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Edited Transcript of 3698.HK earnings conference call or presentation 24-Mar-17 6:45am GMT

Thomson Reuters StreetEvents

Full Year 2016 Huishang Bank Corp Ltd Earnings Presentation (Chinese, English)

Apr 5, 2017 (Thomson StreetEvents) -- Edited Transcript of Huishang Bank Corp Ltd earnings conference call or presentation Friday, March 24, 2017 at 6:45:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Xuemin Wu

Huishang Bank Corporation Limited - President, Executive Director

* Feng Yi

Huishang Bank Corporation Limited - Secretary

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Presentation

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Unidentified Company Representative [1]

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Good afternoon, ladies and gentlemen. On behalf of Huishang Bank Corporation Limited, I welcome all of you to attend this year's annual results announcement. I would like to thank all your long-term support.

First of all, allow me to introduce the management on the stage. They are the Head of Huishang Bank; [Secretary Mr. Yi, Asset and Liability Management Department Head]; Mr. Li Da Wei from Financial Department; and Head of the Director Office, Mr. [Dong].

And now I would like to give the time to Mr. Wu to give you a remark.

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Xuemin Wu, Huishang Bank Corporation Limited - President, Executive Director [2]

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Distinguished guests, this is the fourth annual results announcement. There are many old friends here today, and I also see some new faces. I sent all of you -- first of all, I'd like to welcome all of you to attend this year's announcement. And at the same time, I would like to thank for your long-term support to Huishang Bank.

In 2015, and we focused our innovation and upgrade and we've tried to establish forward service brings and we hope that we can materialize our comprehensive and better development. We hope that by the end of 2015 then the net profit -- the profit was -- and we increased by 12.96. And you can see all indicators are very favorable. And we have enhanced our risk management abilities in the past year, and we focus on our comprehensive services. And we have combating some reforms and we tried to improve our services.

And now we use new models and new measures to create a new landscape for our business and we have reinforced our risk management. And we also have achieved transformation. In 2016, it is a very important year for us to implement the 13th five-year plan, so this is a new financial establishment year for our Bank.

So we tried to calculate new talents and speed up our reform and upgrade, so as to increase the core competitiveness of our Bank. Thank you.

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Unidentified Company Representative [3]

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Thank you for Mr. Wu.

Now I would like to invite Mr. Yi to introduce the annual results of Huishang Bank. Let's invite Mr. Yi.

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Feng Yi, Huishang Bank Corporation Limited - Secretary [4]

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Dear guests, ladies and gentlemen, good afternoon. Welcome to attend 2016 annual results announcement of Huishang Bank. In 2016 and we -- with the support of our customers -- and we focused on our transformation and upgrade, and we tried to enhance our business portfolios. And we also improved our risk management. And under the current economic background, we have achieved a sound development in our business. This year's announcement include the financial highlights, business highlights, risk management, as well as the outlook in 2017.

Next I would like to introduce -- then one by one. First of all, I would like to talk about the financial performance in 2016. In 2016 and the our -- loaned business, investment business, and intermediary services have achieved a net profit of RMB6.996 billion, which is a record high level and increased by 12.62% compared with 2015. With the new normal of economic development, our Bank's assets and liabilities as well profit has turned from high speed growth to medium-high growth. In 2016, the ROAA dropped from 1.11% in 2015 to 1.01% in 2016. And our ROAE dropped from 15.75% in 2015 to 15.63% in 2016. You can see a slight drop.

In 2016, our increase of net profit can attribute to expansion of interest-bearing assets and a stable net interest income. And the total net interest income reached RMB18.34 billion, representing a 23.56% increase on a year-on-year basis in 2016 due to the decrease of interest rate. Our interest rate, you can see it; the net interest rate income drop from 2.71% in 2015 to 2.59% in 2016. And there was also a drop in net interest margin from 2015 to 2016. In 2016, we captured enhancing business portfolios and improving the proportion of intermediary services and achieved substantial results.

