M 招商銀行
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
(Chapter 571 of the Laws of Hong Kong)
Model Code:
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
Chairman's Statement
Annual Report 2018
Chairman's Statement
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.
CM Securities:
CIGNA & CMB Life Insurance Co., Ltd.
CIGNA & CMB Life Insurance:
China Merchants Fund Management Co., Ltd.
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:
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 Stock Exchange of Hong Kong Limited
The Rules Governing the Listing of Securities on the SEHK
CMB Wing Lung Bank:
CMB Wing Lung Bank Limited
CMB Wing Lung Group:
CMB Wing Lung Bank and its subsidiaries
CMB Financial Leasing or CMBFL:
CMB Financial Leasing Co., Ltd.
CMB International Capital or CMBIC:
CMB International Capital Holdings Corporation Limited
China Merchants Fund or CMFM:
Hong Kong Listing Rules:
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.
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.
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.
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.
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.
1
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.
7
8
China Merchants Bank
President's Statement
Annual Report 2018
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.
President's Statement
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.
President
CHINA MERCHANTS BANK
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.
Definitions
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.
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.
M
Li Jianhong
Chairman
6
China Merchants Bank
Annual Report 2018
Chairman's Statement
"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.
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.
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.
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.
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.
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.
China Merchants Bank Co., Ltd.
Chairman
22 March 2019
China Merchants Bank
Annual Report 2018
President's Statement
President's Statement
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.
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.
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.
China Merchants Bank
Annual Report 2018
Tian Huiyu
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.
President's Statement
12
I Company Information
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
3.6 Results of Operating Segments
7
Chairman's Statement
4
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 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 CO., LTD.
(a joint stock company incorporated in the
People's Republic of China with limited liability)
H Share Stock Code: 03968
2018 Annual Report
We are here
Just for
you
無
BUY
BANK
41
2009
China Merchants Bank
Annual Report 2018
Contents
Contents
1
2
Important Notice
3
Definitions
3
ர
3.7 Other Financial Disclosures under the Regulatory Requirements
Preference Share Stock Code: 04614
3.8 Implementation of Business Development Strategies
128
VIII Report of the Board of Supervisors
129
IX Financial Statements
China Merchants Bank
Important Notice
Annual Report 2018
41
1.
VII Corporate Governance
2.
4.
5.
6.
7.
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.
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.".
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.
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.
Unless otherwise stated, all monetary sums stated in this annual report are expressed in RMB.
3.
110
Important Notice
V Changes in Shares and Information on Shareholders
43
VI Directors, Supervisors, Senior Management, Employees and Organisational Structure
50
3.10 Business Operation
66
3.11 Risk Management
72
3.12 Profit Appropriation
74
3.13 Requirements of the Environmental, Social and Governance Reporting Guide
3.9 Changes in External Environment and Corresponding Measures
3.14 Compliance with Relevant Laws and Regulations
95
74
IV Important Events
75
83
74
3.15 Management Contracts
74
3.16 Permitted Indemnity Provision
shares
China Everbright Bank
Company Limited
6.91
19,000,000
Domestic preference
Others
6
20,000,000
Insurance Company of China, Ltd.
7.27
Domestic preference
Others
Ping An Property & Casualty
4
shares
person
shares
China National Tobacco
shares
15,000,000
10
person
Corporation, Guangdong Branch
3.64
10,000,000
State-owned legal Domestic preference
China Construction Bank
9
shares
State-owned legal Domestic preference
person
5.45
15,000,000
State-owned legal Domestic preference
China National Tobacco
7
shares
person
(Sichuan Province) Company
5.45
(Anhui Province) Company
(Henan Province) Company
38.55
20,000,000
frozen (share)
(share)
(%)
(share)
period (share)
Type of shares
Shares
pledged or
to trading
moratorium
shareholdings
of the period
the reporting
Type of
shareholders
Serial No. Name of shareholders
Percentage of
Number of
shares subject
Shares held
at the end
Changes in
China National Tobacco
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:
1
China Mobile Communications
Group Co., Ltd.
State-owned legal
Domestic preference
State-owned legal Domestic preference
China National Tobacco
shares
(中銀資產管理有限公司)
9.09
25,000,000
Domestic preference
Others
BOC Asset Management Co., Ltd.
7.27
3
person
10.91
30,000,000
State-owned legal Domestic preference
CCB Trust Co., Ltd.
2
shares
person
106,000,000
shares
(Liaoning Province) Company
Changjiang Pension Insurance
Co., Ltd.
Shareholding
State-owned legal Domestic preference
shares
reporting
period
the Company
during the
related
parties of
from the
having
received
remunerations
period
during the
Aggregate
pre-tax
remunerations
(RMB ten
thousand)
(share)
(share)
Term of office
Title
(Y/M)
Gender
Name
the period
period
Date of Birth
Chairman
2014.8-2019.6
Li Jianhong
Male
Annual Report 2018
468.99
110,000
1965.12
Male
Tian Huiyu
2013.8-2019.6
Executive Director
2010.8-2019.6
end of
Non-Executive Director
1966.12
Male
Fu Gangfeng
2018.7-2019.6
Vice Chairman
2014.7-2019.6
Non-Executive Director
Yes
1956.5
Yes
person
of the
at the
"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.
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.
The shareholdings of preference shareholders are calculated based on the information listed in the register of shareholders of
preference shares maintained by the Company.
(3)
(2)
(1)
Notes:
shares
person
1.82
5,000,000
State-owned legal Domestic preference
China Resources SZITIC Trust
Co., Ltd.
1.82
5,000,000
State-owned legal Domestic preference
shares
person
1.82
5,000,000
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
at the
beginning
the Company
Shareholding
received from
Whether
6.1 Directors, Supervisors and senior management
Directors, Supervisors, Senior Management,
Employees, and Organisational Structure
95
VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
reporting
China Merchants Bank
Annual Report 2018
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
During the reporting period, there had been no repurchase and conversion of preference shares.
5.6.4 Repurchase or conversion of preference shares
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.
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).
V Changes in Shares and Information on Shareholders
China Merchants Bank
Annual Report 2018
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.
V Changes in Shares and Information on Shareholders
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.
"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.
240,423,406
Approved lending agent
Long
corporation
30,671,564
Interest of controlled
Long
interest in shares
4,500
Person having a security
Long
H
Citigroup Inc.
corporation
0.00
0.01
5
318,000
Interest of controlled
Short
Short
Interest of controlled
corporation
66
(4.2)
(4.1)
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:
-through physically settled listed derivatives
-through cash settled listed derivatives
-through physically settled unlisted derivatives
-through cash settled unlisted derivatives
1,118,000 H shares (long position) and 262,452 H shares (short position)
2,790,000 H shares (long position)
1,982,835 H shares (long position) and 403,000 H shares (short position)
1,372,450 H shares (short position)
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:
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.
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.
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".
(3)
(2)
(1)
Notes:
0.01
0.05
1.07
5.91
6
271,099,470
2,122,841 6
corporation
1.05
5.74
shares (%)
issue (%)
Notes
No. of shares
Capacity
position
shares
Shareholder
issued
ordinary
of shares in
Class of Long/short
Name of Substantial
of total
Percentage
relevant class
Percentage
of the
V Changes in Shares and Information on Shareholders
China Merchants Bank
Annual Report 2018
(4)
Verise Holdings Company
H
Long
Limited
5
263,574,754
Interest of controlled
Long
H
BlackRock, Inc.
Limited
1.89
10.41
(4.3)
4
Beneficial owner
Long
H
China Merchants Union (BVI)
1.89
10.41
4
477,903,500
Interest of controlled
corporation
477,903,500
China Merchants Bank
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.
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.
Serial No. Name of shareholder
Type of
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:
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 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.
5.6.2 Number of shareholders of preference shares and their shareholdings
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.
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.
5.6.1 Issuance and listing of preference shares
5.6 Preference shares
The Company did not issue any internal staff shares.
For the issuance of other bonds of the Company and its subsidiaries, please refer to Note 44 to the financial
statements.
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.
During the reporting period, the Company did not issue new ordinary shares.
5.5 Issuance and listing of securities
Annual Report 2018
V Changes in Shares and Information on Shareholders
China Merchants Bank
22
1
92
The Bank of New York Depository
(Nominees) Limited
Changes in
the reporting
period (share)
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.
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 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.
(4)
(3)
(2)
(1)
Notes:
shares
person
frozen (share)
Unknown
100
Shares
pledged or
to trading
moratorium
(share)
(%)
(share)
50,000,000
Percentage of
shareholdings
Number of
shares subject
Shares held
at the end
of the period
shareholder
Type of shares
Overseas legal Offshore preference
91
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.
-through physically settled listed derivatives
-through physically settled unlisted derivatives
-through cash settled unlisted derivatives
(5.2.1) BlackRock (Netherlands) B.V. held 560,500 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:
(5.1.5) BlackRock (Singapore) Limited (indirectly wholly-owned by BR Jersey International Holdings L.P.) held 692,000 H shares (long
position) in the Company.
BlackRock 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.
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 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..
(5.1.4)
(5.1.3)
(5.1.2)
(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.
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:
(5.2)
(5.1)
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)
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.
(4.4)
(5.2.2)
BlackRock Advisors (UK) Limited held 242,500 H shares (long position) in the Company.
(5.2.3) BlackRock International Limited held 772,498 H shares (long position) in the Company.
(5.3)
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.
(6)
BlackRock Institutional Trust Company, National Association held 56,848,976 H shares (long position) and 264,000 H shares
(short position) in the Company.
(5.3.2)
BlackRock Fund Advisors held 120,019,888 H shares (long position) in the Company.
(5.3.1)
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:
No
(5.2.10) BlackRock Asset Management (Schweiz) AG held 33,000 H shares (long position) in the Company.
BlackRock Fund Managers Limited held 9,288,613 H shares (long position) in the Company.
(5.2.8)
(5.2.7) BlackRock Asset Management Deutschland AG held 241,731 H shares (long position) in the Company.
BlackRock Investment Management (UK) Limited held 15,043,907 H shares (long position) in the Company.
BLACKROCK (Luxembourg) S.A. held 10,720,292 H shares (long position) and 18,000 H shares (short position) in the
Company.
(5.2.6)
(5.2.5)
BlackRock Asset Management Ireland Limited held 28,798,784 H shares (long position) in the Company.
(5.2.4)
(5.2.9) BlackRock Life Limited held 6,301,655 H shares (long position) in the Company.
President and Chief Executive Officer
Male
Sun Yueying
126.32
50,000
2016.6-2018.7
Former Employee Supervisor
1964.3
Male
Xu Lizhong
2015.9-2019.2
Former Shareholder Supervisor
1961.5
Male
Fu Junyuan
50.00
50.00
2011.11-2018.11
Former Independent Non-Executive Director
1955.6
Female
Pan Yingli
Zhu Qi
2011.7-2018.11
Male
Former Vice President
No
No
Yes
No
No
을을 물을 을 을 을
174.77
70,000
2012.6-2018.7
Former Executive Assistant President
1958.5
Male
Lian Bolin
2015.2-2019.2
Former Vice President
1964.11
Male
Zhao Ju
2008.12-2019.2
1960.7
Former Independent Non-Executive Director
1949.5
Male
2016.11-2019.6
Secretary of Board of Directors
No
342.99
80,000
1965.12
Male
Wang Liang
2015.1-2019.6
Vice President
No
344.99
80,000
2014.7-present
Secretary of the Party Discipline Committee
1963.2
Xiong Liangjun Male
No
344.99
Wang Jianzhong Male
1962.10
Member of the CPC Committee
2017.4-present
Wong Kwai Lam
2014.11-2018.1
Former Non-Executive Director
No
1959.5
Male
Li Xiaopeng
2015.11-2018.1
Former Vice Chairman
Notes:
No
85,000
2017.4-present
Member of the CPC Committee
1962.12
Male
Shi Shunhua
No
344.99
80,000
341.54
(1)
(2)
(3)
Hebei Port Group Co., Ltd.
SAIC Motor Corporation Limited
Wen Jianguo
Wu Heng
Wang Daxiong
Fu Junyuan
of the China Merchants Financial Group/Platform
General Manager of China Merchants Finance Holdings
Chairman
Executive Director and Chief Financial Officer
Deputy Director of the Executive Committee
of the China Merchants Financial Group/Platform
Deputy Director of the Executive Committee
Chief Digital Officer
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
Director and Chief Accountant
Deputy General Manager of Finance Department
Term of Office
From July 2014 up to now
From February 2018 up to now
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
Sun Yueying
99
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
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).
80,000
Director and General Manager
Fu Gangfeng
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
VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
China Merchants Bank
Annual Report 2018
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.
(8)
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.
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.
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.
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.
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.
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.
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.
(7)
(6)
(5)
(4)
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.
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.
6.3 Changes of information of Directors and Supervisors
1.
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
China Merchants Group Ltd.
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..
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.
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..
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..
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.
6.
5.
4.
3.
2.
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..
2013.9-2019.6
2013.12-2019.6
1965.8
Male
Liu Yuan
Chairman of Board of Supervisors,
2018.11-2019.6
Independent Non-Executive Director
1970.5
Male
Liu Qiao
2018.11-2019.6
Independent Non-Executive Director
1967.4
Male
Li Menggang
2017.2-2019.6
Independent Non-Executive Director
1953.6
Wong See Hong Male
2015.1-2019.6
Independent Non-Executive Director
1962.1
Male 1962.9
2014.8-2019.6
50.00
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
No
24 4 4 4 4 2 2 2 2 2 2 2
386.99
90,000
4.17
4.17
50.00
50.00
50.00
Zhao Jun
2012.7 (note 2)
Independent Non-Executive Director
Hong Xiaoyuan Male
2018.10-2019.6
Non-Executive Director
1972.4
Male
Zhou Song
Vice President and Chief Financial Officer
428.99
100,000
2007.6-2019.6 (note 1)
1959.3
Male
Li Hao
Executive Director, First Executive
Yes
2001.4-2019.6
Non-Executive Director
1958.6
Female
1963.3
Non-Executive Director
2007.6-2019.6
Zhang Jian
2015.1-2019.6
Independent Non-Executive Director
1952.1
1946.2
Pan Chengwei Male
Chung, Antony
Male
Leung Kam
2016.11-2019.6
Non-Executive Director
Employee Supervisor
1960.12
Wang Daxiong
2014.9-2019.6
Non-Executive Director
Female 1968.2
Su Min
2016.11-2019.6
Non-Executive Director
1964.10
Male
Male
Wen Jianguo
90
1962.10
period
end of
of the
reporting
at the
beginning
Shareholding
Shareholding
at the
VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
China Merchants Bank
Annual Report 2018
96
No
No
No
No
z z z z zZÁÁ
341.54
80,000
2006.5-2019.6
Date of Birth
period
the period
(RMB ten
Male
Liu Jianjun
period
thousand)
(share)
(share)
Term of office
Title
(Y/M)
Vice President
Gender
during the
reporting
the Company
related
parties of
from the
received
remunerations
the Company
during the
having
Aggregate
pre-tax
remunerations
received from
Whether
Name
Vice President
1960.3
Tang Zhihong
Ding Huiping
40.00
65,800
65,800
2014.10-2019.6
External Supervisor
1957.8
Male
Jin Qingjun
Yes
Yes
No
2016.6-2019.6
Shareholder Supervisor
1976.8
Male
Wu Heng
2016.6-2019.6
Shareholder Supervisor
Male
1956.6
External Supervisor
2016.6-2019.6
224.45
45,000
2015.3-2019.6
Employee Supervisor
1966.6
Female
Huang Dan
176.23
60,000
Male
2018.7-2019.6
1964.9
Wang Wanging Male
40.00
2016.6-2019.6
External Supervisor
1963.7
Male
Han Zirong
40.00
Employee Supervisor
06
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.
28
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.
Staff education and training program
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".
Staff remuneration policy
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.
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.
4,804
2,646,099
201201
1
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
210005
199 Lushan Road, Jianye District, Nanjing
6.7 Information about employees
Nanjing Branch
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
Yangtze River Delta
547,567
6,327
23,260
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
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
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.
), 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
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..
VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
China Merchants Bank
Annual Report 2018
100
1,655
45,778
38
1,267
32,330
1,086
42,258
700
24,002
Central China
Wuhan Branch
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..
31
Company since August 2014.
China Merchants Bank
Annual Report 2018
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
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.
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.
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. 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.
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. 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
104
103
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.
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. 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
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.
1,174
64,344
Suzhou Branch
Wuxi Branch
523000
200 Hongfu Road, Nancheng District, Dongguan
Dongguan Branch
Foshan Branch
Fengze Street, Quanzhou
17,683
485
18
362000
Huangxing Building, No. 301, the middle section of
52,904
990
31
361012
18 Lingshiguan Road, Siming District, Xiamen
28
56,350
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
1,148
Pearl River Delta and
West Side of
Taiwan Strait
909
12 Denghu Road East, Guicheng Street, Nanhai
130022
9999 Renmin Avenue, Nanguan District, Changchun
38
150010
3 Zhongyang Avenue, Daoli District, Harbin
116001
110003
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
38,623
Business address
Regions
(RMB
No. of
No. of
assets
Volume of
VI Directors, Supervisors, Senior Management, Employees, and Organisational Structure
China Merchants Bank
Annual Report 2018
108
District, Foshan
42,354
937
31
528200
Name of branches
518 Jianshe Avenue, Wuhan
3,223
14,240
Qingdao Branch
100031
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
65 Hai'er Road, Laoshan District, Qingdao
544
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
60
214001
6-107, 6-108 1st Financial Street, Binhu District,
Wuxi
29
215028
36 Wansheng Street, Industrial Park, Suzhou
13
227
266103
Tianjin Branch
444
37
063000
13
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
49
1,805
250012
7 Gongqingtuan Road, Jinan
Jinan Branch
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
59
430022
105
2,695
29
2 42
15,584
8,424
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
Office of Board of Supervisors
General Office
Human Resources Department
Strategic Planning and Implementation Department
the Protection of Customer Interests#
Assets and Liabilities Management Department
Investment Management Department#
Financial Accounting Department
1
Procurement Management Department#
45
18/F, 20 Fenchurch Street, London, UK
L39, GPT, 1 Farrer Place, Sydney, NSW
23rd Floor,535 Madison Avenue,
New York, U.S.A
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
29
20 Boulevard Royal, L-2449 Luxembourg
L-2449
1
43
Other assignments
London Branch
Sydney Branch
1
New York Branch
General Office of Corporate
Strategic Customers Department
Asset Security Department
Operation Management Department
Information Technology Department
Audit Department
Inspection Department
Legal Compliance Department
CMB Research Institute
Operational Risk Management Department#
Market Risk Management Department#
Loan Approval Center#
Pre-warning Center#
Special Assets Operating Center#
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
Note #secondary department
*independent secondary department
Credit Approval Department
Finance
Risk Management Department
Network Operation Service Center#
Institutional Customers Department
Financial Institutions Department
Small Enterprises Finance Department
Transaction Banking Department
Project Management Department#
Pension Finance Department#
Loan Approval Center#
Bills Center#
General Office of Investment
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
Bills Business Department*
Wealth Management Department
Private Banking Department
Retail Credit Business Department
(Inclusive Finance Service Center)
Credit Card Center
(Consumer Finance Center)
Overseas Divisions#
1
2
10022
878
28,919
Haikou Branch
Complex Building C, Haian Yihao, 1 Shimao Road
North, Haikou
570125
10
1
11,353
Western China
Chengdu Branch
No. 1, the 3rd section of Renmin Road South,
Wuhou District, Chengdu
610000
52
1,617
55,573
Lanzhou Branch
Xi'an Branch
9 Qingyang Road, Chengguan District, Lanzhou
1 Gaoxin No.2 Road, Xi'an
730030
28
906
27,073
710075
64
1,859
61,466
28
Chongqing Branch
030012
Taiyuan Branch
126,424
Nanchang Branch
468 Dieshan Road, Donghu District, Nanchang
330008
56
1,509
72,518
Changsha Branch
766 Wuyi Avenue, Changsha
410005
43
1,466
41,785
Hefei Branch
169 Funan Road, Hefei
230001
42
1,281
47,610
Zhengzhou Branch
96 Nongye Road East, Zhengzhou
450018
42
1,280
60,472
265 Nan Zhong Huan Road, Xiaodian District,
Taiyuan
88 Xingguang Road, New North District, Chongqing
288
47
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
10
265
10,450
Outside Mainland
China
Hong Kong Branch
12 Harcourt Road, Central, Hong Kong
401121
250
50
155,201
USA Representative Office
23rd Floor, 535 Madison Avenue,
New York, U.S.A
550001
284 Zhonghua Road North, Yunyan District, Guiyang
1
23,120
Guiyang Branch
1,656
72,429
Urumchi Branch
2 Huanghe Road, Urumchi
830006
16
771
23,650
Kunming Branch
1 Chongren Street Wuhua District, Kunming
650021
46
629
53,047
522
1,278
530022
92-1 Minzu Avenue, Nanning
Nanning Branch
21
625
21
010098
9 Chilechuan Avenue, Saihan District, Huhhot
Hohhot Branch
21,576
Beijing Audit
Division
Division
Audit Department
Supervisory Committee
Assets and Liabilities Management Committee
Risk and Compliance Management Committee)
IT Management Committee
Business Continuity and Emergency Committee)
Fuzhou Audit
Division
Wuhan Audit
Division
Chengdu Audit
Division
Shenyang Audit
Fintech Committee
China Merchants Bank
Annual Report 2018
VII Corporate Governance
7.2 Overview of corporate governance
Xi'an Audit
Division
Nanjing Audit
Division
Office of the Board of
Directors
Shanghai Audit
Division
110
China Merchants Bank
VII Corporate Governance
Annual Report 2018
Corporate Governance
7.1 Corporate governance structure:
Strategy Committee
Nomination Committee
Nomination Committee
Board of Directors
Board of Supervisors
Remuneration and Appraisal
Committee
Risk and Capital Management Committee
Audit Committee
Office of Board of
Supervisors
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.
Executive Office of
President
Shenzhen Audit
Division
Shareholders' General Meeting
Related Party Transactions Management and
Consumer Rights Protection Committee
7.3 Information about general meetings
The Independent Non-Executive Directors reviewed the continuing connected transactions of the Company
and made confirmations as required by the Hong Kong Listing Rules.
115
116
China Merchants Bank
VII Corporate Governance
Annual Report 2018
7.5 Special committees under 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 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.
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:
7.5.1 Strategy Committee
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.
Main authorities and duties:
1.
Formulate the operational goals and medium-to-long term development strategies of the Company, and
make an overall assessment on strategic risks;
2.
Consider material investment and financing plans and make proposals to the Board of Directors;
3.
Main authorities and duties:
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.
7.5.2 Nomination Committee
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.
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.
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.
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;
Any other task delegated by the Board of Directors.
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.
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
(3)
0/0
2/2
2/2
នន 88 នននន
0/1
6/6
1/1
0/0
1.
Li Jianhong, the Chairman of the Board of Directors, did not attend the general meeting due to his other business engagements.
VII Corporate Governance
6.
5.
4.
3.
2.
1.
China Merchants Bank
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:
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
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.
2.
3.
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.
4.
Main authorities and duties:
7.5.5 Audit Committee
VII Corporate Governance
China Merchants Bank
Annual Report 2018
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.
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".
Any other task delegated by the Board of Directors.
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.
Arrange and instruct risk prevention works in accordance with the authorisation of the Board of Directors;
and
5.
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;
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.
6.
1.
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;
Examine the internal control system of the Company, and put forward the advices to improve the internal
control of the Company;
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:
1/1
6.
Submit proposals on perfecting the management of risks and capital of the Company;
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:
Review the systems and policies for remuneration management of the whole Bank; and
7.5.3 Remuneration and Appraisal Committee
Any other task delegated by the Board of Directors.
5.
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;
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".
5.
4.
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.
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;
3.
2.
Any other task delegated by the Board of Directors.
1.
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
Main authorities and duties:
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.
0/0
4/4
Board of
Directors (1)
Strategy
Committee
Special committees under the Board of Directors
Related Party
Transactions
Management
Risk and
and Consumer
Remuneration
Capital
Rights
Shareholders'
and Appraisal
Committee
Nomination
Committee
Actual times of attendance/Required times of attendance (2)
Management
Audit
Committee
Sun Yueying
5/5
7/7
18/18
Fu Gangfeng
3/3
Directors
7/7
Li Jianhong
Non-Executive Directors
Meeting
General
Protection
Committee
Committee
18/18
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.
7.4.5 Attendance of Directors at relevant meetings
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.
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.
7.4.1 Composition of the Board of Directors
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.
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.
VII Corporate Governance
7.4 Board of Directors
VII Corporate Governance
China Merchants Bank
112
111
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.
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.
Annual Report 2018
18/18
7.4.2 Appointment, re-election and removal of Directors
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).
7.4.4 Chairman of the Board of Directors and the President
Annual Report 2018
VII Corporate Governance
China Merchants Bank
114
113
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.
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 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.
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.
2/2
6/6
Zhou Song
3/3
18/18
Zhao Jun
6/6
3/3
18/18
Wong See Hong
Pan Chengwei
5/6
2/2
17/18
Leung Kam Chung, Antony
Independent Non-Executive Directors
នន
2/2
2/2
17/18
Li Menggang
4/4
2/2
4/4
ཟུཟུཐཱ་
་ ཌཱུ➢ང➢
3/3
6/6
16/16
16/16
Wong Kwai Lam (resigned)
0/0
2/2
Liu Qiao
2/2
Pan Yingli (resigned)
1/1
4/4
6/6
Wang Daxiong
4/4
6/6
18/18
Su Min
6/6
18/18
17/18
6/6
2/2
18/18
Hong Xiaoyuan
1/1
5/5
Zhang Jian
1/2
6/6
0/2
18/18
Li Hao
3/3
7/7
18/18
Tian Huiyu
៩ ន ន ន នននន
Executive Directors
2/2
2/2
2/2
1/1
2/2
2/2
2/2
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.
VII Corporate Governance
129
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.
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, and those committees were chaired by an External Supervisor.
7.7.4 Operation of the special committees under the Board of Supervisors
120
China Merchants Bank
Annual Report 2018
VII Corporate Governance
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.
Main authorities and duties:
1.
2.
3.
4.
5.
6.
Annual Report 2018
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.
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.
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.
Investor relations
7.11 Communication with shareholders
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.
7.10 Misconduct reporting and monitoring
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.
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, 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.
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.
VII Corporate Governance
China Merchants Bank
Annual Report 2018
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.
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.
7.8 Trainings and investigations/surveys conducted by Directors and
Supervisors during the reporting period
7.9 Company secretary under Hong Kong Listing Rules
124
8.
Inspect, supervise and review the major related party transactions and continuing related party transactions,
and control the risks associated with related party transactions;
7.7 Board of Supervisors
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.
7.7.1 Composition of the Board of Supervisors
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.
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.
During the reporting period, the Board of Supervisors of the Company had no objection to each of the supervisory
matters.
121
122
China Merchants Bank
VII Corporate Governance
China Merchants Bank
Annual Report 2018
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; and
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;
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;
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;
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;
Identify related parties of the Company pursuant to relevant laws and regulations;
1.
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;
2.
China Merchants Bank
Annual Report 2018
Making inquiries to the Board of Directors
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
128
China Merchants Bank
VIII Report of the Board of Supervisors
Report of 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.
Independent opinions on relevant matters from the Board of Supervisors:
Lawful operation
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.
Authenticity of financial statements
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.
Use of proceeds
During the reporting period, the use of proceeds of the Company was consistent with such usages as committed in the
Prospectus of the Company.
Purchase and sale of assets
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.
Related party transactions
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.
7.17 Internal audit
125
Annual Report 2018
VII Corporate Governance
China Merchants Bank
126
VII Corporate Governance
7.14 Statement made by the Directors about their responsibility for
the financial statements
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 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.
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).
7.16 Internal control
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.
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.
China Merchants Bank
VII Corporate Governance
Annual Report 2018
7.15 Compliance with the Corporate Governance Code
Implementation of resolutions passed at the general meeting(s)
Annual Report 2018
Internal control
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.
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.
Convening of extraordinary general meeting
7.12 Shareholders' rights
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.
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.
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.
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).
manner.
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".
VII Corporate Governance
7.13 Major amendments to the Articles of Association of the Company
Making proposals at the shareholders' general meeting
Annual Report 2018
Chairman of the Board of Supervisors
22 March 2019
China Merchants Bank
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.
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.
IX Financial Statements
Liu Yuan
Financial Statements
By Order of the Board of Supervisors
Financial statements and notes thereto
Unaudited supplementary financial information
(See Annexures)
130
135
284
Independent Auditor's Report
IX Financial Statements
China Merchants Bank
Annual Report 2018
DTTHK(A)(19)100046
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.
Other Information
How our audit addressed the key audit matter
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.
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 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.
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.
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.
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.
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.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
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.
The structured entities include the wealth management
products, asset management schemes, mutual funds,
etc. as disclosed in note 65 in the consolidated financial
statements.
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.
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.
о
Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements (continued)
DTTHK(A)(19)100046
Responsibilities of Directors and Those Charged with Governance for
the Consolidated Financial Statements
IX Financial Statements
134
133
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.
Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements
Those charged with governance are responsible for overseeing the Group's financial reporting process.
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.
China Merchants Bank
Annual Report 2018
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.
Key Audit Matters
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.
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.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors of the 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.
China Merchants Bank
IX Financial Statements
Annual Report 2018
DTTHK(A)(19)100046
Key Audit Matters (continued)
Key audit matter
Expected credit loss allowance of loans and advances
to customers at amortised cost and debt investments
at amortised cost
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.
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.
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.
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.
How our audit addressed the key audit matter
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.
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)
Consolidation of Structured Entities
DTTHK(A)(19)100046
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.
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.
Annual Report 2018
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.
Net fee and commission income
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.
166,025
Operating profit before impairment losses
(70,431)
(81,110)
10
Operating expenses
149,608
220,039
Operating income
N/A
(350)
- Disposal of financial instruments at amortised cost
11,169
20,271
247,135
9
Expected credit losses
(60,829)
3
37
27
995
1,272
26
14
Income tax
Share of profits of associates
Share of profits of joint ventures
(4)
(8)
Impairment losses on other assets
(59,922)
Profit before taxation
Other net income
64,018
66,480
2017
2018
Notes
For the year ended 31 December 2018
(Expressed in millions of Renminbi unless otherwise stated)
Consolidated Statement of Profit or Loss
Annual Report 2018
Interest income
IX Financial Statements
22 March 2019
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
The engagement partner on the audit resulting in the independent auditor's report is Eric Tong.
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.
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.
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.
China Merchants Bank
Interest expense
Net interest income
Fee and commission income
Basis for Opinion
(5,890)
(6,566)
Fee and commission expense
69,908
73,046
8
144,852
160,384
(97,153)
(110,527)
7
242,005
270,911
6
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.
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.
(6,902)
Opinion
year 2017
(iv) Distribution to perpetual capital
instruments
63
(v) Proposed dividends for the year 2018
(vi) Dividends paid for preference shares
for the
125
(34)
(34)
7,523
7,621
(40,510)
2,522
125
(22,844)
(iii) Dividends declared and paid
general reserve
(a) Net profit for the year
(b) Other comprehensive income for the year 16
Total comprehensive income for the year
(c) Capital contribution from equity holders
(i) Non-controlling shareholders'
contribution to non-wholly
52
owned subsidiaries
(d) Profit appropriations
(i) Appropriations to statutory
surplus reserve
51
7,523
(ii) Appropriations to regulatory
(ii) Decrease in non-controlling interests
Changes in equity for the year
(64)
(7,523)
(4)
At 31 December 2018
25,220
34,065 67,523
5,532
63 53,682
4
78,542 250,654
1,130 540,118
1,158
2,329 543,605
The notes form part of these consolidated financial statements.
139
China Merchants Bank
23,707
(4) (22,912)
at FVTOCI
(e) Transfers within equity upon disposal
7,621
(7,621)
1
(21,185)
(21,185)
(4) (21,189)
of equity Instruments designated
(64)
69
(23,707)
23,707
(1,659)
(1,659)
(1,659)
(64)
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.
At 1 January 2018
91
Subtotal
capital
interest Total
70,921 219,878
21,185
(843) 480,210
reserve
1,170
3
2,368
(9,270)
(6,902)
106,497
25,220
2,012 483,392
34,065 67,523
profits appropriations
reserve reserve reserve
(3,812) (86) 46,159
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
reserve
Annual Report 2018
Non-controlling interests
Regulatory
general Retained
Proposed
Perpetual Non-
profit Exchange
debt controlling
IX Financial Statements
policy changes
(1,444)
70,921
149
1,973
9,094
(12)
35 9,117
6,972
6,972
149
1,973
89,654
52
350
230 89,936
91
80,560
(86) 46,159
195 80,819
80,560
210,608
21,185
(843) 473,308
1,170
2,012 476,490
6,976
64
149 7,523
40,046
2,522
1,973 66,810
(12)
317 67,115
80,560
7,621
90,680
3.13
(25,678)
405,314
2017
(Restated)
2018
Notes
Total equity
- Perpetual debt capital
- Non-controlling interest
Non-controlling interests
Total equity attributable to shareholders of the Bank
Exchange reserve
Proposed profit appropriations
Retained profits
Regulatory general reserve
Surplus reserve
Hedging reserve
Investment revaluation reserve
Capital reserve
414,838
- Preference shares
34
439,118
N/A
39
4,064,345
4,427,566
38
125,620
78,141
37
21,857
36,570
61(f)
26,619
44,144
36
272,734
203,950
35
470,826
Other equity instruments
Share capital
Equity
32,568
33
50,120
58,374
32
9,954
9,954
31
The notes form part of these consolidated financial statements.
Total assets
Other assets
Deferred tax assets
Goodwill
7,255
9,150
30
49,812
23,248
6,745,729
6,297,638
137
Total liabilities
Other liabilities
Deferred tax liabilities
Debt securities issued
Provision
Contract liabilities
Tax payable
Salaries and welfare payable
36,501
Interest payable
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
138
Deposits from customers
56,206
40(a)
8,020
1,170
1,158
63(a)
2,012
2,329
3,182
3,487
480,210
540,118
(843)
1,130
54
21,185
23,707
53(b)
219,878
250,654
543,605
6,745,729
70,921
483,392
Total equity and liabilities
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
Notes
Other
2018
Adjustments of application of accounting
At 31 December 2017
(Expressed in millions of Renminbi unless otherwise stated)
For the year ended 31 December 2018
Consolidated Statement of Changes in Equity
Annual Report 2018
IX Financial Statements
China Merchants Bank
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.
6,297,638
78,542
52
46,159
69,318
6,202,124
45
1,070
1,211
32
296,477
424,926
44
450
5,665
43
N/A
5,607
42
26,701
20,411
41
79,896
5,814,246
40
46
53,682
51
(86)
63
50
(3,812)
5,532
49
8,475
67,523
48
34,065
34,065
47
34,065
34,065
25,220
25,220
67,523
15
29
2,061
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
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
16
reserve
9,117
Attributable to:
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
23
9,094
Total comprehensive income for the year
Non-controlling interests
Equity shareholders of the Bank
(7,691)
Available-for-sale financial assets: net movement in fair value
comprehensive income
instruments measured at fair value through other
135
488
259
70,150
80,560
70,638
80,819
The notes form part of these consolidated financial statements.
2.78
17
Basic and diluted (RMB)
Earnings per share
Non-controlling interests
Equity shareholders of the Bank
Attributable to:
Profit for the year
(20,042)
136
China Merchants Bank
IX Financial Statements
Annual Report 2018
Net changes in expected credit losses of debt
N/A
6,243
Fair value gain on debt instruments measured at fair value
through other comprehensive income
44
(36)
26
comprehensive income
IX Financial Statements
Items that may be reclassified subsequently to profit or loss
Equity-accounted investees share of other
Other comprehensive income for the year
Profit for the year
2017
70,638
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
after tax and reclassification adjustments
1,612
Annual Report 2018
At 31 December 2018
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
N/A
421,070
24(c)
comprehensive income
Debt investments at fair value through other
N/A
916,012
24(b)
Debt investments at amortised cost
383,101
18,916
Held-to-maturity investments
N/A
28
20
249
27
5,183
8,622
26
Intangible assets
Property and equipment
Investment properties
Interest in associates
Interest in joint ventures
572,241
N/A
24(g)
Debt securities classified as receivables
558,218
24(f)
34,220
61(f)
Derivative financial assets
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
Cash
Assets
2017
(Restated)
2018
Notes
(Expressed in millions of Renminbi unless otherwise stated)
100,160
76,918
Placements with banks and other financial institutions
20
64,796
330,302
24(a)
Investments at fair value through profit or loss
28,726
N/A
23
Interest receivable
Consolidated Statement of Financial Position
3,414,612
22
Loans and advances to customers
252,550
199,386
21
Amounts held under resale agreements
154,628
313,411
3,749,949
Fair value gain on equity instruments measured at fair value
through other comprehensive income
130
4,395
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.
(2) Basis of measurement
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.
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.
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.
143
144
China Merchants Bank
Annual Report 2018
2.
IX Financial Statements
Basis of preparation of consolidated financial statements (continued)
(2) Basis of measurement (continued)
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;
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 period are discussed in
Note 5.
3. Application of new and amendments to IFRSS
New and revised IFRSS effective in the current period applied by the Group
IFRS 9
IFRS 15
IFRIC 22
Amendments to IFRS 2
Amendments to IFRS 4
(1)
Amendments to IAS 40
Amendments to IAS 28
Basis of preparation of consolidated financial statements
Statement of compliance and basis of preparation
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.
4,928
(4,219)
56(a)
543,683
460,425
Cash flows from operating activities include:
Interest received
Interest paid
The notes form part of these consolidated financial statements.
214,843
188,045
95,349
83,869
China Merchants Bank
Annual Report 2018
IX Financial Statements
Notes to the Financial Consolidated Statements
For the year ended December 31, 2018
(Expressed in millions of Renminbi unless otherwise stated)
1.
(1)
Organisation and principal activities
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.
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 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.
(2) Principal activities
2.
Financial Instruments
Revenue from Contracts with Customers and the related Amendments
Foreign Currency Transactions and Advance Consideration
Classification and Measurement of Share-based Payment Transactions
(22)
76,896
institutions
IAS 39
Remeasurement: ECL
IFRS 9
154,628
(49)
154,579
Amounts held under resale agreements
IAS 39
Remeasurement: ECL
IFRS 9
252,550
(610)
251,940
Loans and advances to customers at amortised cost
IAS 39
3,414,612
Transfer to loans and advances to customers at
FVTOCI (note (i))
(136,918)
Remeasurement: ECL
(923)
IFRS 9
76,918
2018
Reclassification Remeasurement
2017
Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
Transfers of Investment Property
As part of the annual Improvements to IFRS standards 2014-2016 Cycle
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.
(1)
Impacts and changes in accounting policies of application on IFRS 9 Financial Instruments and the
related amendments
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.
Accounting policies resulting from application of IFRS 9 are disclosed in note 4(5).
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
532,112
(continued)
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
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:
Balances with banks and other financial institutions
IAS 39
Remeasurement: ECL
IFRS 9
Placements with banks and other financial
IAS 39
IFRS 9
31 December
1 January
(1)
3,276,771
460,425
78,330
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
803,283
Investments and net gains received from investments
48,692
52,205
Payment for the purchase of subsidiaries, associates, joint venture
(2,154)
(606)
Payment for the purchase of properties and equipment and other assets
Proceeds from the disposal of properties and equipment and other assets
(17,492)
(16,336)
2,173
Proceeds from the disposal of subsidiaries, associates, joint venture
Proceeds from other investing activities
3,868
9
Cash generated from operating activities before tax
(48,130)
(52,042)
14,530
13,436
(37)
(1,272)
(995)
(196)
(127)
91,162
(25,205)
(375,451)
(322,105)
(14,437)
(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
20,833
191
67
Net cash generated from(used in) investing activities
1,785
19,718
Repayment of issued debt securities
(15,590)
Repayment of negotiable interbank certificates of deposits
(342,201)
(30,186)
(569,088)
Repayment of certificates of deposit
(28,389)
(11,916)
Payment for acquiring additional non-controlling equity
(34)
(32)
Dividends paid
Interest paid on financing activities
Payment for other financing activities
(22,912)
(18,692)
(11,813)
(14,483)
(431)
Net cash generated from financing activities
Cash and cash equivalents as at 1 January
Effect of foreign exchange rate changes
Cash and cash equivalents as at 31 December
94,333
22,663
Net increase/decrease in cash and cash equivalents
2,921
Proceeds from other financing activities
495
125
(84,471)
The notes form part of these consolidated financial statements.
141
142
China Merchants Bank
IX Financial Statements
Annual Report 2018
Note
2018
2017
Financing activities
Proceeds from the issue of debt securities
(67,468)
73,029
Proceeds from the issue of negotiable interbank certificates
of deposits
407,328
559,795
Proceeds from the issue of certificates of deposits
32,300
19,086
Proceeds from the issue of perpetual debt capital
1,170
Proceeds from the issue of preferred shares
34,065
Proceeds from non-controlling shareholders
52,449
(48,267)
Loans and advances to customers at FVTOCI
From loans and advances to customers at amortised
cost (note (i))
210,608
147
148
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)
(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.
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.
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.
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.
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.
(vii)
(9,270)
The Group recognised a loss allowance for ECL on precious metals lease which are subject to impairment under IFRS 9.
219,878
Remeasurement
IFRS 9
23,272
Deferred tax assets
IAS 39
50,120
Remeasurement
IFRS 9
2,211
52,331
Provision
IAS 39
Remeasurement: ECL
IFRS 9
450
4,824
5,274
Investment revaluation reserve
IAS 39
(3,812)
Remeasurement
2,368
IFRS 9
(1,444)
Retained profits
IAS 39
IFRS 9
China Merchants Bank
IX Financial Statements
Annual Report 2018
135
754
22
Reclassification
(15)
15
455
(531)
(4,302)
(93)
Amounts remeasured through
opening retained profits
923
2,670
4,824
22
49
610
446
546
(17)
Amounts remeasured through
investment revaluation
reserve
165
990
116
93
4,302
531
3. Application of new and amendments to IFRSS (continued)
New and revised IFRSS effective in the current period applied by the Group
(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.
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:
Placements
with banks
Loans and
advances to
customers at
amortised cost
Loans and
advances to
customers at
FVTOCI
Debt
instruments
at FVTOCI
Debt
investments
(100)
Financial
guarantee
contracts
and credit Available-for-sale
Debt securities
Balances with
banks and
commitment
financial assets
classified as Held-to-maturity other financial
receivables investments institutions
and Amounts held
other financial under resale
institutions agreements
Interest Precious
receivable
metals
At 31 December 2017
- IAS 39
150,432
at amortised
cost
IAS 39
Transfer to Equity investments designated at FVTOCI
IAS 39
2017
Reclassification Remeasurement
1 January
2018
Available-for-sale financial assets
IAS 39
Transfer to Investments at FVTPL (note (ii))
Transfer to Debt investments at FVTOCI (note (iv))
Transfer to Equity investments designated at FVTOCI
Transfer to Debt investments at amortised cost
IFRS 9
383,101
(49,055)
(331,498)
(1,648)
(900)
Held-to-maturity investments
IAS 39
558,218
Transfer to Debt investments at amortised cost (note (vi))
IFRS 9
(558,218)
Debt securities classified as receivables
IAS 39
Transfer to Investments at FVTPL (note (iii))
Transfer to Debt investments at FVTOCI
Transfer to Debt investments at amortised cost (note (v))
IFRS 9
572,241
(205,657)
(1,540)
31 December
(365,044)
IFRS 9
(1.1) Impacts from classification and measurement (continued)
136,918
Remeasurement: from amortised cost to fair value
(note (i))
(90)
IFRS 9
136,828
Investments at FVTPL
IAS 39
From available-for-sale financial assets (note (ii))
From debt securities classified as receivables (note (iii))
Remeasurement: from amortised cost to fair value
(note (iii))
IFRS 9
64,796
49,055
205,657
(917)
318,591
145
146
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)
(1)
Impacts and changes in accounting policies of application on IFRS 9 Financial Instruments and the
related amendments (continued)
IAS 39
Debt investments at FVTOCI
IAS 39
From Available-for-sale financial assets (note (iv))
From Debt securities classified as receivables
Remeasurement: from amortised cost to fair value
IFRS 9
(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)
Interest receivable
Remeasurement: ECL
IAS 39
IFRS 9
Precious metals
IAS 39
Remeasurement: ECL (note (vii))
IFRS 9
IAS 39
IFRS 9
31 December
1 January
2017 Reclassification Remeasurement
2018
28,726
9,309
(546)
28,180
17
9,326
Other assets
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
331,498
1,540
342
333,380
Equity investments designated at FVTOCI
IAS 39
From Available-for-sale financial assets
From other assets
Remeasurement: from cost to fair value
IFRS 9
1,648
100
1,177
2,925
23,372
Debt investments at amortised cost
From Available-for-sale financial assets
900
From Held-to-maturity investments (note (vi))
558,218
From Debt securities classified as receivables (note (v))
365,044
Remeasurement: ECL
Remeasurement: from fair value to amortised cost
(2,670)
2
IFRS 9
921,494
China Merchants Bank
IAS 39
Deposits from customers
Other liabilities
Loans and advances to customers
instruments
(d) Profit appropriations
(i) Appropriations to statutory
surplus reserve
51
(ii) Appropriations to regulatory
general reserve
(iv) Issuance of perpetual capital
52
for the year 2016 (note(i))
495
495
(32)
(32)
34,065
(ii) Dividends declared and paid
34,065
47
shareholders
29
460 62,947
34,065
Other assets
1,170
463 35,698
(b) Other comprehensive income for the year 16
Total comprehensive income for the year
(c) Capital contribution from equity holders
(i) Non-controlling shareholders'
contribution to non-wholly
owned subsidiaries
25(iv)
(ii) Decrease in non-controlling interests
(ii) Capital injection from preference
34,065
62,458
1,170
6,451
(v) Proposed dividends for the year 2017
(21,185)
21,185
At 31 December 2017
25,220
34,065 67,523
(29)
(3,812)
70,921 219,878
21,185
(843) 480,210
1,170
2,012 483,392
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.
(86) 46,159
(29)
instruments
(iv) Distribution to perpetual capital
3,083
(30,719)
2,522
(18,663)
(29)
77 (18,615)
6,451
(6,451)
3,083 (3,083)
.
.
(18,663)
(18,663)
1
77 (18,586)
1,170
(2,359)
70,150
(67)
(a) Net profit for the year
IX Financial Statements
2017
Total equity attributable to equity shareholders of the Bank
Other
Investment
Changes in equity for the year
Regulatory
Share
equity Capital
revaluation Hedging Surplus
general Retained
profit Exchange
Non-controlling interests
Proposed
At 1 January 2017
China Merchants Bank
Annual Report 2018
140
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
Perpetual Non-
debt controlling
Notes
capital
3,083 39,431
2,522
(2,359)
77,860
1,170
1,000 80,030
70,150
70,150
29
459 70,638
(5,266) (67)
(2,359)
(7,692)
1 (7,691)
(5,266)
(67) 6,451
China Merchants Bank
(5,266)
1,012 403,362
instruments
reserve
reserve reserve reserve
reserve profits
appropriations
reserve
Subtotal
capital interests Total
25,220
67,523
1,454
(19) 39,708
67,838 180,447
18,663
1,516 402,350
34,065
IX Financial Statements
34,065
- Share of profits of associates
5,270
- Depreciation of properties and equipment and investment properties
(561)
(307)
- Unwind of discount
(126)
1,585
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
Consolidated Cash Flow Statement
Annual Report 2018
5,062
- Amortisation of other assets
- Impairment losses on investments and other assets
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 joint ventures
- Net gains on disposal of properties and equipment
Changes in:
Balances with central bank
1,005
23,148
Total assets
6,297,638
(2,078)
6,295,560
Annual Report 2018
152
China Merchants Bank
IX Financial Statements
(100)
3. Application of new and amendments to IFRSS (continued)
New and revised IFRSS effective in the current period applied by the Group
(continued)
151
23,248
1,612
52,331
Deferred tax assets
20
20
1,612
49,812
49,812
7,255
7,255
9,954
9,954
2,211
(3)
50,120
Other assets
Impacts opening consolidated statement of financial position arising from the application of all new
standards, amendments (continued)
Cash
other financial institutions
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
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.
31 December
2017
1 January
IFRS 9
IFRS 15
2018
Assets
154,628
Goodwill
16,412
Precious metals
9,309
17
9,326
Balances with central bank
600,007
600,007
Balances with banks and
other financial institutions
76,918
(22)
76,896
Placements with banks and
16,412
China Merchants Bank
Intangible assets
Investment properties
4.
IX Financial Statements
China Merchants Bank
Annual Report 2018
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.
Using hindsight, such as in determining the lease term if the contract contains options to extend or terminate
the lease.
Exclude initial direct costs from the measurement of the right-of-use asset at the date of initial application.
Applying a single discount rate to a portfolio of leases with reasonably similar characteristics.
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:
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.
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.
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 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.
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.
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 Leases
Standards and amendments that are not yet effective and have not been
adopted by the Group (continued)
3. Application of new and amendments to IFRSS (continued)
Annual Report 2018
IX Financial Statements
China Merchants Bank
154
Principal accounting policies
(1) Subsidiaries and non-controlling interests and 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 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.
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
whether the decisions about the joint ventures' relevant activities require the unanimous consent of the
parties sharing control.
whether any party within the joint arrangement cannot control the relevant activities of the joint ventures;
When judge whether there is a joint control, the Group usually considers the following cases:
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.
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.
(2) Joint ventures
Principal accounting policies (continued)
4.
153
Annual Report 2018
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.
Business combination
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.
IX Financial Statements
Property and equipment
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.
a date to be determined
other comprehensive income
333,380
333,380
Equity investments designated
at fair value through other
comprehensive income
2,925
2,925
Available-for-sale financial assets
383,101
(383,101)
Held-to-maturity investments
558,218
(558,218)
Debt securities classified as receivables
572,241
(572,241)
Interests in joint ventures
5,183
5,183
Interests in associates
Debt investments at fair value through
921,494
921,494
Debt investments at amortised cost
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.
Amounts held under resale agreements
252,550
(610)
251,940
Loans and advances to customers
3,414,612
(1,013)
3,413,599
Interest receivable
Note (i)
28,726
28,180
Investments at fair value through
profit or loss
64,796
253,795
318,591
Derivative financial assets
154,579
18,916
18,916
(546)
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.
Provision
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.
5,819,070
4,824
5,814,246
75,652
(4,244)
79,896
Equity
Total liabilities
Other liabilities
1,070
1,070
Deferred tax liabilities
296,477
296,477
Debt securities issued
5,274
4,824
Share capital
Liabilities
25,220
Other equity instruments
46,159
Surplus reserve
(86)
(86)
Hedging reserve
(1,444)
2,368
(3,812)
Investment revaluation reserve
67,523
67,523
Capital reserve
34,065
34,065
Including: Preference shares
34,065
34,065
25,220
46,159
31 December
IFRS 9
Deposits from customers
4,064,345
21,857
125,620
4,064,345
Interest payable
36,501
36,501
Salaries and welfare payable
8,020
8,020
Tax payable
26,701
26,701
Contract liabilities
4,244
4,244
125,620
2017
agreements
21,857
IFRS 15
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
272,734
Financial liabilities at fair value
through profit or loss
26,619
- 439,118
272,734
26,619
Derivative financial liabilities
Amounts sold under repurchase
Regulatory general reserve
70,921
70,921
Insurance Contracts
IFRS 17
1 January 2019
Annual Improvements to IFRS standards 2015-2017 Cycle
Amendments to IFRSS
1 January 2019
Long-term Interests in Associates and Joint Ventures
Amendments to IAS 28
1 January 2019
Plan Amendment, Curtailment or Settlement
Amendments to IAS 19
1 January 2019
Uncertainty over Income Tax Treatments
IFRIC 23
1 January 2019
Prepayment Features with Negative Compensation
Amendments to IFRS 9
1 January 2021
Leases
Sale or Contribution of Assets between an Investor and
its Associate or Joint Venture
Definition of Material
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 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 and changes in accounting policies of application on IFRS 15
(2)
(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
150
450
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.
1 January 2020
Amendments to IAS 1
and IAS 8
Amendments to IFRS 3
Amendments to IFRS 10
and IAS 28
Definition of a Business
1 January 2019
on or after
period beginning
3,182
Non-controlling interests
473,308
(6,902)
480,210
shareholders of the Bank
Total equity attributable to equity
(843)
(843)
Exchange reserve
21,185
21,185
Proposed profit appropriations
210,608
(9,270)
219,878
Retained profits
3,182
- Non-controlling interests
2,012
2,012
Effective for annual
IFRS 16
Standards and amendments that are not yet effective and have not been
adopted by the Group
3. Application of new and amendments to IFRSS (continued)
Annual Report 2018
IX Financial Statements
China Merchants Bank
6,295,560
The accounting policies resulting from application of IFRS 15 are disclosed in notes 4(14).
(2,078)
476,490
(6,902)
483,392
Total equity and liabilities
Total equity
1,170
1,170
- Perpetual debt capital
6,297,638
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)).
(49)
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.
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 any dividend or interest earned on the financial asset and is included in the "other net income" line item.
159
•
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 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").
•
the financial asset is held within a business model whose objective is to collect contractual cash flows; and
•
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.
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.
it has been acquired principally for the purpose of selling in the near term; or
•
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.
In addition, the Group may irrevocably designate a debt investment that meets the amortised cost or FVTOCI criteria
Debt instruments that meet the following conditions are subsequently measured at amortised cost:
as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
IX Financial Statements
Annual Report 2018
4. Principal accounting policies (continued)
(5) Financial instruments (continued)
Classification and measurement of financial assets (continued)
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.
Debt instruments and loans and advances to customers classified as at FVTOCI
China Merchants Bank
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.
Amortised cost and interest income
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.
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 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)).
When judging whether there is a significant influence, the Group usually considers the following cases:
(3) Associates
4. Principal accounting policies (continued)
Annual Report 2018
IX Financial Statements
China Merchants Bank
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)).
Classification and measurement of financial assets
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.
(4) Goodwill
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.
(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
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.
Goodwill represents the excess of
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.
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.
Initial recognition
Financial instruments
4. Principal accounting policies (continued)
Annual Report 2018
(5)
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)).
IX Financial Statements
(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 recognized immediately in profit or loss as a gain on a bargain
purchase.
20 years
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
20 years
3 years
Leasehold improvements (self-owned property)
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.
3-5 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, investment property and
are accounted for in the consolidated statement of profit or loss as they arise.
(8)
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".
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.
Repossessed assets of equity instruments are detailed in note 4 (5).
China Merchants Bank
Annual Report 2018
IX Financial Statements
4. Principal accounting policies (continued)
Intangible assets
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.
Leasehold improvements (leasing property)
Land use rights are stated at cost, amortised on a straight-line basis over the respective lease periods.
(7) Repossessed assets
Motor vehicles and others
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.
Investment properties
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.
when the Group transfers substantially all the risks and rewards of ownership of the financial assets,
the Group shall derecognise 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 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.
(c)
Sales of assets on condition of repurchase
(d)
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired.
Offsetting financial instruments
Computer equipment
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.
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Annual Report 2018
4.
Principal accounting policies (continued)
(6)
Property, equipment, investment property and depreciation
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.
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
165
The amortization period of intangible assets is as follow:
(11) Impairment on tangible, intangible assets other than impairment under ECL
model (continued)
30~50 years
(11) Impairment on tangible, intangible assets other than impairment under ECL
model
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.
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.
Calculation of recoverable amount
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).
China Merchants Bank
IX Financial Statements
Annual Report 2018
4. Principal accounting policies (continued)
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:
Recognition of impairment losses
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.
(12) Precious metals
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.
(13) Financial guarantee issued, provisions and contingent liabilities
Financial guarantees issued
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).
Other provisions and contingent liabilities
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.
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.
169
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.
Insurance contract liabilities
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.
Insurance income recognition
Both the periods and method of amortisation are reviewed annually.
Core deposit
28 years
(9) Finance and operating lease
Classification
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.
Finance 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).
Operating leases
Assets leased in 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.
Land use right
Assets leased out under operating leases
167
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China Merchants Bank
IX Financial Statements
Annual Report 2018
4.
Principal accounting policies (continued)
(10) Insurance contracts
Insurance contracts classification
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.
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.
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.
Software and Others
2~20 years
(b)
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.
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
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.
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IX Financial Statements
it has been acquired principally for the purpose of repurchasing it in the near term; or
Annual Report 2018
(5)
Principal accounting policies (continued)
Financial instruments (continued)
Hedge accounting (continued)
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 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 effectiveness testing
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.
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:
.
•
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.
4.
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.
A financial liability is classified as held for trading if:
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
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
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).
Significant increase in credit risk
Financial liabilities are classified as at FVTPL when the financial liability is (i) held for trading or (ii) it is designated as
at FVTPL.
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.
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)
Annual Report 2018
IX Financial Statements
China Merchants Bank
Annual Report 2018
160
Securitisation
4. Principal accounting policies (continued)
(5) Financial instruments (continued)
Classification and measurement of financial liabilities
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.
Derivatives that do not qualify for hedge accounting
Financial liabilities at FVTPL
Specific items
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.
(5)
Financial instruments (continued)
Specific items (continued)
Equity instruments
A financial instrument is an equity instrument if, and only if, both conditions (i) and (ii) below are met:
(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
(!!)
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.
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.
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.
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.
Derecognition of financial instruments
(a)
Financial Assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)
is derecognised when:
the rights to receive cash flows from the asset have expired; or
the Group has transferred its rights to receive cash flows from the asset; or
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.
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.
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.
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.
Derecognition of financial instruments (continued)
(5) Financial instruments (continued)
4. Principal accounting policies (continued)
Annual Report 2018
IX Financial Statements
4. Principal accounting policies (continued)
China Merchants Bank
Annual Report 2018
China Merchants Bank
Cash equivalents
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.
Balances and placements with banks and other financial institutions
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
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.
4. Principal accounting policies (continued)
(5)
Financial instruments (continued)
Specific items (continued)
Resale and repurchase agreements
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".
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.
Embedded derivatives
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.
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164
IX Financial Statements
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.
14,011
Debt securities issued
12,723
Agency services fees
9,209
10,267
Remittance and settlement fees
3,568
16,727
Bank cards fees
2017
2018
Fee and commission income
8.
97,153
110,527
Interest expense on financial liabilities measured at amortised cost
13,436
14,530
6,091
Amounts sold under repurchase agreements
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).
7,294
6,019
8,802
1,271
1,980
8,679
7,961
4,608
8,718
98,386
113,698
65,864
73,954
2017
2018
Note:
and fair value through other comprehensive income.
Interest income on financial assets measured at amortised cost
12,287
- Debt investments at amortised cost
7,531
5,136
48,267
52,042
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
4,441
Deposits from customers
2018
Interest expense
7.
242,005
270,911
N/A
36,011
N/A
12,256
2017
Commissions from credit commitment and lending business
836
6,372
320
334
2,882
3,555
3,202
3,889
1,934
3,538
Total
Others
- insurance income
- rental income
Other income
Exchange gain
34
- others
2,903
N/A
- gain on disposal of bills
426
N/A
451
11,169
- Debt investments at FVTOCI
2,132
Business tax and surcharges
39,512
46,025
Subtotal
6,530
7,171
4,696
5,777
- Social insurance and corporate supplemental insurance
Others
-
28,286
33,077
- Salaries and bonuses (note (i))
2017
2018
Staff costs
10. Operating expenses
20,271
- available-for-sale financial assets
N/A
154
- 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
25,245
23,351
Commissions on trust and fiduciary activities
1,803
104
- derivatives instruments
52
- 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)
6,807
- disposal of financial instruments at amortised cost
9,734
- financial instruments at FVTPL
4,911
11,327
Investment income
167
(764)
precious metals
400
1,138
Investments
the Group's performance creates and enhances an asset that the customer controls as the Group performs; or
Placements with banks and other financial institutions
Principal accounting policies (continued)
4.
Annual Report 2018
IX Financial Statements
China Merchants Bank
172
171
(15) 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.
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;
•
The Group has a present right to payment for the services;
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.
•
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.
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.
(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;
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.
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.
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 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.
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.
(16) Foreign currencies translations
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:
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.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or
service.
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".
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.
Net Interest income
(14) Income recognition
Principal accounting policies (continued)
4.
Annual Report 2018
IX Financial Statements
China Merchants Bank
170
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.
Fee and commission income
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.
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.
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.
•
2,152
•
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.
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.
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).
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.
(17) Employee benefits
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.
IX Financial Statements
5. Significant accounting estimates and judgements (continued)
(4) Impairment under ECL model
IX Financial Statements
China Merchants Bank
176
175
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.
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 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:
Annual Report 2018
Annual Report 2018
5. Significant accounting estimates and judgements (continued)
(5) Fair value of financial instruments
Balances with banks and other financial institutions
Balances with central bank
- Discounted bills
- Retail loans
- Corporate loans
Loans and advances to customers
6. Interest income
Annual Report 2018
IX Financial Statements
China Merchants Bank
178
177
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.
(7) Impairment of goodwill
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.
(6) Income taxes
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.
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.
Amounts held under resale agreements
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.
(3)
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.
4. Principal accounting policies (continued)
Share-based payment
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.
Post employment benefits
Salaries, bonuses and other benefits are accrued in the period in which the associated services are rendered by
employees.
Salaries and staff welfare
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.
(18) 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 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.
(19) Segmental reporting
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.
(21) 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. The Group only charges a relevant
commission.
(20) Fiduciary activities
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.
De-recognition of financial assets transferred
Property, equipment and investment properties depreciation
(27)
5,062
5,270
179
(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
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.
Other general and administrative expenses (note (ii))
22,214
714
Rental expenses
4,242
983
Charge for insurance claims
244
232
4,189
Intangible assets amortization
N/A
N/A
N/A
N/A
- Net movement in fair value
reserve of available-for-sale
financial assets
N/A
- Net movement in cash flow
(7,154)
1,785
(5,369)
hedge reserve
180
(31)
149
496
N/A
6
amount
N/A
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)
Net-of-tax
(89)
Before-tax Tax benefit/ Net-of-tax
amount
(expense)
8,494
(2,251)
6,243
N/A
N/A
490
22
(2,359)
- Equity-accounted investees-share
(74)
12
(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)
N/A
N/A
N/A
332
of other comprehensive income
- Exchange difference on translation
(36)
(36)
44
44
of financial statements of foreign
operations
1,995
1,995
(67)
(2,359)
Items that will not be reclassified
subsequently to profit or loss
- Fair value gain on equity
instruments measured at fair
value through other
comprehensive income
- Remeasurement of defined
benefit scheme redesigned
through reserve
439
(107)
(a) Tax effects relating to each component of other comprehensive income
16. Other comprehensive income
Note:
IX Financial Statements
395
682
Total
60,829
59,922
15. Income tax
(a) Income tax in the consolidated statement of profit or loss represents:
Current income tax expense
- Mainland China
- Hong Kong
- Overseas
Subtotal
Deferred taxation
Total
2018
2017
32,744
N/A
374
(886)
N/A
Net movement in the hedging reserve during the year recognised
in other comprehensive income
21
43
- Realised losses
to profit or loss
N/A
- Debt investments at FVTOCI (Note 24(c))
- Available-for-sale financial assets
1,017
216
- Held-to-maturity investments (Note 24(f))
Expected credit losses relating to financial guarantees and
loan commitments
Others
389
N/A
N/A
(55)
N/A
8
- Debt securities classified as receivables (Note 24(g))
Annual Report 2018
35,849
1,129
33,977
(5,235)
(210)
3,570
(358)
1,970
37
25,678
184
20,042
(b)
(i)
The applicable income tax rate for the Group's operations in Mainland China is 25% during 2018 (2017: 25%).
