Bank of China Announces 2009 First Quarter Results Profit Attributable to Shareholders Reached RMB18.57 billion

Bank of China Limited announced its 2009 first quarter results today. In accordance with International Financial Reporting Standards (“IFRS”), BOC recorded profit attributable to the shareholders of RMB 18.57 billion, down by 14.41% year-on-year, but up by 320.42% from the fourth quarter of 2008.

Fully capitalizing on the opportunities with the State’s measures to increase domestic demand and stimulate economic growth, BOC accelerated its pace in loans and deposits expansion and achieved rapid growth. As at 31 March 2009, the Bank’s domestic RMB-denominated loans increased by RMB 569.4 billion or 24% compared with the end of 2008 and the market share increased by 0.62 percentage point. Domestic RMB-denominated customer deposits also increased by RMB 723.1 billion or 18% from the end of 2008. Market share of the Bank’s domestic RMB-denominated corporate deposits and savings deposits also increased by 0.79 and 0.14 percentage point respectively, compared with the end of 2008.

In the mean time, BOC proactively adjusted its assets/liabilities structure, increased the proportion of high yield assets and lowered funding cost. The proportion of foreign currency-denominated assets of the group at the end of first quarter was reduced by 6 percentage points compared to the end of 2008 to 29%. RMB-denominated investment securities increased to RMB 1,219.482 billion, up by 18.29%, whilst the amount of foreign currency-denominated investment securities was reduced by 4.30% to USD 86.157 billion. Demand deposits represented 44.85% of the total customer deposits, an increase of 0.23 percentage point compared to the end of 2008. Loans account for 49.73% of the balance of interest-earning assets, up 0.43 percentage point. Loan to deposit ratio increased by 0.28 percentage point to 64.88%.

In the first quarter of 2009, net interest income amounted to RMB 36.838 billion, down 9.74% against the same period of 2008. Net interest margin was 2.14%, down by 63 basis points year-on-year, or 34 basis points from the fourth quarter of 2008.

In the first quarter, total export and import trade volume in China decreased by 24.9% year-on-year, but BOC’s international trade settlement volume still reached USD 137.862 billion and maintained its market share. Also, the Bank capitalized on the business opportunities arising from credit expansion and domestic consumption demands; financial advisory fee income increased by 70% year-on-year, and bank cards related fee income also rose by 21%. The bank achieved net fee and commission income of RMB 11.263 billion, a strong rebound of 38.95% compared to the fourth quarter of 2008, representing 22.32% of operating income, an increase of 1.84 percentage points compared with the same period of 2008.

While expanding business size and optimizing business structure, BOC further enhanced its cost management. Staff cost in the first quarter dropped by 3.79% year-on-year. Operating expense dropped by 15.07% year-on-year. Cost to income ratio decreased by 1.57 percentage points to 33.06%.

BOC continued to exercise stringent credit quality control, fortify its effort in non-performing loan recoveries, and strictly control the growth in non-performing loans. As a result, the Bank’s total identified impaired loans decreased by RMB3.652 billion from the end of 2008 to RMB 87.227 billion, with impaired loan ratio at 2.29%, a decrease of 0.47 percentage point from the end of 2008. The impaired loan coverage ratio reached 123.43%, up 6.25% from last year end. Non-performing loans amounted to RMB 85.127 billion, down by RMB 2.363 billion. Non-performing loan ratio dropped by 0.41% to 2.24%, and non-performing loan coverage ratio rose by 4.75 percentage points from the end of 2008 to 126.47%. Impairment losses on loans and advances for the first quarter were RMB 2.752 billion and credit cost was 0.31%.

As at 31 March 2009, the carrying value of US subprime mortgage related debt securities, US Alt-A mortgage-backed securities, Non-agency US mortgage-backed securities, debt securities issued by and mortgage-backed securities guaranteed by US Freddie Mac and Fannie Mae held by the Bank amounted to USD 13.145 billion, a decrease of USD 2.861 billion from the end of 2008. The aggregated amount of allowances for these securities was USD 4.838 billion, up by USD 0.378 billion. Impairment losses on investment securities for the quarter amounted to RMB 3.013 billion.

BOC has achieved a strong start in all business areas in the first quarter, providing a solid base for the healthy development of all businesses for the year. While the global economic environment gradually stabilized and China’s economy showed early signs of recovery, BOC will seize the business opportunity with the Chinese macro-economic policy of “expanding domestic demand, adjusting economic structure and achieving economic growth”, and continue to implement its strategy of “expand business size, optimize business structure, develop premium brand, strengthen infrastructure, control cost and sharpen competitiveness”. BOC will focus on increasing market share and expanding customer base through product and service innovation, and continue to restructure the Bank’s service and growth mode, as well as accelerating the expansion of overseas business, thereby fully implementing the strategic development plan.

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