Limited
+Shareholder's
+1.23%
+(note(vi))
+310,125,822
+RMB21,749
+million
+Industry Corporation
+Shanghai
+Shanghai Automotive
+Chen Hong
+vehicles, consulting
+limited
+service, imports and
+liability
+million
+Company Limited
+Zhong Desheng
+Limited
+Subsidiary
+100% Finance lease
+RMB12,000
+Shanghai
+CMB Financial Leasing
+CMB Wing Lung Bank
+Limited (CMBIC)
+investment managements
+million
+Holdings Corporation
+Wang Liang
+Limited
+Subsidiary
+100% Investment bank and
+HKD4,129
+CMB International Capital Hong Kong
+exports
+company
+liability
+- Bills of acceptances
+Tier-2 capital:
+919,798
+NSFR derivative liabilities before deduction of
+6
+1,458,116
+4,379,860
+Unsecured wholesale funding, of which:
+5
+286,860
+2,868,604
+Less stable deposits
+4
+41,476
+829,526
+Operational deposits (excluding correspondent banks)
+328,336
+Retail and small business customers deposits, of which:
+Stable deposits
+3
+2
+Cash outflows
+2,017,296
+Total stock of high quality liquid assets
+1
+(average value)
+Weighted
+amount
+Unweighted
+amount
+(average value)
+Stock of high quality liquid assets
+3,698,130
+Serial No.
+2,650,733
+7
+1,697,049
+Undrawn committed credit and liquidity facilities
+13
+Cash outflows arising from secured debt instruments funding
+12
+transactions arising from related collateral requirements
+276,651
+276,651
+Cash outflows arising from derivative contract and other
+11
+385,580
+655,476
+1,973,700
+10
+13,664
+Secured funding
+9
+26,092
+26,092
+Unsecured debt issuance
+8
+776,548
+1,703,035
+Non-operational deposits (including all counterparties)
+Additional requirements, of which:
+108,929
+(Expressed in millions of Renminbi except percentage)
+(C) Liquidity coverage ratio
+171,348
+Gross SFT assets (with no recognition of netting), after adjusting
+for sale accounting transactions
+288,941
+278,195
+Total securities financing transaction exposures
+4.
+derivatives
+Less: Adjusted effective notional deductions for written credit
+Effective notional amount of written credit derivatives
+exposures
+Less: Exempted central counterparty leg of client-cleared trade
+276,497
+Less: Deductions of receivables assets for cash variation margin
+provided in derivatives transactions
+Gross-up for derivatives collateral provided where deducted from
+5,175
+12,180
+Add-on amounts for potential future exposure associated with all
+derivatives transactions
+5,551
+4,639
+of eligible cash variation margin)
+Replacement cost associated with all derivatives transactions (net
+10,726
+16,819
+Total derivative exposures
+the balance sheet assets
+The Group prepared and disclosed information on liquidity coverage ratio in accordance with the "Measures for the
+Disclosure of Information on Liquidity Coverage Ratio by Commercial Banks". The basis used herein may differ from
+those adopted in Hong Kong or other countries and regions. The average of liquidity coverage ratio of the Group
+was 159.82% in the fourth quarter of 2023, an increase of 0.17 percentage points from the previous quarter, which
+was maintained basically stable. The liquidity coverage ratio of the Group at the end of the fourth quarter of 2023
+was 173.36%, which met the regulatory requirements in 2023. The breakdown of the Group's average value of
+each item of liquidity coverage ratio in the fourth quarter of 2023 is set out below:
+Less: Netted amounts of cash payables and cash receivables of
+gross SFT assets
+12,444
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+306
+305
+7.95%
+8.26%
+Leverage ratio
+7.
+11,569,842
+12,806,260
+Counterparty credit risk exposure for SFT assets
+Balance of adjusted on-balance sheet and off-balance sheet
+assets
+(1,597,659)
+(1,782,260)
+Less: Adjustments for conversion to credit equivalent amounts
+3,093,836
+3,524,325
+Off-balance sheet exposure at gross notional amount
+1,496,177
+1,742,065
+Balance of adjusted off-balance sheet assets
+5.
+Agent transaction exposures
+6.
+3.
+14
+103,364
+Less stable deposits
+6
+839,045
+1,121
+525
+5,726
+875,774
+Stable deposits
+5
+3,610,469
+5,038
+1,406,801
+57,445
+2,282,575
+Small business customer
+Retail deposits and deposits from
+4
+Other capital instruments
+3
+1,071,254
+1,071,254
+1,071,254
+Regulatory capital
+2
+1,071,254
+1,617,013
+Capital
+1,611,287
+3,917
+169,456
+2,657
+Other liabilities
+11
+Liabilities with matching interdependent assets
+10
+1,300,177
+289,042
+251,230
+41,983 2,423,633
+Other wholesale funding
+56,920
+9
+2,602,120
+Operational deposits
+8
+2,601,237
+289,042
+251,230
+2,423,633
+2,644,103
+Wholesale funding
+7
+2,771,424
+1,301,060
+Other contractual obligations to extend funds
+1
+6 months to
+12 months
+1,527,425
+Total cash inflows
+20
+274,223
+274,843
+Other cash inflows
+19
+682,265
+1,072,229
+Contractual inflows from fully performing loans
+18
+1,136,304
+179,816
+Secured lending (including reverse repo and securities borrowing)
+17
+Cash inflows
+2,398,529
+Total cash outflows
+16
+109,469
+3,643,112
+Other contingent funding obligations
+15
+103,364
+180,353
+≥ 12 months
+Adjusted value
+Total stock of high quality liquid assets
+< 6 months
+No maturity
+Available stable funding (ASF) item
+Serial No.
+Weighted
+amount
+Unweighted amount
+(Expressed in millions of Renminbi except percentage)
+31 December 2023
+The Group prepared and disclosed information on Net Stable Funding Ratio in accordance with the "Measures for
+the Disclosure of Information on Net Stable Funding Ratio by Commercial Banks". The Group's Net Stable Funding
+Ratio at the end of the fourth quarter of 2023 was 130.72%, representing an increase of 0.58 percentage points
+as compared with the previous quarter, which was maintained basically stable. The breakdown of the Group's Net
+Stable Fund Ratio in the last two quarters is set out below:
+(D) Net stable funding ratio
+Chapter VIII Financial Statements
+21
+China Merchants Bank
+Annual Report 2023 (H share)
+The domestic data in the above table is a simple arithmetic average of the 92-day value for the latest quarter and the month-end average for
+the data of subsidiaries.
+(ii)
+159.82%
+1,262,225
+2,017,296
+(i)
+Notes:
+Liquidity coverage ratio (%)
+23
+Net cash outflows
+22
+The high quality liquid assets in the above table are prepared based on cash and the central bank reserve available under pressure conditions,
+as well as the bond in line with definition of Tier 1 and Tier 2 assets set by former CBIRC on the "Measures for the Liquidity Risk Management
+of Commercial Banks".
+(22,114)
+(13,451)
+Less: Asset amounts deducted in determining Basel III Tier 1
+capital
+In the cases that the Group has neither transferred nor retained substantially all the risks and rewards of the
+transferred credit assets, and for which the Group retains control, the Group recognises an asset in the consolidated
+statement of financial position to the extent of the Group's continuing involvement in the transferred assets, the
+remaining portion is derecognised. The extent of the Group's continuing involvement is the extent of the risks and
+rewards exposed by the Group to the value changes of the transferred assets. For the year ended 31 December
+2023, there were no new securitised credit assets in which the Group retained the continuing involvement (2022:
+None). The carrying amount of the continuing involvement asset and the corresponding continuing involvement
+liability, are recognised in other assets and other liabilities in the consolidated statement of financial position,
+amounting to RMB5,274 million as at 31 December 2023 (31 December 2022: RMB5,274 million).
+Transfers of credit assets to third parties
+During the year of 2023, in addition to securitisation transactions, the Group transferred credit assets amounting to
+RMB1,107 million (2022: RMB995 million) to independent third parties directly. The Group determined that these
+transferred assets qualified for full derecognition, based on the criteria set out in Note 4(5), since the Group has
+transferred substantially all the risks and rewards of the transferred assets to the counterparties.
+Repurchase transactions and securities lending transactions
+Transferred financial assets that do not qualify for derecognition mainly include debt securities, discounted bills held
+by counterparties as collateral under repurchase agreements and securities lent to counterparties under securities
+lending agreements. The counterparties are allowed to sell or repledge those securities sold under agreements to
+repurchase in the absence of default by the Group, but has an obligation to return the securities at the maturity
+of the contract. The Group determines that it retains substantially all the risks and rewards of these securities and
+therefore does not derecognise them. Instead, it recognises a financial liability for cash received as collateral.
+301
+302
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+64. Interests in unconsolidated structured entities
+With respect to the credit assets that are securitised and qualified for derecognition, based on the criteria set out in
+Note 4(5), the Group derecognises the transferred credit assets in their entirety. During the year of 2023, the Group
+transferred loans amounting to RMB22,589 million (2022: RMB17,362 million) in securitisation arrangements, as
+well as substantially all the risks and rewards associated with the loans. The full amount of such securitised loans
+were then derecognised.
+The scope of the Group's consolidated financial statements is determined on a control basis. Control means that
+the investor has the power over the investee, enjoys variable returns by participating in the relevant activities of the
+investee, and has the ability to use the power to affect the amount of its return.
+In addition to the above-mentioned structured entities that have been included in the Group's consolidated financial
+statements, the Group's interests in structured entities which is not covered by the consolidated financial statements
+is as follows:
+(a)
+Interests in the structured entities sponsored by third parties institutions
+The Group holds interests in some structured entities sponsored by third parties through investments in the units
+issued by these structured entities. Such interests include investments in wealth management products, asset
+management schemes, trust beneficiary rights, assets-backed securities and fund investments, and the Group does
+not consolidate these structured entities. The purpose of the Group holding these structured entities is to obtain
+investment income, capital appreciation or both.
+The following tables set out an analysis of the balance of interests held by the Group in the structured entities
+sponsored by third parties and an analysis of the line items in the consolidated statement of financial positions as at
+31 December 2023 and 31 December 2022:
+2023
+Asset management schemes
+Trust beneficiary rights
+Asset-backed securities
+Fund investments
+Wealth management products
+Total
+Financial
+investments
+at FVTPL
+The Group has the power over structured entities, and the other investors have no substantive rights. In the
+meantime, the Group is entitled to variable returns, and will consolidate entities, in which the Group has the right
+to affect the amount of its return.
+Balance
+The Group enters into securitisation transactions in the normal course of business by which it transfers credit assets
+to special purpose trusts which in turn issue asset-backed securities to investors. The Group may acquire certain
+investments at the subordinated tranche level and accordingly, may retain parts of the risks and rewards of the
+transferred credit assets. The Group would determine whether or not to derecognise the associated credit assets by
+evaluating the extent to which it retains the risks and rewards of the assets.
+The Group enters into transactions in the normal course of business by which it transfers recognised financial
+assets to third parties or to special purpose vehicles. In some cases, such transfers may give rise to full or partial
+derecognition of the financial assets concerned, and in other cases the transfers may not qualify for derecognition as
+the Group retains substantially all the risks and rewards of these transferred assets. As a result, the Group continues
+to recognise these transferred assets.
+182
+(182)
+182
+(182)
+51
+2,838
+51
+2,838
+Principal
+Distributions/Paid
+Total
+3,636
+(1,104)
+3,636
+Securitisation of credit assets
+(1,104)
+202
+(202)
+(202)
+255
+2,787
+255
+2,787
+There is no maturity for the instruments and the payments of distribution can be cancelled at the discretion of
+the issuer. Cancelled interest is non-cumulative. There is no contractual obligation to deliver cash to other parties.
+During the years ended 31 December 2023 and 2022, CMB WLB did not cancel the payment of distribution and the
+corresponding amounts were paid to the perpetual debt holders accordingly.
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+63. Transfers of financial assets
+202
+2,787
+Debt
+at amortised
+17,983
+307,912
+307,912
+2022
+Balance
+Asset management schemes
+Trust beneficiary rights
+Asset-backed securities
+Fund investments
+Financial
+investments
+at FVTPL
+Debt
+investments
+at amortised
+61,368
+Debt
+investments
+cost
+at FVTOCI
+Total
+exposure
+48,362
+48,362
+48,362
+37,954
+37,954
+37,954
+835
+186,311
+Maximum
+investments
+580
+227,477
+*
+184
+320
+227,477
+580
+228,561
+35,275
+25,020
+Debt
+investments
+Maximum
+580
+cost
+Total
+exposure
+35,275
+35,275
+25,204
+25,204
+1,073
+17,983
+19,376
+19,376
+227,477
+at FVTOCI
+Total
+2,787
+Principal Distributions/Paid
+10,138,912
+2022
+2023
+11,028,483
+Adjustment for off-balance sheet items
+Adjustment for securities financing transactions
+Adjustments for derivative financial instruments
+Adjustments for fiduciary assets
+but outside the scope of regulatory consolidation
+Adjustments for investments in banking, financial, insurance or
+commercial entities that are consolidated for accounting purposes
+Total consolidated assets as per published financial statements
+The difference between regulatory items and accounting items:
+(55,771)
+In accordance with the former CBIRC's Administrative Measures on Leverage Ratio of Commercial Banks (Revision)
+issued in 2015 and effective on 1 April 2015, the Group's leverage ratio is as follows. The basis used herein may
+differ from those adopted in Hong Kong or other countries and regions.
+Chapter VIII Financial Statements
+China Merchants Bank
+Annual Report 2023 (H share)
+In 2023, by the method of calculating credit risk using the weighted approach, market risk using the standardised
+approach and operational risk using the basic indicator approach, the Bank's core tier-1 capital adequacy ratio is
+11.38%, tier-1 capital adequacy ratio is 13.40%, capital adequacy ratio is 14.52%, net capital is RMB1,023,111
+million and total risk-weighted assets is RMB7,046,274 million.
+In 2023, by the method of calculating credit risk using the weighted approach, market risk using the standardised
+approach and operational risk using the basic indicator approach, the Group's core tier-1 capital adequacy ratio is
+11.86%, tier-1 capital adequacy ratio is 13.82%, capital adequacy ratio is 14.96%, net capital is RMB1,144,901
+million and total risk-weighted assets is RMB7,652,723 million.
+In 2023, in accordance with the Advanced Measurement Approach approved by former CBIRC in April 2014, the
+Bank's core tier-1 capital adequacy ratio is 13.32%, tier-1 capital adequacy ratio is 15.70%, capital adequacy ratio is
+17.62%, net capital is RMB1,059,697 million and total risk-weighted assets is RMB6,015,774 million.
+(ii) : The Group's additional tier-1 capital includes preference shares, perpetual bonds, etc.
+(i) : Under former CBIRC's Administrative Measures on the Capital of Commercial Banks (Provisional), other includes investment revaluation reserve,
+exchange reserve, hedging reserve in the consolidated financial statements, etc.
+5,841,685
+6,608,021
+1,037,942
+118,144
+(B) Leverage ratio
+123,733
+1,181,487
+(47,666)
+(7,911)
+9,796,112
+10,782,632
+financing transactions (SFT))
+On-balance sheet items (excluding derivatives and securities
+9,773,998
+10,769,181
+Balance of adjusted on-balance sheet assets (excluding
+derivatives and SFTs)
+919,798
+1,057,754
+2.
+Net tier-1 capital
+(1,913)
+1.
+Leverage ratio, net tier-1 capital, adjusted on-balance sheet and off-balance sheet exposures and other information:
+11,569,842
+12,806,260
+Balance of adjusted on-balance sheet and off-balance sheet assets
+Other adjustments
+(22,114)
+(13,451)
+1,496,177
+1,742,065
+12,444
+106,847
+31 December 2023 31 December 2022
+Notes:
+Total risk-weighted assets (taking into consideration the floor
+requirements during the parallel run period)
+Net capital
+18,583
+(18,121)
+(41,066)
+2,100
+19,107
+(i)
+Total
+17,866
+The above share-based payments represent the estimated fair value of the share appreciation rights granted (Note
+39(a)(iii)) to senior management under the Bank's H share Appreciation Rights Scheme. The fair value is measured
+by using the Black-Scholes model and according to the accounting policy set out in Note 4(16); and the amounts are
+charged to the consolidated statement of profit or loss and other comprehensive income. As the share options may
+expire without being exercised, the directors consider the amounts disclosed are not representative of actual cash
+flows received or to be received by senior management.
+Annuity scheme
+Apart from the obligation for defined contributions to the annuity scheme and normal banking transactions, no
+other transactions were conducted between the Group and the annuity scheme for the years ended 31 December
+2023 and 2022.
+38,249
+62. Non-controlling interests
+(a) Perpetual debt capital
+CMB WLB, the Group's subsidiary, issued perpetual debt of US$400 million on 24 January 2019. Movements of
+these perpetual debt capital are as follows:
+At 1 January 2023
+Distributions in 2023
+Paid in 2023
+Exchange difference
+At 31 December 2023
+At 1 January 2022
+Redemption in 2022
+Distributions in 2022
+Paid in 2022
+Exchange difference
+At 31 December 2022
+Non-controlling interests represent the interests that the Group does not hold in the subsidiaries, the Group does
+not have any subsidiary with significant non-controlling interests during the reporting period.
+37,228
+2022
+RMB'000
+2023
+RMB'000
+Net tier-2 capital
+Regulatory deductions from core tier-2 capital
+118,144
+123,733
+Total tier-2 capital
+1,565
+1,558
+Qualifying portion of non-controlling interests
+96,579
+122,175
+Surplus provision for loans impairment
+20,000
+Qualifying portion of tier-2 capital instruments and their premium
+300
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+61. Material related party transactions (continued)
+(h)
+Key management personnel
+Key management personnel are those persons having authority and responsibility for planning, directing and
+controlling the activities of the Group, directly or indirectly, including directors, supervisors and executive officers.
+Salaries and other emoluments
+Discretionary bonuses
+Share-based payment
+Contributions to defined contribution retirement schemes
+64,195
+118,015
+106,847
+12
+38,577
+80,370
+6,936
+2,792
+Physical traded commodities, including gold
+27
+339,270
+202,353
+55,109
+178,176
+101,255
+108,846
+Securities that are not in default and do not qualify
+as HQLA, including exchange-traded equities
+Assets with matching interdependent liabilities
+Other assets
+25
+2228
+24
+1,140,044
+1,313,046
+25,505
+25,454
+≥ 12 months
+12 months
+< 6 months
+26
+No maturity
+208,457
+Assets posted as initial margin for derivative
+contracts and contributions to default funds of
+5,803,725
+Off-balance sheet items
+32
+198,238
+75,498
+38,577
+80,370
+4,144
+All other assets not included in the above categories
+31
+2,373
+6,692
+variation margin posted
+30
+919
+33,071
+NSFR derivative assets
+20
+29
+235
+277
+CCPs
+6,692
+Performing residential mortgages, of which:
+With a risk weight of less than or equal to 35%
+under the Basel II standardized approach for credit
+risk
+23
+22
+71,249
+750,105
+by non-Level 1 HQLA and unsecured performing
+loans to financial institutions
+Performing loans to financial institutions secured
+19
+8,751
+58,340
+Level 1 HQLA
+Performing loans to financial institutions secured by
+18
+27,211
+30,547
+4,708,965
+1,092,143
+7,691
+2,352,104
+101,255
+Performing loans and securities
+17
+44,005
+operational purposes
+Deposits held at other financial institutions for
+16
+344,456
+4,699
+3,838,101
+175,363
+20
+Performing loans to non-financial corporate clients,
+Required stable funding (RSF) item (continued)
+Serial No.
+Weighted
+amount
+6 months to
+Unweighted amount
+30 September 2023 (continued)
+(D) Net stable funding ratio (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+329,378
+228,926
+135,598
+225,553
+risk
+under the Basel II standardized approach for credit
+With a risk weight of less than or equal to 35%
+21
+940,280 2,295,491 3,045,537
+1,340,029
+which:
+loans to sovereigns, central banks and PSES, of
+loans to retail and small business customers, and
+219,747
+Total NSFR high-quality liquid assets (HQLA)
+33
+5,512,172
+Surplus reserve
+126,648
+65,547
+Qualifying portion of capital reserve
+25,220
+25,220
+Qualifying portion of share capital
+17.77%
+17.88%
+15.75%
+108,700
+16.01%
+13.73%
+2022
+2023
+Core tier-1 capital:
+Components of capital base
+Capital adequacy ratio
+Tier-1 capital adequacy ratio
+Core tier-1 capital adequacy ratio
+In accordance with the Advanced Measurement Approach approved by the former CBIRC in April 2014, the Group
+calculates core tier-1 capital adequacy ratio, tier-1 capital adequacy ratio and capital adequacy ratio as follows:
+The Group's capital adequacy ratio was prepared solely in accordance with the former CBIRC's Administrative
+Measures on the Capital of Commercial Banks (Provisional) issued in 2012 and effective on 1 January 2013. The
+bases used herein may differ from those adopted in Hong Kong or other countries and regions.
+13.68%
+(A) Capital adequacy ratio
+94,948
+141,184
+1,057,754
+Net tier-1 capital
+120,446
+150,446
+Additional tier-1 capital (note (ii))
+799,352
+907,308
+Net core tier-1 capital
+22,114
+13,451
+General reserve
+Regulatory deductions from core tier-1 capital
+920,759
+Total core tier-1 capital
+14,480
+16,994
+Other (note (i))
+Qualifying portion of non-controlling interests
+488,970
+563,114
+Retained earnings
+132,451
+821,466
+(Expressed in millions of Renminbi unless otherwise stated)
+Unaudited Supplementary Financial Information
+Annual Report 2023 (H share)
+87,347
+110
+110
+187,256
+Total
+Wealth management products
+186,311
+186,311
+2,036
+2,036
+170
+170
+1,031
+The item 26 "Other assets" unweighted amount in the above table does not include the item 30 "NSFR derivative liabilities before deduction
+of variation margin posted".
+(iii)
+Items to be reported in the "no maturity" time include, but are not limited to, items such as capital with perpetual maturity, non-maturity
+deposits, short positions, open maturity positions, non-HQLA equities and physical traded commodities.
+(ii)
+The Group calculates Net Stable Funding Ratio in accordance with the "Measures for the Liquidity Risk Management of Commercial Banks"
+and relevant statistical regulations.
+(i)
+Notes:
+130.14%
+Net Stable Funding Ratio (%)
+34
+309
+274,773
+110
+274,773
+The maximum exposures of investments in funds, trust beneficiary rights, asset management schemes, wealth
+management products and asset-backed securities are the balance of these assets.
+Chapter VIII Financial Statements
+China Merchants Bank
+304
+303
+Certain comparative figures in the notes have been re-presented to conform to presentation in current year.
+65. Comparative figures
+The total amount of non-principal-guaranteed wealth management products sponsored by the Group after 1 January
+2023 with a maturity date before 31 December 2023 was RMB502,145 million (2022: RMB620,318 million).
+During the year ended 31 December 2023, the amount of fee and commission income the Group received from such
+unconsolidated asset management schemes was RMB653 million (2022: RMB683 million).
+During the year ended 31 December 2023, the amount of fee and commission income the Group received from such
+unconsolidated funds was RMB5,041 million (2022: RMB5,470 million).
+During the year ended 31 December 2023, the amount of fee and commission income the Group received from such
+non-principal-guaranteed wealth management products was RMB10,394 million (2022: RMB17,037 million).
+During the year ended 31 December 2023, the amount of unconsolidated non-principal-guaranteed wealth
+management products sponsored by the Group transferred to investments measured at amortised cost of the Group
+was Nil (2022: RMB11,143 million).
+As at 31 December 2023, the amount of unconsolidated funds held by the Group was RMB14,827 million (31
+December 2022: RMB14,228 million).
+As at 31 December 2023, the amount of unconsolidated non-principal-guaranteed wealth management products
+held by the Group was RMB2,149 million (31 December 2022: RMB2,433 million).
+As at 31 December 2023, amounts held under resale agreements transacted between the Group and the non-
+principal-guaranteed wealth management products sponsored by the Group were RMB25,701 million (31 December
+2022: RMB17,252 million). The above transactions were conducted in accordance with normal business terms and
+conditions.
+As at 31 December 2023, the amount of unconsolidated asset management schemes sponsored by the Group was
+RMB289,215 million (31 December 2022: RMB262,095 million).
+As at 31 December 2023, the amount of unconsolidated funds sponsored by the Group was RMB1,237,828 million
+(31 December 2022: RMB1,147,030 million).
+As at 31 December 2023, the amount of unconsolidated non-principal-guaranteed wealth management products
+sponsored by the Group was RMB2,548,929 million (31 December 2022: RMB2,667,663 million).
+Interests in the unconsolidated structured entities sponsored by the Group
+The unconsolidated structured entities sponsored by the Group include non-principal-guaranteed wealth
+management products, funds and assets management schemes. The nature and purpose of these structured entities
+are to generate fees from managing assets on behalf of investors. These structured entities are financed through
+the issuance of investment products to investors. Interest of the Group in these unconsolidated structured entities is
+limited to fees and commissions charged for management services provided.
+(b)
+64. Interests in unconsolidated structured entities (Continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+Total RSF
+15
+65,397
+140,838
+7,173,540
+31 December 2023 (continued)
+(D) Net stable funding ratio (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+308
+307
+339,288
+189,205
+54,315
+Unweighted amount
+180,222
+Securities that are not in default and do not qualify
+as HQLA, including exchange-traded equities
+Assets with matching interdependent liabilities
+25
+24
+under the Basel II standardized approach for credit
+risk
+With a risk weight of less than or equal to 35%
+23
+262,016
+1,154,132
+161,811
+1,328,961
+124,083
+26,102
+25,840
+122,075
+Performing residential mortgages, of which:
+Weighted
+6 months to
+NSFR derivative assets
+22
+29
+283
+333
+200,668
+1,973
+2,321
+Physical traded commodities, including gold
+Assets posted as initial margin for derivative contracts
+and contributions to default funds of CCPS
+28
+27
+amount
+101,462
+73,396
+10,761
+Other assets
+26
+≥ 12 months
+12 months
+< 6 months
+No maturity
+Required stable funding (RSF) item (continued)
+Serial No.
+34,039
+22
+189,595
+under the Basel II standardized approach for credit
+risk
+17
+44,614
+operational purposes
+Deposits held at other financial institutions for
+16
+399,307
+Total NSFR high-quality liquid assets (HQLA)
+15
+Required stable funding (RSF) item
+126,648
+7,409,608
+Performing loans and securities
+Total ASF
+94,551
+64,195
+169,456
+2,657
+above categories
+All other liabilities and equity not included in the
+13
+23,464
+NSFR derivative liabilities
+Required stable funding (RSF) item
+14
+122,075
+7,289
+2,398,056
+1,197,720
+With a risk weight of less than or equal to 35%
+21
+3,130,694
+1,026,194 2,303,658
+1,383,699
+which:
+loans to sovereigns, central banks and PSES, of
+loans to retail and small business customers, and
+Performing loans to non-financial corporate clients,
+20
+173,769
+29,240
+91,109
+659,621
+by non-Level 1 HQLA and unsecured performing
+loans to financial institutions
+Performing loans to financial institutions secured
+19
+22,301
+148,674
+Performing loans to financial institutions secured by
+18
+26,166
+4,820,184
+3,851,064
+25,650
+2,186
+Level 1 HQLA
+NSFR derivative liabilities before deduction of
+variation margin posted
+170,233
+2,377,268
+2,603,626
+Wholesale funding
+7
+2,643,869
+4,954
+85,799
+1,466,756
+1,379,573
+Less stable deposits
+6
+807,808
+1,198
+464
+5,750
+842,850
+Stable deposits
+5
+3,451,677
+6,152
+86,263
+1,472,506
+2,222,423
+Small business customer
+Retail deposits and deposits from
+4
+Other capital instruments
+3
+294,570
+2,554,246
+8
+Operational deposits
+Total ASF
+30
+14
+102,640
+76,397
+151,468
+7,430
+above categories
+All other liabilities and equity not included in the
+13
+32,152
+NSFR derivative liabilities
+12
+140,838
+1,026,779
+1,026,779
+134,792
+151,468
+7,430
+Other liabilities
+11
+Liabilities with matching interdependent assets
+10
+1,263,413
+294,570
+170,233
+2,377,268
+21,961
+Other wholesale funding
+9
+1,290,833
+76,397
+1,026,779
+2,581,665
+2
+33
+221,955
+5,947,508
+4,889
+Regulatory capital
+31
+Total RSF
+All other assets not included in the above categories
+73,396
+34,039
+75,479
+191,337
+32
+Off-balance sheet items
+8,440
+5,668,280
+4,889
+Net Stable Funding Ratio (%)
+34
+Serial No.
+Available stable funding (ASF) item
+No maturity
+< 6 months
+12 months
+≥ 12 months
+1
+Weighted
+amount
+1,026,779
+Unweighted amount
+(Expressed in millions of Renminbi except percentage)
+30 September 2023
+130.72%
+Capital
+6 months to
+100
+935,777
+Credit cards
+1,376,815
+100
+Residential mortgage
+100
+514,054
+100
+471,127
+Discounted bills
+35
+2,215,835
+884,395
+34
+2,428,284
+1,379,825
+Micro-finance loans
+11,374
+750,019
+2023
+2022
+Operation outside the Chinese mainland
+(G) Further analysis on loans and advances to customers analysed by
+industry sector (continued)
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+China Merchants Bank
+54
+5,837,565
+52
+6,271,366
+Gross amount of loans and advances to customers
+61
+Consumer loans
+3,107,676
+3,371,955
+Retail loans and advances subtotal
+93
+Corporate loans and advances subtotal
+90
+7,806
+Others
+3
+202,225
+2
+301,538
+79
+629,857
+59
+30
+75,593
+31
+187,737
+35
+Leasing and commercial services
+186,463
+27
+32
+203,870
+38
+171,786
+78,950
+% of gross
+32
+17
+158,320
+14
+Construction
+110,577
+22
+103,998
+24
+Telecommunications, software and IT services
+95,394
+49
+Wholesale and retail
+67,677
+259,864
+Production and supply of electric power, heating
+76,400
+Others
+33
+34,421
+34
+42,326
+Mining
+30
+64,886
+45
+42,813
+Water, environment and public utilities management
+23
+17
+88,296
+Finance
+Property development
+48
+303,707
+52
+349,682
+48
+278
+power, gas and water
+% of gross
+Residential mortgage
+advances
+100
+ཀྵ ཨྰ ཿཌ ལྐ ཿ
+100
+9,383
+124
+37
+8,165
+100
+159,781
+36
+5,414
+95
+110
+1,772
+3,430
+6,074
+10,908
+8,923
+9,023
+གླགླསྐལྦ⌘ge8༅ ༄ག8 ཞ
+237,499
+Gross amount of loans and advances to customers
+65,928
+Retail loans and advances subtotal
+100
+1,181
+43,425
+100
+96
+credit impaired)
+impaired)
+- Stage 3
+(Lifetime ECL
+- not credit-
+- Stage 1
+(12-month ECL)
+Impaired loans
+and advances
+and advances
+Overdue loans
+Micro-business loan
+Residential mortgage
+Credit card
+- Stage 2
+(Lifetime ECL
+2023
+When the amount of loans and advances to customers for an industry/category accounts for 10% or above of
+the total amount of loans and advances to customers, the amount of overdue loans, impaired loans and credit
+impairment allowances in each expected credit loss stage are disclosed as follows:
+(G) Further analysis on loans and advances to customers analysed by
+industry sector (continued)
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+314
+313
+47
+213,894
+53
+54,113
+55,846
+1,278
+Others
+Micro-finance loans
+26,298
+44
+22,960
+Property development
+19
+30,814
+21
+36,248
+Transportation, storage and postal services
+23
+36,521
+37
+45,368
+Finance
+other security
+Amount
+Amount other security
+collateral or
+collateral or
+covered by
+advances
+loans and
+covered by
+37
+loans and
+Manufacturing
+56
+133
+Credit cards
+8,671
+171,571
+Corporate loans and advances subtotal
+4,782
+419
+Water, environment and public utilities management
+Others
+623
+Construction
+4,945
+Mining
+6,207
+Leasing and commercial services
+8,323
+Telecommunications, software and IT services
+10,002
+Wholesale and retail
+12,359
+power, gas and water
+Production and supply of electric power, heating
+39
+20,494
+19,335
+461,434
+Foreign currencies transactions in the
+477,016
+Net option position
+341,554
+18,938
+17,447
+305,169
+Forward written
+335,212
+56,399
+2,258
+276,555
+15,700
+Forward purchased
+91,232
+16,460
+530,903
+Spot liabilities
+642,379
+53,176
+41,714
+547,489
+Spot assets
+Non-structural position
+638,595
+(1,122)
+(695)
+13,883
+Banks
+and other
+2023
+International claims have been disclosed by different countries or geographical areas. A country or geographical
+area is reported where it constitutes 10% or more of the aggregate amount of international claims, after taking
+into account any risk transfers. Risk is transferred only when the claims are guaranteed by a party in country which
+is different from that of the counterparty or if the claims are on an overseas branch of a bank whose head office is
+located in another country.