(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
China Merchants Bank
811
1,574
(5,917)
22,670
90,680
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:
149
- Effects of non-deductible expenses
- Effects of different applicable rates of tax prevailing
in other jurisdictions
- Transfer out of prior deferred tax assets
- Other
Income tax expense
2018
2017
106,497
26,624
- Effects of non-taxable income
Movements relating to components of other comprehensive income are as
follows:
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
2017
The Non-Executive Directors' emoluments shown above were for their services as directors of the Bank.
Subtotal
Wang Daxiong
Zhang Jian
Su Min
Hong Xiaoyuan
Zhou Song (ii)
Fu Gangfeng
Sun Yueying
Li Jianhong
Non-Executive Directors
The Executive Directors' emoluments shown above were for their services in connection with the management of the
affairs of the Bank and the Group.
8,980
160
4,290
90
4,690
Independent Non-Executive
T
500
500
42
Li Menggang (iii)
500
Wong See Hong
500
Zhao Jun
500
500
Pan Chengwei
70
Liang Jinsong
3,870
90
3,780
42
42
42
500
500
Directors and Supervisors
Liu Qiao (iii)
8,820
4,620
China Merchants Bank
180
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
Effective portion of changes in fair value of hedging instruments
Reclassification adjustment for realised loss transferred
IX Financial Statements
Annual Report 2018
11. Directors' and Supervisors' emoluments
The emoluments of the Directors and Supervisors during the year are as follows:
(i)
RMB'000
RMB'000
Total
scheme
contributions
bonuses
RMB'000
RMB'000
in kind
4,200
Discretionary
2018
and benefits
Salaries,
allowances
Directors'
fees
RMB'000
Subtotal
Li Hao
Tian Huiyu
Executive Directors
Retirement
2018
22
Fu Junyuan (iv)
Total
The former executive, Non-Executive Directors' and Supervisors' emoluments shown above were for their services as
Directors or Supervisors of the Bank.
2,263
63
1,263
63
500
500
1,200
1,200
1,000
500
500
RMB'000
Total
contributions
RMB'000
bonuses
RMB'000
RMB'000
RMB'000
Notes:
(i)
4,284
Net movement in the equity investment revaluation reserve during the
year recognised in other comprehensive income
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
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
N/A
in kind
149
N/A
Net movement in the debt instrument revaluation reserve during the
year recognised in other comprehensive income
496
N/A
Equity instruments measured at fair value through other
comprehensive income
Changes in fair value recognised during the year
332
N/A
496
Liu Yuan
fees
Discretionary
400
400
7,655
3,284
2,152
1,723
400
400
400
Subtotal
Huang Dan
Wang Wanqing (v)
Han Zirong
Ding Huiping
Jin Qingjun
Wu Heng
Wen Jianguo
400
39
1,762
2,245
and benefits
Directors'
Salaries,
allowances
2018
Subtotal
Xu Lizhong (v)
Pan Yingli (vii)
Wong Kwai Lam (vii)
Retirement
scheme
Li Xiaopeng (vi)
Former Executive, Non-Executive
11. Directors' and Supervisors' emoluments (continued)
IX Financial Statements
Annual Report 2018
China Merchants Bank
The independent Non-Executive Directors' and Supervisors' emoluments shown above were for their services as
Directors or Supervisors of the Bank.
-222
11,161
Directors and Supervisors
17,675
to equity shareholders of the Bank (in RMB)
187
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
2018
The number of the five highest paid individuals whose emoluments fell within the following bands is set out below:
33,750
3,736
520
23,200
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.
13. Loans to Directors, Supervisors and executive officers
Loans to Directors, Supervisors and executive officers of the Group are as follows:
2018
Amounts due from banks and other financial institutions
60,052
59,252
Loans and advances to customers (Note 22(c))
2017
2018
14. Expected credit losses
Annual Report 2018
Total
IX Financial Statements
57
54
the Group outstanding during the year
Maximum aggregate amount of relevant loans made by
50
47
Aggregate amount of relevant loans made by the Group
outstanding at year end
2017
China Merchants Bank
(368)
30,014
Contributions to defined contribution retirement schemes
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).
1
1
64--|-7-
1
Discretionary bonuses (Note 11)
Salaries and other emoluments
2017
RMB'000
2018
RMB'000
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:
12. Individuals with highest emoluments
IX Financial Statements
China Merchants Bank
Annual Report 2018
22,680
184
25
1
25
5,500,001 – 6,000,000
6,000,001 -6,500,000
Total
55 |-|-||27
2017
1
1
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.
(ii)
121
- Debt investments at amortised cost (Note 24(b))
Less: Impairment allowances
- Banks
- Other financial institutions
Subtotal
Total
2017
77,034
(171)
(116)
99,851
76,918
309
N/A
100,160
76,918
2018
2017
Total
- Other financial institutions
Subtotal
- Banks
Balances outside Mainland China
(i)
(ii)
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)
60,222
2018
100,022
Interest receivable
Total
(a) Analysed by nature of counterparties
Balances in Mainland China
- Banks
- Other financial institutions
Subtotal
106
Subtotal
Investments
49,093
2,942
Exchange difference
Balance as at the end of the year
2018
2017
116
196
22
N/A
138
196
43
(80)
(10)
171
116
189
787
Charge/(release) 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
63,055
52,035
36,861
24,937
106
62
36,967
24,999
2,833
100,022
(133)
(116)
(38)
(171)
(116)
99,851
76,918
(b) Movements of allowances for impairment losses are as follows:
77,034
(67)
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.
Notes:
500
500
500
500
500
491
4,746
400
400
400
384
3,337
281
2,440
417
1,156
14,640
9,367
4,117
417
2,953
2,159
Fu Junyuan
Wen Jianguo
Wu Heng
Jin Qingjun
Ding Huiping
Han Zirong
Xu Lizhong
Huang Dan
Wong See Hong (iii)
Subtotal
| | | |
The independent Non-Executive Directors' and Supervisors' emoluments shown above were for their services as
directors or Supervisors of the Bank.
| | |│5
500
500
500
500
4,255
400
400
400
500
Liu Yuan
China Merchants Bank
IX Financial Statements
70,150
78,901
(1,659)
70,150
80,560
2017
2018
Note:
Basic and diluted earnings per share attributable
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)
Net profit attributable to equity shareholders of the Bank
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.
17. Earnings per share
Annual Report 2018
IX Financial Statements
China Merchants Bank
188
25,220
25,220
3.13
2.78
11. Directors' and Supervisors' emoluments (continued)
Former Executive, Non-Executive
Directors and Supervisors
Notes:
600,007
477,568
1,486
N/A
68,012
Annual Report 2018
2017
530,509
Total
Interest receivable
Fiscal deposits
Surplus deposit reserve (note (ii))
Statutory deposit reserve (note (i))
18. Balances with central 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.
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.
2018
438,777
36,488
2,056
247
(i)
Zhao Jun
Pan Chengwei
(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.
(iii)
(iv)
(v)
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.
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.
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.
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
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.
22,404
445
Guo Xuemeng (iv)
24,607
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
183
IX Financial Statements
(i)
Total
Retirement
scheme
bonuses contributions
RMB'000
in kind
RMB'000
Discretionary
and benefits
Directors'
fees
RMB'000
Salaries,
allowances
2017
RMB'000 RMB'000
Pan Yingli
Annual Report 2018
Executive directors
9,967
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
Wang Daxiong
Subtotal
The Non-Executive Directors' emoluments shown above were for their services as directors of the Bank.
Independent Non-Executive
Directors and Supervisors
Liang Jinsong
Wong Kwai Lam
1,147
4,746
546
5,221
Tian Huiyu
Li Hao
Subtotal
2017
Salaries,
allowances
Directors'
fees
RMB'000
and benefits
Discretionary
11. Directors' and Supervisors' emoluments (continued)
in kind
bonuses
RMB'000
Retirement
scheme
contributions
RMB'000
Total
RMB'000
4,620
4,200
8,820
601
RMB'000
(88)
16.27
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.
2.78
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
31 December
2018
31 December
2017
Changes
+/(-)%
6,745,729
6,297,638
7.12
3,933,034
3,565,044
10.32
6,202,124
5,814,246
3.13
Changes
+/(-)%
2017
2018
Il Summary of Accounting Data and Financial Indicators
Annual Report 2018
Summary of Accounting Data
and Financial Indicators
2.1 Key accounting data and financial indicators
Operating Results
Changes
(in millions of RMB, excluding percentages)
2018
2017
+/(-)%
Net operating income (1)
6.67
248,444
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
Per Share (RMB)
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
Volume Indicators
221,037
China Merchants Bank
4,400,674
8.28
Increased by 0.15
percentage point
Net interest margin
2.57
2.43
Increased by 0.14
percentage point
As percentage of net operating income
- Net interest income
64.56
65.53
Decreased by 0.97
percentage point
- Net non-interest income
35.44
34.47
Increased by 0.97
percentage point
Cost-to-income ratio(1)
31.04
30.21
Increased by 0.83
percentage point
(%)
Capital adequacy indicators under the
advanced approach
2.29
2.44
Net interest spread
percentage point
540,118
480,210
12.48
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.
(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.
China Merchants Bank
Annual Report 2018
Il Summary of Accounting Data and Financial Indicators
2.2 Financial ratios
(%)
4,064,345
Profitability indicators
2018
2017
Changes
1.24
1.15
Increased by 0.09
to shareholders of the Bank
Return on average equity attributable
16.57
16.54
percentage point
Increased by 0.03
to ordinary shareholders of the Bank
Return on average assets attributable
16
15
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.
Website: www.cmbchina.com
Hotline for complaints on customer service: 95555-7
Hotline for consumer rights protection: +86 755 8307 7333
21st Floor, Bank of America Tower, 12 Harcourt Road, Hong Kong
1.1.6 Share Listing:
A Shares: Shanghai Stock Exchange
Abbreviated Name of A Shares: CMB
Stock Code: 600036
H Shares: SEHK
Abbreviated Name of H Shares: CM BANK
Stock Code: 03968
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
Office Address: 35th Floor, One Pacific Place, 88 Queensway, Hong Kong
1.1.8 Legal Advisor as to PRC Law: Jun He Law Offices
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
E-mail: cmb@cmbchina.com
Fax: +86 755 8319 5109
Tel: +86 755 8319 8888
7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province, China
Postcode: 518040
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
China Merchants Bank
12
I Company Information
Annual Report 2018
Company Information
1.1 Company Profile
1.1.1 Registered Company Name in Chinese: RESĦRA (Abbreviated Name in Chinese: ÀRͯ)
Registered Company Name in English: China Merchants Bank Co., Ltd.
1.1.2 Legal Representative: Li Jianhong
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:
China Merchants Bank
I Company Information
Annual Report 2018
1.1.10 Newspapers and Websites Designated for Information Disclosure:
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.
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:
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.
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.
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.
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
Annual Report 2018
China Merchants Bank
Annual Report 2018
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 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 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".
I Company Information
Core Tier 1 capital adequacy ratio
14
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.
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)
Hong Kong:
website of SEHK (www.hkex.com.hk)
website of the Company (www.cmbchina.com)
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
13
Continuous Supervision Period: 12 January 2018 to 31 December 2019
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:
Strategic positioning:
Development Strategies:
Building the "Best Commercial Bank in China" with innovation-driven development,
leading retail banking and distinguished features.
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.
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.
1.2 Corporate business overview
19
Tier 1 capital adequacy ratio
Equity to total assets
30.42
Non-performing loan ratio
1.36
1.61
1.87
1.68
1.11
Core Tier 1 capital adequacy ratio under
the advanced approach
11.78
12.06
11.54
10.83
10.44
Tier 1 capital adequacy ratio under the
advanced approach
12.62
13.02
11.54
10.83
10.44
Capital adequacy ratio under the advanced
approach
15.68
15.48
27.55
27.60
30.21
31.04
25,220
543,605
6,202,124
Deposits from customers
4,400,674
Total assets
6,745,729
Total loans and advances to customers
3,933,034
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
25,220
361,758
5,113,220
3,571,698
25,220
315,060
4,416,769
3,304,438
5,474,978 4,731,829
2,824,286 2,513,919
(%)
Key Financial Ratios
13.33
Return on average assets attributable to
1.24
1.15
1.09
1.13
1.28
Return on average equity attributable to
ordinary shareholders of the Bank
16.57
16.54
17.09
19.28
Cost-to-income ratio
shareholders of the Bank
Total liabilities
12.57
China Merchants Bank
(10,679)
Share of profits of associates and joint ventures
Expected credit losses
1,309
(60,829)
998
(59,922)
311
(907)
Impairment losses on other assets
(8)
Profit before tax
106,497
Income tax
(25,678)
(4)
90,680
(20,042)
(4)
15,817
(5,636)
Net profit
80,819
70,638
10,181
Net profit attributable to shareholders of the Bank
80,560
70,150
10,410
2
(70,431)
(81,110)
Operating expenses
9,102
III Report of the Board of Directors
Annual Report 2018
Report of the Board of Directors
3.1 Analysis of overall operation
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:
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.
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.
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.
3.2 Analysis of income statement
3.2.1 Financial highlights
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.
(in millions of RMB)
12.38
2018
Changes
Net interest income
160,384
144,852
15,532
Net fee and commission income
66,480
64,018
2,462
Other net income
20,271
11,169
2017
Capital adequacy ratio(2)
Total shareholders' equity
Year end
Allowance ratio of loans (4)
4.88
4.22
Increased by 0.66
Notes: (1)
(2)
percentage point
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.
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.
(3)
Allowance coverage ratio of non-performing loans = allowances for impairment losses/balance of non-performing loans.
(4) Allowance ratio of loans = allowances for impairment losses/total loans and advances to customers.
17
18
China Merchants Bank
Annual Report 2018
Il Summary of Accounting Data and Financial Indicators
2.3 Five-year financial summary
(in millions of RMB)
Results for the year
Net operating income
2018
2017
2016
2015
2014
percentage points
percentage point
Increased by 96.07
262.11
358.18
31 December
31 December
2018
2017
Changes over
2017 year-end
11.78
12.06
Decreased by 0.28
12.62
13.02
percentage point
Decreased by 0.40
percentage point
248,444
15.68
Increased by 0.20
percentage point
8.06
7.68
Increased by 0.38
percentage point
Asset quality indicators
Non-performing loan ratio
1.36
1.61
Decreased by 0.25
Allowance coverage ratio of non-performing loans (3)
15.48
Share capital
221,037
202,302
0.84
0.74
0.69
0.67
Basic earnings attributable to ordinary
shareholders of the Bank
3.13
2.78
2.46
2.29
2.22
Diluted earnings attributable to ordinary
0.94
shareholders of the Bank
2.78
2.46
2.29
2.22
Year-end net assets attributable to ordinary
shareholders of the Bank
20.07
17.69
15.95
14.31
12.47
(in millions of RMB)
3.13
Dividend (tax inclusive)
Per Share
(RMB)
166,525
Operating expenses
81,110
70,431
65,148
67,957
61,413
Impairment losses
60,837
59,926
66,159
59,266
31,681
Profit before tax
106,497
90,680
78,963
75,079
73,431
Net profit attributable to shareholders
of the Bank
80,560
70,150
62,081
57,696
55,911
210,270
1.1.5 Principal Place of Business in Hong Kong:
N/A
N/A
(15,682)
33,815
68,107
Balance as at the beginning of the year
impaired)
impaired)
ECL)
ECL-credit
credit-
(12-month
-Stage 3
(Lifetime
ECL- not
-Stage 1
-Stage 2
(Lifetime
2018
Reconciliation of allowance for expected credit loss measured at amortised cost:
49,418
Movements of allowance for impairment losses
Total
151,340
- Stage 1
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
Transfer to
29,779
(i)
22. Loans and advances to customers (continued)
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
Loans and advances
(c)
3,507,658
Less: allowance
Annual Report 2018
IX Financial Statements
China Merchants Bank
196
195
3,414,612
7,589
2,082
3,404,941
Net loans and advances
(150,432)
3,565,044
41,520
(33,931)
(13,784)
(102,717)
15,866
2,289
136,150
(39,577)
(24,283)
(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
Transfer
29,230
22
Unwinding of discount
33,931
13,784
102,717
Balance as at the end of the year
(349)
5,519
3,195
(137)
(212)
2,324
Exchange difference
written off
Recoveries of loans and advances previously
(561)
(560)
(1)
22
Release for the year (Note 14)
10,108
Balance as at the beginning of the year
49
152
Exchange difference
7,453
7,453
Recovery of loans and advances written off
(307)
(307)
Unwinding of discount on allowance
(26,197)
(26,197)
Write-offs
(76,946)
(19,723)
(17,646)
78
70,694
279
105,978
Total
assessed
assessed
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
38,517
Balance as at the end of the year
175,078
3,563,492
6,334
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
IX Financial Statements
491,179
22.
(b)
Manufacturing
25,613
38,212
Transportation, storage and postal services
47,198
52,174
63,209
54,167
Financial concerns
Property development
2018
Operation outside Mainland China
Analysed by industry sector and category: (continued)
(i)
Analysis of loans and advances to customers (continued)
Loans and advances to customers (continued)
26,860
575,299
825,797
Telecommunications, software and IT services
46,276
61,963
Financial concerns
74,804
84,475
Construction
123,768
124,094
Leasing and commercial services
121,900
138,773
205,884
157,984
204,322
60,703
Credit cards
67,964
55,890
921,500
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
35,349
Mining
61,920
Water, environment and public utilities management
14,221
Wholesale and retail
12,505
-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
China Merchants Bank
241,305
250,552
20,940
21,696
11,376
12,720
-Stage 2
(Lifetime
ECL- not
credit-
1,747
-Stage 3
(Lifetime
ECL-credit
impaired)
52,425
3,504,733
Loans and advances to customers at FVTOCI
Loss allowances of loans and advances to
customers at FVTOCI
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
impaired)
ECL)
1,525
7,613
204
17,743
220,365
Leasing and commercial services
4,211
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
Telecommunications, software and IT services
13,934
2,001
13,444
Water, environment and public utilities management
26
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
150,432
Micro-finance loans
7,260
Residential mortgage
228,856
Corporate loans and advances subtotal
17,882
Others
419
Credit cards
248,815
China Merchants Bank
Annual Report 2018
22. Loans and advances to customers (continued)
330,302
64,796
(i)
Investments measured at FVTPL
Financial assets held for trading
2018
2017
Bonds
Government bonds
20,917
12,286
Bonds issued by policy banks
9,091
1,317
Bonds issued by commercial banks and other financial institutions
Total
17,362
N/A
Interest receivable
Financial assets at fair value through profit or loss
Notes
2018
2017
Investments measured at FVTPL
(i)
314,459
55,415
Financial assets designated at fair value through profit or loss
(ii)
13,184
9,381
Subtotal
327,643
64,796
2,659
(a)
36,085
47,605
Listed outside mainland China
8,514
9,848
Unlisted
1,082
9,086
Investments in equity, funds, precious metal contracts and others
Listed inside mainland China
Listed outside mainland China
Unlisted
84
2
121
271
3,323
35,837
Other debt securities
85,379
Bonds
5,083
Equity investments
111
32
Investments in funds
2,089
401
Long position in precious metal contracts
111
211
Others
1,217
Total
98,503
55,415
Listed inside mainland China
371
1,597,272
Total
122,183
23. Interest receivable
Debt securities
Loans and advances to customers
Others
Total
2017
15,089
10,240
3,397
28,726
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.
197
198
China Merchants Bank
130,913
IX Financial Statements
leases receivable
(2,674)
N/A
- Stage 3 (Lifetime ECL
-credit impaired)
(847)
N/A
N/A
N/A
- Individually assessed
N/A
N/A
N/A
(426)
- Collectively assessed
N/A
N/A
N/A
Net investment in finance
1,705,619
Annual Report 2018
Notes
421,070
N/A
Equity investments designated at FVTOCI
24(d)
4,015
N/A
24(e)
N/A
383,101
24(f)
N/A
558,218
24(g)
N/A
572,241
24(c)
24. Investments
Debt securities classified as receivables
Debt investments at FVTOCI
2018
2017
Financial assets at fair value through profit or loss
24(a)
330,302
64,796
Derivative financial assets
61(f)
34,220
18,916
Debt investments at amortised cost
24(b)
916,012
N/A
Held-to-maturity investments
Available-for-sale financial assets
China Merchants Bank
IX Financial Statements
Annual Report 2018
(4,787)
32,215
28,450
(6,603)
35,053
Over 5 years
65,776
(11,092)
76,868
72,389
(11,777)
84,166
(inclusive)
Over 1 year but within 5 years
32,079
27,428
(5,093)
Subtotal
(22,456)
916,012
199
(492)
not credit-impaired)
- 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
157,119
(8,126)
37,172
(4,076)
2018
The table below provides an analysis of finance lease receivable for leases of equipment in which the Group is the
lessor:
(d) Finance leases receivable
228
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)
2017
33,824
Total
Unearned
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
minimum
(46)
(8,080)
924,138
Investments in equity, funds, wealth management products and others
Unlisted
2018
22,352
2,338
173,988
1,450
14,765
1,060
3
215,956
24,303
387
173,988
17,278
(ii)
Unlisted
Financial assets designated at fair value through profit or loss
Non-standard assets -Bills
Listed inside Mainland China
24. Investments (continued)
(a) Financial assets at fair value through profit or loss (continued)
(i)
Investments measured at FVTPL (continued)
Other investments measured at FVTPL
Bonds
Bonds issued by commercial banks and other financial institutions
Other debt securities
Non-standard assets -Bills
Equity investments
Investments in funds
Wealth management products
Others
Total
Bonds
Unlisted
2018
2017
Government bonds
4,099
Unlisted
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.
(b)
Debt investments at amortised cost
Debt investments at amortised cost (i)(ii)
Interest receivable
Subtotal
Impairment losses of principal (i)(ii)(iii)
Impairment losses of interest receivable
Subtotal
Total
2018
911,348
12,790
4,762
520
7,652
5,372
520
Bonds issued by policy banks
2,310
2,571
Bonds issued by commercial banks and other financial institutions
Other debt securities
7,190
1,576
IX Financial Statements
3,684
Total
13,184
9,381
Classification
Listed inside mainland China
Listed outside mainland China
160
4,714
251,979
2017
188,822
21. Amounts held under resale agreements
Principal(a)
Impairment losses (a)(d)
Subtotal
Interest receivable
Total
2018
2017
199,918
(737)
253,304
(754)
199,181
252,550
205
N/A
Annual Report 2018
199,386
IX Financial Statements
135
Charge for the year (note 14)
Exchange difference
Balance as at the end of the year
2018
2017
135
16
49
N/A
184
16
218
119
3
405
China Merchants Bank
Balance as at the beginning of the year
252,550
2018
(737)
(754)
Total
199,181
252,550
(b) Analysed by residual maturity
2018
2017
Maturing
- Within one month (inclusive)
198,183
- Between one month and one year (inclusive)
Total
998
249,563
2,987
199,181
(95)
(a) Analysed by nature of counterparties
(508)
(229)
2017
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
(659)
252,550
Adjustments under IFRS 9
Movements of allowances for impairment losses are as follows:
Subtotal
Total
Less: Impairment allowances
- Banks
- Other financial institutions
Subtotal
Total
(b) Analysed by residual maturity
Maturing
- Within one month (inclusive)
- Between one month and one year (inclusive)
- Over one year
Total
2017
154,763
- Banks
(405)
Placements outside Mainland China
- Other financial institutions
255,683
190
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
Subtotal
Balance as at the end of last year
(135)
154,628
(225)
(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)
(98)
312,154
(180)
312,559
1,257
N/A
313,411
154,628
2017
99,487
74,098
136,274
52,747
235,761
126,845
76,798
27,918
76,798
27,918
154,763
(c) Analysed by assets types
2018
Bills
Less: Impairment allowances
- Individually assessed
- Collectively assessed
Subtotal
Net loans and advances to customers
1,779,749
Gross loans and advances to customers
833,410
312,716
147,786
1,785,295
3,565,044
(33,931)
(116,501)
491,383
Subtotal
Others
Micro-finance loans
2,009,339
3,755,264
(105,978)
(38,517)
(47,277)
(191,772)
3,563,492
31 December 2017
1,663,861
115,888
Corporate loans and advances
Discounted bills
Subtotal
Retail loans and advances
Residential mortgage
Credit cards
(150,432)
3,414,612
China Merchants Bank
IX Financial Statements
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.
(b) Analysis of loans and advances to customers
(i)
Analysed by industry sector and category:
Operation in the Mainland China
2018
2017
Property development
Manufacturing
Transportation, storage and postal services
Wholesale and retail
Production and supply of electric power,
heating power, gas and water
Bonds
262,323
(228)
1,745,925
(41)
177,367
Annual Report 2018
22. Loans and advances to customers (continued)
(a) Loans and advances to customers (continued)
(ii)
Loans and advances to customers at FVTOCI
Corporate loans and advances
Discount bills
Loans and advances to customers at FVTOCI
Loss allowances
· Stage 1 (12-month ECL)
- Stage 2 (Lifetime ECL- not credit-impaired)
- Stage 3 (Lifetime ECL- credit impaired)
31 December 2018
27,601
149,766
(187)
Net loans and advances to customers at amortised cost
Subtotal
- Stage 3 (Lifetime ECL- credit impaired)
672
610
N/A
1,364
672
(629)
82
2
737
754
191
192
China Merchants Bank
IX Financial Statements
Annual Report 2018
754
2017
2018
Balance as at the end of the year
Asset management schemes
Total
Subtotal
2018
2017
188,429
10,752
245,059
22. Loans and advances to customers
6,443
199,181
252,550
(d) 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
Exchange difference
1,048
(a) Loans and advances to customers
(Release)/charge for the year (note 14)
Gross loans and advances to customers at amortised cost (i)
Interest receivable
- Stage 2 (Lifetime ECL- not credit-impaired)
Loans and advances to customers at FVTPL
Total
403
N/A
3,749,949
3,414,612
(i)
Loans and advances to customers at amortised cost
31 December 2018
Corporate loans and advances
Retail loans and advances
Gross loans and advances to customers at amortised cost
Less: loss allowances
- Stage 1 (12-month ECL)
177,367
Loans and advances to customers at FVTOCI (ii)
N/A
3,414,612
3,755,264
8,810
3,565,044
N/A
Subtotal
3,764,074
3,565,044
(191,772)
(123)
(150,432)
loss allowances of loans and advances to customers at amortised cost (i)
loss allowances of Interest receivable
Subtotal
(191,895)
(150,432)
Loans and advances to customers at amortised cost
3,572,179
N/A
31 December 2018 31 December 2017
(3)
(42)
6
51
(9)
(7)
(17)
24
- Stage 3
impaired)
- Stage 1
Transfer to:
Total
7,065
2,555
49
4,461
Balance as at the beginning of the year
35
impaired)
ECL)
ECL-credit
not credit-
- Stage 2
(3)
6,176
- Charge for the year (note 14)
IX Financial Statements
China Merchants Bank
Annual Report 2018
4,302
(12-month
25. Particulars of principal subsidiaries of the bank
(988)
(2,227)
Balance as at the end of the year
Write-off for the year
Release for the year(note 14)
1,341
Charge for the year
Charge for the year(note 14)
2017
Movements of allowances for impairment losses are as follows:
38
576,505
Outside mainland China
(19)
(1,797)
- Release for the year (note 14)
1,707
507
907
Balance as at the beginning of the year
-Stage 3
(Lifetime
(ii)
(Lifetime ECL-
-Stage 3
(Lifetime
-Stage 2
(Lifetime ECL-
-Stage 1
(12-month
2018
Analyzed by ECL :
253,422
666,092
3,089
3,490
651,347
Unlisted
not credit-
903,268
(517)
(3,582)
911,348
Non-standard assets
Fair value for the listed bonds
Listed outside Mainland China
Unlisted
Listed inside Mainland China
Bonds
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.
Stage 3 (Lifetime ECL- credit impaired)
Stage 2 (Lifetime ECL- not credit-impaired)
(3,981)
2018
ECL)
ECL- credit
impaired)
-Stage 1
-Stage 2
Movements of allowances for impairment losses
(iii)
(b) Debt investments at amortised cost (continued)
24. Investments (continued)
Annual Report 2018
IX Financial Statements
China Merchants Bank
903,268
60
impaired)
(8,080)
(517)
443
902,765
Net debt investments at amortised cost
(3,582)
at amortised cost
Less: Loss allowances of debt investments
Total
911,348
4,041
960
906,347
Debt investments at amortised cost
(3,981)
Name of company
of the
Particulars of the
issued and paid
50.00%
50.00%
RMB2,800,000
Shenzhen
Limited company
CIGNA &CMB Life Insurance Company
Limited (note(i))
of the Bank subsidiaries Principal activity
interest
ownership
effective
incorporation Particulars of issued
and operation and paid up capital
(in thousands)
Form of business
structure
Name of joint ventures
ownership
of
Group's
Place of
of
Percentage
Percentage
44
(36)
5,183
995
Life insurance business
Merchants Union Consumer Finance
Company Limited. (note(ii))
Limited company
Shenzhen
Revenue Profit or loss
Stage 1 (12-month ECL)
Equity
Assets Liabilities
and
Cash Depreciation
and cash
Total
Other
comprehensive comprehensive
(i)
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)
1,272
Annual Report 2018
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:
Recoveries of debt previously written off
25.85% Consumer finance
24.15%
50.00%
RMB3,868,964
IX Financial Statements
Place of
incorporation
and operation
8,622
2017
Limited company
100% Banking
HKD1,161
Hong Kong
CMB Wing Lung Bank Limited
(note (iii))
Shi Shunhua
Limited company
100% Finance lease
RMB6,000
Shanghai
CMB Financial Leasing Company
Limited (note (ii))
Tian Huiyu
Limited company
100% Financial advisory
services
HKD4,129
Hong Kong
CMB International Capital Holdings
Corporation Limited (note (i))
(in millions)
Legal
representative
Economic
nature
Bank Principal activities
up capital
% of
ownership
held by the
Tian Huiyu
China Merchants Fund Management
Co., Ltd. (note (iv))
Shenzhen
RMB1,310
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
26. Interest in joint ventures
Annual Report 2018
IX Financial Statements
China Merchants Bank
206
205
(Restated)
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 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.
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.
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)
Notes:
Li Hao
Limited company
55% Asset management
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.
Total
Exchange difference
Subtotal
Available-for-sale financial assets (continued)
Movements of allowances for impairment losses are as follows:
2017
Balance as at the beginning of the year
645
Charge for the year
24
Releases for the year
Write-offs
Balance as at the end of the year
(75)
(35)
(28)
531
(f)
Held-to-maturity investments
Government bonds
Bonds issued by policy banks
Bonds issued by commercial banks and other financial institutions
Other debt securities
Subtotal
Less: impairment allowances
Total
(e)
24. Investments (continued)
IX Financial Statements
China Merchants Bank
Annual Report 2018
Other debt securities
49,703
Subtotal
333,784
Equity investments
3,301
Investments in funds
Subtotal
Less: impairment allowances
Total
Classification
Classification
Bonds
Investments in equity and funds
Listed inside mainland China
Listed outside mainland China
Unlisted
46,547
383,632
(531)
383,101
231,466
44,195
58,123
1,905
1,057
46,886
Listed inside mainland China
Listed outside mainland China
Unlisted
78,940
Listed inside mainland China
Unlisted
Government bonds
908
Bonds issued by commercial banks and other financial institutions
9,428
Other debt securities
9,817
Non-standard assets
Bills
Loans and advances to customers
290,215
261,213
Wealth management products
1,962
Creditor's beneficiary rights to other commercial banks
3,000
Subtotal
576,543
Less: impairment allowances
(4,302)
Total
Classification
572,241
Inside mainland China
income
Bonds
2017
(g) Debt securities classified as receivables
24. Investments (continued)
Fair value of listed debt securities
Movements of allowances for impairment losses are as follows:
Balance as at the beginning of the year
Charge for the year(note 14)
Exchange difference
Balance as at the end of the year
2017
330,120
202,610
25,072
509
Listed outside mainland China
558,311
554,936
2,661
714
542,523
2017
90
93
203
204
China Merchants Bank
IX Financial Statements
Annual Report 2018
(93)
558,218
Less: loss allowances
Bonds issued by commercial banks and other financial institutions
Bonds issued by policy banks
Exchange difference
32
4
36
Balance as at the end of the year
3,582
517
3,981
8,080
(c) Debt investments at FVTOCI
Debt investments at FVTOCI(i)
Interest receivable
Total
Impairment losses of debt investments at FVTOCI (ii)
Impairment losses of interest receivable
Total
2018
414,691
6,379
421,070
(1,897)
(15)
(1,912)
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.
(i)
192
200
China Merchants Bank
IX Financial Statements
538
Others
3,000
Creditor's beneficiary rights to other commercial banks
206,229
Loans and advances to customers
43,655
Bills
Non-standard assets
8,942
Other debt securities
Debt investments at FVTOCI by type :
29,602
219,275
Bonds issued by policy banks
400,107
Government bonds
Bonds
2018
Debt investments at amortised cost by type:
(i)
(b) Debt investments at amortised cost (continued)
24. Investments (continued)
Annual Report 2018
Bonds issued by commercial banks and other financial institutions
51,715
2018
220,078
(d)
Equity investments designated at FVTOCI
Repossessed equity instruments
Others
Total
Listed inside Mainland China
2018
1,445
389
63
1,897
2018
220
3,795
4,015
66
1,410
Listed outside Mainland China
Unlisted
2,539
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.
(e) Available-for-sale financial assets
2017
Government bonds
153,426
Balance as at the end of the year
Exchange difference
Charge for the year (note 14)
Balance as at the beginning of the year
Bonds issued by policy banks
60,365
Bonds issued by commercial banks and other financial institutions
Other debt securities
98,428
35,820
Total
Classification
414,691
Listed inside Mainland China
Listed outside Mainland China
Unlisted
Government bonds
292,347
71,858
201
202
China Merchants Bank
IX Financial Statements
Annual Report 2018
24. Investments (continued)
(c) Debt investments at FVTOCI (continued)
Movements of allowances for impairment losses
(ii)
Balance as at the end of last year
Adjustments under IFRS 9
50,486
income
1,445
Income tax
4,837
37
8
3
China Merchants Bank
IX Financial Statements
Annual Report 2018
28. Investment properties
2018
2017
Cost:
At 1 January
2,855
2,884
Transfers in/(out)
550
109
Disposals
(12)
Exchange difference
95
(138)
At 31 December
3,488
2,855
Accumulated depreciation:
At 1 January
1,243
1,183
Depreciation
83
134
37
comprehensive
income
207
208
China Merchants Bank
IX Financial Statements
Annual Report 2018
27. Interest in associates
2018
2017
Share of net assets
Goodwill
249
18
2
Total
Share of profits for the year
249
37
20
3
The following list contains the information of associates, which are unlisted corporate entities and are not
individually material to the Group:
2018
Others
Group's effective interest
2017
Others
Group's effective interest
Other
Total
Profit or loss
comprehensive
income
4,837
147
Transfers in/(out)
17
Fair Value
as at 31
December
Level 1
Level 2
Level 3
2018
1,781
1,781
2,864
2,864
4,645
4,645
Fair Value
as at
31 December
Level 1
Level 2
Held in Mainland China
Level 3
1,033
2017
1,033
Held overseas
2,688
2,688
Total
3,721
3,721
In estimating the fair value of the properties, the highest and best use of the properties is their current use.
209
Total
Held overseas
Held in Mainland China
The fair value hierarchy of Investment properties of the Group are listed as below:
(27)
Disposals
Exchange difference
At 31 December
Net book value:
At 31 December
At 1 January
As at 31 December 2018, no impairment was considered necessary for investment properties by the management of
the Group (2017: nil).
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:
(12)
45
(60)
1,427
1,243
2,061
92
1,612
1,701
2018
equivalents amortisation
Within 1 year (inclusive)
277
216
1 year to 5 years (inclusive)
Over 5 years
Total
251
140
2
2
530
358
1,612
11
2017
451
17,971
15,576
2,395
6,968
319
63
66
33
3332
732
945
31
75
352
473
16
38
188
116
(ii)
MUCFC:
Total
comprehensive
Cash
and cash
Depreciation
and
Assets
Liabilities
Equity
Group's effective interest
666
13,935
4,790
81
2018
CIGNA & CMB Life
45,332
39,549
5,783
16,649
1,045
(25)
1,020
303
28
Group's effective interest
22,666
Revenue Profit or loss
19,775
8,325
509
(13)
496
152
81
245
14
23
123
2017
CIGNA & CMB Life
35,942
31,152
2,891
income
3,121
(2,334)
amortisation
23,490
21,170
2,320
2,082
595
595
406
4
192
Summarised financial information of the joint ventures that are not individually material to the Group:
2018
Others
Group's effective interest
2017
Group's effective interest
Others
Other
Profit or loss
Total
comprehensive
income
1,051
137
(111)
940
(23)
114
(518)
192
398
53
equivalents
Group's effective interest
383
comprehensive
income
812
Income tax
8
MUCFC
74,748
66,855
7,893
6,956
1,253
2018
2,273
10
Group's effective interest
37,374
33,428
3,946
1,253
626
1,189
3,478
4,163
4,641
46,980
MUCFC
2017
42,339
391
15
1,137
626
196
1,189
1,646
Accumulated depreciation:
87,787
6,369
At 1 January 2018
33,904
7,669
12,276
1,141
At 31 December 2018
1,401
12
14
54
180
Exchange difference
25,923
8,134
(17)
4,305
(3,006)
(487)
(256)
(18)
(252)
(19)
Disposals
(17)
Reclassification and transfers
5,136
537
1,459
576
1,344
1,220
Depreciation
27,347
5,288
1,947
7,673
(490)
professional
(19)
At 1 January 2018
Cost:
Total
others
equipment
Motor
vehicles and
(1,032)
Leasehold
equipment improvements
24,847
in progress
Construction
Land and
buildings
Aircrafts,
vessels and
29. Property and equipment
Annual Report 2018
IX Financial Statements
China Merchants Bank
210
Computer
2,482
10,165
6,829
(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
(2,094)
Exchange difference
Land and
buildings
24
Disposals
(223)
13
197
(4)
(2,831)
2,402
Reclassification and transfers
(403)
12,305
8,399
402
1,465
1,516
113
Additions
67,351
6,410
410
19,054
(7)
(912)
2,888
At 1 January 2017
Accumulated depreciation:
77,159
6,416
26,420
6,829
10,165
(411)
2,482
At 31 December 2017
(1,362)
(6)
(1,033)
(32)
(60)
(231)
Exchange difference
24,847
94
6,269
3,797
30,735
2,800
3,487
1,646
16,511
At 31 December 2018
Net book value:
31,581
1,027
5,342
4,869
8,789
9,412
At 31 December 2018
147
4
19
6
3,169
9,167
56,206
16,713
22,654
At 1 January 2017
Cost:
Total
and others
professional Motor vehicles
equipment
equipment improvements
Leasehold
At 1 January 2018
Computer
vessels and
Aircrafts,
49,812
1,128
24,473
2,524
2,492
2,482
Construction
in progress
(91)
N/A
6,810
2018
Total
Subtotal
- Time deposits
- Demand deposits
Retail customers
Subtotal
- Time deposits
Demand deposits
Corporate customers
(a) Analysed by nature of counterparties
Total
Interest payable
Principal (a)
38. Deposits from customers
Annual Report 2018
IX Financial Statements
China Merchants Bank
125,620
2017
4,400,674
26,892
4,064,345
N/A
Guarantee for acceptance bills
Guarantee for loans
(b) Customer deposits including deposits for guarantees are as follows:
4,064,345
4,400,674
1,338,522
1,562,953
366,231
503,030
972,291
78,029
1,059,923
2,837,721
1,144,021
1,022,294
1,581,802
1,815,427
2017
2018
4,064,345
4,427,566
2,725,823
Guarantee for issuing letters of credit
Total
7,853
5,162
7,769
120,423
70,260
5,468
114,955
69,089
1,171
2017
2018
125,620
78,141
N/A
125,620
78,029
112
2017
2018
(b) Analysed by assets type
Total
Subtotal
35
7,769
5,197
78,029
Discounted bills
85,571
70,176
Subtotal
928
1,917
- Other debt securities
4,470
5,469
40,049
- Bonds issued by commercial banks and other financial institutions
21,399
- Bonds issued by policy banks
31,900
41,391
- PRC government bonds
Debt securities
2017
2018
125,620
48,273
Deposit for letters of guarantee
Others
Total
customers and
other assets
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
1,764
1,260
543
on loans and
advances to
Impairment
allowances
Note:
At 31 December 2017
(19)
(2,371)
Exchange difference
5
N/A
(31)
(26)
At 31 December 2018
51,718
17,085
(1,437)
N/A
4,646
325
57,163
At 1 January 2017
Recognised in profit or loss
Recognised in other comprehensive
Income
Exchange difference
1,911
1,751
44
1,795
1,820
2017
Total
Customer deposits and others
Issued debt securities
39. Interest payable
189,935
163,962
20,417
34,681
19,054
46,107
19,035
12,974
27,931
20,908
78,123
64,919
2017
2018
44,429
- Other financial institutions
36,501
219
(5)
41,647
8
55
57
1,857
1,308
3,884
354
49,050
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.
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.
IX Financial Statements
Annual Report 2018
33. Other assets
2018
2017
(Restated)
Amounts pending for settlement
9,344
7,818
Interest receivable
China Merchants Bank
N/A
- Banks
Subtotal
439,118
470,826
N/A
1,818
439,118
2017
Total
Interest payable
2018
469,008
Principal(a)
34. Deposits from banks and other financial institutions
IX Financial Statements
China Merchants Bank
Annual Report 2018
216
215
The Group plans to dispose of the repossessed assets by auction, bid or transfer.
(ii)
In 2018, the Group has disposed of repossessed assets with a total cost of RMB143 million (2017: RMB73 million).
(i)
(a) Analysed by nature of counterparties
2018
2017
In Mainland China
469,008
9,929
11
32
7,185
9,897
431,922
459,079
359,598
Note:
350,347
108,732
Total
Subtotal
Other financial institutions
- Banks
Outside Mainland China
Subtotal
- Other financial institutions
- Banks
72,324
439,118
868
(646)
88
112
Premium receivables
3,054
2,416
Prepayment for lease improvement and other miscellaneous items
207
209
Recoverable from reinsurers
607
794
Guarantee deposits
868
597
Repossessed assets (note (a))
1,109
1,117
Prepaid lease payments
7,104
Post-employment benefits
- Defined benefit plan (Note 40(b))
31
109
(188)
1,514
785
488
18
1,026
767
2017
2018
597
Net repossessed assets
Total
Others
Residential properties
(a) Repossessed assets
9,388
23,248
32,568
Total
15,060
Others
Less: impairment allowances
35. Placements from banks and other financial institutions
Principal (a)
Interest payable
Total
- Debt securities issued
Outside Mainland China
- Certificates of deposit issued
- Precious metal contracts with other banks
- Others
In Mainland China
2017
2018
(b) Financial liabilities designated at fair value through profit or loss
11,389
18,962
64
1,090
11,325
17,872
2017
2018
26,619
44,144
9,663
7,688
2,879
118
- Other financial institutions
- Banks
In Mainland China
(a) Analysed by nature of counterparties
Total
Interest payable
Principal (a) (b)
37. Amounts sold under repurchase agreements
Annual Report 2018
N/A
IX Financial Statements
218
217
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.
15,230
25,138
4,239
9,977
3,185
2,619
China Merchants Bank
44
15,230
25,138
122,305
88,862
81,876
48,311
2017
2018
272,734
N/A
272,734
2017
2018
202,974
976
203,950
130,187
Total
- Other financial institutions
- Banks
Outside Mainland China
Subtotal
- Other financial institutions
- Banks
In Mainland China
(a) Analysed by nature of counterparties
Total
Subtotal
Outside Mainland China
211,167
61,565
2017
11,389
2018
18,962
Total
Short selling securities
Precious metal relevant financial liabilities
Financial liabilities held for trading
(a)
Total
Financial liabilities designated at fair value through profit or loss(b)
Interest payable
72,769
Financial liabilities held for trading(a)
Annual Report 2018
IX Financial Statements
China Merchants Bank
272,734
202,974
61,567
72,787
2
18
36. Financial liabilities at fair value through profit or loss
(2,352)
7,196
Recognised in other
2,310
737
7,255
Land
use rights
Software and
Others
Core deposits
Total
Cost:
At 1 January 2017
Additions
Transfers/disposals
Exchange difference
1,593
3,886
1,178
6,657
2,975
1,070
4,045
79
4,208
At 1 January 2018
9,150
735
358
3,397
237
706
40
983
(3)
(5)
1
(30)
3
33
662
3,319
427
4,408
Net book value:
At 31 December 2018
5,412
3,003
29
49
(13)
(3)
(2)
(26)
(30)
At 31 December 2017
426
2,613
358
3,397
Net book value:
(2)
At 31 December 2017
2,310
737
7,255
At 1 January 2017
1,302
1,778
834
3,914
211
4,208
2,613
Exchange difference
(29)
(83)
(99)
At 31 December 2017
4,634
4,923
1,095
10,652
Amortisation:
At 1 January 2017
(30)
291
344
2,743
Additions (Note 10)
138
536
40
714
Transfers/disposals
(1)
2,108
212
426
1,162
(25)
(16)
(80)
(2)
(229)
At 31 December 2017
8,134
7,673
4,305
1,947
5,288
27,347
Net book value:
At 31 December 2017
16,713
2,482
2,492
2,524
24,473
(106)
Exchange difference
(847)
(400)
3,684
comprehensive Income
909
4,987
23,494
Depreciation
1,158
1,280
656
1,128
1,118
4,915
Reclassification and transfers
27
(13)
14
Disposals
(49)
(392)
(6)
703
49,812
At 1 January 2017
3,797
3,224
1,398
4,622
Transfers
(1,785)
(1,785)
Disposals
(4)
(4)
10,652
(8)
5
5
67
77
At 31 December 2018
Amortisation:
At 1 January 2018
Additions (Note 10)
Transfers/disposals
Exchange difference
At 31 December 2018
6,074
6,322
Exchange difference
13,558
1,095
4,634
2,357
2,585
18,145
1,423
43,857
(a) As at 31 December 2018, the Group considered that there is no impairment loss on 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.
(c) As at 31 December 2018, the Group has no significant unused property and equipment (2017: nil).
China Merchants Bank
4,923
IX Financial Statements
30. Intangible assets
Land
use rights
Software
and others
Core deposits
Total
Cost:
At 1 January 2018
Additions
Annual Report 2018
China Merchants Bank
15,550
Annual Report 2018
Available-for-sale financial assets
N/A
N/A
(124)
(36)
Others
(8,524)
(1,254)
(6,932)
(1,065)
Total
(8,189)
(1,211)
(6,867)
(1,070)
213
214
China Merchants Bank
IX Financial Statements
(29)
(116)
Financial assets at FVTPL
N/A
1,579
6,413
1,419
234,353
58,374
201,347
50,120
Total
Deferred tax liabilities
Annual Report 2018
Impairment allowances on loans and
and other assets
207
34
189
31
Financial assets at FVTOCI
244
38
N/A
advances to customers at amortised cost
32. Deferred tax assets, deferred tax liabilities (continued)
(b) Movements of deferred tax are as follows:
Impairment
allowances
351
(1,308)
N/A
2,211
At 1 January 2018
43,894
921
2,208
3,884
921
354
Recognised in profit or loss
7,819
(6)
(297)
N/A
762
IX Financial Statements
8,299
21
51,261
6,980
2,247
49,050
on loans and
advances at
amortised
cost to
customers
Available-
and other
Financial
instruments
Financial
instruments
for-sale
financial
Salary and
welfare
assets
Adjustments under IFRS 9
at FVTOCI
assets
payable
Others
Total
At 31 December 2017
41,647
1,857
1,308
354
at FVTPL
Others
3,884
15,535
10,177
355
10,177
355
(579)
9,598
355
1
10,533
1
1
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
2018
2018
2018
year
WLB (note (i))
CMFM (note (ii))
Zhaoyin Internet
31. Goodwill
3,884
(note (iii))
Total
Notes:
(i)
(ii)
32. Deferred tax assets, deferred tax liabilities
(iii)
loss at 1
Net value at
As at 31
1 January
2018 & 31
As at 1
January 2018
Addition in Release in the
the year
December
December
December
Impairment
Deferred tax assets
January
2018 & 31
1,857
51,684
166,590
41,616
Financial assets at FVTOCI
(1,475)
N/A
N/A
Financial assets at FVTPL
7,758
1,940
7,428
Available-for-sale financial assets
N/A
N/A
5,381
1,344
Salary and welfare payable
4,646
Deferred tax liabilities
206,932
and other assets
(5,899)
advances to customers at amortised cost
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
58,374
50,120
(1,211)
57,163
(1,070)
49,050
2017
Deferred tax
Deferred tax
difference
2018
temporary
(taxable)
18,582
Deductible/
2017
Deductible/
(taxable)
temporary
difference
1.43%
1.43%
2017
Phase V
Phase VI
Phase VII
Phase VIII
Phase IX
Phase X
10.51
Fair value at measurement date (in RMB)
12.19
11.14
6.71
4.29%
9.67
1.43%
6.58
7.67
6.98
8.67
Expected dividends rate
3.39%
1.43%
3.39%
3.39%
3.39%
3.39%
Risk-free interest rate
1.43%
1.43%
3.39%
4.06
25.68%
30.55
Share appreciation rights life (year)
4.33
Expected dividends rate
4.29%
5.42
4.29%
6.50
25.68%
4.29%
1.43%
1.43%
1.43%
7.58
4.29%
1.43%
5.50
8.67
Risk-free interest rate
Share price (in HKD)
25.68%
25.68%
30.55
30.55
30.55
30.55
30.55
Exercise price (in HKD)
25.68%
11.71
12.34
19.49
18.06
28.60
Expected volatility
25.68%
12.28
4.42
40. Staff welfare scheme (continued)
Share appreciation rights life (year)
19.32
7.24
14.13
0.96
12.05
0.53
5.86
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).
China Merchants Bank
Annual Report 2018
IX Financial Statements
(a) Salaries and welfare payable (continued)
(iii)
Other long-term employee benefits (continued)
(3)
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.
Fair value of share appreciation rights and assumptions
19.00
14.26
19.32
7.24
4.29%
Weighted Number of share
appreciation
rights
(in million)
15.81
11.44
(2.70)
28.60
12.34
(0.08)
13.43
(3.30)
16.06
(1.30)
1.80
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.
2018
Phase V
Exercise price (in HKD)
10.70
11.26
11.33
18.48
17.05
29.15
27.59
32.46%
32.46%
32.46%
32.46%
32.46%
32.46%
Expected volatility
29.15
29.15
29.15
Phase VI
Phase VII
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
3.33
1.43%
Phase X
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.
(in
(in
(in
thousands) thousands) thousands) thousands) thousands) thousands) thousands) thousands)
Ma Wei Hua
307
Exercised
307
1,269
Li Hao
50
100
180
240
614
270
Total
(in
96
192
1,021
1,560
1,410
1,590
Phase IX
(in
5,869
2017
Phase V Phase VI Phase VII
Phase VIII
(in
(in
(in
2,065
300
1,140
991
210
240
818
52
150
210
210
210
810
113
180
price
(HKD)
180
210
240
158
Wang Liang
Lian Bo Lin
Xu Shi Qing
Liu Jian Jun
Tang Zhi Hong
46
92
158
210
210
240
956
947
Tian Hui Yu
300
300
300
330
1,230
660
1.43%
240
210
(in
(in
(in
Phase V Phase VI Phase VII Phase VIII
(in
(in
(in
(in
Li Hao
Tang Zhi Hong
Tian Hui Yu
50
100
180
thousands) thousands) thousands) thousands) thousands) thousands) thousands) thousands)
240
(in
Total
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.
223
224
China Merchants Bank
IX Financial Statements
Annual Report 2018
Exercised
40. Staff welfare scheme (continued)
(iii) Other long-term employee benefits (continued)
(4)
The number of share appreciation rights granted to members of senior management:
2018
Phase IX
Phase X
(a) Salaries and welfare payable (continued)
270
300
1,140
240
818
52
Wang Liang
150
210
210
210
810
Xu Shi Qing
150
180
330
Xiong Liang Jun
Total
240
210
158
Liu Jian Jun
991
46
92
158
210
210
240
956
947
225
300
300
330
1,155
75
210
appreciation average exercise
rights
(in million)
1,286
exercise price
81
(80)
5
Housing reserve
171
2,309
4
(2,282)
Labour union and employee
education expenses
1,616
(1,035)
1,867
Total
198
7,756
- Maternity insurance
(28)
30,126
(29,872)
6,112
3,534
(3,523)
73
4
- Medical insurance
2,108
(2,112)
38
- Injury insurance
3
29
42
balance
39,473
8,297
balance
Charge
for the year
transfers
Ending
in the year
balance
Beginning
4,554
(22,991)
5,858
62
3,337
(3,337)
62
24,295
(38,932)
Payment/
Total
China Merchants Bank
IX Financial Statements
Annual Report 2018
40. Staff welfare scheme (continued)
(a) Salaries and welfare payable (continued)
(i) Short-term employee benefits (continued)
2017
Salary and bonus
- Medical insurance
- Injury insurance
- Maternity insurance
Housing reserve
Labour union and employee
education expenses
Welfare expense
Social insurance
in the year
Ending
transfers
Post-employment benefits
defined
contribution plans (ii)
228
Other long-term employee benefits(iii)
36
8,297
3,543
30
129
(17)
49
Total
8,020
43,046
(3,642)
(42,591)
(38,932)
Ending
balance
IX Financial Statements
683
Annual Report 2018
40. Staff welfare scheme
(a) Salaries and welfare payable
(i)
39,473
2018
Beginning
Short-term employee benefits (i)
balance
7,756
Charge
for the year
Transfers
in the year
Payment/
8,475
2017
Payment/
(55)
36
7,048
35,528
(34,556)
8,020
46
Short-term employee benefits
Payment/
Salary and bonus
Welfare expense
Social insurance
Beginning
balance
5,858
62
Charge
for the year
2018
45
Other long-term employee benefits(iii)
Total
228
Beginning
balance
Charge
for the year
Transfers
Ending
in the year
balance
Short-term employee benefits (i)
Post-employment benefits - defined
contribution plans (ii)
6,319
32,691
(31,254)
7,756
684
2,791
(3,247)
3 25
1,791
(1,752)
42
2017
Payment/
Beginning
balance
Charge
Transfers
Ending
49
for the year
balance
45
46
(55)
36
(1)
in the year
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.
(17)
36
222
China Merchants Bank
IX Financial Statements
Annual Report 2018
40. Staff welfare scheme (continued)
(a) Salaries and welfare payable (continued)
30
(iii) Other long-term employee benefits
Cash settled share-based transactions
2018
Beginning
balance
Charge
for the year
Payment/
Transfers
in the year
Ending
balance
Cash settled share-based transactions
All share appreciation rights shall be settled in cash. The terms and conditions of the scheme are listed below:
(2)
Number of
unexercised share
appreciation rights
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:
Outstanding as at the beginning of the year
Granted during the year
10 years
Exercised during the year
Outstanding at the end of the year
Exercisable at the end of the year
2018
2017
Weighted
average
Number
of share
Forfeited during the year
3 years after the grant date
1.410
10 years
at the end of 2018
(in millions)
Contract period of
share appreciation
Exercise conditions
rights
0.096
3 years after the grant date
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
221
(HKD)
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 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.
7,756
(ii) Post-employment benefits-defined contribution plans
2018
Beginning
balance
Charge
for the year
Payment/
Transfers
(31,254)
in the year
Basic retirement security
Supplementary pension
61
149
2,134
(2,130)
65
Ending
balance
1,356
32,691
1,616
23
(22)
3
5
67
(68)
6,319
4
2,085
(2,061)
171
1,546
1,093
(1,023)
147
(1,462)
43
Unemployment insurance
12
1,884
851
56
(1,885)
61
(1,312)
149
Unemployment insurance
(50)
Total
684
2,791
(3,247)
228
Defined contribution pension schemes
18
Ending
balance
in the year
Payment/
Transfers
18
53
(50)
21
Total
228
3,543
(3,642)
129
2017
Beginning
Basic retirement security
Supplementary pension
balance
62
610
Charge
for the year
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%).
37
fluctuation
180
million)
million)
million)
million)
million)
Fixed rate bond
(in million)
36 months
4.20
RMB18,000
17,979
5
17,984
Medium term note
22 May 2017
36 months
(RMB in
(RMB in
Term to
maturity
Beginning
Issue during
premium Exchange rate
Ending
Date of issuance
(RMB in
Annual interest rate
balance
the year
amortisation
balance
(RMB in
(RMB in
Nominal value
Debt type
12 Jun 2017
USD800
29,964
Total
35,170
29,966
12
286
(2)
65,434
Discount or
Debt type
Term to
maturity
Date of
Issuance
Annual interest rate
As at the end of the reporting period, long-term debt securities issued by CMBFLC were as follows:
3M Libor+0.825
29,966
3.95
5,206
4
286
5,496
Fixed rate bond
36 months
RMB30,000
Fixed rate bond
14 Sep 2017
17 Aug 2018
4.30
RMB12,000
11,985
5
11,990
36 months
Discount or
As at the end of reporting period, long-term debt securities issued by the Bank were as follows:
(b) Long-term debt securities issued
Nominal value
balance
amortisation
fluctuation
the year
balance
Annual interest rate
(RMB in
(RMB in
(RMB in
(RMB in
(%)
(in million)
million)
(RMB in
million)
Date of issuance
Exchange rate Repayment for
(3)
19,993
30,084
19,996
(109)
(7,000)
Ending
42,971
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
Total
million)
million)
million)
2,743
T*+1.75% (from 6
year onwards, if the
notes are not called by
the Bank)
Total
3,893
142
10
(1,320)
2,743
T represents the 5 years US Treasury rate.
China Merchants Bank
Annual Report 2018
IX Financial Statements
44. Debt securities issued (continued)
160
1
2,600
USD400
Fixed to floating rate notes
120 months
6 Nov 2012
3.50 (for the first 5 years);
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);
(%)
Fixed rate bond (note (i))
60 months
26 Jun 2013
RMB1,500
1,496
1
1,497
Fixed rate bond (note (v))
36 months
4.80
20 Jul 2017
RMB2,500
2,494
2
2,496
Fixed rate bond
36 months
4.89
3 Aug 2017
5 Jul 2017
Fixed rate bond (note (iv))
4.3/4.5/4.73
RMB4,930
2,186
3
(1,483)
706
36 months
Fixed rate bond
15 Mar 2017
4.50
RMB4,000
3,988
4
3,992
36 months
4.60
RMB2,000
1,995
1
3,989
3,988
3.989
Total
29,485
3,988
11,963
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.
229
China Merchants Bank
40
RMB4,000
RMB4,000
4.50
16 Jul 2018
2
1,997
Fixed rate bond (note (vi))
36 months
14 Mar 2018
5.24
RMB4,000
3,987
2
3,989
Fixed rate bond (note (vii))
Fixed rate bond
36 months
9 May 2018
4.80
36 months
21 Feb 2017
19,996
31 months
6,157
4
(1,000)
Fixed rate bond
60 months
11 Aug 2014
3.25
996
USD500
2
161
3,431
Fixed rate bond
36 months
7 Dec 2015
3,268
3.75
RMB1,000
24 Jul 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
4.98
Repayment for
the period
balance
(RMB in million) (RMB in million) (RMB in million) (RMB in million)
4
(1,000)
Fixed rate bond (note (i))
60 months
Ending
RMB200
200
-
29 Nov 2016
2.63
USD300
1,956
4
2,056
36 months
Fixed rate bond (note (iii)
29 Nov 2016
3.25
USD900
5,862
7
288
60 months
Fixed rate bond (note (iii)
(253)
-
(200)
Fixed rate bond (note (ii))
36 months
11 Mar 2016
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
Leased asset backed securities
150
RMB20,000
15 Nov 2018
Exchange difference
20
(29)
Fair value of the Plan assets at 31 December
357
394
(28)
225
China Merchants Bank
Annual Report 2018
IX Financial Statements
40. Staff welfare scheme (continued)
(b)
Post-employment benefits – defined benefit plan (continued)
The major categories of the Plan assets are as follows:
226
Equities
(18)
(46)
(23)
Actual obligation at 31 December
326
285
The movements in the fair value of the Plan assets during the year are as follows:
2018
72
2017
394
373
Interest income
7
6
Expected return on the Plan assets other than interest profit or losses
Actual benefits paid
Fair value of the Plan assets at 1 January
16
Bonds
Total
357
100.0
394
100.0
Deposit with the Bank included in the amount of the Plan assets was RMB56 million(2017: Nil).
The principal actuarial assumptions adopted in the valuation are as follows:
16.0
Discount rate
- Defined benefit pension scheme
Long-term average rate of salary increase for the Plan
Pension increase rate for the defined benefit pension plan
2018
2017
%
- Defined benefit scheme
Cash
63
78
2018
2017
Amount
%
Amount
%
21.8
216
267
67.8
63
17.6
64
16.2
60.6
7
Actuarial gain or losses due to demographic assumption changes
Exchange difference
11
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.
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%).
China Merchants Bank
Annual Report 2018
IX Financial Statements
40. Staff welfare scheme (continued)
(b)
Post-employment benefits - defined benefit plan
Post-employment benefits – defined benefit plan (continued)
2018
2017
Fair value of the Plan assets
357
394
Present value of the funded defined benefit obligation
The amounts recognised in the statement of financial position as at 31 December 2018 are analysed as follows:
Net asset recognised in the statement of financial position
(b)
3,296
330
Xiong Liang Jun
Total
210
210
240
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).
660
499
1,209
1,740
1,590
1,800
7,241
403
(326)
(285)
31
320
Current service cost
10
11
Interest cost
5
285
5
(18)
(28)
Actuarial profit or losses due to liability experience
10
3
Actuarial profit or losses due to financial assumption changes
Actual benefits paid
Present value of obligation at 1 January
2017
2018
109
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.
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:
Current service cost
Net interest income
Net expense for the year included in retirement benefit costs
2018
(10)
2
(8)
2017
(11)
(10)
The actual loss on the Plan assets for the year ended 31 December 2018 was RMB39 million (2017: actual profit
RMB78 million).
The movements in the defined benefit obligation during the year are as follows:
%
1.9
1.7
1.8
Beginning
Issue during
premium Repayment for
Ending
Date of issuance
Annual interest rate
Term to
maturity
Nominal value
the year
the year
balance
(RMB in
(RMB in
(RMB in
balance
(RMB in
Debt type
As at the end of the reporting period, subordinated notes issued by the Bank were as follows:
Interest payable
2,599
N/A
Total
424,926
296,477
Discount or
227
China Merchants Bank
IX Financial Statements
Annual Report 2018
Subordinated notes issued
44. Debt securities issued (continued)
(a)
228
(RMB in
(in million)
million)
RMB11,700
11,689
4
11,693
Fixed rate bond
120 months
5.20
18 Apr 2014
RMB11,300
11,289
(4)
11,285
Fixed rate bond
120 months
6.40
28 Dec 2012
180 months
Fixed rate bond
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)
years); 8.90 (from 11
year onwards, if the
notes are not called by
the Bank)
20,935
4.65
26,724
178,189
26,701
China Merchants Bank
IX Financial Statements
Annual Report 2018
42. Contract liabilities
Credit card points
20,411
Others deferred fee and commission income
43. Provision
2018
4,799
808
5,607
2018
2017
Total
Expected credit loss provision
1,029
3,831
1.3
5.0
4.3
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.