In 2016, we have realized net fee and commission income of RMB2.491 billion on a year-on-year basis and increased by 40.65%. Amount which the custodian and other fiduciary service fees, bank card fees, consultancy and advisory fees, as well as agency services commissions accounts a big portion in our business. They were 53.59%, 19.5%, 6.8%, and 6.61%, representatively. In 2016 the operating expenses was RMB5.763 billion and representing a 6.03% on a year-on-year basis. It was mainly due to business expansion and increase in head counts.

In 2016 the cost to income ratio was 27.55%, dropped by 4.4% compared with 2015, and we maintain a low level. And we can see a very [adverse] result on cost control.

Now I would like to talk about the business performance in 2016. In our business performance in 2016, our Bank actively took up with various adverse factors and we insist to focus on transformation and upgrade, further encourage innovation, and split up structural adjustments and realized a moderate and stable growth on our main business.

By the end of 2016, the total asset accounts for RMB754.8 billion, increased by 18.69%. And among which total loans, advances reached RMB277.4 billion, up by 13.94%. By the end of 2016, the total liability was RMB701.6 billion, increased by 18.16% compared with the beginning of the year. And the deposit reached RMB462 billion, increased by 28.61%.

And in terms of our credits and loans, and we can see our SME business and retail business have achieved a moderate growth. And you can see with the SME loan growth has been higher than average loan growth, and you can see the retail loans increased from 25.8% in 2014 to 29.35% in 2016.

In 2016, our Bank followed a national macroeconomic policies and mandatory credit policies for the optimized loan structure supporting strategic emerging industries, modern services sectors, and transitional advantaged industries. And we effectively operated at local government financial platforms and curb unfavorable industry loan.

By the end of 2016, the corporate loan reached RMB179.2 billion, increased by 13.83%. The corporate deposit reached RMB332.9 billion, increased by 36.89% year on year. And our Bank -- actually you can see our markets share for corporate deposit has ranked number 1 in Anhui financial institutes in consecutive nine years. In [1916] and we focused on retail business. By the end of 2016, our retail loan was RMB81.4 billion and increased by 26.42% year on year and doubled that of corporate loan, and accounted for 29.35% of loan (inaudible).

And in retail loans, you can see our mortgage accounts for 25% in retail loans, and we have been actively develop our retail deposit business. And we maintained a very stable personal deposit. By the end of 2016, the retail deposit was RMB105.5 billion, increased by 21.2% on a year-on-year basis.

By the end of 2016 and our Bank committed to create an influential credit card brand in Anhui Province. We improved credit card business, management, and risk management so as to enhance credit card functions and service level. By the end of 2016, we have newly issued credit card 250,000. And valid card, the number of valid card reached 700.5 [thousand]. And by the end of 2016 the credit card income reached RMB545 billion (sic - see slide 13, "million") and also the number of debit cards issued amounting to 10.357 billion (sic - see slide 13, "million").

The total number of all-purpose cards transaction was 8.1553 million, increased by 18.16% on a year-on-year basis. And the bank card commission fees reached RMB514 million, increased by 75.43%.

In international businesses in 2016, our bank launched innovative business, including cross-border mergers and acquisitions, and cross-border RMB two-way capital pool, and [bentray] industry financial services. And we ranked number five by cross-border payment and settling [among] the financial institutions in Anhui Province. Our Bank has been attaching importance to develop our comprehensive channels [YIT], including online banking, mobile banking, phone banking, and direct banking.

In 2016, the trading account transactions via retail electronic channels accounting for 82.37%. Settlement and our clearing fees maintain a steady growth to RMB109 million in 2016. Custodian and other fiduciary service fees [ruck] soared to RMB1.41 billion in 2016, up by 38.51%.

Now I would like to introduce the asset and the risk management in 2016. By the end of 2016, the core tier net capital reached RMB46.5 billion and the risk weighted assets was RMB529.2 billion. And the core Tier 1 CAR was 8.79% and the core tier -- and the CAR was 12.99%. And the [CRA] dropped slightly due to asset expansion in 2016.