+International claims include loans and advances, balances and placements with banks and other financial institutions,
+holdings of trade bills, certificates of deposit and securities investment.
+The Group is principally engaged in business operations within the Chinese mainland, and regards all claims on third
+parties outside the Chinese mainland and claims in foreign currencies on third parties within the Chinese mainland
+as international claims.
+(F) International claims
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+China Merchants Bank
+Investments in overseas subsidiaries.
+Capital and statutory reserves of overseas branches; and
+Investment properties, property and equipment, net of depreciation charges;
+The net option position is calculated using the delta equivalent approach required by the Hong Kong Monetary
+Authority (the "HKMA"). The net structural position of the Group includes the structural positions of the Bank's
+branches substantially involved in foreign exchange. Structural assets and liabilities include:
+51,801
+1,136
+40,691
+9,974
+11,325
+(1,290)
+8,943
+3,672
+Net structural position
+Net long position
+(in millions of RMB)
+Public
+Total
+HKD
+(in millions of RMB)
+Non-structural position
+Spot assets
+601,745
+31,474
+47,462
+680,681
+Spot liabilities
+553,972
+18,032
+90,942
+Total
+662,946
+Forward written
+417,752
+6,195
+76,916
+500,863
+476,337
+7,311
+38,999
+522,647
+5,122
+Forward purchased
+Other
+HKD
+USD
+USD
+2022
+51,347
+1,552
+41,314
+8,481
+Net structural position
+11,670
+(2,001)
+12,247
+1,424
+Net long position
+15,719
+3,562
+(79)
+12,236
+Net option position
+310
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+(E) Currency concentrations other than RMB
+2023
+Other
+financial
+sector
+institutions
+312
+311
+678,475
+358,590
+110,175
+209,710
+Total
+146,738
+19,809
+81,981
+China Merchants Bank
+44,948
+34,683
+20,479
+1,732
+12,472
+Europe
+205,724
+146,107
+19,891
+39,726
+- of which attributed to Hong Kong
+North and South America
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+(G) Further analysis on loans and advances to customers analysed by
+Transportation, storage and postal services
+32
+445,218
+28
+557,691
+Manufacturing
+other security
+Amount
+other security
+Amount
+collateral or
+advances
+covered by
+loans and
+collateral or
+covered by
+advances
+loans and
+% of gross
+% of gross
+2023
+2022
+Operation in the Chinese mainland
+industry sector
+246,723
+162,273
+22,043
+62,407
+42,493
+21,029
+1,598
+19,866
+Europe
+223,769
+181,581
+17,202
+24,986
+- of which attributed to Hong Kong
+267,980
+199,166
+19,653
+49,161
+Asia Pacific excluding the Chinese mainland
+240,095
+132,845
+2,079
+105,171
+Chinese mainland
+Total
+Other
+entities
+North and South America
+40
+68,925
+17,584
+Asia Pacific excluding the Chinese mainland
+250,331
+156,029
+4,419
+89,883
+Chinese mainland
+Foreign currencies transactions in the
+Total
+Other
+entities
+institutions
+sector
+financial
+Public
+and other
+Banks
+2022
+756,769
+370,624
+143,022
+243,123
+Total
+206,201
+119,692
+7,021
+78
+4,388
+315
+316
+China Merchants Bank
+Chapter VIII Financial Statements
+Annual Report 2023 (H share)
+(H) Loans and advances to customers overdue for more than 90 days
+(continued)
+0.68%
+(iii) Collateral information
+Unsecured portion of overdue loans and advances
+Fair value of collateral held against overdue loans and advances
+2023
+2022
+17,141
+16,404
+28,681
+Secured portion of overdue loans and advances
+24,674
+0.70%
+0.35%
+over 12 months
+22,748
+14,409
+45,822
+41,078
+Total
+As a percentage of total gross amount of loans and
+0.24%
+advances to customers:
+- between 6 and 12 months (inclusive)
+- over 12 months
+Total
+0.17%
+0.25%
+0.18%
+0.19%
+- between 3 and 6 months (inclusive)
+-
+47,613
+The amount of the Group's overdue loans and advances to financial institutions for more than 90 days as at 31
+December 2023 was RMB1 million (31 December 2022: RMB1 million).
+5,207
+0.09%
+- Renegotiated loans and advances to customers
+overdue less than 90 days
+6,334
+0.10%
+6,869
+0.11%
+0.10%
+Note:
+The amount of the Group's renegotiated loans and advances to financial institutions as at 31 December 2023 was
+nil (31 December 2022: nil).
+(J) Non-bank the Chinese mainland exposures
+The Bank is a commercial bank incorporated in the Chinese mainland with its banking business primarily conducted
+in the Chinese mainland. As of 31 December 2023 and 31 December 2022, most of the Bank's exposures arose from
+businesses with the Chinese mainland non-bank institutions or individuals. Analyses of various types of exposure by
+counterparty have been disclosed in the notes to the financial report.
+公 招商銀行
+CHINA MERCHANTS BANK
+招商銀行股份有限公司
+We are here Just for you
+2,739
+Represents the restructured non-performing loans.
+42,302
+6,673
+13,007
+The above analysis represents loans and advances overdue for more than 90 days as required and defined by the HKMA.
+Loans and advances with a specific repayment date are classified as overdue when the principal or interest is overdue.
+For loans and advances repayable by regular installments, if part of the installments is overdue, the whole amount of these loans would be
+classified as overdue.
+Loans and advances repayable on demand are classified as overdue when a demand for repayment has been served on the borrower but
+repayment has not been made in accordance with the instructions. If the loans and advances repayable on demand are outside the approved
+limit that was advised to the borrower, they were also considered as overdue.
+The collateral of the Group included cash deposit, shares, land use right, property, motor vehicles and other equipment, etc. The fair value
+of collateral was estimated by management based on the latest available external valuations adjusted by taking into account the current
+realisation experience as well as market situation. Where collateral values are greater than gross advances, only the amount of collateral up to
+the gross advance had been included in the "secured portion of overdue loans and advances" as set out in the above tables.
+(I) Renegotiated loans and advances to customers
+Renegotiated loans and advances to customers (Note)
+Less:
+Renegotiated loans and advances to customers
+overdue more than 90 days
+2023
+% of total
+loans and
+advances
+Amount
+% of total
+loans and
+advances
+0.20%
+12,076
+0.20%
+Amount
+2022
+11,290
+Note:
+- between 6 and 12 months (inclusive)
+Micro-business loan
+31,413
+4,582
+4,904
+15,650
+4,031
+8,604
+26,255
+11,180
+7,342
+2,441
+19,383
+3,821
+14,665
+3,640
+As at 31 December 2023, for corporate loans and advances measured at amortised cost, the fair value of collateral
+held against impaired loans and advances is RMB3,810 million (31 December 2022: RMB3,206 million).
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter VIII Financial Statements
+(H) Loans and advances to customers overdue for more than 90 days
+1,839
+(i)
+Residential mortgage
+Overdue loans
+and advances
+29,910
+11,598
+16,383
+26,666
+19,179
+15,562
+5,269
+Impaired loans
+and advances
+4,592
+1,649
+3,793
+2022
+Stage 1
+(12-month ECL)
+- Stage 2
+(Lifetime ECL
+- not credit-
+impaired)
+- Stage 3
+(Lifetime ECL
+- credit impaired)
+11111
+9,130
+By geographical segments
+Credit card
+Yangtze River Delta region
+1,433
+967
+5,307
+5,239
+4,538
+638
+395
+2,780
+2,458
+45,822
+41,078
+2023
+2022
+Gross amount of loans and advances to customers which have been
+overdue with respect to either principal or interest for periods of:
+- between 3 and 6 months (inclusive)
+Headquarters
+11,476
+15,379
+4,619
+5,342
+3,653
+Subsidiaries
+4,051
+Northeast region
+Central region
+Western region
+Outside the Chinese mainland
+Total
+(ii) By overdue period
+Pearl River Delta and West Coast region
+2023
+13,308
+11,980
+7,613
+7,716
+4,863
+2022
+Bohai Rim region
+6,051,459
+0.95
+100.00
+Loans to the top ten single borrowers
+58,004
+100.00
+6,508,865
+61,579
+0.96
+3.4.6
+(under the
+Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+As at the end of the reporting period, the Group's collateralised loans and pledged loans increased by 5.74% as
+compared with the end of the previous year; the guaranteed loans decreased by 1.73% as compared with the end
+of the previous year, and the credit loans increased by 16.78% as compared with the end of the previous year.
+Among them, the non-performing loan ratios of credit loans as well as collateralised loans and pledged loans all
+decreased as compared with the end of the previous year, while the non-performing loan ratio of guaranteed loans
+increased as compared with the end of the previous year.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+to customers
+Percentage
+of net capital
+Note:
+Total loans and advances
+35.24
+514,054
+14,091
+0.63
+Advanced
+2,132,337
+14,246
+0.67
+Pledged loans
+379,457
+8.49
+5.83
+1.22
+348,883
+5.77
+5,398
+1.55
+Discounted bills
+471,127
+7.24
+4,613
+Loans as at
+9,528
+Percentage
+14,548
+1.23
+0.22
+13,276
+1.12
+0.20
+F
+Transportation, storage and postal services
+Transportation, storage and postal services
+Transportation, storage and postal services
+10,645
+0.17
+G
+Transportation, storage and postal services
+0.81
+0.15
+H
+Property development
+34.48
+0.90
+E
+D
+0.24
+(in millions of RMB, except for percentages)
+Top ten borrowers
+Industry
+31 December
+Approach) of total loans
+2023
+(%)
+(%)
+AB
+Finance
+22,280
+1.89
+0.34
+C
+Transportation, storage and postal services
+Transportation, storage and postal services
+18,876
+1.60
+0.29
+15,363
+1.30
+Measurement
+2,244,129
+10.55
+2.00
+544
+0.69
+Subsidiaries
+354,942
+5.45
+4,346
+1.22
+332,147
+1.30
+5.49
+1.14
+Total loans and advances
+to customers
+6,508,865
+100.00
+61,579
+0.95
+6,051,459
+3,790
+100.00
+78,567
+851
+6,514
+0.95
+641,554
+10.60
+8,048
+1.25
+Western China
+686,701
+1.06
+9,359
+0.85
+633,129
+10.46
+5,468
+0.86
+Overseas
+80,336
+1.23
+5,820
+Collateralised loans
+58,004
+Notes:
+(%)(Note)
+Credit loans
+2,592,093
+39.82
+24,147
+0.93
+2,219,635
+36.68
+loans
+21,662
+Guaranteed loans
+822,059
+12.63
+18,728
+2.28
+836,550
+13.82
+16,698
+0.98
+0.96
+(%)
+Non-
+performing
+(1) Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+(2) The Head Office includes Credit Card Centre.
+The Group seized the development opportunities brought by national strategies of coordinated regional
+development, focused on advantageous industries within the region, strengthened the coordination of branches
+in key regions, promoted business synergy within the region, and accelerated the development of branches in key
+regions. Furthermore, the Group closely monitored market changes, conducted continuous research on regional
+credit policies, and implemented differentiated operational management strategies.
+3.4.5 Distribution of loans and non-performing loans by type of guarantees
+31 December 2023
+Percentage
+Non-
+Performing
+(in millions of RMB,
+Loans and
+advances to
+loan ratio
+of the
+total loans performing
+except for percentages)
+customers
+(%)
+loans
+Non-
+Performing
+loan ratio
+(%) (Note)
+Loans and
+advances to
+customers
+31 December 2022
+Percentage
+of the
+total loans
+Non-
+0.79
+The Group imposed strict and prudent management and control over loan restructuring. As at the end of the
+reporting period, the percentage of the Group's restructured loans to total loans was 0.20%, remained at the same
+level as compared with the end of the previous year.
+Manufacturing
+31 December
+2023
+31 December
+2022
+Increase/decrease
+at the end of
+the current year
+as compared with
+the end of the
+previous year (%)
+907,308
+799,352
+13.51
+Net core Tier 1 capital
+Net Tier 1 capital
+919,798
+15.00
+Net capital
+1,181,487
+1,037,942
+13.83
+Risk-weighted assets (without taking into
+consideration the floor requirements during the
+1,057,754
+parallel run period)
+Capital adequacy ratios under the Advanced
+Measurement Approach (1)
+The Group
+2023
+261,476
+46,635
+Balance as at the end of the period
+8,819
+(47,922)
+526
+269,534
+2022
+246,104
+45,157
+8,972
+(39,087)
+(in millions of RMB, except for percentages)
+330
+The Group continued to adopt a consistent and prudent policy in respect of making allowances. As at the end of the
+reporting period, the balance of allowances for impairment losses on loans of the Group amounted to RMB269.534
+billion, representing an increase of RMB8.058 billion as compared with the end of the previous year. The allowance
+coverage ratio was 437.70%, representing a decrease of 13.09 percentage points as compared with the end of
+the previous year; the allowance-to-loan ratio was 4.14%, representing a decrease of 0.18 percentage point as
+compared with the end of the previous year.
+4
+The allowances for impairment losses on loans include the allowance for impairment losses on loans and advances measured at amortised cost and on loans
+and advances measured at fair value through other comprehensive income.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+3.5 Analysis of Capital Adequacy
+3.5.1 Capital adequacy ratio
+As at the end of the reporting period, the core Tier 1 capital adequacy ratio, the Tier 1 capital adequacy ratio and
+the capital adequacy ratio of the Group under the Advanced Measurement Approach were 13.73%, 16.01% and
+17.88% respectively, representing an increase of 0.05, 0.26 and 0.11 percentage point respectively, as compared
+with the end of the previous year.
+261,476
+Foreign exchange rate and other movements
+5,919,504
+7.80
+16.01%
+15.75%
+Increased by 0.26
+percentage point
+Capital adequacy ratio
+17.88%
+17.77%
+Increased by 0.11
+percentage point
+Tier 1 capital adequacy ratio
+Information on leverage ratio (2)
+assets
+Leverage ratio
+12,806,260
+8.26%
+11,569,842
+7.95%
+Notes:
+10.69
+Increased by 0.31
+percentage point
+(1) The "Advanced Measurement Approach" refers to the advanced measurement approach set out in the "Capital Rules for Commercial Banks
+(Provisional)" issued on 7 June 2012 (same as below). In accordance with the requirements of the Advanced Measurement Approach, the scope
+of entities for calculating the capital adequacy ratio of the Group shall include China Merchants Bank and its subsidiaries. The scope of entities for
+calculating the capital adequacy ratio of the Company shall include all the domestic and overseas branches and sub-branches of China Merchants
+Bank. As at the end of the reporting period, the Group's subsidiaries for calculating its capital adequacy ratio included CMB Wing Lung Bank, CMB
+International Capital, CMB Financial Leasing, CMB Wealth Management, China Merchants Fund, CIGNA & CMAM and CMB Europe S.A.. During
+the parallel run period when the Advanced Measurement Approach for capital measurement is implemented, a commercial bank shall use both the
+Advanced Measurement Approach and other approaches to calculate capital adequacy ratios, and comply with the capital floor requirements. The
+capital floor adjustment coefficients shall be 95%, 90% and 80% respectively in the first year, the second year, and the third year (i.e. 2017) and
+subsequent years during the parallel run period.
+Balance of adjusted on- and off-balance sheet
+5,491,072
+percentage point
+13.12
+Of which: Credit risk weighted assets
+Market risk weighted assets
+5,226,757
+4,823,836
+8.35
+86,751
+89,200
+-2.75
+Operational risk weighted assets
+Increased by 0.05
+605,996
+4.84
+Risk-weighted assets (taking into consideration
+the floor requirements during the parallel run
+period)
+6,608,021
+Core Tier 1 capital adequacy ratio
+13.73%
+5,841,685
+13.68%
+578,036
+0.14
+Write-offs/disposal for the period
+Charge for the period
+37,207
+0.61
+Overdue from 3 months up to 1 year
+23,074
+0.35
+26,669
+0.44
+Overdue from 1 year up to 3 years
+0.56
+17,671
+9,810
+0.16
+Overdue more than 3 years
+5,077
+0.08
+4,599
+0.08
+Total overdue loans
+0.27
+81,983
+36,161
+loans (%)
+9,205
+0.78
+0.14
+Transportation, storage and postal services
+7,624
+0.64
+0.12
+130,704
+Overdue within 3 months
+11.06
+Total
+As at the end of the reporting period, the total loan of the Group's largest single borrower amounted to RMB22.280
+billion, representing 1.89% of the Group's net capital under the Advanced Measurement Approach. The loan of
+the Group's top ten single borrowers totalled RMB130.704 billion, representing 11.06% of the Group's net capital
+under the Advanced Measurement Approach, 11.42% of the Group's net capital under the Weighted Approach, and
+2.01% of the Group's total loans, respectively.
+3.4.7 Distribution of loans by overdue term
+31 December 2023
+Loans and
+advances to
+Percentage
+of the total
+loans (%)
+31 December 2022
+Loans and Percentage
+advances to of the total
+customers
+(in millions of RMB, except for percentages)
+customers
+2.01
+Recovery of loans previously written off
+1.26
+1.29
+Loan balance
+12,076
+advances (%)
+0.20
+Of which: restructured loans overdue more than
+90 days
+6,673
+0.10
+5,207
+0.09
+loans and
+Note:
+10.55
+3.4.9
+Repossessed assets and impairment allowances
+As at the end of the reporting period, the balance of repossessed assets (other than financial instruments) of
+the Group amounted to RMB556 million. After deducting the impairment allowances of RMB139 million, the
+net carrying value amounted to RMB417 million. The balance of repossessed financial instruments amounted to
+RMB5.404 billion.
+3.4.10 Changes in the allowances for impairment losses on loans
+The following table sets forth the changes in the allowances for impairment losses on loans of the Group.
+(in millions of RMB)
+Balance as at the end of the previous year
+Represents the restructured non-performing loans.
+78,285
+of total
+31 December 2022
+Total loans and advances to customers
+6,508,865
+100.00
+6,051,459
+100.00
+As at the end of the reporting period, overdue loans of the Group amounted to RMB81.983 billion, up by RMB3.698
+billion from the end of the previous year and accounting for 1.26% of its total loans, representing a decrease of
+0.03 percentage point as compared with the end of the previous year. Of the overdue loans, collateralised loans
+and pledged loans accounted for 28.81%; guaranteed loans accounted for 23.18%; and credit loans accounted for
+48.01% (the majority of which were overdue loans of credit cards). The Group adopted prudent asset classification
+criteria for overdue loans, and the ratio of non-performing loans to the loans overdue for more than 90 days was
+1.34, and the Company's ratio of non-performing loans to the loans overdue for more than 60 days was 1.19.
+37
+38
+Percentage
+China Merchants Bank
+Annual Report 2023 (H share)
+3.4.8
+Restructured loans
+(in millions of RMB, except for percentages)
+Loan balance
+Restructured loans (note)
+13,007
+31 December 2023
+Percentage
+of total
+loans and
+advances (%)
+0.20
+Chapter III Management Discussion and Analysis
+686,673
+Chapter III Management Discussion and Analysis
+1.19
+customers
+Percentage
+of the total
+loans (%)
+Non-
+Non-
+Performing
+performing
+loan ratio
+loans
+(%) (1)
+(%)(1)
+Corporate loans
+39.94
+30,992
+1.19
+2,375,616
+39.26
+29,961
+1.26
+Transportation, storage
+2,599,855
+and postal services
+loans
+customers
+(3) Discounted bills will be transferred to corporate loans for accounting purposes once overdue.
+(4) Primarily consists of commercial housing loans, automobile loans, house decoration loans, education loans and other personal loans secured by
+monetary assets.
+With regard to corporate loans, the Group focused on the national macroeconomic policies, implemented the value
+creation bank strategy on a comprehensive scale, accelerated the transformation of business models, promoted
+optimisation of the structure of customers, continuously strengthened the origination and investment of high-quality
+assets, thereby maintaining stable asset quality. As at the end of the reporting period, the balance of the Group's
+corporate loans amounted to RMB2,599.855 billion, representing an increase of 9.44% as compared to the end
+of the previous year, with a proportion of corporate loans of 39.94%. As affected by significant risk exposure of
+some high-debt real estate customers and individual corporate customers with poor operation and management, the
+amount of non-performing corporate loans reached RMB30.992 billion, representing an increase of RMB1.031 billion
+as compared with the end of the previous year; and the non-performing loan ratio of corporate loans was 1.19%,
+down by 0.07 percentage point as compared with the end of the previous year.
+With regard to retail loans, the Group actively carried forward the innovation of products and business models,
+accelerated the origination of high-quality assets, and continuously increased credit support for small- and micro-
+sized customers. The Group gave priority to customers with rigid and improving housing demands, and maintained
+an overall stability in residential mortgage loans. Furthermore, the Group adhered to its "stable and low-volatility"
+operational strategy by focusing on value-based customer acquisition, optimising asset structure, and steadily
+developing its credit card business. As at the end of the reporting period, the balance of the Group's retail loans
+amounted to RMB3,437.883 billion, representing an increase of 8.73% as compared to the end of the previous
+year, with a proportion of retail loans of 52.82%, of which micro-finance loans amounted to RMB751.297 billion,
+representing an increase of 19.06% as compared with the end of the previous year. As at the end of the reporting
+period, the balance of non-performing retail loans amounted to RMB30.587 billion, representing an increase of
+RMB2.544 billion as compared with the end of the previous year. The non-performing ratio of retail loans was
+0.89%, which remained at the same level as compared to the end of the previous year, of which the balance of
+non-performing credit card loans amounted to RMB16.383 billion, representing an increase of RMB733 million as
+compared with the end of the previous year; and the non-performing loan ratio of credit card loans was 1.75%,
+down by 0.02 percentage point as compared with the end of the previous year.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+3.4.3 Distribution of loans and non-performing loans by industry
+31 December 2023
+loans (%)
+31 December 2022
+Percentage
+(in millions of RMB,
+advances to of the total
+Non
+performing
+Non-
+Performing
+loan ratio
+Loans and
+advances to
+except for percentages)
+Loans and
+(2) Primarily consists of other corporate loans such as financial leasing, M&A loans and corporate mortgage loans.
+513,264
+1,739
+1.03
+Production and supply of
+electric power, heat,
+gas and water
+272,223
+4.18
+443
+0.16
+4,781
+212,893
+468
+0.22
+Leasing and commercial
+services
+192,670
+2.96
+1,470
+0.76
+3.52
+7.89
+7.70
+0.53
+0.34
+492,248
+8.14
+948
+0.19
+Property development
+326,667
+5.02
+465,712
+17,183
+375,980
+6.21
+15,348
+4.08
+Manufacturing
+577,026
+8.87
+3,063
+5.26
+161,750
+(1) Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+0.96
+3,437,883
+52.82
+30,587
+0.89
+3,161,789
+52.25
+28,043
+0.89
+Retail loans
+Micro-finance loans
+11.54
+4,592
+0.61
+631,038
+10.43
+4,031
+0.64
+Residential mortgage loans
+751,297
+1,385,486
+8.49
+7.24
+5.13
+119
+0.04
+289,605
+4.79
+330
+0.11
+Others(2)
+514,054
+405,951
+7,890
+1.94
+399,862
+6.61
+5,946
+1.49
+Discounted bills(3)
+471,127
+6.24
+Notes:
+21.29
+0.37
+Others(4)
+63,652
+0.98
+1,205
+1.89
+54,799
+0.90
+1,267
+1.08
+2.31
+customers
+6,508,865
+100.00
+61,579
+0.95
+6,051,459
+100.00
+58,004
+Total loans and advances to
+5,122
+2,191
+202,225
+1,389,208
+22.96
+4,904
+0.35
+Credit card loans
+935,910
+14.38
+16,383
+3.34
+1.75
+14.62
+15,650
+1.77
+Consumer loans
+301,538
+4.63
+3,285
+1.09
+884,519
+2.67
+1,784
+1.10
+(in millions of RMB,
+except for percentages)
+advances to
+of the total performing
+loan ratio
+advances to
+of the total
+performing
+loan ratio
+Non-
+Performing
+customers
+loans
+(%)(1)
+customers
+loans (%)
+loans
+(%)(1)
+Head Office (2)
+973,646
+loans (%)
+14.96
+Non-
+Loans and
+0.96
+Notes:
+(1) Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
+(2) Primarily consists of agriculture, forestry, animal husbandry, fishery, accommodation and catering, health and social work, etc.
+The Group continued to improve the quality and efficiency of its services for the real economy, focused on the
+development of key finance sectors, including sci-tech finance, green finance, inclusive finance, retirement finance
+and digital finance, etc., improved the capabilities of customer operation, further increased the effort of loan
+extension, and steadily promoted the structural adjustment of asset business. As at the end of the reporting
+period, the balance of the Group's loans extended to the manufacturing industry amounted to RMB577.026 billion,
+representing an increase of 23.90% as compared with the end of the previous year, accounting for 8.87% of
+the total loans and advances to customers, with the proportion by 1.17 percentage points as compared with the
+end of the previous year. Furthermore, the Group closely tracked changes in internal and external situations, and
+continuously prevented and defused risks in key areas such as real estate and local government financing platforms.
+During the reporting period, the non-performing loan ratios of the Group in terms of property development,
+information transmission, software and IT service as well as transportation, storage and postal services all increased
+due to the risk exposure of high-debt real estate enterprises and individual corporate customers with poor operation
+and management.
+35
+36
+China Merchants Bank
+Percentage
+(2) The leverage ratio shall be calculated based on the "Measures for Management of the Leverage Ratio of Commercial Banks (Revised)" promulgated
+on 12 February 2015. The leverage ratio of the Group was 7.93%, 7.70% and 7.96% respectively as at the end of the third quarter, the end of the
+half year and the end of the first quarter of 2023.
+3.4.4
+Distribution of loans and non-performing loans by region
+31 December 2023
+31 December 2022
+Loans and
+Percentage
+Non
+Non-
+Performing
+Annual Report 2023 (H share)
+58,004
+18,011
+942,006
+Western Taiwan Straits
+Economic Zone
+1,186,286
+18.23
+7,941
+0.67
+1,087,410
+17.97
+Pearl River Delta and
+4,673
+North-eastern China
+168,929
+2.60
+1,862
+1.10
+169,566
+2.80
+2,020
+0.43
+1.85
+0.62
+13.69
+15.57
+17,811
+1.89
+Yangtze River Delta
+1,441,147
+22.14
+10,489
+0.73
+5,118
+1,338,769
+10,532
+0.79
+Bohai Rim
+930,205
+14.29
+5,745
+0.62
+828,311
+22.12
+100.00
+6,051,459
+0.95
+0.30
+105,770
+1.75
+435
+0.41
+Information transmission,
+software and IT service
+103,717
+333
+1.59
+0.73
+89,858
+1.48
+406
+0.45
+Water conservancy,
+environment and
+public utilities
+760
+43,232
+1.71
+Construction
+Wholesale and retail
+197,739
+3.04
+1,330
+0.67
+180,709
+2.99
+1,836
+111,200
+1.02
+133,664
+2.05
+387
+0.29
+112,114
+1.85
+440
+0.39
+Finance
+0.66
+101
+0.23
+471,127
+7.24
+514,054
+8.49
+Retail loans
+3,437,883
+52.82
+30,587
+Discounted bills
+0.89
+52.25
+28,043
+0.89
+Total loans and advances
+to customers
+6,508,865
+100.00
+61,579
+3,161,789
+3.96
+2,894
+1.21
+64,996
+1.07
+100
+0.15
+Mining
+47,271
+0.73
+567
+1.20
+40,495
+0.67
+521
+1.29
+Others(2)
+81,182
+1.24
+3,616
+4.45
+73,091
+Central China
+39
+23,449
+14,123
+(11,671)
+(856)
+18,671
+(18,636)
+The above table shows the notional amount and fair value of the Group's derivative financial instruments by their
+remaining maturity on each balance sheet date. The notional amount refers only to the transaction volumes that
+have not yet been due or completed on the balance sheet date, and does not represent the value at risk.
+During the reporting period, the fluctuation of the RMB exchange rate increased and the interest-rate derivatives
+market showed a wide range-bound feature. As an integrated market maker in the interbank RMB foreign exchange
+market and a quote provider for derivatives in the local currency market, the Group was committed to providing
+liquidity to the market and maintaining the stability of the market. Meanwhile, by continuously leveraging its
+professional strengths in financial market derivative transactions, the Group kept up its effort in publicising the
+"exchange rate risk-neutral" concept, helping customers carry out hedging transactions to improve their risk
+resistance capabilities and reduce financial costs, and facilitating the high-quality development of the real economy.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+Financial investments at fair value through profit or loss
+As at the end of the reporting period, the balance of the financial investments at fair value through profit or loss
+of the Group amounted to RMB526.145 billion, with bond and fund investments etc. being the major categories.
+The investments were primarily made by the Group based on assessments of, among other factors, macro economy,
+monetary and fiscal policies, industrial policies and market supply and demand, so as to obtain investment return by
+capturing trading opportunities in the market. During the reporting period, funding was stable in general and bond
+yields trended downward amid fluctuations. The Group actively expanded its bond investments while strengthening
+market timing, achieving favourable returns. For details, please refer to Note 23(a) to the financial statements.
+Debt investments at amortised cost
+As at the end of the reporting period, the balance of the Group's debt investments at amortised cost amounted to
+RMB1,728.620 billion. Among them, the bond investments mainly involved bonds issued by government and policy
+banks. This type of investment was held on a long-term basis for the strategic allocation of assets and liabilities of
+the Group, based on the requirements of interest rate risk management of banking book and liquidity management,
+while taking into account returns and risks. For details, please refer to Note 23(b) to the financial statements.
+Debt investments at fair value through other comprehensive income
+As at the end of the reporting period, the balance of debt investments at fair value through other comprehensive
+income of the Group amounted to RMB889.736 billion, with interest rate bonds such as government bonds
+and policy bank bonds and medium-to-high rating quality credit bonds being the major categories. This type of
+investment was primarily based on the Group's research and analysis on the bond market, with the purpose of
+obtaining investment return by capturing investment and allocation opportunities in the market and constantly
+optimising asset allocation structure. For details, please refer to Note 23(c) to the financial statements.
+Equity investments designated at fair value through other comprehensive income
+As at the end of the reporting period, the balance of equity investments designated at fair value through other
+comprehensive income of the Group amounted to RMB19.649 billion. Such investments were mainly non-trading
+equity investments held by the Group in the investees over whom the Group had no control, joint control or
+significant influence. For details, please refer to Note 23(d) to the financial statements.
+The composition of the Group's total bond investments classified by the issuing entities
+(in millions of RMB)
+Official authorities
+Policy banks
+(6,109)
+Others
+Liabilities
+92,258
+2,509,725
+Notional
+Assets
+Liabilities
+amount
+Interest rate derivatives
+1,819,231
+5,433
+(5,476)
+1,543,237
+Currency derivatives
+1,431,262
+11,815
+(10,667)
+874,230
+Other derivatives
+Total
+136,759
+3,387,252
+1,485
+18,733
+(1,300)
+(17,443)
+Assets
+6,428
+11,376
+867
+Commercial banks and other financial institutions
+Total bond investments
+31 December 2023 31 December 2022
+31 December 2022
+Percentage
+of the total
+(in millions of RMB, except for percentages)
+Amount
+amount (%)
+Amount
+Percentage
+of the total
+amount (%)
+Deposits from customers
+8,155,438
+82.02
+7,535,742
+82.05
+Inter-bank transactions (1)
+888,408
+8.94
+957,657
+10.42
+Borrowings from the central bank
+377,189
+31 December 2023
+The following table sets forth, as at the dates indicated, the components of the total liabilities of the Group.