41. Tax payable
Corporate income tax
1,045
Value added tax
Total
2018
2017
16,229
21,841
3,137
Others
4,565
N/A
Other estimated liabilities
Total
4,565
44. Debt securities issued
Notes
2018
2017
Subordinated notes issued
410
45,714
Long-term debt securities issued
(b)
104,483
63,376
Negotiable interbank certificates of deposit
245,406
33,977
1,221
2,934
Expected credit loss provision
Total
1,100
450
5,665
450
Expected credit loss provision as for loan commitments and financial guarantee contracts follows:
2018
-Stage 2
(Lifetime ECL-
-Stage 3
(Lifetime
-Stage 1
not credit-
ECL-credit
(12-month ECL)
impaired)
impaired)
Certificates of deposit issued
220
amortisation
(43,803)
Repayment
(342,201)
(28,389)
(15,590)
(431)
(386,611)
Interest/dividend paid
(6,659)
(5,154)
(22,912)
(34,725)
Non-cash changes:
515,578
Accrued interest
5,933
Dividend declared
Discount or premium amortisation
22,912
22,912
8,588
56
(47)
8,597
Fair value adjustments
Foreign exchange
At 31 December 2018
5,933
10
2,921
32,300
84,517
58,814
200,326
61,872
191,923
249,992
14,615
543,683
5,323
460,425
(b) Reconciliation of liabilities arising from financing activities
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
Negotiable
73,029
interbank Certificates
certificates
of deposit
issued
At 1 January 2018
178,189
24,120
Debt
securities
issued
101,592
Other
Interest Dividend financial
payable payable liabilities
1,820
26
Total
305,747
Cash changes:
Proceeds from the issue
407,328
of deposit
84,424
4
403
631,330
Repayment
(569,088)
(11,916)
(30,186)
(611,190)
Interest/dividend paid
(9,872)
(4,611)
(18,692)
(33,175)
Non-cash changes:
52,449
Accrued interest
5,018
Dividend declared
Dividend cancelled
18,692
(77)
18,692
(77)
Discount or premium amortisation
9,113
Fair value adjustments
(29)
13
(666)
8,418
5,018
389
19,086
Proceeds from the issue
161
245,406
1,246
29,343
1,186
160,174
2,599
26
2,879
2,593
440,427
Negotiable
interbank
certificates
Certificates
of deposit
559,795
of deposit
Debt
securities
issued
Interest
payable
Dividend
payable
Total
At 1 January 2017
188,248
18,114
81,253
1,413
103
289,131
Cash changes:
issued
52,302
2017
2018
reserve
reserve
profits
appropriations reserve
Total
At 1 January 2017
25,220
76,681
1,206
(19)
39,708
67,030
reserve
158,317
386,806
Changes in equity for 2017:
34,065
(5,299)
(67)
6,451
2,760
34,114
2,522
(78)
74,468
Net profit for the year
18,663
64,510
reserve
capital
Dividends paid for preference shares
(1,659)
(1,659)
At 31 December 2018
25,220
34,065
76,681
5,540
(27) 53,682
75,818
219,622
23,707
instruments reserve
155
Other
Investment
Regulatory
Proposed
Share
equity
Capital
revaluation Hedging
Surplus
general
Retained
profit Exchange
514,463
64,510
Other comprehensive income
for the year
(2,760)
(18,663)
(18,663)
(21,185)
21,185
25,220
34,065
76,681
(4,093)
(86)
46,159
69,790
2,760
192,431
(78)
461,274
235
236
China Merchants Bank
IX Financial Statements
Annual Report 2018
56. Notes to consolidated cash flow statements
(a) Analysis of the balances of cash and cash equivalents (with original maturity
within 3 months):
Cash and balances with central bank
Debt securities investments
Total
21,185
(6,451)
6,451
(18,663)
Total comprehensive income
for the year
Capital injection from
preference shareholders
Profit appropriations
Appropriations to statutory
(5,299)
(67)
(5,299)
(67)
(78)
(5,444)
64,510
(78)
59,066
surplus reserve
Appropriations to regulatory
general reserve
Dividends paid for the year 2016
Proposed dividends for the year 2017
At 31 December 2017
34,065
34,065
6,451
2,760
(30,396)
2,522
(11)
23,707
2
(7)
Capital expenditure (note(i))
3,291
2,930
4,858
4,494
9,256
8,926
17,405
16,350
Wholesale
Retail
financial business
90,680
financial business
Total
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2018
2017
2018
2017
2018
2017
2018
2017
(Restated)
(Restated)
Other business
(Restated)
106,497
8,320
68,152
8,155
4,846
166,025
149,608
Expected credit losses and impairment
losses on other assets
(38,171)
(39,826)
(21,522)
(19,737)
(1,144)
5,481
(363)
(59,926)
Share of profit of associates and
joint ventures
1,309
998
1,309
998
Reportable segment profit before tax
39,914
36,784
58,263
48,415
(60,837)
79,785
Reportable segment assets
2,831,765
Deferred tax assets
Other unallocated assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Tax payable
Other unallocated liabilities
Consolidated total liabilities
2018
247,135
106,497
2017
220,039
90,680
31 December 2018 31 December 2017
6,671,992
9,954
735
Intangible assets
6,232,200
4,674
9,954
737
50,120
4,627
6,745,729
6,297,638
6,131,562
5,719,614
20,411
50,151
26,701
67,931
6,202,124
5,814,246
239
58,374
Reportable segment liabilities
Goodwill
Assets
3,526,129
2,824,662
3,459,039
2,045,530 1,814,963
1,598,208 1,359,453
1,794,697
1,592,575
6,671,992
6,232,200
1,007,225
901,122
6,131,562
5,719,614
Interest in associates and joint ventures
Total assets for reportable segments
8,871
8,871
5,203
Note:
(i) Capital expenditure represents the amount incurred for acquiring long-term segment assets.
China Merchants Bank
IX Financial Statements
Annual Report 2018
57. Operating segments (continued)
(b) Reconciliations of reportable segment revenue, profit or loss, assets, liabilities
and other material items
For the year ended 31 December
Total operating income for reportable segments
Total profit before income tax for reportable segments
5,203
76,610
78,085
impairment losses
(a)
Segment results, assets and liabilities
Wholesale
Retail
financial business
financial business
Other business
Total
2018
2017
2018
2017
57. Operating segments (continued)
2018
2018
2017
External net interest income
24,466
28,441
100,299
89,674
35,619
26,737
160,384
144,852
Internal net interest income/(expense)
2017
52,553
Annual Report 2018
China Merchants Bank
(1,148)
(1,247)
(2,402)
At 31 December 2017
178,189
24,120
101,592
1,820
26
305,747
(c) Significant non-cash transactions
There are no significant non-cash transactions during the year.
IX Financial Statements
China Merchants Bank
Annual Report 2018
57. Operating segments
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.
(1) Wholesale 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.
(2) 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.
(3) Other Business
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.
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.
237
238
IX Financial Statements
44,084
(17,681)
(18,716)
103,015
125,843
108,383
11,997
8,641
247,135
220,039
Operating expenses
- Depreciation
(1,527)
(1,542)
(2,255)
109,295
(2,368)
(1,152)
(5,270)
(5,062)
- Others
(29,683)
(24,863)
(37,863)
(2,354)
(2,643)
(75,840)
(65,369)
Reportable segment profit before
(1,488)
Operating income
11,169
20,271
(34,872)
(25,368)
Net interest income
77,019
72,525
82,618
70,958
747
1,369
160,384
144,852
Net fee and commission income
20,095
23,871
42,700
36,390
3,685
3,757
66,480
64,018
Other net income
12,181
6,619
525
1,035
7,565
3,515
Foreign exchange
(23,707)
Balance with banks and other financial institutions
Placements with banks and other financial institutions
Amounts held under resale agreements
(21,185)
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
The capital reserve primarily represents share premium of the Bank. The capital reserve can be used to issue shares
with the shareholders' approval.
Remeasurement of defined benefit liability
91
Equity-accounted investees share of other comprehensive income
Available-for-sale financial assets: investment revaluation reserve
(42)
(6)
N/A
(3,897)
Total
5,532
(3,812)
China Merchants Bank
Annual Report 2018
IX Financial Statements
50. Hedging reserve
29
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).
48. Capital reserve
1,158
The domestic and offshore preference shares have conditions of events triggering mandatory conversion as follows:
(1)
Proposed dividends for the year 2018
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.
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.
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.
(b) Relative Information Attributed to Equity Instrument Holders
At 31 December
2018
At 31 December
2017
Equity attributed to shareholders of the bank
- Equity attributed to ordinary shareholders of the bank
1,170
540,118
506,053
446,145
- Equity attributed to other equity holders of the bank
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
2,012
- Equity attributed to non-controlling holders of
other equity instrument (note 63)
480,210
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.
51. Surplus reserve
At 1 January
70,921
2018
21,185
2017
18,663
2018
2017
7,523
6,451
7,621
3,083
23,707
21,185
78,542
38,851
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.
54. Exchange reserve
The exchange reserve comprises all foreign exchange differences arising from the translation of the consolidated
financial statements of operations outside Mainland China.
233
234
China Merchants Bank
IX Financial Statements
Annual Report 2018
55. The bank's statement of financial position and changes in the
bank's reserves
2018
2017
30,719
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.
3,083
67,838
Statutory surplus reserve
At 31 December
2018
2017
46,159
39,708
7,523
6,451
53,682
46,159
52. 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. The Bank and the Group's financial
services subsidiaries in Mainland China have complied with the requirements as of 31 December 2018.
7,621
At 1 January
At 31 December
53. Profit appropriations
(a) Dividends approved/declared by shareholders
Dividends in 2017, approved and to be declared RMB0.84 per shares
Dividends in 2016, approved and to be declared RMBO.74 per shares
(b) Proposed profit appropriations
Statutory surplus reserve
Regulatory general reserve
Dividends
- cash dividend: RMBO.94 per shares (2017: RMB0.84 per shares)
Total
2018
2017
70,921
Statutory surplus reserve
(continued)
(!!)
Preference Shares (continued)
9 Jul 2018
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
fluctuation Ending balance
(RMB in million) (RMB in million)
53
2,060
2,007
36 months
53
45. Other liabilities
Clearing and settlement accounts
Salary risk allowances (note)
Insurance liabilities
Payment and collection account
Cheques and remittances returned
2018
2017
7,661
21,990
16,000
13,000
2,060
1,832
Fixed rate bond
Total
Date of issuance
230
China Merchants Bank
IX Financial Statements
Annual Report 2018
44. Debt securities issued (continued)
(b)
Long-term debt securities (continued)
Note:
(i)
The Bank holds financial bonds issued by CMBFLC amounted to 0 as of 31 December 2018 (31 December 2017: RMB382 million).
(ii)
The Bank holds financial bonds issued by CMBFLC amounted to 0 as of 31 December 2018(31 December 2017: RMB200 million).
Annual interest rate
(%)
(iii)
(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
The Bank holds financial bonds issued by CMBIL amounted to USD30 million as of 31 December 2018(31 December 2017: USD30 million).
1,711
2,532
1,394
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
6,597
27,468
50
6,597
275
27,468
325
34,065
Amount
325
(i)
(ii)
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.
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.
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)
(a)
34,065
(millions
of shares)
31 December 2018
No.
25,220
70
41,223
69,318
44
41,757
79,896
Others
Total
Note:
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.
China Merchants Bank
Annual Report 2018
IX Financial Statements
46. Share capital
By type of share:
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
No. of shares
(in million)
25,220
Amount
Assets
Cash
(2)
Balances with central bank
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
5,943,375
Proposed
profit Exchange
reserve
reserve
reserve reserve
reserve
profits appropriations reserve Subtotal
At 31 December 2017
25,220
34,065
76,681
(4,093) (86)
46,159
69,790
capital instruments
192,431
(78)
461,274
Total equity and liabilities
34,065
Capital reserve
76,681
76,681
Investment revaluation reserve
5,540
(4,093)
Hedging reserve
(27)
(86)
Surplus reserve
53,682
6,347,615
46,159
75,818
69,790
Retained profits
219,622
192,431
Proposed profit appropriations
23,707
21,185
Exchange reserve
155
Total equity
514,463
Regulatory general reserve
21,185
(78)
461,274
Total comprehensive income
for the year
Profit appropriations
Appropriations to statutory
surplus reserve
Appropriations to regulatory
7,143
59
233
7,435
7,143
59
for the year
75,232
7,523
6,028
(38,917)
2,522
(22,844)
7,523
(7,523)
general reserve
Precious metals
(6,028)
Dividends paid for the year 2017
(21,185)
233 82,667
Other comprehensive income
75,232
75,232
Adjustments of application of
accounting policy changes
2,490
(9,124)
(6,634)
At 1 January 2018
25,220
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
233
59,823
Net profit for the year
34,065
Other equity instruments - Preference Shares
6,028
25,220
380,971
N/A
Equity investments designated at fair value through
other comprehensive income
3,465
N/A
Available-for-sale financial assets
N/A
341,571
Held-to-maturity investments
Debt securities classified as receivables
Investments in subsidiaries
Debt investments at fair value through other comprehensive income
Interest in joint ventures
Property and equipment
Intangible assets
Deferred tax assets
Other assets
N/A
557,942
N/A
570,175
43,901
43,901
4,797
3,095
Investment properties
N/A
915,410
Debt investments at amortised cost
25,220
Balances with banks and other financial institutions
Placements with banks and other financial institutions
Loans and advances to customers
Interest receivable
14,997
15,724
6,573
9,243
474,380
583,692
68,501
43,189
299,981
165,511
199,555
252,464
3,471,874
3,159,655
N/A
27,216
Financial assets at fair value through profit or loss
315,000
57,902
Derivative financial assets
33,582
17,691
1,262
621
Amounts held under resale agreements
23,145
N/A
34,398
Salaries and welfare payable
6,697
6,245
Tax payable
Contract liabilities
Provision
Debt securities issued
Other liabilities
25,942
5,607
N/A
5,638
450
375,625
260,560
55,918
65,352
Total liabilities
5,833,152
5,482,101
Share capital
Equity
23,169
Interest payable
3,890,024
19,512
Deposits from customers
6,354
56,866
4,237,430
48,734
25,174
15,550
Total assets
Liabilities
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
6,347,615
8,157
125,585
77,064
452,305
21,194
35,795
Derivative financial liabilities
Amounts sold under repurchase agreements
40,175
189,825
116,072
421,251
26,437
Entrusted loans
China Merchants Bank
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
244
14,471
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
14,548
Entrusted funds
243
2018
Analysis of loans and advances by industry and loan portfolio are stated in Note 22.
2017
489,351
246
245
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.
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.
(a) Credit risk
417,263
61. Risk management
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
(489,351)
(417,263)
Annual Report 2018
1,845
Capital commitments
8,925
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
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.
70,724
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)
Bills of acceptances
Usance letters of credit
China Merchants Bank
Other payment commitments (note)
90,276
1,741
Credit risk weighted amounts of contingent liabilities and commitments
2017
355,050
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
2018
373,397
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:
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.
7,065
IX Financial Statements
968
61. Risk management (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
Of which: Sight letters of credit
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
(802)
(455)
1,083
(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
IX Financial Statements
China Merchants Bank
Incorporation of forward-looking information
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.
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)
(a) Credit risk (continued)
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.
Annual Report 2018
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.
During the reporting period, the Group did not make any changes to the predicted technology and important
assumptions.
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
(a) Credit risk (continued)
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.
61. Risk management (continued)
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
(v)
Annual Report 2018
Irrevocable letters of credit
Irrevocable loan commitments
Of which: Financial guarantees
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
Central region
11,930
8,108
16,925
15,181
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
30,764
Northeast region
38,903
4,285
2,071
3,041
165
145
16,015
17,491
6,745
10,790
2,490
2,389
355,602
3,399
Pearl River Delta and
25,116
26,946
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
2017
"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;
"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
China Merchants Bank
240
Non-financial guarantees
"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;
Note:
2018
2017
12,080
16,383
2,131
2,015
484,410
32,517
34,386
19,659
24,040
2,849
2,948
745,677
2017
759,258
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
(Restated)
76,680
Non-current assets include interests in joint ventures, interests in associates, property and equipment, investment properties, intangible assets,
goodwill, etc.
West Coast region
IX Financial Statements
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
91,436
Non-financial guarantees
53,951
83
54,034
Credit card commitments
Irrevocable guarantees
China Merchants Bank
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
China Merchants Bank
242
143,228
241
468
12,181
1,543,835
74,923
5
74,918
Total
Others
845,502
81
8,497
836,924
1,556,484
3
- with an original maturity over 1 year
- Financial assets at fair value through profit or loss
95,828
N/A
- Available-for-sale financial assets
71,196
- Debt investments at fair value through other comprehensive income
N/A
280,262
- Debt investments at amortised cost
5,316
18,925
Assets pledged
540,458
- Held-to-maturity investments
483,455
125,620
78,141
Amounts sold under repurchase agreements
414,838
405,314
Borrowing from central bank
2017
2018
The following assets have been pledged as collateral for liabilities under repurchase arrangements:
288
58. Assets Pledged as Security
Annual Report 2018
Subtotal
N/A
N/A
-Stage 3
(Lifetime
142,937
Of which: Financial guarantees
235,100
357
370
234,373
Irrevocable guarantees
Total
ECL-
credit
impaired)
409,092
-Stage 2
(Lifetime
ECL- not
credit-
impaired)
ECL)
-Stage 1
(12-month
2018
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.
- Other assets
Total
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.
Contractual amount
586,182
480,140
109,757
75,946
Assets and liabilities by original currency are shown as follows: (continued)
2017
Equivalent in RMB million
Original
currency in million
(2)
Annual Report 2018
Foreign exchange risk (continued)
(i)
(b) Market risk (continued)
61. Risk management (continued)
RMB
Banking book (continued)
USD
119,708
Others
Total
USD
HKD
Assets
Cash and balances with central bank
Amounts due from banks and
569,550
27,997
16,665
2,207
IX Financial Statements
616,419
HKD
China Merchants Bank
23,854 1,556,484
15,733
4,299
28,089
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
52,220
31,692
25,454 1,179,584
59,557
(24,796)
(45,387) (1,156,166)
(79,104)
(28,280)
364
27,788
(650)
3,500
9,404
415
(20,583)
26,918
85,433
20,001
22,750
355,030
63,937 6,297,638
65,912
259,319
Liabilities
Amounts due to central bank, banks and
other financial institutions
1,141,054
103,011
5,660
Deposits from customers
3,542,432
336,471
216,064
149,594
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
1,791
48,476
1,384,833
2,585
35,848
429,224
5,588,413
Total
99,931
12,419
16,716 484,096
15,346
14,905
Loans and advances to customers
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
Other assets
135,223
33,360
16,960
(304) 185,239
5,121
20,355
other financial institutions
Credit commitments (note(ii)
China Merchants Bank
21,175
other financial institutions
414,598 166,478
18,866
11,244
611,186
24,247
21,517
Loans and advances to customers
3,377,558
191,839
130,064
41,801 3,741,262
5,338
27,941
Investments (including derivatives)
1,574,122
73,659
23,497
12,263 1,683,541
10,729
26,798
Other assets (note(i))
158,173
43,612
12,925
1,895 216,605
148,339
2,660
493,135
1,880
other financial Institutions
3,493
250
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
RMB
USD
HKD
Others
Total
USD
HKD
Assets
Cash and balances with central bank
Amounts due from banks and
468,309
18,266
4,680
6,353
Net off-balance sheet position:
14,741
5,992,760
2,909
422,327
5,590
9,036
Other liabilities (note(i))
131,311
7,313
5,671
4,181
148,476
1,065
6,466
7,923
Total
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)
5,483,475
38,382
373,113
Debt securities issued
493,854
190,032
69,083 6,745,729
71,930
216,733
Liabilities
Amounts due to central bank, banks and
other financial institutions
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
4,244
2,240
Total
2,151
296,528
255,686
33,898
102,778
1,900
2,209
484,096
Loans and advances to customers
358,319 268,551
1,006,228
880,201
887,849
299,502
13,464
Investments (note (ii))
- Financial assets at fair value through
profit or loss (including derivatives)
5,298
14,697
42,895
18,354
1,592
876
83,712
3,414,612
- Available-for-sale financial assets
43,809
Amounts due from banks and
1 month
3 months
1 year
Repayable
on demand
Within
but within
but within
but within
After
1 month
other financial institutions
3 months
5 years
5 years
Indefinite
Overdue
Total
Cash and balances with central
bank (note (i))
84,424
531,995
616,419
1 year
8,337
18,304
68,573
1,292
505
137,166
7,096
185,239
Total assets
143,532
909,814 378,025
1,415,820
1,494,604
2,793
1,256,972
22,248 6,297,638
Amounts due to banks and
182,894
340,645
23,509
5,404
Deposits from customers (note (iii))
2,554,598
364,232
350,167
676,623
3,048
18,040
15,299
166,935
116,255
4,277
420
383,101
-Held-to-maturity investments
3,418
6,444
31,217
306,655
210,484
558,218
- Debt securities classified as
receivables
216,900
33,083
161,336
119,267
40,287
100
1,268
572,241
Other assets
After
After
After
2017
1,409,522
1,682,861
1,334,392
633,170
22,960
6,745,729
other financial Institutions
328,999
269,494
184,328
469,112
334,596
5,744
1,612
1,150,156
Deposits from customers (note (iii))
3,029,478
217,170
246,113
486,450
418,866
2,597
25,383
1,053,468
140,244
Amounts due to banks and
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
23,800
6,524
7,010
11,418
3,053
200
164,600
216,605
Total assets
4,400,674
570,414
Financial liabilities at fair value through
14,564
516,618
1,051,229
568,746
63,451
5,147
6,202,124
(3,297,928)
494,707
(47,506)
358,293
558,761
1,114,115
628,023
22,960
543,605
257
258
China Merchants Bank
IX Financial Statements
Annual Report 2018
61. Risk management (continued)
(c) Liquidity risk (continued)
1,270,941
3,438,172
(Short)/long position
Total liabilities
13,725
8,400
16,859
17,200
9,530
213
80,491
Debt securities issued
13,343
68,339
194,051
101,780
44,814
422,327
Other liabilities (note (iv))
65,131
45,029
9,438
19,273
5,517
766
3,322
148,476
profit or loss (including derivatives)
221,560
3,374
1,252,310
4,064,345
510
- Equity investments designated
comprehensive income
4,015
4,017
4,017
Other assets
70,949
Total
70,824
6,566,024 7,588,712 151,283 1,084,121
112,052
24,066
6,963
11,143
3,003
200
19,177
512,002 1,568,469
2,038,928
1,723,091
487,775
23,043
6,397
232,981
83,448
18,406
188,738
59,383
23,145
34,099
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
income
414,691
469,935
434
22,104
Non-derivative financial liabilities
3,045
Amounts due to banks and
Deposits from customers
117,228 117,734
35,565
44,540
9,085
17,487
7,224
1,863
1,970
Total
6,134,485 6,366,184 3,472,356
Other liabilities
599,868
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
Debt securities issued
528,405
49,337
88,801
68,511 224,268
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
45,108
21,532
5,765
1,999
5,320
10,279
213
Debt securities issued
422,327
454,141
23,224
other financial institutions
other comprehensive income
340,529
through profit or loss
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
8,725
(2,791,639)
1,170,989
1,213,662 670,550
22,248
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)
49,175 (262,629) 411,036
12,795
8,274
38,461
Financial liabilities at fair value through
profit or loss (including derivatives)
6,815
6,119
7,905
21,743
5,126
649
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)
77,230
Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
327,643
China Merchants Bank
Annual Report 2018
461,514
Amounts due from banks and
other financial institutions
611,186
664,376
92,117
425,647
42,522
99,309
3,567
31,621
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
Loans and advances to customers
493,135
493,135
Cash and balances with central bank
61. Risk management (continued)
(c)
Liquidity risk (continued)
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.
2018
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
5 years
Indefinite
Overdue
Non-derivative financial assets
IX Financial Statements
- Debt investments at fair value through
at fair value through other
3,413
1,665,384
1,846,122
170,453
59,303
Investments (including derivatives)
1,683,541
439,396
173,454
665,013
360,022
45,656
Other assets (note (ii))
216,605
216,605
Total assets
6,745,729
3,100,714
2,104,255
835,734
420,539
284,487
Liabilities
Amounts due to banks and
3,741,262
Loans and advances to customers (note (i))
6,412
1,214
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.
2018
Total
3 months
or less
(include
overdue)
Over
Over
Non-
3 months
to 1 year
1 year
to 5 years
Over
5 years
other financial institutions
interest
Assets
Cash and balances with central bank
493,135
477,321
15,814
Amounts due from banks and
other financial institutions
611,186
518,613
84,679
268
bearing
1,150,156
802,236
327,266
Total liabilities
Asset-liability gap
6,202,124
4,366,105
1,011,939
539,398
52,307
232,375
543,605 (1,265,391)
1,092,316
403,330
148,457
296,336
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)
Banking book (continued)
2017
368,232
Banking book (continued)
19
Other liabilities (note (ii))
10,792
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
148,476
profit or loss (including derivatives)
206
2,667
9,511
213
67,894
Debt securities issued
422,327
77,883
197,850
101,780
44,814
80,491
3 months
(2)
(ii)
35,740
30,895 1,407,008
20,447
42,896
Derivatives:
-forward purchased
- 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:
(i)
Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
(ii)
Credit commitments generally expire before they are drawn, therefore the above net position does not represent the future cash
outflows.
251
252
133,144
1,207,229
Credit commitments (note(ii)
Net off-balance sheet position:
33,038
903,268
6,930
823
296,477
5,073
8,317
Other liabilities
134,726
8,308
6,631
China Merchants Bank
2,973
1,276
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
152,638
IX Financial Statements
Annual Report 2018
61. Risk management (continued)
(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)
(ii)
Interest rate risk (continued)
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.
(2)
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.
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.
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.
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.
253
254
China Merchants Bank
IX Financial Statements
Annual Report 2018
61. Risk management (continued)
(b) Market risk (continued)
Banking book
Interest rate risk (continued)
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.
(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
2017
Change in foreign currency
exchange rate (in basis points)
Change in foreign currency
exchange rate (in basis points)
(100)
(ii)
100
100
Increase/decrease) in annualised net profit
177
(177)
364
(364)
Increase/decrease) in annualised equity
177
(177)
364
(364)
(100)
Total
(b) Market risk (continued)
(3,544)
(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
2017
Change in interest
rates (in basis points)
Change in interest
rates (in basis points)
25
(25)
25
(25)
(Decrease)/increase in annualised
net interest income
(1,966)
1,966
(2,010)
Liquidity risk
(c)
61. Risk management (continued)
Annual Report 2018
IX Financial Statements
China Merchants Bank
Note:
256
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.
3,174
(3,152)
3,756
(Decrease)/increase in equity
2,010
255
21,103
376,452
300,150
Debt securities issued
40,987
388
3,195
3,823
83
296,477
48,476
Financial liabilities at fair value through
3,354
404,127
588,581
3,056,891
4,064,345
profit or loss (including derivatives)
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.
143,759
152,638
1,071,770
(1,286,083)
207,609
39,883
478,658
152,473
Other liabilities
1
63,707
56,327
164
978,438
4,109,658
5,814,246
483,392
Asset-liability gap
Total liabilities
32,684
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.
970,623
964,517
1,097,315
275,758
414,154
Loans and advances to customers
18,895
611,186
1,230
85,447
31,664
410,287
81,344
other financial institutions
1,214
Amounts due from banks and
3,741,262
- Financial assets at fair value through
106,912
75,329
9,809
- Debt investments at amortised cost
361,567
275
Investments (note (ii))
1,827
42,361
33,898
62,960
191,652
3,045
profit or loss (including derivatives)
25,549
Deposits from customers
493,135
31,621
Repayable
After
After
After
2018
Analysis of the Group's assets and liabilities by residual maturity is as follows:
Within
Liquidity risk (continued)
61. Risk management (continued)
Annual Report 2018
IX Financial Statements
China Merchants Bank
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.
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.
(c)
461,514
1 month
but within
1 year
bank (note (i))
Cash and balances with central
Total
Overdue
Indefinite
5 years
3 months
5 years
3 months
1 month
on demand
After
but within
but within
1 year
2,757
11,392
7,628
3,352
1,901
90,437
388,406
484,096
other financial institutions
Amounts due from banks and
16,412
616,419
Cash and balances with central bank
Assets
bearing
5 years
to 5 years
to 1 year
interest
Over
1 year
3 months
Non-
Over
Over
or less
(include
overdue)
240,250
467,555
Loans and advances to customers (note (i))
3,414,612
600,007
1,669,795
329,543
908,925
1,252,310
1,481,059
Amounts due to banks and
Liabilities
228,712
416,335
778,808
2,823,575 2,050,208
6,297,638
Total assets
other financial institutions
185,239
210,845
185,239
52,913
Investments (including derivatives)
1,597,272
354,103
3,457
289,976
566,062
363,422
Other assets
23,709
2,005
3,225
- Investments in funds
1,905
44,481
161
46,547
Subtotal
76,354
2,166
11,325
383,101
91,664
372,983
162
466,813
Total
Liabilities
Financial liabilities held for trading
- Precious metal relevant financial liabilities
304,581
2,166
(ii) Assets and liabilities which are measured at fair value at date of financial position on a recurring basis
(continued)
333,329
(3)
11,325
(g) Fair value information (continued)
61. Risk management (continued)
Annual Report 2018
IX Financial Statements
China Merchants Bank
The fair value of certificates of deposit issued is measured by using the comprehensive valuations issued by
Bloomberg.
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 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.
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.
- Debt securities
4,886
4,495
9,381
Derivative financial assets
18,916
18,916
Available-for-sale financial assets
- Debt securities
– Equity investments
73,391
259,938
1,058
- Short selling securities
Total
64
25,224
48,476
During the year there were no significant transfers of financial instruments between Level 1 and Level 2 of the fair
value hierarchy.
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.
267
268
China Merchants Bank
IX Financial Statements
Annual Report 2018
61. Risk management (continued)
23,252
(g) Fair value information (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.
(2)
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.
Valuation techniques used and the qualitative and quantitative information of key parameters for
recurring fair value measurement categorised within Level 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.
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:
(ii) Assets and liabilities which are measured at fair value at date of financial position on a recurring basis
(continued)
64
21,857
Derivative financial liabilities
Subtotal
11,325
64
11,389
Financial liabilities designated at fair value
through profit or loss
- Precious metal contracts with other banks
7,688
7,688
- Certificates of deposit issued
21,857
3,185
- Debt securities issued
4,239
4,239
- Others
Subtotal
118
118
11,927
3,303
15,230
3,185
Fair value
as at
IX Financial Statements
2018
1,254,997
487,858
5,682
2,057,791
2,197
(1,808)
Currency derivatives
Forwards
47,939
24,254
309,254
6,273
82,060
1,452
(1,595)
Foreign exchange swaps
372,129
460,552
15,532
58
848,271
12,438
3,594
(14,003)
Interest rate swaps
Liabilities
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
Annual Report 2018
61. Risk management (continued)
(f) Use of derivatives (continued)
Interest rate derivatives
2017
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
Assets
Notional amounts with remaining life of
31 December
Options
185,538
148
595
108,184
108,927
322
(323)
Cash flow hedge derivatives
Interest rate derivatives
Interest rate swaps
through profit or loss
Subtotal
3,400
2,400
8,500
(79)
Derivatives managed in
conjunction with financial
Market approach
1,031
Equity investments designated
Unobservable input
Valuation techniques
2,700
149,618
(323)
54,092
1,793
336,949
2,234
(3,926)
Subtotal
569,686
670,344
23,598
3,652
1,267,280
54,529
16,124
Other derivatives
Equity options purchased
5
301
54,092
54,398
322
Equity options written
143
294
(19,524)
Financial assets designated at fair value
125
44,991
Assets
Total
Level 3
Level 2
Level 1
2017
(ii) Assets and liabilities which are measured at fair value at date of financial position on a recurring basis
(continued)
(g) Fair value information (continued)
314,459
Investments designated at FVTPL
Financial assets held for trading
- Debt securities
8,203
41
13,184
Derivative financial assets
34,220
Loans and advances to customers at FVTPL
403
Debt investments at FVTOCI
78,551
336,140
4,940
34,220
403
414,691
Debt securities
44,590
1,060
1,060
- Non-standard assets -Bills
173,988
- Others
1,147
73
173,988
1,220
Subtotal
12,477
10,181
298,389
Total
Subtotal
401
401
- Investments in funds
32
54,771
211
211
32
- Equity investments
- Long position in precious metal contracts
3,593
- Wealth management products
Loans and advances to customers at FVTOCI
Equity investments designated at FVTOCI
2,619
- Debt securities issued
9,977
9,977
- Others
Subtotal
Derivative financial liabilities
Total
365
2,514
2,619
2,879
2,984
2,514
25,138
36,570
36,570
38,602
39,554
2,514
80,670
China Merchants Bank
Annual Report 2018
19,640
156,683
- Certificates of deposit issued
9,663
1,475
20,684
2,540
177,367
4,015
Total
97,443
833,635
27,261
958,339
Liabilities
9,663
Financial liabilities held for trading
17,872
17,872
- Short selling securities
1,090
1,090
Subtotal
18,962
18,962
Financial liabilities designated at FVTPL
- Precious metal contracts with other banks
- Precious metal relevant financial liabilities
16,854
336
1,561
10,630
641
45,937
273
(123)
Total
18,916
(21,857)
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
15,836
Interest rate derivatives
Other derivatives
Credit valuation adjustment risk weighted assets
Total
Note:
2018
2017
272
1,190
7,728
8,357
Currency derivatives
4,236
18,830
(112)
10,424
instruments designated
at fair value through
profit or loss
Interest rate derivatives
Interest rate swaps
100
2,377
4,839
117
Subtotal
7,433
52
(11)
Currency derivatives
Foreign exchange swaps
18,730
13,459
5,791
524
38,504
221
62
3,467
17,606
18,836
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
Assets
Investments measured at FVTPL
Debt securities
10,237
(ii)
108,682
119,665
- Long position in precious metal contracts
111
111
- Equity investments
61. Risk management (continued)
- Investments in funds
2,004
58
14,514
1,378
746
(g) Fair value information (continued)
61. Risk management (continued)
Annual Report 2018
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.
265
266
China Merchants Bank
IX Financial Statements
55,415
(62)
49,027
8,848
34,503
Loans and advances to customers
3,414,612 4,119,230
6,822
371,155
298,493
106,161
1,123,118 1,127,013
2,027
2,221
1,185,940
300,198
6,689
- Financial assets at fair value
through profit or loss
64,796 71,187
2,363
10,209
35,379
16,741
1,307
5,188
- Available-for-sale financial assets
Investments
383,101
43,932
484,096
Within
but within
but within
but within
After
amount
Total
on demand
1 month
3 months
489,042
1 year
5 years
Indefinite
Non-derivative financial assets
Cash and balances with central bank
616,419
616,419
84,424
531,995
Amounts due from banks and
other financial institutions
5 years
Repayable
427,401
20,020 76,330
3,048
115
1,292
505
19,519
Total
6,153,979 7,074,112
150,477
938,597
411,211
18,040
1,560,176
1,603,878
570,585
Non-derivative financial liabilities
Amounts due to banks and
other financial institutions
1,252,310
1,265,833
Deposits from customers
4,064,345
4,175,394
1,839,188
24,266
15,299
60,496
192,057
111,115
3,613
- Held-to-maturity investments
558,218
682,646
5,176
9,825
46,113
366,084
60,496
255,456
as receivables
572,241
607,691
217,399
35,113
170,282
133,974
49,555
1,368
Other assets
- Debt securities classified
296,594
2,609,943
Carrying
1 year
Liquidity discount
Risk-adjusted discount rate,
Risk-adjusted discount rate,
Liquidity discount
Risk-adjusted discount rate,
Liquidity discount
Risk-adjusted discount rate,
Net fund value approach
2,514
Financial liabilities designated
at FVTPL
Risk-adjusted discount rate,
Discounted cash flow
approach
Investments designated at FVTPL
cash flow
Discounted cash flow
approach
58
- Others
Market approach
15
- Others
cash flow
Discounted cash flow
approach
41
1,060
Risk-adjusted discount rate,
cash flow
Fair value
as at
269
cash flow
Risk-adjusted discount rate,
Risk-adjusted discount rate,
cash flow
Transaction of near delivery rate
Liquidity discount
Unobservable input
161 Discounted cash flow
Discounted cash flow
499
Book net assets, liquidity discount
Unlisted available-for-sale
equity investments
Unlisted available-for-sale
fund investments
Market approach
727
Unlisted available-for-sale
approach
Market comparison
Valuation techniques
2017
779
equity investments
Unlisted available-for-sale
31 December
equity investments
After
- Wealth management products
Discounted cash flow
approach
Discounted cash flow
approach
customers at FVTPL
403
Loans and advances to
Book net assets,
Net asset value
approach
at FVTOCI
1,509
Equity investments designated
at FVTOCI
Loans and advances to
Liquidity discount
China Merchants Bank
IX Financial Statements
Annual Report 2018
61. Risk management (continued)
(c) Liquidity risk (continued)
2017
After
1 month
3 months
After
260
cash flow
20,684
Discounted cash flow
approach
44
- Investments in funds
Market approach
292
- Investments in funds
cash flow
Discounted cash flow
approach
5
- Equity investments
Market approach
customers at FVTOCI
1,373
cash flow
Discounted cash flow
approach
746
- Debt securities
adjusted discount rate,
cash flow
actual trading conditions-
Risk-adjusted discount rate,
Risk-adjusted discount rate,
actual trading conditions-
adjusted discount rate,
cash flow
liquidity discount
Investments measured at FVTPL
– Equity investments
403,939 185,110
2,793
24,732
17,618
(21,321)
Other derivatives
Equity options purchased
1,160
55,926
57,086
169
Equity options written
1,160
1,603,067
55,926
(169)
Commodity trading
121
171
11
303
69
(69)
Credit default swap
570
57,086
137
11,172
886,259
28,237
148
11,172
94,628
1,104
(867)
Foreign exchange swaps
450,164
604,153
9,767
15,292
1,064,084
(12,551)
Options
185,109
253,869
5,377
444,355
2,766
346,279
Subtotal
690,344
13,748
55,071
707
(1)
instruments designated
at fair value through
profit or loss
Interest rate derivatives
Interest rate swaps
624
735
4,707
6,066
103
conjunction with financial
(62)
Currency derivatives
Foreign exchange swaps
2,164
618
2,782
12
Subtotal
624
2,899
5,325
629
4
Derivatives managed in
118
Bond Forwards
481
618
343
1,442
198
(198)
Subtotal
2,922
1,359
(2)
112,343
440
(437)
Cash flow hedge derivatives
Interest rate derivatives
Interest rate swaps
52
2,103
6,864
339
9,358
116,624
Forwards
(7,903)
(14,748)
38,696
Currency derivatives
14,013
8,824
1,244
5,148
Total
5,756,598 5,908,149 2,956,220
863,521
647,040
42,868
1,012,542
55,073
5,266
Gross loan commitments
771,367 771,367
China Merchants Bank
IX Financial Statements
Annual Report 2018
61. Risk management (continued)
(d)
Operational risk
368,487
116,847 119,283
Other liabilities
37,384
9,179
367,920
356,795
581,761
252,097
6,878
Financial liabilities at fair value
through profit or loss
26,619
26,658
6,815
3,939
3,697
8,464
3,237
388
118
Debt securities issued
296,477
320,981
92,948
62,025
79,597
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.
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.
8,490
(e) Capital management
Annual Report 2018
61. Risk management (continued)
(f)
Use of derivatives (continued)
Derivatives at fair value
through profit or loss
Interest rate derivatives
2018
Notional amounts with remaining life of
Fair value
Within
3 months
IX Financial Statements
Between
3 months
and 1 year
More than
5 years
Total
Assets
Liabilities
Interest rate swaps
636,827 1,804,827
1,922,312
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.
4,367,289
15,929
Between
1 year
and 5 years
China Merchants Bank
3,323
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.
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.
The objectives of the Group's capital management are to:
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;
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
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.
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.
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.
261
262
China Merchants Bank
IX Financial Statements
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 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.
Annual Report 2018
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.
(f) Use of derivatives
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.
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)
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.
financial
Adjustments under IFRS 9
at FVTOCI
at FVTOCI
assets
Total
At 31 December 2017
2,166
2,166
Profit or loss
17,294
14,909
2,380
(2,166)
At 1 January 2018
2,171
14,909
2,380
19,460
designated
2,171
customers
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)
Available-
- In profit or loss
270
China Merchants Bank
IX Financial Statements
Annual Report 2018
61. Risk management (continued)
(g)
Fair value information (continued)
(ii)
for-sale
Assets and liabilities which are measured at fair value at date of financial position on a recurring basis
(continued)
1)
Valuation of financial instruments with significant unobservable inputs
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:
Financial
assets at fair
value through
Assets
profit or loss
Loans and
advances to
customers
at FVTPL
Loans and
advances to
Equity
investments
(3)
376
902
N/A
Li Hao
Limited company
Subsidiary
55% Asset Management
RMB1,310 million
Shenzhen
China Merchants Fund
Limited (WLB)
Tian Huiyu
Limited company
Subsidiary
Management Co., Ltd.
(CMFM)
100% Banking
Hong Kong
CMB Wing Lung Bank
Company Limited
(CMBFLC)
Shi Shunhua
Limited company
Subsidiary
100% Finance lease
RMB6,000 million
Shanghai
CMB Financial Leasing
Limited (CMBICHC)
HKD1,161 million
Holdings Corporation
275
China Merchants Bank
CMSNCL
CMG
The information of registered capital of the related parties as at 31 December 2018 and 2017 is as below:
Name of related party
2018
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.
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%).
China Communications Construction Group LTD ("China Communications Construction Group") holds 2.27% of the bank through its
subsidiaries (2017: 2.27%).
(viii)
(vii)
(vi)
Hebei Port Group Company Ltd. directly holds 1.21% of the Bank (2017: 1.21%).
(v)
276
China COSCO Shipping Corporation Ltd. holds 9.97% of the Bank (2017: 9.97%) through its subsidiaries.
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)
CMG holds 29.97% of the Bank (2017: 29.97%) through its subsidiaries.
(i)
Notes:
Material connected person information (continued)
(a)
62. Material related-party transactions (continued)
Annual Report 2018
IX Financial Statements
(iv)
RMB 16,700,000,000
Tian Huiyu
Subsidiary
asset management business,
Chen Hong
Limited company
Production and sale of vehicles, Shareholder's
1.23%
(note(vii))
310,125,822
RMB21,599
million
Shanghai Automotive Industry Shanghai
Corporation (Group)
business
investment and management
service, imports and exports,
parent
repair, technical consulting
Joint stock limited
company
Shareholder
General contraction for
construction, leasing and
1.78%
450,164,945
RMB16,175
million
Construction Co., Ltd
Beijing
China Communications
company
parent
Liu Qitao
Limited company
domestic trade business,
consulting service
100% Financial advisory services
HKD4,129 million
CMB International Capital Hong Kong
business etc.
handling and warehousing
maintenance business,
port leasing and
Cao Ziyu
Limited company
Shareholder
Port construction and
investment management,
company
1.21%
(note(v))
and exports
company
consulting service, imports
Chen Hong
Joint stock limited
Production and sale of vehicles, Shareholder
1.23%
310,125,822
RMB11,683
million
Shanghai
SAIC Motor Corporation
Limited
Hebei Port Group Co., Ltd. Qin Huangdao RMB8,000 million 305,434,127
construction
2017
RMB7,000,000,000
62. Material related-party transactions (continued)
Annual Report 2018
IX Financial Statements
China Merchants Bank
RMB1,310,000,000
RMB1,310,000,000
HKD1,160,950,575
HKD1,160,950,575
RMB6,000,000,000
RMB6,000,000,000
HKD4,129,000,000
(a)
HKD4,129,000,000
WLB
CMBFLC
CMBICHC
RMB8,000,000,000
RMB8,000,000,000
Hebei Port Group Co., Ltd.
RMB11,683,461,365
RMB11,683,461,365
RMB21,599,175,737
RMB21,599,175,737
Shanghai Automotive Industry Corporation (Group)
SAIC Motor Corporation Limited
CMFM
RMB16,174,735,425
Material connected person information (continued)
(b)
720,500,000
6,000,000,000 100.00 1,160,950,575 100.00
4,129,000,000 100.00
3,289,470,337 13.04
At 31 December 2018
%
RMB
720,500,000 55.00
6,000,000,000 100.00 1,160,950,575 100.00
13.04 4,129,000,000 100.00
3,289,470,337
At 1 January 2018
Change
The change of proportion of the Bank held by the largest shareholder and the portion of the subsidiaries
held by the Bank
%
WLB
HKD
%
RMB
%
CMBFLC
CMBICHC
HKD
%
RMB
CMSNCL
The subsidiaries held by the Bank
The Bank held by the
largest shareholder
CMFM
RMB13,750,000,000
RMB16,174,735,425
RMB5,855,423,830
RMB37,000,000,000
RMB37,000,000,000
Anbang Property & Casualty Insurance Co., Ltd.
RMB61,900,000,000
RMB61,900,000,000
Anbang Insurance Group Co., Ltd
USD10,000,000
USD60,000
USD10,000,000
(Shenzhen) Co., Ltd.
China Merchants Industry Development
Hexie Health Insurance Co.,Ltd
USD50,000
China Merchants Union (BVI)Ltd.
Best Winner Investment Ltd.
RMB600,000,000
RMB600,000,000
China Merchants Finance Investment Holdings Co., Ltd.
RMB600,000,000
RMB600,000,000
Development Company Ltd.
RMB600,000,000
Shenzhen Yan Qing Investment Development Co., Ltd.
Shenzhen Chu Yuan Investment and
RMB5,900,000,000
USD50,000
USD60,000
China Communications Construction Co., Ltd
RMB13,900,000,000
Anbang Life Insurance Co.,Ltd
RMB5,855,423,830
RMB299,020,000
RMB299,020,000
Shenzhen Tri-Dynas Oil & Shipping Co., Ltd.
China Communications Construction Group LTD
HKD500,000,000
HKD500,000,000
China COSCO Shipping Financial Holdings Co., Ltd.
RMB3,191,200,000
RMB1,398,941,000
RMB2,000,000
RMB2,000,000
RMB8,900,000,000
RMB3,191,200,000
China COSCO Shipping (Shanghai) Co., Ltd.
Guangzhou Haining Maritime Technology Service Co., Ltd.
China COSCO Shipping (Guangzhou) Co., Ltd.
RMB16,191,351,300
RMB16,191,351,300
China Ocean Shipping Co., Ltd.
RMB11,000,000,000
RMB11,000,000,000
China COSCO Shipping Corporation Limited.
RMB30,790,000,000
RMB30,790,000,000
RMB1,398,941,000
Liu Qitao
Limited company
Shareholder's
held by
by the
held by the
Issued and
fully paid capital
Registered
location
Company name
Company
of the
Proportion
Proportion
of the
Bank held
the Bank
The
relationship
No. of
Shares of
62. Material related-party transactions (continued)
Annual Report 2018
IX Financial Statements
China Merchants Bank
274
273
regulations, etc.
and investment business
permitted by national laws and
holding investment enterprises,
international businesses of
various domestic and
(a) Material connected person information (continued)
He Xiaofeng
Company
the Bank
He Xiaofeng
Joint stock limited
Life insurance, health insurance, Shareholder
4.99%
RMB30,790 1,258,949,100
million
Beijing
Anbang Life Insurance
Co.,Ltd
insurance, etc.
insurance and accident
insurance, short-term health
Legal
representative
He Xiaofeng
Company
insurance and guarantee
liability insurance, credit
Shareholder
Property damage insurance,
1.65%
416,196,445
RMB37,000
million
Insurance Co., Ltd.
Anbang Property & Casualty Shenzhen
Legal form
with the Bank
Business
Joint stock limited
company
accident insurance, and
Shareholder's parent Joint stock limited
company
company
Investing and establishing
Hong Xiaoyuan
Limited company
Shareholder
Invest and set up industries,
4.55%
RMB600 million 1,147,377,415
Shenzhen
China Merchants Finance
marketing business, etc.
materials supply and
Development Co., Ltd.
Investment Holdings
Co., Ltd.
domestic commerce,
Xu Xin
Limited company
Shareholder
Invest and set up industries,
3.74%
RMB600 million 944,013,171
Shenzhen
Shenzhen Chu Yuan
marketing business, etc.
materials supply and
Co., Ltd.
Investment and
insurance companies,
supervising and managing
domestic commerce,
marketing business, etc.
11.63%
(note (iii))
RMB61,900 million 2,934,094,716
Anbang Insurance Group Beijing
Co., Ltd
enterprise management
consulting and investment
consulting, etc.
Wang Xiaoding
Limited company
Shareholder
Invest and set up industries,
0.22%
USD10 million 55,196,540
Shenzhen
materials supply and
China Merchants Industry
Development (Shenzhen)
Limited
Shareholder
1.89%
USD0.06 million 477,903,500
China Merchants Union (BVI) British Virgin
Limited
Islands
Joint stock limited
company
Shareholder
1.53%
USD0.05 million 386,924,063
British Virgin
Islands
Co., Ltd.
Best Winner Investment
Limited company
company
other personal insurance
services, etc.
Company
of the
Proportion
Proportion
of the
Bank held
the Bank
No. of
Shares of
(a) Material connected person information (continued)
62. Material related-party transactions (continued)
IX Financial Statements
China Merchants Bank
Annual Report 2018
Co., Ltd.
Company name
etc.
Financial Holdings
Limited company
Shareholder
Leasing business, financing
54,721,930 0.22%
HKD500 million
Hong Kong
China COSCO Shipping
Zhao Bangtao
Limited company
Shareholder
business, insurance business
Shipping business, leasing
business, ship repairing and
building etc.
Shenzhen Tri-Dynas Oil &
Shipping Co., Ltd.
Issued and
fully paid capital
General contraction for
2.27%
(note(vi))
Construction Group LTD
RMB5,855 million 571,845,625
Beijing
China Communications
business etc.
Legal
representative
Ren Zhaoping
leasing business, shipping
business, shipping agency,
Legal form
Limited company
Registered
location
Shenzhen
Ship purchasing and marketing Shareholder
The
relationship
0.04%
10,121,823
RMB299 million
Business
the Bank
Company
Company
held by
by the
held by the
with the Bank
0.30%
75,617,340
RMB1,399 million
Beijing
China Ocean Shipping
Co., Ltd.
Xu Lirong
Limited company
International shipping business, Shareholder's
parent
company
and technology, etc.
import and export of goods
(note(iv))
9.97%
RMB11,000 2,515,193,034
million
Beijing
RMB16,191 1,574,729,111
million
China COSCO Shipping
Corporation Limited.
business entrusted by the
and health insurance
Gu Hongmei
Joint stock limited
company
Shareholder
medical security policy,
currency health insurance
business, accidental
injury insurance business,
supporting the national
Various RMB and foreign
4.99%
RMB13,900 1,258,949,171
million
Hexie Health Insurance Chengdu
Co.,Ltd
government, etc.
6.24%
Transportation business,
Shareholder
Shanghai
China COSCO Shipping
(Shanghai) Co., Ltd.
Co., Ltd.
Huang Biao
Limited company
Shareholder
Business services
0.41%
103,552,616
RMB2 million
Guangzhou Haining Maritime Guangzhou
Technology Service
Shou Jian
Limited company
Shareholder
Shipping business
2.76%
RMB3.191 million 696,450,214
Guangzhou
China COSCO Shipping
(Guangzhou) Co., Ltd.
trading ships, etc.
leasing, constructing and
time charter, voyage charter,
shipping space booking,
Xu Lirong
Limited company
55.00
5
The Bank held by the
largest shareholder
CMSNCL
Level 2
Level 3
amount
value
Level 1
Level 2 Level 3
257,476
N/A
N/A
N/A
N/A
Fair
N/A
N/A
N/A
N/A
N/A
N/A
558,218
542,664
2,967 539,697
(2)
Financial Liabilities
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:
Held-to-maturity investments
2018
Carrying
903,268
Changes in valuation technique and the reasons for making the changes
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.
271
272
China Merchants Bank
IX Financial Statements
Annual Report 2018
61. Risk management (continued)
(g)
Fair value information (continued)
(iii)
Fair
value Level 1
925,363 4,777 663,110
Financial assets and financial liabilities that are not measured at fair value
Financial Assets
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.
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.
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).
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 :
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.
2018
2017
Carrying
amount
Debt investments at amortised cost
(1)
3)
Carrying
amount
Level 1
Total
97,353
97,169
97,169
China Merchants Bank
Annual Report 2018
IX Financial Statements
62. Material related-party transactions
(a)
Material connected person information
The Bank's main shareholders and its parent company and the Bank's subsidiaries.
No. of
63,224
Shares of
Proportion
of the
Bank held
Proportion
of the
Company
The
Company name
Registered
location
China Merchants Group (CMG) Beijing
Issued and
fully paid capital
RMB16,700 million
held by the
by the
the Bank
Fair value
63,224
Long-term debt securities issued
Level 2
Level 3
Subordinated notes issued
45,714
46,191
46,191
Long-term debt securities issued
Total
104,483
104,712
104,712
150,197
63,376
150,903
2017
Carrying
amount
Fair value
Level 1
Level 2
Level 3
Subordinated notes issued
33,977
33,945
33,945
150,903
held by
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.
Total unrealised gains and losses included in the consolidated statement of
profit or loss for liabilities held at the end of the reporting period
(317)
At 31 December 2018
3,634
403
20,684
2,540
N/A
27,261
Total unrealised gains and losses
included in the consolidated
statement of profit or loss for
assets held at the end of the
reporting period
376
N/A
5
381
Tradable
financial
assets-debt
Derivative
Available- for-
sale financial
securities financial assets
assets
Total
1,873
1,873
(4)
N/A
(4)
(27)
(300)
381
- In other comprehensive income
26
Purchases
3,457
388
31,732
8རྗ
86
N/A
112
10
101
35,678
Transfer to Level 3
279
N/A
279
Disposals or settlement on maturity
(2,349)
(25,983)
N/A
(28,332)
Exchange difference
N/A
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
(67)
1,618
(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: (continued)
1)
Valuation of financial instruments with significant unobservable inputs (continued)
2)
Financial
liabilities
at fair value
through profit
or loss
Liabilities
At 1 January 2018
In profit or loss
(g) Fair value information (continued)
Issues
2,263
Disposals and settlement on maturity
At 31 December 2018
2,514
Total unrealised gains and losses included in the consolidated statement of
profit or loss for liabilities held at the end of the reporting period
251
At 1 January 2017
In profit or loss
Issues
Disposals and settlement on maturity
At 31 December 2017
251
(67)
61. Risk management (continued)
IX Financial Statements
1,618
| | |
(1,186)
(1,186)
(68)
(68)
2,166
2,166
Assets
At 1 January 2017
Profit or loss
Annual Report 2018
- In profit or loss
Purchases
Disposals and settlement on
maturity
Exchange difference
At 31 December 2017
Total unrealised gains and losses
included in the consolidated
statement of profit or loss for
assets held at the end of the
reporting period
(4)
(4)
China Merchants Bank
- In other comprehensive income
relationship
Company Company
7,559,427,375 29.97% (note
the Bank Business
758
728
707
718
161
36
146
91
434
1,489
1,868
398
53,686
5,109
4,526
11,122
12,151
Other net income
Operating expenses
Net fee and commission income
Interest expense
Interest income
- Factoring
- Bills of acceptances
59,156
- Irrevocable letters of credit
404
(31)
- Factoring
2,056
- Bills of acceptances
97
673
5,017
25,327
32,269
1,063
3,549
6,955
(47)
13,489
2018
- Irrevocable letters of credit
- Irrevocable guarantees
Off-balance sheet:
- Deposits from customers
- Investments
- Loans and advances to customers
On-balance sheet:
(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
34
3
2017
1,628
- Irrevocable guarantees
- Deposits from customers
1,160,950,575
3,289,470,337 13.04 4,129,000,000 100.00 6,000,000,000 100.00
At 31 December 2017
100.00
1,160,950,575
100.00
6,000,000,000
100.00
13.04 4,129,000,000
3,289,470,337
At 1 January 2017
Change
100.00
%
%
HKD
%
RMB
%
CMFM
WLB
CMBFLC
CMBICHC
HKD
%
RMB
RMB
Off-balance sheet:
115,500,000
605,000,000
720,500,000 55.00
Transaction terms and conditions
- Investments
- Loans and advances to customers
On-balance sheet:
2017
2018
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:
Shareholders and their related companies
(c)
62. Material related-party transactions (continued)
Annual Report 2018
IX Financial Statements
55.00
China Merchants Bank
277
There were no credit impaired loans and advances granted to related parties during the year.
4.75% to 4.90%
0.35%
1.10% to 2.75%
4.75% to 4.90%
0.35%
1.10% to 2.75%
Time deposits
Demand deposits
Medium to long-term loans
2017
4.35%
2018
4.35%
Short-term loans
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:
278
Interest income
672
536
55
Other net income
905
1,360
Net fee and commission income
274
971
Interest expense
43
267
11
13
360
16,144
30
13,880
27,601
200
934
5,848
22,306
Interest income
- Factoring
- Bills of acceptances
- Irrevocable letters of credit
5,898
- Irrevocable guarantees
279
Investment Development
Transportation, shipping agency,
(i)(viii))
warehousing and storage,
leasing, manufacturing
building and facility, repair and
contracting, sales operating
management service, etc.
shareholder's
parent company
Legal form
Limited company
with the Bank
The largest
Legal
representative
Li Jianhong
China Merchants Steam
Navigation Co., Ltd.
(CMSNCL)
Beijing
domestic commerce,
RMB7,000 million 3,289,470,337 13.04% (note
The largest
Limited company
Li Jianhong
shareholder
Shenzhen Yan Qing
Shenzhen
RMB600 million 1,258,542,349 4.99%
Invest and set up industries,
Shareholder
Limited company
Xu Xin
Transportation, building and
repair, procurement, supply
chain management and
distribution, shipping agency
services, etc.
Off-balance sheet:
- Deposits from customers
- Investments
Off-balance sheet:
- Placements
-
- Deposits from customers
- Loans and advances to customers
On-balance sheet:
(f)
(e) Associates and joint ventures other than those under Note 62(c) above
62. Material related-party transactions (continued)
Annual Report 2018
IX Financial Statements
- Irrevocable guarantees
China Merchants Bank
(87)
Other net income
(1,178)
(1,436)
Operating expenses
700
562
Net fee and commission income
634
470
Interest expense
22
Interest income
Interest expense
Net fee and commission income
- Loans and advances to customers
On-balance sheet:
2017
2018
1
11
10
928
1,123
16
17
37
11
8,700
8,701
2,700
9,500
1,696
2,665
2,748
2017
2018
Other shareholders holding more than 5% shares
Other net income
Operating expenses
The subsidiaries held by the Bank
RMB600,000,000
280
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:
52,134
- Cash outflows arising from secured debt
instruments funding
- Committed credit facilities and
committed liquidity facilities
898,776
49,820
743,527
42,699
Other contractual lending obligations
34,114
34,114
19,230
19,230
Other contingent funding obligations
4,376,071
76,864
2,668,869
18,562
52,145
318,937
318,937
contracts and other transactions arising
from related collateral requirements
1,636,910
406,679
- Non-business relations deposits
(including all the counterparties)
1,199,128
616,297
1,192,084
647,894
Total cash outflows
- Liabilities and obligations arising from
15,738
63,258
63,258
- Secured funding
13,954
42,401
Additional requirements, of which:
- Cash outflows arising from derivative
unsecured funding
1,678,144
1,424,424
Cash inflows
TOTAL HQLA
TOTAL NET CASH OUTFLOWS
LCR (%))
Note:
(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.
745,738
596,666
Adjusted value
516,412
144.41%
101.90%
287
288
China Merchants Bank
IX Financial Statements
Annual Report 2018
(D) Currency concentrations other than RMB
585,613
411,011
Adjusted value
1,161,732
Secured lending transactions (including
reverse repurchase agreements and
securities borrowed)
241,925
241,902
175,291
175,291
Cash inflows from fully honoured payments
838,811
902,066
868,522
611,834
Other cash inflows
303,041
302,573
53,418
51,686
Total cash inflows
617,257
1,649,778
correspondent banks operations)
- Business relations deposits (excluding
Gross SFT assets (with no recognition of netting),
after adjusting for sale accounting transactions
199,386
252,550
Less: Netted amounts of cash payables and
cash receivables of gross SFT assets
Counterparty credit risk exposure for SFT assets
Agent transaction exposures
49,351
34,953
Total securities financing transaction exposures
234,339
281,399
Off-balance sheet exposure at gross notional amount
1,964,539
1,754,836
Less: Adjustments for conversion to credit equivalent amounts
(910,508)
28,849
(776,906)
42,964
Less: Adjusted effective notional deductions for written credit derivatives
(excluding derivatives and SFTs)
6,480,720
6,001,076
Replacement cost associated with all derivatives transactions
(net of eligible cash variation margin)
with all derivatives transactions
17,420
18,088
Total derivative exposures
Add-on amounts for potential future exposure associated
29,748
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
954
1,515
24,590
2018
Balance of adjusted off-balance sheet assets
977,930
Weighted
amount
(Average value) (Average value)
(Average value)
(Average value)
745,738
596,666
Stable deposits
358,911
Unweighted
amount
17,946
16,124
Components of capital base
- Less stable deposits
1,234,633
123,463
1,154,427
115,443
Unsecured wholesale funding, of which:
322,474
1,054,031
Quarter ended 31 December 2018
Unweighted
Weighted
amount
Retail deposits and small business funding,
of which:
Net tier-1 capital
516,433
459,782
Balance of adjusted on-balance sheet and off-balance sheet assets
7,812,054
7,309,756
Leverage ratio
6.61%
amount
6.29%
IX Financial Statements
Annual Report 2018
(C) Liquidity coverage ratio
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:
Quarter ended 31 December 2017
High quality liquid assets
Total high quality liquid assets (HQLA)
Cash outflows
China Merchants Bank
USD
HKD
Others
26,210
20,720
143,855
190,785
Europe
18,219
732
17,117
- of which attributed to Hong Kong
36,068
43,707
18,407
57,912
120,026
Total
222,475
47,131
298,231
North and South America
567,837
233,721
22,016
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.
2018
Banks
and other
Public
financial
sector
institutions
entities
162,613
Others
Foreign currencies transactions in
Mainland China
111,457
5,976
60,589
178,022
Asia Pacific excluding Mainland China
49,092
Total
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.
2017
and other
196,252
Europe
289
467,489
263,272
49,620
154,597
Total
139,530
47,931
1,863
11,553
North and South America
23,471
5,804
2,057
15,610
Core tier-1 capital:
34,515
Banks
35,912
- of which attributed to Hong Kong
Public
financial
sector
institutions
entities
Others
Total
Foreign currencies transactions in
20,810
Mainland China
9,758
73,302
179,172
Asia Pacific excluding Mainland China
31,322
35,942
149,651
216,915
96,112
Balance of adjusted on-balance sheet assets
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.