In 2016 we maintained a good asset quality under the backdrop of economic slowdown and rebound of NPL. By the end of 2016, the NPL ratio was 1.07%, increase by 0.09% compared with the end of 2015, which was lower than the national average level of 1.74%.

In 2016 and the allowance to NPL ratio was 220.77% (sic - see slide 18, 270.77%). The allowance to loan ratio was 2.9% and we had a steady growth compared with last year. And we also strictly controlled high-risk industrial loans, actively improved our services, and focused on the SMEs, which has been our strategy positioning for all times.

In 2016, our bank focused on transformation and upgrading, encouraged innovation, and improved management, which helped to stimulate business and achieve stable and moderate development. In 2016, our Bank utilized various financials tools, including credit and asset management programs, and earmarked funds to further support our key customers and major industrial clients.

On the one hand, all these measures helped to enhance social and economic development and at the same time it drive business development and speed up transformation and upgrade, as well as establish [low cost] mainstream bank brand. In terms of reform and innovation in 2016, our Bank focused on innovation. We have witnessed the results in products, channels, technologies, and mechanisms.

And we shape a new landscape in our business developments through new [my sat], new measures, and new models. And transformation and upgrade has become our highlights and our momentums. So in terms of transformation and upgrade, in 2016 our Bank established four financial service brands. They are comprehensive finance, general finance, smart finance, and safe finance. The depth and width of customer services have been expanded. Assets and liabilities customer structures have been enhanced. Our income structure was diversified, and intermediary service income maintained a stable growth.

So, these are -- you can see we have promote our business to a higher level. In 2016 our Bank's asset was more than RMB750 billion; and deposit, over RMB450 billion; loans surpassed, RMB250 billion; and profit reached more than RMB6.5 billion. And we ranked 188 in a World Bank and ranked number 311 in Fortune China 500, and number four in [Sinoscope] ranking.

Now, I would like to give you our outlook in 2017. And I would like to introduce you some of our strategies in 2016. The year 2016 is a significant year for the implementation of the 13th five-year strategic development plan. And it is also a new financial development year for Huishang Bank. And we will continue to innovate and transform our business, with focus on comprehensive finance, general finance, smart finance, and safe finance. We'll be [also] update ourselves to the new economy and strive to develop new finance, cultivate new talents, so as to [formed] our new [strands] so as to bring better returns to our shareholders.

And we're also -- we're actively developed our business and tried to use a comprehensive measures, provide better services and products to our customers. And we hope that we can have our customers to materialize their values. And we will promote PPP projects and provide service to new towns. And we will consolidate various products, including bonds, M&A, asset [securitization], and transaction banking, and provide a basket of services to our customers. And we will focus on the healthcare industries.

We try to provide effective services to SMEs. And then we are also expand our business to various sectors in the society. And we hope that we can accelerate the progress of intelligent finance to seize commanding heights. And we will expand our business from cities to rural areas, from big corporations to SMEs. We hope that we can improve the customer experience and to further promote our business in rural areas, and hope that we can increase our market shares in cities and rural areas.

We hope that we can also promote our brands. We hope we can also make more effort in mobile financial services. We will develop our card services. We hope that we can issue new card of 1 million.

And the third is to enhance our smart finance. We hope that we can consolidate our accounts. We can use our online and off-line services so as to provide our integrated smart financial brand for our customers. We hope to speed up the development of our business through IT and also to create our smart financial brand through direct banking.

We hope we can also promote our technologies so as to support our establishment of our smart and mobile business. And we also hope to increase our application so as to attract more customers. And then we also try to adhere to safe finance philosophy to promote sustainable development. We are focused on our risk management. We hope that we can establish a safe finance brand. We hope that we can have a better control on our risk.

In 2017, we will enhance our risk management process management, so as to have a better control on all different types of market risks. We will use different measures and choose to improve our ability in capital management and risk management, as well as our transformation.

This is our result announcement in 2016. Thank you.