+As at the end of the reporting period, the total liabilities of the Group amounted to RMB9,942.754 billion,
+representing an increase of 8.25% as compared with the end of the previous year, which was primarily attributable
+to the steady growth in deposits from customers.
+3.3.2 Liabilities
+1,944,820
+1,600,274
+503,459
+494,628
+252,828
+232,923
+143,578
+111,026
+2,844,685
+Notional
+amount
+2,438,851
+Investments in joint ventures and associates
+As at the end of the reporting period, the Group's investments in joint ventures and associates amounted to
+RMB26.590 billion, up 11.52% from the end of the previous year. As at the end of the reporting period, the
+balance of allowances for impairment losses on investments in joint ventures and associates of the Group was zero.
+For details, please refer to Note 25 and Note 26 to the financial statements.
+3.3.1.3 Goodwill
+In compliance with the International Financial Reporting Standards, at the end of the reporting period, the Group
+conducted an impairment test on the goodwill arising from the acquisition of CMB Wing Lung Bank, China
+Merchants Fund and other companies and determined that allowances for impairment losses were not necessary for
+the reporting period. As at the end of the reporting period, the Group had a balance of allowances for impairment
+losses on goodwill of RMB579 million and the carrying value of goodwill was RMB9.954 billion.
+31
+32
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2023 (H share)
+Note: "Official authorities" include the Ministry of Finance of the PRC, local governments and the central bank, etc.; "Others" mainly refer to
+enterprises.
+(in millions of RMB)
+Fair value
+Fair value
+526,145
+16.40
+423,467
+15.19
+- Bond investments
+274,687
+8.57
+215,081
+7.72
+- Others (note)
+251,458
+7.83
+208,386
+7.47
+Debt investments at amortised cost
+1,728,620
+53.86
+1,536,397
+55.13
+or loss
+Financial investments at fair value through profit
+0.67
+18,671
+334,150
+30
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2023 (H share)
+3.3.1.2
+Investment securities and other financial assets
+The Group's investment securities and other financial assets consist of listed and unlisted financial instruments
+denominated in RMB and foreign currencies.
+The following table sets forth, as at the dates indicated, the components of investment securities and other financial
+assets of the Group by line items.
+- Bond investments
+31 December 2023
+(in millions of RMB, except for percentages)
+Amount
+Percentage
+of the total
+amount (%)
+Percentage
+of the total
+Amount
+amount (%)
+Derivative financial assets
+18,733
+1.63
+31 December 2022
+3.79
+- Non-standardised asset investments
+1,680,262
+0.61
+13,416
+0.48
+Investments in joint ventures and associates
+26,590
+0.83
+23,844
+0.86
+Total investment securities and
+other financial assets
+3,209,473
+100.00
+2,787,066
+100.00
+Note: Including equity investments, fund investments, wealth management products, long position in precious metal contracts and others.
+Derivative financial instruments
+As at the end of the reporting period, the major categories and amount of derivative financial instruments held by
+the Group are indicated in the following table. For details, please refer to Note 60(f) to the financial statements.
+31 December 2023
+31 December 2022
+19,649
+other comprehensive income
+Equity investments designated at fair value through
+27.67
+52.36
+1,452,499
+52.12
+87,069
+2.71
+126,698
+4.55
+679
+0.02
+- Others
+648
+(39,390)
+(1.23)
+(43,448)
+0.02
+(1.56)
+Debt investments at fair value through other
+comprehensive income
+889,736
+27.72
+771,271
+- Less: allowances for impairment losses
+129,438
+0.58
+Financial liabilities at fair value through profit or
+58,004
+0.96
+During the reporting period, the Group insisted on strict classification of asset risks to truly reflect the asset quality
+according to the new regulations on risk classification of financial assets. Affected by the unwinding of risks
+among some high-debt real estate customers and risks associated with retail banking business, the balance of non-
+performing loans of the Group increased as compared with the end of the previous year. As at the end of the
+reporting period, the balance of the Group's non-performing loans amounted to RMB61.579 billion, representing
+an increase of RMB3.575 billion as compared with the end of the previous year, with a non-performing loan ratio of
+0.95%, representing a decrease of 0.01 percentage point as compared with the end of the previous year.
+33
+34
+34
+China Merchants Bank
+Annual Report 2023 (H share)
+3.4.2
+Chapter III Management Discussion and Analysis
+Distribution of loans and non-performing loans by product type
+31 December 2023
+31 December 2022
+Percentage
+Loans and
+of the
+Non-
+Non-
+Performing
+Percentage
+0.95
+100.00
+6,051,459
+100.00
+73,470
+1.21
+Substandard
+Doubtful
+Loss
+16,576
+0.26
+22,770
+0.38
+Loans and
+21,554
+23,737
+0.39
+0.36
+11,497
+0.19
+Total loans and advances to customers
+Non-performing loans
+Note: Under the 5-tier loan classification system, non-performing loans of the Group include substandard loans, doubtful loans and loss loans.
+6,508,865
+61,579
+0.33
+1.10
+(in millions of RMB,
+total loans
+29,961
+1.26
+Working capital loans
+1,021,305
+15.69
+8,068
+0.79
+821,269
+13.57
+9,562
+1.16
+Fixed asset loans
+838,449
+12.88
+14,915
+1.78
+864,880
+1.41
+14.29
+39.26
+2,375,616
+1.19
+30,992
+performing
+loan ratio
+advances to
+of the
+total loans
+Non-
+Non-
+Performing
+performing
+loan ratio
+except for percentages)
+advances to
+customers
+loans
+(%) (1)
+customers
+(%)
+loans
+(%)(1)
+Corporate loans
+2,599,855
+39.94
+(%)
+71,328
+Trade finance
+5,919,985
+The following table sets forth, as at the dates indicated, the deposits from customers of the Group by product type
+and customer type.
+31 December 2022
+Percentage
+of the total
+amount (%)
+31 December 2023
+(in millions of RMB, except for percentages)
+Amount
+Percentage
+of the total
+amount (%)
+Amount
+Corporate customer deposits
+Demand
+2,644,685
+32.43
+2,762,671
+36.66
+Time
+2,015,837
+24.72
+1,668,882
+22.15
+As at the end of the reporting period, total deposits from customers of the Group amounted to RMB8,155.438
+billion, representing an increase of 8.22% as compared with the end of the previous year, accounting for 82.02%
+of the total liabilities of the Group, which was the major funding source of the Group.
+Deposits from customers
+(2) "Others" include salaries and welfare payable, taxes payable, contract liabilities, lease liabilities, expected liabilities, deferred income tax liabilities,
+interest payable and other liabilities.
+(1) "Inter-bank transactions" include deposits and placements with banks and other financial institutions and amounts sold under repurchase
+agreements. According to the relevant provisions of the Interim Measures for the Administration of Gold Leasing Business (Yin Ban Fa [2022] No.
+88) issued by the General Office of the People's Bank of China in July 2022, since 2023, for the gold leasing business carried out between the
+Group and financial institutions, the lease-in side was adjusted from "financial liabilities at fair value through profit or loss" to "placements from
+banks and other financial institutions", and the comparative figures are re-presented accordingly.
+61,401
+97.83
+loss and derivative financial liabilities(1)
+0.62
+67,780
+0.74
+174,764
+1.76
+222,288
+Subtotal
+2.42
+Total liabilities
+285,554
+9,942,754
+2.87
+271,769
+2.96
+100.00
+9,184,674
+100.00
+Notes:
+Others(2)
+4,660,522
+Debt securities issued
+4,431,553
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+3.3.3 Shareholders' equity
+As at the end of the reporting period, the Group's equity attributable to shareholders of the Bank was
+RMB1,076.370 billion, representing an increase of 13.84% as compared with the end of the previous year, among
+which retained profits amounted to RMB568.372 billion, representing an increase of 15.30% as compared with the
+end of the previous year; investment revaluation reserve amounted to RMB13.656 billion, representing an increase
+of 15.58% as compared with the end of the previous year, mainly due to an increase in the valuation of financial
+assets at fair value through other comprehensive income as compared to the end of the previous year; exchange
+difference on translation of financial statements of foreign operations amounted to RMB2.934 billion, representing
+an increase of RMB925 million as compared with the end of the previous year, mainly due to the fluctuations in
+RMB exchange rate.
+3.4.1
+3.4 Analysis of Loan Quality
+Distribution of loans by 5-tier loan classification
+The following table sets forth the 5-tier loan classification of the Group as at the dates indicated.
+31 December 2023
+31 December 2022
+(in millions of RMB, except for percentages)
+Amount
+Percentage
+of the total
+amount (%)
+Amount
+Percentage
+of the total
+amount (%)
+Special mention
+97.95
+57.15
+6,375,958
+China Merchants Bank
+In 2023, the percentage of daily average balance of the demand deposits to that of the deposits from customers of
+the Group was 57.08%, representing a year-on-year decrease of 4.55 percentage points. Among these, the daily
+average balance of demand deposits from corporate customers accounted for 57.31% of that of the corporate
+customer deposits, representing a year-on-year decrease of 2.67 percentage points; the daily average balance
+of demand deposits from retail customers accounted for 56.74% of that of the deposits from retail customers,
+representing a year-on-year decrease of 7.69 percentage points. Affected by the decline in the risk appetite of
+customers and insufficient liquidity activities of enterprises, customers' demand for investment in time deposit
+products increased, leading to a decrease in the proportion of demand deposits.
+Normal
+7,535,742
+100.00
+Demand
+22.43
+1,983,364
+58.81
+26.32
+Time
+1,665,304
+20.42
+1,829,612
+14.87
+100.00
+1,120,825
+Total deposits from customers
+41.19
+8,155,438
+42.85
+Subtotal
+3,104,189
+3,494,916
+Deposits from retail customers
+Measurement Approach
+817,387
+944,349
+Net Tier 1 capital
+14.34
+701,033
+801,565
+Capital adequacy ratios under the Advanced
+the end of the
+previous year (%)
+31 December
+2022
+15.53
+at the end of
+the current year
+as compared with
+Increase/decrease
+(in millions of RMB, except for percentages)
+Net core Tier 1 capital
+The Company
+31 December
+2023
+7.50
+1,059,697
+554,239
+As at the end of the reporting period, the core Tier 1 capital adequacy ratio, the Tier 1 capital adequacy ratio and
+the capital adequacy ratio of the Company under the Advanced Measurement Approach were 13.32%, 15.70% and
+17.62% respectively, representing an increase of 0.09, 0.28 and 0.11 percentage point respectively, as compared
+with the end of the previous year.
+Operational risk weighted assets
+-2.69
+69,000
+67,143
+7.91
+4,330,955
+4,673,703
+Of which: Credit risk weighted assets
+Market risk weighted assets
+4,925,532
+5,295,085
+parallel run period)
+consideration the floor requirements during the
+Risk-weighted assets (without taking into
+14.21
+927,881
+Net capital
+Chapter III Management Discussion and Analysis
+703
+40
+3.6 Results of Operating Segments
+The major business segments of the Group include retail finance and wholesale finance. The following table
+summarises the operating results of each business segment of the Group for the periods indicated.
+Items
+(in millions of RMB)
+Retail finance
+Wholesale finance
+Other businesses
+Total
+2023
+Profit
+2022
+before tax
+by business
+Net
+Profit
+before tax
+operating
+by business
+525,577
+334
+China Merchants Bank
+Annual Report 2023 (H share)
+809
+911
+40
+No.
+31 December 2023
+Distressed
+market risk
+value during
+the reporting
+General
+market risk
+value during
+the reporting
+(in millions of RMB)
+Item
+1
+2
+3
+4
+Average value
+Maximum value
+Minimum value
+Value at the end of the period
+period
+period
+857
+541
+1,060
+302
+5.45
+7,652,723
+the floor requirements during the parallel run
+period)
+As at the end of the reporting period, the core Tier 1 capital adequacy ratio, the Tier 1 capital adequacy ratio and
+the capital adequacy ratio of the Company under the Weighted Approach were 11.38%, 13.40% and 14.52%
+respectively, representing an increase of 0.41, 0.61 and 0.30 percentage point respectively as compared with the
+end of the previous year.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2023 (H share)
+Note: The "Weighted Approach" refers to the Weighted Approach for credit risk, the Standardised Measurement Approach for market risk and the
+Basic Indicator Approach for operational risk in accordance with the relevant provisions of the "Capital Rules for Commercial Banks (Provisional)"
+issued on 7 June 2012. Same as below.
+Increased by 0.28
+percentage point
+14.68%
+14.96%
+percentage point
+Increased by 0.57
+13.25%
+13.82%
+percentage point
+Increased by 0.34
+10.25
+6,941,350
+11.52%
+11.86%
+segments
+The Company
+12.39
+(in millions of RMB, except for percentages)
+Approach
+817,387
+944,349
+14.34
+701,033
+801,565
+the end of the
+previous year (%)
+31 December
+2022
+31 December
+2023
+at the end of
+the current year
+as compared with
+Increase/decrease
+Capital adequacy ratio
+Tier 1 capital adequacy ratio
+Core Tier 1 capital adequacy ratio
+Risk-weighted assets
+Net capital
+Net Tier 1 capital
+Net core Tier 1 capital
+Capital adequacy ratios under the Weighted
+Risk-weighted assets (taking into consideration
+1,018,678
+15.00
+percentage point
+Increased by 0.11
+17.51%
+17.62%
+Capital adequacy ratio
+percentage point
+Increased by 0.28
+15.42%
+15.70%
+Tier 1 capital adequacy ratio
+percentage point
+Increased by 0.09
+13.52
+5,299,237
+13.23%
+13.32%
+Core Tier 1 capital adequacy ratio
+6,015,774
+As at the end of the reporting period, the core Tier 1 capital adequacy ratio, the Tier 1 capital adequacy ratio
+and the capital adequacy ratio of the Group under the Weighted Approach were 11.86%, 13.82% and 14.96%
+respectively, representing an increase of 0.34, 0.57 and 0.28 percentage point respectively as compared with the
+end of the previous year.
+1,144,901
+The Group
+Capital adequacy ratios under the Weighted
+Approach (note)
+919,798
+1,057,754
+13.51
+799,352
+907,308
+at the end of
+the current year
+as compared with
+the end of the
+previous year (%)
+Increase/decrease
+31 December
+2022
+2023
+31 December
+Capital adequacy ratio
+Tier 1 capital adequacy ratio
+Core Tier 1 capital adequacy ratio
+Risk-weighted assets
+Net capital
+Net Tier 1 capital
+Net core Tier 1 capital
+(in millions of RMB, except for percentages)
+income
+6
+Net
+operating
+income
+China Merchants Bank
+42
+38,998
+253,314
+232,634
+38,019
+Counterparty
+Off-balance sheet
+Annual Report 2023 (H share)
+5,178,480
+On-balance sheet
+Portion not covered by the IRB
+approach
+713,291
+713,291
+Other retail
+1,921,846
+1,921,846
+4,608,970
+3.5.3
+Chapter III Management Discussion and Analysis
+Measurement of market risk capital
+3.9.1 Net interest margin
+During the reporting period, the Group's net interest margin was 2.15%, representing a decrease of 25 basis points
+year-on-year; the Company's net interest margin was 2.20%, representing a decrease of 24 basis points year-on-
+year. Such decrease in net interest margin was mainly due to the reasons below. On the asset side, firstly, due to
+the continued downturn of the LPR (Loan Prime Rate) and the insufficient effective credit demand, the pricing of
+newly granted loans declined year-on-year, which led to the year-on-year decrease in the average yield of loans;
+secondly, residents' consumption and their willingness to purchase houses are pending for further recovery and the
+growth of loans which had relatively high yields, such as credit card loans and residential mortgage loans, remained
+sluggish. On the liability side, corporate funds were insufficiently allocated to demand deposit products, and the
+growth of low-cost corporate demand deposits such as corporate settlement funds deposits was restricted. Coupled
+with shift of residents' investment to time deposits due to the disturbance in the capital market, customers' demand
+for wealth-enhancing features in deposits was on the rise, and the proportion of demand deposits declined, with
+an increase in cost ratio of liabilities. In order to maintain a relatively stable net interest margin, the Group further
+strengthened the management of its asset and liability portfolio during the reporting period. On the asset side, the
+Group persistently focused on loan granting while increasing asset allocation in bonds to improve the efficiency of
+capital utilisation. On the liability side, the Group focused on driving growth in low-cost core deposits. The average
+cost rate of customer deposits denominated in RMB of the Company during the reporting period was 1.56%,
+representing a year-on-year decrease of 4 basis points.
+Looking forward to 2024, The Group will actively take measures to maintain the net interest margin at a relatively
+outstanding level in the industry. On the asset side, the Group will continue to prioritise category asset allocation to
+promote the stable growth of credit scale and enhance the effort of retail loan extension, while reinforcing the loan
+risk pricing management. At the same time, the Group will strengthen its capability in forward-looking prediction of
+market interest rates, and flexibly allocate investment assets to improve overall allocation efficiency. On the liability
+side, the Group will insist on focusing on the growth of low-cost core deposits, strengthen the limit control of high-
+cost deposits. Meanwhile, the Group will flexibly arrange market-oriented financing and reduce the overall cost of
+liabilities according to the trend of market interest rates.
+3.9.2 Net non-interest income
+9
+The income from extensive wealth management includes the fee and commission income from wealth management, asset management and custody
+business.
+49
+49
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+The major items under the Group's net fee and commission income during the reporting period are analysed as
+follows. Fee and commission income from wealth management amounted to RMB28.466 billion, representing
+a year-on-year decrease of 7.89%, of which income from agency distribution of insurance policies amounted to
+RMB13.585 billion, representing a year-on-year increase of 9.33%. The growth rate narrowed compared with that
+in the first three quarters due to fee reduction in the bancassurance channel. Income from agency distribution of
+wealth management products was RMB5.424 billion, representing a year-on-year decrease of 18.37%, mainly due
+to the changes in scale and structure of wealth management products. Income from agency distribution of funds
+amounted to RMB5.179 billion, representing a year-on-year decrease of 21.52%, which was mainly due to the
+downward trend amid volatility of the capital market, resulting in year-on-year decrease in the holding and sales
+of equity funds with higher fees. Income from agency distribution of trust schemes amounted to RMB3.206 billion,
+representing a year-on-year decrease of 19.43%, which was mainly due to the decrease in the holding of agency
+distribution of trust. Income from securities brokerage was RMB731 million, representing a year-on-year decrease of
+19.05%, which was mainly affected by the market conditions and trading activity of Hong Kong's capital market.
+Fee and commission income from asset management amounted to RMB11.474 billion, representing a year-on-
+year decrease of 7.89%, which was mainly due to the year-on-year decrease in the daily average scale of products
+under the management of CMB Wealth Management. Commission income from custody business was RMB5.328
+billion, representing a year-on-year decrease of 8.00%, which was mainly due to the decrease in income from
+equity mutual funds and wealth management custody. Income from bank card fees amounted to RMB19.525
+billion, representing a year-on-year decrease of 8.76%, which was mainly due to the decrease in fee income from
+offline transaction of credit cards. Income from settlement and clearing fees amounted to RMB 15.492 billion,
+representing a year-on-year increase of 2.93%, mainly due to the increase in e-payment income.
+Looking forward to 2024, the Group will promote the high-quality growth of net non-interest income through the
+following measures: the first is to continuously promote the development of extensive wealth management business,
+attaching great importance to both expanding the customer base and tapping the potential of the existing wealth
+management customer groups. By putting in more efforts in strengthening product innovation and tapping the
+asset allocation potential of key customers, the Group will pay close attention to the opportunities amid the market
+recovery, optimise the structure of insurance, funds, wealth management and other products, and enhance the
+contribution of fee and commission income from wealth management by emphasising on both volume and pricing;
+the second is to seize the opportunity of consumption recovery, continue to upgrade and improve basic transaction
+services such as credit cards and e-payments, vigorously carry out promotion of card binding and card activation
+operations, improve refined operational capabilities by leveraging on the power of Fintech and tap the potential
+of transaction to increase revenue; the third is to strengthen market research and judgement and professional
+capacity building, closely keep up with the needs of enterprises, make arrangements in advance, and improve the
+comprehensive service system, so as to increase the contribution of corporate finance, investment banking and
+financial market segments to net non-interest income.
+3.9.3 Risk management and control in the real estate sector
+During the reporting period, the Group followed the national policy guidance and regulatory requirements, and adhered
+to the overall strategy with "clear positioning, stable scale, improved onboarding, focused regions, adjusted structure and
+strict management". Under the premise of controllable risks, the Group seized structural opportunities, focused on high-
+quality enterprises and high-quality regions, and selected high-quality businesses and projects that can be covered by
+project cash flow, especially high-quality commodity residential projects, government-subsidised (rental) housing projects
+and operating property projects, so as to support the stable and healthy development of the real estate market. At the
+same time, the Group unified the risk appetite of on- and off-balance sheet businesses, implemented centralised risk
+management of customers granted with large credit facility, strictly examined cash flows, and continuously strengthened
+post-investment and post-loan management.
+The Group's market risk capital requirement under the Internal Model-based Approach was calculated using the
+market risk value based on 250 days of historical market data, a confidence coefficient of 99% and a holding
+period of 10 days. The following table sets forth the market risk value indicators of the Group as at the end of the
+reporting period.
+The Group uses mixed approaches to calculate its market risk capital requirement. Specifically, it uses the Internal
+Model-based Approach to calculate the general market risk capital requirement of the Company (excluding
+overseas branches), and uses the Standardised Measurement Approach to calculate the general market risk
+capital requirement of overseas branches and subsidiaries of the Company as well as the specific market risk
+capital requirement of the Company and its subsidiaries. As at the end of the reporting period, the market risk-
+weighted assets of the Group were RMB86.751 billion, and the market risk capital requirement was RMB6.940
+billion, of which the general market risk capital requirement calculated under the Internal Model-based Approach
+was RMB4.528 billion, and the market risk capital requirement calculated under the Standardised Measurement
+Approach was RMB2.412 billion.
+Qualified revolving retail
+1,379,581
+1,379,581
+Of which: Residential mortgage
+14.22%
+14.52%
+percentage point
+Increased by 0.61
+12.79%
+13.40%
+percentage point
+Increased by 0.41
+10.97%
+11.38%
+10.27
+6,390,196
+7,046,274
+12.61
+908,572
+1,023,111
+15.53
+Increased by 0.30
+3.9 Key Business Concerns in Operation
+11
+percentage point
+4,014,718
+4,014,718
+Retail
+2,553,072
+2,553,072
+1,159,243
+1,159,243
+Group
+Legal person
+Corporate
+Financial institution
+Type of risk exposure
+Portion covered by the
+IRB approach
+(in millions of RMB)
+31 December 2023
+During the reporting period, the credit risk of the Company under the Internal Ratings-Based approach (IRB
+approach) was classified into six types of risk exposures: sovereign, financial institution, corporate, retail,
+shareholding and others. As at the end of the reporting period, the balances of various risk exposures were as
+follows.
+3.5.2 Balance of credit risk exposures
+41
+Chapter III Management Discussion and Analysis
+Annual Report 2023 (H share)
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+3.7 Other Financial Disclosures under the Regulatory Requirements
+3.7.1 Balance of off-balance sheet items that may have a material effect on the
+financial position and operating results and the related information
+The Group's off-balance sheet items include derivative financial instruments, commitments and contingent liabilities.
+Commitments and contingent liabilities include credit commitments, leasing commitments, capital commitments,
+securities underwriting commitments, bonds redemption commitments, outstanding litigations and disputes and
+other contingent liabilities, among which the credit commitments are the primary component. As at the end of the
+reporting period, the balance of credit commitments of the Group was RMB2,817.969 billion. For details of the
+contingent liabilities and commitments, please refer to Note 58(a) to the financial statements.
+3.7.2 Outstanding overdue debts
+As at the end of the reporting period, the Group did not have any outstanding overdue debts.
+3.8 Implementation of Development Strategies
+During the reporting period, the Company focused on the strategic objective of "value creation bank", and adhered
+to the priority of stability, while pursuing progress amid stability. The Company accelerated to improve its capabilities
+in wealth management, Fintech and risk management, maintaining stable operating results and further enhancing
+market competitiveness, so as to take solid steps on the path of high-quality development.
+1.
+Dynamically balanced development of "Quality, Profitability and Scale"
+Focusing on the value creation chain of "volume growth revenue growth - profit growth - value growth", the
+Company adhered to the principle of "takes quality as the foundation and profitability as priority, while maintaining
+moderate scale and reasonable structure", maintained stable asset quality, leading position in risk compensation
+capacity, steady profit growth, and a relatively high level of ROAA and ROAE during the reporting period; the
+business scale grew steadily, and the customer base, assets and liabilities increased in quantity and maintained in
+good quality. In light of the operational structure with obvious advantages, retail finance business contributed to
+more than 55% in terms of both net operating income and profit; indicators such as proportion of demand deposits,
+proportion of net non-interest income and others maintained a relatively good level; and customer structure and
+asset structure were continuously optimised.
+2.
+Balanced and coordinated development of our four major sectors
+During the reporting period, the Company continued to promote the development of four major sectors, namely
+"retail finance, corporate finance, investment banking and financial markets, wealth management and asset
+management", to form a business pattern of balanced and coordinated development with distinctive features,
+strengthened and enhanced the capital-heavy business, and optimised and expanded the capital-light business.
+The systematic advantages of the Company's retail finance sector were further highlighted. Focusing on
+the original needs of customers in "deposit, loan, and remittance (17)", the Company constantly improved the
+service level through the methodology of "people + digitalisation" services. As at the end of the reporting period,
+the Company's retail customers reached 197 million in total, representing an increase of 7.07% as compared with
+the end of the previous year. As of the end of the reporting period, the balance of total assets under management
+(AUM) from retail customers amounted to RMB13.32 trillion, representing an increase of 9.88% as compared with
+the end of the previous year. The balance of deposits from retail customers amounted to RMB3,314.318 billion,
+representing an increase of 12.13% as compared with the end of the previous year. The balance of retail loans
+amounted to RMB3,373.633 billion, representing an increase of 8.49% as compared with the end of the previous
+year. Due to continued improvement of the debit and credit card integrated customer acquisition and operating
+efficiency, 65.72% of our credit card customers held both our debit cards and credit cards as of the end of the
+reporting period, up by 1.62 percentage points as compared with the end of the previous year.
+43
+44
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+Annual Report 2023 (H share)
+The featured advantages of the Company's corporate finance sector were continuously strengthened.
+Focusing on the needs of the nation and the capabilities of CMB, the Company built featured finance services,
+including sci-tech finance, green finance, inclusive finance and intelligent manufacturing finance, upgraded the
+customer acquisition and service model, and continued to expand the breadth and depth of customer services.
+As at the end of the reporting period, the total number of corporate customers served by the Company reached
+2,820,600, representing an increase of 11.66% as compared with the end of the previous year. The balance
+of deposits from corporate customers amounted to RMB4,557.243 billion, representing an increase of 5.52%
+as compared with the end of the previous year; and the balance of loans to corporate customers amounted
+to RMB2,321.585 billion, representing an increase of 10.70% as compared with the end of the previous year.
+Among them, the growth rate of loans in key areas such as sci-tech finance, green finance, inclusive finance and
+manufacturing finance was significantly higher than the overall growth rate of the loans of the Company. As at the
+end of the reporting period, the balance of loans extended to the sci-tech enterprises5 was RMB428.477 billion,
+representing an increase of 44.95% as compared with the end of the previous year; the balance of green loans
+amounted to RMB447.765 billion, representing an increase of 26.00% as compared with the end of the previous
+year; the balance of SME inclusive finance loans was RMB804.279 billion, representing an increase of 18.56% as
+compared with the end of the previous year; and the balance of loans extended to the manufacturing industry
+amounted to RMB555.102 billion, representing an increase of 25.06% as compared with the end of the previous
+year.
+China Merchants Bank
+For the detailed figures of the Group's business and geographical segments, please refer to Note 56 to the financial
+99,913
+194,315
+94,178
+191,415
+72,765
+134,625
+67,149
+142,094
+3,940
+10,138
+3,786
+11,231
+176,618
+339,078
+165,113
+344,740
+During the reporting period, profit before tax of retail finance business of the Group amounted to RMB99.913
+billion, up by 6.09% year-on-year, accounting for 56.57% of the profit before tax of the Group, representing a
+year-on-year decrease of 0.47 percentage point; net operating income amounted to RMB194.315 billion, up by
+1.52% year-on-year, accounting for 57.31% of the net operating income of the Group, representing a year-on-year
+increase of 1.79 percentage points. During the reporting period, the cost-to-income ratio of retail finance business
+of the Group was 31.96%, representing a year-on-year increase of 0.01 percentage point.
+statements.
+segments
+The leading advantages of the Company's investment banking and financial markets sector were
+continuously consolidated. The Company accelerated the transformation of its investment banking business to
+become a "fund originator", and continuously improved its business capabilities in terms of bond underwriting
+and M&A financing. As at the end of the reporting period, the balance of the aggregate financing products to
+corporate customers (FPA) contributed by the investment banking business increased by 14.91% as compared with
+the beginning of the year. The self-operated investment and research systems of the financial markets business were
+continuously improved, and the advantages of tradings on behalf of customers were further consolidated. During
+the reporting period, the Company provided hedging services to 6,285 companies with a total transaction volume
+of USD64.783 billion in derivatives from corporate customers. With the on-going improvement of the integrated
+operation capability of bill business, the Company continued to enhance its bill transaction business. During the
+reporting period, the number of customers of bill business of the Company was 159,700 with a year-on-year
+increase of 11.38% and the volume of commercial acceptance bill discounting ranked first in the market (data from
+the Commercial Bank Bill Business Association).
+5
+The Company grasped the definite opportunities of the large language model, and actively carried out the
+construction and application of the large language model. On the one hand, the Company actively strengthened
+the construction of large models, introduced large models with hundreds of billions of parameters, used its own
+corpus to optimise, train and adapt to bank-wise application scenarios, and actively followed up the technological
+development of open-source large models. The Company also self-developed the large models with tens of billions
+of parameters in professional scenarios. On the other hand, we actively explored the application of large models in
+retail business, wholesale business, middle office and back office. At the same time, the Company established the
+large model experience platform, connecting to various mainstream large models in China.
+8
+Availability refers to the proportion of normal working conditions in a given period of time. The overall availability of the cloud platform is the arithmetic
+average of the availability of each important system running on the cloud platform.
+China Merchants Bank
+Annual Report 2023 (H share)
+4.
+5.
+6.
+Chapter III Management Discussion and Analysis
+To continue building a fortress-style overall risk and compliance management
+system
+During the reporting period, the Company continued to promote the "Six All" risk management system covering "all
+risks, all branches and subsidiaries, all customers, all assets, all processes, and all factors", optimised the centralised
+system of credit granting and limit management of customers granted with large credit facility, further enhanced
+centralised customer management, established a domestic branch-based risk profile and classification system, and
+enhanced the risk management for subsidiaries and overseas institutions. The Company actively prevented and
+mitigated risks in key areas, effectively and steadily disposed a number of real estate projects associated with risk,
+promoted the prudent and differentiated management of local government financing business, steadily carried out
+the business of small- and medium-sized financial institutions, and continued to promote the collection of non-
+performing loans. The Company promoted the dynamic rebalancing of asset business, optimised the "one branch,
+one policy", list-based operation for the asset business, and optimised research policies on industrial clusters,
+advantageous industries and regional economies. The Company comprehensively reinforced the internal control and
+compliance management, strengthened the promotion of risk and compliance culture, strengthened the construction
+of inspection and supervision team at branches, continued to strengthen the sanction and compliance management,
+and continuously deepened the money laundering risk management.