IX Financial Statements
Net option position
(4,703)
(107)
511
(4,299)
Net long position
22,728
11,219
669,524
(2,292)
Net structural position
8,208
32,039
547
40,794
2017
USD
HKD
31,655
Others
98,857
552,660
Total
(in millions of RMB)
Non-structural position
Spot assets
Spot liabilities
Forward purchased
Forward written
464,106
34,567
18,007
77,376
453,891
21,100
78,093
553,084
569,876
15,866
96,770
682,512
576,049
(E) International claims
Total
Non-structural position
(190)
117
(4,399)
Net long position
Net structural position
19,826
9,447
1,621
(4,326)
30,894
31,898
522
40,661
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:
Investment properties, property and equipment, net of depreciation charges;
Capital and statutory reserves of overseas branches; and
Investments in subsidiaries.
China Merchants Bank
Annual Report 2018
8,241
(in millions of RMB)
Net option position
74,085
Spot assets
417,418
55,164
75,178
547,760
Spot liabilities
463,514
37,867
511,853
59,902
Forward purchased
484,274
16,083
60,313
560,670
Forward written
414,026
23,742
561,283
(18,792)
15,738
Less: Asset amounts deducted in determining Basel III Tier 1 capital
31 December 2018
Carrying amount
Financial
assets at fair
value through
Debt
investments
at amortised
Debt
2017
11.78%
2018
12.06%
13.02%
15.68%
15.48%
Qualifying portion of share capital
25,220
25,220
Qualifying portion of capital reserve
67,149
12.62%
63,272
Interest in the structured entities sponsored by third party institutions
65. Interests in unconsolidated structured entities
(64)
(12)
1,158
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.
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.
(a)
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).
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
Transactions of credit assets
(64)
Surplus reserves
46,131
34,093
34,093
Net tier-1 capital
516,433
459,782
Tier-2 capital:
Qualifying portion of tier-2 capital instruments and their premium
43,000
Additional tier-1 capital (note (ii))
30,000
82,393
54,586
Qualifying portion of non-controlling interests
55
2,166
Total tier-2 capital
125,448
86,752
Surplus provision for loans impairment
53,648
425,689
Net core tier-1 capital
Regulatory general reserve
78,543
70,907
Retained profits
272,510
239,560
Qualifying portion of non-controlling interests
207
482,340
208
6,858
(817)
Total core tier-1 capital
504,135
444,481
Regulatory deductions from core tier-1 capital
21,795
18,792
Others (note (i))
Regulatory deductions from core tier-2 capital
64
Total
1,170
7,973
- Deposits from customers
Off-balance sheet
- Irrevocable guarantees
- Bills of acceptances
Interest income
Interest expense
Net fee and commission
12,859
Operating expenses
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
Other net income
413
- Deposits from banks and other financial institutions
1,142
China Merchants Bank
IX Financial Statements
Annual Report 2018
62. Material related-party transactions (continued)
(g) Subsidiaries
On-balance sheet
2018
2017
1,330
- Balances with banks and other financial institutions
1,078
- Placements with banks and other financial institutions
25,689
25,782
- Loans and advances to customers
3,237
2,196
- Investments
2,545
64
800
13
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.
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
2018 and 31 December 2017.
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.
(i)
(21,795)
At 1 January 2018
Distributions in 2018
Paid in 2018
Exchange difference
At 31 December 2018
Principal
1,170
Distributions/Paid
(12)
1,158
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:
1,419
99,594
5,543
1,596
12
1
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))
82,228
Share-based payment
Total
2018
RMB'000
2017
RMB'000
51,472
47,557
29,444
46,494
1,312
Contributions to defined contribution retirement schemes
Net tier-2 capital
Perpetual debt capital
Total risk-weighted assets
93,993
401
3,437
21,051
563
4,427
8,427
8,427
21,452
93,993
21,452
24,488
563
545,023
571,523
571,523
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.
(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.
401
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).
93,993
447,651
assets held
for trading
financial
assets
Held-to-
maturity
investments
Debt
securities
classified as
Maximum
receivables
Total
447,651
exposure
Asset backed securities
Investment in funds
Total
Wealth management products
Trust beneficiary rights
1,048
1,048
446,603
Asset management schemes
agreements
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).
China Merchants Bank
(Expressed in millions of Renminbi unless otherwise stated)
Net capital
(A) Capital adequacy ratio
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.
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:
Core tier-1 capital adequacy ratio
Tier-1 capital adequacy ratio
Capital adequacy ratio
Unaudited Supplementary Financial Information
IX Financial Statements
Leverage ratio (continued)
Leverage ratio, net tier-1 capital, on-balance sheet and off-balance sheet exposures and other information:
2018
2017
On-balance sheet items (excluding derivatives and
securities financing transactions (SFT))
6,502,515
6,019,868
(B)
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).
Annual Report 2018
China Merchants Bank
IX Financial Statements
Annual Report 2018
(b) Interest in the unconsolidated structured entities sponsored by the Group
(continued)
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.
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).
IX Financial Statements
66. Non-adjusting events after the reporting period
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
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.
resale
65. Interests in unconsolidated structured entities (continued)
Financial
Adjustments for derivative financial instruments
Adjustment for securities financing transactions
2018
6,745,729
2017
6,297,638
(9,608)
(6,304)
8,744
30,435
34,953
28,849
Adjustment for off-balance sheet items
Other adjustments
1,054,031
977,930
(21,795)
(18,792)
Adjustments for fiduciary assets
The Group's additional tier-1 capital includes qualifying portion of non-controlling interests, preferred shares and etc.
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:
China Merchants Bank
IX Financial Statements
Annual Report 2018
(A) Capital adequacy ratio (continued)
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.
Others represent exchange reserve of foreign currency consolidated financial statements under CBIRC's Administrative Measures on the Capital
of Commercial Banks (Trial).
:
(i)
Balance of adjusted on-balance sheet and off-balance sheet assets
Notes:
546,534
641,881
4,092,890
86,752
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.
for-sale
125,448
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.
(B) Leverage ratio
3,530,745
7,812,054
but outside the scope of regulatory consolidation
285
3,538
3,538
Investment in funds
7,309,756
16,854
16,854
16,854
Total
1,214
114,527
1,214
350,534
350,534
31 December 2017
Carrying amount
Amounts
Available-
held under
234,793
855
(ii) :
Asset backed securities
1,469
247,685
247,685
151,481
Asset management schemes
exposure
Total
Trust beneficiary rights
at FVTOCI
96,204
profit or loss
Maximum
investments
82,457
China Merchants Bank
Annual Report 2018
286
82,457
cost
82,457
8,718
4.47
164,005
4,608
2.81
168,858
5.13
3,508,470
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
2018
2017
196,370
195,120
3,825,123
98,386
Discounted bills
Average
Interest
Average
Average
Interest
Average
(in millions of RMB, except for percentages)
balance
income
yield (%)
balance
income
yield (%)
Corporate loans
1,743,614
4.24
1,650,406
65,864
3.99
Retail loans
1,886,389
113,698
6.03
1,694,059
5.81
Loans and advances to customers
73,954
0.73
Interest income from balances and placements with banks and other financial institutions
1,242,061
34,166
2.75
1,182,334
29,089
2.46
Subtotal
2,801,232
46,807
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
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.
Time
Time
10,794
0.81 1,483,512
12,641
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
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.
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.
2018
2017
Average
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
balance
expense
Average
cost ratio
(%)
Average
balance
Interest
Average
cost ratio
expense
(%)
Deposits from corporate customers
Demand
1,559,171
(in millions of RMB, except for percentages)
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%.
26,619
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.
0.59
36,570
Derivative financial liabilities
0.46
0.71
44,144
Financial liabilities at fair value through profit or loss
4.69
272,734
3.29
203,950
Placements from banks and other financial institutions
7.13
414,838
6.54
405,314
7.55
439,118
7.59
470,826
69.90
21,857
0.38
Amounts sold under repurchase agreements
78,141
438,373
29
Including salaries and welfare payable, taxes payable, deferred income tax liabilities and other liabilities.
Note:
100.00
5,814,246
100.00
6,202,124
Total liabilities
2.63
4,064,345
152,638
110,687
Others (note)
5.10
296,477
6.85
424,926
Debt securities issued
2.16
125,620
1.26
1.78
Interest income from loans and advances to customers
71.39
Percentage of
the total (%)
23.72
Other net income
8.16
5.05
6.89
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
100.00
3.2.3 Interest income
26.20
28.95
28.96
26.76
Amount
Percentage of
Amount the total (%)
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.
(%)
4,427,566
2018
2016
2015
2014
Net interest income
64.56
65.53
64.01
68.01
70.38
Net fee and commission income
2017
11,771
97,153
331,547
25.42
1,602,475
25.45
central bank
500,020
7.41
625,728
9.94
Balances with banks and other financial institutions
100,160
1.48
76,918
1.22
Placements with banks and other financial
institutions and amounts held under resale
agreements
Goodwill
1,714,490
Other assets(3)
Investment securities and other financial assets(2)
Cash, precious metals and balances with the
3,414,612
(in millions of RMB, except for percentages)
Percentage of
Amount the total (%)
Amount
Percentage of
the total (%)
Total loans and advances to customers
3,941,844
58.43
3,565,044
56.61
Allowances for impairment losses on loans (1)
(191,895)
(2.84)
(150,432)
(2.39)
Net loans and advances to customers
3,749,949
55.59
54.22
31 December 2017
Total assets
7.60
III Report of the Board of Directors
Annual Report 2018
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 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
Percentage of
the total (%)
Amount
Percentage of
the total (%)
327,643
19.36
64,796
China Merchants Bank
512,797
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.
(3) Including fixed assets, intangible assets, investment properties, deferred tax assets and other assets.
407,178
6.47
9,954
0.15
9,954
0.16
158,359
2.35
160,773
2.54
6,745,729
100.00
6,297,638
100.00
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.
3.3.1.1 Loans and advances to customers
4.04
31 December 2018
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.
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
Amortisation of intangible assets
Rental expenses
Other general and administrative expenses
Allowances for insurance claims
Total
2018
2017
46,025
39,512
2,132
2,152
3.2.7 Operating expenses
5,270
III Report of the Board of Directors
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.
20,271
11,169
1,091
671
11,327
4,911
3,538
1,934
4,315
3,653
- Share of profits of associates and joint ventures
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.
China Merchants Bank
Annual Report 2018
The following table sets forth, as at the dates indicated, the components of the total assets of the Group.
5,062
714
Expected credit losses relating to financial guarantees and loan commitments
Other assets
374
N/A
395
682
Total expected credit losses
60,829
59,922
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
3.3.1 Assets
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.
121
983
(368)
(933)
4,242
22,214
4,189
18,570
244
81,110
232
70,431
3.2.8 Expected credit losses
In 2018, the expected credit losses of the Group were RMB60.829 billion, representing a year-on-year increase of
1.51%.
The following table sets forth, for the periods indicated, the principal components of expected credit losses of the
Group.
(in millions of RMB)
2018
2017
Loans and advances to customers
59,252
60,052
Investments
1,176
Amounts due from banks and other financial institutions
12,167
132,849
64,152
Liabilities
4,382,713
16,150
1,605,849
17,630
(14,812) 2,073,724
(21,321) 1,305,784
2,249
16,345
(1,898)
(19,636)
116,624
6,105,186
440
34,220
(437) 108,927
(36,570) 3,488,435
322
(323)
18,916
(21,857)
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.
Assets
Debt investments at fair value through other comprehensive income
Liabilities
Fair value
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)
Interest rate derivatives
Currency derivatives
Other derivatives
Total
31 December 2018
31 December 2017
Notional
Notional
amount
Fair value
amount
Assets
28
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.
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.
1,205,466
976,400
Note:
"Official authorities" include the Ministry of Finance of the PRC, local governments and the central bank etc.; "Others" mainly refer to
enterprises.
China Merchants Bank
Annual Report 2018
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.
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.
The following table sets forth, as at the dates indicated, the components of the total liabilities of the Group.
31 December 2018
31 December 2017
(in millions of RMB, except for percentages)
Total Bond investments
Equity investments designated at fair value through other comprehensive income
69,826
151,101
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
31 December
(in millions of RMB)
2018
2017
Official authorities (note)
641,102
497,260
Policy banks
Others (note)
291,041
258,213
Commercial banks and other financial institutions
174,934
98,389
7.85
27
Investments at fair value through profit or loss
4,015
0.24
N/A
N/A
Debt investments at amortised cost
903,268
53.36
N/A
N/A
- Bond investments
657,926
38.87
N/A
N/A
- Non-standardised credit asset investments
252,884
14.94
through other comprehensive income
N/A
Equity investments designated at fair value
N/A
4.00
- Non-standardised credit asset investments
- Others(1)
173,988
10.28
20,806
1.23
644
0.04
Derivative financial assets
34,220
2.02
18,916
1.18
Debt investments at fair value through other
comprehensive income
414,691
24.50
N/A
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.
N/A
538
572,241
35.71
Investments in joint ventures and associates (2)
8,871
0.52
5,203
0.32
Total investment securities and other
financial assets (2)
1,692,708
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.
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.
N/A
- Others
N/A
34.84
0.03
N/A
N/A
Less: allowances for impairment losses
(8,080)
(0.48)
N/A
N/A
Available-for-sale financial assets
N/A
N/A
383,101
23.91
Held-to-maturity investments
N/A
N/A
558,218
Investments classified as receivables
2.69
21,580
66,480
3.15
305,886
9,250
3.02
Total
5,820,808
110,527
1.90 5,491,455
1.77
Net interest income
1
160,384
144,852
/
Net interest spread
Net interest margin
2.44
2.57
10,982
2.29
348,093
3.96
3,965,462
50,329
1.27
Deposits and placements from banks and
other financial institutions
863,041
23,028
2.67
880,787
24,138
2.74
Debt securities issued
340,151
14,530
4.27
339,320
13,436
Borrowings from the central bank
1.45
2.43
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.
5,887
Changes in interest income
14,564
14,342
28,906
Interest-bearing liabilities
Deposits from customers
4,415
7,243
11,658
Deposits and placements from banks and other
financial institutions
(474)
(636)
(1,110)
Debt securities issued
35
916
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.
4,971
Balances and placements with banks and other
2018 compared with 2017
Increase (decrease) due to
(in millions of RMB)
Interest-earning assets
Loans and advances to customers
Volume
Interest rate
16,256
11,256
Investments
(5,793)
2,018
Net increase
(decrease)
27,512
(3,775)
Balances with the central bank
(870)
152
(718)
financial institutions
1,059
61,987
Deposits from customers
2017
(in millions of RMB, except for percentages)
Average
balance
Interest
income
Average
yield (%)
Average
balance
Interest
income
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
2018
Balances with the central bank
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.
3.2.5 Net interest income
6,846
2.06
Subtotal
1,468,291
15,180
1.03 1,299,616
10,446
0.80
Total
4,269,523
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.
Interest expense on debt securities issued
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.
4,269,523
510,760
1.56
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
22
7,961
22
4.06
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
6,244,967 270,911
2.91 459,129
4.34 5,966,601
12,426
2.71
242,005
21
64,018
1,094
1,332
28,209
1.89
5,890,720
28,155
1.90
Net interest income
40,960
42,412
/
Net interest spread
2.40
2.54
2.52
2.66
Net interest margin
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.
23
24
5,915,737
China Merchants Bank
Total
2,766
Deposits and placements from banks
and other financial institutions
899,692
5,549
Debt securities issued
351,024
3,810
Borrowings from the central bank
345,820
2,769
2.45
4.31
3.18 344,161
797,923
5,041
2.51
388,434
4,109
4.20
3.19
1.48
III Report of the Board of Directors
3.2.6 Net non-interest income
6,372
- Commissions on trust and fiduciary activities
23,351
25,245
- Others
3,171
2,784
Less: fees and commission expense
(6,566)
(5,890)
Net fee and commission income
Other net non-interest income
- Other net income
Net gains from fair value changes
- Net investment income
- Exchange gain
Other net operating income
6,807
Annual Report 2018
- Commissions from credit commitment and loan business
12,723
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.
(in millions of RMB)
Fee and commission income
2018
2017
73,046
69,908
- Bank card fees
16,727
14,011
- Settlement and clearing fees
10,267
9,209
- Agency service fees
12,287
Borrowings from the central bank
16,239
16,081
Interest
average
(in millions of RMB, except for percentages)
Interest-earning assets
balance
income
yield (%)
balance
income
yield (%)
Loans and advances to customers
3,910,859
50,603
5.13
3,920,319
51,661
5.23
Investments
Average
1,280,918
average
Average
400
1,732
Changes in interest expense
5,308
8,066
13,374
Changes in net interest income
9,256
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
Annualised
Annualised
Interest
1.48 4,360,202
12,165
1,275,105
6,337,546
70,567
4.42
July to September 2018
October to December 2018
(in millions of RMB, except for percentages)
Average
balance
Annualised
average
Interest cost ratio
expense
(%)
Annualised
average
Average
balance
Interest
cost ratio
expense
(%)
Interest-bearing liabilities
Deposits from customers
4,319,201
4.29
3.77
69,169
Total
12,004
3.73
Balances with the central bank
512,102
2,009
1.56
487,473
1,925
1.57
Balances and placements with banks and other
financial institutions
690,285
4,392
2.52
654,649
4,977
3.02
6,394,164
Deposits from customers
Deposits from banks and other financial institutions
Borrowings from the central bank
Collectively
28,855
25,825
10,254
9,390
6,570
7,057
Total
- over 12 months
- between 6 and 12 months (inclusive)
- between 3 and 6 months (inclusive)
-
42,272
As a percentage of total gross loans and advances:
- over 12 months
- between 6 and 12 months (inclusive)
- between 3 and 6 months (inclusive)
with respect to either principal or interest for periods of:
Gross loans and advances to customers which have been overdue
2017
2018
45,679
42,272
1,067
962
Total
42
45,679
0.18%
19,137
34,185
32,978
11,494
9,277
2017
2018
Provision of overdue loans and advances for which impairment losses
are individually assessed
Value of collateral held against overdue loans and advances
Unsecured portion of overdue loans and advances
Secured portion of overdue loans and advances
0.18%
(iii) Collateral information
Annual Report 2018
IX Financial Statements
China Merchants Bank
294
293
1.28%
1.08%
0.81%
0.66%
0.29%
0.24%
(G) Overdue loans and advances to customers (continued)
13,239
248
5,460
Annual Report 2018
IX Financial Statements
China Merchants Bank
290
China Merchants Bank
IX Financial Statements
Annual Report 2018
(F) Further analysis on loans and advances to customers analysed by
industry sector
Operation in Mainland China
11,273
(G) Overdue loans and advances to customers
2017
loans and
advances
% of gross
loans and
advances
covered by
covered by
collateral or
collateral or
Amount
other security
Amount
other security
% of gross
9,334
(i)
Headquarters
5,119
4,003
4,061
3,922
7,758
6,020
5,990
7,798
7,813
7,834
4,495
By geographical segments
6,025
2018
(ii) By overdue period
Total
Subsidiaries
Outside Mainland China
Western region
Central region
Northeast region
Pearl River Delta and West Coast region
Bohai Rim region
Yangtze River Delta region
2017
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).
to perform relevant duties under the advanced capital measurement method pursuant to the
authorisation given by the Board of Directors;
to make regular assessment on the risk policies, management status, risk-withstanding ability and
capital status of the Bank;
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;
Main authorities and duties of the Risk and Capital Management Committee are:
(iv) Risk and Capital Management Committee
Board committees (continued)
(J) Corporate governance (continued)
Annual Report 2018
IX Financial Statements
China Merchants Bank
296
to submit proposals on perfecting the management of risks and capital of the Bank;
295
and
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;
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 identify connected persons of the Company according to relevant laws and regulations;
Main authorities and duties of the Related Party Transactions Control Committee are:
(iii) Related Party Transactions Control Committee
any other task delegated by the Board of Directors.
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
to examine the internal control system of the Bank, and make recommendations for improvement in
the internal control of the Bank;
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 coordinate the communication between internal auditors and external auditors;
to review the announcements on related party transactions of the Bank.
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 arrange and instruct risk prevention works in accordance with the authorisation of the Board of
Directors; and
(v)
assessed impairment
allowance
Postcode 518040
(0755) 8319 5555
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: China Merchants Bank Tower, No 7088,
Shennan Boulevard, Shenzhen, China
://www.cmbchina.com
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any other task delegated by the Board of Directors.
any other task delegated by the Board of Directors.
to conduct preliminary examination on the candidates for directors and senior management and make
recommendations to the Board of Directors; and
to study the standards and procedures for selection of directors and senior management, and make
recommendations to the Board of Directors;
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;
Main authorities and duties of the Nomination Committee are:
Nomination Committee
any other task delegated by the Board of Directors.
to review the regulations and policies in respect of remuneration of the Bank; and
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
(vi)
to conduct extensive searches for qualified candidates for directors and senior management;
to propose the appointment or replacement of external auditors;
Main authorities and duties of the Audit Committee are:
Audit Committee
- rescheduled loans and advances overdue
more than 90 days
Less:
0.51%
18,009
0.58%
and advances
Amount
and advances
Amount
% of
total loans
total loans
16,218
% of
Rescheduled loans and advances to
customers (Note)
2017
2018
(I)
(H) Rescheduled loans and advances to customers
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.
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.
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 with a specific repayment date are classified as overdue when the principal or interest is overdue.
The above analysis represents loans and advances overdue for more than 90 days as required and defined by the HKMA.
Note:
22,766
0.41%
11,293
0.32%
(ii)
to make recommendations and proposals on important issues for discussion and determination by the
Board of Directors.
to evaluate and monitor the implementation of Board resolutions; and
to supervise and review the implementation of the annual operational and investment plans;
to consider material investment and financing plans and make proposals to the Board of Directors;
to formulate the operational goals and medium-to-long term development strategies of the Bank, and
make an overall assessment on strategic risks;
Main authorities and duties of the Strategy Committee are:
Strategy Committee
(i)
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.
Board committees
(J) Corporate governance
Annual Report 2018
IX Financial Statements
China Merchants Bank
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.
Non-bank mainland china exposures
The amount of the Group's rescheduled loans and advances to financial institutions as at 31 December 2018 was 1
million (2017: 1 million).
Note: Represents the restructured non-performing loans.
0.19%
6,716
0.17%
6,548
less than 90 days
Rescheduled loans and advances overdue
Property development
262,323
2018
188,822
Micro-finance loans
Others
1,525
12,720
Retail loans and advances subtotal
21,696
6228 28 282
16
7,065
49
25
4,211
89
97
1,937
81
89
13,934
73
7
419
17
100
72
7,260
191
Residential mortgage
Telecommunications, software and IT services
9,309
68
13,444
35
Production and supply of electric power,
heating power, gas and water
7,889
Construction
5,635
Mining
2,196
Leasing and commercial services
2,001
Water, environment and
public utilities management
26
Others
17,882
Corporate loans and advances subtotal
228,856
Credit cards
90
54
67
2018
Overdue loans
and advances
Residential mortgage
Credit card
3,614
12,595
Impaired loans
and advances
2,610
6,394
-Stage 2
-Stage 1 (Lifetime ECL-
(12-month ECL) not credit-impaired)
-Stage 3
(Lifetime ECL-
credit impaired)
7,655
4,213
435
12,895
2,054
6,044
2017
Residential mortgage
Credit card
Overdue loans
and advances
3,869
9,787
2,734
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).
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:
17,743
220,365
industry sector (continued)
IX Financial Statements
58
7,613
100
204
99
1,747
98
88
11,376
83
92
20,940
90
Gross loans and advances to customers
250,552
57
241,305
61
291
292
China Merchants Bank
Annual Report 2018
(F) Further analysis on loans and advances to customers analysed by
Impaired loans
and advances
25,613
12,505
1,987,643
Gross loans and advances to customers
3,682,482
22223 123388 265
121,900
28
123,768
28
74,804
40
46,276
33
67,964
61
61,920
44
39,136
56,721
1,443,496
92
115,888
825,797
491,179
310,969
100
Retail loans and advances subtotal
100
141,835
575,299
1,545,073
Corporate loans and advances subtotal
59,021
Others
35,349
Mining
55,890
public utilities management
Water, environment and
60,703
Telecommunications, software and IT services
61,963
Financial concerns
84,475
100
Residential mortgage
921,500
100
Credit cards
Micro-finance loans
Others
349,009
51
54
66
Property development
54,167
66
63,209
58
Financial concerns
52,174
36
47,198
40
Transportation, storage and postal services
38,212
65
14,221
58
Manufacturing
26,860
45
11,371
44
Wholesale and retail
other security
136,410
Amount
Amount
1,764,355
3,323,739
35 673 788 2265
38
94
70
China Merchants Bank
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
% of gross
loans and
advances
% of gross
loans and
advances
covered by
covered by
collateral or
collateral or
other security
Discounted bills
149,766
heating power, gas and water
Individually
assessed impairment
allowance
Construction
124,094
Leasing and commercial services
138,773
Production and supply of electric power,
42
205,884
157,984
Wholesale and retail
37
204,322
62
Manufacturing
255,683
35
251,979
31
33
Transportation, storage and postal services
248,815
34
56
184
294
0.53
62,339
1.74
1.42
20.18
Mining
37,545
0.95
3,019
55,916
0.30
public utilities
70,012
Water conservancy,
1.75
1,391
2.23
79,335
1.01
710
70
1.78
8.04
software and IT service
Information transmission,
1.89
environment and
43,347
751
4,622
53,605
100.00
3,933,034
customers
Total loans and advances to
0.89
15,871
50.08
1,785,295
0.79
15,847
51.09
2,009,339
Retail loans
3.25
115,888
3.81
149,766
Discounted bills
1.01
1,452
2.08
74,464
0.89
685
1.96
76,903
Others(2)
10.66
1.22
2.15
0.00
1.20
Production and supply of
4.14
9,101
6.17
219,818
4.03
6,867
4.33
170,489
Wholesale and retail
6.55
17,447
7.47
electric power, heat,
266,200
18,760
7.18
282,543
Manufacturing
0.97
2,241
6.45
229,935
0.58
1,674
7.30
287,027
postal services
6.64
gas and water
146,662
3.73
1,080
2.29
90,110
Construction
0.00
1
2.62
93,474
1.36
3
2.90
114,137
Finance
0.14
196
3.85
137,212
0.46
576
3.21
126,095
services
Leasing and commercial
0.72
925
3.62
128,965
0.56
827
76,741
3,565,044
100.00
57,393
Overseas
Yangtze River Delta
12,012
9.85
350,991
2.09
7,975
9.68
380,675
Western China
1.86
6,394
9.63
343,343
1.30
123,337
5,005
3.13
0.37
customers
Total loans and advances to
0.79
2,054
7.30
260,347
0.69
1,968
7.23
284,366
Subsidiaries
0.19
203
3.07
109,508
456
3,933,034
9.77
Central China
1.71
7,266
11.94
425,602
1.73
8,708
12.80
503,588
Bohai Rim
1.48
10,893
20.62
735,044
1.30
10,334
Pearl River Delta and West
384,094
Side of Taiwan Strait
16.96
2.93
4,260
4.07
145,204
3.82
5,583
3.72
146,198
North-eastern China
1.45
8,674
16.78
598,374
1.05
7,009
667,011
100.00
53,605
1.36
Loan
(in millions of RMB, except for percentages)
balance
of the
total (%)
performing
loan ratio
Loan
of the
performing
loan ratio
loan
(%)(note)
balance
total (%)
loan
Non-
performing
(%)(note)
Non-
Non-
performing
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)
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.
China Merchants Bank
Annual Report 2018
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-
Percentage
Head Office
650,128
16.53
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
57,393
100.00
3,565,044
Non-
performing
Percentage
Non-
Non-
performing
6,567
1.01
596,631
16.74
5,637
0.94
(%)(nate)
793,637
loan
balance
(in millions of RMB, except for percentages)
Loan
loan ratio
performing
of the
Loan
total (%)
3.42
performing
of the
total (%)
3,142,192
during the parallel run period)
consideration the floor requirements
Risk-weighted assets (without taking into
18.60
483,546
573,466
Net capital
12.31
402,869
452,449
Net Tier 1 capital
13.35
371,416
420,996
Net core Tier 1 capital
the advanced approach
year as compared
with the end of the
previous year (%)
Increase/decrease at
the end of the current
2017
31 December
31 December
2018
Capital adequacy ratios under
(in millions of RMB, except for percentages)
The Company
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.
2,945,175
III Report of the Board of Directors
6.69
2,698,166
15.52%
percentage point
Decreased by 0.44
12.69%
12.25%
Tier 1 capital adequacy ratio
percentage point
Decreased by 0.31
16.43
3,173,532
11.70%
11.39%
Core Tier 1 capital adequacy ratio
3,694,893
floor requirements during the parallel run period)
Risk-weighted assets (taking into consideration the
5.96
362,152
383,754
Operational risk weighted assets
17.00
51,513
60,272
Market risk weighted assets
6.58
2,531,510
Of which: Credit risk weighted assets
China Merchants Bank
Annual Report 2018
38
37
14.50
57,560
65,906
7.18
2,848,064
3,052,636
7.25
3,291,816
3,530,424
the floor requirements during the parallel run period)
Of which: Credit risk weighted assets
Market risk weighted assets
Risk-weighted assets (without taking into consideration
17.45
546,534
641,881
Net capital
12.32
459,782
516,433
13.31
425,689
482,340
Net Tier 1 capital
Net core Tier 1 capital
the advanced approach (1)
Capital adequacy ratios under
Operational risk weighted assets
411,882
386,192
6.65
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.
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.
percentage point
(2)
Notes: (1)
percentage point
Increased by 0.20
percentage point
15.48%
15.68%
Increased by 0.32
6.87
7,309,756
6.29%
7,812,054
6.61%
15.24%
Adjusted balance of on- and off-balance sheet assets
Leverage ratio
Capital adequacy ratio
percentage point
Decreased by 0.40
13.02%
12.62%
Decreased by 0.28
15.92
3,530,745
12.06%
4,092,890
11.78%
Tier 1 capital adequacy ratio
Core Tier 1 capital adequacy ratio
floor requirements during the parallel run period)
Risk-weighted assets (taking into consideration the
Information on leverage ratio (2)
(in millions of RMB, except for percentages)
The Group
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 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.
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:
Balance of credit risk exposures
percentage point
Increased by 0.50
12.16%
12.66%
Capital adequacy ratio
percentage point
percentage point
Increased by 0.25
10.30%
10.55%
Tier 1 capital adequacy ratio
Increased by 0.32
9.50%
9.82%
Core Tier 1 capital adequacy ratio
9.60
3,911,286
4,286,653
Risk-weighted assets
14.05
475,774
542,610
Net capital
12.31
(in millions of RMB)
Portion covered
402,869
Type of risk exposure
by the IRB approach
39
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.
Measurement of market risk capital
46,676
106,485
2,489,129
429,738
429,738
2,062,279
94,872
45,204
1,144,335
1,144,335
967,481
967,481
2,541,554
2,541,554
1,863,316
1,863,316
Group
1,322,393
1,322,393
Legal person
On-balance sheet
Off-balance sheet
Counterparty
Portion not covered
by the IRB approach
Other retail
Of which: Residential mortgage exposures
Qualified revolving retail
Retail
Corporate
Financial institution
452,449
Net Tier 1 capital
13.35
9.96
4,254,180
4,677,967
Risk-weighted assets
13.41
538,761
611,025
Net capital
12.32
459,782
516,433
Net Tier 1 capital
13.31
425,689
482,340
Net core Tier 1 capital
year as compared
with the end of the
previous year (%)
Increase/decrease at
the end of the current
31 December
2017
2018
31 December
the weighted approach (note)
Capital adequacy ratios under
The Group
(in millions of RMB, except for percentages)
Core Tier 1 capital adequacy ratio
10.31%
10.01%
Increased by 0.30
371,416
420,996
Net core Tier 1 capital
the weighted approach
Capital adequacy ratios under
The Company
(in millions of RMB, except for percentages)
year as compared
with the end of the
previous year (%)
Increase/decrease at
the end of the current
31 December
2017
31 December
2018
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.
Increased by 0.28
percentage point
III Report of the Board of Directors
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.
Note:
percentage point
Increased by 0.40
12.66%
13.06%
Capital adequacy ratio
percentage point
percentage point
Increased by 0.23
10.81%
11.04%
Tier 1 capital adequacy ratio
China Merchants Bank
Annual Report 2018
balance
year as compared
with the end of the
previous year (%)
31 December
2017
2018 approach) (%) total loans (%)
advanced Percentage of
(under the
Percentage
of net capital
31 December
as at
Loan balance
Information transmission, software and IT service
Transportation, storage and postal services
Property development
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
Industry
ABCD
В
(in millions of RMB)
Top ten
borrowers
24,100
3.4.6 Loans to the top ten single borrowers
14,650
8,664
15.85
101,744
0.15
0.89
0.15
0.93
5,993
5,680
0.17
1.04
0.18
1.07
0.21
1.30
0.22
1.35
0.22
1.35
0.31
1.89
0.37
0.61
8,649
11
2.28
3.75
12,150
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.
Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
Note:
42.04
1,653,517
Collateralised loans
5.11
21,416
11.75
418,769
4.61
20,332
11.22
441,212
Guaranteed loans
0.72
7,844
30.55
1,089,261
0.74
9,752
33.57
1,320,545
Credit loans
(%)(note)
loan
loan ratio
Transportation, storage and
20,769
1.26
1,550,904
43.50
1.61
57,393
100.00
3,565,044
1.36
53,605
100.00
3,933,034
customers
Total loans and advances to
3.25
115,888
2.59
3.81
Discounted bills
1.33
5,202
10.95
390,222
0.75
2,752
9.36
367,994
Pledged loans
1.48
22,931
149,766
Increase/decrease at
the end of the current
8,316
6,669
Charge for the period
110,032
151,520
Balance as at the beginning of the year
N/A
1,088
instrument standard
Adjustment at the beginning of the period under the new financial
2017
110,032
150,432
Balance as at the end of the previous year
2018
(in millions of RMB)
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.
3.4.10 Changes in the allowances for impairment losses on loans
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.
3.4.9 Repossessed assets and impairment allowances
III Report of the Board of Directors
China Merchants Bank
Annual Report 2018
36
35
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.
Represents the restructured non-performing loans.
Note:
0.32
136,198
11,293
64,450
(76,946)
31 December
2018
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".
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.
3.5 Analysis of capital adequacy ratio
Annual Report 2018
III Report of the Board of Directors
China Merchants Bank
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.
Represents the interest income accrued on impaired loans as a result of the increase in their present value due to the passage of time.
Note:
150,432
(349)
5,519
(24,283)
(26,197)
279
192,000
Balance at the end of the period
Foreign exchange rate movements
Write-offs/disposal
7,453
Recovery of loans and advances previously written off
(561)
(307)
Unwinding of discount on impaired loans and advances (note)
22
Transfer into/(out) for the period
(4,398)
Release for the period
0.41
16,218
Of which: restructured loans overdue more than
90 days
0.47
16,824
0.42
16,447
Overdue from 3 months up to 1 year
0.46
16,178
0.50
19,731
Overdue within 3 months
Percentage
of total
loans (%)
Loan
balance
loans (%)
balance
(in millions of RMB, except for percentages)
of total
Loan
Percentage
31 December 2017
31 December 2018
3.4.7 Distribution of loans by overdue term
III Report of the Board of Directors
Annual Report 2018
China Merchants Bank
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.
Overdue from 1 year up to 3 years
19,130
0.49
26,093
0.51
Percentage
of total
loans (%)
Loan
balance
18,009
31 December 2017
31 December 2018
Percentage
of total
loans (%)
0.58
22,766
Restructured loans (note)
Loan
balance
(in millions of RMB, except for percentages)
3.4.8 Restructured loans
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.
100.00
6,873
3,565,044
1.74
61,857
1.58
62,003
3,933,034
Total loans and advances to customers
Total overdue loans
0.08
2,762
0.17
6,695
Overdue more than 3 years
0.73
100.00
1.27
1.36
7.07
57,393
1.36
53,605
100.00
3,565,044
100.00
3,933,034
0.52
18,716
0.38
15,038
Total non-performing loans
Total loans and advances to customers
Loss
0.61
21,577
0.64
Doubtful
3,820,100
97.13
3,450,450
96.79
59,329
1.61
1.51
1.60
13,526
0.34
17,100
0.48
25,041
57,201
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
loan
(%) (1)
Corporate loans
1,773,929
45.10
37,758
loan ratio
2.13
46.67
41,522
2.50
Working capital loans
884,660
22.49
1,663,861
Substandard
performing
Non-
31 December 2017
Loan
Percentage
of the
Non-
Non-
performing
performing
Non-
performing
loan ratio
balance
total (%)
loan
(%) (1)
balance
Percentage
of the
total (%)
Loan
Special mention
Normal
Amount the total (%)
41.25
1,581,802
38.92
Time
1,022,294
23.23
1,815,427
1,144,021
Subtotal
2,837,721
64.48
2,725,823
67.07
Deposits from retail customers
28.15
Demand
Demand
Percentage of
the total (%)
3,211
30
China Merchants Bank
III Report of the Board of Directors
Annual Report 2018
Deposits from customers
Deposits from corporate 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.
31 December 2018
31 December 2017
(in millions of RMB, except for percentages)
Amount
Percentage of
the total (%)
Amount
The following table sets forth, as at the dates indicated, the deposits from customers of the Group by product type
and customer type.
25,698
1,059,923
972,291
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
3.3.3 Shareholders' equity
3.4.1 Distribution of loans by 5-tier loan classification
31 December 2018
31 December 2017
(in millions of RMB, except for percentages)
Amount
Percentage of
the total (%)
Percentage of
The following table sets forth the 5-tier loan classification of the Group as at the dates indicated.
24.09
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.
4,064,345
23.92
Time
503,030
11.43
366,231
9.01
100.00
Subtotal
1,562,953
35.52
1,338,522
32.93
4,400,674
100.00
Total deposits from customers
2.90
(in millions of RMB, except for percentages)
24.37
31 December 2018
3.4.3 Distribution of loans and non-performing loans by industry
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.
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.
III Report of the Board of Directors
China Merchants Bank
Annual Report 2018
32
32
31
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.
(4)
The Company will transfer discounted bills to corporate loans for accounting purposes once overdue.
(3)
(2) Consists primarily of other corporate loans such as financial leasing, M&A loans and corporate mortgage loans.
Notes: (1) Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
1.61
57,393
3.93
2,163
1.40
147,786
4.15
2,118
31 December 2017
1.43
customers
3,933,034
100.00
53,605
3,565,044
100.00
Total loans and advances to
Percentage
Non-
Non-
performing
1,773,929
45.10
37,758
2.13
1,663,861
46.67
Corporate loans
41,522
Property development
316,490
8.05
3,263
1.03
252,031
2.50
154,555
(%)(1)
(%)
of the total
performing
loan ratio
Loan
Percentage
of the total
Non-
loan
Non-
performing
loan ratio
(in millions of RMB, except for percentages) Loan balance
(%)
loan
(%) (1)
balance
performing
Others(4)
868,844
5,470
3.81
149,766
Discounted bills (3)
2.91
6,936
6.68
238,120
1.73
4,528
6.65
261,655
Others(2)
0.95
1,516
4.46
159,090
1.57
1.11
3.14
Fixed asset loans
470,521
11.97
5,067
115,888
1.08
11.16
5,770
1.45
157,093
3.99
2,465
397,807
3.25
Trade finance
2,009,339
2,610
0.28
833,410
23.38
2,734
0.33
23.62
Credit card loans
14.63
6,392
1.11
491,383
Retail loans
13.78
575,490
928,760
27,300
1.77
15,847
51.09
Residential mortgage loans
0.79
1,785,295
15,871
0.89
Micro-finance loans
50.08
8.91
4,682
1.34
312,716
8.77
5,549
350,534
46
761,970
Yangtze River Delta
17
15,387
44
2,557,785
2,908,217
Amount
Percentage
(%)
Amount
(%)
Amount
(%)
12
(in millions of RMB, except for percentages)
Percentage
Percentage
Total profit before tax
2017
Head Office
745,677
8
19,659
31 December 2017
150,447
11
632,515
9260
360,547
Western China
358,334
151,548
North-eastern China
10
645,313
Taiwan Strait
Pearl River Delta and West Side of
13
12,080
484,410
8
492,441
Bohai Rim
22
13
Central China
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.
31 December 2017
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.
Capital management
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 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.
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).
352,226
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.
49
49
III Report of the Board of Directors
China Merchants Bank
Annual Report 2018
III Report of the Board of Directors
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.
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.
Advancement in monthly active users (MAU)
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.
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.
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.
3.9.2 Outlook and countermeasures for 2019
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.
9.
8
8.
China Merchants Bank
Annual Report 2018
Total assets
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
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.
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.
47
48
Total liabilities
355,602
41
15,998
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.
Investment of corporate loans
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.
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.
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
China Merchants Bank
Annual Report 2018
43
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.
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.
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
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.
44
5.
III Report of the Board of Directors
New policies on asset management business and countermeasures
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.
III Report of the Board of Directors
China Merchants Bank
Annual Report 2018
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.
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.
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
55
45
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
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.
III Report of the Board of Directors
4.
China Merchants Bank
Annual Report 2018
90,680
100
5,814,246
100
822720
9,077
6
338,891
7
419,432
6,297,638
Total
Subsidiaries
2,071
3
196,693
3
199,836
Overseas
6,745
8,108
1,555
100
9366
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
3.7.2 Outstanding overdue debts
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.
2.
1.
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
China Merchants Bank
Annual Report 2018
42
42
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.
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.
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.
Continuous implementation of strategic transformation
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.
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.
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.
6
Overseas
Pearl River Delta and West Side of
15
16,383
8
513,813
8
526,143
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.
Bohai Rim
23
24,040
12
759,258
12
777,607
Yangtze River Delta
11
12,017
44
Percentage
(%)
Amount
Percentage
(%)
Amount
2,739,929
46
3,129,174
Head Office
Percentage
(%)
Amount
(in millions of RMB, except for percentages)
Taiwan Strait
693,830
10
679,961
2
(1,320)
(1)
Central China
389,081
6
380,025
6
11,930
11
Western China
144,367
Subsidiaries
380,152
Total profit before tax
2018
6
6
10,790
10
240,080
4
234,741
4
3,041
3
465,295
North-eastern China
18
19,279
11
371,913
146,060
Total liabilities
31 December 2018
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.
Business segments
3.6 Results of operating segments
165
889
126
668
403
2,038
253
1,328
period
period
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
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.
Items
(in millions of RMB)
Retail finance
Geographical segments
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.
221,037
90,680
248,444
106,497
9,639
5,481
13,306
8,320
103,015
36,784
109,295
39,914
Total assets
31 December 2018
108,383
125,843
58,263
Net
operating
income
before tax
by business
segments
income
segments
Net
operating
Profit
Profit
before tax
by business
2017
2018
Total
Other businesses
Wholesale finance
48,415
2
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.
50
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%.
Asset management business
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.
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.
11
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.
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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.
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.
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).
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.
12
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.
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"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.
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.
For the analysis of the new policy on asset management business, please refer to section 3.9.1.
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
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.
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.
Corporate customer deposits
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.
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
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.
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 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.
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.
Investment banking business
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.
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).
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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.
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.
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 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.
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.
Bill business
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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
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".
Private banking
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
China Merchants Bank
Annual Report 2018
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.
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
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.
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
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3.10.2 Wholesale finance
Annual Report 2018
III Report of the Board of Directors
China Merchants Bank
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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 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
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
Corporate loans
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.
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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.
3.11.1 Credit risk management
III Report of the Board of Directors
China Merchants Bank
Annual Report 2018
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
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.
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 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).
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.
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.
III Report of the Board of Directors
China Merchants Bank
Annual Report 2018
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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.
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.
3.10.7 CMB Financial Leasing
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 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
3.10.8 CMB International Capital
3.11.2 Management of large-scale risk exposure
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.
3.11.3 Country risk management
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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
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.
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.
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
Annual Report 2018
III Report of the Board of Directors
China Merchants 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.
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.
Banking book
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
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.
Annual Report 2018
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.
3.11.4 Market risk management
60
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.
Sydney Branch
Smart WeChat Customer Service
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.
CMB Life APP for Credit Card
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.
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 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.
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.
The Company provides products and services via multiple distribution channels. Our distribution channels mainly
consist of physical distribution channels and e-banking channels.
3.10.3 Distribution channels
III Report of the Board of Directors
China Merchants Bank
Annual Report 2018
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.
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, 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.
Financial markets business
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.
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).
Asset custody business
Annual Report 2018
III Report of the Board of Directors
China Merchants Bank
Physical distribution channels
III Report of the Board of Directors
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.
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.
China Merchants Bank
Annual Report 2018
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
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.
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.
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
Direct banking
China Merchants Bank
Annual Report 2018
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".
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
63
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.
3.10.4IT and R&D
III Report of the Board of Directors
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
China Merchants Bank
Annual Report 2018
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.
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.
financial
(6)
(4)
(3)
(2)
profit appropriation of the Company shall focus on reasonable returns on investment of the investors,
and such policies shall maintain continuity and stability;
(1)
2.
1.
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
30.05
30.20
30.06
The profit appropriation plan for 2018 is subject to consideration and approval at the 2018 Annual General Meeting of the Company.
78,901
70,150
62,081
23,707
18,663
21,185
the year (in
of RMB) millions of RMB) statements (%)
financial
tax, in millions
(inclusive of statements for
held (No. of
shares)
(7)
0.94
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;
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.
4.2 Financial highlights
The Company is engaged in banking and related financial services.
4.1 Principal business activities
Important Events
Annual Report 2018
IV Important Events
China Merchants Bank
Chairman of the Board of Directors
22 March 2019
Li Jianhong
By order of the Board of Directors
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.
3.16 Permitted indemnity provision
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.
3.15 Management contracts
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.
3.14 Compliance with relevant laws and regulations
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.
reporting guide
3.13 Requirements of the environmental, social and governance
Annual Report 2018
III Report of the Board of Directors
China Merchants Bank
74
73
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.
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;
Details are set out in Chapter II Summary of Accounting Data and Financial Indicators.
0.84
shares) of tax, in RMB)
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.
3.11.8 Compliance risk management
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.
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.
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.
3.11.7 Reputational risk management
III Report of the Board of Directors
China Merchants Bank
Annual Report 2018
The stress test is the Company's internal management indicator - the domestic calibre
14
The liquidity coverage ratio is an external regulatory indicator - the legal person calibre
13
Please refer to Note 61(c) to the financial statements for more details of the liquidity risk management of the
Company.
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.
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, 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.
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.
3.11.6 Liquidity risk 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.
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.
3.11.5 Operational risk management
Annual Report 2018
III Report of the Board of Directors
China Merchants Bank
70
3.11.9 Anti-money laundering management
0.74
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.
71
bonus shares Cash dividend
for every share for every share
held (No. of held (inclusive
ཏི མནྟཱ ཨིཏི, སྨཱ ནྟི བྷི
of ordinary
shares in the
consolidated
to holders
attributable
Proportion of
cash bonus
to net profit
of ordinary
shares in the
consolidated
to holders
Net profit
attributable
dividends
Total cash
capitalisation of
surplus reserve
for every share
Number of
shares issued on
Number of
Note:
Year
2016
2017
2018 (note)
3.12.2 Profit appropriation 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 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.
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.
3.12.1 The profit appropriation plan for 2018
3.12 Profit appropriation
Annual Report 2018
III Report of the Board of Directors
China Merchants Bank
72
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.
79
(5)
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.
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
23,282
0.00011
0.00009
90,000
0.00044
0.00036
Supervisors, Employee
110,000
Beneficial Owner
Percentage
of total
issued
ordinary
shares (%)
Percentage
of the
relevant class
of shares
in issue (%)
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.
4.5 Purchase, sale or repurchase of listed securities of the Company
Neither the Company nor its subsidiaries had purchased, sold or repurchased any of the Company's listed securities
during the reporting period.
4.6 Pre-emptive rights
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.
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
Jin Qingjun
Wang Wanging
Huang Dan
China Merchants Bank
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
As at the end of the reporting period, the continuing connected transactions between the Company and Anbang
Insurance Group amounted to RMB1.270 billion.
IV Important Events
Supervisor
External Supervisor
Employee Supervisor
shares
A Share
A Share
A Share
77
78
China Merchants Bank
IV Important Events
Annual Report 2018
4.16 Significant connected transactions
4.16.1 Overview of connected transactions
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.
4.16.2 Non-Exempt continuing connected transactions
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.
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.
CMFM Group
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.
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.
As at the end of the reporting period, the continuing connected transactions between the Company and CMFM
Group amounted to RMB1.333 billion.
China Merchants Bank
Annual Report 2018
IV Important Events
CM Securities Group
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.
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.
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.
As at the end of the reporting period, the continuing connected transactions between the Company and CM
Securities Group amounted to RMB254 million.
Anbang Insurance Group
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.
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.
Employee Supervisor
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.
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.
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.
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.
4.15 Undertakings made by the Company, Directors, Supervisors,
senior management and other connected persons
Beneficial Owner
Beneficial Owner
Beneficial Owner
65,800
0.00032
0.00026
60,000
0.00029
0.00024
45,000
0.00022
0.00018
Company
4.10 Directors' interests in the businesses competing with those of the
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.
4.14 Explanation about the integrity profile of the Company
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.
Supervisors or senior management
4.13 Disciplinary actions imposed on the Company, Directors,
4.12 Contractual rights and service contracts of Directors and
Supervisors
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).
IV Important Events
China Merchants Bank
Annual Report 2018
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
Long position
Long position
Long position
4.99
Anbang Property & Casualty
1,258,949,100
Long
Beneficial owner
6.10
4.99
Anbang Life Insurance Co., Ltd.
corporation
0.91
A
2
229,498,500
A
Long
Long
186,697,945
Insurance Company Ltd.
Long
Interest of controlled
1,258,949,171
corporation
1,445,647,116 2
7.01
5.73
H
Beneficial owner
4.99
Interest of controlled
229,498,500 2
Beneficial owner
Long
V Changes in Shares and Information on Shareholders
corporation
2,202,555,520
0.91
1
10.68
8.73
China Merchants Bank
Annual Report 2018
Percentage
of the
relevant class
Percentage
of total
Name of Substantial
Class of Long/short
of shares in
issued
ordinary
Shareholder
shares
position
Ltd.
10.72
13.11
2
2,704,596,216
Interest of controlled
H
Long
Anbang Insurance Group Co.,
shares (%)
issue (%)
Notes
No. of shares
Capacity
A
Hexie Health Insurance Co., Ltd. A
China Merchants Bank
Annual Report 2018
Beneficial owner
Pagoda Tree Investment
H
Long
Interest of controlled
477,903,500
4
10.41
1.89
Company Limited
corporation
(中國華馨投資有限公司)
Compass Investment Company
H
Long
Limited
Interest of controlled
corporation
477,903,500
corporation
89
corporation
1.89
10.41
4
0.01
477,903,500
Long
H
CNIC Corporation Limited
1.89
10.41
4
Interest of controlled
Long
0.04
Beneficial owner
1,258,949,171
2
6.10
4.99
China Ocean Shipping
A
Long
Beneficial owner
1,574,729,111
7.63
6.24
Company Limited
JPMorgan Chase & Co.
H
Long
Beneficial owner
26,465,550
Short
0.92
5.03
3
231,052,446
78,690,591
2,037,902 3
Approved lending agent
16,080
Trustee
Long
125,880,225
Investment manager
Long
Long
Ltd.
80
Interest of controlled
State-owned
3,289,470,337
13.04
A Shares not
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
subject to trading
moratorium
4
Hexie Health Insurance Co.,
Ltd. Traditional Ordinary
insurance products
-
China Merchants Steam
Domestic legal 1,258,949,171
person
2
H Shares
944,013,171
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
1
HKSCC Nominees Ltd.
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)
2,470,137
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.
4.99
1,258,949,171
China Merchants Finance
State-owned
1,147,377,415
4.55
A Shares not
Investment Holdings Co. Ltd.
legal person
subject to trading
moratorium
8
Shenzhen Chu Yuan
State-owned
944,013,171
3.74
A Shares not
Investment and Development
Company Ltd.
legal person
subject to trading
moratorium
7
A Shares not
moratorium
Ltd.
subject to trading
moratorium
5
Anbang Life Insurance Co., Ltd.
- Conservative Investment
Portfolio
Domestic legal 1,258,949,100
person
4.99
A Shares not
1,258,949,100
subject to trading
moratorium
6
Shenzhen Yan Qing Investment
State-owned
1,258,542,349
4.99
A Shares not
and Development Company
legal person
subject to trading
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.
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.
100.00
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.
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
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 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.
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
Explanatory notes and independent opinions of the Independent Non-Executive
Directors towards the guarantees of China Merchants Bank
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.
IV Important Events
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.
IV Important Events
4.16.3 Confirmation from the Independent Non-Executive Directors and auditors
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:
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
Significant events in respect of holding in custody, contracting, hiring or
leasing of assets
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 guarantees
China Merchants Bank
Annual Report 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
(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
3.
Total shares
25,219,845,601
100.00
25,219,845,601
100.00
25,219,845,601
100.00
25,219,845,601
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
5.1 Changes in ordinary shares of the Company during the reporting
period
31 December 2017
9
Percentage
(%)
31 December 2018
Percentage
No. of shares
(%)
No. of shares
1.
Shares subject to trading
moratorium
2.
Shares not subject to trading
moratorium
Changes in the
No. of shares
during the
reporting period
No. of shares
China Securities Finance
83
Domestic legal 754,798,622
person
806,680,423 1
17.57
26.78
3.20
corporation
China Merchants Steam
A
Long
Beneficial owner
3,289,470,337
Navigation Co., Ltd.
Long
Interest of controlled
3,408,080,075
corporation
Long
Others
55,196,540
6,752,746,952
1
Interest of controlled
32.73
Long
32.73
of the
relevant class
Name of Substantial
Shareholder
Class of Long/short
shares position
Capacity
China Merchants Group Ltd.
A
Long
Interest of controlled
corporation
No. of shares
6,697,550,412
Notes
of shares in
issue (%)
of total
issued
ordinary
shares (%)
Long
Others
55,196,540
6,752,746,952
1
H
H
Long
Interest of controlled
Beneficial owner
58,147,140
1
0.28
0.23
H
Long
Beneficial owner
328,776,923
1
7.16
1.30
Shenzhen Yan Qing Investment
A
Long
Beneficial owner
1,258,542,349
and Development Company
Corporation Limited
Long
A
Best Winner Investment
Limited
13.50
806,680,423 1
17.57
26.78
3.20
corporation
China Merchants Finance
A
Long
Beneficial owner
1,147,377,415
Percentage
Investment Holdings Co., Ltd.
Interest of controlled
2,202,555,520
corporation
Long
Others
55,196,540
3,405,129,475
1
16.51
Long
Percentage
Long
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
5.3 Information on substantial shareholders
5.3.1 Information on the Company's largest shareholder
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.
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.
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.)
100%
China Merchants
Steam Navigation Co., Ltd.
100%
China Merchants Holdings (Hong Kong) Company Limited
100%
China Merchants Finance
Investment Holdings Co. Ltd.
100%
China Merchants International
Finance Company Limited
50%
100%
China Merchants
Union (BVI) Limited
Best Winner
Investment Limited
China Merchants Bank
Annual Report 2018
1.89%
The above shareholders do not hold the shares of the Company through credit securities accounts.
(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.
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):
A Shares not
subject to trading
moratorium
10
COSCO Shipping (Guangzhou)
Co., Ltd.
State-owned
696,450,214
2.76
legal person
A Shares not
subject to trading
moratorium
Notes: (1)
-106,265,358
Shares
pledged
or frozen
(share)
Unknown
(2)
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.
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.
(4)
51%
2.99
Shenzhen Yan Qing Investment
1.
2.
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.
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.
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.
China Merchants Bank
Annual Report 2018
5.3.3 Other substantial shareholders under the regulatory calibre
1.
2.
3.
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.
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.
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.
87
88
China Merchants Bank
Annual Report 2018
V Changes in Shares and Information on Shareholders
27.59%
5.3.2 Information on other shareholders holding more than 5% shares of the
Company
V Changes in Shares and Information on Shareholders
V Changes in Shares and Information on Shareholders
86
China Merchants Bank
Annual Report 2018
China Merchants China
and Development Company Ltd.
Direct Investments Limited
50%
50%
100%
Shenzhen Chu Yuan Investment
and Development Company Ltd.
China Merchants Industry
Development (Shenzhen) Limited
49%
1.53%
4.99%
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%
85
4.55%
13.04%
3.74%
President's Statement
Chairman
廖建民
25 March 2024
8
China Merchants Bank
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.
Annual Report 2023 (H share)
President's Statement
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 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.
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 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.
6
China Merchants Bank
Annual Report 2023 (H share)
President's Statement
China Merchants Bank Co., Ltd.
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".
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.
on,
Annual Report 2023 (H share)
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".
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.
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 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.
1
Six All: all risks, all branches and subsidiaries, all customers, all assets, all processes and all factors.
China Merchants Bank
Annual Report 2023 (H share)
Chairman's Statement
Miao Jianmin
Chairman
LO
China Merchants Bank
Annual Report 2023 (H share)
Chairman's Statement
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.
- 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.
- 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 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.
China Merchants Bank
Chairman's Statement
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".
12
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.
3
2 Significant Risk Warning
Definitions
2
Contents
Contents
Annual Report 2023 (H share)
China Merchants Bank
무
3.li
☑
2023 Annual Report
H Share Stock Code : 03968
People's Republic of China with limited liability)
(a joint stock company incorporated in the
CHINA MERCHANTS BANK CO., LTD.
CHINA MERCHANTS BANK
Chairman's Statement
ㅆ招商銀行
Important Notice
4
Chairman's Statement
8
2
Management staff can be promoted or demoted; qualified talents can be recruited and those unqualified can be dismissed; remuneration can be
increased or decreased.
Analysis of Capital Adequacy
3.5
39
Analysis of Loan Quality
3.4
33
3.3 Analysis of Balance Sheet
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!
29
22
3.1 Analysis of Overall Operation
22
Chapter III Management Discussion and Analysis
Chapter II Summary of Accounting Data and Financial Indicators
22
18
Chapter I Company Information
President's Statement
3.2 Analysis of Income Statement
Chairman's Statement
CMB International Capital or CMBIC:
China Merchants Bank
Chapter VII Changes in Shares and Information on Shareholders
153 Chapter VIII Financial Statements
1
China Merchants Bank
Annual Report 2023 (H share)
Definitions
Definitions / Significant Risk Warning
The Company, the Bank, CMB or China Merchants
Bank:
China Merchants Bank Co., Ltd.
The Group:
China Merchants Bank and its subsidiaries
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:
CMB Wing Lung Bank Limited
Chapter VI Important Events
CMB Wing Lung Group:
Chapter V Corporate Governance
144
Results of Operating Segments
43
3.7
43
3.8
Other Financial Disclosures under the Regulatory Requirements
Implementation of Development Strategies
48
3.9
Key Business Concerns in Operation
57
3.10 Business Operation
76
3.11 Risk Management
82
3.12 Outlook and Coping Tactics
85
96
137
Chapter IV Environmental, Social and Governance (ESG)
Annual Report 2023 (H share)
CMB Wing Lung Bank and its subsidiaries
CMB Financial Leasing Co., Ltd.
Annual Report 2023 (H share)
Important Notice
Important Notice
1.
2.
3.
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
contents.
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..
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.
4.
Unless otherwise stated, all monetary sums stated in this report are expressed in RMB.
5.
6.
7.
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.
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.
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.
3
China Merchants Bank
CMB Financial Leasing or CMBFL:
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.
Model Code for Securities Transactions by Directors of
Listed Issuers of Hong Kong Stock Exchange
CMB International Capital Holdings Corporation Limited
CMB Wealth Management:
CMB Wealth Management Company Limited
China Merchants Fund or CMFM:
China Merchants Fund Management Co., Ltd.
CIGNA & CMAM:
CIGNA & CMB Asset Management Company Limited
CMB Europe S.A.:
China Merchants Bank (Europe) Co., Ltd. ((&)
有限公司)
CIGNA & CMB Life Insurance:
CIGNA & CMB Life Insurance Co., Ltd.
MUCFC:
Merchants Union Consumer Finance Company Limited
CMB YunChuang:
CMB YunChuang Information Technology Co., Ltd. with
100% equity interest held by the Company indirectly
CMB Network Technology:
China Merchants Bank Network Technology (Shenzhen)
Co., Ltd. with 100% equity interest held by the Company
indirectly
Deloitte Touche Tohmatsu Certified Public
Accountants LLP:
Deloitte Touche Tohmatsu Certified Public Accountants
LLP (Special General Partnership)
SFO:
Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong)
Model Code:
Significant Risk Warning
3.6
42
Shanghai Audit Division
55.23
No
President
Li Delin
Male
1974.12
Xiong Kai
Male
1971.4
Former Executive Vice 2021.3-2023.7
President
Former Secretary of
the Party Discipline
Committee
204,400
204,400
168.89
No
2021.7-2023.7
245,000
245,000
Former Executive Vice 2019.4-2023.2
1962.12
191,800
59.35
No
Assets and Liabilities Management
Committee
Supervisor
Wang Jianzhong
Male
225,600
1962.10
240,200
240,200
55.57
No
President
Shi Shunhua
Male
Former Executive Vice 2019.4-2023.2
183,000
225,600
No
Nomination Committee
Committee
Strategy and Sustainable Development
5.1 Corporate Governance Structure
Corporate Governance
Chapter V Corporate Governance
Annual Report 2023 (H share)
China Merchants Bank
96
96
We are here just for you
Never change our original
inspiration
TUTURATE
www
T
Remuneration and Appraisal Committee
Risk and Capital Management Committee)
Audit Committee
Shareholders' General Meeting
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.
187.14
(7) None of the people listed in the above table has been punished by the securities regulator(s) over the past three years.
99
Supervisory Committee
Executive Office of
President
Related Party Transactions Management and
Consumer Rights Protection Committee
Board of Supervisors
Board of Directors
Nomination Committee
(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.
For more details on corporate governance, please refer to Chapter V.
2018.7-2023.3
parties
during the
reporting
period
Xiong Liangjun
Male
1963.2
Director
Former Chairman
of the Board
2021.8-2023.6
240,000
240,000
187.04
22 223 224 2
Yes
Yes
No
of Supervisors,
Employee Supervisor
Peng Bihong
Former Non-Executive 2014.9-2023.3
1968.2
Female
Su Min
Chief Information
2019.11-present
198,100
232,400
276.78
Officer
Hu Jianhua
Male
Male
Former Non-Executive 2022.10-2024.1
Yes
Director
Hong Xiaoyuan Male
1963.3
Former Non-Executive 2007.6-2024.1
Director
1962.11
Former Employee
1963.10
2019.6-2024.1
period (RMB
Date of
Name
Gender
Wang Wanging Male
Birth (Y/M)
1964.9
Title
Term of
office
the period
of the period
in ten
(share)
(share)
thousand)
related
at the end
beginning of
reporting
during the
Yes
Supervisor
China Merchants Bank
Annual Report 2023 (H share)
Chapter V Corporate Governance
Whether or
Total
Former Shareholder
not
received
before tax remuneration
Shareholding
at the Shareholding
the Company
received from
from the
Company's
remuneration
1967.12
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.
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.
Ningbo
2,676
Chongqing
29,396
Shenzhen(2)
762
Wuxi
1,388
Dongguan
2,847
Qingdao
38,847
complaints
Region
complaints
1,343
Hohhot
750
Beijing
Guangzhou
552
Nantong
1,227
Foshan
2,322
Harbin
Region
7,093
712
Nanning
1,268
Xiamen
2,557
Chengdu
13,943
Wuhan
5,231
complaints
complaints
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
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.
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.
Information security and privacy protection
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.
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
Chapter IV Environmental, Social and Governance (ESG)
4.3.5 Consumer rights protection
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.
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.
Region
Shanghai (1)
Number of
Number of
Number of
Number of
The distribution by region is shown in the table below.
Chapter IV Environmental, Social and Governance (ESG)
Region
China Merchants Bank
Annual Report 2023 (H share)
22
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.
92
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.
Hefei
Kunming
Including complaints from credit card users.
(1)
Notes:
167
Xining
916
Lanzhou
1,494
Fuzhou
3,036
Jinan
279
Tangshan
978
Shijiazhuang
(2)
Including complaints from Head Office departments.
4.3.6 Human resources development
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.
4.4 Governance Information
Chapter IV Environmental, Social and Governance (ESG)
Annual Report 2023 (H share)
China Merchants Bank
94
93
3
1,905
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.
4.3.7 Rural revitalisation
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.
Chapter IV Environmental, Social and Governance (ESG)
China Merchants Bank
Annual Report 2023 (H share)
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.
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 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.
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.
2,292
Dalian
Shenyang
2,054
Nanchang
4,509
Hangzhou
439
Yinchuan
1,169
Taiyuan
2,065
Changsha
4,927
Nanjing
520
Guiyang
1,221
Changchun
1,067
Haikou
391
315
Wenzhou
1,014
Urumqi
1,997
Zhengzhou
3,755
3,130
Tianjin
Quanzhou
1,041
Yantai
2,012
Suzhou
4,353
Xi'an
374
Anti-money Laundering, Sanction and
Compliance Management Committee
Jiang Chaoyang Male
14.85
Wong See Hong
Male
1953.6
Independent Non-
2017.2-(Note 1)
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
Chief Risk Officer
No
282.08
198,800
Chen Dong
Male
1974.12
Non-Executive Director 2022.10-2025.6
煎煎煎
Yes
Yes
2018.11- (Note 2)
Yes
Male
1972.12
Executive Director
Executive Vice
President
2023.8-2025.6
2021.9-2025.6
2020.7-2025.6
198,800
Zhu Jiangtao
No
50.00
No
Name
Gender
Birth (Y/M)
Title
Term of
office
beginning of
the period
(share)
at the end
reporting
period (RMB
of the period
(share)
in ten
thousand)
related
parties
during the
reporting
period
Tian Hongqi
Male
Date of
during the
Company's
the Company
No
No
97
98
China Merchants Bank
Annual Report 2023 (H share)
Chapter V Corporate Governance
2 2 2
Whether or
not
remuneration
received
before tax remuneration
received from
from the
Shareholding
at the Shareholding
Total
1957.5
345.32
300,000
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.
5.3 Information about Shareholders' General Meetings
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.
5.4 Directors, Supervisors and Senior Management
Total
remuneration
Whether or
not
received
before tax remuneration
Shareholding
at the Shareholding
the Company
during the
received from
from the
Company's
Risk and Compliance Management
Committee
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 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.
Chapter V Corporate Governance
Annual Report 2023 (H share)
Beijing Audit Division
IT Management Committee
Audit Department
Shenzhen Audit Division
Xi'an Audit Division
Business Continuity Management
Committee
Nanjing Audit Division
Date of
Shenyang Audit Division
Digital Transformation Committee
Chengdu Audit Division
Fuzhou Audit Division
5.2 Overview of Corporate Governance
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
Wuhan Audit Division
300,000
Name
Birth (Y/M)
Male
1965.8
Non-Executive Director 2022.10-2025.6
Yes
Wang Liang
Male
1965.12
Zhou Song
Male
1972.4
Zhang Jian
Male
1964.10
Executive Director
President and Chief
Executive Officer
Non-Executive Director 2018.10-2025.6
Non-Executive Director 2016.11-2025.6
2019.8-2025.6
2022.6-2025.6
Sun Yunfei
2020.9-2025.6
Non-Executive Director
Yes
Title
Term of
office
beginning of
the period
(share)
at the end
of the period
reporting
period (RMB
parties
during the
Gender
(share)
reporting
period
Miao Jianmin
Male
1965.1
Chairman
2020.9-2025.6
in ten
thousand)
President
Independent Non-
50.00
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
Male
Zhong Desheng
Committee
Party Discipline
1963.6
Executive Vice
2019.6-2025.6
210,000
210,000
286.89
No
62,000
President
Male
1972.3
Secretary of the
2023.8-present
56,800
112.28
No
Zhao Weipeng
Male
123.17
2023.11-2025.6
Male
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
Lei Caihua
of Directors
2023.6-2025.6
Secretary of the Board
200,000
230,000
241.46
No
President
Peng Jiawen
Male
No
1969.5
2023.11-2025.6
167,700
221,900
240.52
No
Chief Financial Officer
2023.2-2025.6
Executive Vice
President
2019.8-2025.6
Wang Yungui
96.66
1970.9
Shareholder Supervisor 2022.6-2025.6
Yes
Wu Heng
Male
1976.8
Shareholder Supervisor 2016.6-2025.6
Yes
Xu Zhengjun
Male
1955.9
External Supervisor
2019.6-2025.6
40.00
No
Male
Luo Sheng
Executive Director
No
No
Executive Director
Li Chaoxian
Male
1958.9
Independent Non-
2021.8-2025.6
Cai Hongping
50.00
Executive Director
Shi Yongdong
Male
1968.11
Independent Non-
2021.8-2025.6
50.00
No
No
Male
External Supervisor
Male
1970.10
Employee Supervisor
2023.3-2025.6
127,000
158,400
129.42
No
Yang Sheng
Male
1972.8
Employee Supervisor
2023.6-2025.6
157,700
197,700
Cao Jian
No
162.69
169,550
2022.6-2025.6
40.00
No
Zhang Xiang
Male
1963.12
External Supervisor
1954.12
2022.6-2025.6
No
Cai Jin
Female 1970.7
Employee Supervisor
2021.12- (Note 3)
90
133,150
40.00
related
143,300
Long position
Long position
5.4.6 Securities transactions of Directors, Supervisors and relevant employees
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.
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.
5.4.7 Interests and short positions of Directors, Supervisors and Chief Executives
under Hong Kong laws and regulations
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:
Percentage
of
Name
Wang Liang
Position
Class of
shares
Executive Director,
A Share
Long/short
position
Long position
No. of
Shares
Capacity
Beneficial owner
(shares)
300,000
the relevant
class of shares
in issue (%)
Percentage
of
the total
issued ordinary
shares (%)
0.00145
0.00119
President and Chief
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
China Merchants Bank
Annual Report 2023 (H share)
Chapter V Corporate Governance
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.
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.
Executive Officer
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
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
5.4.5
Remuneration policy and evaluation and incentive system for Directors,
Supervisors and senior management
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.
107
108
China Merchants Bank
106
Zhou Song
Zhu Jiangtao
158,400
0.00077
0.00063
Employee Supervisor
A Share
A Share
Long position
Long position
Beneficial owner
197,700
0.00096
0.00078
Interest of spouse
0.00069
0.00057
China Merchants Bank
Annual Report 2023 (H share)
Chapter V Corporate Governance
5.5 Board of Directors
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.
5.5.1 Composition of the Board of Directors and diversity policy
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
Beneficial owner
Long position
A Share
Employee Supervisor
Executive Director,
A Share
A Share
Interest of spouse
Beneficial owner
23,282
0.00011
0.00009
198,800
0.00096
0.00079
Vice President, Chief
Risk Officer
Cai Jin
Non-Executive Director
Employee Supervisor
H Share
Long position
Long position
Beneficial owner
165,000
0.00080
0.00065
Beneficial owner
4,550
0.00010
0.00002
Cao Jian
Yang Sheng
A Share
105
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.
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.
Changes in information of Directors and Supervisors
5.4.2
1.
2.
3.
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
5.
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.
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. 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. 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.
Chapter V Corporate Governance
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.
Name
Miao Jianmin
Sun Yunfei
Zhou Song
Zhang Jian
Name of company
China Merchants Group Ltd.
China COSCO Shipping
Corporation Limited
China Merchants Group Ltd.
China Merchants Group Ltd.
China Merchants Financial
Holdings Co., Ltd.
China COSCO Shipping
Corporation Limited
Chen Dong
Luo Sheng
Wu Heng
SAIC Motor Corporation
5.4.3 Current positions held by Directors and Supervisors in the shareholders'
companies
Dajia Insurance Group Co.,
Ltd.
China Merchants Bank
Annual Report 2023 (H share)
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.
100
China Merchants Bank
Chapter V Corporate Governance
Annual Report 2023 (H share)
5.4.1 New appointment and resignation of Directors, Supervisors and senior
management
Directors
In March 2023, Ms. Su Min ceased to be a Non-Executive Director of the Company due to reaching the retirement
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 January 2024, Mr. Hu Jianhua and Mr. Hong Xiaoyuan ceased to be Non-Executive Directors of the Company due
to their age.
Supervisors
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.
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.
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.
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.
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 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 July 2023, Mr. Li Delin ceased to be the Executive Vice President of the Company due to change of work
arrangement.
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 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.
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.
Limited
4.
Deputy General Manager and Chief
Accountant
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
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.
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
103
104
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.
China Merchants Bank
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..
Major title
Chairman
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.
China Merchants Bank
Annual Report 2023 (H share)
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.
Annual Report 2023 (H share)
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.
Supervisors
Biography and positions of Directors, Supervisors and senior management
Chief Accountant
Chief Digital Officer and Director of
Digital Centre
Deputy General Manager
General Manager of Financial
Management Headquarter
Deputy General Manager
General Manager of Finance Affairs
Department
Term of office
From July 2020 up to now
From August 2018 up to
now
From January 2019 up to
now
From September 2022 up
to now
From October 2018 to
December 2023
From September 2020 up
5.4.4
Annual Report 2023 (H share)
From September 2016 up
to now
China Merchants Bank
102
Chapter V Corporate Governance
now
From August 2019 up to
to now
101
Directors
112
China Merchants Bank
Non-Executive
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
Board of Development
Transactions
Strategy
and
Sustainable
Management
Remuneration
Risk and
and Consumer
and
111
Nomination
Related Party
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.
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).
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.
Appraisal
Chapter V Corporate Governance
110
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
5.5.4 Chairman of the Board of Directors and the President
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 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%.
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.
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.
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.
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.
Directors
China Merchants Bank
Committee
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.
115
116
China Merchants Bank
119
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.
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.
6.
Review the strategies, policies and objectives of the consumer rights protection work of the Company;
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.
Identify related parties according to relevant laws and regulations;
1.
Main authorities and duties:
consumers.
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
Any other task delegated by the Board of Directors.
Annual Report 2023 (H share)
6.
5.
Consider material investment and financing plans and make proposals to the Board of Directors;
2.
3.
Supervise and review the implementation of the annual operational and investment plans;
4.
Evaluate and monitor the implementation of the Board resolutions;
5.
Make recommendations and proposals on important issues for discussion and determination by the Board of
Directors;
6.
Formulate data governance strategy and major issues related to data governance;
7.
8.
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;
Any other task delegated by the Board of Directors.
China Merchants Bank
Annual Report 2023 (H share)
Chapter V Corporate Governance
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.
Nomination Committee
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.
Main authorities and duties:
1.
2.
3.
Study the standards and procedures for selection of Directors and senior management, and make
recommendations to the Board of Directors;
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;
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;
4.
Conduct extensive searches for qualified candidates for Directors and senior management;
Conduct preliminary examination on the candidates for Directors and senior management and make
recommendations to the Board of Directors;
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;
3.
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 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.
China Merchants Bank
Chapter V Corporate Governance
Annual Report 2023 (H share)
Main authorities and duties:
1.
2.
3.
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;
Make regular assessment on the risk policies, management status, risk-withstanding ability and capital status
of the Bank;
Perform relevant duties under the Advanced Measurement Approach for Capital Measurement pursuant to
the authorisation given by the Board of Directors;
4.
Submit opinions and proposals on perfecting the management of risks and capital;
5.
Arrange and instruct risk prevention works in accordance with the authorisation of the Board of Directors;
6.
7.
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 Committee
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.
117
118
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.
The Audit Committee considered and discussed the accounting firm's audit plan for 2023 and the unaudited
financial statements of the Company;
3.
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;
Coordinate the communications between internal auditors and external auditors;
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;
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;
Formulate the operational goals and the medium- and long-term development strategies of the Company,
and make an overall assessment on strategic risks;
8.
6.
5.
4.
3.
2.
1.
Main authorities and duties:
Annual Report 2023 (H share)
Annual Report 2023 (H share)
Committee
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.
Remuneration and Appraisal Committee
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.
Main authorities and duties:
7.
1.
Chapter V Corporate Governance
Strategy and Sustainable Development Committee
3/9
རྔུངངངངངང
0/1
1/1
1/1
1/1
(resigned)
Su Min (resigned)
4/5
45
1/1
Executive Directors
Wang Liang
19/19
5/6
99
Zhu Jiangtao
8/8
7/7
7/7
/
2/2
1/1
2/2
ང>
Independent Non-
Executive Directors
Wong See Hong
19/19
7/7
16/19
Hong Xiaoyuan
/
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:
Capital
Management
Committee Committee Committee
Actual times of attendance/Required times of attendance
Rights Shareholders'
Audit
Protection
Committee
General
Meeting
Directors
Miao Jianmin
18/19
6/6
Sun Yunfei
19/19
Zhou Song
Li Menggang
19/19
19/19
-222
7/7
6/6
6/6
8/8
9/9
Chen Dong
19/19
7/7
6/9
Hu Jianhua (resigned)
16/19
5/6
Zhang Jian
19/19
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.
19/19
5.5.6
Chapter V Corporate Governance
Performance of duties by Independent Non-Executive Directors
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.
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.
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.
5.5.7 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;
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.
114
China Merchants Bank
Chapter V Corporate Governance
Annual Report 2023 (H share)
5.5.8 Statement made by the Directors about their responsibility for the financial
statements
5.5.9 Special committees under the Board of Directors
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.
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.
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.
Liu Qiao
Annual Report 2023 (H share)
China Merchants Bank
113
Note:
19/19
Tian Hongqi
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.
Li Chaoxian
19/19
6/6
Shi Yongdong
7/7
9/9
7/7
8/8
4/4
1/1
7/7
7/7
19/19
1/1
1/1
HH
8/8
===
8/8
4/4
1/1
1/1
4/4
8/8
1/1
9/9
7/7
7/7
Annual Report 2023 (H share)
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
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.
Chapter V Corporate Governance
Investor relations
China Merchants Bank
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.
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
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.
5.8 Company Secretary under Hong Kong Listing Rules
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.
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.
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.
Chapter V Corporate Governance
124
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.
5.11 Shareholders' Rights
Annual Report 2023 (H share)
Annual Report 2023 (H share)
China Merchants Bank
126
125
own.
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
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
Contact Us" on the Company's official
website (www.cmbchina.com) and click the URL link "Email" thereon to leave a message for us.
China Merchants Bank
-
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
Chapter V Corporate Governance
Investors may login onto the page of "CMB Info - Investor Relations
China Merchants Bank
The Nomination Committee under 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.
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.
Annual Report 2023 (H share)
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.
Operation of the special committees under the Board of Supervisors
5.6.4
Chapter V Corporate Governance
5.6.5
Annual Report 2023 (H share)
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.
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.
5.6.2 How the Board of Supervisors performs its supervisory duties
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
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.
Independent opinions from the Board of Supervisors
121
5.7 Investigations/Surveys and Trainings Conducted by Directors and
Supervisors during the Reporting Period
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.
Internal Control
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).
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
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.
During the reporting period, the use of proceeds of the Company was consistent with such usages as committed in
the Prospectus of the Company.
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
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
Use of Proceeds
Chapter V Corporate Governance
Total cash
dividends
(inclusive of
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.
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
Annual Report 2023 (H share)
China Merchants Bank
128
127
The profit appropriation plan for 2023 is subject to consideration and approval at the 2023 Annual General Meeting of the Company.
Note:
35.01
142,044
49,734
1.972
2023 (Note)
33.01
132,775
43,832
2.
(2)
(3)
(4)
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
1.738
Annual Report 2023 (H share)
China Merchants Bank
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.
(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.
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.
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 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)
Chapter V Corporate Governance
33.00
116,309
38,385
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
Annual Report 2023 (H share)
China Merchants Bank
Other rights conferred by laws, administrative regulations and the Articles of Association of the Company.
Number of Cash dividend
bonus 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.
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.
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
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.
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.
Other rights
Making interim proposals at the Shareholders' General Meetings
for every share
share held
1.522
2021
2022
(%)
RMB)
held
(No. of shares)
Year
financial
statements
cash dividend
to net profit
attributable
to holders
of ordinary
shares in the
consolidated
Proportion of
for every
for the year
(in millions of
to holders
of ordinary
shares in the
consolidated
Net profit
attributable
tax, in
millions
of RMB)
tax, in RMB) (No. of shares)
held
reserve for
every share
of surplus
Number of
shares
issued on
capitalisation
(inclusive of
financial
statements
Chapter V Corporate Governance
120
China Merchants Bank
Shijiazhuang
199 Lushan Road, Jianye District, Nanjing
300 Fuchun Road, Shangcheng District,
Hangzhou
85
281,062
78
279,521
Ningbo Branch
342 Min' an East Road, Yinzhou District,
Ningbo
34
105,030
Suzhou Branch
36 Wansheng Street, Industrial Park,
Suzhou
34
156,045
Wuxi Branch
6-107, 6-108 1st Financial Street, Binhu
20
71,093
District, Wuxi
Wenzhou Branch
464 Fudong Road, Lucheng District,
Wenzhou
15
10,477
4
56 Bohang Road, Pudong New Area,
Shanghai
442,813
No. of (in millions
Region
Head Office
Name of branch
Business address
branches
of RMB)
Head Office
7088 Shennan Boulevard, Futian District,
Shenzhen
1
3,182,493
39,404
Credit Card Centre
1
893,692
Global Markets
Centre
Yangtze River Delta Shanghai Branch
Shanghai Pilot
Free Trade Zone
Branch
Nanjing Branch
Hangzhou Branch
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
686 Lai'an Road, Pudong New Area,
Shanghai
Bohai Rim
Nantong Branch
Beijing Branch
111 Gongnong Road, Nantong
36,123
Pearl River Delta
and the Western
Taiwan Straits
Economic Zone
Tangshan Branch
Guangzhou Branch
Shenzhen Branch
45 Beixinxi Road, Lubei District, Tangshan
11
12,987
5 Huasui Road, Tianhe District, Guangzhou
2016 Shennan Boulevard, Futian District,
Shenzhen
74
267,947
121
551,106
Fuzhou Branch
316 Jiangbinzhong Boulevard, Taijiang
District, Fuzhou
41
82,835
Xiamen Branch
18 Lingshiguan Road, Siming District,
Xiamen
33
80,627
Quanzhou Branch
China SCE⚫ International Finance Centre (+
20
Shijiazhuang Branch 172 Zhonghua South Street, Qiaoxi District,
Technological Development Area, Yantai
32,305
18
38,327
156 Fuxingmen Nei Dajie, Xicheng District,
129
515,074
Beijing
Qingdao Branch
65 Hai'er Road, Laoshan District, Qingdao
54
77,123
Asset scale
Tianjin Branch
44
106,417
Hexi District, Tianjin
Jinan Branch
7000 Jingshi Road, High-tech Zone, Jinan
64
136,831
Yantai Branch
117 Changjiang Road, Economic &
17
255 Guangdong Road and 9 Qianjin Road,
5.16 Head Office and Branches and Representative Offices
Chapter V Corporate Governance
Annual Report 2023 (H share)
131
132
China Merchants Bank
Chapter V Corporate Governance
Annual Report 2023 (H share)
5.15 Organisational Structure of the Company as at the End of the Reporting Period
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)#
Human Resources Department
Fintech Office
Assets and Liabilities Management Department
Financial Accounting Department
General Office of Corporate Finance
Strategic Customers Department
Institutional Customers Department
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.
27
For details of the Company's human resources development, please refer to section 4.3.6 "Human resources
development" in this report.
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.
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 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.
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%.
Investment Management Department*
China Merchants Bank
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.
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).
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.
Staff remuneration policy and training
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)
Overseas Branch Management Department*
Procurement Management Department*
Pension Finance 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"
Wholesale Application R&D Centre*
Infrastructure R&D Centre*
Information Technology Department
Data Asset and Platform R&D Centre*
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
*independent secondary department
China Merchants Bank
Testing Centre"
17
Operation Management Department
Credit Approval 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
Asset Security Department
Bill Brokerage Department*
Offshore Business Department*
Wealth Management Platform Department
Network Operation Service Centre*
Private Banking Department
Retail Credit Business Department
Credit Card Centre
Risk Management Department
Consumer Finance Centre*
Operational Risk Management Department*
Market Risk Management Department*
General Office of Retail Finance
32,445
•), South of Eastern Section of
Northeast
13,476
1
10,936
1
12,283
Total
/
/
1,935
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.
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.
5.19 Compliance with the Corporate Governance Code
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.
135
1
20 Boulevard Royal, L-2449, Luxembourg
18/F, 20 Fenchurch Street, London, UK
L39, GPT, 1 Farrer Place, Sydney, NSW
Taipei
Sydney Branch
10,570
Overseas
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
Focusing on the core
needs of customers,
accompanying customers
535 Madison Avenue, 18th Floor, New
York, U.S.A
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
Luxembourg Branch
London Branch
1
to grow together
China Merchants Bank
Annual Report 2023 (H share)
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.
6.11 Financial, Business and Kinship Relations among Directors,
Supervisors and Senior Management
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.
6.12 Contractual Rights and Service Contracts of Directors and
Supervisors
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).
6.13 Disciplinary Actions Imposed on the Company, Directors,
Supervisors or Senior Management
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.
6.14 Explanation on the Integrity of the Company
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.
China Merchants Bank
Annual Report 2023 (H share)
6.10 Directors' Interests in the Businesses Competing with Those of
the Company
Chapter VI Important Events
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.
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.
6.16 Significant Connected Transactions28
6.16.1 Overview of 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.
6.16.2 Non-exempt continuing connected transactions
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.
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.
During the reporting period, the continuing connected transactions between the Company and CMFM Group
amounted to RMB1,016 million.
28
6.15 Undertakings
10
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.
Annual Report 2023 (H share)
Chapter VI Important Events
137
Important Events
6.1 Principal Business Activities
The Company is engaged in banking and related financial services.
6.2 Financial Highlights
Details are set out in Chapter II Summary of Accounting Data and Financial Indicators.
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
6.9 Compliance with Laws and Regulations
Changes in fixed assets of the Company as at the end of the reporting period are detailed in Note 28 to the
financial statements.
Neither the Company nor its subsidiaries had purchased, sold or repurchased any of the Company's listed securities
during the reporting period.
6.6 Pre-emptive Rights
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.
6.7 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
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.
138
China Merchants Bank
Chapter VI Important Events
6.5 Purchase, Sale or Repurchase of Listed Securities of the Company
130
79 Haiyan Road, Chengxi District, Xining
Yinchuan
Region
Central
Name of branch
Business address
branches
of RMB)
Wuhan Branch
188 Yunxia Road, Jianghan District, Wuhan
99
210,665
Nanchang Branch
1111 Huizhan Road, Honggutan New
51
98,245
District, Nanchang
Changsha Branch
39 Chazishan East Road, Yuelu District,
50
97,834
Changsha
West
Hefei Branch
Zhengzhou Branch
Taiyuan Branch
(in millions
No. of
Asset scale
Annual Report 2023 (H share)
Dongguan Branch
Foshan Branch
Shenyang Branch
Dalian Branch
Harbin Branch
Changchun Branch
12 Denghu Road East, Nanhai District,
Foshan
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
Haikou Branch
51
35
44,465
40
46,617
23
26,806
133
134
China Merchants Bank
Chapter V Corporate Governance
50,799
Lanzhou Branch
Xi'an Branch
Chongqing Branch
Urumchi Branch
Kunming Branch
18
34,294
1 Chongren Street, Wuhua District,
Kunming
56
74,485
Hohhot Branch
9 Chilechuan Avenue, Saihan District,
Hohhot
24
33,349
Nanning Branch
2 Huanghe Road, Urumchi
No. 136-5 Minzu Avenue, Qingxiu District,
Nanning
20
40,499
Guiyang Branch
West 2nd Tower, International Finance
18
34,433
Yinchuan Branch
Centre, Guanshanhu District, Guiyang
138 Beijingzhong Road, Jinfeng District,
15
16,982
20
Xining Branch
130,442
141,213
169 Funan Road, Hefei
42
97,690
96 Nongye Road East, Zhengzhou
53
101,307
265 Nan Zhong Huan Road, Xiaodian
District, Taiyuan
23
37,794
1 Shimao Road North, Haikou
53
10
Chengdu Branch
1, the 3rd section of Renmin Road South,
Wuhou District, Chengdu
59
121,684
9 Qingyang Road, Chengguan District,
Lanzhou
45
25
43,304
1 Gaoxin No.2 Road, Gaoxin District, Xi'an
88 Xingguang Road, New North District,
Chongqing
69
34,585
Both "connected transactions" and "connected parties" in this section are terms used in Hong Kong Listing Rules.
139
(share)
(former name: CMF
1.30
7.16
1
328,776,923
Interest of controlled
Long
H
Company Limited
corporation
Holdings (Hong Kong)
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
corporation
1
Holdings Limited)
A
Beneficial owner
Long
A
China Ocean Shipping
Company Ltd.
Development
Investment and
4.99
6.10
1
1,258,542,349
Beneficial owner
Long
A
Shenzhen Yan Qing
1.30
7.16
1
328,776,923
Beneficial owner
Long
H
Limited
0.23
0.28
1
58,147,140
Beneficial owner
Long
Best Winner Investment
3,463,276,615
Investment Holdings
55,196,540
Beneficial owner
Long
A
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
China Merchants Group
3,289,470,337
Navigation Co., Ltd.
Long
Interest of controlled
Other
Long
Merchants Finance
corporation
(former name: China
2,260,702,660
Interest of controlled
Long
Holdings Co., Ltd.
1,147,377,415
Beneficial owner
Long
China Merchants Financial A
corporation
1,574,729,111
3.20
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
17.57
Capacity
7.63
Company Limited
320,853
Investment manager
Short
corporation
37,148,259
Interest of controlled
Short
1.22
6.71
4
308,250,977
86,536,612
Approved lending agent
180
Trustee
14,530,768
in shares
Long
having a security interest
Long
164,968,770
Investment manager Person
Long
corporation
Long
42,214,647
Interest of controlled
Long
H
37,469,112
JPMorgan Chase & Co.
4
0.15
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)
(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:
(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.
Notes:
0.003
0.02
5
752,500
1.08
5.91
5
271,479,387
Interest of controlled
corporation
Interest of controlled
corporation
Short
Long
H
BlackRock, Inc.
0.82
(BVI) Limited
1.89
10.41
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
Compass Investment
(中國華馨投資有限公司)
1.89
10.41
3
477,903,500
Interest of controlled
corporation
Company Limited
Long
Pagoda Tree Investment H
Co. Ltd.
4.48
5.48
2
1,130,991,537
Beneficial owner
Long
A
Hexie Health Insurance
Name of
substantial
shareholder
Class of
shares
Long/short
position
3
477,903,500
Beneficial Owner
Long
H
China Merchants Union
1.89
10.41
3
477,903,500
Interest of controlled
corporation
Long
Verise Holdings Company H
Limited
corporation
6.24
1.89
3
477,903,500
ordinary
shares (%)
in issue (%)
Notes
(shares)
of shares
No. of shares
Percentage
of the
total issued
Percentage
of the
relevant class
Interest of controlled
Long
CNIC Corporation Limited H
Capacity
10.41
shares position
shareholder
No. of shares
6.19 Use of Funds by Related Parties
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.
6.20 Engagement of Accounting Firms
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.
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)
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.
Changes in Shares and Information on Shareholders
Significant guarantees
Annual Report 2023 (H share)
sales
trading restrictions on
Unknown
796,918
H Shares not subject to
18.06
4,554,053,841
Overseas legal
person
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
Chapter VI Important Events
7.1 Changes in Ordinary Shares of the Company During the
Reporting Period
31 December 2022
Changes in the
No. of shares
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
period
on sales
frozen
(share)
(%)
Type of shares
(share)
(share)
China Merchants Bank
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.
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.
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.
31 December 2023
during the
reporting
No. of shares
(share)
HKSCC Nominees Ltd.
period
(share)
No. of shares Percentage
(share)
(%)
1. Shares subject to trading restrictions on sales
2.
Shares not subject to trading restrictions on sales
25,219,845,601
(1) Ordinary shares in RMB (A Shares)
2
20,628,944,429
(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
4,590,901,172
18.20
25,219,845,601
100.00
100.00
81.80
China Merchants Steam Navigation
Co., Ltd.
State-owned legal 3,289,470,337
person
13.04
and Development Company Ltd.
100%
Shenzhen Chu Yuan Investment
100%
Direct Investments Limited
China Merchants China
China Merchants Financial Holdings
(Hong Kong) Company Limited
27.59%
100%
China Merchants Financial Holdings Co., Ltd.
100%
Navigation Co., Ltd.
China Merchants Steam
100%
China Merchants Group Ltd.
4.99%
1.89%
Shenzhen Yan Qing Investment
and Development Company Ltd
100%
China Merchants
Union (BVI) Limited
50%
Note:
China Merchants Holdings
(Hong Kong) Company Limited
100%
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):
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.
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.
7.3.1 Information on the Company's largest shareholder
7.3 Information on Substantial Ordinary Shareholders
Best Winner
Investment Limited
100%
China Merchants Industry
Development (Shenzhen) Limited
3.74%
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..
Chapter VII Changes in Shares and Information on Shareholders
3.
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
China Merchants Bank
Annual Report 2023 (H share)
13.04%
0.22%
China Merchants Financial Holdings (Hong Kong) Company Limited was renamed from CMF Holdings Limited.
China Merchants Bank Co., Ltd.
1.53%
4.55%
2.
1
Annual Report 2023 (H share)
146
7
sales
products
A Shares not subject to
trading restrictions on
4.48
Domestic legal 1,130,991,537
person
Traditional Ordinary insurance
Hexie Health Insurance Co., Ltd. -
6
trading restrictions on
sales
person
A Shares not subject to
4.55
China Merchants Financial Holdings State-owned legal 1,147,377,415
Co., Ltd.
5
trading restrictions on
sales
A Shares not subject to
4.99
State-owned legal 1,258,542,349
person
Shenzhen Yan Qing Investment and
Development Company Ltd.
4
trading restrictions on
sales
A Shares not subject to
6.24
State-owned legal 1,574,729,111
person
China Ocean Shipping Company
Limited
3
trading restrictions on
sales
A Shares not subject to
Hong Kong Securities Clearing
Company Limited
Overseas legal 1,060,494,391
person
4.20
145
(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.
(3) There were no cases of proxy, trustee nor waiver of voting rights for the above holders of A Shares.
(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.
(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.
Notes:
A Shares not subject to
trading restrictions on
sales
2.76
State-owned legal 696,450,214
person
COSCO Shipping (Guangzhou) Co.,
Ltd.
10
trading restrictions on
sales
-28,333,100
A Shares not subject to
China Merchants Bank
3.08
Domestic legal
person
Dajia Life Insurance Co., Ltd. -
Universal products
9
sales
trading restrictions on
A Shares not subject to
3.74
State-owned legal 944,013,171
person
Shenzhen Chu Yuan Investment and
Development Company Ltd.
8
sales
trading restrictions on
-446,296,795
A Shares not subject to
776,574,735
Percentage
(%)
Type of
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.
8,600,000
Domestic
preference
share
BOCI Securities China Hong - Hui
Zhong No. 32 Collective Asset
Others
BOCI Securities - Bank of China -
9
Asset Management
Scheme of Everbright Securities
Collective Asset Management
preference
share
Bank Xinyou () No. 2
Management - China Everbright
3.27
9,000,000
Domestic
Others
Everbright Securities Asset
8
preference
share
legal person
Province) Company
3.13 8,600,000
5.45
10
(4) No.2 Special Asset
Management Scheme of CCB
Capital
Repurchase or conversion of preference shares
7.5.5
7.5.4
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.
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).
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.
Dividend distribution of domestic preference shares
7.5.3 Dividend distribution of preference shares
(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.
(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.
(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.
Chapter VII Changes in Shares and Information on Shareholders
Notes:
Annual Report 2023 (H share)
China Merchants Bank
152
151
3.12 -31,430,000
8,570,000
Domestic
preference
share
Others
Management Scheme
CCB Capital "Qianyuan - Private
(-)", an open private
banking RMB wealth management
product (daily calculated) of China
Construction Bank - Anxin Private
During the reporting period, there were no repurchases or conversions of preference shares of the Company.
15,000,000
State-owned
7.27
20,000,000
Domestic
Others
Ping An Property & Casualty
share
preference
legal person
Province) Company
7.27
20,000,000
Domestic
State-owned
China National Tobacco (Henan
3
share
) of Suyin Wealth Management
preference
8.36 23,000,000
23,000,000
Domestic
Insurance Company of China, Ltd.
share
Domestic
preference
share
China National Tobacco (Sichuan
preference
legal person
Province) Company
5.45
15,000,000
share
Domestic
State-owned
China National Tobacco (Anhui
6
Branch
preference
of China Limited, Shenzhen
-9,100,000
5.78
15,900,000
Domestic
Others
BOC Asset Bank of China - Bank
5
products
- traditional - ordinary insurance
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
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)
Chapter VIII Financial Statements
China Merchants Bank
158
157
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.
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.
Our audit procedures in relation to consolidation of
structured entities included the following:
How our audit addressed the key audit matter
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.
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.
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.
Consolidation of structured entities
Key audit matter
Key Audit Matters (continued)
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
Responsibilities of Directors and Those Charged with Governance for
the Consolidated Financial Statements
How our audit addressed the key audit matter
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.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
159
25 March 2024
Hong Kong
Certified Public Accountants
Deloitte Touche Tohmatsu
The engagement partner on the audit resulting in the independent auditor's report is Shi Chung Fai.
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.
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.
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.
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.
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 appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors of the Bank.
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.
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.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism
throughout the audit. We also:
Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements (continued)
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
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.
Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements
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.
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.
Expected credit loss allowances of loans and advances
to customers at amortised cost, debt investments at
amortised cost, and financial guarantees and loan
commitments
Key audit matter
德勤
(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 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
154
153
304
160
154
Unaudited Supplementary Financial Information
Financial Statements and Notes Thereto
Independent Auditor's Report
Financial Statements
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
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.
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
Key Audit Matters (continued)
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
156
155
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.
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.
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:
How our audit addressed the key audit matter
- No. 1 Hengyuan Rongda (
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.
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.
Expected credit loss allowances of loans and advances
to customers at amortised cost, debt investments at
amortised cost, and financial guarantees and loan
commitments
Key audit matter
Key Audit Matters (continued)
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
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.
Key Audit Matters
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.
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.
Suyin Wealth Management Co., Ltd. Others
7.5.6
share
Number of
Number of
shares subject
As at the end of the reporting period, the shareholdings of the Company's top ten holders of domestic preference
shares were as follows:
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.
7.5.2 Number of shareholders of preference shares and their shareholdings
Chapter VII Changes in Shares and Information on Shareholders
Annual Report 2023 (H share)
China Merchants Bank
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.
Shares held
at the end of
7.5.1 Issuance and listing of preference shares
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.
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.
7.4 Issuance and Listing of Securities
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)
China Merchants Bank
150
7.5 Preference Shares
to trading
2
Percentage of
shares
pledged,
preference
(share)
(share)
frozen
sales
Changes
(share)
(%)
38.55
106,000,000
Domestic
legal person
China Mobile Communications
Group Co., Ltd.
1
the period shareholdings
(share)
Type of
shares
shareholders
No. shareholders
Serial Name of
restrictions on
marked or
State-owned
Total liabilities
Equity
- Perpetual bonds
Other equity instruments
- Preference shares
Capital reserve
Share capital
Other liabilities
Lease liabilities
Debt securities issued
Provisions
Contract liabilities
Tax payable
Salaries and welfare payable
7,590,579
Investment revaluation reserve
8,240,498
Deferred tax liabilities
Hedging reserve
6,679
39(a)
32
223,821
176,578
43
22,491
19,662
42
13,013
Surplus reserve
12,675
38
5,486
41
19,458
13,597
40
23,866
28,679
29(b)
Deposits from customers
36
135,078
2023
Notes
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
The notes form part of these consolidated financial statements.
10,138,912
11,028,483
2022
Total assets
53,884
33
90,848
90,557
32
9,999
9,954
31
55,978
107,093
Liabilities
Borrowing from central banks
37
Amounts sold under repurchase agreements
18,636
17,443
60(f)
Derivative financial liabilities
49,144
43,958
1,607
Financial liabilities at fair value through profit or loss
247,299
35
645,674
508,378
34
Deposits from banks and other financial institutions
Placements from banks and other financial institutions
129,745
378,621
207,027
1,510
27,468
113,195
2.
Basis of preparation of consolidated financial statements
(1) Statement of compliance and basis of preparation
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.
(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.
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.
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:
China Merchants Bank
Annual Report 2023 (H share)
2.
(2)
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.
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
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.
(2) Principal activities
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").
293,467
285,050
121,178
108,496
Interest paid
The notes form part of these consolidated financial statements.
167
168
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.
China Merchants Bank
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)
1.
(1)
Organisation and principal activities
Organisation
Annual Report 2023 (H share)
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
150,446
46
25,220
25,220
45
Total equity
- Perpetual debt capital
- Non-controlling interest
120,446
-
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
Non-controlling interests
46(a)
Other assets
27,468
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
Insurance Contracts
Disclosure of Accounting Policies
Definition of Accounting Estimates
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction
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
122,978
46(b)
44
Deferred tax assets
13,416
3,402
- Other
4,429
983
- Exchange difference on translation of financial statements of
foreign operations
112
(59)
- Net movement in cash flow hedge reserve
3,471
(45)
(2,045)
measured at fair value through other comprehensive income
(5,617)
3,337
(1,155)
202
1,285
2,373
139,294
Interest received
148,006
45
· Net fair value gain on equity instruments designated at
fair value through other comprehensive income
Remeasurement of defined benefit scheme
The notes form part of these consolidated financial statements.
Non-controlling interests
Equity holders of the Bank
Attributable to:
Total comprehensive income for the year
Non-controlling interests
Equity holders of the Bank
Attributable to:
Items that will not be reclassified to profit or loss
1,323
16
Other comprehensive income for the year, net of tax
(10)
4
48
354
38
358
2,731
2,658
- Net changes in expected credit losses of debt instruments
· Share of other comprehensive income/(expense) from
equity-accounted investees
Earnings per share
Non-controlling interests
Equity holders of the Bank
139,294
148,006
(25,819)
(28,612)
15
Basic and diluted (RMB Yuan)
165,113
Attributable to:
Profit for the year
Income tax
Profit before taxation
815
616
26
Investment properties
176,618
Net fair value gain/(loss) on debt instruments measured at
fair value through other comprehensive income
146,602
1,404
-
-
Items that may be reclassified subsequently to profit or loss
Other comprehensive income for the year after tax
Profit for the year
2022
2023
Note
138,012
For the year ended 31 December 2023
(Expressed in millions of Renminbi unless otherwise stated)
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
The notes form part of these consolidated financial statements.
5.26
5.63
17
1,282
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Goodwill
1,053
270
comprehensive income
Equity investments designated at fair value through other
1,555,457
780,349
899,102
23(c)
Debt investments at fair value through other comprehensive income
1,749,024
23(b)
23(d)
Debt investments at amortised cost
18,733
60(f)
Derivative financial assets
423,467
526,145
23(a)
Financial investments at fair value through profit or loss
5,807,154
18,671
6,252,755
19,649
25
2,709
30
17,553
17,041
29(a)
99,919
115,348
28
Interests in joint ventures
1,268
27
9,597
10,883
26
Intangible assets
Right-of-use assets
Property and equipment
15,707
1,160
73
22
276,676
Assets
2022
2023
Notes
(Expressed in millions of Renminbi unless otherwise stated)
At 31 December 2023
Consolidated Statement of Financial Position
Chapter VIII Financial Statements
Cash
Annual Report 2023 (H share)
162
161
1,552
1,477
139,065
149,260
140,617
150,737
China Merchants Bank
Loans and advances to customers
Precious metals
63,611
172,246
21
264,209
287,694
20
91,346
100,769
19
Balances with central banks
587,818
18
2,329
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
667,871
Cash flows from operating activities include:
619,696
599,019
2,009
945,503
5,948 2,787 954,238
The notes form part of these consolidated financial statements.
166
China Merchants Bank
43,832
Annual Report 2023 (H share)
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
(Expressed in millions of Renminbi unless otherwise stated)
2023
2022
Operating activities
Chapter VIII Financial Statements
151 94,985 132,471 449,139
92,978 65,435 11,815
25,220 27,468
equity instruments
designated at fair
value through other
comprehensive income
(43,832)
43,832
(1,675)
(1,675)
(1,675)
(3,562)
(3,562)
(3,562)
(20)
20
At 31 December 2022
Profit before taxation
Adjustments for:
upon disposal of
- Impairment losses on loans and advances
165,113
(14,722)
- Interest income on investments
- Interest expense on issued debt securities
(80,836)
(65,808)
7,781
(18,149)
9,662
(616)
(815)
- Share of profits of joint ventures
(1,860)
(1,710)
- Net gains on disposal of properties and equipment and other assets
- Share of profits of associates
- Net gains on debt securities and equity investments
1,193
1,170
46,635
45,157
- Impairment losses on investments and other
(5,166)
12,409
- Unwinding of discount on loans and advances
(257)
(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
176,618
(e) Transfers within equity
perpetual bonds
(vii) Distribution to
457 140,617
(8,685)
1,832
(1,104) (7,957)
(1,489)
1,842
1,095
353
(7,196)
(10)
(7,196)
preference shares
(6,597)
(599)
.......(10) - (1
139,065
4,153
138,012
shareholders
(ii) Decrease in
non-controlling
interests
(iii) Redemption of
(1,489)
(3,212)
112
4,153
1,053
15
255
1,323
(3,212)
112
(iv) Redemption of
perpetual debt
capital
62(a)
(1,104) (1,104)
51--...... 17,183
52(a)
29
(12,848)
(17,183)
(38,385)
I
(38,385)
(279)
(38,664)
62 (202) (202)
(v) Proposed dividends
for the year 2022 52(b)
(vi) Dividends to
preference shares
12,848
(168)
(279) (202) (44,103)
5,447
165
(d) Profit appropriations
(i) Appropriations to
statutory surplus
reserve
(ii) Appropriations to
general reserve
(iii) Dividends paid for
the year 2021
(iv) Distribution to
perpetual debt
capital
50
12,848
17,183
(79,100)
(43,622)
(282)
- Interest expense on lease liabilities
480
68,608
55(b)
of deposit
Proceeds from the issuance of negotiable interbank certificates
Financing activities
2022
78,666
2023
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
(513,926)
(255,107)
(484)
(34,892)
Notes
Proceeds from the issuance of certificates of deposit and
other debt securities
567,198
Repayment of negotiable interbank certificates of deposit
10,796
17,303
55(b)
Proceeds from other financing activities
2,667
Proceeds from non-controlling interests of subsidiaries
29,997
Proceeds from the issuance of perpetual bonds
21,481
25,201
55(b)
Proceeds from the issuance of debt securities
20,287
66,504
(30,161)
(39)
The notes form part of these consolidated financial statements.
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
392,539
Cash generated from operating activities before income tax payment
(39,251)
(45,862)
Other liabilities
(30,073)
247,751
Borrowing from central banks
(46,825)
(13,744)
original maturity over 3 months
Amounts due from banks and other financial institutions with
1,188,664
(135,569)
(69,249)
Amounts due to banks and other financial institutions
607,566
55(b)
Income tax paid
(37,423)
(1,898,898)
(2,282,035)
463
79,122
6,750
97,963
4,950
154
Proceeds from the disposals of subsidiaries, associates or joint ventures
Payment for the purchases of investments
Proceeds from the disposals of property and equipment and other assets
Investment income received
1,334,013
1,954,061
Proceeds from disposals and redemptions of investments
Investing activities
570,143
357,753
Net cash generated from operating activities
(34,786)
by non-controlling
(112,584)
Repayment of certificates of deposit and other debt securities
Net interest income
Fee and commission income
6
375,610
353,380
7
Interest expense
(160,941)
214,669
218,235
8
92,834
103,372
Fee and commission expense
(135,145)
Interest income
2022
2023
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
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)
Notes
(8,726)
(9,097)
Net fee and commission income
84,108
14
(41,278)
(56,751)
Impairment losses on other assets
(191)
(815)
Share of profits of joint ventures
25
1,860
1,710
Share of profits of associates
Repayment of debt securities
(16,504)
(48,267)
55(b)
Expected credit losses
(250,996)
220,154
Operating profit before impairment losses and taxation
94,275
Other net income
9
37,825
29,705
- Disposal of financial instruments at amortised cost
967
170
Operating income
336,602
342,215
Operating expenses
10
(120,991)
(122,061)
215,611
(i) Capital invested
55(b)
(6,597)
Chapter VIII Financial Statements
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
(Expressed in millions of Renminbi unless otherwise stated)
At 1 January 2023
Changes in equity for the year
2023
Annual Report 2023 (H share)
Total equity attributable to equity holders of the Bank
Non-controlling interests
Share Preference Perpetual
Investment
Capital revaluation Hedging
Surplus
Notes
capital shares bonds
25,220 27,468 92,978
Other equity instruments
China Merchants Bank
164
163
6,521
5,948
62(a)
2,838
2,787
1,085,729
954,238
11,028,483
10,138,912
Total equity and liabilities
The notes form part of these consolidated financial statements.
Approved and authorised for issue by the Board of Directors on 25 March 2024.
Miao Jianmin
Director
Wang Liang
Director
reserve
reserve
reserve
reserve
130,867
573
51
131,491
146,602
146,602
1,222
182
148,006
(a) Net profit for the year
(b) Other comprehensive
income for the year
16
Total comprehensive income for
the year
954,238
8,735
2,787
Non- Perpetual
controlling debt
Subtotal interest capital
5,948
General Retained Proposed profit Exchange
reserve earnings appropriation
reserve
65,435 11,815
151
94,985
132,471
449,139
30,000
(3)
1,841
(59)
13,752 9,010
69,499
5,902
43,832 2,009 945,503
925
Total
(c) Capital movement from
9,359
1,076,370
(7,482)
55(b)
(3,562)
(3,562)
55(b)
(1,675)
(12,400)
(996)
Distribution paid on preference shares
Distribution paid on perpetual bonds
Interest paid on financing activities
Payment for other financing activities
(38,664)
(44,120)
55(b)
Payment for dividends distribution
(202)
55(b)
55(b)
(7,210)
(14,959)
55(a)
(2,088)
Cash and cash equivalents as at 31 December
6,259
2,164
Effect of foreign exchange rate changes
801,754
567,198
Cash and cash equivalents as at 1 January
(240,815)
29,657
Net increase/(decrease) in cash and cash equivalents
(297,032)
(72,989)
Net cash used in financing activities
(182)
55(b)
Distribution paid on perpetual debt capital
(1,104)
151
50
108,737
94,985
51
141,481
132,471
518,638
449,139
52(b)
49,734
43,832
53
2,934
2,009
92
945,503
49
13,656
Payment for redemption of perpetual debt capital
(7,196)
Payment for redemption of preference shares
(4,932)
(5,053)
55(b)
Payment for lease liabilities
(78,735)
(51,146)
55(b)
92,978
47
65,432
65,435
48
11,815
30,000
14,247
equity holders
2022
Total equity attributable to equity holders of the Bank
Non-controlling interests
Other equity instruments
Investment
Non- Perpetual
Annual Report 2023 (H share)
Notes
Share Preference Perpetual
shares bonds
reserve
reserve
reserve
Capital revaluation Hedging Surplus General Retained
reserve reserve earnings
controlling debt
capital
Chapter VIII Financial Statements
China Merchants Bank
The notes form part of these consolidated financial statements.
value through other
comprehensive income
49
Interests in associates
(49)
At 31 December 2023
25,220
27,468 122,978 65,432 13,656
92
108,737 141,481
518,638
49,734
2,934 1,076,370
6,521
2,838 1,085,729
appropriation
reserve
Subtotal interest capital Total
25,220
(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
income for the year
16
Total comprehensive income for
the year
equity holders
(3)
(c) Capital movement from
2,648
(3,562)
4,153 86,758
17,183 58,932
138,012
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
5,447
(3,562)
Proposed profit Exchange
(996)
925
149,260
233
150,737
29,997
(383)
29,614
(383)
(383)
46(b)
30,000
(3)
29,997
29,997
13,752
146,602
9,010 (77,054)
(59)
2,731
(i) Decrease in
non-controlling
(3,562)
interests
(ii) Issue of perpetual
bonds
(d) Profit appropriations
(i) Appropriations to
statutory surplus
1,792
(59)
925
2,658
22
51
1,792
5,902
1,244
(288) (182) (48,860)
62 (182) (182)
capital
(v) Proposed dividends
for the year 2023 52(b)
(vi) Dividends to
preference shares
(vii) Distribution to
perpetual debt
perpetual bonds
upon disposal of
equity instruments
designated at fair
(49,734)
(48,390)
(996)
(996)
(e) Transfers within equity
(iv) Distribution to
49,734
(288)
(44,120)
reserve
50
(ii) Appropriations to
general reserve
51
the year 2022
(iii) Dividends paid for
13,752
(13,752)
9,010
(9,010)
(43,832)
(43,832)
52(a)
174
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
China Merchants Bank
Initial recognition
Annual Report 2023 (H share)
4.
(5)
Material accounting policy information (continued)
Financial instruments
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.
Chapter VIII Financial Statements
4. Material accounting policy information (continued)
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)).
(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
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.
(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;
material transactions between the entity and its investee.
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.
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, 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
(ii)
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.
Annual Report 2023 (H share)
Classification and measurement of financial assets
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.
Classification and measurement of financial assets (continued)
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 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".
175
176
China Merchants Bank
Chapter VIII Financial Statements
Chapter VIII Financial Statements
Financial assets at FVTPL
(5) Financial instruments (continued)
4. Material accounting policy information (continued)
Chapter VIII Financial Statements
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.
Debt instruments that meet the following conditions are subsequently measured at amortised cost:
•
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").
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
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.
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
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.
Annual Report 2023 (H share)
170
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)).
Amendments to IAS 1
Non-current Liabilities with Covenants
1 January 2024
Amendments to IAS 7 and IFRS 7
Supplier Finance Arrangements
1 January 2024
Amendments to IAS 21
Lack of Exchangeability
1 January 2025
Amendments to IFRS 10 and IAS 28
Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture
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)
1 January 2024
Chapter VIII Financial Statements
Classification of Liabilities as Current or Non-current
1 January 2024
4. Material accounting policy information (continued)
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
Amendments to IAS 1
China Merchants Bank
4. Material accounting policy information
Business combination
Business combinations or asset acquisitions (continued)
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.
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)).
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.
Business combination (continued)
(1)
(1)
Annual Report 2023 (H share)
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.
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.
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 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
4. Material accounting policy information (continued)
(5) Financial instruments (continued)
Annual Report 2023 (H share)
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.
Financial instruments (continued)
(5)
4. Material accounting policy information (continued)
Chapter VIII Financial Statements
Annual Report 2023 (H share)
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.
Cash flow hedge
Hedge accounting (continued)
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.
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.
Hedge accounting
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.
Other financial liabilities
Classification and measurement of financial liabilities (continued)
(5) Financial instruments (continued)
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.
4. Material accounting policy information (continued)
Hedge effectiveness testing
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:
Impairment under ECL model
179
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".
Resale and repurchase agreements
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.
Balances and placements with banks and other financial institutions
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.
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.
Specific items
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 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.
the effect of credit risk does not dominate the value changes that result from that economic relationship;
and
there is an economic relationship between the hedged item and the hedging instrument;
•
•
Cash equivalents
Chapter VIII Financial Statements
China Merchants Bank
China Merchants Bank
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. The
measurement and recognition of ECL are detailed in Note 60(a).
Measurement and recognition of ECL
Impairment under ECL model (continued)
(5) Financial instruments (continued)
Material accounting policy information (continued)
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.
4.
China Merchants Bank
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.
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).
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.
Annual Report 2023 (H share)
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.
Annual Report 2023 (H share)
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.
Credit-impaired financial assets
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:
178
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
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;
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.
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 (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.
Classification and measurement of financial liabilities
Financial liabilities at FVTPL
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.
the cash flows that the Group expects to receive if the loan is drawn down.
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
•
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.
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.
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).
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.
As a lessor
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:
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
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.
the amount expected to be payable by the lessee under remaining value guarantees.
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
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.
185
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.
China Merchants Bank
Annual Report 2023 (H share)
4.
Chapter VIII Financial Statements
Material accounting policy information (continued)
(9) Leases (continued)
As a buyer-lessor in a sale and leaseback transactions
(10) Impairment on tangible and intangible assets other than impairment under
ECL model
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.
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.
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.
Calculation of recoverable amount
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).
variable lease payments that depend on an index or rate, initially measured using the index or rate at
the commencement date;
186
fixed lease payments (including in-substance fixed payments), less any lease incentives;
China Merchants Bank
•
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:
•
the amount of the initial measurement of the lease liability;
•
•
any lease payments made at or before the commencement date, less any lease incentives received;
any initial direct costs incurred by the lessee; and
(d)
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.
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.
Accounting policy for any identified right-of-use asset impairment loss are disclosed in Note 4(10).
Leasehold land and building
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.
Impairment losses recognised
•
Annual Report 2023 (H share)
(9)
Chapter VIII Financial Statements
Material accounting policy information (continued)
Leases (continued)
As a lessee (continued)
(e)
Lease liabilities
Lease liability is presented as a separate line in the consolidated statement of financial position.
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 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:
•
•
•
4.
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.
Rental income
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.
the Group's performance creates and enhances an asset that the customer controls as the Group performs;
or
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.
Otherwise, revenue is recognised at a point in time.
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.
China Merchants Bank
Annual Report 2023 (H share)
4.
Chapter VIII Financial Statements
Material accounting policy information (continued)
(13) Income recognition (continued)
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:
•
the Group has a present right to payment for the goods or services;
•
the Group has transferred physical possession of the goods;
•
the customer has the significant risks and rewards of ownership of the goods;
•
the customer has accepted the goods or services.
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.
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.
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.
(14) Taxation
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.
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.
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.
180
the customer simultaneously receives and consumes the benefits provided by the Group's performance as the
Group performs;
(11) Precious metals
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:
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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
4. Material accounting policy information (continued)
(12) Financial guarantee issued, provisions and contingent liabilities
Financial guarantees issued
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).
Provisions and contingent liabilities
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.
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.
(13) Income recognition
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.
Net interest 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 recognised in "Other net income".
Dividend income
Dividend income from investments is recognised when the dividend is declared and approved by the investee.
Right-of-use assets
Income derived from operating leases is recognised in the consolidated statement of profit or loss using the straight-
line method over the lease term.
187
188
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
4. Material accounting policy information (continued)
(13) Income recognition (continued)
Fee and commission income
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.
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.
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.
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.
(c)
Both the periods and method of amortisation are reviewed annually.
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).
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.
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.
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.
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.
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.
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)
(a)
Financial instruments (continued)
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.
Loans and advances directly granted by the Group to customers 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 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.
(5)
Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)
is derecognised when:
the rights to receive cash flows from the asset have expired; or
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.
Sales of assets on condition of repurchase
(c)
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).
Securitisation
(b)
Derecognition of financial instruments (continued)
(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).
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
•
Financial investments
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.
Specific items (continued)
Material accounting policy information (continued)
(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".
Repossessed assets of equity instruments are detailed in Note 4(5).
Intangible assets
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 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.
The amortisation period of intangible assets is as follows:
Software and Other
2 - 20 years
Core deposit
28 years
183
184
(7) Repossessed assets
China Merchants Bank
Annual Report 2023 (H share)
4.
(9)
Material accounting policy information (continued)
Leases
Definition of a lease
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.
As a lessee
(a)
Allocation of consideration to components of a contract
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.
(b)
Short-term leases and leases of low-value assets
Chapter VIII Financial Statements
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.
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.
(5)
4.
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
A financial liability (or part of it) is derecognised when the obligation under the liability (or part of it) is
discharged, cancelled or expired.
Offsetting financial instruments
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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
4. Material accounting policy information (continued)
(6)
Property, equipment, investment property and depreciation
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.
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:
Land and buildings
Investment properties
Computer equipment
Leasehold improvements (leased property)
Leasehold improvements (self-owned property)
Aircraft, vessels and professional equipment
Other
20 years
20 years
the estimated useful lives
the estimated useful lives
no more than 25 years
3-5 years
Financial instruments (continued)
3 years
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.
7.03
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 November 2023, the Company ranked among China's Most Admired Companies by Fortune magazine.
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.
Facilitating digital
transformation of enterprises
to open a new chapter by
riding on the momentum
18
China Merchants Bank
Annual Report 2023 (H share)
Chapter II Summary of Accounting Data and Financial Indicators
Summary of Accounting Data
and Financial Indicators
2.1 Key Accounting Data and Financial Indicators of the Group
(in millions of RMB, unless otherwise specified)
2023
2022
Changes
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.
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 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.
Strategic focus:
We are committed to building the best value creation bank with innovation-driven
development, leading model and distinguished features.
Building a value creation bank.
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.
Being customer-centric and creating values for customers.
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".
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.
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.
+/-%
15
China Merchants Bank
Chapter I Company Information
Annual Report 2023 (H share)
1.4 Honors and Awards
In 2023, the Company received a number of honours and awards from organisations both at home and abroad,
including:
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 March 2023, the Company was awarded the "Best Retail Bank in China" in "Asia Trailblazer Awards
2023" hosted by Retail Banker International.
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".
16
Operating Results
Net operating income (1)
Profit before tax
Changes
+/-%
Volume Indicators
Total assets
of which: total loans and advances to customers(3)
Total liabilities
11,028,483
10,138,912
31 December
2022
8.77
6,051,459
7.56
9,942,754
9,184,674
8.25
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)
8,155,438
7,535,742
6,508,865
Core Value:
2023
31 December
339,078
344,740
-1.64
176,618
165,113
6.97
Net profit attributable to shareholders of the Bank
146,602
(in millions of RMB, unless otherwise specified)
138,012
Per Share (RMB yuan)
Basic earnings attributable to ordinary shareholders of
the Bank (2)
5.63
5.26
Diluted earnings attributable to ordinary shareholders
of the Bank
5.63
5.26
7.03
6.22
Strategic objectives:
Strategic vision:
1.3 Development Strategies
Registered Company Name in English: China Merchants Bank Co., Ltd.
1.1.2 Legal Representative: Miao Jianmin
Authorised Representatives: Wang Liang, Peng Jiawen
Secretary of the Board of Directors: Peng Jiawen
Joint Company Secretaries: Peng Jiawen, Ho Wing Tsz Wendy
Securities Representative: Xia Yangfang
1.1.3 Registered and Office Address: 7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province,
China
1.1.4 Contact Details:
Address: 7088 Shennan Boulevard, Futian District, Shenzhen, Guangdong Province, China
ØRSOR(Abbreviated Name in Chinese: )
Postcode: 518040
Fax: +86 755 8319 5555
E-mail: cmb@cmbchina.com
Website: www.cmbchina.com
Customer complaint hotline: 95555-7
Credit card complaint hotline: +86 400 820 5555-7
1.1.5 Principal Place of Business in Hong Kong: 31/F, Three Exchange Square, 8 Connaught Place, Central,
Hong Kong, the PRC
1.1.6 Share Listing:
A Shares: Shanghai Stock Exchange
Tel: +86 755 8319 8888
Abbreviated Name of A Shares: CMB
1.1.1 Registered Company Name in Chinese:
Company Information
China Merchants Bank
Annual Report 2023 (H share)
President's Statement
Wang Liang
President and Chief Executive Officer
China Merchants Bank
Annual Report 2023 (H share)
President's Statement
1.1 Company Profile
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 and Chief Executive Officer
2
25 March 2024
11
12
China Merchants Bank
Chapter I Company Information
Annual Report 2023 (H share)
China Merchants Bank Co., Ltd.
8.22
Stock Code: 600036
Abbreviated Name of H Shares: CM BANK
"China Securities Journal" (www.cs.com.cn), "Securities Times" (www.stcn.com),
"Shanghai Securities News" (www.cnstock.com)
website of Shanghai Stock Exchange (www.sse.com.cn)
website of the Company (www.cmbchina.com)
website of Hong Kong Exchanges and Clearing Limited (www.hkex.com.hk)
website of the Company (www.cmbchina.com)
Place for maintenance of periodic reports: Office of the Board of Directors of the Company and principal
place of business of the Company
13
14
Hong Kong:
China Merchants Bank
Chapter I Company Information
1.2 Corporate Business Overview
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.
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.
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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter I Company Information
Annual Report 2023 (H share)
H Shares: SEHK
The Chinese mainland:
Registrar for Domestic Preference Shares: China Securities Depository & Clearing Corporation Ltd.,
Shanghai Branch
Stock Code: 03968
Domestic Preference Shares: Shanghai Stock Exchange
Abbreviated Name of Shares: Zhao Yin You 1 (1)
Stock Code: 360028
China Merchants Bank
Annual Report 2023 (H share)
Chapter I Company Information
1.1.7 Domestic Auditor: Deloitte Touche Tohmatsu Certified Public Accountants LLP
Office Address: 30th Floor, Bund Centre, 222 Yan'an Road East, Shanghai, China
Certified Public Accountants for Signature: Wu Lingzhi, Sun Weiqi
1.1.10 Newspapers and Websites Designated for Information Disclosure:
International Auditor: Deloitte Touche Tohmatsu
1.1.8 Legal Advisor as to PRC Law: JunHe LLP
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
Address: 188 South-Yanggao Road, Pudong New Area, Shanghai, the PRC
Tel: +86 4008 058 058
Share Register and Transfer Office as to H Shares:
Computershare Hong Kong Investor Services Ltd.
Address: Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, the PRC
Tel: +852 2862 8555
Office Address: 35th Floor, One Pacific Place, 88 Queensway, Hong Kong, the PRC
1,076,370
945,503
13.84
437.70
Allowance coverage ratio (5)
10
0.96
0.95
Non-performing loan ratio
Asset quality indicators
percentage point
Increased by 0.43
9.41
9.84
Equity to total assets
percentage point
Increased by 0.11
17.77
17.88
Capital adequacy ratio
percentage point
Increased by 0.26
15.75
16.01
Tier 1 capital adequacy ratio
percentage point
Increased by 0.05
13.68
13.73
Core Tier 1 capital adequacy ratio
450.79
Measurement Approach (4)
percentage point
Decreased by 13.09
Allowance-to-loan ratio (6)
19
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.
(7)
Allowance-to-loan ratio = allowances for impairment losses/total loans and advances to customers.
(6)
Allowance coverage ratio = allowances for impairment losses/balance of non-performing loans.
(5)
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.
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)
Net interest spread = average yield of the total interest-earning assets - average cost ratio of total interest-bearing liabilities.
(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
percentage points
Capital adequacy indicators under the Advanced
Decreased by 0.01
Changes over
2022 year-end
percentage point
Decreased by 0.84
17.06
16.22
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
shareholders of the Bank
(%)
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)
Notes:
(%)
32.71
36.71
2.2 Financial Ratios of the Group
Net interest spread(1)
12.23
2.28
2.03
31 December
2022
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
- Net non-interest income
percentage point
2023
63.30
Increased by 0.01
percentage point
Net interest margin (2)
2.15
2.40
percentage point
Decreased by 0.25
percentage point
As percentage of net operating income
-
Net interest income
63.31
Decreased by 0.25
(17) Related parties
Material accounting policy information (continued)
4.