+To accelerate the construction of advantages in key regions
+During the reporting period, the Company proactively responded to the nation's major regional development
+strategy and industrial cluster development strategy, and accelerated the release of development potential of the
+key branches among the Yangtze River Delta, the Pearl River Delta, Chengdu-Chongqing Region and the Western
+Taiwan Straits Economic Zone in combination with the regional layout and business structure of the Company's
+branches so as to adapt to local economic development. The Company carried out the "deep and intensive
+cultivation" centring on regional advantageous and characteristic industries as well as customer needs, strengthened
+its core competitiveness and enhanced the operating efficiency of branches in key regions by "promoting featured
+services of CMB in key regions, developing region-based strategies within CMB" to develop new growth engines
+for high-quality development. The development strategy of key regions has achieved initial results. As at the end of
+the reporting period, the growth rates of core deposits, AUM and corporate loans of 17 branches of the Company
+in key regions were higher than the average level of the Bank. As at the end of the reporting period, the balance
+of corporate loans of the above 17 branches in the key regions amounted to RMB867.679 billion, representing an
+increase of RMB124.941 billion as compared with the end of the previous year, accounting for 37.37% of the total
+corporate loans of the Company. The increased loans accounted for 55.66% of the total incremental corporate
+loans of the Company.
+To comprehensively improve the level of refined management
+During the reporting period, the Company insisted on building a refined and standardised management system to
+improve the efficiency, effectiveness, and efficacy of value creation. By further reforming in organisational structure,
+the Company steadily promoted the reform of operational system of branches, and adjusted and optimised the
+structure and management model of Head Office departments, so the organisational structure became more aligned
+with value creation bank. The Company also strengthened talent management, promoted the development of
+talents across different organisational level, upgraded talent exchange program, enhanced the application of the
+"Six Can-do" mechanism (), and comprehensively strengthened the code of conduct of employees. The
+Company optimised the management of asset and liability, upgraded the asset and liability management system
+and the performance management system focusing on value creation, and actively promoted the preparation for
+implementation of the New Capital Rules. The Company upgraded its service management, explored the construction
+of an "extensive consumer protection" working pattern, strengthened the protection of consumer rights, focused on
+the traceability and rectification of key and difficult issues, created new service standards for China Merchants Bank,
+and constantly improved service quality and efficiency. Therefore, the number of customer complaints was reduced
+by 35% year-on-year. The Company implemented strict financial management, adhered to careful planning, and
+strengthened the closed-loop management of the whole process of costs and expenses.
+47
+48
+In terms of digital infrastructure, the Company has entered into a more stable, agile and resilient "post-
+cloud era". The technology middle office strengthened component governance and accelerated the establishment
+and promotion of low-threshold development platform. The data middle office pushed forward the import of
+external data and enterprise-level data governance and application. As of the end of the reporting period, the overall
+availability of the cloud services exceeded 99.999%, while the "Project of Full-scale Cloud Deployment of CMB
+Banking System" winning the first prize of Fintech Development Award of the People's Bank of China. The system
+supported on-demand application expansion with minute-level flexibility, which could adjust the flexible allocation of
+resources according to business needs and strategies to achieve the optimal use of resources. The technology middle
+office had launched over 5,100 components, among which 1,254 components passed the quality certification of the
+Bank, representing an increase of 146.85% as compared with the end of the previous year. The Company launched
+5,646 applications on the low-code development platform, of which the business personnel accounted for more
+than 53% of all developers. The data middle office introduced nearly 400 data sources, and the big data services
+covered 60% of the employees in the Bank.
+The Company's capabilities of wealth management and asset management were constantly enhanced. The
+Company continued to promote the development of extensive wealth management business. On the client side, as
+of the end of the reporting period, the number of customers holding our wealth management products reached
+51,379,500, representing an increase of 19.13% as compared with the end of the previous year, and the number
+of private banking customers exceeded 140,000. On the product side, the Company carefully selected diversified
+products in the whole market for customers, and enhanced the exploration of high-quality products. On the service
+side, the Company further promoted the "CMB TREE Asset Allocation Service System". The number of customers
+who conducted asset allocation under the system reached 9,114,500, representing an increase of 12.15% as
+compared with the end of the previous year. The Company continued to build the service ecosystem with partners
+and accompanied customers throughout their investment journey. As at the end of the reporting period, 152
+asset management institutions have been introduced to the "Zhao Cai Hao ()", an open platform of wealth
+management business of the Company. The Group's asset management subsidiaries continued to strengthen the
+six major capabilities of investment research, asset origination, risk management, technology support, business
+innovation and talent team. As at the end of the reporting period, the scale of assets management business
+amounted to RMB4.48 trillion. The Company accelerated the exploration of the service model of asset custody
+business of "service + technology + collaboration". As at the end of the reporting period, the total asset under
+custody of the Company reached RMB21.12 trillion, ranking first in the industry (data from the Custody Business
+Professional Committee under China Banking Association).
+In terms of internal operation, the Company relieved its staff from repetitive, time-consuming work
+by leveraging technology and consolidated experience with data to construct the intelligent operation
+engine and achieve a high-quality balance of experience, efficiency, risk and cost. During the reporting
+period, "Kaiyang Portal (F)", a new generation of open operation service platform, completed the intelligent
+transformation and application of over 400 operation processes, and the processing efficiency of key businesses
+increased by 27%. By leveraging the intelligent application in scenarios such as the intelligent customer service,
+intelligent process, quality inspection and the Conch RPA (Robot Process Automation), our staff were relieved from
+repetitive, time-consuming work equivalent to a workload of over 17,000 full-time individuals.
+Chapter III Management Discussion and Analysis
+Represents loans granted to sci-tech enterprises such as "specialised, competitive, distinguished, and innovative ()" enterprises, high-tech enterprises
+and technology-based SMEs by the Company.
+Refers to the Golden card and Golden Sunflower card holders who have two or more types of wealth management products out of the four types of wealth
+management products, namely, trade-ready management, protection-based management, conservative investment and aggressive investment.
+China Merchants Bank
+Annual Report 2023 (H share)
+3.
+7
+Chapter III Management Discussion and Analysis
+Promoting the construction of digital finance and pressing ahead towards
+"Smart CMB ()"
+The Company promoted the construction of digital finance around the transformation direction of "online, data-
+based, intelligent, platform-based and ecological operation", thereby shifting from "Online CMB" towards "Smart
+CMB". During the reporting period, the Company's information technology input amounted to RMB14.126 billion.
+The ratio of information technology input to the Company's net operating income reached 4.60%. The Company
+attached great importance to the construction of digital talent pool. As of the end of reporting period, the number
+of R&D personnel of the Group reached 10,650, accounting for 9.14% of the total number of employees of the
+Group. Focusing on the five major development directions of digital operation and management, cutting-edge
+technology capabilities, bank-to-business ecosystem, bank-to-consumer ecosystem, innovation and incubation, the
+Company continuously promoted the construction of new capabilities and the exploration of new models of Fintech
+Innovation Project Fund. During the reporting period, 558 new projects were launched, and 612 new projects
+were put into operation. As of the end of reporting period, the number of the Bank's Fintech innovation projects
+launched and put into operation reached an aggregate of 3,800 and 3,062, respectively.
+In terms of retail customer service, the Company accelerated the transformation and upgrading from
+"online retail ()" to "digital and intelligent retail ()", constructed the intelligent wealth
+engine and intelligent customer service engine, and consolidated our digital capabilities. CMB APP further
+integrated artificial intelligence, intelligent customer service and remote consultancy capabilities to launch the
+brand new intelligent wealth assistant "Xiao Zhao ()", which provided one-stop wealth management services
+such as financial analysis, product selection strategies, market views and yield analysis, as well as personalised and
+customised advisory services. As of the end of reporting period, the monthly active users (MAU) of the CMB APP
+and the CMB Life APP reached 117 million. During the reporting period, the micro-finance loans granted through
+online approval accounted for 66.74% of the micro-finance loans granted through all channels, representing a year-
+on-year increase of 7.13 percentage points. With the upgrading of "Wealth Alpha+" platform in respect of wealth
+management business, the Company realised digital and intelligent operation of the whole process in investment
+research, product selection and post-investment management, and deepened the empowerment to improve the
+professionalism of key positions.
+In terms of wholesale customer service, digital channel has become an important portal of customer
+acquisition. Based on online operation, the Company used digital tools to improve the quality and
+efficiency of services of relationship managers, and facilitated the digital transformation as well
+as integrated transformation of business and finance of enterprises with products such as Treasury
+Management Cloud (). During the reporting period, the Company achieved list-based high-quality
+customer acquisition of 112,600 customers, representing a year-on-year increase of 28.85%; the volume of service
+delivered via Enterprise WeChat exceeded 17 million times. As at the end of the reporting period, the percentage of
+financing business conducted online was 92.28%, representing an increase of 10.14 percentage points as compared
+with the end of the previous year, and the percentage of foreign exchange business conducted online was 75.34%,
+representing an increase of 9.85 percentage points as compared with the end of the previous year. As at the end of
+the reporting period, Treasury Management Cloud () accumulatively served 477,600 corporate customers,
+representing an increase of 62.15% as compared with the end of the previous year.
+In terms of risk management, the Company constructed the intelligent risk control engine, and
+comprehensively utilised internal and external data to continuously enhance its digital risk control
+capability and efficiency. During the reporting period, the intelligent pre-warning coverage rate of on- and off-
+balance sheet "all businesses"7 reached 100%. "Libra ()" guarded transaction security, effectively helping
+customers block telecommunications fraud, and the percentage of fraud and account takeover amounts by non-
+cardholders was lowered to 0.1 in ten millionths. The corporate loans newly granted through the online risk control
+platform amounted to RMB303.560 billion, representing a year-on-year increase of 53.58%. By applying digital
+processes, the Company reduced the average time taken for the granting of an inclusive finance mortgage loan
+from one month to 2.7 days.
+Covering on- and off-balance sheet businesses such as proprietary credit extension business, asset management business, agency distribution business and
+other cooperative businesses.
+45
+46
+46
+China Merchants Bank
+Annual Report 2023 (H share)
+In terms of operation management, the Company used data to drive operation decisions, so as to improve
+the efficiency and accuracy of management decisions. During the reporting period, the Company built a
+strategic operation decision-making analysis platform for retail business lines, and developed a mobile business
+intelligence, a unified data reviewing portal for the Head Office and branches, and a business scenario-based data
+ecosystem to improve the efficiency of operation analysis for all positions, all businesses and all scenarios. The
+Company promoted the construction of a digital platform of customer relationship management (CRM) system
+for wholesale business lines, which linked the whole chain of operation and management of the Head Office,
+branches and sub-branches, significantly improving the digital operation and management level of corporate
+business. The Company built a risk portal for risk business lines, integrated various risk data inside and outside the
+Bank, and built a rich database, model library, knowledge base and application functions to provide effective data
+and decision-making support for credit officers. The Company realised comprehensive operation monitoring and
+intelligent reasoning analysis for the Head Office, branches and sub-branches via "Zi Zhai Tong ()" portal of
+the finance and accounting business line, the closed-loop management of all online pricing process via the product
+pricing management system, and integrated the New Capital Rules into the internal management system via the
+capital management system, which significantly improved the efficiency of resource allocation and stimulated the
+enthusiasm of frontline operations through digital tools. The Company built a digital platform for smart finance,
+realising online and intelligent management of all financial processes, and building a leading financial management
+system in the domestic banking industry.
+During the reporting period, faced with challenges such as insufficient effective demand and the continued
+downturn in the capital market, the Group implemented high-quality development requirements, focused on
+customer needs, made efforts to support the real economy, and continuously improved the quality and efficiency
+of intermediary business services. In light of the impact of short-term adverse factors, the Group actively built
+differentiated competitiveness in an effort to explore growth points in segmented areas. During the reporting period,
+the Group realised net non-interest income of RMB124.409 billion, representing a decrease of 1.66% year-on-year,
+accounting for 36.69% of net operating income, representing a decrease of 0.01 percentage point year-on-year.
+Among the Group's net non-interest income, net fee and commission income was RMB84.108 billion, representing
+a decrease of 10.78% year-on-year, accounting for 67.61% of the net non-interest income; other net non-interest
+income was RMB40.301 billion, representing an increase of 25.04% year-on-year. During the reporting period, the
+Group's revenue contributed by extensive wealth management was RMB45.268 billion, representing a decrease of
+7.90% as compared with the previous year.
+3.9.8 Capital management
+0.43
+overdue
+Percentage
+Balance of
+Percentage
+of special-
+mentioned
+mentioned
+of special-
+Non-
+performing
+performing
+loans and
+(In millions of RMB,
+of non-
+Balance of
+Balance
+Balance
+31 December 2022
+1.19
+73,568
+1.08
+66,822
+0.93
+57,233
+of overdue
+except for percentages)
+advances
+loans loan ratio (%)
+46,731
+1.42
+44,097
+0.90
+28,009
+3,109,737
+Retail loans
+8
+513,857
+Discounted bills
+6,166,345
+1.23
+1.03
+21,515
+1.25
+26,205
+2,097,114
+Corporate loans
+loans (%)
+loans
+loans (%)
+loans
+25,852
+1.50
+customers
+12.11
+13,107
+0.37
+5,113
+1,376,814
+Residential mortgage loans
+0.70
+5,211
+0.35
+2,648
+0.61
+4,592
+749,773
+Micro-finance loans
+1.41
+47,706
+1.44
+48,739
+0.91
+30,539
+3,373,633
+Retail loans
+0.95
+7,466
+0.54
+Credit card loans
+1,178
+0.74
+72
+12.00
+1,168
+9,731
+Others (Note)
+1.31
+3,946
+0.51
+Total loans and advances to
+1,539
+3,285
+301,538
+Consumer loans
+3.20
+29,905
+3.35
+31,373
+1.75
+16,381
+935,777
+1.09
+Micro-finance loans
+629,628
+4,027
+The statistical calibre of the industries under list-based management has been changed, and the figures at the beginning of the year have been adjusted in
+accordance with the same statistical calibre.
+In 2023, the Company renamed industries under classified management as industries under list-based management, and the scope of the industry was
+adjusted. In 2023, the industries under list-based management include 14 industries including glass manufacturing, textile and chemical fiber, synthetic
+material manufacturing, steel trade, iron and steel (long process), metal ore mining and processing, fertilizer manufacturing, basic chemical, coal chemical,
+coal trade, coal, non-ferrous metal smelting and calendaring (excluding electrolysis of aluminium), financial leasing and commercial leasing.
+12
+11
+In view of the fact that the Company's basic customer groups of the industries under list-based management are
+mainly strategic customers of the Head Office level and branch level and whitelist customers with relatively strong
+capabilities to resist external risks, it is expected that the risks in this field will be generally controllable in 2024.
+In the future, the Company will dynamically adjust credit policies in relevant fields according to national industrial
+policies, financial supervision policies and actual market condition.
+As of the end of the reporting period, the Company's full-calibre business financing exposure in industries under
+list-based management was RMB234.160 billion 12, representing a decrease of RMB8.672 billion as compared with
+the beginning of the year, mainly extended to strategic customers of the Head Office level and branch level and
+whitelist customers. The non-performing loan ratio of the industries under list-based management was 0.91%,
+representing a decrease of 0.39 percentage point as compared with the beginning of the year. Affected by the risk
+exposure and the continuous decline of business scale of individual existing risk customers, the non-performing loan
+ratio of the industries such as metal ore mining, steel trading and basic chemical industries increased as compared
+with the beginning of the year, while the non-performing loan ratios of other industries remained at the same level
+or decreased compared with the beginning of the year.
+During the reporting period, the Company implemented differentiated management for customers in the 14
+industries under list-based management that are significantly affected by supply-side structural reforms, overcapacity
+or the "carbon peak and carbon neutrality” policies. In particular, for the whitelist customers and strategic
+customers of the Head Office level and branch level such as leading enterprises in the industry and regional
+advantageous enterprises, the Company strengthened its policy preference and provided priority support through
+various resources, products and services. For other customers with relatively stable risks and fair business conditions,
+on the basis of solid customer maintenance and operation as well as consolidation of the overall customer base,
+the Company realised the dynamic optimisation of customer structure and asset structure through supporting
+the superior, phasing out the inferior and concentrating the structure of customer base on listed companies, core
+enterprises of group companies and mid-tier customers with sound performances.
+Control over the risks relating to industries under list-based management¹¹
+In the future, the Company will continue to guard the risk bottom line, pay close attention to changes in the market
+situation, and improve the capabilities to analyse and judge the risk situation. The Company will continuously
+strengthen its quantitative risk control capabilities, improve the risk quantitative system in response to changes in
+the risks of small- and micro-sized customers, enrich the risk monitoring data dimensions, identify the risks earlier,
+give warnings earlier, expose the risks earlier and dispose the risks earlier, so as to maintain a relatively outstanding
+level of quality of micro-finance loan assets in the industry.
+As of the end of the reporting period, the non-performing loan ratio of the Company's retail micro-finance loans
+was 0.61%, representing a decrease of 0.03 percentage point as compared with the end of the previous year, the
+special-mentioned loan ratio was 0.35%, representing a decrease of 0.05 percentage point as compared with the
+end of the previous year and the overdue loan ratio was 0.70%, representing a decrease of 0.03 percentage point
+as compared with the end of the previous year.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2023 (H share)
+The Company adhered to the implementation of the national strategy of vigorously supporting the development of
+small- and micro-sized enterprises, accelerated the pace of retail micro-finance asset origination and loan extension,
+promoted the high-quality development of micro-finance loan business, while relying on Fintech to explore product
+and service innovation so as to further improve the quality and efficiency of financial services for small- and micro-
+sized customers.
+Control over the risks relating to micro-finance loan business
+In the future, the Company will continue to improve the refined risk management and control strategy for consumer
+credit business. On the one hand, the Company will continuously optimise the customer base and asset structure
+by strictly reviewing the credit risks of customers and focusing on the customers with good credit record and stable
+income source to strictly prevent the risk of "joint debts"; on the other hand, the Company will continuously
+increase the access to data sources, so as to enhance the accuracy of risk identification of customer base, and at the
+same time rely on big data quantitative risk control technology to closely monitor the changes in risks of customer
+base, make risk pre-warning in a timely manner, actively dispose of non-performing asset, and strive to maintain a
+relatively outstanding level of quality of consumer credit business assets in the industry.
+As of the end of the reporting period, the non-performing loan amount of the Company's consumer credit business
+(including credit cards) was RMB19.666 billion, representing an increase of RMB1.827 billion as compared with the
+end of the previous year; the non-performing loan ratio was 1.59%, representing a decrease of 0.05 percentage
+point as compared with the end of the previous year. The special-mentioned loan ratio was 2.66%, representing a
+decrease of 0.20 percentage point as compared with the end of the previous year and the overdue loan ratio was
+2.74%, representing a decrease of 0.38 percentage point as compared with the end of the previous year.
+During the reporting period, the market demands steadily recovered, and the consumer market was gradually
+recovering. The Company insisted on focusing on the acquisition of value customers, further exploring the upgraded
+consumption scenarios and the comprehensive consumption scenarios of individuals or families encouraged by
+national policies, and developing the consumer credit business in a steady manner. Thanks to the continuous
+optimisation of the customer base and the asset structure and the application of various risk management strategies,
+the consumer credit business maintained stable growth while the risk was generally stable.
+With the adjustment on the interest rates for the existing residential mortgage loans, the interest spread between
+the newly-granted and existing residential mortgage loans has narrowed, which to some extent eased the trend
+of prepayment. However, due to the decline in the current returns on market investment, it is expected that the
+prepayment of residential mortgage loans in 2024 will remain at a high level in recent years. The Company will
+continue to strictly control the onboarding of residential mortgage loan business. In terms of customer selection,
+the Company will offer priority support to customers with rigid and improving housing demands, and in terms of
+location, the Company will offer priority support to quality residential projects located in core districts to ensure
+the healthy development of the residential mortgage loan business from the origin. In the future, under the general
+trend that the government will support the smooth development of the real estate market, the Company will strive
+to maintain a relatively outstanding level of quality of residential mortgage loan assets in the industry.
+Risk control over consumer credit business
+As of the end of the reporting period, the non-performing loan ratio of the Company's residential mortgage loans
+was 0.37%, representing an increase of 0.02 percentage point as compared with the end of the previous year. The
+special-mentioned loan ratio was 0.95%, representing an increase of 0.20 percentage point as compared with the
+end of the previous year. The overdue loan ratio was 0.54%, representing an increase of 0.04 percentage point as
+compared with the end of the previous year. The Company had always been regularly monitoring and revaluating
+the value of the existing collaterals and adjusting the value of mortgaged assets in a timely manner. As of the
+end of the reporting period, the weighted average loan-to-value ratio of residential mortgage loans was 32.93%,
+representing an increase of 0.34 percentage point as compared with the end of the previous year, and the collaterals
+were sufficient and stable. Therefore, the overall risk of residential mortgage loans was controllable.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2023 (H share)
+55
+56
+56
+China Merchants Bank
+As of the end of the reporting period, the balance of total assets under management for retail customers of the
+Company amounted to RMB13,321.131 billion, representing an increase of 9.88% as compared with the end of the
+previous year. Among them, the balance of total assets under management for the customers in the level of Golden
+Sunflower and above amounted to RMB10,819.744 billion, representing an increase of 9.66% as compared with the
+end of the previous year. As of the end of the reporting period, the balance of deposits from retail customers of the
+Company amounted to RMB3,314.318 billion, representing an increase of 12.13% as compared with the end of the
+previous year. During the reporting period, the demand deposits accounted for 58.16% of the daily average balance
+of deposits from retail customers of the Company.
+As of the end of the reporting period, the Company had 197 million retail customers (including debit and credit card
+customers), representing an increase of 7.07% as compared with the end of the previous year, among which the
+number of customers in the level of Golden Sunflower and above (those with minimum daily average total assets of
+RMB500,000 for each month) reached 4,640,600, representing an increase of 12.00% as compared with the end of
+the previous year.
+During the reporting period, in the face of the complex and volatile external situation and the increasingly fierce
+competition from the banks and other financial institutions, the Company proactively promoted the strategic
+deployment in key regions to explore growth potential, and further propelled business integration to strengthen
+its ability to expand group finance service. The Company intensified the customer base operation, returned to the
+original needs of customers in "deposit, loan, and remittance (7)" banking services, made full use of Fintech
+to push forward the innovation of retail products and refined operation, and diversified the categories and offerings
+of products and deepened asset allocation services catering for customers' needs. During the reporting period, the
+number of retail customers and the balance of the total assets under management (AUM) from retail customers of
+the Company maintained stable growth.
+Retail customers and total assets under management for retail customers
+During the reporting period, by adhering to its core value of "being customer-centric and creating value for
+customers", the Company continued to consolidate its systematic strengths in retail finance by expanding its capital-
+light businesses such as wealth management and strengthening its capital-heavy business, and continued to enhance
+its value creation capability, thereby promoting the high-quality development of its retail business. Through building
+the "people + digitalisation" omni-channel service system, strengthening the ecological construction of financial
+scenarios, and continuously optimising the core retail finance products, the Company provided more customers with
+better retail finance services to actively satisfy the needs of people's livelihood. During the reporting period, the
+retail business of the Company maintained a good momentum of development.
+During the reporting period, the profit before tax from the retail finance business of the Company amounted to
+RMB97.292 billion, representing an increase of 4.95% as compared with the previous year. The net operating
+income from the retail finance business amounted to RMB190.146 billion, representing an increase of 0.89% as
+compared with the previous year and accounting for 61.86% of the net operating income of the Company. The net
+interest income from the retail finance business amounted to RMB133.766 billion, representing an increase of 3.42%
+as compared with the previous year and accounting for 70.35% of the net operating income from retail finance; the
+net non-interest income from the retail finance business amounted to RMB56.380 billion, representing a decrease
+of 4.66% as compared with the previous year while accounting for 29.65% of the net operating income from retail
+finance and 56.56% of the net non-interest income of the Company. During the reporting period, the fee and
+commission income from retail wealth management business of the Company was RMB27.007 billion, representing
+a decrease of 8.71% as compared with the previous year and accounting for 48.80% of the net fee and commission
+income from retail finance; the Company recorded a fee income of RMB19.394 billion from retail bank card
+business, representing a decrease of 8.80% as compared with the previous year.
+Business overview
+3.10.1 Retail finance business
+3.10 Business Operation
+Chapter III Management Discussion and Analysis
+54
+Annual Report 2023 (H share)
+In the future, the Company will, under the guidance of the New Capital Rules and the strategic objective of building
+a value creation bank, and following the business concept of the value creation chain of "volume growth - revenue
+growth profit growth - value growth", continue to optimise the capital allocation tactics, strengthen the asset-
+liability portfolio management, improve the capital return management mechanism, promote the dynamically
+balanced development of "Quality, Profitability and Scale", so as to constantly enhance the capability of endogenous
+growth of capital and ensure the smooth operation of the capital adequacy ratio.
+In November 2023, the National Financial Regulatory Administration (NFRA) released the Rules on Capital
+Management of Commercial Bank (hereinafter referred to as the "New Capital Rules"), which took effect on 1
+January 2024. Under the New Capital Rules, the capital occupation of the credit business will decrease in general,
+and the capital occupation of the financial market business will increase slightly. As for the Company, the New
+Capital Rules will lead to increase and decrease in the capital occupation for different businesses. The Company will
+optimise and adjust its business structure and operating strategies in a timely manner.
+In September 2023, the list of domestic systemically important banks in 2023 was released. The Company was still in
+the third group of the list and still needed to meet additional regulatory requirements such as the additional capital
+adequacy ratio of 0.75% and the additional leverage ratio of 0.375%. At present, the Company's capital adequacy
+ratio, leverage ratio, liquidity and other operating indicators at all levels are maintained at a high level, which can
+meet additional regulatory requirements.
+The Company adheres to the development strategy of marketisation, branding and internationalisation, continuously
+advances the innovation and development of asset securitisation business and continuously enriches capital
+management tools. During the reporting period, the Company issued eight asset securitisation projects through the
+inter-bank market with a total scale of RMB2.961 billion. The underlying assets were non-performing loans.
+During the reporting period, the Company redeemed RMB20 billion of Tier 2 capital bonds and issued RMB30
+billion of undated additional Tier 1 capital bonds for the purpose of replenishing the additional Tier 1 capital of the
+Company. Please refer to the relevant announcements issued by the Company on Shanghai Stock Exchange, Hong
+Kong Exchanges and Clearing Limited and the Company's website for details. The Company will keep on improving
+the level of shareholder returns by improving the efficiency of capital utilisation, optimising the asset-liability
+structure and other ways.
+The Company adhered to the principle of prudence and stability and maintained the steady growth of risk-weighted
+assets under the premise of controllable risk. As of the end of the reporting period, the growth rate of risk-weighted
+assets under the Advanced Measurement Approach of the Company (having taken into consideration the bottom-
+line requirements of the parallel run period) was 13.52%. Under the Advanced Measurement Approach, the ratio
+of risk-weighted assets (having taken into consideration the bottom-line requirements of the parallel run period)
+to total assets was 58.31%. During the reporting period, the risk-adjusted return on capital (RAROC, before tax)
+under the Advanced Measurement Approach was 27.47%, significantly higher than the cost of capital. As of the
+end of the reporting period, the Company's core tier one capital adequacy ratio under the Advanced Measurement
+Approach and the Weighted Approach increased as compared with the end of the previous year, maintaining an
+endogenous growth of capital.
+The Company kept on optimising its business structure and strengthening capital management. The Company met
+various capital requirements of the supervisory and management bodies of the banking industry in China during the
+reporting period with sufficient capital buffer.
+China Merchants Bank
+Chapter III Management Discussion and Analysis
+Annual Report 2023 (H share)
+China Merchants Bank
+54
+53
+The Company actively implemented the national and regional policy requirements, adhered to the implementation of
+city-specific policy, actively responded to the new situation where the supply-demand relationship in the real estate
+market has changed significantly, and supported customers with rigid and improving housing demands, so as to
+steadily conduct residential mortgage loan business. During the reporting period, the Company further concentrated
+its residential mortgage loan business to cities in which the housing prices were relatively stable, and the amount
+of residential mortgage loans newly granted by the Company in the first-tier and second-tier cities accounted
+for 90.25% of the total amount of residential mortgage loans newly granted by the Company, representing an
+increase of 2.13 percentage points year-on-year. The closing balance of residential mortgage loans in the first-tier
+and second-tier cities accounted for 87.04% of the closing balance of the Company's residential mortgage loans,
+representing an increase of 0.54 percentage point as compared with the end of the previous year.
+Consumer loans
+3.55
+31,408
+3.41
+30,201
+1.77
+15,648
+884,394
+Credit card loans
+0.50
+202,225
+6,956
+10,409
+0.35
+4,898
+1,379,812
+Residential mortgage loans
+0.73
+4,567
+0.40
+2,515
+0.64
+0.75
+12
+2,191
+862
+Risk control over residential mortgage loans
+Note: Primarily consists of commercial housing loans, automobile loans, house decoration loans, education loans and other personal loans secured by
+monetary assets.
+1.27
+72,583
+1.15
+65,620
+0.95
+54,214
+5,720,708
+customers
+1.08
+Total loans and advances to
+1,256
+0.80
+110
+9.10
+1,245
+13,678
+Others (Note)
+1.26
+2,544
+Chapter III Management Discussion and Analysis
+9.18
+57
+471,127
+25,862
+During the reporting period, the Company recorded a fee and commission income from retail wealth management
+business of RMB27.007 billion, among which income from agency distribution of insurance policies amounted to
+RMB12.743 billion, income from agency distribution of funds amounted to RMB5.457 billion, income from agency
+distribution of wealth management products amounted to RMB5.291 billion, income from agency distribution of
+trust schemes amounted to RMB3.175 billion, and other income amounted to RMB341 million. For details of the
+reasons of changes in fee and commission income from wealth management, please refer to 3.9.2 "Net non-interest
+income" in this chapter.
+As of the end of the reporting period, the Company's balance of retail wealth management products amounted to
+RMB3,499.766 billion, representing an increase of 11.51% as compared with the end of the previous year, mainly
+due to the increased allocations towards stable long-term products by the Company in line with customers' needs,
+resulting in an increased growth rate in the scale of wealth management products under management as compared
+with the previous year. During the reporting period, the agency distribution of non-money-market mutual funds
+of the Company totalled RMB296.809 billion, representing a decrease of 11.42% year-on-year. The decrease was
+mainly due to further decline in customer risk appetite as the capital market remained under pressure. However,
+the sales of more stable bond fund products recovered on a quarter-to-quarter basis in the second half of the year.
+During the reporting period, the Company achieved the agency distribution of insurance premiums of RMB96.826
+billion, representing an increase of 33.76% year-on-year. The increase was mainly due to the fact that the Company
+further seized market opportunities and increased its efforts in the allocation of regular insurance, which drove
+an overall increase in premiums. During the reporting period, the Company recorded RMB84.647 billion in agency
+distribution of trust schemes, representing a decrease of 24.77% as compared with the corresponding period of the
+previous year,
+which was mainly due to the fact that the Company actively adjusted its business direction under the
+policy background of "reform of trust business classification", and other policy backgrounds.
+Wealth management
+Annual Report 2023 (H share)
+50
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+As at the end of the reporting period, the Group's total balance of real estate related businesses which were subject
+to credit risks, such as the actual and contingent credit, proprietary bond investments, and proprietary investment
+of non-standardised assets, amounted to RMB398.967 billion, representing a decrease of 13.89% as compared with
+the end of the previous year. The total balance of the businesses for which the Group did not assume credit risks,
+such as wealth management fund financing, entrusted loans, agency distribution of trust schemes under the active
+management by cooperative institutions, and debt financing instruments with the Group as the lead underwriter
+amounted to RMB249.448 billion, representing a decrease of 16.95% as compared with the end of the previous
+year. As at the end of the reporting period, the Company's balance of loans granted to the real estate industry
+was RMB290.742 billion, representing a decrease of RMB42.973 billion as compared with the end of the previous
+year, accounting for 4.71% of the Company's total loans and advances to customers, representing a decrease of
+1.12 percentage points as compared with the end of the previous year. As at the end of the reporting period, the
+customer and regional structure of the Company in respect of real estate related loans have remained sound, among
+which the balance of loans granted to customers featuring high credit-rating accounted for over 70%; in terms of
+regions where the projects were located, over 85% of the Company's balance of loans for real estate development
+was located in the urban areas of first-tier and second-tier cities. As at the end of the reporting period, the
+Company's non-performing loan ratio of real estate loans was 5.01%, representing an increase of 1.02 percentage
+points as compared with the end of the previous year.
+In the future, the Group will continue to firmly implement relevant national policies on the real estate industry,
+support rigid and improving housing demands, meet the reasonable financing needs of real estate enterprises
+of different ownerships with fair and equal treatment, enhance the support for non-state-owned real estate
+enterprises, improve the service level to the "three major projects" such as government-subsidised housing, and
+the development of the housing rental market. At the same time, the Group reasonably identified project risks of
+subsidiaries and the holding companies of the groups, further strengthened centralised risk management and post-
+investment and post-loan management, resolutely implemented the requirements for closed management of real
+estate loans, and effectively managed and controlled risk of projects. In accordance with the principles of compliance
+with laws and regulations, controllable risks and business sustainability, the Company promoted risk mitigation of
+real estate enterprises, maintained the overall stability of the quality of real estate assets, endeavoured to provide
+financial support to the steady and healthy development of the real estate market, and facilitated the construction
+of the new development model of real estate industry.
+3.9.4 Deposits from customers
+As at the end of the reporting period, the balance of deposits from customers of the Company was RMB7,871.561
+billion, representing an increase of RMB597.048 billion or a growth rate of 8.21% as compared with the end of the
+previous year. The growth rate of deposits from customers of the Company declined compared with the previous
+year, with the main reasons as follows: firstly, the growth rate of M2 declined, which was recorded as 9.7% in
+2023, representing a decrease of 2.1 percentage points as compared with the previous year, and the increase in
+deposits from financial institutions was less than that of the previous year; secondly, economic recovery has not met
+the expectations. Enterprises experienced slower recovery than expected, and the liquidity activities of enterprises
+remained at low level, with lack of willingness for investment and financing, thus generating less demand deposits.
+At the same time, disturbance in the capital market and the demand for deposits from customers, especially demand
+for medium- and long-term time deposits increased, resulting in an increase in the proportion of time deposits of
+the Company. Facing the challenges of changes in the external environment, the Company coped with the pressure
+of slowdown in deposit growth by taking various measures such as strengthening customer-centric management,
+enhancing customer base expansion, reinforcing deposit classification management and cost control. During the
+reporting period, the Company's average daily balance of core deposits 10 was RMB6,615.946 billion, representing
+an increase of RMB758.195 billion or a growth rate of 12.94% as compared with the previous year, accounting
+for 86.63% of the average daily balance of customer deposits, representing a decrease of 0.87 percentage point
+as compared with the previous year. The average daily balance of demand deposits was RMB4,430.730 billion,
+representing an increase of RMB268.196 billion or a growth rate of 6.44% as compared with the previous year,
+accounting for 58.02% of the average daily balance of customer deposits, representing a decrease of 4.16
+percentage points as compared with the previous year. As at the end of the reporting period, the balance of
+structured deposits of the Company amounted to RMB262.934 billion, representing an increase of RMB20.170
+billion as compared with the end of the previous year, accounting for 3.34% of the balance of deposits from
+customers, which remained at the same level compared to that at the end of the previous year.
+10
+The core deposits represent the internal management indicator for the Company's deposits, excluding large-denomination certificates of deposit, structured
+deposits and other high-cost deposits.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+Looking forward to 2024, the general keynote of the macro-economy is to adhere to the principle of making
+progress amid stability, promoting stability through progress, establishing the new before abolishing the old, and
+continuing to consolidate the foundation of seeking progress while maintaining stability. The proactive fiscal policy
+and prudent monetary policy will continue to exert influence, and the macro-economy will further recover. The
+external environment for the growth of deposits among commercial banks is expected to experience marginal
+improvement, but the trend of shifting towards time deposits is likely to continue, with increasingly fierce market
+competition. It is expected that the Company will continue to face pressures in both scale growth and cost control.
+In order to maintain the high-quality growth of deposits, the Company will take the following measures. Firstly, the
+Company will return to the origin of customers and consolidate the foundation for deposit growth through customer
+base expansion. Secondly, the Company will adhere to the promotion strategy of focusing on core deposits and
+expand stable and low-cost deposits through settlement services, wealth management, product innovation and other
+means. Thirdly, the Company will use classified management to strengthen the control of the scale and proportion
+of high-cost deposits to ensure that the deposit cost ratio remains at a satisfactory level throughout the year.
+During the reporting period, in the light of customers' demands for stable-performing products, the Company
+strengthened its capability of offering professional wealth management services, built an omni-channel service
+system based on "people + digitalisation", and helped customers achieve asset preservation and appreciation.
+First, the Company stepped up efforts in upgrading payment settlement customers to wealth management
+customers for the purpose of increasing the number of customers holding our wealth products. The Company
+insisted on the scenario construction of payment settlement service and continuously improved customers' service
+experience in various scenarios to promote the upgrade of customers' needs from payment settlement towards
+wealth management. As of the end of the reporting period, the Company had 51,379,500 customers holding our
+wealth products, representing an increase of 19.13% as compared with the end of the previous year.
+3.9.5 Assets allocation
+Second, the Company increased its offering of stable products in response to changes in customers' risk appetite.
+In terms of wealth management products, the Company integrated the advantageous resources of its partners,
+offered stable products as its core offering, and captured periodic investment opportunities. In terms of fund
+products, the Company increased its offering of short-term debt and "fixed income+" products and thus improve
+customers' experience in comprehensive income. In terms of insurance products, the Company has continued to
+enrich its product offerings to cover major insured types such as pension, health, accident and property, so as to
+satisfy customers' needs for insurance. Furthermore, the Company continued to broaden its product categories
+and cooperation channels, and further explored customers' asset allocation needs, providing customers of various
+channels and types with appropriate business strategies and products.
+Fourth, the Company constantly iterated the open platform capabilities to enhance the customer's experience with
+wealth management product held with the Company. The Company further optimised the service capabilities of
+"Zhao Cai Hao ()", an open platform of wealth management business on CMB APP, improved the operation
+and organisation mechanism, and provided customers with better wealth services. As of the end of the reporting
+period, "Zhao Cai Hao ()" on CMB APP has onboarded in total 152 asset management institutions with
+industrial representativeness. During the reporting period, "Zhao Cai Hao ()" provided professional investment
+guidance and companion for customers on their investment journey by offering wealth information, online
+interactions and organisation of events, etc.
+1.11
+59
+The term "individual, family, enterprise and society" specifically refers to the needs of individuals, families, enterprises and the society.
+13
+In terms of risk management, the Company continued to optimise its customer structure and asset portfolio under the
+guidance of the operation strategy focusing on "stability and low volatility". Additionally, the Company has further
+studied regional strategies with forward-looking judgement, and continued to iterate various types of quantitative
+models to enhance its risk decision-making capability, while continuously upgrading the post-loan digital operations
+to improve operational efficiency and collection effects. During the reporting period, the risk indicators for its credit
+card business declined, indicating enhanced risk-resistant capabilities. As of the end of the reporting period, the
+balance of non-performing credit card loans was RMB16.381 billion, representing a non-performing loan ratio of
+credit card loans of 1.75% with a decrease of 0.02 percentage point from the end of the previous year. In view of
+the current complicated external environment, the Company will prudently arrange various strategic deployments
+in the next stage, continue to optimise its strategy on customer structure and asset portfolio, coordinate regional
+business development based on specific local policies, explore various ways of restructuring the balance between risk
+and growth under the new situation, and continue to promote high quality development of its credit card business.
+As of the end of the reporting period, the Company had issued an aggregate of 97.1181 million active credit cards,
+representing a decrease of 5.44% as compared with the end of the previous year, and there were 69.7404 million
+active credit card users, representing a decrease of 0.37% as compared with the end of the previous year, mainly due to
+the decrease in newly-acquired customers as the Company placed more emphasis on high-quality customer acquisition.
+During the reporting period, the credit card transactions of the Company amounted to RMB4,814.967 billion,
+representing a decrease of 0.44% as compared with the corresponding period of the previous year. Interest income from
+credit cards amounted to RMB63.515 billion, representing a decrease of 0.72% as compared with the corresponding
+period of the previous year. Non-interest income from credit cards amounted to RMB27.228 billion, representing a
+decrease of 3.02% as compared with the corresponding period of the previous year. For details of the scale and quality
+of the credit card loans of the Company, please refer to 3.9.7 "Asset quality in key areas" in this chapter.
+Credit cards
+Fourthly, the Company adhered to sound operation by upholding the bottom line of risk prevention. With effective
+risk prediction, the Company continued to improve segmented and classified management of products available
+for sale, and properly matched the products with the risk-return preferences of customers, so as to empower its
+business development.
+Thirdly, the Company continued to fulfill its social responsibility under the philosophy of wealth for common good.
+Under the main theme of common prosperity, the Company identified the connection between customer service
+and social welfare by actively responding to the needs of customers to participate in public charity and practice ESG
+ideals, and promoted the implementation of charitable projects through charitable trusts and other tools. With the
+release of the 2023 Charity Research Report among High-Net-Worth Individuals in China (2023 £¾»L\#
+» and the establishment of a philanthropy exchange platform named "Goodwill Hall ()", the
+Company has contributed to the dissemination of charity beliefs.
+Secondly, the Company managed to achieve service upgrade via technology-driven innovation. In particular, it
+improved the exclusive APP for private banking customers to increase the proportion of online transactions, build an
+ecosystem of private equity institutions and upgrade the digital comprehensive financial services. Benefiting from the
+development of a digital wealth management and asset allocation system, the Company upgraded the "one-to-one"
+advisory asset allocation services with digital tools. It also sought to create an operation model driven by advanced
+technology to accurately analyse and deeply understand customers' needs based on digital means.
+Firstly, the Company diversified its products and services following the principle of "being customer-centric". It
+focused on satisfying customers' demand for stable products based on a clear understanding of the changes in their
+actual needs. Thus, the Company selected outperforming asset management institutions in the entire market with
+the aim of continuously enriching its products portfolio, and developed specific accompanying service for customers
+throughout their whole investment journey. Meanwhile, the Company integrated the resources of the group
+members and third-party partners to deliver a "financial + non-financial" service ecosystem for customers and the
+enterprises behind them.
+During the reporting period, the Company continued to enhance the core competence of the private banking
+business, continuously improved and upgraded the comprehensive service system of "individual, family, enterprise
+and society (13 in light of customers' changing diverse demands under this system, and promoted the
+steady quality development of its private banking business in a prudent manner.
+As of the end of the reporting period, the Company had 148,842 private banking customers (retail customers of
+the Company with minimum total daily average assets of RMB10 million per month), representing an increase of
+10.42% as compared with the end of the previous year.
+Chapter III Management Discussion and Analysis
+Private banking
+Annual Report 2023 (H share)
+China Merchants Bank
+Third, the Company constantly optimised the "CMB TREE Asset Allocation Service System" to guide customers to
+make scientific asset allocation. In terms of customer service, the Company integrated its online and offline customer
+services to form a service model centring on asset allocation and continuous review on re-balancing service to build
+a virtuous operation cycle. In terms of capability enhancement, the Company provided its front-line team with
+systematic training to improve its abilities in communication and interaction with customers, professional market
+analysis and judgement, and asset allocation services, so as to help customers form a correct investment philosophy.
+As of the end of the reporting period, the Company had 9,114,500 customers who conducted asset allocation under
+such system, representing an increase of 12.15% as compared with the end of the previous year.
+The Company continued to build the capability of asset origination and took various measures to promote the steady
+growth of loans while appropriately increasing the allocation of interest rate bonds and quality credit bonds in light
+of interest rate trends. As at the end of the reporting period, the Company's total loans and advances to customers
+amounted to RMB6,166.345 billion, representing an increase of 7.79% as compared with the end of the previous
+year, accounting for 59.77% of the total assets of the Company, representing a decrease of 0.38 percentage point
+as compared with the end of the previous year. Among them, retail loans were RMB3,373.633 billion, representing
+an increase of 8.49% as compared with the end of the previous year, accounting for 54.71% of the loans and
+advances to customers of the Company, representing an increase of 0.35 percentage point as compared with the
+end of the previous year. The growth of residential mortgage loans was relatively weak due to the adjustment and
+transformation of the real estate market. The Company promoted steady growth in retail loans by increasing the
+granting of high-quality micro-finance loans and consumer loans. Corporate loans amounted to RMB2,321.585
+billion, representing an increase of 10.70% as compared with the end of the previous year, accounting for 37.65%
+of the loans and advances to customers of the Company, representing an increase of 0.99 percentage point as
+compared with the end of the previous year. The Company continued to promote the expansion of customer base
+in key areas, fully met customers' credit financing needs, and continued to enhance the service support to the real
+economy. As at the end of the reporting period, the Company's bonds investment amounted to RMB2,588.035
+billion, representing an increase of 15.94% as compared with the end of the previous year, accounting for 25.08%
+of the total assets of the Company, representing an increase of 1.61 percentage points as compared with the end of
+the previous year.
+58
+51
+Non-
+performing
+Balance
+of special-
+mentioned
+Percentage
+of special-
+mentioned
+Balance of
+Percentage
+overdue
+advances
+loans loan ratio (%)
+loans
+loans (%)
+loans
+2,321,585
+26,694
+1.15
+18,071
+Looking forward to 2024, the Company will consistently strengthen the effective asset origination, improve the
+service quality and efficiency to the real economy, and continuously optimise the business strategy in combination
+with the changes in the New Capital Rules to promote the high-quality growth of loans. In 2024, the Company
+plans to increase its loans and advances to customers by approximately 8%. In terms of retail loans, the Company
+will keep up with the changes in the real estate market and push forward the steady growth of residential mortgage
+loans in accordance with regional characteristics while constantly enriching personal financial products, continuously
+promoting the steady growth of micro-finance loans and consumer loans under the premise of enhanced risk control
+and management. In terms of corporate loans, the Company will closely follow the national strategy, focus on key
+sectors including sci-tech finance, green finance, inclusive finance, retirement finance and digital finance, continue
+to promote customer expansion and optimise the corporate credit structure to effectively support the real economy.
+In terms of bonds investment, the Company will, taking into account the risks and returns, study and evaluate the
+trend of interest rates in domestic and foreign currencies in a forward-looking manner, maintain a dynamic and
+flexible asset allocation tactics, and rationalise the pace of increase in investment assets.
+0.78
+performing
+loans and
+of overdue
+loans (%)
+except for percentages)
+Corporate loans
+China Merchants Bank
+52
+Discounted bills
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+During the reporting period, the Company formed new non-performing loans of RMB60.997 billion, representing a
+year-on-year decrease of RMB1.978 billion; the formation ratio of non-performing loans was 1.03%, representing
+a year-on-year decrease of 0.12 percentage point. From the perspective of major business categories, the amount
+of newly formed non-performing corporate loans was RMB13.124 billion, representing a year-on-year decrease of
+RMB4.714 billion. The amount of newly formed non-performing retail loans (excluding credit cards) was RMB9.163
+billion, representing a year-on-year increase of RMB848 million. The amount of newly formed non-performing
+credit cards loans was RMB38.710 billion, representing a year-on-year increase of RMB1.888 billion. From the
+perspective of regions, the formation of the Company's non-performing loans was mainly concentrated in the
+Head Office (credit card loans), the Yangtze River Delta and the Pearl River Delta regions. From the perspective of
+industries, the formation of the Company's non-performing corporate loans was mainly distributed in the real estate
+industry, accommodation and catering industry, transportation, storage and postal services. From the perspective of
+customer base, the formation of the Company's non-performing corporate loans was concentrated in medium-sized
+enterprises according to national standards.
+The Company always adhered to value customer selection, optimised the asset portfolio allocation, made adequate
+risk compensation and maintained strong risk resistance ability. As of the end of the reporting period, the balance
+of the Company's allowances for impairment losses on loans was RMB261.402 billion, representing an increase
+of RMB7.989 billion as compared with the end of the previous year. The allowance coverage ratio was 456.73%,
+representing a decrease of 10.70 percentage points as compared with the end of the previous year. The allowance-
+to-loan ratio was 4.24%, representing a decrease of 0.19 percentage point as compared with the end of the
+previous year. During the reporting period, the credit cost ratio was 0.72%, representing a year-on-year decrease of
+0.07 percentage point.
+During the reporting period, the Company played an active role in the disposal of non-performing loans, taking
+various approaches to reduce and dispose of risk assets. During the reporting period, the disposal of non-performing
+loans by the Company amounted to RMB58.113 billion, of which RMB22.652 billion was written off, RMB22.589
+billion was securitised, RMB11.204 billion was recovered by cash collection, and RMB1.668 billion was disposed of
+by other means such as repossession, transfer, restructuring, upward migration and remission.
+In 2024, the Company will keep a close eye on the changes in the macro situation, continue to enhance the
+industry understanding, continue to improve the credit policies, implement the "one branch, one policy", list-based
+operation for the asset business and fully promote the optimisation of customer base structure and investment in
+quality assets. The Company will carry out risk management and control in key areas, strengthen the management
+of special-mentioned loans and overdue loans, strictly classify assets, make adequate allowances, and effectively
+prevent and dispose of potential risks; actively dispose of non-performing assets in multiple ways, persistently
+dispose of risk assets to maintain overall stability of asset quality.
+3.9.6 The formation and disposal of non-performing assets
+Chapter III Management Discussion and Analysis
+3.9.7 Asset quality in key areas
+During the reporting period, the Company strengthened risk control over residential mortgage loans, consumer
+financing business, micro-finance loans, industries under list-based management and other key areas, and the asset
+quality was generally stable. In 2024, the Company will actively respond to the changes in the external macro-
+economic situation and continue to strengthen the investigation, research and judgement on the risk situation in the
+key areas for better risk prevention and control. For details of the quality of real estate assets, please refer to 3.9.3
+"Risk management and control in the real estate sector" in this chapter.
+(In millions of RMB,
+The following table sets out the asset quality of the Company's loans and advances by product type as of the date
+indicated.
+31 December 2023
+Balance
+of non-
+China Merchants Bank
+Annual Report 2023 (H share)
+Balance of
+During the reporting period, the Company continued to take advantage of the business opportunities arising from
+capital diversion in the key sectors of the capital market, enhanced the fund origination for trade settlement based
+on the enterprise's operation scenarios, proactively expanded low-cost deposits. As of the end of the reporting
+period, corporate customer deposit balance was RMB4,557.243 billion, representing an increase of 5.52% as
+compared with the end of the previous year. The daily average balance was RMB4,532.794 billion, representing
+an increase of 6.42% as compared with the previous year. Demand deposits accounted for 57.92% of the average
+daily balance of corporate customers' deposits, representing a decrease of 2.63 percentage points as compared with
+the previous year. During the reporting period, the average cost rate of corporate customer deposits was 1.75%,
+representing an increase of 3 basis points as compared with the previous year.
+Corporate customer deposits
+With regard to basic customers, the Company continued to explore the "people + digitalisation" service model by
+optimising the centralised operation mechanism, empowering the middle office of the Head Office and branches and
+improving the comprehensive capability of its frontline teams. The Company also enhanced the effectiveness and
+experience of customer services through standardisation of offline processes, online operation of customer services
+and digitalised customer operation and customer contact. The Company used intelligent technologies to build big
+data customer profiles and customer potential identification models, improve customer service processes, establish
+a closed loop of service and operation covering all processes and the full-life cycle of services and operations, and
+enhance the breadth and efficiency of services. During the reporting period, the Company served 37.0604 million
+times for corporate customers through various online channels. During the reporting period, the Company had
+1,197,800 corporate customers for withholding transactions, representing a year-on-year increase of 11.36%. The
+transaction amount was RMB2.17 trillion, representing a year-on-year increase of 7.96%.
+Chapter III Management Discussion and Analysis
+The number of strategic customers of the branch level is the corporate legal entity number of strategic customers of the branch level served by the
+Company. There was an adjustment to the list of strategic customers of the branch level in 2023, and the same-calibre adjustment was made to the
+2022 data.
+The number of strategic customers of the Head Office level is that of the group number as the strategic customers of the Head Office level served by
+the Company. There was an adjustment to the list of strategic customers of the Head Office level in 2023, and the same-calibre adjustment was made
+to the 2022 data.
+18
+17
+Corporate loans
+With regard to cross-border customers, the Company overcame multiple challenges at home and abroad and
+continued to build distinctive advantages in cross-border finance. Focusing on the acquisition and operation of
+customers and strengthening its strategic organisation and professional empowerment, the Company recorded
+stable growth in the cross-border business, aiming to become the "principal bank for settlement" and "first bank
+to inquire" for customers of cross-border transactions business. As of the end of the reporting period, according
+to the latest statistical calibre of the State Administration of Foreign Exchange, the Company had 75,601 corporate
+customers in respect of international balance of payments, representing an increase of 14.03% on the same calibre
+as compared with the previous year.
+China Merchants Bank
+Annual Report 2023 (H share)
+As of the end of the reporting period, the Company's total corporate loans amounted to RMB2,321.585 billion,
+representing an increase of 10.70% as compared with the end of the previous year, accounting for 37.65% of the
+Company's total loans and advances, representing an increase of 0.99 percentage point as compared with the end
+of the previous year. Among them, the balance of medium- and long-term domestic corporate loans amounted
+to RMB1,425.673 billion, representing an increase of 7.44% as compared with the end of the previous year,
+accounting for 63.76% of the total domestic corporate loans, representing a decrease of 1.94 percentage points
+as compared with the end of the previous year. The non-performing loan ratio of the corporate loans was 1.15%,
+representing a decrease of 0.10 percentage point as compared with the end of the previous year.
+During the reporting period, the Company continued to optimise its loan structure and maintained greater support
+for loan granting in sci-tech innovation, green economy, inclusive economy for small- and micro-sized enterprises,
+manufacturing industry and other sectors in response to national policy guidance, and steadily and orderly
+promoted the development of real estate business. For the key regulatory areas such as local government financing
+platforms, the loan granting control was strictly implemented in accordance with the regulatory guidance. As of
+the end of the reporting period, the balance of the corporate loans extended to the manufacturing industry was
+RMB555.102 billion, representing an increase of RMB111.250 billion as compared with the end of the previous
+year, accounting for 23.91% of the total corporate loans, representing an increase of 2.75 percentage points as
+compared with the end of the previous year. The balance of green loans was RMB447.765 billion, representing an
+increase of RMB92.408 billion as compared with the end of the previous year, accounting for 19.29% of the total
+corporate loans, representing an increase of 2.34 percentage points as compared with the end of the previous
+year. The balance of loans to strategic emerging industries was RMB375.097 billion, representing an increase of
+RMB72.774 billion as compared with the end of the previous year, accounting for 16.16% of the total corporate
+loans, representing an increase of 1.74 percentage points as compared with the end of the previous year. For loans
+in key areas such as real estate, please refer to Chapter 3.9. For the details of green finance business, please refer to
+Chapter 4.2.1.
+19
+Such loans include loans made by domestic institutions to overseas and offshore customers, domestic non-enterprise customers and self-employed
+businesses.
+63
+64
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+Sci-tech finance business
+The Company has launched the sci-tech finance service brand, offering integrated service solutions for sci-tech
+enterprises catering for their five core needs, namely "bank financing, treasury management, capital connection,
+cross-border development, and talent retention and employment". The Company innovatively launched the exclusive
+financing product "Sci-Tech Loan ()", established "six specialised (P)" working mechanism to serve
+sci-tech enterprises covering teams, products, policies, institutions, assessments and processes, expanded the layout
+of key branches for sci-tech finance, thereby increasing the number of key branches to 11, and carried out the bulk
+acquisition and operation of sci-tech enterprise customers through major channels. As of the end of the reporting
+period, the number of sci-tech enterprise customers of the Company reached 140,800, representing an increase of
+42.51% as compared with the end of the previous year; and the balance of loans extended to sci-tech enterprises
+amounted to RMB428.477 billion, representing an increase of 44.95% as compared with the end of the previous
+year.
+Inclusive finance business
+During the reporting period, the Company implemented the policy guidance of providing financial support for
+small- and micro-sized enterprises, and steadily improved the quality and efficiency of its financial services for the
+real economy while maintaining stable asset quality and strengthening compliance management. As of the end of
+the reporting period, the balance of loans granted by the Company to inclusive small- and micro-sized enterprises
+amounted to RMB804.279 billion, representing an increase of RMB125.930 billion or 18.56% as compared with the
+end of the previous year, 10.77 percentage points higher than the overall loan growth rate of the Company. The
+number of inclusive small- and micro-sized enterprises with loan balance was 1,004,500, representing an increase of
+13,800 as compared with the end of the previous year. During the reporting period, the Company has newly issued
+inclusive loans of RMB602.821 billion for inclusive small- and micro-sized enterprises, with an average interest rate
+of 4.48%, down by 67 basis points year-on-year.
+With regard to its supply chain and scenario-based finance, the Company innovated and upgraded the supply
+chain finance 3.0 service system by launching the new products such as "CMB Chain Easy Loan ()" and
+the "Distribution Easy Loan ()", which further improved the supply chain product system and effectively
+enhanced the efficiency of product operation and customer experience. Leveraging the advantage of "One Entire
+Bank for One Customer (-)", the Company provided exclusive credit support to customers in key
+industries such as automobile, green energy, medical security and healthcare, communication, power and equipment
+manufacturing under the "product + customer group" scenario-based business model. During the reporting period,
+the business volume of the Company's supply chain financing amounted to RMB818.733 billion, representing an
+increase of 23.68% as compared with the end of the previous year. The Company served 6,556 core enterprises,
+and 39,490 upstream and downstream customers.
+With regard to its financial institution customers, the Company comprehensively deepened its customer operation by
+constantly improving its operation system for financial institution customers, enhanced its capabilities of the industry
+specialised operation through classified operations for specific industries, and joined hands with the financial
+institution customers to serve the customers, which facilitated acquisition and operation of corporate customers and
+retail customers. At the same time, the Company cooperated with policy banks to carry out sub-loans services and
+implemented the decisions and arrangements related to the national inclusive finance development.
+As of the end of the reporting period, the balance of loans to domestic national-standard large enterprises was
+RMB1,021.981 billion, representing an increase of 9.71% as compared with the end of the previous year, accounting
+for 45.70% of the domestic corporate loans, representing a decrease of 0.43 percentage point as compared with the
+end of the previous year, and the non-performing loan ratio was 0.84%, representing a decrease of 0.06 percentage
+point as compared with the end of the previous year. The balance of loans to domestic national-standard medium-
+sized enterprises was RMB579.121 billion, representing an increase of 4.16% as compared with the end of the
+previous year, accounting for 25.90% of the domestic corporate loans, representing a decrease of 1.63 percentage
+points as compared with the end of the previous year, and the non-performing loan ratio was 1.91%, representing a
+decrease of 0.15 percentage point as compared with the end of the previous year. The balance of domestic national-
+standard small- and micro-sized enterprise loans was RMB484.632 billion, representing an increase of 25.27% as
+compared with the end of the previous year, accounting for 21.67% of the domestic corporate loans, representing
+an increase of 2.51 percentage points as compared with the end of the previous year, and the non-performing
+loan ratio was 0.74%, representing a decrease of 0.26 percentage point as compared with the end of the previous
+year. The balance of domestic loans to enterprises in other national-standard classifications 19 was RMB150.439
+billion, representing an increase of 3.66% as compared with the end of the previous year, accounting for 6.73% of
+the domestic corporate loans, representing a decrease of 0.46 percentage point as compared with the end of the
+previous year, and the non-performing loan ratio was 1.75%, representing an increase of 0.37 percentage point as
+compared with the end of the previous year.
+With regard to its institutional customers, the Company continued to optimise its product systems and user
+experience focusing on scenarios including government and industry funds, local government special bonds, income
+and expense management of fiscal funds, tax payment and refund as well as convenient civil services, aiming
+to provide differentiated services for all levels and types of institutional customers, and further tap into the full
+potential of institutional customers through the service chain. In terms of serving national government institutions,
+the Company was recognised as excellent agency for all the three agency qualifications in the 2023 Central Fiscal
+Agency Service Assessment, and continued to strengthen the multi-dimensional cooperation in terms of policies,
+qualifications, systems, data and other aspects, and to build a distinctive brand with digital services. In terms of
+serving local governments and competent authorities, the Company provided customers with a package of solutions
+encompassing intelligence, financing and technology service system, and established its reputation in the market for
+its integrated services. As of the end of the reporting period, the Company had 50,600 institutional customers, with
+an average daily deposit balance of RMB1,077.397 billion.
+3.10.2 Wholesale finance
+The Company has established a corporate customer service system with segmentation and classification-based
+management for strategic customers, institutional customers, financial institution customers, cross-border customers
+and basic customers. During the reporting period, the Company kept on focusing on the industry specialised
+operation for strategic customers of the Head Office level and branch level, acquisition of high-quality corporate
+customers and in-depth operations of existing customers. As of the end of the reporting period, the total number of
+corporate customers of the Company came in at 2,820,600, representing an increase of 11.66% as compared with
+the end of the previous year. The number of newly acquired corporate customers during the reporting period was
+481,900, contributing daily average deposits of RMB172.744 billion.
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+In terms of business development, the Company adhered to the value-oriented and innovation-driven approach to
+promote service and product upgrades. Firstly, the transformation of customer acquisition strategies has facilitated
+the Company's high-quality customers acquisition efforts. Additionally, it has constantly enriched its card product
+portfolio by launching green and low-carbon themed credit card in practicing the ESG concept, and joined hands
+with Meituan and Mango TV to launch co-branded cards in satisfying the needs of young customers for online
+shopping and entertainment. Particularly for female customers, the Company launched, among others, the Hello
+Kitty pink graffiti card and "Free Life (±)" platinum credit card (Pink Version), enabling the Company to
+further strengthen the connection with its customers. Secondly, the Company applied a combination of measures
+to boost consumption, seizing the consumption hotspots of festivals and holidays and e-commerce promotions to
+enhance the efficiency of marketing operations. Furthermore, it capitalised on the recovery of overseas transactions
+by launching the themed marketing campaign of "Extraordinary Overseas Tours (). Thirdly, the Company
+continued to focus on the operation of instalment assets and enhance the operating efficiency of bill instalments
+and consumption instalments. Meanwhile, it innovated the post-loan procedure for automobile instalment loans and
+enhanced service quality and efficiency through online solutions. Fourthly, it deepened the digital transformation
+based on the credit card core system 3.0, upgrading business procedures and functions, creating the "people +
+digitalisation" omni-channel service system and promoting the digital and intelligent transformation of customer
+service. In addition, the Company has further deepened the operation of the CMB Life APP. For details of the CMB
+Life APP, please refer to 3.10.3 "Distribution channels" in this chapter.
+Retail loans
+As of the end of the reporting period, the balance of retail loans of the Company amounted to RMB3,373.633
+billion, representing an increase of 8.49% as compared with the end of the previous year and accounting for
+54.71% of the Company's total loans and advances to customers, up by 0.35 percentage point as compared with
+the end of the previous year. Among them, the balance of the Company's retail loans (excluding credit card loans)
+reached RMB2,437.856 billion, representing an increase of 9.55% as compared with the end of the previous year,
+accounting for 39.53% of total loans and advances to customers of the Company and representing an increase of
+0.63 percentage point as compared with the end of the previous year.