Annual Report 2023 (H share)
192
China Merchants Bank
191
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.
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.
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.
Chapter VIII Financial Statements
Significant accounting estimates and judgements
Dividends or profit distributions are recognised as a liability in the year in which they are approved and declared.
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
(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
Annual Report 2023 (H share)
5.
Chapter VIII Financial Statements
Share-based payment
(18) Segmental reporting
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.
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.
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.
Chapter VIII Financial Statements
4. Material accounting policy information (continued)
(14) Taxation (continued)
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.
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:
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
in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation
authority on either:
the same taxable entity; or
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.
(15) Foreign currencies translations
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.
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 as part of the effective portion of a hedge on certain
foreign currency risks; or
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).
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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
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.
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.
Annual Report 2023 (H share)
3,317
190
2,650
202
202
400
211
2,098
7,515
3,804
1,548
2,650
202
202
400
Subtotal
Cai Jin
Wang Wanging
Zhang Xiang (iii)
Cai Hongping (iii)
Xu Zhengjun
Wu Heng
Peng Bihong
Luo Sheng (iii)
5,626
211
2,098
1,548
China Merchants Bank
13,628
Former executive, non-executive
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.
20,387
431
4,678
11,140
4,138
Total
The former executive, non-executive directors' and supervisors' emoluments shown above were for their services as
directors or supervisors of the Bank.
334
167
167
334
167
167
Subtotal
Han Zirong (vi)
Ding Huiping (vi)
| | | |
| | | |
Guo Xikun (vi)
Luo Sheng (v)
Wang Daxiong (v)
Tian Huiyu (v)
Fu Gangfeng (iv)
directors and supervisors
The independent non-executive directors' and supervisors' emoluments shown above were for their services as directors or
supervisors of the Bank.
(1) Control over structured entity
Xiong Liangjun
(3)
3,600
Other income
- rental income
- insurance income
Other
Total
11,418
9,702
4,132
11,352
66
521
729
1,065
37,825
29,705
10. Operating expenses
2023
9,181
2022
Foreign exchange gain
232
19,700
18,013
- financial instruments at FVTPL
14,523
12,443
- gain on disposal of financial assets at amortised cost
967
170
86
- gain on disposal of debt instruments at FVTOCI
5,161
- of which: gain on disposal of bills
1,551
3,291
- dividend income from equity investments designated at FVTOCI
317
153
- other
3,661
Net investment income
Staff costs
70,348
229
Charge for insurance claims
360
Other general and administrative expenses (note)
31,321
32,319
Total
120,991
216
122,061
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
The emoluments of the Directors and Supervisors during the year were as follows:
Executive directors
Wang Liang
Note:
- Salaries and bonuses
Short-term leases expense and leases of low-value assets expense
4,205
70,657
55,477
55,647
- Social insurance and corporate supplemental insurance
- Other
7,349
8,421
7,522
6,589
4,151
Tax and surcharges
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
2,963
Zhu Jiangtao (ii)
(351)
- precious metals
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
Borrowing from central banks
2,628
Debt securities issued
7,781
9,662
Lease liabilities
Total
480
510
160,941
1,960
135,145
105,836
Deposits from customers
80,836
65,808
-
- Debt investments at FVTOCI
26,201
19,654
- Debt investments at amortised cost
54,635
128,809
46,154
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
Total
(55)
8.
2023
92,834
103,372
195
196
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
9. Other net income
Total
2023
1,846
(2,675)
- financial instruments at fair value through profit or loss
1,797
(2,204)
- derivatives instruments
104
(120)
2022
Fee and commission income
12,018
Other
2022
Commissions from wealth management
28,466
30,903
Commissions from asset management
11,474
12,457
Bank cards fees
7,552
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
21,399
Financial investments
Subtotal
Salaries,
allowances
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
(2)
In March 2023, Ms. Su Min retired and resigned as the Non-Executive Director of the Bank.
2022
Directors'
fees
and benefits
Discretionary
RMB'000
in kind
RMB'000
bonuses
RMB'000
Retirement
scheme
contributions
RMB'000
Salaries,
allowances
Total
RMB'000
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 January 2024, Mr. Peng Bihong ceased to be the Shareholder Supervisor of the Bank due to change of work arrangement.
197
198
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
11. Directors' and supervisors' emoluments (continued)
Notes:
(i)
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.
(!!)
(iv)
(v)
(vi)
(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.
In January 2024, Mr. Hu Jianhua and Mr. Hong Xiaoyuan ceased to be Non-Executive Directors of the Bank due to their age.
(iii)
16,825
(i)
-
-
directors and supervisors
Wong See Hong
500
500
Li Menggang
Liu Qiao
Tian Hongqi
Li Chaoxian
500
|| | ||
500
500
500
500
500
500
Shi Yongdong
500
500
500
(i)
Independent non-executive
Subtotal
3,625
3,625
2,580
2,580
220
220
6,425
6,425
199
The non-executive directors shown above did not receive remuneration from the Bank.
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.
Miao Jianmin
Hu Jianhua (ii)
Sun Yunfei (ii)
Zhou Song
Hong Xiaoyuan
Zhang Jian
Su Min
Chen Dong (ii)
Non-executive directors
2023
12,625
Total
Zhang Jian
Chen Dong
Subtotal
The non-executive directors shown above did not receive remuneration from the Bank.
Independent non-executive
directors and supervisors
Wong See Hong
500
Hong Xiaoyuan (iii)
Li Menggang
Tian Hongqi
Li Chaoxian
Shi Yongdong
500
500
500
500
500
Liu Qiao
Luo Sheng
Zhou Song
Hu Jianhua (iii)
Retirement
Directors'
fees
RMB'000
and benefits Discretionary
in kind
RMB'000
bonuses
RMB'000
scheme
contributions
RMB'000
Sun Yunfei
Total
RMB'000
- 3,453
2,821
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
3,453
4,200
Peng Bihong (iv)
Xu Zhengjun
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
400
Su Min (vii)
Wang Wanqing (v)
Subtotal
1,870
593
2,463
1,870
-- 593
2,463
The former executive, non-executive directors' and supervisors' emoluments shown above were for their services as
directors or supervisors of the Bank.
Xiong Liangjun (vi)
Wu Heng
400
500
Cai Hongping
Zhang Xiang
Cai Jin
400
400
400
1,627
Cao Jian (v)
Yang Sheng (vi)
500
Subtotal
967
4,200
3,888
I
500
500
500
500
1,294
4,487
Net gain/(loss) from fair value change
193
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
166,104
168,174
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
6.
7,760
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.
Chapter VIII Financial Statements
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.
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.
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.
5. Significant accounting estimates and judgements (continued)
(4) Impairment under ECL model
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
194
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.
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.
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 Group analyses the contractual rights and obligations in connection with such transfers to determine whether
derecognition criteria are met based on the following considerations:
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.
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.
Derecognition of financial assets transferred
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.
Classification of financial assets
(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.
China Merchants Bank
Annual Report 2023 (H share)
5. Significant accounting estimates and judgements (continued)
(7) Impairment of goodwill
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.
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.
Amounts held under resale agreements
3,860
203,870
259,864
Production and supply of electric power, heating power, gas and water
349,682
303,707
Property development
461,434
477,016
2023
3,661
66,701
68
70,430
445,218
557,691
Manufacturing
2022
2023
Operations in the Chinese mainland
Analysed by industry sector and category:
Wholesale and retail
Transportation, storage and postal services
187,737
Leasing and commercial services
Other
34,421
42,326
Mining
64,886
42,813
Water, environment and public utilities management
75,593
171,786
88,296
78,950
95,394
Telecommunications, software and IT services
103,998
110,577
Construction
158,320
186,463
Finance
(i)
(b) Analysis of loans and advances to customers
22. Loans and advances to customers (continued)
100,430
404,417
4,863
525,179
614,481
(2,729)
(6,563)
(2,726)
120,762
(6,311)
(252)
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.
(iii)
Loans and advances to customers at FVTPL
Corporate loans and advances
Discounted bills
Interest receivable
Total
(3)
2022
3
128
2023
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
208
207
4,994
(50,083)
Net amount of loans and advances to customers at amortised cost
5,646,519
5,177,199
(ii)
Loans and advances to customers at FVTOCI
Corporate loans and advances
Discounted bills
Loss allowances
Loans and advances to customers at FVTOCI
Stage 1 (12-month ECL)
· Stage 2 (Lifetime ECL - not credit-impaired)
· Stage 3 (Lifetime ECL - credit-impaired)
2022
514,051
2022
534,232
50,846
2,455
(53,210)
Notes:
11. Directors' and supervisors' emoluments (continued)
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
200
- Between one month and one year (inclusive)
Total
268,890
7,577
172,119
276,467
(c) Analysed by underlying assets
Bonds
Bills
(i)
Total
2022
256,129
20,338
276,467
(d) Movements of allowances for impairment losses are as follows:
Balance as at the beginning of the year
Release for the year (note 14)
Balance as at the end of the year
2023
2022
1,094
4,263
2023
164,702
7,417
172,119
(!!)
(iii)
(iv)
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:
20,061
8,263
Total
842
Contributions to defined contribution retirement schemes
7,455
Discretionary bonuses
11,764
2022
RMB'000
2023
RMB'000
8,263
Salaries and other emoluments
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:
12. Five highest paid individuals
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.
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.
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).
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.
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 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, 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 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.
On 27 September 2023, the Board of Directors approved the discretionary bonuses of the Bank's directors, supervisors and executive officers
for 2022.
(vii)
(vi)
(v)
(505)
76,400
(3,169)
1,094
5,807,154
(i)
Loans and advances to customers at amortised cost
2023
2022
Corporate loans and advances
2,475,432
2,270,323
Retail loans and advances
3,437,883
3,161,789
Discounted bills
6,252,755
9
5,913,324
5,432,112
Less: Loss allowances
(266,805)
(254,913)
- Stage 1 (12-month ECL)
(165,866)
(159,932)
- Stage 2 (Lifetime ECL - not credit-impaired)
(47,729)
(44,898)
Stage 3 (Lifetime ECL - credit-impaired)
Gross amount of loans and advances to customers at amortised cost
614,481
4,994
70,430
Loans and advances to customers at FVTPL (iii)
Total
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
22. Loans and advances to customers
(a) Loans and advances to customers
2023
2022
Gross amount of loans and advances to customers at amortised cost (i)
Interest receivable
5,913,324
5,432,112
Subtotal
11,442
5,924,766
11,326
5,443,438
Less: Loss allowances of loans and advances to customers
at amortised cost (i)
Loss allowances of interest receivable
(266,805)
(815)
(254,913)
(846)
Subtotal
(267,620)
(255,759)
Loans and advances to customers at amortised cost
5,657,146
5,187,679
Loans and advances to customers at FVTOCI (ii)
525,179
589
67,677
5,837,565
2,428,284
overdue
loans
6,971
6,133
4,638
5,157
2,571
766
1,556
1,549
1,249
39,362
19,002
17,477
618
6,142
23,074
17,671
5,077
81,983
4,360
Overdue
from
2022
Overdue
from
Overdue
within
3 months
36,161
1
1,661
13,310
822,059
2,244,129
379,457
6,037,738
471,127
6,508,865
348,883
5,537,405
514,054
6,051,459
Overdue
within
3 months
Overdue
3,905
7,053
from
up to 1 year
2023
Overdue
from
1 year up to
3 years
Overdue
more than
3 years
Total
11111
20,486
3 months
year up to
Overdue
more than
Total
573
951
1,261
6,019
Gross amount of loans and advances to customers
37,207
26,669
9,810
4,599
78,285
3,234
Note: Loans are classified as overdue when the principal or interest is overdue more than one day.
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
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:
Pledged loans
15,966
1,696
overdue
3 months
up to 1
year
3 years
3 years
loans
Credit loans
22,260
12,382
2,365
880
37,887
Guaranteed loans
6,533
7,537
3,581
762
18,413
Collateralised loans
5,180
6,177
2,913
2022
2,219,635
836,550
2,132,337
2023
2,592,093
Gross amount of loans and advances to customers
Pledged loans
2022
Finance
45,368
36,521
Transportation, storage and postal services
36,248
30,814
Property development
22,960
26,298
2023
Manufacturing
20,494
Production and supply of electric power, heating power, gas and water
Wholesale and retail
12,359
9,023
10,002
8,923
Telecommunications, software and IT services
8,323
10,908
Leasing and commercial services
19,335
Operations outside the Chinese mainland
2,500,001 -3,000,000
6,271,366
2,215,835
Discounted bills
471,127
514,054
Residential mortgage
1,376,815
1,379,825
Credit cards
935,777
884,395
Micro-finance loans
750,019
629,857
Consumer loans
301,538
202,225
Other
7,806
11,374
Subtotal of retail loans and advances
3,371,955
3,107,676
Gross amount of loans and advances to customers
6,207
Subtotal of corporate loans and advances
3,430
Construction
237,499
213,894
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%).
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
22. Loans and advances to customers (continued)
(b) Analysis of loans and advances to customers (continued)
(ii)
Analysed by type of guarantees:
Gross amount of loans and advances to customers
Credit loans
Collateralised loans
Pledged loans
Subtotal
Discounted bills
Gross amount of loans and advances to customers
(iii)
Analysed by overdue term:
Credit loans
Guaranteed loans
Collateralised loans
Guaranteed loans
54,113
65,928
Subtotal of retail loans and advances
Water, environment and public utilities management
Other
Subtotal of corporate loans and advances
Residential mortgage
Credit cards
Micro-finance loans
Other
4,945
6,074
623
1,772
419
110
4,782
5,414
171,571
159,781
8,671
9,383
133
124
1,278
55,846
1,181
43,425
Mining
3,000,001 3,500,000
2023
12
2,658
2,860
Release for the year (note 14)
(2,143)
(235)
Exchange difference
Balance as at the end of the year
4
33
519
2,658
205
206
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
21. Amounts held under resale agreements
Principal (a)
Impairment allowances (a)(d)
Subtotal
Interest receivable
Total
(a) Analysed by nature of counterparties
In the Chinese mainland
- Banks
Balance as at the beginning of the year
2022
2023
Movements of allowances for impairment losses are as follows:
137,363
71,366
62,401
70,625
61,880
741
521
286,247
265,415
(519)
(92)
(2,658)
(163)
Other financial institutions
(427)
285,728
262,757
2023
2022
107,390
175,523
90,001
158,086
2,815
14,670
285,728
262,757
(c)
(2,495)
Outside the Chinese mainland
- Banks
- Other financial institutions
Total
(1,094)
(148)
(216)
(441)
(878)
172,119
276,467
2023
2022
Maturing
- Within one month (inclusive)
172,119
(589)
2023
536,637
(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.
Note:
5.26
5.63
(ii)
172,840
277,561
179
Less: Impairment allowances
- Banks
- Other financial institutions
Net carrying amount
(b) Analysed by remaining maturity
2023
2022
172,708
(589)
277,561
(1,094)
172,119
276,467
172,708
127
172,246
276,676
2023
2022
172,334
9,961
162,373
277,382
42,077
235,305
374
179
88
286
209
25,220
65,651
203,014
(223)
(509)
100,534
91,078
235
268
100,769
91,346
2023
2022
62,381
57,809
57,387
54,808
4,994
3,001
38,376
33,778
37,872
33,390
504
388
100,757
91,587
(223)
91,587
2022
Net carrying amount
- Other financial institutions
285
587,818
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.
Surplus deposit reserve maintained with the PBOC and central banks outside the Chinese mainland are mainly for clearing and settlement
purposes.
(iii)
Other deposits with central banks primarily represent fiscal deposits and foreign exchange reserve placed with the PBOC.
203
204
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
19. Balances with banks and other financial institutions
(509)
2023
100,757
Impairment allowances (a)(b)
Subtotal
Interest receivable
Total
(a) Analysed by nature of counterparties
In the Chinese mainland
- Banks
Other financial institutions
Outside the Chinese mainland
- Banks
- Other financial institutions
Total
Less: Impairment allowances
- Banks
Principal (a)
(196)
(490)
(27)
265,415
(519)
(2,658)
285,728
262,757
1,452
264,209
1,966
287,694
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.
(a) Analysed by nature of counterparties
In the Chinese mainland
- Banks
2022
- Other financial institutions
- Other financial institutions
Total
Less: Impairment allowances
- Banks
- Other financial institutions
Net carrying amount
(b) Analysed by remaining maturity
Maturing
- Within one month (inclusive)
- Between one month and one year (inclusive)
- Over one year
Total
2023
214,881
2022
Outside the Chinese mainland
- Banks
42,041
2023
286,247
Total
(19)
100,534
91,078
(b) Movements of allowances for impairment losses are as follows:
2023
2022
Balance as at the beginning of the year
509
378
(Release)/charge for the year (note 14)
(287)
120
Note:
Exchange difference
11
Balance as at the end of the year
223
509
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
20. Placements with banks and other financial institutions
Principal (a)
Impairment allowances (a)(c)
Subtotal
Interest receivable
1
25,220
132,775
142,044
- Effects of different applicable rates in other jurisdictions
2,548
4,551
- Effects of costs, expenses and losses not deductible for tax purpose
(17,114)
(18,872)
- Effects of non-taxable income
(15,459)
(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:
25,819
(8,457)
(83)
28,612
170
174
973
1,155
(260)
(215)
- Tax effect of perpetual bond/perpetual debt capital interest expense
- Other
(937)
(expense)
amount
amount
(expense)
Net-of-tax
Tax benefit/
Tax benefit/ Net-of-tax Before-tax
Before-tax
amount
2022
2023
Income tax effects relating to each component of other comprehensive income
(a)
33,133
16. Other comprehensive income
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)
Annual Report 2023 (H share)
27,366
34,276
28,695
50,470
- 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
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
40,175
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
3,500,001 -4,000,000
4,000,001 -4,500,000
4
2022
Aggregate amount of relevant loans made by the Group outstanding
at year end
amount
(3,835)
(2,935)
2022
2023
Total
Deferred taxation
Overseas
- 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
4,982
557
41,278
(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)
7,112
Items that may be reclassified subsequently to profit or loss
2,766
(393)
(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)
3,471
6,083
2022
2023
Movements relating to components of other comprehensive income are as
follows:
(b)
1,323
551
772
2,731
(475)
3,206
Other comprehensive income
(10)
Net fair value gain/(loss) on debt instruments measured at FVTOCI
Changes in fair value recognised during the year
2
Net fair value gain on equity instruments designated at FVTOCI
Changes in fair value recognised during the year
48
(3,562)
(3,562)
(1,675)
(996)
138,012
146,602
2022
2023
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)
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.
354
17. Earnings per share
China Merchants Bank
Annual Report 2023 (H share)
112
(59)
Net movement in hedging reserve during the year recognised in other
comprehensive income
(1)
112
(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
48
354
Net movement in investment revaluation reserve during the year
recognised in other comprehensive income
Chapter VIII Financial Statements
125,878
5,054
302
667,871
(12)
(1)
- 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)
4,631
(2,045)
202
730
- 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
(2,775)
4
202
(1,155)
6,017
5
- Remeasurement of defined benefit scheme
48
(4)
52
354
(81)
435
-Net fair value gain on equity instruments designated at
FVTOCI
38
40
(1,155)
358
440
Items that will not be reclassified to profit or loss
45
45
(45)
(45)
- Other
4,429
4,429
983
983
- Exchange difference on translation of financial statements
of foreign operations
(82)
209
44,898
411,591
Stage 2 (Lifetime ECL - not credit-impaired)
Stage 3 (Lifetime ECL - credit-impaired)
Net debt investments at amortised cost
1,768,010
1,579,845
(39,390)
(43,448)
(13,193)
(10,120)
(486)
Stage 1 (12-month ECL)
(960)
(32,368)
1,728,620
1,536,397
215
216
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
23. Financial investments (continued)
(b) Debt investments at amortised cost (continued)
(25,711)
Less: Loss allowances
Total
127,346
30,915
23,996
1,708,448
1,457,373
87,748
127,346
- Non-standard assets - Loans and advances to customers
73,709
108,616
- Non-standard assets - Creditor's beneficiary rights to other
commercial banks
3,738
- Non-standard assets - Other
9,622
5,500
12,582
- Other
679
648
-
Classified by listing
Unlisted
87,748
127,346
87,748
(ii) Analysed by stage of ECL:
Debt investments at amortised cost
Less: Loss allowances of debt investments
at amortised cost
Net debt investments at amortised cost
1,837
1,728,620
2022
- Stage 1
(12-month
- Stage 2
(Lifetime
ECL - not
credit-
Stage 3
(Lifetime
ECL - credit-
ECL)
impaired)
impaired)
Total
1,543,652
2,073
34,120
1,579,845
(10,120)
(960)
(32,368)
(43,448)
1,533,532
1,113
1,752
1,536,397
1,031
Classified by underlying assets
1,725,752
(25,711)
Debt investments at amortised cost
Less: Loss allowances of debt investments
at amortised cost
Net debt investments at amortised cost
(iii)
Movements of allowances for expected credit loss
Balance as at the beginning of the year
Transfer to:
- Stage 1
(12-month
credit-
2023
- Stage 2
(Lifetime
ECL - not
- Stage 3
(Lifetime
ECL - credit-
ECL)
impaired)
impaired)
Total
1,738,945
1,517
27,548
1,768,010
(13,193)
(486)
(39,390)
Other investments:
Fair value for the listed bonds
Unlisted
Financial investments designated at fair value through profit or loss
2023
2022
Bonds:
Classified by issuer
12,879
11,876
Government bonds
228
218
- Bonds issued by policy banks
4,492
4,559
Bonds issued by commercial banks and other financial institutions
- Other debt securities
7,327
6,370
832
729
Classified by listing
12,879
11,876
- Listed in the Chinese mainland
12,637
(ii)
11,656
Fund management
227,204
Other
Classified by listing
- Listed in the Chinese mainland
- Listed outside the Chinese mainland
- Unlisted
Total other financial investments measured at FVTPL
Total financial investments measured at FVTPL
247,111
4,228
240,864
206,415
4,362
199,725
1,683
336
1,511
817
247,111
206,415
990
330
972
653
245,149
205,432
257,730
513,266
Stage 3
(Lifetime
Listed outside the Chinese mainland
220
- Government bonds
1,680,262
1,452,499
1,179,073
993,624
- Bonds issued by policy banks
442,206
394,126
Bonds issued by commercial banks and other financial institutions
51,732
56,913
Other debt securities
7,251
7,836
Classified by listing
1,680,262
1,452,499
Listed in the Chinese mainland
– Listed outside the Chinese mainland
1,607,814
1,395,184
41,533
33,319
Classified by issuer
242
Bonds:
2023
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
23. Financial investments (continued)
(b) Debt investments at amortised cost
(i)
Debt investments at amortised cost (i)(ii)
Interest receivable
Subtotal
Impairment losses of principal (i)(ii)(iii)
Impairment losses of interest receivable
Subtotal
Total
Debt investments at amortised cost:
2023
2022
1,768,010
20,796
1,788,806
1,579,845
19,294
1,599,139
(39,390)
(43,448)
(392)
(39,782)
1,749,024
(234)
(43,682)
1,555,457
2022
Wealth management products
ECL credit-
- Stage 1
(12-month
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
23. Financial investments (continued)
(c) Debt investments at FVTOCI (continued)
Movements of allowances for expected credit loss
(ii)
Balance as at the beginning of the year
Charge/(release) for the year (note 14)
Write-offs/disposals
Exchange difference
218
Balance as at the end of the year
2023
2022
6,540
6,622
1,009
(355)
(807)
70
273
6,812
(d) Equity investments designated at FVTOCI
217
70,013
107,999
889,736
771,271
Government bonds
636,625
524,651
- Bonds issued by policy banks
35,519
74,072
- Bonds issued by commercial banks and other financial institutions
- Other debt securities
149,397
119,602
68,195
52,946
Classified by listing
889,736
771,271
Listed in the Chinese mainland
676,653
611,110
- Listed outside the Chinese mainland
105,084
90,148
- Unlisted
6,540
Repossessed equity instruments
Other
Total
CMB International Capital Holdings
Corporation Limited (note (i))
Hong Kong
paid up capital
(in millions)
HKD4,129
the Bank Principal activities
Economic
nature
Legal
representative
100%
Investment bank
and investment
Limited liability
Wang Liang
management
CMB Financial Leasing Company Limited
(note (ii))
Shanghai
RMB12,000
100%
Finance leasing
Limited liability
Zhong Desheng
CMB Wing Lung Bank Limited (note (iii))
China Merchants Fund Management Co., Ltd.
Hong Kong
Shenzhen
HKD1,161
RMB1,310
100%
Banking
% of
ownership
held by
Classified by issuer
Particulars of
the issued and
Name of company
Classified by listing
- Listed in the Chinese mainland
- Listed outside the Chinese mainland
Unlisted
Total
2023
2022
2,857
3,266
16,792
10,150
19,649
13,416
926
1,412
9,515
2,744
9,208
9,260
19,649
13,416
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.
24. Particulars of principal subsidiaries of the bank
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.
Place of
incorporation
and operation
Bonds:
2022
2023
66
10
66
13
Balance as at the end of the year
13,193
486
25,711
39,390
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
23. Financial investments (continued)
(b) Debt investments at amortised cost (continued)
Movements of allowances for expected credit loss (continued)
(iii)
- Stage 1
(12-month
2022
- Stage 2
(Lifetime
ECL - not
- Stage 3
(Lifetime
ECL credit-
Balance as at the beginning of the year
ECL)
credit-
impaired)
14,974
712
(1)
impaired)
24,021
4
Recovery of debt previously written off
ECL)
- Stage 2
(Lifetime
ECL - not
credit-
impaired)
10,120
960
impaired)
Total
32,368
43,448
Stage 1
Stage 2
(37)
37
- Stage 3
(484)
Charge/(release) for the year (note 14)
3,111
(25)
484
(4,313)
Write-offs/disposals
(5)
(1)
(2,904)
(1,227)
(2,910)
Exchange difference
2023
Total
39,707
- Stage 1
(c) Debt investments at FVTOCI
Debt investments at FVTOCI (i)
Interest receivable
Total
Impairment losses of debt investments at FVTOCI (ii)
Impairment losses of interest receivable
Total
2023
2022
889,736
771,271
9,366
9,078
899,102
780,349
(6,812)
(6,540)
(148)
(80)
(6,960)
(6,620)
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.
(i)
Debt investments at FVTOCI:
43,448
Transfer to:
32,368
10,120
- Stage 2
(27)
27
- Stage 3
(153)
(298)
451
(Release)/charge for the year (note 14)
(4,674)
518
8,390
4,234
Write-offs/disposals
(531)
(531)
Recovery of debt previously written off
28
28
Exchange difference
1
9
10
Balance as at the end of the year
960
Fund investments
-
-
254,913
Transfer to
- Stage 1
7,480
(7,309)
(171)
- Stage 2
(5,807)
6,382
(575)
50,083
- Stage 3
(14,547)
16,172
Charge for the year (note 14)
5,274
18,214
26,982
Write-offs/disposals
Recovery of loans and advances written off
(47,922)
8,819
50,470
(47,922)
(1,625)
8,819
Limited liability
Balance as at the beginning of the year
614,481
Loss allowances of loans and advances to customers
at FVTOCI
(6,311)
(252)
(6,563)
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
22. Loans and advances to customers (continued)
159,932
(c)
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 1
(12-month
ECL)
2023
- Stage 2
(Lifetime
ECL - not
credit-
- Stage 3
(Lifetime
ECL - credit-
impaired)
impaired)
Total
(i)
1,821
Exchange and other differences
91
(74)
(180)
- Stage 3
(3,693)
(4,681)
8,374
(Release)/charge for the year (note 14)
(1,694)
12,653
29,216
40,175
7,879
Write-offs/disposals
(39,016)
(39,087)
Recovery of loans and advances written off
8,972
8,972
Limited liability
632
76
(378)
330
(71)
612
(7,699)
(2,965)
Balance as at the end of the year
165,866
47,729
(178)
53,210
525
266,805
2022
- Stage 2
(Lifetime
ECL - not
- Stage 3
(Lifetime
- Stage 1
(12-month ECL)
- Stage 2
credit-
impaired)
impaired)
Total
Balance as at the beginning of the year
169,347
32,007
43,169
244,523
Transfer to
- Stage 1
3,039
ECL - credit-
Balance as at the end of the year
612,660
5,177,199
RMB500
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))
100%
(note (vii))
(note (iv))
210
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
22. Loans and advances to customers (continued)
(b) Analysis of loans and advances to customers (continued)
Analysed by ECL
(iv)
- Stage 1
(12-month
credit-
2023
Wang Liang
Wang Xiaoqing
- Stage 2
(Lifetime
ECL - not
Banking
Chen Yisong
Xue Fei
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)
Limited liability
(iv)
(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
(iii)
Loans and advances to customers at FVTOCI
- Stage 3
(Lifetime
ECL)
Stage 1
(12-month
- Stage 2
(Lifetime
ECL - not
- Stage 3
(Lifetime
credit-
ECL - credit-
ECL)
impaired)
impaired)
Total
Loans and advances measured at amortised cost
Less: Loss allowances of loans and advances to
customers at amortised cost
2022
5,217,868
58,004
5,432,112
(159,932)
(44,898)
(50,083)
(254,913)
Net amount of loans and advances to customers at
amortised cost
5,057,936
111,342
7,921
156,240
ECL - credit-
(2,729)
(2,726)
impaired)
impaired)
Total
Loans and advances measured at amortised cost
Less: Loss allowances of loans and advances to
customers at amortised cost
5,686,659
165,105
61,560
5,913,324
(165,866)
(47,729)
(3)
(53,210)
Net amount of loans and advances to customers at
amortised cost
5,520,793
117,376
8,350
5,646,519
Loans and advances to customers at FVTOCI
524,624
555
525,179
Loss allowances of loans and advances to customers
at FVTOCI
(266,805)
159,932
Exchange and other differences
50,083
Listed outside the Chinese mainland
Unlisted
Other investments:
236,106
167,998
12,787
12,215
2,296
2,203
Classified by underlying assets
– Equity investments
- Listed in the Chinese mainland
4,347
257
17
-
Fund investments
1,440
814
- Wealth management products
1,046
1,032
- Long position in precious metal contracts
1,971
1,604
182,416
Classified by listing
(a)
Financial investments at fair value through profit or loss (continued)
(i) Financial investments measured at FVTPL
Financial investments held for trading
44,898
2022
Bonds:
Classified by issuer
- Government bonds
251,189
251,189
182,416
81,781
- Bonds issued by policy banks
20,502
21,871
-
- Bonds issued by commercial banks and other financial institutions
Other debt securities
40,591
35,999
61,202
42,765
128,894
23. Financial investments (continued)
108
4,347
740
-
- Bonds issued by commercial banks and other financial institutions
Other debt securities
3,781
14,039
6,098
6,750
Classified by listing
10,619
20,789
- Bonds issued by policy banks
-
- Listed outside the Chinese mainland
Unlisted
7,483
18,216
2,777
1,872
359
701
Other investments:
Classified by underlying assets
– Equity investments
- Listed in the Chinese mainland
Classified by listing
20,789
Classified by issuer
1,971
― Listed outside the Chinese mainland
- Unlisted
1,604
134
2,743
1,837
Total financial investments held for trading
255,536
184,387
213
10,619
214
Chapter VIII Financial Statements
Annual Report 2023 (H share)
23. Financial investments (continued)
(a)
Financial investments at fair value through profit or loss (continued)
(i) Financial investments measured at FVTPL (continued)
Other financial investments measured at FVTPL
2023
2022
Bonds:
China Merchants Bank
Chapter VIII Financial Statements
2023
China Merchants Bank
2023
2022
Total minimum leases receivable
Within 1 year (inclusive)
Over 1 year but within 2 years (inclusive)
Over 2 years but within 3 years (inclusive)
Over 3 years but within 4 years (inclusive)
15,305
13,323
8,010
11,035
7,573
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:
6,074
6,089
Over 4 years but within 5 years (inclusive)
Over 5 years
3,729
3,860
19,145
Annual Report 2023 (H share)
Subtotal
58,517
57,829
Unearned finance income
4,755
(10,491)
Finance leases receivable
22. Loans and advances to customers (continued)
254,913
Reconciliation of allowance for expected credit loss for loans and advances to customers measured at
(ii)
FVTOCI:
Balance as at the beginning of the year
(Release)/charge for the year (note 14)
Exchange difference
Balance as at the end of the year
2023
2022
(d)
6,563
(3,835)
4,982
1
2,729
6,563
211
212
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
1,581
(9,665)
17,448
48,026
Equity investments designated at FVTOCI
23(d)
899,102
19,649
780,349
13,416
Present value of minimum leases receivable
3,193,920
2,772,689
(a) Financial investments at fair value through profit or loss
Notes
2023
23(c)
2022
(i)
513,266
411,591
Financial assets designated at fair value through profit or loss
(ii)
12,879
11,876
Total
526,145
423,467
Financial investments measured at FVTPL
Debt investments at FVTOCI
Total
526,145
1,749,024
48,164
Less: Impairment allowances
(2,629)
(3,671)
2022
423,467
1,555,457
(661)
(1,308)
- Stage 2 (Lifetime ECL - not credit-impaired)
· Stage 3 (Lifetime ECL - credit-impaired)
Net carrying amount of finance leases receivable
(1,368)
Stage 1 (12-month ECL)
(600)
(1,646)
23(b)
Debt investments at amortised cost
23(a)
Financial investments at fair value through profit or loss
55%
Notes
23. Financial investments
44,493
45,397
(717)
2023
20,331
429
9,855 40,661
4,616
165,340 155,485
82,359 77,743
Group's effective interest
CIGNA & CMB Life
(expense) equivalents amortisation
tax
and Income
income/ and cash
comprehensive
Total
2023
Cash Depreciation
Net
429
50.00%
50.00%
Merchants Union Consumer Finance Company Joint stock limited
Limited (note(ii))
Shenzhen
RMB10,000
50.00%
50.00%
Life insurance
business
Consumer finance
company
Notes:
(i)
RMB2,800
(ii)
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.
In July 2023, MUCFC completed the registration of the change of its Chinese name from “2” to “XOA⠀✰ARGO
公司”.
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
25. Interests in joint ventures (continued)
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:
(i)
Other
comprehensive
income/
(expense)
profit
Assets Liabilities Equity Revenue
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%.
CIGNA & CMB Life:
Shenzhen
(in millions)
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
25. Interests in joint ventures
Share of net assets
Share of profits for the year
Share of other comprehensive income/(expense) for the year
Details of the Group's interests in major joint ventures are as follows:
2023
15,707
2022
14,247
CIGNA & CMB Life Insurance Co., Ltd. (note(i)) Limited liability
1,860
31
Name of joint ventures
Economic nature
Place of
incorporation
and operation
Particulars of
issued and
Group's
effective
Percentage of
ownership held
paid up capital
interest
by the Bank
Principal activity
1,710
(997)
63
vehicles
2,590
-
4,161
(3,055)
2
4,163
(2)
(3,057)
2
12
14
6,002
25,044
29,947
10
31,067
Accumulated depreciation:
1,375
10,953
182
4,018
(2,584)
12
53 II
2
12,335
2
11
4,205
11
23,926
225
226
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
29. Lease contracts
(a)
Right-of-use assets
Cost:
At 1 January 2023
Additions
Decrease
10
Exchange difference
At 1 January 2023
Depreciation (note 10)
Decrease
Exchange difference
At 31 December 2023
Motor
Land
Computer
use rights
Buildings
equipment
and other
Total
6,000
At 31 December 2023
62,155
(1)
12
and other
Total
Cost:
At 1 January 2022
5,985
23,070
Additions
3,656
Decrease
(2,848)
74 €
16
vehicles
29,078
3,667
(12)
(2,861)
Exchange difference
15
48
63
At 31 December 2022
6,000
23,926
10
11
7
(2,585)
Computer
equipment
use rights
1,557
12,399
8
3
13,967
Impairment loss:
At 1 January 2023
At 31 December 2023
59
59
59
59
Net carrying amount:
Buildings
At 31 December 2023
12,645
2
8
17,041
At 1 January 2023
4,566
12,973
5
9
17,553
Motor
Land
4,386
62,735
19,876
21,954
Reclassification and transfers
(33)
113
(113)
(33)
Disposals
(87)
(497)
(70)
(1,653)
(578)
(2,885)
10,147
Exchange difference
77
(16)
686
13
935
At 31 December 2022
14,339
14,791
8,045
13,111
4,344
54,630
175
Impairment loss:
557
1,103
Exchange difference
261
113
82
5,454
17
5,927
At 31 December 2022
30,501
3,787
18,516
11,678
5,027
85,741
155,701
Accumulated depreciation:
At 1 January 2022
12,998
12,924
7,028
9,051
4,465
46,466
Depreciation
1,286
2,174
5,478
At 1 January 2022
20 ---
Charge
80,415
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.
(b)
As at 31 December 2023, the Group had no significant unused property and equipment (31 December 2022: None).
(c)
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).
(d)
The Group's total future minimum lease receivables under non-cancellable operating leases are as follows:
2023
2022
Within 1 year (inclusive)
1 year to 2 years (inclusive)
1,444
2 year to 3 years (inclusive)
11,306
8,993
9,601
7,906
8,134
3 year to 4 years (inclusive).
4 year to 5 years (inclusive)
Over 5 years
Total
6,808
7,087
6,363
6,151
10,711
51,778
3,897
3,936
Disposals
Exchange difference
At 31 December 2022
20
Net carrying amount:
At 31 December 2022
At 1 January 2022
(a)
498
518
778
778
(194)
(194)
50
50
1,132
1,152
16,142
3,787
3,725
3,633
71,498
1,134
99,919
15,858
3,502
29,947
Accumulated depreciation:
At 1 January 2022
1,190
(13)
(13)
14
98
112
At 31 December 2022
10,393
1,181
11,574
Accumulated amortisation:
At 1 January 2022
6,550
347
512
Charge for the year (note 10)
1,021
40
1,061
Disposals
(10)
(10)
Exchange difference
11
48
59
7,572
7,062
600
347
1,083
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
11,128
550
2,821
581
3,402
Software
and other
Core deposits
Total
Cost/appraisal value:
At 1 January 2022
Additions
Disposals
Exchange difference
10,045
2,709
8,172
Net carrying amount:
At 31 December 2022
355
355
45
(45)
1
1
10,578
(45)
10,533
(579)
9,999
(579)
(45)
10,177
9,954
(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.
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.
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 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.
Impairment test for goodwill
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
Notes:
10,177
2023
the year
At 1 January 2022
2,821
581
3,402
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
As at
Addition
Decrease
As at
31 December
during
during
31 December
2022
the year
(46)
(9,322)
-
930
59
59
At 31 December 2022
At 1 January 2022
4,566
12,973
5
9
17,553
4,736
13,656
4
559
7
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)
1 year to 2 years (inclusive)
2 years to 5 years (inclusive)
18,403
Over 5 years
12,335
5
9,414
3
9
10,616
Depreciation (note 10)
181
3,965
3
2
4,151
Decrease
Exchange difference
2
At 31 December 2022
At 1 January 2022
At 31 December 2022
Net carrying amount:
(2,458)
(1)
(9)
(2,468)
4
32
36
1,375
10,953
Impairment loss:
Total
Interest expense on lease liabilities is set out in note 7.
(c)
Cost/appraisal value:
At 1 January 2023
Additions
Disposals
Exchange difference
At 31 December 2023
10,393
253
1,181
11,574
253
(73)
(73)
Total
4
26
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
220
Core deposits
Software
and other
30. Intangible assets
(d)
Short-term leases and leases of low-value assets
2023
2022
454
503
578
591
2,804
3,091
3,085
3,038
4,672
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)
(46)
(643)
(7,912)
(100)
522 1,099
273
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
4,445
(138)
4,307
20,368
522 1,196
1,004
(35)
1330
969
130
297
Summarised financial information of the associates that are not individually material to the Group is as follows:
Other
comprehensive
Net loss income/(expense)
Total
comprehensive
expense
2023
Other associates
(5,308)
5,063
Group's effective interest
2,376
46
Principal activity
(in millions)
Bank of Taizhou Co., Ltd. (Note)
Joint stock limited
company
Taizhou
RMB 1,800
24.8559%
24.8559%
Commercial Bank
Note:
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.
Summarised financial information of the associate which is individually material to the Group is as follows:
1,098
Other
Equity Revenue profit
Total Cash Depreciation
Net comprehensive comprehensive and cash
and Income
income
income equivalents amortisation
tax
2023
Bank of Taizhou Co.,
Ltd.
Group's effective interest
2022
402,413 369,702 32,711 12,552
98,881 91,893 6,988 3,120
4,639
184
4,823
9,561
1,052
Assets Liabilities
(436)
781
125
(4,527)
(311)
13
(79)
34
153
3,097
3,301
2,033
1,763
140
132
(204)
33
(159)
(57)
105
1,937
2,033
1,160
1,268
1,268
1,372
At 31 December
At 1 January
As at 31 December 2023, no impairment allowance was considered necessary for investment properties by the
Group (31 December 2022: Nil).
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).
The Group's total future minimum leases receivable under non-cancellable operating leases are as follows:
25
3,135
3,301
2022
2022
Other associates
(11,527)
(737)
Group's effective interest
(189)
(123)
(12,264)
(312)
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
27. Investment properties
Cost:
At 1 January
Transfers (out)/in
Disposals
Exchange difference
At 31 December
Accumulated depreciation:
At 1 January
Depreciation
Transfers (out)/in
Disposals
Exchange difference
At 31 December
Net carrying amount:
2023
Percentage of
ownership held
by the Bank
2023
interest
effective
and cash
and Income
Assets Liabilities
Equity Revenue profit
income equivalents amortisation
tax
2023
MUCFC
Group's effective interest
176,421
88,211
156,054 20,367 19,602
78,027
3,600
Net comprehensive
3,600
44
533
10,184
9,801
1,800
1,800
2,085
22
267
2022
MUCFC
164,346
4,170
147,279
Cash Depreciation
MUCFC:
149
(944)
167
31
198
1,295
75
(472)
2022
CIGNA & CMB Life
Group's effective interest
130,758
65,116
Total
121,145
60,573
730
(1,996)
(1,266)
1,071
336
(997)
(661)
536
བs
147 (475)
74 (238)
(ii)
9,613 31,841
4,543 15,921
17,067
17,501
3,329
expense
(1,197)
(107)
(2,874)
(291)
221
222
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
26. Interests in associates
Share of net assets
comprehensive
Share of profits for the year
Details of the Group's interest in major associate are as follows:
2023
10,883
2022
9,597
616
815
171
(158)
Economic nature
Place of
incorporation
and operation
Particulars of
issued and
Group's
Share of other comprehensive income/(expense) for the year
Total
(291)
Group's effective interest
3,329
5,425
47
500
Group's effective interest
82,174
73,640
8,534
8,751
1,665
1,665
2,713
24
250
Summarised financial information of the joint ventures that are not individually material to the Group is as follows:
Other
comprehensive
Net loss
expense
2023
Other joint ventures
(1,197)
Group's effective interest
(107)
2022
Other joint ventures
(2,874)
paid up capital
492
2022
227
259
At 31 December 2023
15,984
14,582
8,946
16,815
4,270
60,597
Impairment loss:
At 1 January 2023
Charge
20
4
1,132
183
Disposals
(175)
183
(175)
Exchange difference
At 31 December 2023
20
19
1,159
19
1,179
Net carrying amount:
1,152
At 31 December 2023
183
22
14,791
8,045
13,111
4,344
54,630
Depreciation
1,408
2,064
934
5,921
541
10,868
7
Reclassification and transfers
24
(24)
204
Disposals
(10)
(2,319)
(40)
(2,400)
(595)
(5,364)
Exchange difference
43
204
17,022
3,980
2,756
At 1 January 2022
28,876
3,502
16,860
10,925
61,327
5,909
127,399
Additions
24
1,910
1,898
Cost:
649
357
31,710
Reclassification and transfers
1,490
(1,625)
162
122
(162)
(13)
Disposals
(150)
(517)
26,872
Total
Other
equipment
3,821
86,829
940
115,348
At 1 January 2023
16,142
3,787
3,725
3,633
71,498
1,134
99,919
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
28. Property and equipment (continued)
Aircraft,
vessels and
Land and
Construction
Computer
Leasehold
professional
buildings
in progress
equipment
improvements
14,339
Within 1 year (inclusive)
At 1 January 2023
177,124
2,036
2,036
2,396
2,396
2,036
2,396
4,432
Fair Value
as at
31 December
Level 1
Level 2
Total
Level 3
Located in the Chinese mainland
3,140
3,140
Located overseas
2,394
2,394
Total
3,140
2,394
5,534
In estimating the fair value of the properties, the highest and best use of the properties is their current use.
223
2022
224
Located overseas
2023
289
1 year to 2 years (inclusive)
196
240
2 year to 3 years (inclusive)
165
184
3 year to 4 years (inclusive)
136
153
4 year to 5 years (inclusive)
79
Located in the Chinese mainland
102
225
275
Total
1,028
1,243
The fair value hierarchy of the investment properties of the Group are listed as follows:
Fair Value
as at
31 December
Level 1
Level 2
Level 3
Over 5 years
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
(2,686)
28
380
(8)
159
Disposals
(15)
(2,374)
(82)
(6,983)
(625)
(10,079)
2,445
Exchange difference
23
16
1,356
5
1,455
At 31 December 2023
33,026
3,980
17,338
12,767
104,803
5,210
55
Reclassification and transfers
29,888
360
28. Property and equipment
Aircraft,
vessels and
Land and
Construction
Computer Leasehold
professional
buildings
in progress
equipment improvements equipment
Other
Total
Cost:
At 1 January 2023
30,501
3,787
18,516
11,678
85,741
5,478
155,701
Additions
40
2,879
1,145
775
24,689
Accumulated depreciation:
22
At 31 December 2022
2022
661
10,779
9,884
781
11,440
10,665
529,928
464,509
103,250
32,286
633,178
496,795
2022
2023
Total
- Other financial institutions
- Banks
Outside the Chinese mainland
Other financial institutions
In the Chinese mainland
- Banks
(a) Analysed by nature of counterparties
507,460
1,056
645,674
644,618
Annual Report 2023 (H share)
2022
136,235
157,360
2023
Total
- Other financial institutions
- Banks
Outside the Chinese mainland
- Other financial institutions
- Banks
In the Chinese mainland
(a) Analysed by nature of counterparties
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.
247,299
Note:
Total
207,027
2022
206,015
1,012
2023
246,085
1,214
Principal (a)
Interest payable
35. Placements from banks and other financial institutions
Chapter VIII Financial Statements
China Merchants Bank
155,595
2022
644,618
Total
Other
50
50
Post-employment benefits: defined benefit plan (note 39(b))
196
7,569
7,436
Prepayment for leasehold improvement and other miscellaneous items
Premium receivables
329
Receivable from reinsurers
465
563
Guarantee deposits
456
417
Repossessed assets (a)
209
203
Prepaid lease payments
4,154
4,526
Total
2023
507,460
918
508,378
21,573
21,889
55,978
Interest payable
Principal (a)
34. Deposits from banks and other financial institutions
Note: In 2023, the Group disposed of repossessed assets with a total carrying value of RMB56 million (2022: RMB44 million).
456
417
(156)
(139)
612
556
6
5
606
551
2022
2023
Net repossessed assets
Less: Impairment allowances
Other repossessed assets
Total
Land and buildings
(a) Repossessed assets
53,884
5,274
135,636
599
69
107,024
2022
2023
134,863
215
(b) Analysed by underlying assets
- Other financial institutions
Total
- Banks
Outside the Chinese mainland
- Other financial institutions
- Banks
In the Chinese mainland
(a) Analysed by nature of counterparties
Total
Interest payable
Principal (a)(b)
37. Amounts sold under repurchase agreements
Chapter VIII Financial Statements
China Merchants Bank
234
233
30,897
135,078
758
107,093
117,668
73,335
84,438
- Government bonds
95,999
117,032
Debt securities
2022
2023
107,024
134,863
771
6,879
2,801
10,316
3,572
17,195
6
9,302
103,446
108,366
2022
103,452
2023
1,765
574
27,830
Total
Short position on bonds
Financial liabilities related to precious metal
(a) Financial liabilities held for trading
49,144
43,958
30,897
27,830
Financial liabilities designated at fair value through profit or loss (b)
Total
18,247
16,128
Financial liabilities held for trading (a)
2023
36. Financial liabilities at fair value through profit or loss
206,015
246,085
209
213
69,571
88,512
69,780
88,725
Total
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.
2023
15,748
380
16,128
- Other
7,709
5,179
383
212
- Debt securities issued
Certificates of deposit issued
8,850
5,965
22,047
21,865
22,047
21,865
Outside the Chinese mainland
In the Chinese mainland
- Other
2022
2023
Financial liabilities designated at fair value through profit or loss
(b)
18,247
613
2022
17,634
5,274
Continuing involvement assets
Interest receivable
15,387
(894)
(476)
(1,904)
Financial instruments at FVTPL
(1,371)
(5,487)
(2,496)
(9,985)
Financial assets at FVTOCI
qualifying amounts
Deferred tax liabilities before offsetting
97,400
393,772
98,301
397,036
Total
18,146
75,077
20,538
84,873
Salaries and welfare payable and other
(224)
3,156
Right-of-use assets
(3,133)
90,557
Deferred tax assets after offsetting qualifying amounts
(6,552)
(7,744)
97,400
98,301
Deferred tax assets before offsetting qualifying amounts
Offsetting amounts
2022
2023
(8,062)
(38,691)
(9,351)
(43,682)
Total
(3,307)
(19,669)
(3,246)
(19,476)
Other
(3,160)
(12,641)
(12,317)
90,848
12,624
12,543
difference
temporary
(taxable)
Deductible/
2023
Deferred tax assets before offsetting
(a) Deferred tax assets/(liabilities) and related temporary differences are
attributable to the following items:
89,338
(1,510)
(1,607)
88,950
90,848
2022
2023
90,557
Net amount
Deferred tax liabilities
Deferred tax assets
32. Deferred tax assets and deferred tax liabilities
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
230
2022
3,135
Deductible/
tax
Lease liabilities
461
1,839
113
451
Financial instruments at FVTPL
359
2,170
264
1,605
Financial assets at FVTOCI
75,278
302,062
74,251
297,564
customers and other assets at amortised cost
Impairment allowances on loans and advances to
qualifying amounts
tax
Deferred
(taxable)
temporary
difference
Deferred
Deferred tax liabilities before offsetting qualifying amounts
Offsetting amounts
(9,351)
(8,062)
11,863
(4)
(2,764)
1,160
Total
Other
at FVTPL
at FVTOCI
4,061
71,191
amortised cost
Financial
instruments
Note:
At 31 December 2022
Exchange difference
Recognised in other comprehensive income
Recognised in profit or loss
At 1 January 2022
Financial
assets
other assets at
customers and
on loans and
advances to
80,286
Impairment
allowances
243
8,457
13,842
Amounts pending for settlement
2022
2023
33. Other assets
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
232
231
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.
89,338
14,835
237
38
(2)
14
(1,012)
26
75,278
557
(21)
578
2,993
88,950
17,294
(363)
assets
Financial
other assets at
amortised cost
on loans and
advances to
customers and
Impairment
allowances
At 31 December 2023
Exchange difference
Recognised in other comprehensive income
Recognised in profit or loss
At 1 January 2023
Movements of deferred tax
(b)
32. Deferred tax assets and deferred tax liabilities (continued)
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
(1,510)
(1,607)
Deferred tax liabilities after offsetting qualifying amounts
6,552
7,744
at FVTOCI
Financial
instruments
at FVTPL
Other
(2,232)
74,251
13
(8)
3
18
(484)
9
(493)
-
- Bonds issued by policy banks
2,450
14,835
83
89,338
237
(730)
(1,012)
(1,045)
75,278
ཀིཾ ཝུཏྟཱ ཝཱ''ནྟི
Total
(592)
17,266
Annual Report 2023 (H share)
- Bonds issued by commercial banks and other financial institutions
1,971
3,032
education expenses
Labour union and employee
157
(2,318)
2,309
166
Housing reserve
12
(82)
85
9
- Maternity insurance
6
(34)
34
6
- Injury insurance
353
(3,354)
(1,361)
3,192
3,642
18,065
765
79
23
1,996
591
Total
Unemployment insurance
Basic retirement insurance
Supplementary pension
Total
Basic retirement insurance
Supplementary pension
Unemployment insurance
(ii)
39. Staff welfare scheme (continued)
(a) Salaries and welfare payable (continued)
Post-employment benefits-defined contribution plans
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
238
237
23,075
(53,724)
58,583
151
Total
515
- Medical insurance
371
for the year
Charge
2022
28,314
(33)
(56,099)
61,371
23,075
Total
4,204
(1,475)
2,037
3,642
education expenses
Labour union and employee
141
(2,618)
2,602
157
Housing reserve
11
Payment/
Beginning
arising from
Charge
(3,470)
3,311
530
Social insurance
17
15,330
2,310
19
18,888
(44,263)
5,540
48,682
14,318
Welfare expense
Salaries and bonus
balance
in the year
for the year
combination
balance
Ending
transfers
151
(90)
Beginning
balance
2023
(HKD)
rights
exercise price
rights
(in million)
(HKD)
exercise price
Number
of share
appreciation
average
Weighted
Number
of share
appreciation
Weighted
average
2022
2023
The number and weighted average exercise prices of share appreciation rights are as follows:
10 years
10 years
3 years after the grant date
3 years after the grant date
rights
Exercise conditions
Contract period of
share appreciation
Number of
unexercised share
appreciation rights
at the end of 2023
(in millions)
0.210
0.240
Share appreciation rights granted on 24 Aug 2016 (Phase IX)
Share appreciation rights granted on 25 Aug 2017 (Phase X)
(in million)
(2)
Outstanding as at the beginning of the year
0.61
239
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.
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).
0.55
15.25
0.45
15.11
Exercisable at the end of the year
0.61
15.91
0.45
15.11
Outstanding at the end of the year
(1.15)
13.65
Forfeited during the year
(0.16)
12.81
Exercised during the year
1.76
16.21
15.91
All share appreciation rights shall be settled in cash. The terms and conditions of the Scheme are listed below:
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.
(1)
balance
in the year
for the year
balance
Ending
Payment/
transfers
Charge
Beginning
2022
361
(5,944)
21
(81)
179
(2,426)
(3,437)
3,465
1111
Ending
balance
transfers
in the year
Payment/
157
2,821
(2,827)
151
Other long-term employee benefits
(iii)
Salaries and welfare payable (continued)
(a)
39. Staff welfare scheme (continued)
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
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.
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%).
Charge
for the year
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.
(5,974)
5,110
23
(67)
68
22
1,629
591
(3,080)
2,221
1,450
765
89
(2,312)
- Maternity insurance
235
322,860
350,730
42,490
27,788
44,732
47,694
29,366
23,843
6,888
10,792
199,384
240,613
2022
2023
Total
12
Deposit for letters of guarantee
Guarantee for issuing letters of credit
Guarantee for loans
Guarantee for acceptance bills
236
(b) The deposits taken from customers as collateral or for the purpose of
guarantees are as follows:
China Merchants Bank
Chapter VIII Financial Statements
(56,099)
61,371
23,075
Short-term employee benefits (i)
balance
subsidiaries
in the year
for the year
balance
Ending
disposal of
transfers
arising from
Payment/
Charge/
(Decrease)
Beginning
for the year
Decrease
2023
(a) Salaries and welfare payable
39. Staff welfare scheme
Annual Report 2023 (H share)
(33)
7,535,742
1,120,825
Corporate customers
(a) Analysed by nature of counterparties
Total
Interest payable
Principal (a)
38. Deposits From Customers
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
107,024
134,863
Total
11,025
17,831
Discounted bills
3,858
8,736
- Other debt securities
-
3,476
6,592
-Demand deposits
8,155,438
- Time deposits
-
1,665,304
1,983,364
1,829,612
3,104,189
3,494,916
1,668,882
2,015,837
2,762,671
2,644,685
4,431,553
4,660,522
2022
2023
54,837
7,590,579
8,240,498
7,535,742
8,155,438
85,060
2022
2023
- Time deposits
Total
- Demand deposits
Retail customers
28,314
Other
contribution plans (ii)
Salaries and bonus
balance
subsidiaries
in the year
for the year
balance
Ending
disposal of
arising from
Payment/
transfers
Charge
Beginning
for the year
Decrease
2023
Short-term employee benefits
(i)
(a) Salaries and welfare payable (continued)
39. Staff welfare scheme (continued)
Chapter VIII Financial Statements
Annual Report 2023 (H share)
18,888
China Merchants Bank
52,040
(33)
6
(41)
41
6
- Injury insurance
Post-employment benefits - defined
(1,687)
1,679
353
362
(1,818)
1,809
371
15
(2,885)
2,883
17
Medical insurance
Social insurance
Welfare expense
23,592
(47,303)
23,866
345
26
Charge/
(Decrease)
arising from
Beginning
for the year
Charge
2022
28,679
(33)
4
(4)
(62,047)
66,893
23,866
Total
(18)
26
- cash settled share-based transactions
Other long-term employee benefits (iii)
(5,944)
5,540
765
(59,698)
Payment/
transfers
361
balance
Ending
151
19,761
765
(5,974)
5,110
1,629
23,075
(53,724)
58,583
67
18,065
combination
151
for the year
in the year
balance
(41)
63,652
Short-term employee benefits (i)
Post-employment benefits - defined
contribution plans (ii)
Other long-term employee benefits (iii)
- cash settled share-based transactions
Total
49. Hedging reserve
11,815
13,656
Total
45
(233)
(31)
Share of other comprehensive expense of equity-accounted investees
Other
82
65,435
2,606
3,009
65,432
10,596
Debt instruments measured at FVTOCI: investment revaluation reserve
Fair value gain on equity instruments designated at FVTOCI
Remeasurement of defined benefit scheme
2022
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).
2023
78
9,319
94,985
Annual Report 2023 (H share)
Appropriation for the year
At 31 December
(2,088)
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
13,752
82,137
2022
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
China Merchants Bank
(3)
4,558
65,435
4,558
120,446
150,446
- Equity attributed to other equity instrument holders of the Bank
Including: Net profit
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
Share appreciation rights remaining life (year)
Expected dividends yield
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.
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.
Notes: (continued)
Perpetual Bonds (continued)
(b)
52. Profit appropriations
5,237
67,523
Total comprehensive income
Distributions in current year
(4,558)
2022
2023
48. Investment revaluation reserve
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
6,521
· Equity attributed to non-controlling holders of ordinary shares
8,735
9,359
Equity attributed to non-controlling interests
Cumulative undistributed dividends
(5,237)
5,237
(a) Dividends approved/declared by shareholders
3.58
Ordinary share dividends in 2021, approved and declared:
RMB1.522 per share
9.49
20.03
Expected volatility
Share appreciation rights remaining life (year)
Expected dividends yield
Risk-free interest rate
35.40%
35.40%
25.80
2.58
4.45%
4.45%
1.43%
1.43%
2022
Phase VIII
Phase IX
Phase X
3.58
25.80
6.34
12.74
46. Other equity instruments (continued)
2.50
240
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 (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 life of the rights is used as an input to the model.
2023
Phase IX
Phase X
Fair value at measurement date (in RMB Yuan)
Share price (in HKD)
Exercise price (in HKD)
Fair value at measurement date (in RMB Yuan)
24.94
25.27
17.75
13,752
2022
2023
38,385
43,832
2022
2023
132,471
17,183
9,010
141,481
115,288
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
12,848
Ordinary share dividends in 2022, approved and declared:
RMB1.738 per share
9,010
49,734
Share price (in HKD)
43.30
43.30
43.30
Exercise price (in HKD)
12.81
11.38
21.92
Expected volatility
48.34%
48.34%
48.34%
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
Annual Report 2023 (H share)
(c) Relative Information Attributed to Equity Instrument Holders
China Merchants Bank
19,994
Subordinated bonds issued
2022
2023
Notes
43. Debt securities issued
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
566
Debt securities issued
7,569
863
1,341
15,200
20,217
17,404
Stage 3 (Lifetime ECL - credit-impaired)
Stage 2 (Lifetime ECL - not credit-impaired)
Stage 1 (12-month ECL)
Expected credit loss provisions
2022
12,082
(b)
119,193
120,971
Nominal
value
interest rate
Annual
Date of
issuance
Term to
maturity
Debt type
Discount or
Issue
As at the end of the reporting period, subordinated bonds issued by the Bank were as follows:
(a) Subordinated bonds issued
Other debt securities issued are notes issued by overseas subsidiaries of the Bank.
Note:
223,821
176,578
Total
1,533
1,814
15,604
34,128
Certificates of deposit and other debt securities issued (note)
Interest payable
65,719
21,443
Negotiable interbank certificates of deposit issued
2023
The expected credit loss for loan commitments and financial guarantee contracts by stages are as follows:
22,491
19,662
13,392
7,301
2022
2023
41. Contract liabilities
Total
Other
Value added tax
Corporate income tax
40. Tax payable
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.
5.0
4.5
4.6
4.1
3.3
3.1
%
%
2022
2023
Pension increase rate for the defined benefit pension plan
Long-term average rate of salary increase for the plan
4,035
(%)
4,141
1,925
Total
2,274
2,258
Other
20,217
17,404
Expected credit loss on provisions
2022
2023
42. Provisions
6,679
5,486
Total
1,360
1,354
Other deferred fee and commission income
5,319
4,132
Credit card points
2022
2023
19,458
13,597
2,261
- Defined benefit pension scheme
Fixed rate bond
Total
15 Nov 2018 4.65
RMB10,000
2.90
24 Aug 2021
36 months
Fixed rate bond
19,997
2
19,995
RMB20,000
3.18
9,998
3 Jun 2021
Fixed rate bond
9,999
1
9,998
RMB10,000
3.40
11 Mar 2021
36 months
Fixed rate bond
(10,000)
36 months
9,998
Medium term note
Medium term note
(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
USD300
1.25
1 Sep 2021
60 months
24 months
36 months
36 months
Fixed rate bond
Medium term note
1
9,999
RMB10,000
6 Nov 2020 3.48
Annual
interest rate
(%)
issuance
Date of
Term to
maturity
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
(20,000)
6
(RMB in million)
(RMB in million) (RMB in million)
(RMB in million)
balance
the year
amortisation
the year
Ending
Repayment
during
premium
during
Beginning
balance
(in million) (RMB in million)
RMB20,000
19,994
19,994
Nominal
value
120 months
Beginning
balance
Issue
during
(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
(in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million)
- Defined benefit scheme
Discount rate
The principal actuarial assumptions adopted in the valuation are as follows:
(in thousands)
Phase IX
Exercised/
Accumulated
2023
Note:
Tian Huiyu
Wang Liang
Total
Total
Wang Liang
The number of share appreciation rights granted:
Phase X
(in thousands)
(4)
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.
1.43%
37,454
Risk-free interest rate
1.43%
1.43%
2.93%
2.93%
2.93%
4.58
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.
Total
Forfeited
(in thousands)
210
203
607
240
210
157
157
1,230
(in thousands)
Forfeited
Total
(in thousands)
Phase X
(in thousands)
Phase IX
(in thousands)
Phase VIII
(in thousands)
Accumulated
Exercised/
2022
360
450
240
360
450
240
210
210
(in thousands)
39,862
113,195
125,938
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.
rate
Issue price
No.
Amount
Due date
conditions version
(millions of
(RMB in
shares)
million)
Domestic Preference Shares (note (i))
Total
22 Dec 2017 Equity instruments
3.62% RMB100/Share
275
27,468
Perpetual existence
Note (ii)
None
275
27,468
The changes of Preference Shares issued were as follows:
1 January 2023
No.