+As to business development, during the reporting period, the Company actively implemented the requirements of
+national policies, adhered to the implementation of city-specific policy, proactively adapted to the major changes in
+the supply and demand relationship in the real estate market, and supported rigid and improving housing demands
+of housebuyers, thus achieving a healthy development of the residential mortgage loan business. Furthermore,
+while maintaining proper risk control management and stable asset quality, the Company proactively adjusted its
+business structure and increased the granting of micro-finance loans and consumer loans. With respect to micro-
+finance loans, the Company strictly implemented various regulatory requirements, enriched its product portfolio
+and enhanced policy adaptation to meet the diversified needs of micro-finance loan customers, and expanded the
+coverage of micro-finance loan customers, so as to constantly improve the quality and efficiency of micro-finance
+services. With respect to the consumer loan business, the Company insisted on selecting high-quality customers and
+continued to build on its big data risk control capabilities. The Company carried out segmented management of
+customer groups with different needs, stroke a balance between returns and risks, and reduced operating costs. As
+of the end of the reporting period, the Company recorded a balance of residential mortgage loans of RMB1,376.814
+billion, representing a decrease of 0.22% as compared with the end of the previous year. The balance of retail
+micro-finance loans amounted to RMB749.773 billion, representing an increase of 19.08% as compared with the
+end of the previous year. The balance of consumer loans amounted to RMB301.538 billion, up by 49.11% as
+compared with the end of the previous year. As of the end of the reporting period, the Company had 15.5772
+million retail loan (excluding credit card loans) customers, representing an increase of 28.31% as compared with the
+end of the previous year. The expansion of customer base was mainly attributable to the light model of customer
+acquisition through online platform.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+In terms of risk management, the Company kept intensifying its risk control capabilities. First, the Company
+strengthened the monitoring and prediction of market risk situations, and adjusted its risk management and control
+strategies in a timely manner in line with changes in market conditions; second, the Company prioritised the
+development of areas with better economic development and market potential, while adhering to the selection of
+high-quality customer groups and preference for customers with good credit records and stable repayment sources
+as the main business targets and selecting premium property development projects in core zones as collaterals;
+third, the Company continued to strengthen its big data quantitative risk control capabilities and enhance the
+digital level of risk management by leveraging Fintech, actively expanded access to data sources, continuously
+enriched data tags, rapidly iterated the strategic model, deepening the application of quantitative risk control
+tools in the whole process of pre-lending, lending and post-lending so as to accurately identify and control risks.
+With the above initiatives, the non-performance loan ratio of retail loans of the Company remained stable. As of
+the end of the reporting period, the balance of the Company's retail special-mentioned loans (excluding credit
+card loans) amounted to RMB17.366 billion, special-mentioned loan ratio was 0.71%, representing an increase of
+0.09 percentage point as compared with the end of the previous year. As of the end of the reporting period, the
+balance of non-performing retail loans (excluding credit card loans) amounted to RMB14.158 billion, with the non-
+performing loan ratio of 0.58%, representing an increase of 0.02 percentage point as compared with the end of the
+previous year. Excluding credit card loans, the mortgage and pledged loans accounted for 57.98% of the Company's
+new non-performing retail loans formed during the reporting period, the loan-to-value ratio of the above-mentioned
+mortgage and pledged loans as at the end of the reporting period was 35.12%. Given that the vast majority of such
+new non-performing retail loans were fully secured by collaterals, the risk was within a controllable range.
+China Merchants Bank
+Annual Report 2023 (H share)
+Business overview
+During the reporting period, the Company achieved profit before tax from wholesale finance of RMB69.648 billion,
+representing an increase of 11.63% as compared with the corresponding period of the previous year. The net
+operating income from wholesale finance of the Company was RMB119.481 billion, representing a decrease of
+6.55% as compared with the corresponding period of the previous year, and accounting for 38.87% of the net
+operating income of the Company. Among them, net interest income of wholesale finance business amounted to
+RMB81.058 billion, representing a decrease of 6.33% as compared with the corresponding period of the previous
+year, and accounting for 67.84% of the net operating income of wholesale finance business; the net non-interest
+income of wholesale finance business amounted to RMB38.423 billion, representing a decrease of 7.00% as
+compared with the corresponding period of the previous year, and accounting for 32.16% of the net operating
+income of wholesale finance business, and 38.55% of the net non-interest income of the Company.
+During the reporting period, the Company captured opportunities arising from the transformation of economic
+growth momentum and the change of accelerated transformation and upgrading of industries, so as to proactively
+strategising its business layout. The Company focused on the development of key finance sectors, including sci-tech
+finance, green finance, inclusive finance, retirement finance and digital finance, etc., and continued to develop its
+distinctive advantages and upgraded business models, so as to push forward the optimisation and adjustment of the
+customer structure and business structure of wholesale finance, and enhance the quality and efficiency of serving
+the real economy.
+The Company provided three-dimensional, all-round and multi-level financing support to corporate clients with
+its perspective of integrating investment banking and commercial banking based on its commitment to serving
+customers' needs at all times. As of the end of the reporting period, the Company's balance of aggregate financing
+products to corporate customers (FPA) was RMB5,517.537 billion 14, representing an increase of RMB429.410 billion
+over the beginning of the year. Among them, the balance of traditional financing 15 was RMB3,149.757 billion,
+representing an increase of RMB351.513 billion over the beginning of the year; the balance of non-traditional
+financing 16 was RMB2, 367.780 billion, representing an increase of RMB77.897 billion over the beginning of the year.
+The balance of non-traditional financing accounted for 42.91% of the balance of FPA, representing a decrease of
+2.09 percentage points over the beginning of the year.
+14
+15
+16
+Since the scope of financing wealth management and matching transactions included in FPA were adjusted in this period, the same-calibre adjustment
+was made to the data at the beginning of the period, with the opening balance of the adjusted FPA of RMB5,088.127 billion, of which amount of
+traditional financing amounted to RMB2,798.244 billion and amount of non-traditional financing amounted to RMB2,289.883 billion.
+Traditional financing comprises general corporate loans and commercial bills discounting (including transfer-out of outstanding bills), acceptance, letters
+of credit, financial guarantees and non-financial guarantees.
+The eight compositions of non-traditional financing include: asset operation, proprietary non-standardised corporate investments, financing wealth
+management, debt financing instruments with the Company as the lead underwriter, matching transactions, financial leasing, cross-border coordination
+financing and leading syndicated loans.
+61
+62
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+Wholesale customers
+In terms of strategic customers, the Company optimised and upgraded its strategic customer service model by
+enhancing industry understanding, improving capability of the industry-specialised service for strategic customers,
+deepening industry chain and investment chain operations for strategic customers and leading to the innovation of
+the industrial service model. As of the end of the reporting period, the Company had 32117 strategic customers of
+the Head Office level, with a daily average balance of deposits of RMB1,071.146 billion, representing an increase of
+2.50% on the same calibre as compared with the previous year, and the balance of loans was RMB1,118.486 billion,
+representing an increase of 8.00% as compared with the beginning of the year. As of the end of the reporting
+period, the number of strategic customers of the Company of the branch level was 7,01318. The daily average
+balance of deposits was RMB774.371 billion, representing an increase of 6.01% on the same calibre as compared
+with the previous year, and the balance of loans was RMB407.267 billion, representing an increase of 14.55% as
+compared with the beginning of the year.
+Chapter III Management Discussion and Analysis
+Based on the demand for upgrading treasury management under the multi-entity, cross-region and even global
+business model gradually adopted by enterprises during their business expansion, the Company took the Treasury
+Management Cloud as the digital service platform for enterprises, and developed the "Single Account Version,
+Standard Version, Professional Version and Treasury Version (4Ƒ · 45 · ** · Ƒ)" to completely
+cover and precisely meet the needs of treasury management and intelligent analysis and decision-making for
+various enterprises and users at different stages of development, with different size of business, under different
+management modes and with different roles, thus to assist enterprises in improving their efficiency in allocating
+financial resources. At the same time, the Company actively responded to the needs of large enterprises to
+accelerate the construction of treasury systems, built up the core functions of the Treasury Management Cloud and
+innovatively launched the "consulting + finance + technology (++" treasury service model, so as to
+deepen the cooperation with large conglomerates. As of the end of the reporting period, the number of customers
+of Treasury Management Cloud services reached 477,600, representing an increase of 62.15% as compared with
+the end of the previous year.
+During the reporting period, the Company actively practiced the concept of "finance for the people" and "finance
+to serve the real economy", and regarded the retirement finance business as a strategic business with continuously
+increased input of resources. With the aim of building its distinctive advantages in retirement finance, the Company
+made overall planning in respect of top-level design of retirement finance, integrating retirement finance with non-
+financial service scenarios and building a four-in-one innovative service model integrating "products + services +
+channels + technology" to provide customers with all-round, one-stop, personalised and comprehensive solutions
+for retirement finance. Following the national development strategy of accelerating the formation of a multi-level
+and multi-pillar pension insurance system and leveraging its advantages as a fully licenced financial institution, the
+Company promoted its retirement finance business into a new stage of high-quality development.
+With respect to its corporate wealth management business, the Company actively responded to fluctuations in the
+fixed income market, and continued to improve the product system, thereby enhancing customer service experience.
+During the reporting period, the Company's average daily balance of corporate wealth management products
+was RMB306.759 billion, representing a year-on-year decrease of 20.32% due to the redemption of bank wealth
+management products at the beginning of the year, with the reduction narrowed down by 6.41 percentage points
+from the middle of the year.
+With respect to its market transactions (matching services) business, the Company, in collaboration with licenced
+financial institutions, provided a diverse range of funding services in addition to bank credit, while focusing on the
+needs of customers. During the reporting period, the Company's market transaction (matching services) amounted
+to RMB371.405 billion, representing a year-on-year increase of 14.54%.
+20
+The data for 2023 is based on the latest calibre of the State Administration of Foreign Exchange.
+67
+68
+China Merchants Bank
+Annual Report 2023 (H share)
+21
+Financial institution business
+With respect to financial institution liability business, during the reporting period, the daily average balance of
+financial institution deposits of the Company amounted to RMB565.449 billion, representing a year-on-year
+decrease of 14.79%. The decrease was mainly due to corrections in the equity market, the contraction of the overall
+bank wealth management market, business restructuring of the trust industry, as well as the Company's refined
+management and control over the interest-bearing costs and its initiative to reduce high-priced deposits.
+With respect to its depository service, the Company's security and future margin depository services were in stable
+operation. The Company partnered with 106 securities companies in third-party depository services and 16,618,000
+customers were secured at the end of the reporting period, representing an increase of 7.39% as compared with the
+end of the previous year. Also, the Company entered into cooperation with 144 futures companies on fund transfer,
+securing 423,200 customers at the end of the reporting period, representing an increase of 17.13% as compared
+with the end of the previous year.
+Asset Management Business
+As of the end of the reporting period, the total asset management business of CMB Wealth Management, China
+Merchants Fund, CIGNA & CMAM, and CMB International Capital all being subsidiaries of the Company, amounted
+to RMB4.48 trillion 21, representing an increase of 1.59% as compared with the end of the previous year. Among
+them, the balance of wealth management products under management by CMB Wealth Management amounted
+to RMB2.55 trillion, representing a decrease of 4.49% as compared with the end of the previous year; the scale of
+asset management business of China Merchants Fund amounted to RMB1.55 trillion, representing an increase of
+4.73% as compared with the end of the previous year; the scale of asset management business of CIGNA & CMAM
+amounted to RMB267.593 billion, representing an increase of 62.44% as compared with the end of the previous
+year; the scale of asset management business of CMB International Capital amounted to RMB113.466 billion,
+representing an increase of 8.77% as compared with the end of the previous year.
+During the reporting period, CMB Wealth Management promoted the efficient operation of the value cycle chain in
+accordance with the business strategy of "stabilising scale, adjusting structure and enhancing capacity". In terms
+of improving its investment and research capabilities, it continued to build on its capabilities in terms of asset
+allocation and multi-strategy investment, while promoting the integration of investment and research, maintaining a
+reasonable staff arrangement in the investment and research system and continuous improvement in the conversion
+efficiency of investment and research results. In terms of increasing its efforts on product innovation, 20
+investment strategies highlighting quality asset allocation have been implemented based on market demands, which
+were well accepted by the channels and customers. In terms of enhancing investor experience, CMB Wealth
+Management increased the business hours for wealth management products to 24 hours, extending the daily
+cut-off time for redemption application of cash management products from 15:30 to 24:00, winning favourable
+recognition from customers. In terms of improving risk management, CMB Wealth Management strove to
+build a comprehensive risk and compliance management system in line with the rules of wealth management and
+investment following the principle of prudent and sound risk management.
+During the reporting period, following the "high-quality development" requirements of mutual funds, China
+Merchants Fund stabilised performance, expanded growth, improved capabilities, and upheld to the bottom line,
+and recorded steady progress under the adverse environment prevailing in the fund market. As of the end of the
+reporting period, the total size of non-money-market mutual funds amounted to RMB575.568 billion, representing
+an increase of 2.62% as compared with the end of the previous year. In terms of improving the investment
+and research capability, the organisation of industry chain research teams was optimised, the building of a digital
+investment and research platform was well on track while investment and research capabilities continued to grow.
+In terms of product layout, it insisted on deploying equity products amid the adverse environment, and launched
+as the industry pioneer the first hybrid valuation product, the shareholder return ETF of Central state-owned
+enterprises, the manager concession products and the first green bond index product, so as to satisfy the needs of
+investors through business model innovation. In terms of customer operations, China Merchants Fund actively
+promoted channel and customer base expansion, maintained steady operation of fund investment advisory business,
+took advantage of the opportunity arising from pension business development, further engaged in customer
+accompany and investor education, satisfied customers' needs and realised stable growth in business scale. In terms
+of basic management, it strengthened value orientation, optimised human resource management, accelerated to
+promote the digital transformation, and tightened risk control compliance and operational assurance management
+to help boost the quality and efficiency of various businesses. No major risk compliance incidents occurred during
+the reporting period.
+The total volume of asset management business of China Merchants Fund and CMB International Capital both included the data of their respective
+subsidiaries.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+During the reporting period, CIGNA & CMAM was positioned as a professional and stable long-term capital
+management institution, adhered to the "customer-centric" value orientation, fully integrated into the Group's
+strategic layout, and strove to become an asset management institution with core competitiveness. With regard to
+the insurance fund fiduciary business, it viewed enhancement of fiduciary investment returns as the core objective
+and survival foundation to improve the market competitiveness of insurance products. As of the end of the reporting
+period, the scale of insurance funds under entrusted management was RMB144.963 billion, representing an increase
+of 33.15% as compared with the end of the previous year. In terms of product creation, CIGNA & CMAM
+adopted the approach of "upholding fundamental principles and breaking new ground (E)" and conquered
+challenges to actively seek for new business growth points. During the year, it obtained the issuance qualification
+under the insurance asset support scheme, and has basically acquired the issuance and management capability for
+all types of insurance asset management products. Meanwhile, it steadily improved itself in handling the portfolio
+asset management products, and as of the end of the reporting period, it ranked among the top of the industry in
+terms of alternative insurance asset management products business. In terms of operation and risk management,
+it proceeded with high-quality ground work, established an efficient operation and management system, continued
+to improve the comprehensive risk management system, and accelerated the construction of digital infrastructure,
+with steady progress achieved.
+During the reporting period, CMB International Capital closely aligned with the Bank's strategic goal of building a
+value creation bank by making active business coordination with the Bank and strengthening the linkage mechanism
+of investment banking and commercial banking to jointly propel high quality development. Notwithstanding the
+weak capital market in Hong Kong, CMB International Capital completed a total of 30 Hong Kong IPO projects
+during the reporting period, maintaining its leading position in terms of Hong Kong IPO underwriting business.
+According to the statistics of Bloomberg in respect of the market share of IPO underwriting in Hong Kong, CMB
+International Capital ranked third among all the investment banks and first among the investment banks with
+Chinese banking background as of the end of the reporting period. In respect of domestic asset management
+business, CMB International Capital has focused on the private equity investments business as the core business to
+consolidate its position in the industry. During the reporting period, four investment projects were successfully listed
+domestically and overseas by CMB International Capital. Additionally, it ranked the fifth for three consecutive years
+in the "Zero2IPO Group Top 100 Private Equity Investment Institutions in China (+2⠀RAAHES)"
+and was considered one of the top tier companies in private equity investment industry with the best performance
+among the banking PE institutions. In respect of overseas asset management business, three investment projects
+with respect to CMB International Capital's private equity products completed their listing domestically or overseas
+during the reporting period, and two listed projects were successfully delisted through sound trading strategies.
+Meanwhile, CMB International Capital has made great efforts to develop monetary mutual funds business. During
+the reporting period, the issuance of USD money market funds by CMB International Capital was approved by the
+Hong Kong Securities and Futures Commission, which made the product become the Group's first mutual funds
+product approved overseas.
+Assets custody business
+As of the end of the reporting period, the balance of assets under custody of the Company was RMB21.12 trillion,
+representing an increase of 5.28% as compared with the end of the previous year. The total scale of custody ranked
+first in the industry (data from the Custody Business Professional Committee under China Banking Association).
+Through perseverance with high quality development, the Company aimed to become the first choice of customers
+in respect of custody banks with core competitiveness. During the reporting period, the Company's custody business
+reached a new stage of development. The custody customer acquisition capability and comprehensive service
+capability was continuously improved, and the custody brand influence was constantly enhanced.
+Firstly, the Company continued to optimise its business structure, with significant effect in high-quality development.
+As of the end of the reporting period, the Company's asset management products 22 accounted for 72.02% of its
+incremental custody size, surpassing the average proportion of the industry by 3.30 percentage points. Among them,
+the scales of custody of four key businesses, including mutual funds, insurance, pension and cross-border business,
+increased by 15.07% as compared with the end of previous year, 2.84 percentage points higher than the average
+increase of the industry.
+22
+According to the statistical calibre of the Custody Business Professional Committee under China Banking Association, the custody of asset management
+products includes custody of securities investments funds, customer asset management of fund companies, customer asset management of securities
+companies, bank wealth management, trust property, private equity investment funds, insurance assets, pension funds, QDII products, QFI products,
+futures, etc.
+69
+With respect to its M&A financing business, the Company actively served the industrial integration of real
+economy-based enterprises and built up the ability to provide systematic services in the capital market throughout
+the full-life cycle for enterprises. During the reporting period, the Company's M&A financing business volume
+amounted to RMB193.348 billion, representing a year-on-year increase of 3.71%, ranking first in both book runner
+and lead arranger in the Asia Pacific M&A syndicate ranking published by Bloomberg.
+Retirement finance business
+With respect to its bond underwriting business, the Company strove to serve real economy-based enterprises in
+direct financing and asset revitalisation, with dedication in green finance and sci-tech finance. During the reporting
+period, the debt financing instruments with the Company as the lead underwriter amounted to RMB591.813 billion,
+representing a year-on-year decrease of 5.28%, ranked third among its industry peers (based on the data from the
+National Association of Financial Market Institutional Investors). In particular, the Company ranked first by the size
+of perpetual bonds and sci-tech innovation notes, second by the size of green bonds and third by the size of asset-
+backed notes (ABN) among its industry peers.
+Investment banking business
+In terms of the first pillar, the Company offered convenient online services for insured persons such as social security
+inquiry, qualification certification, annual report review and other services. As of the end of the reporting period, the
+Company has issued a total of 62,586,200 electronic social security cards.
+In terms of the second pillar, the Company strengthened the construction of core capability with distinctive services
+and formed its differentiated competitive advantages. As of the end of the reporting period, the number of
+enterprise annuity accounts under management reached 2,224,800.
+In terms of the third pillar, a total of 5,356,200 individual pension fund accounts had been opened as of the end of
+the reporting period.
+At the same time, the custody service has covered in depth the three-pillar pension insurance system. As of the end
+of the reporting period, the pension funds under custody amounted to RMB1.05 trillion, realising an increase in both
+market share and scale.
+Bill business
+During the reporting period, the Company further deepened the transformation of comprehensive services for bill
+customers, continuously improved the experience of bill customers, and continued to enhance the direct discounting
+and inter-bank discounting linkage capabilities and bill transaction capabilities, and actively responded to the
+changes in the external markets. During the reporting period, the number of customers of bill business of the
+Company was 159,690 with a year-on-year increase of 11.38%, among which 122,800 were micro-, small- and
+middle-sized customers, accounting for 76.90% of the total. The volume of direct bill discounting business was
+RMB1,895.076 billion during the reporting period, representing a year-on-year increase of 24.78%, still ranking
+second in the market (data from the China Banking Association), of which the volume of commercial acceptance
+bill discounting business was RMB234.208 billion, ranking first in the market (data from the Commercial Bank
+Bill Business Association). As of the end of the reporting period, the Company's bill discounting balance was
+RMB471.127 billion, representing a decrease of 8.32% as compared with the end of the previous year, mainly due
+to the active adjustment and optimisation of the Company's asset allocation due to the decrease in interest rate in
+the bill market.
+The Company keeps on improving the bill investment and research integration mechanism and the band trading
+strategy and flow management, optimises the mechanism of Head Office and branch cooperation, and continues
+to enhance its trading capabilities. During the reporting period, the discounted bills transferred to other financial
+institutions (buy-out) amounted to RMB1,851.516 billion, representing a year-on-year increase of 27.62%, ranking
+second in the market (data from the China Banking Association).
+The Company keeps on implementing the rediscounting policy of the People's Bank of China, supports enterprise
+financing through rediscounting, and improves the quality and efficiency of serving the real economy. During the
+reporting period, the business volume of bill rediscounting amounted to RMB260.061 billion, representing a year-
+on-year increase of 25.84%. As of the end of the reporting period, the Company's rediscounting balance was
+RMB101.161 billion, representing an increase of 22.66% as compared with the end of the previous year, ranking
+first in the market (data from the China Banking Association).
+65
+95
+99
+66
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+Transaction banking business
+During the reporting period, the Company, in response to the "Digital China (*)" campaign, not only
+accelerated its own digital transformation, but also focused on the three business scenarios of corporate treasury
+management, sales and procurement. The Company enhanced products innovation and deepened ecological
+connection, so as to forge its two major advantages of "digital treasury management" and "digital integration
+of business and finance". By actively integrating with and empowering the digital transformation of enterprises,
+the Company explored new growth points for the corporate banking business. During the reporting period, the
+Company officially launched the "Enterprise Digital Intelligent Finance (1)" brand, establishing three
+major service systems, namely "Online Finance ()", Treasury Management Cloud ()" and
+"Scenario-based Finance ()", to provide enterprises with intelligent solutions for their efficient operation,
+cost reduction and efficiency enhancement.
+Relying on Fintech, the Company accelerated the online migration of whole-process of corporate banking business
+and enhanced the convenience and efficiency of "Online Finance (*)" services. During the reporting period,
+the online operation of the financing business of the Company was further enhanced. Based on digital risk control
+technology, the Company continued to upgrade its "Flash Series ()" of domestic trade finance products
+to improve the efficiency of short-term financing for enterprises. Furthermore, the Company continued to upgrade
+the "people + digitalisation" whole-process companion model and explored the introduction of artificial intelligence
+technology to create a "digital product manager (*)", forming a service system of instant response
+to customer needs for multiple scenarios to improve service efficiency and enhance customer experience. During
+the reporting period, the letters and certificates issuance business transactions of the Company amounted to
+RMB488.285 billion, representing a year-on-year increase of 20.49%; the domestic trade financing business volume
+amounted to RMB 1,204.238 billion, representing a year-on-year increase of 29.48%.
+The Company also actively explored the comprehensive digital services for enterprises under the scenario of
+"integration of business and finance", and developed the "Payment Centre (+)" for procurement scenarios
+based on the whole procurement service process, providing enterprises with full-cycle digital payment service in
+respect of integration of business and finance. As for the corporate sales scenarios, the Company relied on the
+"Corporate Cashier ()" to offer a omni-channel and whole-process unified sales collection service,
+assisting enterprises with digital upgrade of sales management. The Company developed and further promoted
+the digital intelligent finance solutions for various industries such as automobile, consumption, pharmaceutical,
+infrastructure and energy, and created branded services such as "Automobile Cashier ()" to contribute to
+the digital transformation of the real economy. During the reporting period, the customers of corporate collection
+products reached 87,100, representing a year-on-year increase of 38.92%. The transaction amount of corporate
+collection products was RMB6.28 trillion, representing a year-on-year increase of 47.76%.
+Also, the Company continued to innovate the "Cloud-based H2H Connection" model to expand the breadth and
+depth of the connection between its digital platforms such as the Treasury Management Cloud and the digital
+systems of enterprises, which facilitated rapid access to the financial services of the Company by customers of
+mainstream SaaS office platforms. As of the end of the reporting period, the number of customers of the Cloud-
+based H2H Connection service reached 169,800, representing an increase of 31.93% as compared with the end of
+the previous year.
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+Cross-border finance business
+During the reporting period, the Company focused on the target customer group of cross-border business, improved
+product service system, aiming to become the "principal bank for settlement" for customers of cross-border
+transactions and the "global principal bank" for core customers by implementing operation and management and
+solidifying foundational capacity building. During the reporting period, the Company recorded USD356.887 billion 20
+of international balance of payments for corporate customers, representing an increase of 4.90% based on the same
+calibre as compared with the previous year. In particular, the balance of payments for corporate customers under
+trade in goods amounted to USD173.814 billion, representing a year-on-year increase of 9.92%.
+Centring on customer group acquisition and operation, the Company made solid progress in customer group
+construction. The Company established its marketing strategy led by segmentation-based management and
+supplemented by classification-based management and regional division, thereby consolidating the basic customer
+groups of trade in goods and consolidating our strengths in serving customers of trade in services and capital
+account. At the same time, the Company extended its service coverage by leveraging the strengths in providing
+integrated services at home and abroad to three major customer groups and scenarios, namely the global operation
+of Chinese enterprises, the foreign invested companies "bringing in" and the overseas capital market.
+The Company has fully developed the comprehensive digital and facilitated service system for the cross-border
+finance business and formed differentiated competitive advantages. In addition, it continued to improve its online
+service capability for the basic products, carried out the digital transformation of international trade finance
+business, launched the global cash management service system, deepened the segmentation and classification-based
+service mechanism in respect of international documents, efficiently operated the international business section of
+CMB U-Bank and the CMB Corporate APP, and developed a one-stop service platform for its cross-border finance
+business. During the reporting period, 107,206 customers visited the international business section of CMB U-Bank,
+representing a year-on-year increase of 98%. The total number of online transactions was 1.5 million, among which,
+the online replacement rate for key products was over 86%.
+The Company reinforced proactive management of risks in key areas and built the solid "first line of defence"
+for risk management of cross-border business. It also continued to strengthen the closed-loop risk management
+for products covering the full-life cycle, enhanced risk monitoring in key areas, further optimised the anti-money
+laundering process, and improved the ability to prevent sanction risks.
+During the reporting period, the Company accelerated the transformation of its investment banking business by
+building an all-round service system for corporate investment banking and stepping up its role change from a loan
+provider to a fund originator.
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+60
+CMB Europe S.A. was approved to be established in 2021 with a registered capital of EUR100 million (the Company
+made an additional capital injection of EUR50 million to CMB Europe S.A. in June 2023). It is a wholly-owned
+subsidiary of the Company in Europe and the regional headquarter of the Company in continental Europe. CMB
+Europe S.A. will be fully integrated into the Company's extensive wealth management system and leverage its full
+licence advantage to provide its customers with diversified financial products and services such as cross-border
+financing, M&A finance, private banking, investment management, financial markets, bond underwriting, trade
+financing, and operates and allocates the global assets of enterprises and individuals.
+CMB Europe S.A.
+As of the end of the reporting period, CIGNA & CMAM had total assets of RMB920 million, with net assets of
+RMB713 million and a net profit of RMB108 million during the reporting period.
+CIGNA & CMAM was established in 2020 with a registered capital of RMB500 million, and it is an indirectly owned
+subsidiary of the Company, which is owned as to 87.3458% and 12.6542% by CIGNA & CMB Life Insurance,
+a joint venture of the Company, and CMB International Capital, a subsidiary of the Company, respectively. The
+business scope of CIGNA & CMAM includes entrusted management of client's funds, issuance of insurance asset
+management products and asset management related consultation business.
+CIGNA & CMAM
+As of the end of the reporting period, the total assets of China Merchants Fund amounted to RMB14.151 billion,
+and its net assets amounted to RMB9.325 billion. It realised a net profit of RMB1.753 billion during the reporting
+period.
+Established in 2002, China Merchants Fund has a registered capital of RMB1.31 billion. As of the end of the
+reporting period, the Company and China Merchants Securities Co., Ltd. held 55% and 45% of China Merchants
+Fund's shares, respectively. The business scope of China Merchants Fund covers fund establishment, fund
+management and other operations approved by the CSRC.
+China Merchants Fund
+As of the end of the reporting period, CMB Wealth Management had total assets of RMB21.062 billion and net
+assets of RMB20.135 billion. During the reporting period, the net profit was RMB3.190 billion.
+CMB Wealth Management was officially opened in 2019, and its business scope includes issuing wealth management
+products, providing wealth management advisory and consulting services and other businesses approved by
+regulatory authorities. As of the end of the reporting period, the registered capital of CMB Wealth Management was
+approximately RMB5.556 billion. The Company and JPMorgan Asset Management (Asia Pacific) Limited hold 90%
+and 10% of its shares respectively.
+CMB Wealth Management
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2023 (H share)
+As of the end of the reporting period, the total assets of CMB International Capital amounted to HKD69.714 billion,
+and its net assets amounted to HKD13.146 billion. During the reporting period, it realised a net profit of HKD1.152
+billion.
+Established in 1993, CMB International Capital is a wholly-owned subsidiary of the Company in Hong Kong with
+a registered capital of HKD4.129 billion. At present, the business scope of CMB International Capital and its
+subsidiaries mainly covers corporate finance, asset management, wealth management, global market business and
+structured finance.
+CMB International Capital
+As of the end of the reporting period, the total assets of CMB Financial Leasing were RMB290.794 billion and the
+net assets were RMB33.111 billion. During the reporting period, the net profit was RMB3.675 billion.
+CMB Financial Leasing is a wholly-owned subsidiary established by the Company in 2008 with a registered capital
+of RMB12 billion. It meets the needs of lessees to purchase equipment, promote sales, revitalise assets, balance tax
+burden and improve financial structure through 10 major financial solutions relating to aviation, shipping, energy,
+infrastructure, equipment manufacturing, environment, health, culture and tourism, public transportation and
+logistics, intelligent interconnect and integrated circuit and leasing industry, etc.
+CMB Financial Leasing
+As of the end of the reporting period, the total assets of CMB Wing Lung Group amounted to HKD426.640 billion.
+Total equity attributable to shareholders amounted to HKD46.392 billion. During the reporting period, CMB Wing
+Lung Group realised a net profit attributable to shareholders of HKD1.605 billion. For detailed financial information
+on CMB Wing Lung Group, please refer to the 2023 annual results of CMB Wing Lung Bank, which is published on
+the website of CMB Wing Lung Bank (www.cmbwinglungbank.com).
+Founded in 1933, CMB Wing Lung Bank has a registered capital of HKD1.161 billion, and it is a wholly-owned
+subsidiary of the Company in Hong Kong. CMB Wing Lung Bank provides customers with diversified banking
+products and services, including retail and private banking, corporate banking and other banking businesses. CMB
+Wing Lung Bank also provides asset management and insurance brokerage services through its subsidiaries..
+CMB Wing Lung Bank
+The Company exercises the rights of shareholders in compliance with the law, keeps on strengthening the
+comprehensive control over the corporate governance, capital management, risk management, financial
+management and other aspects of its subsidiaries, and capitalises on the synergy of comprehensive operation to
+enhance the Group's capabilities of providing comprehensive financial services to customers while achieving their
+own high-quality growth.
+3.10.5 Major subsidiaries
+During the reporting period, the Sydney Branch promoted the balanced business development with origination of
+high-quality asset. During the reporting period, the Sydney Branch achieved a net operating income of AUD58.3127
+million.
+The Sydney Branch of the Company was established in 2017 and is the first branch approved to be established in
+Australia among all Chinese joint-stock commercial banks. Based on the overall requirement of "steady growth,
+improved quality and efficiency, enhanced foundation, featured business and risk prevention", the Sydney Branch
+adheres to the high-quality development path guided by our values and managed to get a foothold in businesses
+derived from China-Australia economic, trade and investment exchanges. The Sydney Branch focuses on the needs
+of the strategic customers and top-tiered customers of Australia and New Zealand, creating value for customers
+through providing two-way cross-border financial services. The main services and products of the Sydney Branch
+include: settlement, foreign exchange transactions, trade financing, M&A financing and commitment business,
+project financing, syndicated loans and fund financing. At the same time, the branch actively builds a global service
+network for private banking customers and provides high-quality non-financial value-added services for high-net-
+worth private banking customers.
+Chapter III Management Discussion and Analysis
+As of the end of the reporting period, CMB Europe S.A. had total assets of EUR118 million and net assets of EUR92
+million.