Increase/decrease
Conversion Con-
240
Dividend
Preference Shares
45. Share capital
By type of shares:
- A Shares
- H Shares
Total
2023 and 2022
No. of shares
(in million)
20,629
4,591
25,220
All H Shares are ordinary shares and rank pari passu with the A Shares. There is no restriction on these shares.
At 31 December 2023 and 2022
Capital
No. of shares
(in million)
Amount
25,220
25,220
245
246
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
46. Other equity instruments
(a)
Issuance Accounting
date
classification
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).
(49)
(33)
Fair value of the plan assets at 31 December
Exchange difference
Actual benefits paid
(47)
Expected return on plan assets
5
9
Interest income
349
285
Fair value of the plan assets at 1 January
2022
2023
The movements in the fair value of the plan assets during the year are as follows:
235
217
Actual obligation at 31 December
22
4
Exchange difference
Actuarial gains or losses due to demographic assumption changes
6
(31)
27
285
As at 31 December 2023, deposit with the Bank included in the amount of the plan assets was RMB61 million (2022:
RMB58 million).
100.0
53.7
17.5
28.8
100.0
19.5
26.2
54.3
7111
2022
Amount
Amount
2023
Total
Cash
Equities
Bonds
The major categories of the plan assets are as follows:
Post-employment benefits - defined benefit plan (continued)
(b)
39. Staff welfare scheme (continued)
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
242
241
267
45
Actuarial gains or losses due to financial assumption changes
Actuarial gains or losses due to liability experience
2023
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:
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.
50
(235)
285
2022
50
(217)
267
2023
Net asset recognised in the consolidated statement of financial position
Present value of the funded defined benefit obligation
Fair value of the plan assets
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
(b)
39. Staff welfare scheme (continued)
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
2022
(4)
Current service cost
(9)
(49)
(33)
Actual benefits paid
4
8
Chapter VIII Financial Statements
Interest cost
9
8
Current service cost
284
235
Present value of obligation at 1 January
2022
2023
The movements in the defined benefit obligation during the year are as follows:
The actual gain on the plan assets for the year ended 31 December 2023 was RMB9 million (2022: loss of RMB42
million).
(8)
(7)
Net expense for the year included in retirement benefit costs
1
1
Net interest income
(8)
2,847
11 May 2022
2.65
(697)
(1)
532
729
(357)
700
(20)
708
(9)
353
30
(59)
(19)
709
142
156
2,494
348
355
3,990
Total
45,847
2,122
(583)
31
(1,453)
350
USD50
RMB4,000
357
4,000
(10)
-E2E26E2O
31
(624)
(5)
(344)
(300)
9
(323)
11
709
21
(443)
499
10
426
51
(1,057)
71
18,378
15
655
(12,895)
(in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million) (RMB in million)
Fixed rate bond
Total
36 months 2 June 2021
1.38
USD600
4,166
4,166
19
19
69
69
4,254
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
Total
Note:
2023
2022
20,845
31,534
(%)
RMB350
balance
Ending
52,000
Note:
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)
Debt securities issued (continued)
As at the end of the reporting period, debt securities issued by CMBIC's subsidiary was as follows:
Debt type
Term to
maturity
Date of
Annual
issuance
interest rate
Nominal
value
Beginning
balance
Issue
during
the year
Discount or
Repayment
premium Exchange
amortisation difference
during
the year
3.35
SOFR+1.10
2.90
27 Nov 2023
30 Nov 2023
5 Dec 2023
2,500
698
16 Dec 2022
2.90
EUR57
421
17 Feb 2023
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
2 Mar 2023
SOFR+0.75
USD200
1,382
USD100
15 Mar 2023
SOFR+1.40
USD45
13 Jun 2022
SOFR+0.95
USD120
837
20
(857)
12 months
14 Sep 2022
1.95
EUR80
592
6 months
12 months
12 months
60 months
12 months
24 months
12 months
20 Oct 2022
SOFR+0.75
USD50
349
25 Nov 2022
3.21
RMB300
300
14 Dec 2022
16 Dec 2022
SOFR+0.83
314
48,950
SOFR+0.75
552
USD50
364
36 months
23 Aug 2023
SOFR+1.00
USD300
2,188
24 months
25 Aug 2023
SOFR+0.95
USD100
729
6 months
12 months
36 months
36 months
36 months
36 months
27 Oct 2023 SOFR+0.70
USD20
146
27 Oct 2023
SOFR+0.75
USD22
161
16 Nov 2023
2.80
RMB2,500
SOFR+1.30
USD80
18 Aug 2023
USD100
16 May 2023 4.40
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
31 May 2023
SOFR+1.00
USD75
533
13 Jun 2023
SOFR+1.05
USD103
737
27 Jun 2023
SOFR+0.70
USD50
361
10 Jul 2023
3.05
RMB700
700
16 Aug 2023
SOFR+0.95
729
31 December 2023
45,500
5,274
6,382
106
11
6,265
USD900
3.00
3 Jul 2019
60 months
500
500
120 months
RMB500
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
Ending
during
Exchange
4.00
3 Jul 2019
3.63
USD100
USD400
2.75
12 Aug 2020
120 months
5,670
94
5
5,571
USD800
1.88
12 Aug 2020
60 months
1,995
1
1,994
RMB2,000
4.25
14 Jul 2020
120 months
Fixed rate bond
Fixed rate bond
Fixed rate bond
706
11
694
premium
amortisation difference
Repayment
Discount or
Issue
during
the year
(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
9,998
9,997
RMB10,000
2.40
1 Sep 2022
36 months
Fixed rate bond
4,999
4,999
RMB5,000
2,846
2,771
Total
7,850
Beginning
balance
Nominal
value
interest rate
issuance
Annual
Date of
Term to
maturity
Debt type
As at the end of the reporting period, debt securities issued by CMBFL and its subsidiary were as follows:
(b) Debt securities issued (continued)
43. Debt securities issued (continued)
Annual Report 2023 (H share)
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
76,827
3
47
2,821
14
222
EUR30
0.50
22 Dec 2021
24 months
789
47
1
741
EUR100
0.50
16 Sep 2021
36 months
Fixed rate bond
Fixed rate bond
Floating rate bond
Floating rate bond
2,120
35
4
2,081
USD300
1.75
16 Sep 2021
60 months
(236)
4,255
12 months
SOFR+0.80
2,902
665
827
7
39
(5)
523
USD75
SOFR+1.00
6 May 2022
12 months
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
(311)
(3)
314
USD45
SOFR+0.85
6 May 2022
12 months
(792)
(10)
802
USD115
2 Mar 2022
5,274
71
4,179
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
2,834
5
120 months
2.88
USD600
1.25
16 Sep 2021
36 months
Fixed rate bond
Fixed rate bond
141
3
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
2,765
USD400
4 Feb 2021
12 months
(518)
Amount
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.
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.
(iii)
(ii)
(i)
Notes:
122,978
1,230
30,000
300
92,978
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.
930
300
30,000
300
1 Dec 2023
42,989
430
42,989
430
7 Dec 2021
49,989
500
49,989
30,000
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.
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.
247
(millions of
(RMB in
Issuance date
shares)
million)
No.
(millions of
shares)
Amount
(RMB in
million)
No.
(millions of
shares)
Amount
(RMB in
million)
Domestic Preference Shares (note (i))
Total
22 Dec 2017
275
27,468
275
27,468
275
27,468
275
27,468
Notes:
(i)
(ii)
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)
248
500
Amount
9 Jul 2020
million)
None
49,989 Perpetual existence
500
3.95% RMB100/Unit
3.69% RMB100/Unit
Equity instruments
Equity instruments
Domestic Perpetual Bonds (note (ii)) 7 Dec 2021
Domestic Perpetual Bonds (note (iii)) 1 Dec 2023
Total
Equity instruments
9 Jul 2020
Domestic Perpetual Bonds (note (i))
conditions Conversion
Amount Due date
(millions of units) (RMB in million)
No.
None
Issue price
Interest
rate
Accounting
classification
Issuance
date
(b) Perpetual Bonds
46. Other equity instruments (continued)
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
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.
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.
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.
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.
Conversion
430
42,989 Perpetual existence
None
units)
(RMB in
Amount
31 December 2023
No.
(millions of
(RMB in
million)
units)
million)
units)
(millions of
(RMB in
(millions of
Issuance
date
(2)
No.
Amount
No.
Increase
1 January 2023
The changes of Perpetual Bonds issued were as follows:
122,978
1,230
None
None
30,000 Perpetual existence
300
3.41% RMB100/Unit
None
Domestic Perpetual Bonds (note (i))
Domestic Perpetual Bonds (note (ii))
Domestic Perpetual Bonds (note (iii))
Total
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.
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.
(112,584)
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.
567,198
599,019
50,460
96,122
275,051
171,542
93,704
105,953
81,928
84,593
66,055
140,809
2022
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
Annual Report 2023 (H share)
Chapter VIII Financial Statements
Negotiable Certificates
China Merchants Bank
Debt
of deposit
267,671
13,013
22,719
26
1,533
148,674
15,987
65,719
At 1 January 2023
Total
liabilities
liabilities
payable
Lease
financial
Dividend
Other
Interest
payable
on bonds
(Note)
(Note)
of deposit
issued
issued
certificates
securities
interbank
1,283,400
252
251
Profit appropriations
(7,196)
(599)
(6,597)
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
76,210
236
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
appropriation
Appropriation to statutory surplus reserve
12,848 15,289 (77,206)
12,848
(12,848)
5,447
(43,622)
380 886,898
43,832
94,985 121,230 391,579
13,144
92,978 76,082
27,468
25,220
At 31 December 2022
30
(30)
equity instruments designated at FVTOCI
Transfers within equity upon disposal of
Cash changes:
(3,562)
Distribution to perpetual bonds
(1,675)
(1,675)
Dividends to preference shares
43,832
(43,832)
Proposed dividends for the year 2022
(38,385)
(38,385)
Dividends paid for the year 2021
15,289 (15,289)
Appropriation to general reserve
(3,562)
Proceeds from the issue
68,608
66,504
Exchange difference
(152)
1,399
40
1,287
At 31 December 2023
21,443
34,340
124,372
1,814
26
32,616
12,675
227,286
Negotiable
Certificates
Debt
interbank
of deposit
securities
Interest
Other
certificates
issued
177,616
(42)
(236)
191
3
(48,267) (51,146)
(7,210)
(5,053)
(224,260)
Interest/dividend paid
(2,086)
(5,396)
(48,860)
(56,342)
Non-cash changes:
Additions of lease liabilities
4,235
payable
4,235
5,677
480
6,157
Dividend declared
48,860
48,860
Discount or premium amortisation
1,786
265
53
2,104
Fair value adjustments
Accrued interest
Repayment
Dividend
Lease
Interest/dividend paid
(5,714)
(6,686)
(44,103)
(56,503)
Non-cash changes:
Additions of lease liabilities
3,623
3,623
Accrued interest
6,115
510
6,625
Dividend declared
44,103
44,103
Discount or premium amortisation
3,479
31
37
3,547
Fair value adjustments
(26)
17,303
25,201
(366,126)
(4,932)
(14,959)
(16,504) (78,735)
of deposit
(Note)
(Note)
on bonds
payable
liabilities
liabilities
Total
At 1 January 2022
240,284
11,092
201,142
financial
2,104
26,650
13,812
495,110
Cash changes:
Proceeds from the issue
78,666
20,287
21,481
10,796
131,230
Repayment
(250,996)
26
issued
902,114
(544)
(33,966)
(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
83,405
impairment losses
Reportable segment profit before
(105,778) (107,631)
(6,057)
(3) Other Business
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.
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.
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.
253
254
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
56. Operating segments (continued)
(a) Segment results, assets and liabilities
External net interest income
Internal net interest income/(expense)
Net interest income
Net fee and commission income
(370)
Other net income
(929)
(57,566)
31 December 31 December
31 December 31 December 31 December 31 December 31 December
Total
Other business
Retail finance business
Wholesale finance business
32,057
30,141
513
702
2,660
2,809
28,884
26,630
Capital expenditure (note)
165,113
176,618
3,786
3,940
94,178
99,913
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
(41,469)
31 December
Operating income
- Property and equipment and investment
2022
(3,613) 214,669 218,235
10,979
11,456
2,794
863
29,705
134,625
142,094
194,315 191,415
7,662
8,706 336,602 342,215
properties depreciation
(7,798) (7,103) (2,771) (2,942)
(439)
(234)
(11,008) (10,279)
- Right-of-use assets depreciation
(1,610)
(1,676) (2,312)
5,995
(2,250)
(283)
(225)
(4,205) (4,151)
- Other
(41,812)
(43,495)
(58,860)
2023
Operating expenses
2022
94,275
Wholesale
finance business
2023
2022
2023
23,074
60,952
62,294
84,026
90,459 136,754
131,389
16,710
25,540
56,419
57,279
33,889
26,095
1,142
2,747
Retail finance business
2023
Total
2022
28,165 129,075 140,443 62,520 49,627 214,669 218,235
7,679
(9,054)
(68,631) (53,240)
0004
(6,111)
84,108
37,825
Other business
profit Exchange
2023
6,236,513
31 December 31 December
2022
2023
3,841,548
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
Pearl River Delta and West Coast region
Bohai Rim region
Yangtze River Delta region
Headquarter
Geographical information
31 December
Operating income
Profit before tax
Non-current assets
Total liabilities
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.
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.
Geographical segments
(c)
56. Operating segments (continued)
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
256
31 December
255
2022
54,625
Exchange difference
1,107
5,293
(9)
241
(579)
6,641
At 31 December 2022
65,719
15,987
148,674
1,533
26
22,719
13,013
267,671
Note: Including financial liabilities designated at fair value through profit or loss.
(c) Significant non-cash transactions
There were no significant non-cash transactions during the years ended 31 December 2023 and 2022.
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
56. Operating segments
The Group's principal activities are providing corporate and personal banking services, conducting treasury business,
providing asset management and other financial services.
The Group manages its businesses by divisions, which are organised by both business lines and geography.
(1) Wholesale 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.
(2) Retail finance business
The financial services provided to retail customers include: loan and deposit service, bank card service, wealth
management services, private banking and other services.
52,166
2023 2022
Reportable segment assets
9,184,674
1,510
56. Operating segments (continued)
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
Note: Capital expenditure represents the amount incurred for acquiring segment assets which are expected to be used for more than one year.
9,099,733
9,862,051
446,949
628,708
3,157,321
3,562,087
5,495,463
23,844
26,590
23,844
26,590
2022
10,029,750
2023
10,920,350
1,314,820
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
Of which: Interest in associates and
(b) Reconciliations of reportable segment revenue, profit or loss, assets, liabilities
and other material items
63,973
Operating income for reportable segments
2023
336,602
176,618
19,458
13,597
1,607
65,499
9,942,754
Consolidated 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 assets
7,734
7,072
Other unallocated assets
581
90,848
90,557
Deferred tax assets
550
9,999
10,029,750
10,920,350
9,954
Intangible assets
Goodwill
Total assets for reportable segments
Assets
31 December 2023 31 December 2022
2022
342,215
165,113
Total profit before income tax for reportable segments
Surplus General Retained
earnings
14,866 82,137 105,941 340,271
(20) 120,296
34,065
(a) Credit commitments (continued)
- Stage 1
(12-month
ECL)
credit-
impaired)
2022
- Stage 2
(Lifetime
ECL - not
- Stage 3
(Lifetime
ECL - credit-
impaired)
Total
Irrevocable guarantees
245,003
9,818
272
255,093
Of which: Financial guarantees
44,805
7,341
3
52,149
Non-financing letters of guarantees
200,198
2,477
269
202,944
Irrevocable letters of credit
231,849
58. Contingent liabilities and commitments (continued)
1,344
Chapter VIII Financial Statements
China Merchants Bank
173,578
- with an original maturity within 1 year (inclusive)
23,559
1
23,560
- with an original maturity over 1 year
147,639
2,284
95
150,018
Credit card unused commitments
1,509,253
6,400
21
1,515,674
Other
Total
87,367
156
-
87,523
2,800,495
16,580
894
2,817,969
257
258
Annual Report 2023 (H share)
233,193
Bills of acceptances
427,150
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
58. Contingent liabilities and commitments (continued)
Capital commitments
(b)
The authorised capital commitments of the Group were as follows:
2023
2022
Contracted for
Authorised but not contracted for
Total
219
370
191
189
410
559
The lease commitments of the Group as a lessor are detailed in note 58(e).
(c) Outstanding litigations
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.
(d) Redemption obligations
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.
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:
Redemption obligations
2023
29,144
2022
27,401
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.
2022
595,977
2023
650,343
Credit risk weighted amounts of contingent liabilities and commitments
3,733
500
431,383
Irrevocable loan commitments
155,775
1,607
157,382
- with an original maturity within 1 year (inclusive)
22,638
22,642
- with an original maturity over 1 year
Credit card unused commitments
133,137
1,603
95
134,740
9,613
85
1,416,609
Other
Total
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.
1,406,911
The Group expects that the amount of redemption before the maturity date of these government bonds through the
Group will not be material.
2,285
Irrevocable loan commitments
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
11,028,483
10,138,912
9,942,754 9,184,674
172,802
155,985 176,618 165,113 336,602 342,215
Note:
Non-current assets include interests in joint ventures, interests in associates, property and equipment, investment properties, right-of-use
assets, intangible assets and goodwill.
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
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
20,931
Placements from banks and other financial institutions
20,579
3,051
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
1,063,334
4,125
4,232
Northeast region
168,687
170,632
166,551
166,486
1,440
1,505 2,808
Central region
676,618
636,801
670,811
628,361
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
3,497 8,554 11,755
Amounts sold under repurchase agreements
Total
2023
impaired)
- Stage 3
(Lifetime
ECL - credit-
impaired)
Total
Irrevocable guarantees
320,170
3,940
278
324,388
Of which: Financial guarantees
44,570
1,104
3
45,677
Non-financing letters of guarantees
275,600
2,836
275
278,711
Irrevocable letters of credit
227,114
1,505
228,619
Bills of acceptances
485,393
2,294
500
488,187
- Stage 1
(12-month
ECL)
- Stage 2
(Lifetime
ECL - not
credit-
2023
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.
377,189
9,099
2022
129,438
8,620
134,863
107,024
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
171,198
- Debt investments at fair value through other comprehensive income
25,267
- Loans and advances to customers
Total
130,616
105,531
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.
41,743
92,978 76,681
(e) Lease commitments
2023
10,317,223
49,734
360
43,832
380
886,898
9,510,556
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
54. The bank's statement of financial position and changes in the
bank's equity (continued)
Other equity
instruments
Investment
capital
Share Preference Perpetual Capital revaluation Hedging Surplus General Retained
shares bonds reserve reserve reserve reserve reserve earnings appropriation
Proposed
profit Exchange
reserve Total
At 1 January 2023
25,220
27,468
92,978 76,082
13,144
94,985 121,230 391,579
43,832
380 886,898
Changes in equity for the year
30,000 (3)
1,210
Total equity and liabilities
11
1,007,194
Exchange reserve
89,220
96,680
9,310,029
8,623,658
Equity
Share capital
25,220
25,220
Other equity instruments
150,446
120,446
Capital reserve
76,079
76,082
Investment revaluation reserve
14,354
13,144
Hedging reserve
11
Surplus reserve
108,737
General reserve
129,085
Retained earnings
453,168
94,985
121,230
391,579
Proposed profit appropriation
Total equity
13,752 7,855 61,589
5,902
(58,079)
(996)
(996)
Distribution to perpetual bonds
(3,562)
(3,562)
Transfers within equity upon disposal of
equity instruments designated at FVTOCI
33
(33)
At 31 December 2023
25,220
27,468
122,978 76,079
14,354
11 108,737 129,085 453,168
49,734
360 1,007,194
Other equity
instruments
Investment
Proposed
Share Preference Perpetual Capital revaluation
capital
shares
bonds reserve
reserve reserve reserve
At 1 January 2022
25,220
49,734
(49,734)
Dividends to preference shares
Proposed dividends for the year 2023
Net profit for the year
137,521
137,521
Other comprehensive income for the year
1,177
11
(20) 1,168
Total comprehensive income for the year
Issue of perpetual bonds
Profit appropriations
Appropriation to statutory surplus reserve
Appropriation to general reserve
1,177
11
172,402
(20) 138,689
(3)
29,997
(48,390)
137,521
13,752
7,855 (75,899)
5,902
13,752
(13,752)
7,855 (7,855)
Dividends paid for the year 2022
(43,832)
(43,832)
30,000
Operating lease commitments and financial lease commitments where the Group is a lessor at the end of the
reporting period are as follows:
107,858
19,530
585,338
55,168
47,791
261,190
247,973
169,450
276,292
5,916,313
5,482,692
465,708
369,391
Derivative financial assets
18,014
17,859
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
10,724
Investments in subsidiaries
Interests in joint ventures
Interests in associates
Investment properties
2,251
Property and equipment
Right-of-use assets
14,787
Financial assets at fair value through profit or loss
2022
Operating lease commitments
25,816
30,519
Financial lease commitments
Total
12,859
8,025
38,675
38,544
259
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
2022
Cash
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
14,499
2,245
666,550
Intangible assets
Deferred tax assets
Other assets
21,281
25,865
Derivative financial liabilities
16,653
18,207
Amounts sold under repurchase agreements
114,008
95,970
Deposits from customers
7,953,958
7,327,974
Salaries and welfare payable
23,911
19,136
Tax payable
Contract liabilities
Lease liabilities
Provisions
Debt securities issued
Other liabilities
Total liabilities
11,904
17,221
5,466
6,653
12,039
12,285
Financial liabilities at fair value through profit or loss
57,489
71,077
Placements from banks and other financial institutions
Total assets
Liabilities
54,731
50,767
15,111
13,341
6,991
6,190
836
907
26,690
26,541
16,321
22,410
16,764
2,422
87,177
88,056
37,470
41,440
10,317,223
9,510,556
Borrowing from central banks
378,504
129,745
Deposits from banks and other financial institutions
484,620
621,621
1,720
(5,106)
265,415
Financial liabilities at FVTPL
Balances with banks and other financial institutions
91,574
2
11
91,587
(497)
(509)
Placements with banks and other financial institutions
265,415
(2,658)
(2,658)
Amounts held under resale agreements
277,421
140
277,561
587,533
587,533
Balances with central banks
Total
Stage 1
ECL-not
(Lifetime
(12-month
credit-
ECL-credit-
(12-month
(954)
credit-
ECL)
impaired)
impaired)
Total
ECL)
impaired)
impaired)
ECL-credit-
(Lifetime
(140)
Debt investments at FVTOCI
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.
(1)
Trading book
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.
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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
60. Risk management (continued)
(b)
Market risk (continued)
(i)
Foreign exchange risk (continued)
(2)
Foreign exchange risk
(i)
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.
Market risk
767,905
3,211
155
771,271
(4,472)
(479)
(1,589)
(1,094)
(6,540)
267
268
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
60. Risk management (continued)
(b)
Note: The balances disclosed above do not include interest receivable.
(3)
ECL-not
Stage 3
(Lifetime
(12-month
credit
ECL credit-
(12-month
credit- ECL credit-
ECL)
impaired)
impaired)
Total
ECL)
impaired)
impaired)
Total
Balances with central banks
ECL-not
Stage 1
(Lifetime
ECL - not
1,579,845
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
60. Risk management (continued)
(a) Credit risk (continued)
(xii)
667,569
Credit quality of financial instruments
2023
Principal
Stage 2
(Lifetime
Expected credit loss
Stage 3
Stage 2
(Lifetime
Stage 3
Stage 1
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:
Stage 1
667,569
100,745
390
241
889,736
(5,586)
(132)
(1,094)
(6,812)
2022
Principal
Expected credit loss
Stage 2
Stage 2
(Lifetime
Stage 3
(Lifetime
889,105
Debt investments at FVTOCI
(589)
(140)
1
11
100,757
(211)
(223)
Placements with banks and other financial institutions
286,046
Balances with banks and other financial institutions
201
(518)
(519)
Amounts held under resale agreements
172,568
140
172,708
(449)
286,247
34,120
Banking book
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.
92,852
63,852 11,028,483
209,674
658,508
10,096,449
Total
17,802
16,620
362,659
12,229
16,161
117,867
216,402
Other assets (note (i))
44,888
230,949
Liabilities
Borrowing from central banks and
amounts due to banks and other
liabilities)
(including derivative financial
USD
170,253
54,247
6,252
16,624
34,502
1,265,597
8,155,438
5,676
154,568
384,719
7,562,175
Deposits from customers
117,899
1,132,441
financial institutions
9,581
53,976
52,624
3,182,883
40,754
Amounts due from banks and other
1,512
6,468
682,500
3,063
1,373
45,869
632,195
banks
Cash and balances with central
Assets
HKD
USD
Total
Other
financial institutions
425,397
116,308
3,919
244,690
2,883,787
derivative financial assets)
Financial investments (including
162,431
18,862
6,242,060
13,652
22,151
133,774
5,938,668
Loans and advances to customers
4,316
16,400
558,381
12,757
147,467
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.
8,368
203
Total
357
67,549
(76,687)
- net currency option position
34,270
(13,642)
431,449
418,103
(386,228) (440,704)
-forward sold
-forward purchased
Derivatives (nominal amounts):
27,961
11,755
2,817,969
20,081
(44,812)
58,294
20,985
34,929 918,751
(22,002) (862,576)
(4,250)
8,677
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
269
23,114
25,385
8,220
393
9,525
(13,031)
(15,026)
(62,141)
37,747
60,836
43,144
206
83,364
Credit commitments (note (ii))
7,103
18,858
258,062
Other liabilities (note (i))
3,708
9,514
174,764
2,075
3,366
67,474
101,849
Debt securities issued
227
1,180
61,401
1,531
285,554
2,658
7,824
Off-balance sheet position:
42,685
8,629
(3,514) 1,085,729
38,755
61,190
989,298
2,689,139
Net position
84,223
9,942,754
67,366
170,919
597,318
9,107,151
Total
188,264
Main original currency
2,073
1,198
(550)
Impaired gross amount of debt investments
Impairment allowances
Subtotal
Neither overdue nor impaired
AAA
AA+ to AA-
A+ to A-
Lower than A-
Unrated
Impairment allowances
Subtotal
Total
Notes:
(i)
(!!)
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:
Credit quality of bond investments rating results
(ix)
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).
(vi)
Maximum exposure
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).
263
264
China Merchants Bank
Chapter VIII Financial Statements
2023
Annual Report 2023 (H share)
(a)
Credit risk (continued)
(vii)
(viii)
Renegotiated loans and advances to customers
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).
Non-performing loans
60. Risk management (continued)
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.
2022
398
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
2,432,650
2,833,525
2,432,495
2,833,216
(499)
(243)
309
155
2,577,388
2,187,978
65,894
808
53,526
124,554
27,220
33,429
41,184
38,966
(10,661)
(5,958)
132,191
2023
Groupings based on shared risk characteristics
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%).
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
2023
2022
144,963
108,868
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
60. Risk management
(a) Credit risk
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.
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.
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.
Wealth management services
(b)
260
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
59. Transactions on behalf of customers
(a)
Entrusted lending business
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.
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.
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.
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).
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.
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.
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.
These figures are generally derived from internally developed statistical models and other historical data and they are
adjusted to reflect forward-looking information.
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
60. Risk management (continued)
(a) Credit risk (continued)
(iv)
(v)
Incorporation of forward-looking information
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 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.
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.
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.
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).
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.
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.
261
262
China Merchants Bank
Annual Report 2023 (H share)
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
(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.
Significant increase in credit risk
As describe in Note 4(5), the Group recognises lifetime ECL if there are significant increases in credit risk.
60. Risk management (continued)
(550)
2022
25,148
34,120
195,645
(238)
(4,323)
Total
1,579,845
191,084
Transfer to
- Stage 1
1
(1)
- Stage 2
(339)
339
- Stage 3
(655)
Write-offs
2,073
1,543,652
Net changes for the year
Balance as at the beginning of the year
5,432,112
265
266
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
60. Risk management (continued)
(14)
(a) Credit risk (continued)
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)
(xi)
58,004
(1)
1,738,945
(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)
361,916
Transfer to
Net changes for the year
1,209,359
1,517
655
(2,904)
27,548
(2,919)
1,768,010
2022
- Stage 1
(12-month
-Stage 2
(Lifetime
ECL - not
credit-
- Stage 3
(Lifetime
Balance as at the end of the year
ECL - credit-
impaired)
impaired)
Total
Balance as at the beginning of the year
1,183,320
1,962
24,077
ECL)
20,797
156,240
Balance as at the end of the year
529,134
- Stage 1
30,084
(29,822)
(262)
- Stage 2
(94,405)
95,148
(743)
- Stage 3
(24,861)
(28,910)
53,771
Write-offs
(47,922)
(1,288)
(27,551)
557,973
5,432,112
Movements of loans and advances and debt investments measured at amortised cost
Loans and advances measured at amortised cost:
2023
- Stage 1
(12-month
- Stage 2
(Lifetime
ECL - not
- Stage 3
(Lifetime
ECL)
credit-
impaired)
Balance as at the end of the year
ECL - credit-
Total
Balance as at the beginning of the year
Net changes for the year
Transfer to
5,217,868
156,240
58,004
impaired)
5,217,868
5,686,659
61,560
18,758
(18,644)
(114)
- Stage 2
(103,532)
103,794
(262)
- Stage 3
(35,248)
(13,117)
48,365
Write-offs
(145)
(39,016)
(39,161)
- Stage 1
Transfer to
Total
5,075,052
396,221
(1,831)
(47,922)
5,913,324
2022
- Stage 1
(12-month
- Stage 2
(Lifetime
ECL - not
credit-
- Stage 3
(Lifetime
ECL - credit-
ECL)
165,105
impaired)
Balance as at the beginning of the year
4,912,836
111,354
50,862
Net changes for the year
425,054
(27,002)
impaired)
In RMB Equivalent
HKD
Deposits from customers
270
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 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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
60. Risk management (continued)
(b)
Market risk (continued)
(ii)
Interest rate risk (continued)
(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.
Assets
2023
Total
3 months
or less
(include
overdue)
Over 3
months
to 1 year
Non-
Over 1 year
to 5 years
Over
5 years
interest
bearing
Cash and balances with central
banks
682,500
658,781
23,719
Amounts due from banks and other
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.
Banking book
(2)
(334)
334
(284)
284
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.
Interest rate risk
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.
(1)
Trading book
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.
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.
271
financial institutions
272
Chapter VIII Financial Statements
Annual Report 2023 (H share)
60. Risk management (continued)
(b)
Market risk (continued)
(ii)
Interest rate risk (continued)
(1)
Trading book (continued)
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.
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.
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.
China Merchants Bank
558,381
418,055
133,899
1,013,853
Deposits from customers
8,155,438
5,450,058
231,786
1,300,112
19,670
1,373,425
288
28,172
3,671
Financial liabilities at FVTPL
(including derivative financial
liabilities)
1,265,597
61,401
5,321
55,492
Lease liabilities
12,675
1,032
2,804
7,757
1,082
Debt securities issued
174,764
Other liabilities (note (ii))
272,879
588
(Decrease)/increase in equity
financial institutions
Borrowing from central banks and
6,414
13
Loans and advances to customers
(note (i))
6,242,060
2,497,757
3,076,798
605,016
62,489
Financial investments (including
derivative financial assets)
3,182,883
351,796
amounts due to banks and other
358,289 1,104,825
60,740
Other assets (note (ii))
362,659
362,659
Total assets
11,028,483
3,926,389
3,568,986
1,716,255
1,369,735
447,118
Liabilities
1,307,233
44,549
187
64
101
271,769
1,619
13,397
Total
8,408,425
541,466
177,612
57,171 9,184,674
77,895
199,228
Net position
884,264
33,483
39,469
(2,978)
954,238
4,814
44,274
Off-balance sheet position:
Credit commitments (note (ii))
2,456,047
82,618
21,961
14,504
2,575,130
917
11,944
11,239
247,669
6,964,197
361,242
160,496
49,807
7,535,742
51,967
180,029
Financial liabilities at FVTPL
(including derivative financial
liabilities)
52,044
15,280
11,885
421
67,780
2,197
473
Debt securities issued
162,146
58,447
790
905
222,288
8,408
886
Other liabilities (note (i))
35
24,634
Derivatives (nominal amounts):
- forward purchased
7,781
Notes:
(i)
(!!)
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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
60. Risk management (continued)
(b)
Market risk (continued)
(i)
(5,552)
Foreign exchange risk (continued)
(ii)
(4)
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.
2023
2022
Change in foreign currency exchange rate
Down by 1%
Up by 1%
Down by 1%
Up by 1%
(Decrease)/increase in net profit
(101)
Sensitivity analysis
(64)
30,778
6,937
280,979
288,388
26,409
20,844
616,620
41,486
29,623
- forward sold
(253,696)
(294,290)
(19,462)
(14,878)
6,007
(582,326)
(21,831)
- net currency option position
29,143
(32,690)
(10)
41
(3,516)
(4,703)
(11)
Total
56,426
(38,592)
(42,335)
4,443
78,880
7,376
Chapter VIII Financial Statements
Annual Report 2023 (H share)
60. Risk management (continued)
(c)
Liquidity risk (continued)
Analysis of the Group's assets and liabilities by contractual remaining maturity is as follows:
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
82,709
10,138,912
54,193
217,081
574,949
9,292,689
Total
3,716
13,653
346,100
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.
(ii)
Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities"
respectively.
Sensitivity analysis
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.
2023
2022
Change in interest rates (in basis points)
(Decrease)/increase in net interest income
(Decrease)/increase in equity
Up by 25
Down by 25
Up by 25
Down by 25
(4,118)
(9,319)
3,544
(4,412)
(8,462)
8,586
4,118
9,477
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.
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
60. Risk management (continued)
(c) Liquidity risk
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.
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.
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.
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.
4,412
3,313
94,908
244,335
2,170
2,766
41,978
555,828
banks
Cash and balances with central
Assets
HKD
USD
Main original currency
Total
Other
602,742
HKD
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
USD
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.
6,039
Amounts due from banks and other
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
3,103
5,796,546
157,628
148,993
5,466,679
Loans and advances to customers
24,951
14,511
630,302
16,000
22,244
100,870
491,188
financial institutions
23,246
43,959
Notes: (i)
1,161,435
bearing
Assets
Cash and balances with central
banks
602,742
575,932
26,810
Amounts due from banks and other
financial institutions
630,302
516,942
99,288
14,059
13
Loans and advances to customers
(note (i))
5,796,546
2,234,889 3,028,371
473,932
59,354
Financial investments (including
derivative financial assets)
2,763,222
217,442
356,451
975,413
1,164,031
49,885
interest
Over
5 years
Over 1 year
to 5 years
Non-
2,889
269,803
Total liabilities
9,942,754 6,510,267
Asset-liability gap
1,613,582
1,085,729 (2,583,878) 1,955,404
1,453,021
263,234
36,918
328,966
1,332,817
118,152
273
Other assets (note (ii))
274
Annual Report 2023 (H share)
Chapter VIII Financial Statements
60. Risk management (continued)
(b) Market risk (continued)
(ii)
Interest rate risk (continued)
(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)
(4)
2022
Total
3 months
or less
(include
overdue)
Over 3
months
to 1 year
China Merchants Bank
346,100
346,100
Total assets
3,091
7,650
1,178
Debt securities issued
222,288
35,587
69,617
89,565
27,519
Other liabilities (note (ii))
258,756
203
1,094
2,752
Total liabilities
9,184,674
6,496,614
1,079,745
1,227,282
61,963
319,070
Asset-liability gap
954,238
(2,951,409)
2,404,365
236,122
255,801
103,725
13,013
59,470
10,138,912
3,545,205
3,484,110
1,463,404
1,223,398
422,795
Liabilities
Borrowing from central banks and
amounts due to banks and other
financial institutions
1,087,095
Deposits from customers
Lease liabilities
7,535,742
143,285
860,746
10,501
1,111,583
1,828
31,365
3,799
Financial liabilities at FVTPL
(including derivative financial
13,704
liabilities)
67,780
3,006
5,231
73
931,481
5,528,249
243,502
7,938
539,350
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
Over
5 years
Indefinite Overdue
Non-derivative financial assets
Cash and balances with central
banks
682,500
530,575
682,500
255
55
223
1,863
Amounts due from banks and other
financial institutions
140,809
Over
1 year
to 5 years
2,676
539,585 1,708,061
184,830 159,063 408,936
56,151 134,875
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
2,267,026
1,373,493 1,598,622
2,350,857
23,672
28,673
2,316
156,588
134,391
36,870
- Debt investments at amortised
cost
1,728,620
2,155,149
33,629
50,472 133,924 712,112
9,024
90,873
3 months
to 1 year
1 month to
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
Debt securities issued
12,950
7,416
4,271
11,555
11,457
20,131
692,538
67,780
503
591
3,091
7,650
1,178
13,013
Lease liabilities
3 months
571,061
90,575
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.
9,184,674
(Short)/long position
(5,239,058)
286,291
33,623 882,575 1,379,802
2,788,279 793,520
1,122,739 1,273,510
29,206
Notes:
(i)
(ii)
For cash and balances with central banks, the amounts with indefinite maturities represent statutory deposit reserve and fiscal deposit
balances.
For financial investments at FVTPL included in financial investments, their maturity dates do not represent the Group's intention to hold them
to maturity.
(iii)
954,238
90,873
31,314
11,445
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
10,401
26,108
84,324
53,672
Other liabilities
175,135 175,135
Repayable
50,536
18,080
44,377
31,439
416
Total
9,827,567 10,150,110 5,068,629
30,287
182,443
Within
3 months
Loans and advances to customers
13
15,124
99,900
85,088
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
1 year
Over
amount
Total
on demand
1 month
1 month to
3 months
to 5 years
5 years
Indefinite
Overdue
Non-derivative financial assets
Cash and balances with central
to 1 year
174,764
Debt securities issued
1,280
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
15,314
20,884
1,975
427
5,029
4,485
Overdue
Total
1,100,594
766,578
2,276,495
3,650,383
3,949,919 573,052
30,473
10,737,964 12,625,414 277,920
Non-derivative financial liabilities
and lease liabilities
Borrowing from central banks and
44,074
8,566
4,696
1,053
2,996
7,146
43,958
19,617
12,675
13,664
457
586
2,880
8,461
Lease liabilities
derivative financial liabilities)
Financial liabilities at FVTPL
1,496,187
amounts due to banks and other
financial institutions
1,265,597 1,300,017
449,843
375,736
168,105
29,936
251,248
7,893
Deposits from customers
8,155,438 8,434,777 4,559,684
434,432
554,142
1,360,396
47,192
5,796,546
Financial liabilities at FVTPL (including
35,082
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
714,737 2,038,134
1,078,884
279,798
Total assets
362,659
4,485
256,260
5,155
123,446
444,953
258,481
10
889,736
- Equity investments designated at FVTOCI
41,428
19,649
Other assets (note (iii))
33,120
11,473
15,382
21,518
15,266
19,649
48,148
6,845
Deposits from customers
Other liabilities (note (iii))
174,764
7,376
50,176
82,023
25,288
9,901
Debt securities issued
12,675
1,082
7,757
2,804
578
454
Lease liabilities
61,401
19,662
4,474,297
432,094
542,828
1,301,368
1,375,860
28,991
1,265,597
8,155,438
derivative financial liabilities)
8,577
7,753
4,731
8,601
12,077
Financial liabilities at FVTPL (including
145,327
14,698
1,728,620
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
255
140,809
Cash and balances with central banks (note (i))
Over
Over
Repayable
on demand
Within
1 month to 3 months to
Over 1 year
38,971
Over
1 year
to 5 years
5 years
Indefinite
Overdue
Total
3 months
- Debt investments at FVTOCI
583,687
1,520,502
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
2,756
derivative financial assets)
-Financial investments at FVTPL (including
3,182,883
1,843,531
1,734,232
23,672
6,242,060
Financial investments and derivative financial
assets (note (ii))
497,465
2,756
149,778
360,604
1,158,573
1,298,096
28,673
2,316
182,087
31,190
18,236
45,907
13,416
- Equity investments designated at FVTOCI
771,271
19
210,303
138,723 387,873
28,329
6,024
- Debt investments at FVTOCI
1,536,397
769
904,281
449,002
133,748
35,043
13,554
- Debt investments at amortised cost
1,166,665
19,139
788
2,763,222
- Financial investments at FVTPL (including
derivative financial assets)
13,416
4,213
42,022
99,531
158,992
52,081
5,723
442,138
79,576
995,867
Other assets (note (iii))
10,932
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
515,446
due to banks and other financial institutions
Borrowing from central banks and amounts
29,206 10,138,912
793,520
15,526
18,475
15,859
5,798
238,895
4,154
36,461
346,100
195,193
978,829
604,684
2,005,314
2,653,312
2,878,854
Total assets
372,002
105,394
99,154
3 months to
Over
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
31,803
416
272,879
Total liabilities
5,077,883
848,329
Over 1 year
748,740
1,519,101
64,372
9,942,754
(Short)/long position
(4,798,085) 230,555
(34,003) 353,805
1,684,329
Over
on demand
1 month
15,072
13
630,302
Loans and advances to customers
26,008
499,842
99,288
399,192 1,514,348
1,706,378
24,264
5,796,546
Financial investments and derivative financial
assets (note (ii))
4,213
1,626,514
7,535,742
84,572
62,456
3 months
1 year
to 5 years
5 years
Indefinite
Overdue
368,901
Total
66,055
1,201
535,486
602,742
Amounts due from banks and other financial
institutions
Cash and balances with central banks (note (i))
7,132,934
1 month
516,746
Over
Carrying
amount
Total
Repayable
on demand
Within
1 month
3 months
1 year
1 month to 3 months
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
270,368
127,266
152,122
Over
26,391
Over
29,367
252,649
1989
769
- Equity investments designated
at FVTOCI
13,416
13,416
13,416
Other assets
88,792
88,792
35,078
10,381
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
2022
433,932
7,125
7,535,742
96,703
29,243
Other liabilities
162,436 162,436
62,796
27,724
11,623
28,897
31,154
242
Total
9,069,718 9,355,411 5,438,055
697,154
571,721 1,160,252 1,393,864
94,365
Gross loan commitments
1,573,991
1,573,991
Note:
Interest receivable and interest payable of financial instruments are included in "other assets" and "other liabilities" respectively.
279
26,024
2023
76,447
Deposits from customers
28,783
222,288 235,656
7,794,971
4,847,726
389,687
403,223 894,832
1,223,242
36,261
Financial liabilities at FVTPL
49,144
49,336
4,390
227
4,626
7,988
20,020
Lease liabilities
13,013
14,292
505
599
3,328
8,386
1,474
Debt securities issued
4,480
153,114
12,085
879,458
788
19,139
1,413,650
1,184,020
415,839
101,509
7,808 31,936
4,102
3,251,681
2,744,551
Financial investments
433,106
24,425
2,365,750
2,071,922
- Financial investments at FVTPL
423,467
112,634
4,102
771,271
-Debt investments at FVTOCI
1,103,949
588,262
42,650 166,559
17,387
1,919,576
1,536,397
cost
439,231
1,694,961
76,314
38,048
96,166
161,826
57,052
5,723
-Debt investments at amortised
Cash flow hedge derivatives
8,696
8,282
(295)
369
2,890
3,685
1,752
Interest rate swaps
123
2,890
3,685
1,752
Interest rate derivatives
369
369
Interest rate swaps
(38)
China Merchants Bank
(17,443)
18,733
3,387,252
6,232
727,386
1,528,318
1,125,316
Total
(1)
213
213
7,529
(1)
213
213
Interest rate derivatives
instruments designated at FVTPL
conjunction with financial
Derivatives managed in
(38)
105
8,696
105
753
(123)
(295)
Commodity trading swaps
(876)
63,968
293
63,675
Equity options written
1,110
64,003
35
293
63,675
Equity options purchased
(1,300)
1,485
136,759
35
52
1,553
135,119
Other derivatives
(2,068)
2,464
- Debt securities
7,769
Credit default swaps
649
327
123
8,282
7,529
753
I
Currency derivatives
(123)
3,351
2,838
513
Interest rate swaps
Foreign exchange swaps
Chapter VIII Financial Statements
2,838
513
Interest rate derivatives
Fair value hedge derivatives
(70)
640
640
(354)
375
8,148
52
3,351
Annual Report 2023 (H share)
60,013
(f) Use of derivatives (continued)
(7,304)
Futures
1,043
81
1,124
Options
143,650
98,094
8,951
250,695
390,702
1,598
(3,817)
Other derivatives
91,064
520
640
34
92,258
867
(856)
9,263
591,488
17,724
226,332
(6,062)
Bond futures
409
409
Currency derivatives
513,568
329,319
27,320
1,198
871,405
Equity options purchased
11,348
Forwards
21,443
4,812
645
1,198
28,098
487
(328)
Foreign exchange swaps
347,432
(11,449)
60. Risk management (continued)
42,889
34
6,246
1,534,429
4,720
735,046
734,650
Interest rate derivatives
profit or loss
Derivatives at fair value through
Liabilities
Assets
Total
5 years
Over
Between
1 year
and 5 years
3 months
and 1 year
3 months
Within
Between
Fair value
Notional amounts with remaining life
2022
(6,062)
Interest rate swaps
60,013
734,241
42,980
554
Equity options written
42,909
57
42,966
(472)
Commodity trading swaps
5,266
6,246
57
406
313
(330)
Credit default swaps
640
640
(54)
Fair value hedge derivatives
1,534,020
4,720
735,046
5,672
16,175
18,733
Assets
174
174
Bond futures
(5,314)
(5,314)
5,328
5,327
1,806,971
1,806,787
1,791
676,727
805,030
323,239
Interest rate swaps
1,791
676,727
805,040
323,413
Interest rate derivatives
profit or loss
Liabilities
Assets
Total
1
Interest rate options
-
10
851,510
30,310
394,675
426,525
Foreign exchange swaps
(480)
375
53,897
1,199
257
Over
5 years
17,293
Forwards
(10,372)
11,692
1,422,980
1,199
39,675
717,287
664,819
Currency derivatives
10
35,148
8,853
Between
1 year
and 5 years
3 months
60.
Chapter VIII Financial Statements
Annual Report 2023 (H share)
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.
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.
Operational risk
(d)
60. Risk management (continued)
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
280
(e)
Risk management (continued)
Capital management (continued)
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.
Within
Fair value
Notional amounts with remaining life
2023
Derivatives at fair value through
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.
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.
Use of derivatives (continued)
(f)
60. Risk management (continued)
Between
3 months
and 1 year
Annual Report 2023 (H share)
China Merchants Bank
282
281
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.
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.
Derivatives include forwards, swaps and option transactions undertaken by the Group in the foreign exchange and
interest rate markets.
(f) Use of derivatives
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.
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.
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.
Chapter VIII Financial Statements
Financial investments measured at FVTPL
(7,824)
1,949
Total
Derivative financial liabilities
- Other
- Debt securities issued
- Certificates of deposit issued
27,830
1,825
20,826
5,179
Financial liabilities designated at FVTPL
380
380
- Short position on bonds
15,748
15,748
- Financial liabilities related to precious metal
16,128
380
15,748
Financial liabilities held for trading
Liabilities
212
212
5,179
5,179
Total
Level 3
Level 2
Level 1
2022
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)
(ii) Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
basis (continued)
(g) Fair value information (continued)
60. Risk management (continued)
Annual Report 2023 (H share)
2,059,238
Chapter VIII Financial Statements
285
61,401
1,825
38,649
20,927
17,443
17,443
22,439
1,825
20,614
China Merchants Bank
Futures
19,649
1,753,307
756
Financial investments designated at FVTPL
336
228
108
- Other
2,729
2,729
- Wealth management products
242,304
1,181
4,485
2,392
341
241,091
512,121
9,108
301,816
201,197
Options
5,452
3,503
12,123
12,879
- Debt securities
756
169,942
Total
2,305
10,006
Equity investments designated at FVTOCI
525,179
120,762
404,417
Loans and advances to customers at FVTOCI
899,102
7,338
135,989
758,233
Debt investments at FVTOCI
70,430
3,729
66,701
Loans and advances to customers at FVTPL
18,733
Currency derivatives
Derivative financial assets
12,879
12,123
140,869
1,316
rate, cash flow
Net assets, liquidity
Foreign exchange swaps
Net assets, liquidity
discount
Liquidity discount
Risk-adjusted discount
rate, cash flow
Net assets
Net assets
rate
Risk-adjusted discount
discount
rate, cash flow
Net assets, liquidity
Liquidity discount
Risk-adjusted discount
Net fund value approach
Net fund value approach
approach
Discounted cash flow
Market approach
Net fund value approach
Discounted cash flow
FVTPL
44
1,825
Financial liabilities designated at
- Other
184
- Other
China Merchants Bank
1,180
1
Chapter VIII Financial Statements
60. Risk management (continued)
Net asset value approach
4,564
Equity investments designated at
FVTOCI
Discounted cash flow
approach
101
Equity investments designated at
FVTOCI
FVTOCI
Market approach
2,725
Equity investments designated at
Unobservable inputs
Valuation techniques
2022
31 December
as at
Fair value
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)
Annual Report 2023 (H share)
- Fund investments
- Fund investments
approach
at FVTPL
Discounted cash flow
3,729
Loans and advances to customers
Net asset value approach
4,525
Equity investments designated at
FVTOCI
Discounted cash flow
approach
71
Equity investments designated at
FVTOCI
Liquidity discount
Market approach
2,742
Equity investments designated at
FVTOCI
Unobservable inputs
Valuation techniques
2023
31 December
as at
Fair value
Valuation techniques used and the qualitative information of key parameters for recurring fair value
measurements categorised as Level 3:
approach
rate
Loans and advances to customers
120,762
Discounted cash flow
359
- Debt securities
Net asset value approach
230
- Equity investments
approach
642
- Equity investments
Market approach
Loans and advances to customers
1,520
FVTPL
Financial investments measured at
rate
Risk-adjusted discount
Risk-adjusted discount
discount
rate, cash flow
Net assets, liquidity
Risk-adjusted discount
Discounted cash flow
approach
at FVTOCI
- Equity investments
4,991
Discounted cash flow
at FVTPL
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.
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.
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.
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:
•
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)
(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
(g)
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.
3,687
4,996
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
Interest rate derivatives
Currency derivatives
Other derivatives
Credit valuation adjustment risk weighted assets
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:
Total
2022
1,500
88
137
2,375
1,242
123
121
2,187
2,410
2023
2,586
(3)
2023
Level 2
- Equity investments
528
- Equity investments
Market approach
2,950
- Equity investments
FVTPL
Financial investments measured at
rate
Risk-adjusted discount
Risk-adjusted discount
discount
rate, cash flow
Net assets, liquidity
Risk-adjusted discount
Liquidity discount
Discounted cash flow
approach
at FVTOCI
100,430
Loans and advances to customers
rate
approach
15
Net asset value approach
- Debt securities
359
Level 3
Total
Assets
Financial investments measured at FVTPL
- Debt securities
18,311
490,795
4,160
513,266
14,923
246,526
Level 1
359
- Long position in precious metal contracts
1,604
1,604
- Equity investments
1,752
- Fund investments
797
- Fund investments
approach
Discounted cash flow
261,808
781
Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
basis (continued)
(g) Fair value information (continued)
Discounted cash flow
approach
Liquidity discount
Risk-adjusted discount
discount
Risk-adjusted discount
rate
Net assets
Liquidity discount
Net assets
Net assets, liquidity
discount
289
China Merchants Bank
284
283
There was no ineffective portion of cash flow hedges during the years ended 31 December 2023 and 2022.
(18,636)
(69)
(69)
(47)
(47)
18,671
2,509,725
FVTPL
6,661
Net fund value approach
Net fund value approach
76
- Fund investments
4,379
3,493
392
494
- Equity investments
108
108
- Long position in precious metal contracts
411,591
203,205
4,714
359
187,349
15,497
Net fund value approach
- Fund investments
1
Market approach
- Other
Financial liabilities designated at
64
2,647
767,036
728
728
2,373
Interest rate swaps
8
182
5,006
709
1,804
100
2,393
Interest rate derivatives
Cash flow hedge derivatives
(153)
28
(153)
28
228
2,097
2,097
881
781
1,316
100
1,804
709
4,986
728
728
3,802
717
3,085
3,802
717
3,085
1,068,990
667,038
199,665
Total
Currency derivatives
Interest rate swaps
Interest rate derivatives
instruments designated at FVTPL
conjunction with financial
Derivatives managed in
20
20
Interest rate options
182
Foreign exchange swaps
798
200,539
- Wealth management products
China Merchants Bank
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.
67,780
2,647
39,507
25,626
Total
18,636
18,636
Derivative financial liabilities
22,805
2,647
20,158
- Other
7,709
7,709
- Debt securities issued
383
383
- Certificates of deposit issued
30,897
Chapter VIII Financial Statements
Annual Report 2023 (H share)
60. Risk management (continued)
(g) Fair value information (continued)
60. Risk management (continued)
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
288
287
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.
The fair value of "Other" under financial investments measured at FVTPL is measured based on the net asset
values.
The fair value of certificates of deposit issued is measured by using the comprehensive valuations on
Bloomberg.
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.
2,647
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.
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.
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 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 foreign currency bonds without quoted prices in an active market is measured by using the
comprehensive valuations provided by Bloomberg, etc.
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.
(2) Valuation techniques used and the qualitative information of key parameters for recurring fair value
measurement categorised as Level 2
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.
(1)
Assets and liabilities held at the end of reporting period that are measured at fair value on a recurring
basis (continued)
(ii)
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.
(ii)
613
7,709
4,994
4,991
3
Loans and advances to customers at FVTPL
18,671
18,671
Derivative financial assets
11,876
10,928
948
- Debt securities
11,876
10,928
948
Financial investments designated at FVTPL
817
64
753
- Other
2,543
2,543
Debt investments at FVTOCI
136,831
643,518
780,349
Financial liabilities designated at FVTPL
283
- Short position on bonds
17,634
17,634
- Financial liabilities related to precious metal
18,247
330
17,917
Financial liabilities held for trading
330
20,541
Liabilities
13,416
7,390
117,525
614,481
100,430
514,051
2,862
1,580,735
157,118
Total
3,164
Equity investments designated at FVTOCI
Loans and advances to customers at FVTOCI
1,855,378
32
286
22
29,002
2,670,778
Demand
Deposits from corporate customers
Average
cost ratio
(%)
Interest
expense
Average
balance
Average
cost ratio
(%)
Interest
expense
balance
Time
except for percentages)
(in millions of RMB,
2022
2023
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.
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.
Interest expense on deposits from customers
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.
3.2.4 Interest expense
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
Average
China Merchants Bank
1,989,200
4,659,978
2.77
25,316
913,786
2.77
39,284
1,415,757
Time
0.37
6,073
0.40 1,655,088
Subtotal
7,337
Demand
Deposits from retail customers
1.70
74,447
2.66
46,698
1.05
27,749
1.09 2,631,389
2.67 1,755,394
1.76 4,386,783
82,188
1,857,291
24
23
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.
86,754
2,250,662
3.75
94,526
2,523,210
Corporate loans
yield (%)
income
balance
yield (%)
3.85
income
except for percentages)
Average
Interest
Average
Average
Interest
Average
(in millions of RMB,
2022
2023
balance
Retail loans
3,308,043
166,104
Interest income from balances and placements with banks and other financial institutions
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 investments
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.
4.54
265,601
5,850,275
4.26
268,240
6,299,905
customers
Loans and advances to
2.09
10,673
510,242
1.62
7,610
468,652
Discounted bills
5.44
168,174
3,089,371
5.02
Subtotal
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.
3,273,048
1.42
cost ratio
Interest
cost ratio Average
Average Interest
expense
balance
except for percentages)
(in millions of RMB,
Average
Average
3.89
(%) balance
353,380
375,610
9,987,796
Total
2.09
13,489
644,938
2.80
16,557
591,320
and other financial institutions
3.76 9,081,822
Balances and placements with banks
expense
Interest-bearing liabilities
Borrowings from the central bank
2.99
9,662
322,784
3.24
7,781
240,163
Debt securities issued
1.64
16,309
(%)
996,819
19,866
950,595
and other financial institutions
Deposits and placements from banks
1.52
105,836
1.62 6,955,657
128,809
7,933,026
Deposits from customers
2.09
1.52
8,482
557,031
(in millions of RMB,
2022
2023
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.
During the reporting period, the Group's net interest income amounted to RMB214.669 billion, representing a year-
on-year decrease of 1.63%.
3.2.5 Net interest income
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
China Merchants Bank
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.
Average
Interest expense on debt securities issued
1.52
105,836
6,955,657
1.62
128,809
7,933,026
Total
1.22
31,389
2,568,874
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
Average
Average
1.70
9,977
586,797
Balances with the central bank
3.24
65,808
4.54
265,601
4.26 5,850,275
3.22 2,029,578
80,836
2,509,774
Investments
268,240
6,299,905
Loans and advances to customers
Interest-earning assets
yield (%)
Average
Interest
income
yield (%) balance
income
balance
except for percentages)
46,621
186,340
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%.
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.
Share capital
Year end
(in millions of RMB)
22.89
25.36
29.01
32.71
36.71
ordinary shareholders of the Bank
Year-end net assets attributable to
25,220
3.62
4.61
5.26
5.63
shareholders of the Bank
Diluted earnings attributable to ordinary
3.62
3.79
4.61
5.26
5.63
3.79
shareholders of the Bank
Total shareholders' equity
Total liabilities
Key Financial Ratios
4,490,650
5,029,128
5,570,034
6,508,865 6,051,459
Total loans and advances to customers
(%)
7,417,240
8,361,448
9,249,021
4,844,422
1,085,729
5,628,336
7,631,094
25,220
617,707
730,354
954,238
25,220
25,220
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
9,942,754 9,184,674
6,799,533
Basic earnings attributable to ordinary
1.20
1.253
116,879
122,061
120,991
Operating expenses
269,788
290,279
331,407
344,740
339,078
Net operating income
102,814
Results for the year
2019
2020
2021
2022
2023
2.3 Five-year Financial Summary of the Group
Chapter II Summary of Accounting Data and Financial Indicators
Annual Report 2023 (H share)
China Merchants Bank
20
(in millions of RMB)
91,497
Impairment losses
41,469
1.522
1.738
1.972
Dividend (tax inclusive)
Per Share
(RMB yuan)
92,867
97,342
119,922
138,012
146,602
the Bank
Net profit attributable to shareholders of
117,132
122,440
148,173
165,113
176,618
Profit before tax
61,159
65,025
66,355
57,566
Return on average assets attributable to
Interest income from loans and advances to customers
shareholders of the Bank
1.42
29,705
37,825
94,275
84,108
218,235
214,669
2022
2023
Expected credit losses
Operating expenses
(120,991)
Other net income
Net interest income
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)
3.2.1 Financial highlights
3.2 Analysis of Income Statement
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.
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.
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.
3.1 Analysis of Overall Operation
Management Discussion and Analysis
Chapter III Management Discussion and Analysis
Net fee and commission income
Annual Report 2023 (H share)
(122,061)
(56,751)
3.2.3 Interest income
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.
3.2.2 Net operating income
Chapter III Management Discussion and Analysis
China Merchants Bank
Annual Report 2023 (H share)
Impairment losses on other assets
138,012
146,602
Net profit attributable to shareholders of the Bank
139,294
(41,278)
148,006
(25,819)
(28,612)
Income tax
165,113
176,618
2,525
2,476
Share of profits of joint ventures and associates
Profit before tax
(815)
(191)
Net profit
China Merchants Bank
*
Piecing every small dream
together to fill-in the
development blueprint
1.16
1.07
0.91
0.96
0.95
Non-performing loan ratio
32.08
33.33
33.11
32.89
Credit cost ratio
32.97
16.84
15.73
16.96
17.06
16.22
ordinary shareholders of the Bank
Return on average equity attributable to
1.31
1.23
1.36
Cost-to-income ratio
0.74
0.78
0.70
15.54
16.54
17.48
17.77
17.88
Advanced Measurement Approach
Capital adequacy ratio under the
12.69
13.98
14.94
15.75
16.01
Advanced Measurement Approach
Tier 1 capital adequacy ratio under the
11.95
12.29
12.66
13.68
13.73
the Advanced Measurement Approach
Core Tier 1 capital adequacy ratio under
1.29
0.98
1.39
4,005
53,186
122,194
2,476
Total net non-interest income
Share of profits of joint ventures and associates
12.82
10,767
12,147
14.78
3,600
4,132
N/A
2,525
(2,675)
9.37
18,013
19,700
27.34
29,705
37,825
25.04
32,230
40,301
-10.78
1,846
94,275
-1.94
126,505
70,348
2022
2023
Total operating expenses
Taxes and surcharges
Allowances for insurance claims
Other general and administrative expenses
Depreciation, amortisation and rental expenses
Staff costs
(in millions of RMB)
124,409
The following table sets forth, for the periods indicated, the principal components of the operating expenses of the
Group.
Operating expenses
Chapter III Management Discussion and Analysis
3.2.7
Annual Report 2023 (H share)
China Merchants Bank
28
27
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.
Note:
-1.66
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.
84,108
-4.08
(9,097)
19,525
Bank card fees
-7.89
12,457
11,474
Fees and commissions from asset management
-7.89
30,903
28,466
-10.19
21,399
103,372
+/-%
2022
2023
Changes
Fees and commissions from wealth management
Fee and commission income (note)
(in millions of RMB, except for percentages)
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.
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.
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.
92,834
-8.76
Settlement and clearing fees
15,492
(8,726)
Other net income
Net exchange gain
Net profit/(loss) from fair value change
Net investment income
Other net income
Other net non-interest income
Net fee and commission income
Fee and commission expense
-37.16
12,018
7,552
Others
-8.00
5,791
5,328
Commissions from custody businesses
-13.14
5,753
4,997
Commissions from credit commitment and loan business
2.93
15,051
70,657
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:
16,359
31,321
Inter-bank transactions (2)
5.97
605,068
6.21
684,821
the central bank (2)
27.49
2,787,066
29.10
3,209,473
558,381
Investment securities and other financial assets
Cash, precious metals and balances with
5,796,546
56.60
6,242,060
Net loans and advances to customers
(2.51)
(254,913)
(2.42)
(266,805)
59.69
6,051,459
57.18
59.02
5.06
6.22
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:
100.00
10,138,912
100.00
630,302
11,028,483
3.04
309,931
2.94
323,794
0.10
9,999
0.09
9,954
Other assets (3)
Goodwill
Total assets
6,508,865
amount (%)
Amount
(2,935)
Amounts due from banks and other financial institutions
3,879
(218)
45,157
46,635
2022
2023
Financial investments
Loans and advances to customers
2.15
(in millions of RMB)
During the reporting period, the expected credit losses of the Group were RMB41.278 billion, representing a year-
on-year decrease of 27.26%.
Expected credit losses
3
3.2.8
122,061
120,991
3,005
2,963
360
32,319
The following table sets forth, for the periods indicated, the principal components of expected credit losses of the
Group.
Expected credit losses relating to financial guarantees and loan
commitments
(2,761)
7,112
amount (%)
Amount
(in millions of RMB, except for percentages)
Total loans and advances to customers
Allowances for impairment losses on loans (1)
the total
Percentage of
Percentage of
the total
31 December 2022
31 December 2023
3.3.1.1
The following table sets forth, as at the dates indicated, the components of the total assets of the Group.
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.
3.3.1 Assets
3.3 Analysis of Balance Sheet
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
China Merchants Bank
Other operating expenses include depreciation, amortisation, leases, taxes and surcharges, allowances for insurance claims and various other administrative
expenses.