+Sydney Branch
+3.10.6 Major joint ventures23
+CIGNA & CMB Life Insurance, a joint venture of the Company, was established in 2003 with a registered capital
+of RMB2.8 billion. As of the end of the reporting period, the Company held 50% shares in CIGNA & CMB Life
+Insurance and Cigna Health and Life Insurance Company held the other 50% shares. CIGNA & CMB Life Insurance
+is mainly engaged in insurance businesses such as life insurance, health insurance, accident injury insurance and the
+reinsurance of the above insurances.
+The Company's market risk arises from trading book and banking book, and the interest rate risk and exchange rate
+risk are the major market risks faced by the Company.
+3.11.4 Market risk management
+During the reporting period, the global geopolitical conflict continued. In the face of increasingly complex and
+volatile international political and economic situation, the Company dynamically updated the country risk rating
+according to the risk changes, tightened the monitoring and limit control of country risk and strictly restricted
+the growth of business in high-risk countries. At of the end of the reporting period, the Company's country risk
+exposure was mainly concentrated in relatively-low-risk countries or regions. The country risk would not have a
+significant impact on the Company's business operation.
+The Company strictly implemented relevant regulatory requirements and followed the principles of soundness and
+prudence, established a country risk management system compatible with strategic objectives, risk profile and
+complexity, and incorporated country risk management into its overall risk management system so as to promptly
+identify, measure, evaluate, monitor, report, control and mitigate country risks, assess the country risk ratings in
+a regular manner and implement limit management, while guiding business to tilt in favour of relatively-low-risk
+countries or regions. Major matters involving country risk management strategies and policies were submitted to the
+Board of Directors for consideration and approval.
+Country risks represent the risks of political, economic, social changes and incidents in a country or region that may
+cause debtors in that country or region to be unable or unwilling to fulfill their obligations to banks, or incur losses
+to commercial presences of the Company in that country or region, or other losses to the Company in that country
+or region.
+3.11.3 Country risk management
+In accordance with the Rules on Large Exposure of Commercial Banks (★¤ªMART), large
+exposure refers to the credit risk exposure (including various credit risk exposures in the banking book and trading
+book) to a single customer or a group of related customers of a commercial bank that exceeds 2.5% of its net
+Tier 1 capital. The Company has incorporated large risk exposure management into its overall risk management
+system, continued to improve customer credit management requirements, continued to streamline risk exposure
+measurement rules, dynamically monitored changes in large risk exposures by way of Fintech, and reported regularly
+on large risk exposure indicators and related management work to regulatory authorities, so as to effectively
+control customer concentration risks. As of the end of the reporting period, other than customers with regulatory
+exemption, single non-financial institution customers, group non-financial institution customers, single financial
+institution customers and group financial institution customers of the Company that reached the standards of large
+risk exposure were all in compliance with the regulatory requirements.
+3.11.2 Management of large risk exposure
+Chapter III Management Discussion and Analysis
+Annual Report 2023 (H share)
+China Merchants Bank
+For more information about the Company's credit risk management, please refer to Note 60(a) to the financial
+statements.
+Credit risk refers to the risk arising from a bank's borrowers or counterparties failing to perform their obligations
+as agreed. The Company adhered to the concept of balanced returns and risks and the prudent business strategy
+in which risks can be ultimately covered by capital, pursued the dynamically balanced development of "Quality,
+Profitability and Scale", implemented a unified credit risk preference, optimised the full-life cycle credit risk
+management process, continuously upgraded credit risk management tools, reinforced the construction of three
+lines of defence and strengthened risk management capability, so as to prevent and reduce credit risk loss.
+During the reporting period, the Company closely monitored the macroeconomic situation, actively responded to
+the changes, rigorously upheld the bottom line and took a number of initiatives to ensure stable asset quality.
+Firstly, the Company has strengthened the risk management of domestic and overseas branches and subsidiaries,
+established a branch-based risk profile rating system, put in place the framework and principles for risk management
+in subsidiaries, and further consolidated the risk management foundation. Secondly, the Company improved the
+risk management system, tightened risk management for its off-balance sheet business in strict accordance with
+regulatory requirements, optimised administrative measures such as the centralised system of credit granting and
+credit facility management over group customers, and consolidated the foundation of the risk management system
+for extensive wealth management. Thirdly, the Company carried out strict management in key risk areas, especially
+strengthening the closed-loop management in the real estate sector. The Company conducted risk screening
+targeting key industries and key customer groups and enhanced differentiated and refined risk management
+capabilities. Fourthly, based on the current situation with a long-term perspective, and revolving around the strategy
+of "dynamic rebalancing" of industries, regions and customer bases, the Company strengthened research on key
+industries relying on industry self-organisation, built on its professional capabilities, improved policy adaptability
+and promoted the implementation of "one branch, one policy" principle of list-based customer management
+for assets business, so as to optimise the asset origination and support the high-quality development of the real
+economy. Fifthly, the Company enhanced its efforts in disposal of non-performing loans, focused on key risk
+items, implemented different measures based on different categories, expanded the channels for disposal of
+non-performing assets, and improved the quality and efficiency of settlement, collection and disposal. Sixthly,
+the Company enhanced the application of Fintech, optimised the risk management system, enhanced the risk
+measurement capability and promoted the digital transformation of risk management.
+3.11.1 Credit risk management
+The Company adhered to a solid and prudent risk culture and risk appetite, and was dedicated to building a fortress-
+style overall risk and compliance management system. The Risk and Compliance Management Committee of the
+Head Office is responsible for reviewing and determining the most significant bank-wide risk management policies
+under the framework of risk appetite, strategies, policies and authorisations approved by the Board of Directors.
+During the reporting period, the Company maintained strategic determination, and continued to increase its support
+to the real economy. The Company prevented and mitigated risks, consolidated management foundation, improved
+digital risk control capabilities, and continued to promote the construction of a fortress-style risk and compliance
+management system.
+3.11 Risk Management
+As of the end of the reporting period, the total assets of Merchants Union Consumer Finance amounted to
+RMB176.421 billion and the net assets were RMB20.367 billion. It realised a net profit of RMB3.600 billion during
+the reporting period.
+Merchants Union Consumer Finance, a joint venture of the Company, was established in 2015 with a registered
+capital of RMB10.0 billion. As of the end of the reporting period, the Company held 50% shares in Merchants
+Union Consumer Finance and China United Network Communications Limited held the other 50% shares. Upon the
+approval from regulatory authorities, Merchants Union Consumer Finance completed the registration of the change
+of its Chinese name from "⠀®¬" to "S" in July 2023. Merchants Union
+Consumer Finance is mainly engaged in the granting of personal consumer loans.
+Merchants Union Consumer Finance
+Chapter III Management Discussion and Analysis
+Annual Report 2023 (H share)
+China Merchants Bank
+76
+75
+The major joint ventures of the Company include CIGNA & CMB Life Insurance and Merchants Union Consumer Finance, and their financial data have
+been adjusted in accordance with the accounting policies of the Group, where necessary.
+23
+As of the end of the reporting period, the total assets of CIGNA & CMB Life Insurance amounted to RMB165.340
+billion, and its net assets amounted to RMB9.855 billion. During the reporting period, CIGNA & CMB Life Insurance
+realised a net profit of RMB429 million.
+CIGNA & CMB Life Insurance
+Interest rate risk management
+70
+74
+As of the end of the reporting period, the cumulative number of users of CMB Life APP amounted to 144 million.
+During the reporting period, the maximum number of daily active users of CMB Life APP reached 6,792,300 and the
+number of monthly active users was 41,975,500 as of the end of the period. In terms of user engagement, CMB Life
+APP was in the front rank among other credit card APPS in the banking industry.
+customers.
+)" were launched, to build up and continuously improve the ability to mobilise large-scale online and offline
+During the reporting period, the Company continued to further enhance the customer service and mobilisation
+capabilities of the CMB Life APP. Focusing on high-frequency consumption scenarios and connecting with quality
+partners, the Company enriched the online service ecosystem. Also, the Company enhanced interaction efficiency
+and customer experience with upgraded search, recommendation and other intelligent service capabilities.
+Furthermore, a series of marketing campaigns such as "618 Save Money to Spend (618 XE)", "Exceptional
+Hainan ()", "Cashback ()" and "Welcome to the New Year with Credit Cards (,
+CMB Life APP for Credit Card
+As of the end of the reporting period, the cumulative number of users of CMB APP amounted to 207 million. During
+the reporting period, the maximum number of daily active users of CMB APP reached 21,638,200. The number of
+monthly active users was 75,054,300 as of the end of the reporting period.
+During the reporting period, the Company continued to deepen its core financial scenario services around extensive
+wealth management, focusing on the "people + digitalisation" service model, and continuously improving the
+customer experience of the CMB APP. It also innovatively launched customised wealth products based on users'
+needs and professional services to further improve the self-service model of online wealth management. The reach
+of account management services has been expanded revolving around the purpose of becoming customers' principal
+bank of main accounts, thus improving the account management experience.
+CMB APP
+Major online channels for retail
+Online channels
+The Company's business is mainly in the market of China, and its distribution network is mainly distributed in
+major central cities in the Chinese mainland and some international financial centres such as China's Hong Kong,
+New York, London, Singapore, Luxembourg and Sydney. As of the end of the reporting period, the Company
+has 143 branches and 1,781 sub-branches in China, two branch-level specialised institutions (a credit card centre
+and a global markets centre), 2,226 self-service banks, 5,281 cash self-service devices and 7,603 visual counters.
+The Company has a Hong Kong branch in Hong Kong, China, a representative office in Chinese Taipei, a New
+York branch and a representative office in the United States, a London branch in the UK, a Singapore branch in
+Singapore, a Luxembourg branch and a Sydney branch in Australia.
+The Company provides products and services via multiple online and offline distribution channels.
+Offline channels
+3.10.3 Distribution channel
+Chapter III Management Discussion and Analysis
+Annual Report 2023 (H share)
+China Merchants Bank
+During the reporting period, the Company continued to actively perform its duties as a market maker, and
+successfully completed the first batch of standardised interest rate swap trading through National Interbank Funding
+Centre, and once again received the "Northbound Top Market Maker" award from Bond Connect Company Limited.
+In terms of digital transformation, the Company continued to promote the in-depth integration of technology and
+business, and continued to deepen the application of digital technology in its financial markets business. In terms
+of digital investment and research, the Company has initially studied and developed a multi-factor trading strategy
+covering bonds, foreign exchange and precious metals, formed a multi-dimensional investment decision-making
+system covering fundamental, policy and sentiment perspectives and achieved positive progress in the development
+of its self-developed digital trading platform. The monitoring signals of its self-developed bond investment credit
+risk management system were increasingly diversified, which effectively improved the foresight and effectiveness of
+risk identification. The Company accelerated the building of online platforms for business of tradings on behalf of
+customers, diversified online products, and enhanced the convenience of corporate business processing. During the
+reporting period, the Company provided online derivative trading services to 5,287 corporate clients, with a total
+transaction volume of USD22.661 billion.
+In terms of business of tradings on behalf of customers, the Company continued to advocate the concept of neutral
+management of exchange rate risk to corporate customers, and helped the enterprises to fully understand and
+manage exchange rate risk in a scientific manner. Also, to fulfill customer needs, the Company provided solutions
+against financial market risks such as exchange rate and interest rate risks faced by enterprises tailored to their main
+business scenarios. During the reporting period, the Company provided hedging services to 6,285 companies with a
+total transaction volume of derivatives to corporate customers amounting to USD64.783 billion.
+In terms of investment transactions, the Company adhered to prudent operation, actively studied and made
+judgement on the economic fundamentals of the PRC and the major overseas economies, the trend of inflation
+and the direction of monetary policy, continued to strengthen macro policy research and market analysis, improved
+proprietary investments research and analysis framework, strengthened indicator tracking and monitoring, optimised
+the portfolio structure, and enhanced investments returns. Furthermore, the Company continued to actively provide
+liquidity to the market in the capacity as a market maker, and continued to strengthen the comprehensive capability
+of market making and to enhance its quotation and trading services. Also, it closely followed the guidance of
+national economic strategies, focused on the national industrial structure adjustment, increased its credit bond
+investment in "specialised, competitive, distinguished and innovative ()" enterprises and corporate clients
+in area of new growth engines, thereby assisting the development of strategic emerging industries. During the
+reporting period, the transaction volume of RMB bond investments amounted to RMB2.79 trillion, representing a
+year-on-year increase of 21.57%.
+During the reporting period, the Company continued to build on its investment and research capabilities for
+proprietary investment and service capabilities for trading on behalf of customers, tightened up risk management,
+and strengthened Fintech application. While serving the real economy, the Company achieved high-quality
+development in various businesses.
+Financial markets business
+Thirdly, the Company made active efforts in propelling digitalisation, aiming to enhance customers experience
+through technology empowerment. The Company kept on raising digital service capabilities, and developed a
+number of service platforms such as online customer service digital platform, "custody + bank and enterprise”
+reconciliation platform, "custody + treasury management" cloud platform and "custody + investment" cloud
+platform to broaden the boundaries of custody service.
+Secondly, the Company continued to consolidate its business strengths in various segments, delivering breakthroughs
+in key products. As of the end of the reporting period, the scale of pension products under the Company's custody
+totalled to RMB1.05 trillion, a new breakthrough exceeding one trillion. Additionally, the Company continued to
+rank first in terms of number of public REITS under its custody (data from WIND). During the reporting period, the
+newly offered mutual funds under the custody by the Company ranked the first in terms of number and scale (data
+from WIND). During the reporting period, the Company effectively took the market opportunity to finalise the
+custody of the first batch of cross-border QDII semi-conductor ETF and the first fixed-income QDII-FOF fund.
+Chapter III Management Discussion and Analysis
+Annual Report 2023 (H share)
+China Merchants Bank
+Network Operation Service
+I
+The Company's Network Operation Service Centre provides real-time, comprehensive, prompt, and professional
+services to its customers via telephone, network, video, etc. and applies intelligent technology to link such services
+with the processing interface of the CMB APP directly, making the services more convenient.
+71
+73
+During the reporting period, the London Branch adhered to a value-oriented strategy by emphasising on origination
+of quality asset and building a value-based customer group, deepening business restructuring and optimising
+customer structure, and solidifying the foundations of risk and compliance management, therefore achieving steady
+progress in its overall business operations amid stability. During the reporting period, the London Branch achieved a
+net operating income of USD19.6287 million.
+Established in 2016, the London Branch of the Company is the first branch approved to be established in the United
+Kingdom among all Chinese joint-stock commercial banks, providing comprehensive cross-border one-stop financial
+solutions to Chinese companies "going global" and leading companies "brought in" located in the UK. The main
+services and products of the London Branch include: deposit-taking, settlement, foreign exchange transactions, trade
+financing, bilateral loans, syndicated loans and M&A financing. At the same time, the London Branch actively builds
+a global service network for private banking customers and provides high-quality non-financial value-added services
+for high-net worth private banking customers.
+London Branch
+During the reporting period, the Luxembourg Branch clarified its strategic orientation, optimised its customer
+structure, and cemented its business roots. During the reporting period, the Luxembourg Branch achieved a net
+operating income of EUR36.8897 million.
+The Luxembourg Branch of the Company, established in 2015, is positioned as an important cross-border financial
+platform in the continental Europe, providing comprehensive cross-border one-stop financial solutions to Chinese
+companies "going global" and the companies "brought in" located in Europe. Its main services and products
+include: deposit-taking, lending, project financing, trade financing, M&A financing, M&A consulting, bond
+underwriting and asset management. The branch is also committed to building a business platform in Europe by
+combining the advantages of the Bank and European characteristics.
+During the reporting period, the Singapore Branch has practiced the strategy of "building a value creation bank"
+and broadened the range of its customer services focusing on strategic customers "going global", while assisting
+the branch's characteristic operation with regional advantages, to create value in diversified businesses. During the
+reporting period, the Singapore Branch achieved a net operating income of USD22.4820 million.
+Luxembourg Branch
+Established in 2013, the Singapore Branch of the Company is positioned as a significant cross-border finance
+platform in Southeast Asia. Based in Singapore and expanding to Southeast Asia, the Singapore Branch takes
+cross-border finance and wealth management as its core businesses. In terms of cross-border finance business, the
+Singapore branch strives to provide all-round one-stop solutions to the Chinese companies "going global" and
+the foreign companies "brought in" located in Singapore and other Southeast Asian countries. The main services
+and products of the Singapore Branch include: deposit-taking, settlement, foreign exchange transactions, trade
+financing, syndicated loans, M&A financing and delisting financing. In terms of wealth management business, the
+Private Banking (Singapore) Centre provided private banking products and value-added services with integrated
+investment and financing services, such as cash management, asset allocation and wealth inheritance to high-net-
+worth customers.
+Singapore Branch
+During the reporting period, the New York Branch achieved notable results regarding customer base expansion,
+origination of quality asset, and digital transformation. During the reporting period, the New York Branch achieved
+a net operating income of USD91.7710 million.
+Established in 2008, the New York Branch of the Company is the first branch of Chinese banks approved in the
+U.S. since the implementation of U.S. Foreign Bank Supervision Enhancement Act in 1991. The New York Branch is
+located in the global financial centre and is committed to establishing a cross-border financial platform characterised
+by coordination between China and the U.S., so as to offer diversified and all-round banking services for the
+companies in China and the U.S. Such services and products mainly include: deposit-taking, settlement, foreign
+exchange transactions, international documents, trade financing, bilateral loans, syndicated loans, working capital
+financing, M&A financing, privatisation financing, fund financing, etc. At the same time, the New York Branch
+actively builds a global service network for private banking customers and provides high-quality non-financial value-
+added services for high-net-worth private banking customers.
+Chapter III Management Discussion and Analysis
+New York Branch
+China Merchants Bank
+Annual Report 2023 (H share)
+During the reporting period, the Hong Kong Branch optimised its business structure, focused on customer group
+construction, continuously innovated and developed featured businesses while expanding and strengthening its
+traditional banking business, and increased investment in quality assets by capitalising on the interest rate hike,
+enhanced compliance and risk management, and achieved stable growth in efficiency while maintaining good
+control over asset quality. During the reporting period, the Hong Kong Branch achieved a net operating income of
+HKD3.552 billion.
+Established in 2002, the Hong Kong Branch of the Company is the first branch duly established overseas by the
+Company, which can engage in comprehensive commercial banking businesses. With regard to corporate banking
+business, the Hong Kong Branch provides diversified corporate banking products and services, such as deposit-
+taking, settlement, trade financing, bilateral loans, syndicated loans, cross-border M&A comprehensive solutions,
+asset management and asset custody, and engages in transaction of funds, bond trading and foreign exchange
+trading with financial institutions, and conducts funds clearing and asset transfer with financial institution
+customers. With respect to retail banking, the Hong Kong Branch can provide personal banking services and private
+wealth management services for customers. Featured products include "Hong Kong All-in-one Card" and "Hong
+Kong Bank-Securities Express".
+Hong Kong Branch
+3.10.4 Overseas branches
+During the reporting period, the Company focused on the enterprises' demands for digital transformation, adopted
+"Treasury Management Cloud +" as the main interface to deliver the "Enterprise Digital Intelligent Finance (**
+)" scenario-based services, and transformed the comprehensive customer-oriented product services towards
+scenario-based turnkey (1) solutions. Firstly, the Company built the Treasury Management Cloud (Single
+Account Version) to explore a batch operation model comprising online marketing, online delivery and online
+operation of digital products for corporate customers, making the treasury management services accessible to
+large conglomerates as well as individual start-up enterprises, so as to take the leading position in digital services.
+Secondly, with the two major service channels of CMB Corporate U-Bank and CMB Corporate APP, the Company
+continued to upgrade its channel service capability. During the reporting period, the Company launched the
+upgraded 6.0 version of the Mobile Treasury on CMB Corporate APP catering to the core needs of legal persons,
+executives and other key personnel of enterprises, and provided them with convenient treasury management service
+via the mobile terminals. Thirdly, highlighting core financial scenarios such as cross-border, Special Service Section
+for Specific Scenario, financing and wealth management, the Company built "Treasury Management Cloud + Special
+Service Section for Specific Scenario (+%%¥6&¾)" based on customers' perspective. As of the end
+of the reporting period, the Company had 2,713,700 wholesale customers on the online channels, representing
+an increase of 13.43% as compared with the end of previous year. The coverage rate of wholesale customers on
+the online channels was 96.21%, representing an increase of 1.50 percentage points as compared with the end of
+previous year. The Company had 1,696,900 monthly active customers of wholesale online channels, representing
+a year-on-year increase of 11.68%; the total number of wholesale online channel transactions handled by the
+Company reached 412 million, representing a year-on-year increase of 26.38%; and the total value of wholesale
+online channel transactions amounted to RMB210.22 trillion, representing a year-on-year increase of 20.37%.
+Major wholesale online channels
+In terms of credit card intelligent service system, during the reporting period, the Company continued to push
+forward the digital and intelligent transformation of customer service for credit card business and improve
+development of intelligent service management system, so as to enhance comprehensive customer service
+capabilities. On the one hand, the Company managed to build a new-generation customer contact centre to
+enhance customer interaction experience and operational efficiency through continuous promotion of service
+channel synergy and digital services. On the other hand, CMB Life APP "Xiao Zhao ()" assistant, through real-
+time prediction of users' needs, offered new accompanying service with the service image of "Xiao Zhao Miao (
+"as the core, reshaping intelligent services and interaction patterns.
+In terms of debit card intelligent service system, during the reporting period, the Company continued to optimise
+the intelligent service network of the CMB APP, and further integrated its artificial intelligence, intelligent customer
+service and remote consultancy service capabilities to launch the brand new intelligent wealth assistant "Xiao Zhao
+()" with effective conversation and interaction features, which made it capable of providing customers with
+one-stop wealth management service such as financial analysis, product selection strategy and yield analysis, etc.,
+supporting for troubleshooting consultation for various business scenarios. Furthermore, "Xiao Zhao ()" can be
+also linked with remote relationship managers to provide customers with customised consultancy services.
+Smart Service System
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+72
+The Company continued to enrich the service mode and provided a more intuitive service experience by means
+of images, videos, the same-screen services and other modes to solve complex operational issues. The Company
+optimised the response speed and processing efficiency in handling "business that are urgent, complicated,
+distressing and waiting for help" by intelligent dispatch, which made the issues solved in a more efficient manner.
+The Company further intensified the customised service and warm service for elderly customers to duly fulfill its
+social responsibilities. During the reporting period, the remote online omni-channel manual service connection rate
+was 97.26%, the remote online omni-channel manual service response rate within 20 seconds was 92.52%, and
+the remote online omni-channel customer satisfaction rate was 99.10%. With "people + digitalisation" as the core
+driving force, the Company fully leverage on Fintech, continued to enhance the service level of intelligent robots,
+and provided the most suitable solutions for customers through intelligent dispatch.
+China Merchants Bank
+Annual Report 2023 (H share)
+0
+77
+Trading book
+The Company uses volume indicators, market risk value indicators (VaR, covering interest rate risk factors of various
+currencies and durations relating to trading book business), interest rate stress testing loss indicators, interest rate-
+sensitive indicators and accumulative loss indicators, to measure, monitor and manage the interest rate risk of
+trading book. The interest rate risk factors used for risk measurement cover all businesses under the trading book,
+and are comprised of around 200 interest rate indicators or bond yield curves. VaR includes general VaR and stressed
+VaR, which are both calculated using the historical simulation method and adopt a confidence coefficient of 99%,
+an observation period of 250 days and a holding period of 10 days. The interest rate stress testing scenarios include
+the parallel move, steep move and twisted change of interest rates at various degrees and various unfavourable
+market scenarios designed on the characteristics of investment portfolios. Among them, the extreme interest rate
+scenario may move up to 300 basis points and cover the extremely unfavourable conditions of the market. Major
+interest rate sensibility indicator reflects the duration of bonds and the change in the market value of bonds and
+interest rate derivatives PV01 (when an interest rate fluctuates unfavourably by 1 basis point). As for routine risk
+management, the annual scope of authorisation and the market risk limits for the interest rate risk businesses under
+the trading book are set in accordance with the risk appetite, operation plan and risk prediction of the Board of
+Directors at the beginning of the year for which the Market Risk Management Department is responsible for routine
+monitoring and continuous reporting.
+78
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+During the reporting period, the Sino-US interest rate spread inverted under the weight of continued interest rate
+hikes by the US Federal Reserve, with the RMB interest rate demonstrating an overall downward trend, while the U.S.
+dollar interest rate fluctuated with an upward trend and remained at high levels. The scope of investment in the
+Company's trading books mainly covered RMB bonds. The Company generally adopted a prudent trading strategy
+and prudent risk control measures to ensure that all interest rate risk indicators of the trading book remained within
+the target range.
+In accordance with external regulatory requirements and internal banking book interest rate risk management
+policies, the Company has established and continuously improved the banking book interest rate risk management
+system, clarified the interest rate risk governance structure and established the management process of interest rate
+risk identification, measurement, monitoring, control and reporting. The Company mainly adopts the re-pricing gap
+analysis, duration analysis, benchmark-correlated analysis, scenario simulation and other methods to measure and
+analyse the interest rate risk of banking book on a monthly basis. The re-pricing gap analysis mainly monitors the
+distribution of re-pricing duration and mismatch of assets and liabilities; the duration analysis monitors the duration
+of major product types and the change in the duration gap of assets and liabilities of the Bank as a whole; the
+benchmark-correlated analysis assesses the benchmark risk existing between different pricing benchmark interest
+rate curves, as well as between the different duration points on each of such curves based on the benchmark-
+correlated coefficients calculated using our internal models; the scenario simulation is the major approach for the
+Company to conduct interest rate risk analysis and measurement, which comprises a number of ordinary scenarios
+and stress scenarios, including the interest rate benchmark impact, the parallel move and the change in the shape
+of yield curves, the extreme changes in interest rates in history, and the most possible changes in interest rates in
+the future as judged by experts and other scenarios. The net interest income (NII) for the future one year and the
+changes in economic value of equity (EVE) indicator are calculated through simulation of the scenario of changes
+in interest rates. The NII fluctuation ratio and the EVE fluctuation ratio of certain scenarios are included into
+the interest rate risk limit system of the Bank. In addition, the internal limit indicator system is included into the
+standardised measurement indicators set out in the Guidelines on the Management of Interest Rate Risk of Banking
+Book of Commercial Banks (Revised).
+Adhering to a neutral and prudent interest rate risk preference, the Company pays close attention to changes in
+the external environment and internal interest rate risk exposure structure, predicts and analyses interest rate trends
+based on macro-quantitative models and experts' research and judgement, prospectively deploys active interest
+rate risk management strategies and adjusts them flexibly. During the reporting period, the Company constantly
+monitored and analysed various interest rate risks, especially the gap risk in the context of the LPR downturn and
+the benchmark risk caused by inconsistent changes of deposit and loan interest rates, and adjusted the structure of
+assets and liabilities on the balance sheet and hedged interest rate derivatives off the balance sheet to manage risks.
+As of the end of the reporting period, the Company's on- and off-balance-sheet management measures were carried
+out as planned, the interest rate risk level was controlled within the annual interest rate risk control target range,
+and various indicators including the stress test results were kept within the limits and warning values. The banking
+book interest rate risk was generally controllable.
+Exchange rate risk management
+Trading book
+Banking book
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+During the reporting period, RMB generally demonstrated a trend of "initially appreciation followed by a
+depreciation", with an accumulated depreciation once by as much as over 5.5% against the U.S. dollar. The
+depreciation of RMB narrowed to approximately 2.0% towards the end of the year as the US Federal Reserve
+suspended interest rate hikes resulting in decline of foreign exchange rate. The Company's trading book mainly
+obtained the spread income through the foreign exchange business on behalf of customers, and implemented
+rigorous internal control and management through a well-established and efficient management system, and
+closely monitored changes of limit indicators such as sensitivity index and stop-loss indicator. All exchange rate risk
+indicators of the Company's trading book were within the target range as of the end of the reporting period.
+Banking book
+The Company mainly uses foreign exchange exposure analysis, scenario simulation analysis, stress test, and other
+methods for measurement and analysis of exchange rate risk of its banking book. The foreign exchange exposure
+measurement uses the short-sided method, the correlation approach and the aggregation approach; scenario
+simulation and stress test analysis are two important exchange rate risk management tools of the Company for
+managing foreign exchange rate risk, covering the standard scenario, historical scenario, forward scenario and
+stress scenario, which include scenarios such as spot and forward exchange rate fluctuations and historical extreme
+exchange rate fluctuations of various currencies, each scenario could simulate the impact on the Company's profit
+or loss. The effects of certain scenario simulation on the profit and loss and its percentage to net capital as a limit
+indicator are taken as reference in the routine management. The Company conducts back-testing and assessment on
+relevant model parameters on a regular basis to verify the effectiveness of measurement models.
+The Company regularly measures and analyses foreign exchange exposure of banking book and scenario simulation
+results, monitors and reports exchange rate risk on a monthly basis under its quota limit framework, and adjusts its
+foreign exchange exposure accordingly based on the trend of foreign exchange movements, so as to mitigate the
+relevant foreign exchange risk of banking book. The Audit Department of the Company is responsible for auditing
+of our exchange rate risk.
+During the reporting period, the Company paid close attention to exchange rate movements, took initiative to
+analyse the impact of exchange rate changes in light of the macroeconomic conditions at home and abroad, and
+proposed a balance sheet optimisation program as a scientific reference for the management's decision-making.
+During the reporting period, the Company increased its efforts to monitor and analyse foreign exchange exposure
+and imposed a stringent control over the scale of foreign exchange risk exposure. The Company was prudent
+about the exchange rate risk. As of the end of the reporting period, the scale of foreign exchange exposure of
+the Company's banking book was at a relatively low level. The exchange rate risk of the Company was generally
+stable with all the core limit indicators, general scenarios and stress testing results satisfying the regulatory limit
+requirement.
+For more information about the Company's market risk management, please refer to Note 60(b) to the financial
+statements.
+3.11.5 Operational risk management
+The Company uses risk exposure indicator, market risk value indicator (VaR, covering foreign exchange rate risk
+factors of various currencies related to transactions on the trading book), the exchange loss indicator under
+stress test, option-sensitive indicator and accumulated loss indicator to conduct risk measurement and monitoring
+management. As for risk measurement, the selected exchange rate risk factor is applied on spot prices, forward
+prices and volatilities in all transaction currencies under the trading book. Market value risk indicators comprise
+general market value at risk and stress market value at risk, and are calculated using historical simulation based
+on a confidence coefficient of 99%, an observation period of 250 days and a holding period of 10 days. Exchange
+rate stress test scenarios cover 5%, 10%, 15% or more adverse changes in every transaction currency against
+RMB, and changed volatility of foreign exchange options. Major option-sensitive indicators include Delta, Gamma,
+Vega and other indicators. For routine management, we set annual limits on authority associated with exchange
+rate risks under the trading book and relevant market exposure at the beginning of the year according to the risk
+appetite, business planning and risk forecast of the Board of Directors, and delegated the Market Risk Management
+Department to perform routine monitoring and on-going reporting.
+Operational risk refers to the risk of loss arising from inappropriate or problematic internal procedures, incompetent
+personnel or IT systems, or external events. In view of the various aspects and wide range of operational risks, the
+Company's operational risk management will, based on the principles of cost-revenue matching and input-output
+balance, vigorously strengthen the establishment of operational risk management system, implement internal control
+system, continue to carry out various businesses steadily and reduce or prevent operational risk losses with a certain
+level of cost. In the process of operational risk management, within the risk limits set by the Board of Directors, the
+Company will, through measures such as further improving the risk management mechanism, strengthening risk
+prevention and control in key areas, conducting in-depth risk monitoring and pre-warning, improving assessment
+and evaluation mechanism, and cultivating operational risk prevention culture, further improve operational risk
+management capabilities and effectiveness, and prevent and reduce operational risk losses.