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.
56,751
3,887
557
41,278
Total expected credit losses
Others
15,720
3.2.6 Net non-interest income
(3,284)
Annual Report 2023 (H share)
(196)
1,373
Borrowings from the central bank
(1,881)
807
(2,688)
Debt securities issued
3,557
4,486
(929)
1,177
institutions
22,973
1,726
21,247
Deposits from customers
Interest-bearing liabilities
22,230
(12,448)
34,678
Changes in interest income
3,068
Deposits and placements from banks and other financial
Lease liabilities
(26)
(4)
Interest-earning assets
average
yield (%)
Interest
income
Average
balance
average
yield (%)
income
balance
except for percentages)
Interest
Average
(in millions of RMB,
Annualised
Annualised
July to September 2023
October to December 2023
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.
(3,566)
25,796
6,819
(19,267)
18,977
15,701
Changes in net interest income
Changes in interest expense
(30)
4,579
Loans and advances to customers
(1,511)
Balances and placements with banks and other financial
Net interest margin
Net interest spread
218,235
214,669
Net interest income
1.61
135,145
8,410,862
1.73
160,941
2.03
2.15
9,322,842
3.80
510
13,408
3.77
480
12,718
Lease liabilities
2.31
2,828
Chapter III Management Discussion and Analysis
Total
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.
1,495
1,003
492
Balances with the central bank
15,028
(406)
15,434
Investments
(17,624)
20,263
Net increase
(decrease)
Interest rate
Volume
Loans and advances to customers
Interest-earning assets
(in millions of RMB)
2023 compared to 2022
Increase (decrease) due to
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.
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
China Merchants Bank
26
25
institutions
6,434,844
2,639
4.08
2.15
1,350
249,237
Borrowings from the central bank
3.35
2,137
252,778
3.45
1,776
204,148
157,011
Debt securities issued
4,634
926,136
2.24
5,268
931,173
institutions
banks and other financial
Deposits and placements from
1.64
32,811
1.99
853
2.16
Lease liabilities
China Merchants Bank
66,170
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.
Net interest margin
2.11
1.99
1.93
2.04
Net interest spread
53,290
52,383
Net interest income
1.73
40,551
9,303,113
1.75
42,052
9,513,589
Total
3.57
116
12,877
3.73
12,234
7,954,311
1.64
115
33,543
4,457
546,862
Total
institutions
banks and other financial
Balances and placements with
1.72
2,561
589,741
1.75
3.23
601,670
3.18
20,487
2,555,495
3.21
21,151
2,611,336
Investments
4.24
67,478
6,317,543
Balances with the central bank
10,194,712
2,657
3.68
94,435
Interest-bearing liabilities
(%)
expense
cost ratio
Interest
average
average
cost ratio
(%)
Interest
expense
Average
balance
Average
balance
(in millions of RMB,
except for percentages)
555,602
10,018,381
8,116,797
3,315
2.37
93,841
Deposits from customers
3.72
Annualised
Annualised
Construction
Limited
Wang Tongzhou
liability
Limited
- China Communications Beijing
201,089,738
Shareholder's
parent company
0.80%
construction, leasing
General contractor for
million
RMB16,166
Shareholder
Legal
(note(v))
million
Construction Group
1.68%
422,770,418
RMB7,274
China Communications Beijing
Legal form representative
Relationship
with the Bank
the Bank Business
capital
Joint stock
limited
Company
Company
General contractor for
construction
Wang Tongzhou
-SAIC Motor Corporation Shanghai
and repair, technical
Joint stock
vehicles, consulting
held by
Shareholder
Production and sale of
1.23%
310,125,822
RMB11,683
million
Limited
Chen Hong
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
Production and sale
and exports, investment
and management business
consulting service, imports
company
Company Limited
by the
business, shipping
paid
enterprises, and
of holding investment
international businesses
various domestic and
supervising and managing
parent company liability
insurance companies,
Ji Yuhua
Limited
Investing and establishing Shareholder's
3.08%
(note(iv))
RMB100 776,574,735
million
China Insurance Security Beijing
Fund Co., Ltd
business etc.
shipping agency, leasing
Ltd.
liability
marketing business,
million
Oil & Shipping Co.,
Lin Rui
Limited
Shareholder
Ship purchasing and
0.04%
10,121,823
limited
- Guangzhou Tri-Dynas Guangzhou
RMB299
investment business
held by the
permitted by national laws
- Dajia Life Insurance Co., Beijing
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)
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
company
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
Ltd
and regulations, etc.
service, imports and
16,900,000,000 RMB
exports
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)
China COSCO Shipping Corporation Ltd. holds 9.97% of the Bank (2022: 9.97%) through its subsidiaries.
(iii)
As the largest direct shareholder, CMSN, a subsidiary of CMG, holds 13.04% of the Bank as at 31 December 2023 (2022: 13.04%).
(ii)
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
Name of related party
Subsidiary
2023
CMG
- Deposits from customers
business etc.
Off-balance sheet
- Irrevocable guarantees
- Irrevocable letters of credit
- Bills of acceptances
Interest income
Interest expense
Net fee and commission income/(expenses)
Operating expenses
Other net income
38
1,289
4,599
1,009
222
1,360
943
(115)
(129)
254
(93)
(1,455)
(1,797)
232
150
All significant balances and transactions between the Bank and its subsidiaries have been eliminated in the
consolidated financial statements.
299
RMB
2022
Note 24 Asset management
RMB500
Beijing
Wang Liang
Limited
Subsidiary
100% Banking
HKD1,161
Hong Kong
CMB Wing Lung Bank
(CMBFL)
liability
million
Company Limited
Zhong Desheng
Limited
Subsidiary
100% Finance lease
RMB12,000
Shanghai
CMB Financial Leasing
Limited (CMBIC)
liability
investment managements
million
Holdings Corporation
Wang Liang
Limited
Subsidiary
100% Investment bank and
HKD4,129
CMB International Capital Hong Kong
Limited (CMB WLB)
million
liability
China Merchants Fund
Cigna & CMB Asset
S.A.)
liability
million
S.A. (CMB Europe
Xue Fei
Limited
Subsidiary
100% Banking
EUR100
China Merchants Europe Luxembourg
liability
million
Co., Ltd
company
Chen Yisong
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
Limited
Co., Ltd.
16,900,000,000
business, insurance
Development Co., Ltd.
liability
domestic commerce,
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
the Bank Business
parent company
liability
materials supply and
shareholder's
marketing business, etc.
RMB600
1.53%
386,924,063
USD 1
- Best Winner Investment British Virgin
marketing business, etc.
materials supply and
Co., Ltd.
liability
domestic commerce,
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
-Shenzhen Chu Yuan Shenzhen
Shareholder
Miao Jianmin
Legal
representative
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 2 Level 3
Level 1
Fair value
94,005
Note:
The above financial assets do not include interest receivable.
(2)
Financial Liabilities
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:
2023
2022
Carrying
amount
Fair value
Level 1
5,206
138,708
Limited
138,708
China Merchants Bank
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
of the
Issued No.of shares of
Proportion Proportion
Details of the Bank's major shareholders and their parent companies are as follows:
Material connected person information
(a)
61. Material related party transactions
Chapter VIII Financial Statements
Annual Report 2023 (H share)
Note: The above financial liabilities do not include interest payable.
Joint stock
Ltd.
Islands
liability
million
(Guangzhou) Co., Ltd.
Shou Jian
Limited
Shareholder
Shipping business
CMSN
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.
etc.
freight forwarding agent,
technology, international
exports of goods and
shipping, imports and
- Guangzhou Haining
services to international
Guangzhou
103,552,616
Liu Chong
Limited
Leasing business, financing Shareholder
0.22%
HKD500 54,721,930
million
Investment Holdings
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
liability
Wan Min
Limited
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
Limited
Invest and set up industries, Shareholder
0.22%
liability
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
61. Material related party transactions (continued)
(a)
Material connected person information (continued)
Details of the Bank's major shareholders and their parent companies are as follows: (continued)
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
liability
the Bank
Company
capital
Company
held by
by the
held by the
paid
Registered
location
Company name
of the
Proportion
Proportion
of the
Bank held
the Bank
and fully
Issued No.of shares of
Company
6,056
342
3,578
The carrying value, fair value and fair value hierarchy of debt investments at amortised cost not measured at
fair value are listed as below:
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.
2023
2022
Carrying
amount Fair value
Debt investments at amortised cost 1,728,620 1,791,963
Level 1 Level 2
61,918 1,659,705
Carrying
Level 3 amount Fair value
70,340 1,536,397 1,569,775
Level 1
41,700
Level 2 Level 3
1,434,070
RMB
17,000,000,000 RMB
17,000,000,000
Shenzhen Yan Qing Investment and Development Co., Ltd.
Shenzhen Chu Yuan Investment and Development Co., Ltd.
RMB
600,000,000 RMB
600,000,000
RMB
China Merchants Financial Holdings Co., Ltd.
RMB
600,000,000 RMB
7,778,000,000 RMB
600,000,000
7,778,000,000
Best Winner Investment Ltd.
USD
1 USD
1
China Merchants Union (BVI) Limited
USD
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).
60,000 USD
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.
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.
Addition for the year
Exchange difference
(122)
(142)
96
Disposals and settlement on maturity
(739)
(5,695)
39
241
Balance as at 31 December
1,825
2,647
Total unrealised gains and losses included in the consolidated
statement of profit or loss for liabilities held at the end of the
reporting period
(122)
148
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.
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.
291
292
China Merchants Bank
Chapter VIII Financial Statements
Annual Report 2023 (H share)
60. Risk management (continued)
(g) Fair value information (continued)
(iii)
Financial assets and financial liabilities that are not measured at fair value
(1)
Financial Assets
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.
In loss
60,000
USD
RMB
7,274,023,830 RMB
7,274,023,830
China Communications Construction Company Limited
RMB
16,165,711,425 RMB
16,165,711,425
Shanghai Automotive Industry Corporation (Group)
SAIC Motor Corporation Limited
RMB
21,749,175,737 RMB
21,749,175,737
RMB
CMBIC
HKD
CMBFL
RMB
11,683,461,365 RMB
4,129,000,000 HKD
12,000,000,000 RMB
11,683,461,365
4,129,000,000
12,000,000,000
CMB WLB
HKD
1,160,950,575 HKD
1,160,950,575
CMFM
CMBWM
RMB
1,310,000,000 RMB
1,310,000,000
China Communications Construction Group Limited
China Merchants Industry Development (Shenzhen) Ltd.
299,020,000
RMB
10,000,000 USD
10,000,000
China Insurance Security Fund
RMB
100,000,000 RMB
100,000,000
Dajia Life Insurance Co., Ltd
RMB 30,790,000,000 RMB
30,790,000,000
China COSCO Shipping Corporation Limited
China Ocean Shipping Co., Ltd.
RMB
RMB
COSCO Shipping (Guangzhou) Co., Ltd.
RMB
Guangzhou Haining Maritime Technology Consulting Co., Ltd.
RMB
COSCO Shipping (Shanghai) Co., Ltd.
RMB
11,000,000,000 RMB
16,191,351,300 RMB
3,191,200,000 RMB
52,000,000 RMB
1,398,941,000 RMB
11,000,000,000
16,191,351,300
3,191,200,000
52,000,000
1,398,941,000
COSCO Shipping Investment Holdings Co., Ltd.
HKD
500,000,000 HKD
500,000,000
Guangzhou Tri-Dynas Oil & Shipping Co., Ltd.
299,020,000 RMB
RMB
8,147
Balance as at 1 January
(131)
(276)
553
70
325,509
77
326,209
Disposals or settlement on maturity
(596)
(1,451)
(304,929)
(1)
(306,977)
Transfer out of level 3
(560)
(560)
Exchange difference
At 31 December 2023
63
2
3
4,160
3,729
120,762
7,338
68
135,989
Total unrealised gains and losses included in the
consolidated statement of profit or loss for assets
held at the end of the reporting period
(98)
14
(145)
(84)
(103)
(14)
290
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)
(3)
Valuation techniques used and the qualitative information of key parameters for recurring fair value
measurements categorised as Level 3: (continued)
Valuation of financial instruments with significant unobservable inputs
The following tables show the movements from the beginning balances to the ending balances for Level 3
financial instruments:
Financial
investments
Profit or loss
Assets
At 1 January 2023
- In profit or loss
- In other comprehensive income
Addition for the year
at FVTPL
Loans and
advances to
customers
at FVTPL
Loans and
advances to
customers
at FVTOCI
Equity
investments
designated
at FVTOCI
Total
4,714
4,991
100,430
7,390
117,525
117
2,647
Financial
investments
at FVTPL
(145)
Exchange difference
100
27
At 31 December 2022
4,714
4,991
100,430
215
7,390
Level 2 Level 3
117,525
Total unrealised gains and losses included in the
consolidated statement of profit or loss for assets
held at the end of the reporting period
(49)
(191)
(240)
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)
(3)
Valuation techniques used and the qualitative information of key parameters for recurring fair value
measurements categorised as Level 3: (continued)
Valuation of financial instruments with significant unobservable inputs (continued)
Financial liabilities at fair value through profit or loss
2023
2022
(145)
Assets
Transfer out of level 3
(129)
At 1 January 2022
4,879
Loans and
advances to
customers
at FVTPL
7,281
Loans and
advances to
customers
at FVTOCI
56,713
Equity
investments
designated
at FVTOCI
Total
4,726
73,599
Profit or loss
- In profit or loss
(14)
(366)
744
364
- In other comprehensive income
(107)
51
(56)
Addition for the year
1,041
85
196,298
2,527
Disposals or settlement on maturity
(1,147)
(2,036)
(153,218)
199,951
(156,530)
5,555,555,555 RMB
5,555,555,555
CMB Europe S.A.
(129)
(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
Operating expenses
2023
2022
17,500
14,675
5,771
6,848
894
896
731
331
432
306
(26)
(19)
2,307
2,498
(1)
(8)
(274)
China Merchants Bank
(283)
9
9,360
28,103
2,116
770
1,683
4,346
- Placements from banks and other financial institutions
300
6,047
Deposits from customers
12,304
13,447
- Lease liabilities
65
Off-balance sheet:
- Irrevocable guarantees
- Irrevocable letters of credit
Interest income
Interest expense
Net fee and commission income
Operating expenses
Other net expenses
310
580
6
601
1,035
(460)
(475)
133
3,770
Chapter VIII Financial Statements
61. Material related party transactions (continued)
8,511
3,530
1,835
6,325
5,125
1,616
913
(510)
(633)
114
2,242
(291)
(138)
(1)
2023
2022
- Balances with banks and other financial institutions
2,204
958
- Placements with banks and other financial institutions
26,404
32,438
- Loans and advances to customers
12,442
1,396
- Financial investments
3,711
3,415
- Deposits from banks and other financial institutions
12,146
Annual Report 2023 (H share)
On-balance sheet
Other net expense
(f) Other major shareholders holding more than 5% shares of the Bank and
exercising significant influence over the Bank
2023
2022
On-balance sheet:
- Placements with banks and other financial institutions
- Loans and advances to customers
- Financial investments
600
38,949
27,070
995
4,302
- Deposits from banks and other financial institutions
3,908
2,929
- Deposits from customers
20,537
14,872
27
40
- Lease liabilities
Off-balance sheet:
- Irrevocable guarantees
- Irrevocable letters of credit
- Bills of acceptances
Interest income
Interest expense
Net fee and commission income
Operating expenses
(g) Subsidiaries
2,277
- Deposits from banks and other financial institutions
- Financial investments
CMBFL
No. of shares %
At 1 January 2022
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
CMB WLB
The subsidiaries held by the Bank
CMFM
CMBWM
HKD
%
RMB %
RMB %
CMB Europe S.A.
EUR %
CIGNA & CMAM
At 31 December 2022
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
Note:
This information is detailed in note 24.
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).
China Merchants Bank
Annual Report 2023 (H share)
Chapter VIII Financial Statements
61. Material related party transactions (continued)
(b) Terms and conditions for related-party transactions
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:
Short-term loans
Medium to long-term loans
Demand deposits
Time deposits
2023
CMBIC
3.55% to 3.65%
3.55% to 4.30%
0.35%
1.10% to 2.75%
CMSN
%
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
50,000,000
CIGNA & CMAM
EUR
RMB
100,000,000 EUR
500,000,000 RMB
500,000,000
The proportion of the Bank held by the largest shareholder and the portion of the subsidiaries held by the
Bank
The Bank held by the
largest shareholder
CMSN
No. of shares
At 1 January 2023
At 31 December 2023
CMBIC
CMBFL
HKD
%
The subsidiaries held by the Bank
CMB WLB
CMFM
CMBWM
HKD
%
RMB %
RMB %
CMB Europe S.A.
EUR %
CIGNA & CMAM
RMB
%
note
note
The Bank held by the
largest shareholder
2022
3.65% to 3.80%
3.65% to 4.65%
0.35%
1.10% to 2.75%
There were no loans and advances granted to related parties that were credit impaired during the year (2022:
None).
(c)
3,510
5,087
971
318
289
285
2,364
1,848
(1,475)
(1,376)
1,282
1,027
(211)
(177)
(10)
297
298
China Merchants Bank
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
- Amounts held under resale agreements
- Loans and advances to customers
Other net expenses
Operating expenses
Net fee and commission income
Interest expense
Shareholders and their related companies
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:
On-balance sheet:
2023
2022
- Placements with banks and other financial institutions
2,000
- Amounts held under resale agreements
2,942
2,589
- Loans and advances to customers
46,466
40,772
- Financial investments
4,630
12,159
- Deposits from banks and other financial institutions
26,119
29,726
- Deposits from customers
59,227
45,342
- Lease liabilities
170
210
Off-balance sheet:
- Irrevocable guarantees
- Irrevocable letters of credit
- Bills of acceptances
Interest income
7,626
Carrying
amount
17.77%
China Merchants Bank
Less stable deposits
4
41,476
829,526
328,336
3,698,130
Retail and small business customers deposits, of which:
Stable deposits
3
2,868,604
2
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
Serial No.
Cash outflows
286,860
5
Unsecured wholesale funding, of which:
Additional requirements, of which:
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)
7
655,476
2,650,733
Operational deposits (excluding correspondent banks)
6
1,458,116
4,379,860
(Expressed in millions of Renminbi except percentage)
1,973,700
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:
Chapter VIII Financial Statements
12,444
106,847
Counterparty credit risk exposure for SFT assets
Less: Netted amounts of cash payables and cash receivables of
gross SFT assets
276,497
171,348
Gross SFT assets (with no recognition of netting), after adjusting
for sale accounting transactions
288,941
Agent transaction exposures
278,195
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
Less: Deductions of receivables assets for cash variation margin
provided in derivatives transactions
the balance sheet assets
Total securities financing transaction exposures
5.
Balance of adjusted off-balance sheet assets
1,742,065
Annual Report 2023 (H share)
China Merchants Bank
306
305
7.95%
8.26%
Leverage ratio
7.
11,569,842
12,806,260
Balance of adjusted on-balance sheet and off-balance sheet
assets
6.
(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
(C) Liquidity coverage ratio
385,580
11
Cash outflows arising from derivative contract and other
< 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
6 months to
12 months
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:
Chapter VIII Financial Statements
China Merchants Bank
Annual Report 2023 (H share)
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".
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
(D) Net stable funding ratio
≥ 12 months
1
Capital
5,726
875,774
Stable deposits
5
3,610,469
5,038
57,445
1,617,013
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
(i)
Notes:
Liquidity coverage ratio (%)
23
Total cash outflows
16
109,469
3,643,112
Other contingent funding obligations
15
103,364
103,364
Other contractual obligations to extend funds
14
108,929
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
2,398,529
Gross-up for derivatives collateral provided where deducted from
Cash inflows
Secured lending (including reverse repo and securities borrowing)
Net cash outflows
22
Total stock of high quality liquid assets
21
Adjusted value
1,136,304
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
179,816
180,353
17
5,175
12,180
Add-on amounts for potential future exposure associated with all
derivatives transactions
Qualifying portion of share capital
17.88%
15.75%
16.01%
13.68%
13.73%
2022
2023
25,220
Core tier-1 capital:
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.
(A) Capital adequacy ratio
(Expressed in millions of Renminbi unless otherwise stated)
Unaudited Supplementary Financial Information
Components of capital base
25,220
Qualifying portion of capital reserve
65,547
13,451
Regulatory deductions from core tier-1 capital
821,466
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
141,184
General reserve
94,948
108,700
Surplus reserve
65,397
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
304
170
87,347
110
110
187,256
Total
Wealth management products
186,311
186,311
2,036
2,036
170
1,031
835
186,311
37,954
37,954
37,954
48,362
48,362
48,362
274,773
22,114
110
274,773
China Merchants Bank
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)
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.
525
Net core tier-1 capital
799,352
31 December 2023 31 December 2022
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.
1,496,177
12,444
106,847
(7,911)
(1,913)
(47,666)
(55,771)
10,138,912
2022
1,742,065
Net tier-1 capital
2.
1,057,754
5,551
4,639
of eligible cash variation margin)
Replacement cost associated with all derivatives transactions (net
10,726
16,819
Total derivative exposures
3.
(22,114)
(13,451)
Less: Asset amounts deducted in determining Basel III Tier 1
capital
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
2023
11,028,483
Adjustment for off-balance sheet items
Adjustment for securities financing transactions
Adjustments for derivative financial instruments
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
Tier-2 capital:
919,798
1,057,754
Net tier-1 capital
120,446
150,446
Additional tier-1 capital (note (ii))
Net tier-2 capital
907,308
Net capital
Notes:
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:
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.
(B) Leverage ratio
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
123,733
1,181,487
Total risk-weighted assets (taking into consideration the floor
requirements during the parallel run period)
exposure
1,121
6
Deposits held at other financial institutions for
16
344,456
Total NSFR high-quality liquid assets (HQLA)
15
Required stable funding (RSF) item
140,838
7,173,540
Total ASF
operational purposes
14
76,397
151,468
7,430
above categories
All other liabilities and equity not included in the
13
32,152
NSFR derivative liabilities
102,640
44,005
17
Performing loans and securities
Performing loans to non-financial corporate clients,
20
175,363
27,211
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
30,547
4,708,965
4,699
3,838,101
1,092,143
7,691
2,352,104
101,255
12
loans to retail and small business customers, and
140,838
76,397
7
2,643,869
4,954
85,799
1,466,756
1,379,573
Less stable deposits
6
Wholesale funding
807,808
464
5,750
842,850
Stable deposits
5
3,451,677
6,152
86,263
1,198
2,603,626
2,377,268
170,233
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
2,581,665
Operational deposits
8
2,554,246
294,570
134,792
loans to sovereigns, central banks and PSES, of
which:
1,340,029
All other assets not included in the above categories
31
6,692
6,692
variation margin posted
NSFR derivative liabilities before deduction of
30
919
4,144
33,071
20
29
235
277
CCPs
Assets posted as initial margin for derivative
contracts and contributions to default funds of
2,373
208,457
NSFR derivative assets
80,370
38,577
75,498
309
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
5,512,172
Total RSF
33
219,747
5,803,725
Off-balance sheet items
32
198,238
108,846
38,577
80,370
6,936
2,792
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
22
1,472,506
23
No maturity
Physical traded commodities, including gold
27
339,270
202,353
55,109
178,176
101,255
Securities that are not in default and do not qualify
as HQLA, including exchange-traded equities
Assets with matching interdependent liabilities
Other assets
26
25
2228
24
1,140,044
1,313,046
25,505
25,454
≥ 12 months
12 months
< 6 months
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
2,222,423
Small business customer
Retail deposits and deposits from
148,674
Level 1 HQLA
Performing loans to financial institutions secured by
18
26,166
4,820,184
3,851,064
1,197,720
7,289
2,398,056
22,301
122,075
17
44,614
operational purposes
Deposits held at other financial institutions for
16
399,307
Total NSFR high-quality liquid assets (HQLA)
15
Performing loans and securities
19
Performing loans to financial institutions secured
by non-Level 1 HQLA and unsecured performing
loans to financial institutions
25,840
Performing residential mortgages, of which:
22
189,595
under the Basel II standardized approach for credit
risk
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
Required stable funding (RSF) item
126,648
7,409,608
Total ASF
14
Other wholesale funding
9
1,301,060
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
3,917
56,920
1,611,287
1,406,801
Less stable deposits
41,983 2,423,633
124,083
26,102
251,230
1,300,177
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
12
126,648
118,015
64,195
169,456
2,657
Other liabilities
11
Liabilities with matching interdependent assets
10
289,042
839,045
161,811
1,328,961
23
34
5,668,280
Total RSF
33
221,955
5,947,508
Off-balance sheet items
32
Net Stable Funding Ratio (%)
191,337
34,039
73,396
8,440
All other assets not included in the above categories
31
4,889
4,889
NSFR derivative liabilities before deduction of
variation margin posted
75,479
130.72%
30 September 2023
(Expressed in millions of Renminbi except percentage)
4
Other capital instruments
3
1,026,779
1,026,779
1,026,779
Regulatory capital
2
1,026,779
Capital
1
≥ 12 months
12 months
< 6 months
No maturity
Available stable funding (ASF) item
Serial No.
6 months to
Weighted
amount
Unweighted amount
30
2,186
25,650
NSFR derivative assets
Weighted
Unweighted amount
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
180,222
122,075
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%
amount
262,016
1,154,132
6 months to
Required stable funding (RSF) item (continued)
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
101,462
34,039
73,396
10,761
Other assets
26
≥ 12 months
12 months
< 6 months
No maturity
Serial No.
300
Total
cost
Exchange difference
At 31 December 2022
Principal Distributions/Paid
2,787
Total
2,787
182
(182)
182
(182)
51
2,838
51
2,838
Principal
Distributions/Paid
Total
3,636
(1,104)
3,636
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.
63. Transfers of financial assets
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
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.
Paid in 2022
2,787
255
2,787
(202)
(202)
202
202
(1,104)
255
At 31 December 2023
Exchange difference
Paid in 2023
37,228
2022
RMB'000
2023
RMB'000
Contributions to defined contribution retirement schemes
Share-based payment
Discretionary bonuses
38,249
Chapter VIII Financial Statements
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
at FVTOCI
Annual Report 2023 (H share)
Securitisation of credit assets
18,583
(41,066)
Distributions in 2023
At 1 January 2023
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:
(a) Perpetual debt capital
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.
62. Non-controlling interests
(18,121)
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.
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.
17,866
Total
(i)
19,107
2,100
Annuity scheme
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.
At 1 January 2022
Redemption in 2022
Distributions in 2022
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).
227,477
19,376
17,983
1,073
25,204
25,204
227,477
35,275
exposure
Total
at FVTOCI
cost
Maximum
investments
35,275
Debt
580
61,368
Maximum
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.
Debt
investments
Debt
investments
at amortised
Financial
investments
at FVTPL
Fund investments
580
Asset-backed securities
Asset management schemes
Balance
2022
307,912
307,912
17,983
Trust beneficiary rights
25,020
19,376
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.
Interests in the structured entities sponsored by third parties institutions
(a)
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:
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.
64. Interests in unconsolidated structured entities
Chapter VIII Financial Statements
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.
Annual Report 2023 (H share)
302
301
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.
Repurchase transactions and securities lending transactions
35,275
Transfers of credit assets to third parties
China Merchants Bank
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:
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.
Asset management schemes
Trust beneficiary rights
Asset-backed securities
228,561
2023
227,477
320
184
*
at amortised
investments
580
Balance
at FVTPL
Financial
investments
Wealth management products
Total
Fund investments
Debt
covered by
advances
loans and
% of gross
% of gross
2023
China Merchants Bank
Operation in the Chinese mainland
industry sector
(G) Further analysis on loans and advances to customers analysed by
Annual Report 2023 (H share)
Chapter VIII Financial Statements
collateral or
2022
loans and
37
collateral or
312
461,434
40
477,016
Transportation, storage and postal services
32
advances
covered by
445,218
557,691
Manufacturing
other security
Amount
other security
Amount
28
311
institutions
358,590
162,273
22,043
62,407
Asia Pacific excluding the Chinese mainland
250,331
156,029
246,723
4,419
Chinese mainland
Foreign currencies transactions in the
Total
Other
entities
Property development
89,883
- of which attributed to Hong Kong
39,726
19,891
110,175
209,710
Total
146,738
19,809
81,981
44,948
North and South America
34,683
20,479
1,732
12,472
Europe
205,724
146,107
678,475
303,707
884,395
349,682
Corporate loans and advances subtotal
30
67,677
31
76,400
Others
2,428,284
33
34
42,326
Mining
30
64,886
45
34,421
42,813
34
35
Micro-finance loans
sector
935,777
Credit cards
100
1,379,825
2,215,835
100
Residential mortgage
100
514,054
100
471,127
Discounted bills
1,376,815
52
Water, environment and public utilities management
75,593
38
203,870
32
27
186,463
Leasing and commercial services
171,786
35
Wholesale and retail
259,864
power, gas and water
Production and supply of electric power, heating
278
48
187,737
23
32
158,320
17
88,296
Finance
48
78,950
49
17
95,394
24
103,998
22
110,577
Construction
14
Telecommunications, software and IT services
financial
Net option position
and other
Other
HKD
USD
2022
51,347
1,552
Total
41,314
Net structural position
11,670
(2,001)
12,247
1,424
Net long position
8,481
15,719
(in millions of RMB)
Spot assets
335,212
56,399
2,258
276,555
Forward purchased
638,595
Non-structural position
91,232
530,903
Spot liabilities
642,379
53,176
41,714
547,489
16,460
Forward written
3,562
12,236
31,474
601,745
Non-structural position
Spot assets
(in millions of RMB)
Total
Other
47,462
HKD
2023
(E) Currency concentrations other than RMB
Annual Report 2023 (H share)
Chapter VIII Financial Statements
China Merchants Bank
310
USD
(79)
680,681
553,972
Net option position
522,647
38,999
7,311
476,337
500,863
Spot liabilities
76,916
417,752
Forward written
Forward purchased
662,946
90,942
18,032
6,195
305,169
17,447
18,938
181,581
17,202
24,986
- of which attributed to Hong Kong
267,980
199,166
223,769
19,653
Asia Pacific excluding the Chinese mainland
240,095
132,845
2,079
105,171
Chinese mainland
49,161
Foreign currencies transactions in the
Europe
1,598
Banks
2022
756,769
370,624
143,022
243,123
19,866
Total
17,584
119,692
68,925
North and South America
42,493
21,029
206,201
Total
Other
entities
40,691
9,974
11,325
(1,290)
8,943
3,672
1,136
Net structural position
13,883
(695)
(1,122)
15,700
Consumer loans
341,554
Net long position
51,801
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:
Investment properties, property and equipment, net of depreciation charges;
institutions
sector
financial
Public
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
Public
750,019
10,002
629,857
5,239
5,307
967
1,433
4,619
5,342
4,538
4,051
7,716
7,613
11,980
13,308
2022
2023
4,863
3,653
638
395
22,748
over 12 months
-
11,290
11,598
- between 6 and 12 months (inclusive)
15,379
11,476
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)
2022
2023
41,078
45,822
2,458
2,780
(ii) By overdue period
14,409
Total
Outside the Chinese mainland
8,604
26,255
4,031
4,904
15,650
4,582
31,413
Micro-business loan
11,180
Credit card
Residential mortgage
Impaired loans
and advances
Overdue loans
and advances
11111
- Stage 3
(Lifetime ECL
- credit impaired)
- Stage 2
(Lifetime ECL
- not credit-
impaired)
7,342
2,441
19,383
1,839
3,821
14,665
Western region
Central region
Northeast region
Pearl River Delta and West Coast region
Bohai Rim region
Yangtze River Delta region
Headquarters
By geographical segments
(i)
(H) Loans and advances to customers overdue for more than 90 days
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
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).
3,640
Subsidiaries
Stage 1
(12-month ECL)
45,822
Total
Amount
0.20%
12,076
0.20%
% of total
loans and
advances
Amount
13,007
% of total
loans and
advances
2023
Less:
Renegotiated loans and advances to customers (Note)
(I) Renegotiated loans and advances to customers
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.
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.
2022
Renegotiated loans and advances to customers
overdue more than 90 days
6,673
0.10%
We are here Just for you
CHINA MERCHANTS BANK
招商銀行股份有限公司
公 招商銀行
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.
(J) Non-bank the Chinese mainland exposures
The amount of the Group's renegotiated loans and advances to financial institutions as at 31 December 2023 was
nil (31 December 2022: nil).
Represents the restructured non-performing loans.
Note:
0.11%
6,869
0.10%
6,334
- Renegotiated loans and advances to customers
overdue less than 90 days
0.09%
5,207
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.
41,078
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.
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).
0.68%
0.70%
0.24%
0.35%
0.19%
0.18%
315
0.25%
Total
- over 12 months
- between 6 and 12 months (inclusive)
- between 3 and 6 months (inclusive)
advances to customers:
As a percentage of total gross amount of loans and
0.17%
316
China Merchants Bank
Chapter VIII Financial Statements
42,302
47,613
24,674
28,681
16,404
17,141
2022
2023
Fair value of collateral held against overdue loans and advances
Unsecured portion of overdue loans and advances
Secured portion of overdue loans and advances
(iii) Collateral information
(continued)
(H) Loans and advances to customers overdue for more than 90 days
Annual Report 2023 (H share)
Note:
2022
3,793
1,649
Property development
19
30,814
21
36,248
Transportation, storage and postal services
22,960
23
37
45,368
Finance
other security
Amount
Amount other security
36,521
44
26,298
37
4,945
Mining
6,207
Leasing and commercial services
8,323
Telecommunications, software and IT services
Wholesale and retail
12,359
power, gas and water
Production and supply of electric power, heating
39
20,494
56
19,335
Manufacturing
collateral or
Construction
collateral or
advances
3,107,676
59
3,371,955
Retail loans and advances subtotal
93
11,374
61
90
Others
3
202,225
2
301,538
79
7,806
Gross amount of loans and advances to customers
6,271,366
52
loans and
covered by
advances
loans and
% of gross
% of gross
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
covered by
623
Water, environment and public utilities management
Others
419
and advances
Overdue loans
Micro-business loan
Residential mortgage
Credit card
- Stage 2
(Lifetime ECL
2023
Impaired loans
and advances
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:
Chapter VIII Financial Statements
Annual Report 2023 (H share)
China Merchants Bank
314
313
47
(G) Further analysis on loans and advances to customers analysed by
industry sector (continued)
- Stage 1
(12-month ECL)
- not credit-
- Stage 3
(Lifetime ECL
9,130
4,592
5,269
15,562
19,179
26,666
16,383
29,910
4,388
2,739
7,021
5,122
8,165
credit impaired)
impaired)
213,894
53
54,113
96
237,499
Gross amount of loans and advances to customers
65,928
Retail loans and advances subtotal
55,846
1,278
Others
Micro-finance loans
133
Credit cards
8,671
Residential mortgage
171,571
Corporate loans and advances subtotal
4,782
གླགླསྐལྦ⌘ge8༅ ༄ག8 ཞ
78
9,023
10,908
100
1,181
43,425
95
100
ཀྵ ཨྰ ཿཌ ལྐ ཿ
100
9,383
124
100
159,781
36
5,414
110
100
1,772
3,430
6,074
8,923
Loan balance
12,076
8,155,438
30
14.96
973,646
Head Office (2)
(%)(1)
loans
loans (%)
18,011
customers
loans
loans (%)
customers
loan ratio
performing
of the total
(%)(1)
1.85
942,006
15.57
5,745
14.29
930,205
Bohai Rim
0.79
10,532
22.12
1,338,769
0.73
10,489
22.14
1,441,147
Yangtze River Delta
1.89
17,811
advances to
loan ratio
of the total performing
advances to
(2) Primarily consists of agriculture, forestry, animal husbandry, fishery, accommodation and catering, health and social work, etc.
(1) Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
Notes:
0.96
58,004
100.00
6,051,459
0.95
61,579
100.00
6,508,865
to customers
Total loans and advances
0.89
28,043
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.
0.62
35
China Merchants Bank
(in millions of RMB,
except for percentages)
Non-
Performing
Non-
Percentage
Loans and
Non-
Performing
Non
Percentage
Loans and
31 December 2022
31 December 2023
Distribution of loans and non-performing loans by region
3.4.4
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
36
52.25
828,311
5,118
1.22
4,346
5.45
354,942
Subsidiaries
0.69
332,147
544
78,567
1.06
851
1.23
80,336
Overseas
1.30
5.49
3,790
1.14
3.4.5 Distribution of loans and non-performing loans by type of guarantees
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.
(2) The Head Office includes Credit Card Centre.
(1) Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
Notes:
0.96
58,004
100.00
6,051,459
0.95
61,579
100.00
6,508,865
to customers
Total loans and advances
0.86
5,468
10.46
633,129
2.60
168,929
North-eastern China
0.43
4,673
17.97
1,087,410
0.67
7,941
18.23
1,186,286
Economic Zone
Western Taiwan Straits
Pearl River Delta and
0.62
1,862
13.69
1.10
2.80
0.85
5,820
10.55
686,701
Western China
1.25
10.60
641,554
0.95
6,514
10.55
686,673
Central China
1.19
2,020
169,566
31 December 2023
Percentage
3,161,789
30,587
Production and supply of
1.03
4,781
7.70
465,712
0.53
electric power, heat,
3,063
577,026
Manufacturing
4.08
15,348
6.21
375,980
8.87
gas and water
272,223
4.18
1,784
2.67
161,750
0.76
1,470
2.96
192,670
services
Leasing and commercial
0.22
468
3.52
212,893
0.16
443
5.26
17,183
5.02
326,667
Corporate loans
(%) (1)
loans
loan ratio
performing
Non-
Performing
Non-
Percentage
of the total
loans (%)
customers
(%)(1)
loans
loans (%)
customers
except for percentages)
Loans and
advances to
2,599,855
1.10
39.94
1.19
Property development
0.19
948
8.14
492,248
0.34
1,739
7.89
513,264
and postal services
Transportation, storage
1.26
29,961
39.26
2,375,616
30,992
0.89
Wholesale and retail
3.04
0.67
40,495
1.20
567
0.73
47,271
521
Mining
100
1.07
64,996
0.23
101
0.66
0.15
1.29
Others(2)
81,182
52.82
3,437,883
Retail loans
8.49
514,054
7.24
471,127
Discounted bills
3.96
2,894
1.21
73,091
4.45
3,616
1.24
43,232
public utilities
environment and
Water conservancy,
0.39
440
1.85
112,114
0.29
387
2.05
133,664
Finance
1.02
1,836
2.99
180,709
0.67
1,330
Construction
197,739
111,200
333
0.45
406
1.48
89,858
0.73
760
1.59
103,717
software and IT service
Information transmission,
0.41
435
1.75
105,770
0.30
1.71
loan ratio
Non-
Performing
Loans and
advances to
Increased by 0.11
percentage point
Information on leverage ratio (2)
Balance of adjusted on- and off-balance sheet
assets
Leverage ratio
12,806,260
8.26%
17.77%
11,569,842
7.95%
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.
(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.
39
of total
Notes:
17.88%
Capital adequacy ratio
percentage point
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%
13.12
Increased by 0.05
percentage point
Tier 1 capital adequacy ratio
16.01%
15.75%
Increased by 0.26
Percentage
31 December 2022
31 December 2023
Percentage
of total
loans and
advances (%)
0.20
13,007
81,983
Total overdue loans
0.08
4,599
0.08
5,077
Overdue more than 3 years
0.16
9,810
0.27
17,671
Overdue from 1 year up to 3 years
0.44
26,669
0.35
1.26
578,036
78,285
Total loans and advances to customers
Restructured loans (note)
Loan balance
(in millions of RMB, except for percentages)
Restructured loans
3.4.8
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
China Merchants Bank
38
37
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.
100.00
6,051,459
100.00
6,508,865
1.29
23,074
605,996
-2.75
Write-offs/disposal for the period
Foreign exchange rate and other movements
2023
261,476
46,635
Balance as at the end of the period
8,819
(47,922)
526
269,534
Recovery of loans previously written off
2022
45,157
8,972
(39,087)
330
261,476
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
246,104
Charge for the period
Balance as at the end of the previous year
(in millions of RMB)
advances (%)
0.20
Of which: restructured loans overdue more than
90 days
6,673
0.10
5,207
0.09
Note:
Represents the restructured non-performing loans.
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.
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.
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
1,181,487
1,037,942
13.83
Risk-weighted assets (without taking into
consideration the floor requirements during the
parallel run period)
5,919,504
5,491,072
7.80
Of which: Credit risk weighted assets
Market risk weighted assets
5,226,757
4,823,836
8.35
86,751
89,200
Net capital
Operational risk weighted assets
15.00
1,057,754
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.
The Group
(in millions of RMB, except for percentages)
Capital adequacy ratios under the Advanced
Measurement Approach (1)
Net core Tier 1 capital
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 Tier 1 capital
919,798
(in millions of RMB,
Overdue from 3 months up to 1 year
37,207
Discounted bills
1.55
5,398
5.77
348,883
1.22
471,127
4,613
379,457
Pledged loans
0.67
14,246
35.24
2,132,337
5.83
7.24
514,054
8.49
Chapter III Management Discussion and Analysis
China Merchants Bank
Annual Report 2023 (H share)
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.
Represents the percentage of the non-performing loans in a certain category to the total loans of that category.
Note:
0.96
58,004
100.00
6,051,459
0.95
61,579
100.00
6,508,865
to customers
Total loans and advances
0.63
14,091
34.48
2,244,129
(%)(Note)
loans
(%)
loan ratio
Non-
performing
31 December 2022
Percentage
of the
total loans
Loans and
advances to
customers
Non-
Performing
loan ratio
(%) (Note)
loans
(%)
customers
except for percentages)
total loans performing
Non-
of the
Credit loans
3.4.6
2,592,093
24,147
Collateralised loans
2.00
16,698
13.82
836,550
2.28
18,728
12.63
822,059
Guaranteed loans
0.98
21,662
36.68
2,219,635
0.93
39.82
0.61
Loans to the top ten single borrowers
(under the
0.14
0.78
9,205
Manufacturing
0.14
0.79
Transportation, storage and postal services
9,359
H
0.15
0.81
9,528
Transportation, storage and postal services
G
Property development
7,624
0.64
0.12
0.56
36,161
Overdue within 3 months
loans (%)
customers
(in millions of RMB, except for percentages)
31 December 2022
Loans and Percentage
advances to of the total
customers
Percentage
of the total
loans (%)
31 December 2023
Loans and
advances to
3.4.7 Distribution of loans by overdue term
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.
Total
2.01
11.06
130,704
0.17
0.90
10,645
Transportation, storage and postal services
1.89
22,280
Finance
AB
(%)
(%)
2023
Approach) of total loans
31 December
Industry
(in millions of RMB, except for percentages)
Top ten borrowers
Percentage
Measurement
Loans as at
Advanced
0.34
Percentage
of net capital
C
18,876
F
0.20
1.12
13,276
0.22
1.23
14,548
Transportation, storage and postal services
Transportation, storage and postal services
E
D
0.24
1.30
15,363
0.29
1.60
Transportation, storage and postal services
Transportation, storage and postal services
Non-
Performing
8,048
advances to of the total
82.02
8,155,438
Deposits from customers
Percentage
of the total
amount (%)
Amount
amount (%)
Amount
(in millions of RMB, except for percentages)
Percentage
of the total
31 December 2022
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
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
China Merchants Bank
32
31
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.
3.3.1.3 Goodwill
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.
Investments in joint ventures and associates
Note: "Official authorities" include the Ministry of Finance of the PRC, local governments and the central bank, etc.; "Others" mainly refer to
enterprises.
2,438,851
7,535,742
82.05
Inter-bank transactions (1)
888,408
100.00
2.96
271,769
2.87
285,554
9,942,754
Total liabilities
Others(2)
2.42
222,288
1.76
174,764
Debt securities issued
2,844,685
0.74
0.62
61,401
loss and derivative financial liabilities(1)
Financial liabilities at fair value through profit or
1.41
129,438
3.79
377,189
Borrowings from the central bank
10.42
957,657
8.94
67,780
111,026
143,578
232,923
Assets
6,428
11,376
867
92,258
2,509,725
(1,300)
(17,443)
1,485
18,733
136,759
3,387,252
Total
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.
Liabilities
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.
31 December 2022
Loss
Amount
Percentage
of the total
amount (%)
Percentage
of the total
Amount
amount (%)
Derivative financial assets
18,733
0.58
18,671
0.67
31 December 2023
9,184,674
(6,109)
(856)
252,828
494,628
503,459
1,600,274
1,944,820
31 December 2023 31 December 2022
Total bond investments
Commercial banks and other financial institutions
Others
Policy banks
Official authorities
(in millions of RMB)
(11,671)
The composition of the Group's total bond investments classified by the issuing entities
Equity investments designated 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.
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 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
Financial investments at fair value through profit or loss
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
China Merchants Bank
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.
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.
(18,636)
18,671
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.
Financial investments at fair value through profit
100.00
(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.
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
Substandard
1.21
73,470
1.10
71,328
97.83
5,919,985
97.95
6,375,958
Special mention
Normal
Percentage
of the total
amount (%)
Amount
Percentage
of the total
amount (%)
Amount
(in millions of RMB, except for percentages)
Chapter III Management Discussion and Analysis
3.4.2
Annual Report 2023 (H share)
China Merchants Bank
16,576
0.26
22,770
0.38
21,554
0.33
23,737
0.39
23,449
0.36
11,497
0.19
31 December 2022
Total loans and advances to customers
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
100.00
6,051,459
100.00
0.95
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
Non-performing loans
31 December 2023
The following table sets forth the 5-tier loan classification of the Group as at the dates indicated.
Distribution of loans by 5-tier loan classification
4,431,553
57.15
4,660,522
Subtotal
22.15
1,668,882
24.72
2,015,837
Time
36.66
2,762,671
32.43
58.81
2,644,685
Corporate customer deposits
Amount
Percentage
of the total
amount (%)
Amount
(in millions of RMB, except for percentages)
31 December 2023
Percentage
of the total
amount (%)
31 December 2022
The following table sets forth, as at the dates indicated, the deposits from customers of the Group by product type
and customer type.
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.
Demand
Notes:
Deposits from retail customers
1,829,612
3.4 Analysis of Loan Quality
3.4.1
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.
3.3.3 Shareholders' equity
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
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.
100.00
7,535,742
100.00
loans and
Demand
Total deposits from customers
3,104,189
42.85
3,494,916
Subtotal
14.87
1,120,825
20.42
1,665,304
Time
26.32
1,983,364
22.43
41.19
or loss
(in millions of RMB, except for percentages)
16.40
0.11
Others(2)
405,951
6.24
7,890
1.94
399,862
6.61
5,946
1.49
Discounted bills(3)
471,127
7.24
330
514,054
Retail loans
3,437,883
52.82
30,587
0.89
3,161,789
52.25
28,043
0.89
Micro-finance loans
751,297
11.54
4,592
8.49
4.79
289,605
0.04
39.94
30,992
1.19
2,375,616
39.26
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
14.29
14,123
1.63
Trade finance
334,150
5.13
119
0.61
631,038
10.43
4,031
54,799
0.90
1,267
2.31
Total loans and advances to
customers
6,508,865
100.00
61,579
0.95
6,051,459
100.00
58,004
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 other corporate loans such as financial leasing, M&A loans and corporate mortgage loans.
(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
31 December 2022
Loans and
Percentage
(in millions of RMB,
1.89
2,599,855
1,205
63,652
0.64
Residential mortgage loans
1,385,486
21.29
5,122
0.37
1,389,208
22.96
4,904
0.35
Credit card loans
935,910
14.38
16,383
1.75
884,519
14.62
15,650
1.77
Consumer loans
301,538
4.63
3,285
1.09
202,225
3.34
2,191
1.08
Others(4)
0.98
526,145
Corporate loans
loans
126,698
4.55
679
0.02
648
- Less: allowances for impairment losses
(39,390)
(1.23)
(43,448)
0.02
(1.56)
2.71
Debt investments at fair value through other
(%)(1)
27.72
771,271
27.67
Equity investments designated at fair value through
other comprehensive income
19,649
0.61
13,416
0.48
comprehensive income
87,069
52.12
1,452,499
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
Non
performing
1,536,397
55.13
- Bond investments
- Non-standardised asset investments
- Others
1,680,262
52.36
Investments in joint ventures and associates
26,590
889,736
23,844
(10,667)
874,230
0.83
Other derivatives
Loans and
(in millions of RMB,
advances to
total loans
performing
loan ratio
advances to
of the
total loans
Non-
Non-
Performing
performing
loan ratio
except for percentages)
customers
(%)
loans
(%) (1)
customers
(%)
11,815
1,431,262
Doubtful
1,543,237
Currency derivatives
Liabilities
Assets
Notional
Notional
amount
(in millions of RMB)
Fair value
Fair value
31 December 2022
31 December 2023
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.
amount
Derivative financial instruments
Interest rate derivatives
100.00
2,787,066
100.00
3,209,473
other financial assets
Total investment securities and
0.86
1,819,231
5,433
(5,476)
Note: Including equity investments, fund investments, wealth management products, long position in precious metal contracts and others.
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.
41
percentage point
817,387
15.53
1,023,111
908,572
12.61
7,046,274
6,390,196
11.38%
10.97%
Increased by 0.41
percentage point
13.40%
12.79%
Increased by 0.61
percentage point
14.52%
14.22%
Increased by 0.30
11
3.5.2 Balance of credit risk exposures
10.27
Approach
14.34
Chapter III Management Discussion and Analysis
7
3.
Annual Report 2023 (H share)
China Merchants Bank
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.
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.
6
5
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).
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).
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.
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
China Merchants Bank
Promoting the construction of digital finance and pressing ahead towards
"Smart CMB ()"
44
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 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.
Annual Report 2023 (H share)
China Merchants Bank
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.
8
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.
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.
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.
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.
Chapter III Management Discussion and Analysis
China Merchants Bank
Annual Report 2023 (H share)
46
46
45
Covering on- and off-balance sheet businesses such as proprietary credit extension business, asset management business, agency distribution business and
other cooperative businesses.
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.
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.
43
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.
944,349
3,786
10,138
3,940
142,094
67,149
134,625
72,765
191,415
94,178
194,315
99,913
Net
operating
income
segments
income
segments
11,231
176,618
339,078
165,113
2.
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.
1.
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.
3.8 Implementation of Development Strategies
As at the end of the reporting period, the Group did not have any outstanding overdue debts.
3.7.2 Outstanding overdue debts
4.
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.
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
China Merchants Bank
statements.
For the detailed figures of the Group's business and geographical segments, please refer to Note 56 to the financial
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.
344,740
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
by business
5.
Chapter III Management Discussion and Analysis
944,349
817,387
15.53
Net capital
1,059,697
927,881
14.21
Risk-weighted assets (without taking into
consideration the floor requirements during the
parallel run period)
5,295,085
4,925,532
7.50
Of which: Credit risk weighted assets
Market risk weighted assets
4,673,703
Net Tier 1 capital
4,330,955
14.34
801,565
40
40
China Merchants Bank
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
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.
The Company
(in millions of RMB, except for percentages)
Capital adequacy ratios under the Advanced
Measurement Approach
Net core Tier 1 capital
Increase/decrease
at the end of
the current year
as compared with
31 December
2023
31 December
2022
the end of the
previous year (%)
701,033
7.91
67,143
69,000
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.
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.
3.9.1 Net interest margin
3.9 Key Business Concerns in Operation
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
China Merchants Bank
48
47
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.
To comprehensively improve the level of refined management
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 accelerate the construction of advantages in key regions
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 continue building a fortress-style overall risk and compliance management
system
3.9.2 Net non-interest income
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.
9
The income from extensive wealth management includes the fee and commission income from wealth management, asset management and custody
business.
-2.69
Operational risk weighted assets
554,239
525,577
5.45
Risk-weighted assets (taking into consideration
the floor requirements during the parallel run
period)
6.
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.
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.
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.
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
China Merchants Bank
49
49
3.9.3 Risk management and control in the real estate sector
operating
Balanced and coordinated development of our four major sectors
Net
Net Tier 1 capital
Net capital
Risk-weighted assets
Core Tier 1 capital adequacy ratio
Tier 1 capital adequacy ratio
Capital adequacy ratio
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
1,057,754
Net core Tier 1 capital
919,798
Capital adequacy ratios under the Weighted
Approach (note)
The Group
5,299,237
13.23%
13.52
Increased by 0.09
percentage point
Tier 1 capital adequacy ratio
15.70%
15.42%
Increased by 0.28
percentage point
Capital adequacy ratio
17.62%
17.51%
Increased by 0.11
percentage point
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.
(in millions of RMB, except for percentages)
15.00
Profit
before tax
1,018,678
Capital adequacy ratios under the Weighted
Net core Tier 1 capital
Net Tier 1 capital
Net capital
Risk-weighted assets
Core Tier 1 capital adequacy ratio
Tier 1 capital adequacy ratio
Capital adequacy ratio
Increase/decrease
at the end of
the current year
as compared with
31 December
2023
31 December
2022
the end of the
previous year (%)
801,565
701,033
(in millions of RMB, except for percentages)
The Company
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
12.39
7,652,723
11.86%
6,941,350
11.52%
10.25
Increased by 0.34
percentage point
13.32%
13.82%
Increased by 0.57
percentage point
14.96%
14.68%
Increased by 0.28
percentage point
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.
China Merchants Bank
Annual Report 2023 (H share)
13.25%
Core Tier 1 capital adequacy ratio
1,144,901
31 December 2023
857
period
period
Value at the end of the period
Minimum value
Average value
Maximum value
3
4
2
1
Item
(in millions of RMB)
General
market risk
value during
the reporting
31 December 2023
Distressed
market risk
value during
the reporting
No.
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.
541
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.
911
302
6,015,774
before tax
by business
2022
Profit
2023
Total
Other businesses
Wholesale finance
Retail finance
(in millions of RMB)
Items
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.
3.6 Results of Operating Segments
334
809
703
Measurement of market risk capital
1,060
3.5.3
1,379,581
Of which: Residential mortgage
4,014,718
4,014,718
Retail
2,553,072
1,159,243
1,379,581
1,159,243
Legal person
Corporate
Financial institution
Type of risk exposure
Portion covered by the
IRB approach
Chapter III Management Discussion and Analysis
(in millions of RMB)
Group
Qualified revolving retail
2,553,072
1,921,846
Annual Report 2023 (H share)
42
38,998
253,314
232,634
38,019
Counterparty
Off-balance sheet
5,178,480
China Merchants Bank
On-balance sheet
Portion not covered by the IRB
approach
713,291
713,291
Other retail
1,921,846
4,608,970
0.78
18,071
1.15
26,694
2,321,585
of overdue
loans (%)
loans
loans (%)
advances
loans loan ratio (%)
overdue
Percentage
Balance of
Balance
of special-
mentioned
Percentage
of special-
mentioned
25,862
loans
1.11
5,211
12
Non-
performing
0.70
0.35
2,648
0.61
4,592
749,773
471,127
Micro-finance loans
47,706
1.44
48,739
0.91
30,539
3,373,633
Retail loans
1.41
performing
China Merchants Bank
Discounted bills
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.
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.
3.9.5 Assets allocation
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.
Chapter III Management Discussion and Analysis
China Merchants Bank
Annual Report 2023 (H share)
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.
51
10
3.9.4 Deposits from customers
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.
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.
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
50
Residential mortgage loans
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.
loans and
52
Annual Report 2023 (H share)
except for percentages)
Corporate loans
(In millions of RMB,
Balance
of non-
Balance of
31 December 2023
The following table sets out the asset quality of the Company's loans and advances by product type as of the date
indicated.
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.
China Merchants Bank
3.9.7 Asset quality in key areas
China Merchants Bank
Annual Report 2023 (H share)
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.
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.
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 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.
3.9.6 The formation and disposal of non-performing assets
Chapter III Management Discussion and Analysis
Chapter III Management Discussion and Analysis
1,376,814
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.
0.37
13,678
1,245
9.10
110
0.80
1,256
9.18
Total loans and advances to
customers
5,720,708
54,214
0.95
65,620
1.15
72,583
1.27
Note: Primarily consists of commercial housing loans, automobile loans, house decoration loans, education loans and other personal loans secured by
monetary assets.
Risk control over residential mortgage loans
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.
53
54
54
China Merchants Bank
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
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.
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
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.
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.
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.
Others (Note)
Control over the risks relating to micro-finance loan business
1.26
0.43
Micro-finance loans
629,628
4,027
0.64
2,515
0.40
4,567
0.73
Residential mortgage loans
1,379,812
4,898
0.35
10,409
0.75
6,956
0.50
Credit card loans
884,394
15,648
1.77
30,201
3.41
31,408
3.55
Consumer loans
202,225
2,191
1.08
862
2,544
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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
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.
57
58
China Merchants Bank
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
Wealth management
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.
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.
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.
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.
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.
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.
China Merchants Bank
Annual Report 2023 (H share)
Private banking
Chapter III Management Discussion and Analysis
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.
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.
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.
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.
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.
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.
Credit cards
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.
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.
13
The term "individual, family, enterprise and society" specifically refers to the needs of individuals, families, enterprises and the society.
59
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.
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.
Control over the risks relating to industries under list-based management¹¹
5,113
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.
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.
11
12
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.
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.
55
56
56
China Merchants Bank
Annual Report 2023 (H share)
1.50
Chapter III Management Discussion and Analysis
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.
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.
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 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.
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.
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 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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
3.10 Business Operation
3.10.1 Retail finance business
Business overview
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.
3.9.8 Capital management
46,731
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.
1,168
Others (Note)
9,731
1.42
44,097
0.90
28,009
Retail loans
8
513,857
Discounted bills
1.23
25,852
1.03
21,515
1.25
1.31
3,946
0.51
1,539
13,107
0.95
7,466
0.54
Credit card loans
935,777
16,381
26,205
1.75
3.35
29,905
3.20
Consumer loans
301,538
3,285
1.09
31,373
2,097,114
3,109,737
loans (%)
Balance
Balance
31 December 2022
1.19
73,568
1.08
66,822
Balance of
0.93
6,166,345
customers
Total loans and advances to
12.11
1,178
0.74
72
Corporate loans
of non-
57,233
loans and
(In millions of RMB,
loans
loans (%)
loans
loans loan ratio (%)
advances
except for percentages)
of overdue
12.00
Percentage
Balance of
Percentage
of special-
mentioned
mentioned
of special-
Non-
performing
overdue
performing
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.
16
15
Business overview
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.
14
3.10.2 Wholesale finance
China Merchants Bank
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
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.
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.
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.
Chapter III Management Discussion and Analysis
China Merchants Bank
60
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.
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.
Annual Report 2023 (H share)
Retail loans
China Merchants Bank
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%.
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 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.
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.
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.
Investment banking business
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.
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%.
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%.
Cross-border finance business
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
China Merchants Bank
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.
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%.
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.
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%.
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.
Transaction banking business
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
20
The data for 2023 is based on the latest calibre of the State Administration of Foreign Exchange.
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69
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.
22
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.
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.
Assets custody business
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.
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.
Chapter III Management Discussion and Analysis
China Merchants Bank
Annual Report 2023 (H share)
China Merchants Bank
The total volume of asset management business of China Merchants Fund and CMB International Capital both included the data of their respective
subsidiaries.
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.
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.
Asset Management Business
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.
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.
Financial institution business
21
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
China Merchants Bank
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.
62
66
95
19
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.
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.
Corporate loans
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
China Merchants Bank
Annual Report 2023 (H share)
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
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.
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.
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.
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.
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.
Wholesale customers
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
Such loans include loans made by domestic institutions to overseas and offshore customers, domestic non-enterprise customers and self-employed
businesses.
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China Merchants Bank
65
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).
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).
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.
Bill business
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.
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.
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 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.
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.
64
Retirement finance business
China Merchants Bank
Annual Report 2023 (H share)
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.
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.
Inclusive 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.
Sci-tech finance business
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.
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
61
3.10.6 Major joint ventures23
As of the end of the reporting period, CMB Europe S.A. had total assets of EUR118 million and net assets of EUR92
million.
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.
Major wholesale online channels
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%.
3.10.4 Overseas branches
Hong Kong Branch
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".
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.
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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
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.
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.
Singapore 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.
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
New York Branch
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)
CMB APP
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.
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.
CMB Life APP for Credit Card
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 (,
)" were launched, to build up and continuously improve the ability to mobilise large-scale online and offline
customers.
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.
Network Operation Service
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.
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.
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China Merchants Bank
Chapter III Management Discussion and Analysis
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.
Major online channels for retail
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.
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.
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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
CMB Wealth Management
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.
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.
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.
China Merchants Fund
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.
CIGNA & CMAM
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.
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.
CMB Europe S.A.
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.
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.
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.
79
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.
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74
I
China Merchants Bank
Annual Report 2023 (H share)
Sydney Branch
Chapter III Management Discussion and Analysis
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.
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.
3.10.5 Major subsidiaries
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.
CMB Wing Lung Bank
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..
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).
CMB Financial Leasing
London Branch
Online channels
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.
The Company provides products and services via multiple online and offline distribution channels.
Offline channels
77
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.
Trading book
Interest rate 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 faced by the Company.
3.11.4 Market risk management
78
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.
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)
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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
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.
3.11.5 Operational risk management
For more information about the Company's market risk management, please refer to Note 60(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 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.
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.
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.
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
Chapter III Management Discussion and Analysis
China Merchants Bank
Annual Report 2023 (H share)
Trading book
Exchange rate risk management
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.
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).
Banking book
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.
China Merchants Bank
For more information about the Company's credit risk management, please refer to Note 60(a) to the financial
statements.
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.
3.11.1 Credit risk management
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
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.
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.
Financial markets business
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.
China Merchants Bank
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 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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter III Management Discussion and Analysis
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.
3.10.3 Distribution channel
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.
0
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.
CIGNA & CMB Life Insurance
70
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.
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.
3.11 Risk Management
Merchants Union Consumer Finance
Chapter III Management Discussion and Analysis
Annual Report 2023 (H share)
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.
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.
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
China Merchants Bank
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.
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.
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.
4.2.2
Green operation
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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter IV Environmental, Social and Governance (ESG)
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.
•
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.
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.
55
Chapter IV Environmental, Social and Governance (ESG)
Annual Report 2023 (H share)
China Merchants Bank
98
86
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.
4.2.1 Green finance
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.
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.
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.
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.
Please refer to section 3.10.2 "Retirement finance business" of this report for details of retirement finance business.
87
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 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.
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 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.
China Merchants Bank
Annual Report 2023 (H share)
Chapter IV Environmental, Social and Governance (ESG)
4.3.2 Support the improvement of people's livelihood
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
to.
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 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 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.
4.3.3 Accessibility to financial services
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 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.
89
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.
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.
4.3.1 Serving the real economy
4.3 Social Responsibility Information
Chapter IV Environmental, Social and Governance (ESG)
Annual Report 2023 (H share)
China Merchants Bank
88
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.
4.2 Environmental Information
2
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.
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
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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
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.
3.11.7 Reputational risk management
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.
Chapter III Management Discussion and Analysis
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.
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.
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.
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.
3.11.6 Liquidity risk management
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.
Chapter III Management Discussion and Analysis
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Annual Report 2023 (H share)
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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.
China Merchants Bank
Annual Report 2023 (H share)
3.12 Outlook and Coping Tactics
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.
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.
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.
4.1 ESG Review
Environmental, Social and Governance (ESG)
Chapter IV Environmental, Social and Governance (ESG)
Annual Report 2023 (H share)
China Merchants Bank
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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.
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.
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 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.
Chapter III Management Discussion and Analysis
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.
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.
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.