+79
+In terms of paper management, the Company actively carried out daily paper-saving publicity campaign, advocated
+double-sided printing, adopted shared printers monitoring and other measures to reduce paper-wasting behaviours;
+reduced the consumption of all kinds of materials for meetings, such as disposable paper cups and tissues; and used
+big data and cloud storage instead of paper archives, and reduced the use of paper documents through system
+module construction. During the reporting period, through continuously promoting straight-through business
+processes and digitalisation of counter service agreements, the Company saved approximately 69.96 million pieces
+of paper, achieving energy saving and carbon emission reduction of 181.90 tonnes.
+In terms of waste management, the Company has set up various treatment methods for different types of wastes
+to ensure that wastes are treated in a timely and scientific manner. During the reporting period, the Company
+standardised the garbage storage sites on the office floors of the Head Office Tower to achieve full-process
+compliance management of garbage classification at the Head Office Tower; advocated the "Clean Your Plate"
+campaign and promoted the "Against Food Waste" work. During the reporting period, food waste for the five
+restaurants at the Head Office decreased by 9.81% year-on-year.
+87
+Chapter IV Environmental, Social and Governance (ESG)
+China Merchants Bank
+Annual Report 2023 (H share)
+In terms of water resources management, the Company earnestly carried out water conservation publicity campaign
+and water conservation sign posting; completed direct drinking fountain renovation in the break room and
+removed barrelled water; reduced the use of bottled water during meetings and receptions; installed additional air-
+conditioning condensate recycling equipment with the processed air-conditioning condensate as a source of water
+for the atrium pool; adopted infrared-detecting human-sensor faucets and water-saving toilets; and used high-
+pressure scrubbers and sweeping robots to sweep the floor of the plaza and lobbies to enhance the efficiency of
+water resource utilisation.
+88
+In terms of energy management, as of the end of the reporting period, the online energy management platform
+achieved automatic collection and real-time monitoring of the power energy consumption data of 54 Head Office
+and branch office buildings and 172 sub-branch offices. Through a series of energy-saving measures and continuous
+refinement of management, the energy consumption per square metre of the Head Office Tower was 118.98kwh/
+(m² a) in 2023, which was reduced to below the constraint value as published in the "Guangdong Province Standard
+for Energy Consumption of Public Buildings", and successfully passed the assessment of "Three-Star Green Property
+Management Project" in Shenzhen. The Pinghu Data Centre in Shenzhen and Zhangjiang Data Centre in Shanghai
+reduced power consumption by about 10.82 million kWh a year through various measures such as Al controlled
+tuning of the chilled water system, use of natural cooling sources, highly airtight cold and hot aisles, intelligent
+speed-regulated operation of precision air conditioners, and intelligent lighting.
+Chapter III Management Discussion and Analysis
+The Company adhered to the concept of "green operation", striving to reduce the impact of operation on the
+environment. During the reporting period, starting with sorting out our carbon footprint to identify carbon
+emission sources, the Company conducted a comprehensive inventory of all carbon emission sources of over 1,900
+organisations across the Bank over the past three years benchmarking against general international standards,
+and grasped the energy management mechanism and consumption of each organisation. The Company assessed
+the potential for carbon emission reduction based on the results of the inventory, so as to formulate carbon
+emission reduction measures. From the perspectives of energy management, water resources management, paper
+management, waste management and other dimensions, the Company implemented various emission reduction
+measures according to local conditions, and effectively promoted the green transformation of its operations.
+Chapter IV Environmental, Social and Governance (ESG)
+China Merchants Bank
+Annual Report 2023 (H share)
+The Company continued to promote the establishment of smart service system. By strengthening smart service
+capabilities, enriching online services, and optimising service points, the Company provided convenient digital
+financial services to hundred-million customers to effectively reduce the frequency of customers going to physical
+outlets for business, thereby decreasing carbon emissions from customer travel. The Company encouraged credit
+card customers to accept electronic bills and continued to upgrade and optimise reconciliation across various online
+channels, as well as guided customers to check their accounts quickly through self-service channels. As of the end of
+the reporting period, with the proportion of credit card electronic bill reaching 99.57%, the Company saved more
+than 1.893 billion pieces of paper in billing during the reporting period.
+Green operation
+4.2.2
+In terms of promoting green consumption, the Company strengthened proactive marketing to customers in
+environmental-friendly and green properties, advanced the granting of green micro-finance loans, and proactively
+explored green consumption business innovation. During the reporting period, the Company issued the green
+and low-carbon themed credit card which is integrated with a number of exclusive rights and interests regarding
+environmental protection. The Company also increased its financial support to new energy vehicles, created
+the "e-second car purchase" green finance product, simplified the application process for new energy vehicle
+instalments, pioneered the dedicated service model for new energy business, and worked with new energy vehicle
+shops to provide customers with one-stop services from shop entry to vehicle delivery and vehicle registration, so as
+to facilitate green consumption.
+In terms of green investment, the Company's subsidiaries effectively practised the ESG investment philosophy.
+CMB Wealth Management prioritised the investment in green finance products such as green finance bonds, green
+enterprise bonds, green debt financing instruments and green asset-backed securities, with a balance of green
+bonds investment of RMB29.286 billion as of the end of the reporting period. China Merchants Fund insisted on
+taking social responsibility, ESG guidelines and "dual carbon" strategy as the main direction of product deployment,
+and constantly improved the product spectrum of ESG funds. During the reporting period, it focused on the issuance
+of China Merchants Social Responsibility Mixed Fund and China Merchants CFETS Green Bond Index Fund, the
+first green bond index product in the industry. As of the end of the report period, China Merchants Fund had a
+total of 10 existing ESG-related products, with an existing fund size of RMB9.321 billion, representing an increase
+of 154.53% as compared with the end of the previous year. CMB International Capital actively promoted the
+transformation, upgrading and sustainable development of the green industry, and invested in 8 green finance
+industry projects with an amount of totalling RMB735 million during the reporting period.
+4.3 Social Responsibility Information
+•
+4.3.1 Serving the real economy
+to.
+The Company took Fintech as the main direction of serving the real economy, further focusing on serving sci-tech
+enterprises and making significant achievements in Fintech. As of the end of the reporting period, the balance
+of the loans extended to the manufacturing industry of the Company was RMB555.102 billion, representing an
+increase of RMB111.250 billion as compared with the end of the previous year, accounting for 23.91% of the total
+corporate loans, representing an increase of 2.75 percentage points as compared with the end of the previous
+year. The balance of loans to strategic emerging industries was RMB375.097 billion, representing an increase of
+RMB72.774 billion as compared with the end of the previous year, accounting for 16.16% of the total corporate
+loans, representing an increase of 1.74 percentage points as compared with the end of the previous year. As of the
+end of the reporting period, the Company served 140,800 customers of sci-tech enterprises, with the balance of
+loans to sci-tech enterprises amounting to RMB428.477 billion, representing an increase of 44.95% as compared
+with the end of the previous year.
+89
+The Company paid attention to the needs of the elderly, disabled and other special groups. All domestic business
+outlets supported barrier-free services and deployed convenient service facilities, providing services for special groups
+by setting up ramps for the disabled, barrier-free access telephone signs, one-click call buttons, wheelchairs for the
+disabled and other measures.
+The Company adopted "control over total number of branches and optimisation of existing branches" as the
+strategy and policy of its domestic branches layout. During the reporting period, the number of business outlets
+increased by 25. The Company has now 1,924 domestic business outlets, including 128 business outlets in rural and
+county areas and 134 community and small-sized sub-branches. Meanwhile, more than 70 existing business outlets
+were relocated for optimisation to further stimulate the vitality of existing outlets, expand the service coverage of
+outlets and improve financial service capabilities.
+The Company continuously iterated and upgraded the "people + digitalisation" service model, improved the
+customer service system and focused on meeting the financial and non-financial needs of people in areas where
+offline outlets are unable to cover by further promoting the service capacity construction of online tools, such as
+CMB APP and CMB Life APP.
+4.3.3 Accessibility to financial services
+Please refer to section 3.10.2 "Retirement finance business" of this report for details of retirement finance business.
+In the field of medical security, the Company promoted the application of medical insurance code and upgraded the
+service experiences, such as the QR code display by long-pressing the CMB APP icon, inquiries for designated medical
+institutions and designated pharmacies and account transaction notification. As the first batch of cooperative banks
+for the medical insurance API interface, the Company completed the development and launch of new functions
+to enhance online service capability of medical insurance for the convenience of the public. As at the end of the
+reporting period, a total of 24.9681 million electronic medical insurance vouchers were activated, serving 14.2350
+million insured persons.
+In the field of education, the Company will continuously provide agency settlement services for students with locally-
+granted student loan from China Development Bank for 5 years from 2022, including online account opening, loan
+issuance, identity verification for renewal application, loan repayment, etc., so as to build a full-process, full-cycle,
+omni-channel service system for the locally-granted student loan project of China Development Bank. During the
+reporting period, the Company granted national student loans exceeding RMB10 billion to over a million students.
+In the field of housing, the Company actively cooperated with various provinces and cities on the contribution to
+the housing provident fund for flexible employment personnel, assisted in the establishment of the contribution and
+loan system, information system and business process applicable to flexible employment personnel, aiming to benefit
+more people with housing provident fund system. As at the end of the reporting period, the Company cooperated
+with 22 housing provident fund centres on the contribution to the housing provident fund for flexible employment
+personnel. At the same time, the Company actively built Al intelligent customer service, intelligent approval platform,
+business fund management and other digital products and services, helping local housing provident fund centres to
+improve their digital and intelligent level of operation, service and management, and providing 7×24 uninterrupted
+services to employees who make contributions to housing provident fund. As at the end of the reporting period, the
+Company engaged in digital cooperation with 96 housing provident fund centres. As one of the banks cooperating
+with the Ministry of Housing and Urban-Rural Development on the National Housing Provident Fund Mini
+Programme, the Company served 6.12 million users during the reporting period.
+In promoting coordinated regional development, the Company took the initiative to serve the national major
+strategies for regional development by relying on the "One Entire Bank for One Customer (-)" cross-
+regional synergy mechanism, improving the credit policy for industries with regional advantages, strengthening
+coordinated regional exchanges, and establishing green channels for major projects, so as to enhance the efficiency
+of services for key customers and projects in key regions, and to promote the economic development of key regions
+such as Beijing-Tianjin-Hebei region, the Yangtze River Delta region, the Chengdu-Chongqing Economic Circle, and
+the Guangdong-Hong Kong-Macao Greater Bay Area.
+In terms of green wealth management, as of the end of the reporting period, the Company had a total of 7 existing
+ESG-themed wealth management products from its agency distribution, with a balance of RMB3.718 billion. CMB
+Wealth Management, a subsidiary of the Company, issued 4 ESG-concept wealth management products in total,
+with an existing fund size of RMB1.730 billion.
+4.3.2 Support the improvement of people's livelihood
+Chapter IV Environmental, Social and Governance (ESG)
+China Merchants Bank
+Annual Report 2023 (H share)
+CMB Financial Leasing, a subsidiary of the Company, fully implemented the integration of industry and finance,
+cooperated with a number of shipyards and local shipbuilding enterprises under the three major state-owned
+shipbuilding groups in China, namely China Merchants Industry Holdings Co., Ltd., China State Shipbuilding
+Corporation Limited and COSCO SHIPPING Heavy Industry Co., Ltd., and built a total of more than 100 ships, with a
+balance of assets of approximately RMB18.0 billion, actively supporting the development of shipbuilding enterprises
+in China.
+CMB International Capital, a subsidiary of the Company, made full use of its differentiated professional advantages
+to provide corporate clients with comprehensive financial services such as sponsoring and underwriting of listing in
+Hong Kong, placing and rights issue of listed companies, bond issuance, asset management and financial advisory,
+contributing to the high-quality development of the real economy.
+CMB Wealth Management, a subsidiary of the Company, continuously directed the capital flows towards the real
+economy, especially to support the financing of enterprises in scientific and technological innovation, infrastructure
+and energy fields that are in line with economic transformation and upgrading. As of the end of the reporting
+period, the business balance of CMB Wealth Management's wealth management investment assets supporting the
+real economy amounted to RMB1.88 trillion.
+The Company actively supported the comprehensive promotion of rural revitalisation by increasing its grants
+in agriculture-related loans to promote the integrated development of urban and rural areas. As of the end of
+the reporting period, the balance of the Company's agriculture-related loans amounted to RMB269.282 billion,
+representing an increase of 15.43% as compared with the end of the previous year, of which the balance of
+inclusive agriculture-related loans amounted to RMB17.821 billion, representing an increase of 29.73% as compared
+with the end of the previous year.
+The Company continued to optimise the top-level design for inclusive finance development, constructed a long-
+term mechanism for inclusive finance development and reinforced its financial support for private small- and
+micro-sized enterprises. As of the end of the reporting period, the balance of the Company's inclusive small- and
+micro-sized enterprises loans was RMB804.279 billion, representing an increase of 18.56% as compared with the
+end of the previous year; and the number of inclusive small- and micro-enterprises with loan balance was 1,004,500,
+representing an increase of 13,800 as compared with the end of the previous year.
+The Company is committed to helping solve the shortcomings in education, housing, old-age care, medical care and
+other areas of people's livelihood, and investing financial resources in key areas that people attach great importance
+3.11.7 Reputational risk management
+With respect to ESG bonds, during the reporting period, the Company issued the world's first floating-rate blue
+bond overseas with an issuing scale of USD400 million. The proceeds raised will be applied to support sustainable
+water resources management and offshore wind power projects, contributing to water ecological protection, marine
+renewable energy and marine economic construction. As of the end of the reporting period, the balance of the
+Company's existing domestic green bonds amounted to RMB15.000 billion, and the balance of existing overseas ESG
+bonds amounted to USD1.900 billion. During the reporting period, the Company served as leading underwriter for
+41 green bonds and underwrote RMB27.073 billion in those bonds. During the reporting period, CMB International
+Capital, a subsidiary of the Company, assisted 11 enterprises to issue 11 green bonds, with a fundraising scale of
+USD5.980 billion.
+Annual Report 2023 (H share)
+Annual Report 2023 (H share)
+China Merchants Bank
+In 2024, challenges and opportunities in the external environment coexist. The Company will maintain its strategic
+development focus, while accurately identifying changes, scientifically making response, and proactively seeking
+transformation. The Company will continue to promote the strategy of building a value creation bank with
+adherence to the development goal of creating greater value for customers, employees, shareholders, partners and
+the society, insist on the development philosophy which "takes quality as the foundation and profitability as priority,
+while maintaining moderate scale and reasonable structure" as well as differentiated and characteristic development
+path, accelerate the establishment of a new high-quality development model driven by strict management and
+securing growth while upholding fundamental principles and breaking new ground (), so as to strive for
+a world-class value creation bank, and make contribution to the development of financial industry with Chinese
+characteristics.
+According to the current policies and economic expectations analysis, the Company plans to increase loans and
+advances to customers by 8% approximately and customer deposits by around 10% in 2024.
+On the domestic front, the economic growth momentum is expected to improve and stabilise in 2024. The growth
+rate of fixed assets investment is expected to further increase, consumption will be steadily restored, and the
+momentum will return to the potential level. The export is expected to grow moderately. Macroeconomic policies
+will intensify counter-cyclical and cross-cyclical adjustments. Fiscal policies will be moderately strengthened and
+improved in terms of quality and efficiency. Monetary policies will be flexible, appropriate, accurate and effective.
+The innovation and coordination of policy tools will be strengthened to stabilise expectations, growth and
+employment, thereby bringing development opportunities to the banking industry.
+Looking forward to 2024, the economic growth of the Europe and the U.S. may slow down slightly as compared
+with 2023. Among which, the U.S. economy will still remain resilient, leading to a possible marginal fall in the
+inflation, and the end of interest rate hike cycle of the U.S. dollar with limited rate cuts.
+In 2023, against the backdrop of economic recovery, while facing the pressure of weakening expectations,
+insufficient demand and declining interest rate spreads, China's banking industry adhered to carrying out sound
+operations, actively implementing macroeconomic control policies, increasing efforts to serve the real economy,
+maintaining a rapid growth of asset scale, while the net operating income was under pressure. China's banking
+industry also focused on mitigating risks in key areas, maintaining stable asset quality, while holding the bottom line
+to avoid systemic financial risks.
+3.12 Outlook and Coping Tactics
+During the reporting period, the Company proactively fulfilled its anti-money laundering obligations and constantly
+improved the quality and effectiveness of its money laundering risk management. The Company optimised the
+money laundering risk management policies and procedures, and improved the anti-money laundering mechanism
+in strict compliance with the laws and regulations and regulatory requirements in relation to anti-money laundering.
+The Company continued to strengthen the money laundering risk management for customers and products,
+focusing on the identification, assessment and management of customers and products associated with high risk.
+The Company improved the tools for monitoring suspicious transactions and endeavoured to enhance the quality
+and efficiency of suspicious transaction monitoring and analysis. The Company continued to increase technology
+input in key anti-money laundering fields, and continued to promote the implementation of the Group's anti-money
+laundering system in the overseas branches and subsidiaries, so as to safeguard the unified implementation of the
+Group's anti-money laundering policies in the overseas branches and subsidiaries.
+Money laundering risk refers to the risk that the Company may be exposed to because of being used by the three
+types of activities, namely "money laundering", "terrorist financing" and "proliferation financing" in the course of
+conducting business and managing operations. The Company has established a relatively sound money laundering
+risk management mechanism, including a money laundering risk management structure with clear responsibilities
+assumed by the Board of Directors, the Board of Supervisors, senior management, functional departments, branches
+and subsidiaries, an anti-money laundering system with comprehensive coverage, an effectively operated risk
+assessment and dynamic monitoring mechanism, scientific and reasonable anti-money laundering data governance,
+targeted management of customers and businesses associated with high risks, advanced and efficient IT system
+support, independent inspection and auditing, as well as continuous anti-money laundering training and promotion,
+so as to provide compliance guarantee for the Company's stable operations.
+3.11.9 Money laundering risk management
+Chapter III Management Discussion and Analysis
+China Merchants Bank
+Annual Report 2023 (H share)
+2
+Chapter III Management Discussion and Analysis
+82
+During the reporting period, the Company strictly complied with relevant laws and regulations and continued to
+consolidate its "fortress-style" internal control and compliance management system through various measures.
+The Company effectively identified, evaluated and prevented the compliance risk of new products, new businesses
+and major projects, continued to strengthen the interpretation and conveyance of the new regulations, and carried
+out the internalisation of external regulations in a timely manner. The Company further promoted compliance
+culture, and carried out "Compliance for 2023" culture promotion activity. The Company tightened up supervision,
+inspection, rectification and accountability procedures by setting up inspection and supervision teams in the
+Legal Compliance Department of branches and assigning additional inspectors. The Company empowered digital
+transformation of internal control and compliance management with technology, laying a solid foundation for the
+high-quality development of the Company.
+Compliance risk refers to the risk of being subject to legal sanctions, regulatory punishments, material financial
+losses, and reputational loss as a result of the failure to observe the laws, rules and standards. The Company set
+up three lines of defence for compliance risk management comprising business lines, compliance management
+department and auditing department through the establishment of a reticulate management structure comprising
+the Risk and Capital Management Committee under the Board of Directors, the risk and compliance management
+committee, heads of compliance, compliance officers as well as compliance supervisors of the Head Office and
+its branches, thereby forming a compliance management organisational system with sound organisation, clearly-
+defined rights and responsibilities, reasonable work allocation and mutual coordination and collaboration.
+Meanwhile, through system management, compliance risk assessment and monitoring, construction of compliance
+culture, management of employees behavior and system building, the Company continuously improved compliance
+risk management techniques and optimised management procedures and established a complete and effective
+compliance risk management system to achieve effective control of compliance risks.
+3.11.8 Compliance risk management
+80
+60
+China Merchants Bank
+Annual Report 2023 (H share)
+Chapter III Management Discussion and Analysis
+During the reporting period, by striving for the goal of preventing losses arising from systematic operational risk
+and major operational risk, the Company continued to improve its operational risk management system. Firstly, the
+Company carried out the implementation of the new Basel III operational risk standards at the group level, took the
+contents of the Basel III reform plan as a benchmark, and further improved the level of operational risk management.
+Secondly, the Company strengthened risk prevention and control in key areas, carried out special investigation on
+agency clearing and settlement and other businesses and put forward management measures and suggestions.
+Thirdly, the Company kept improving the operational risk management system, carried out system platform
+reconstruction and development and data migration, launched the new operational risk portal system within the
+Group in a comprehensive manner, continued to strengthen the construction and application of system tools and
+accelerated the digitalisation process of the operational risk management. Fourthly, the Company strengthened
+the second line of defence of information technology risk and business continuity management, and carried
+out informational technology process inspection, external events analysis and organised business continuity risk
+assessment. Fifthly, the Company arranged for the Head Office, branches and subsidiaries to carry out centralised
+training for operational risk management and organising corresponding examination for the personnel holding
+relevant positions of operational risk management throughout the Bank, and issuing newsletters on operational
+risk management, so as to enhance the awareness of operational risk prevention at the Head Office, branches and
+subsidiaries.
+3.11.6 Liquidity risk management
+Reputational risk refers to the risk that the Company might be negatively evaluated by relevant stakeholders,
+the public and the media due to behaviours of the Company and its employees or external incidents, which is
+detrimental to the brand value and normal operation of the Company, or, to the extent, be exposed to the risks
+involving market and social stability. Reputational risk management is an important part of the corporate governance
+and the overall risk management system of the Company, covering all activities, operations and businesses
+undertaken by the Company and its subsidiaries. The Company has established and formulated the reputational risk
+management rules and system by taking the initiatives to effectively prevent the reputational risk and coping with
+any incidents in relation to reputation, so as to reduce loss and negative impact to the greatest extent.
+During the reporting period, the Company strictly fulfilled the requirements of the Rules on Reputational Risk
+Management of Banking and Insurance Institutions, further developed the reputational risk management system
+following the management principles of forward-looking, full-coverage, matching and effectiveness, and enhanced
+its capability of managing reputational risk. Firstly, by implementing the requirements of "stability", the Company
+adhered to the reputational risk management concept of prevention comes first and strengthened inspection,
+early warning and prompting to reduce potential reputational risks at source. Secondly, the Company enhanced
+the precision and frequency of public opinion events, aiming to realise early intervention in public opinion and to
+stop the fermentation of reputational risk events. Thirdly, the Company established a mechanism to analyse the
+causes of problems at source on the basis of proper handling of public opinion, and promoted the improvement of
+operation and management by virtue of such public opinion. Fourthly, the Company strengthened empowerment
+and improved the reputational risk management abilities of branches and subsidiaries through online training, case
+promotion, emergency drills and other means.
+Based on the principle of separating policy-making, strategy implementation and supervision of liquidity risk
+management, the Company has established a liquidity risk management governance structure under which the roles,
+responsibilities and reporting lines of the Board of Directors, the Risk and Capital Management Committee, the
+Board of Supervisors, senior management, special committees and relevant departments are segregated to ensure
+the effectiveness of liquidity risk management.
+During the reporting period, the central bank kept on adopting a prudent monetary policy, and the inter-bank
+market maintained reasonable and sufficient liquidity. Based on the analysis of macroeconomic and market trends,
+the Company dynamically quantified and forecasted the future risk situation, and proactively laid out the asset
+liability management strategy to achieve the balance between risk and yield. Firstly, the Company constantly
+promoted the steady growth of customer deposits with multiple measures adopted to enhance the origination and
+support of assets, constantly optimised the asset-liability structure, realising the smooth operation of assets and
+liabilities. Secondly, the Company strengthened forward-looking forecasts of liquidity indicators, flexibly carried
+out active liability management of treasury based on the operation of deposit and loan business and indicators,
+expanded diversified financing channels, stabilised the sources of long-term liabilities through bond issuance
+and other means. Thirdly, the Company strengthened the management of monetary market trading strategies to
+maintain sufficient liquidity reserves, actively conducted open market transactions and played the role of a primary
+dealer. Fourthly, the Company strengthened liquidity risk monitoring and management for business lines, overseas
+branches and subsidiaries with reasonable control of maturity mismatches. Fifthly, the Company continued to carry
+out emergency management, tested and improved the liquidity emergency plan and effectively improved the ability
+to respond to liquidity risk events through regular liquidity risk emergency drills.
+As of the end of the reporting period, all liquidity indicators of the Company met the regulatory requirements
+and the Company had sufficient funding sources to meet the needs of sustainable and healthy development of its
+business. In accordance with the requirements of the PBOC, the Company's RMB statutory deposit reserve ratio was
+7%, and the foreign exchange statutory deposit reserve ratio was 4%. The Company's liquidity indicators operated
+well. Deposits maintained steady growth. Liquidity reserves were sufficient and overall liquidity was at a safe level.
+For more information about the Company's liquidity risk management, please refer to Note 60(c) to the financial
+statements.
+China Merchants Bank
+Annual Report 2023 (H share)
+81
+Chapter IV Environmental, Social and Governance (ESG)
+The first is to enhance the quality and efficiency of serving the real economy and to firmly adhere to the
+direction for high-quality development. By adapting to the shift in China's economic growth momentum and
+the acceleration of modern industrial system formation, the Company will boost its support for key areas and weak
+areas in the real economy. Focusing on the sci-tech finance, green finance, inclusive finance, retirement finance and
+digital finance, the Company will accelerate the systematic deployment and enhance the market competitiveness
+to achieve volume growth and quality improvement. Based on China's national strategy to promote coordinated
+development of regional economies, the Company will promote the enhancement of service quality and efficiency
+of branches in key regions. In the course of serving the demand of the real economy and people's livelihood, the
+Company will continue to optimise its customer structure, business structure and asset structure.
+The third is to consolidate a fortress-style overall risk and compliance management system to strengthen
+the guarantee for high quality development. The Company will continuously improve mechanism construction,
+constantly consolidate the "Six All" comprehensive risk management system, strengthen forward-looking judgement
+of risks, and smoothly operate the prompt response mechanism from risk identification to risk disposal. The
+Company will also strengthen the prevention and mitigation of risks in key areas and weak areas such as real estate,
+local debts as well as small- and medium-sized financial institutions. The Company will enhance management
+empowerment, and carry out differentiated empowerment based on the actual risk management situation of its
+domestic and overseas branches and subsidiaries. The Company will also intensify internal control compliance
+management, make increasing efforts to develop compliance culture and improve its management capability in
+respect of sanction and money laundering risks.
+China Merchants Bank
+98
+86
+55
+85
+Green deposit is a green finance product that raises funds for sustainable projects of green economy, helping drive the economic transition to low
+carbon, climate change adapted and sustainable development.
+Social contribution value per share = basic earnings per share + (taxes paid + employee expenses + interest expenses + total external donations)/total
+share capital of ordinary shares at the end of the period.
+In terms of green deposit and green credit, the Company launched innovative green deposit products, while
+increasing the funds allocation to the green sector, with a focus on energy conservation and environmental
+protection, clean production, clean energy, ecological environment, green upgrade of infrastructure, green services
+and other sectors. During the reporting period, the Company's green deposits 25 amount was RMB917 million with
+a closing balance of RMB420 million. As of the end of the reporting period, the Company's balance of green loans
+was RMB447.765 billion, representing an increase of 26.00% as compared with the end of the previous year. During
+the reporting period, the Company granted RMB370 million of carbon emission reduction-linked loans. During the
+reporting period, CMB Financial Leasing, a subsidiary of the Company, granted loans of RMB54.721 billion in green
+leasing, accounting for 49.67% of the total loans granted by CMB Financial Leasing, with a closing balance for
+green leasing of RMB121.500 billion, representing an increase of 15.31% as compared with the end of the previous
+year.
+The Company actively integrated itself into the national green development strategy. During the reporting period,
+the Company released the "CMB Green Finance" brand, which is in line with the green development of the
+Company, with an aim to realise green value creation. In addition, it published the "Sustainable Finance Report
+under 'Dual Carbon' Goal" (""X%\D]# to provide guidance on implementing the green
+finance business strategy. Moreover, the Company incorporated green finance concept into the main direction of the
+Company's financial development, with a view to building a green financial service system to help achieve the "dual
+carbon" goal in China. During the reporting period, the Company further increased the provision of green financial
+services focusing on green deposits, green credits, ESG bonds, green wealth management, green investment, green
+consumption and others.
+4.2.1 Green finance
+The Company keeps on promoting green finance and green operation and building a green home. During the
+reporting period, the Company did not have any environmental violations.
+4.2 Environmental Information
+For further information on the ESG of the Company, please refer to China Merchants Bank Co., Ltd. Sustainability
+Report 2023 published on the websites of the Shanghai Stock Exchange, Hong Kong Exchanges and Clearing Limited
+and the Company.
+In 2023, the Company's MSCI ESG rating remained grade A. In 2023, the Company achieved the social contribution
+value of RMB17.04 per share 24 (calculated on the Group's statistical calibre), and the total amount of external
+donations of the Company was RMB115 million.
+The second is to push forward balanced and coordinated development of the four major business segments
+and to forge advantages in high-quality development. Adhering to the positioning of retail finance as the
+"comprehensive platform of the wealth ecosystem, ballast stone of asset business, driving force of the flywheel
+effect and pilot of value creation", the Company will consolidate and expand the advantages of retail finance
+systemisation, and play the strategic main role of retail finance to a further extent. The Company will continue
+to develop featured financial services of corporate banking business, upgrade customer operation and service
+models, thereby enhancing differentiated competitive advantages. The Company will promote the improvement of
+capabilities of investment banking and financial market business and reinforce specialised, systematic and ecological
+services, while stepping up transformation and upgrading of the wealth management and asset management
+segment to accelerate the shaping of Malik growth curve.
+The Company adheres to the concept of social responsibility of "originating from society and repaying society",
+takes "being committed to sustainable finance, promoting sustainable value and contributing to sustainable
+development" as the sustainable development goal, integrates the concept of Environmental, Social and Governance
+(ESG) into the daily operation and management of the Company, constantly improves the sustainable development
+management mechanism, fully communicates with stakeholders, effectively fulfills corporate social responsibility and
+continuously promotes high-quality financial development.
+Environmental, Social and Governance (ESG)
+Chapter IV Environmental, Social and Governance (ESG)
+Annual Report 2023 (H share)
+China Merchants Bank
+24
+25
+sustainable
+the beautiful world
+ESG philosophy to make
+implementing
+Resolutely
+83
+The fifth is to strengthen strict management and build on the capability for high-quality development. The
+Company will establish and improve a standardised, refined, empowering, systematic and scientific management
+system to create an intensive development mode, so as to provide guarantee for the construction of a world-class
+commercial bank with first-class management standards. The Company will carry forward strict and standardised
+management culture adhering to the principle of "all business activities must be governed by policies, all policies
+must be implemented with inspections, and all inspections must be followed by accountability investigations", so
+as to strengthen management standardisation. By attaining to the broad and great while addressing the delicate
+and minute, thorough consideration and pursuit of excellence, the Company will strengthen its management of
+cost, assets and liabilities as well as subsidiaries, so as to enhance management refinement. By improving working
+style and transforming management concept, the Company will enhance its support and assistance to the frontline,
+so as to enhance management empowerment. By establishing systematic thinking and improving comprehensive
+policy implementation capability, the Company will balance its multiple objectives, so as to enhance systematic
+management. The Company will incorporate long-term principle, strategy orientation, problem orientation and
+objective orientation into all aspects of operation management, so as to enhance scientific management level.
+The fourth is to uphold fundamental principles and break new ground (E) and to enhance the
+momentum for high-quality development. Focusing on the needs of the nation and the needs of customers, with
+technology and talents as the engine, the Company will promote the generation, implementation and upgrading of
+more innovative achievements. The Company will continue to build a "Digital CMB", and accelerate the transition
+from "Online CMB" to "Smart CMB". Focusing on "technology + products", "people + digitalisation" and "Al +
+finance", the Company will accelerate the promotion of product innovation, business innovation, model innovation
+and management innovation, consolidate the existing advantages and create new advantages in more segments, so
+as to achieve differentiated and featured development.
+4.1 ESG Review
+Liquidity risk refers to the risk that the Company is unable to obtain sufficient funds at a reasonable cost in a
+timely manner to grow its assets, pay maturing debts and perform other payment obligations. The liquidity risk
+management of the Company is based on the principles of prudence, foresight and comprehensiveness, which is
+more appropriate for the current development stage of the Company. The current liquidity risk management policies
+and systems of the Company have satisfied the regulatory requirements and its own management needs.