SUMMARY OF RESULTS
The Board of Directors of CITIC Bank International Limited (the "Bank") is pleased to announce the audited consolidated results of the Bank and its subsidiaries (the "Group") for the year ended 31 December 2000 as follows:-
2000 1999 Variance
---------- ---------- --------
HK$'000 HK$'000 %
Interest income 3,759,046 3,167,111 18.69
Interest expense (2,607,670) (2,269,518) 14.90
---------- ----------
Net interest income 1,151,376 897,593 28.27
---------- ----------
Fees and commission income 291,663 199,127 46.47
Fees and commission expense (17,245) (15,870) 8.66
Other revenue 18,033 15,504 16.31
Other operating income 156,101 53,532 191.60
---------- ----------
Non-interest income 448,552 252,293 77.79
---------- ----------
Operating income 1,599,928 1,149,886 39.14
Operating expenses (648,052) (480,614) 34.84
---------- ----------
Operating profit before provisions 951,876 669,272 42.23
Charge for bad and doubtful debts (318,571) (937,588) (66.02)
---------- ----------
Operating profit / (loss) 633,305 (268,316)
Net (loss) / profit on disposal of tangible
fixed assets (1,999) 188
Profit on disposal of interest
in subsidiaries 0 396,909
Net profit on disposal of held-to-maturity
securities 10,433 0
Provision on held-to-maturity securities
and investment securities (5,694) (18,737)
---------- ----------
Profit from ordinary activities
before taxation 636,045 110,044 477.99
Tax on profit from ordinary
activities (Note 1)
- Hong Kong (53,249) (786)
- Overseas (134) (697)
---------- ----------
Profit from ordinary activities
after taxation 582,662 108,561 436.71
Minority interest (50,521) 0
---------- ----------
Profit attributable to shareholders 532,141 108,561 390.18
Appropriation: Dividends (181,640) (25,945) 600.10
---------- ----------
Retained profit for the year 350,501 82,616 324.25
========== ==========
Earnings per share
- Basic (Note 2) 20.51
4.19
- Diluted (Note 3) 20.50 4.18
Interim dividend paid per share 2.00 0.00
Proposed final dividend per share 5.00 1.00
Total dividend per share 7.00 1.00
Notes:
(1) The provision for Hong Kong profits tax is based on an estimate of the assessable profits for the year ended 31 December 2000 at 16% (1999: 16%). Taxation for overseas branches and subsidiaries is charged at the appropriate current rates of taxation ruling in the countries in which they operate.
No provision for deferred tax is made as there are no material timing differences which would result in a liability payable or an asset receivable in the foreseeable future.
(2) The calculation of basic earnings per share is based on the profit attributable to shareholders of HK$532,141,000 (1999: HK$108,561,000) and on the weighted average of 2,594,622,100 (1999: 2,593,248,423) ordinary shares in issue during the year.
(3) The calculation of diluted earnings per share is based on the profit attributable to shareholders of HK$532,141,000 (1999: HK$108,561,000) and on the weighted average number of ordinary shares of 2,596,384,250 (1999: 2,595,460,815) after adjusting for the effects of all dilutive potential ordinary shares.
FINANCIAL INFORMATION
(1) Summary of financial position
The Group
---------------------------------
31/12/2000 31/12/1999 Variance
---------- ---------- --------
HK$'000 HK$'000 %
Loans and advances 32,798,146 28,320,335 15.81
Loans loss provision 854,247 1,033,786 (17.37)
Total assets 56,657,829 48,783,089 16.14
Total interest earning assets 53,932,408 46,448,474 16.11
Total deposits 48,676,445 41,704,606 16.72
Shareholders' funds 5,713,438 5,361,889 6.56
Financial ratios
Capital adequacy 17.12% 19.16%
Average liquidity 42.08% 39.45%
Loans to deposits 67.38% 67.91%
Loans to total assets 57.89% 58.05%
General provision coverage 1.10% 1.12%
Property lending 48.28% 45.02%
Cost to income 40.51% 41.80%
Return on assets 1.11% 0.23%
Return on shareholders' funds 9.61% 2.04%
Payout ratio 34.13% 23.90%
(2) Advances and other accounts
The Group
---------------------------------
31/12/2000 31/12/1999 Variance
---------- ---------- --------
HK$'000 HK$'000 %
Advances to customers 31,925,836 27,603,561 15.66
Advances to banks and other
financial institutions 580,987 639,817 (9.19)
Accrued interest and other accounts 2,057,312 1,844,839 11.52
Provisions for bad and doubtful
debts
- Specific (499,955) (723,969) (30.94)
- General (351,027) (308,854) 13.65
---------- ----------
33,713,153 29,055,394 16.03
========== ==========
(3) Advances to customers - by industry sectors
The Group
---------------------------------------------
31/12/2000 31/12/1999 Variance
----------------- ----------------- --------
HK$'000 % HK$'000 % %
Loans for use in Hong Kong
Industrial, commercial and
financial
- property development 635,940 1.99 1,393,313 5.05 (54.36)
- property investment 3,004,415 9.41 1,801,952 6.53 66.73
- financial concerns 1,970,085 6.17 1,177,542 4.26 67.30
- stockbrokers 384 0.00 192,440 0.70 (99.80)
- wholesale and retail trade 2,367,404 7.42 1,137,820 4.12 108.06
- manufacturing 1,957,305 6.13 885,096 3.20 121.14
- transport and transport
equipment 1,482,624 4.64 1,271,654 4.61 16.59
- others 3,677,965 11.52 6,045,662 21.90 (39.16)
Individuals
- loans for the purchase of
flats in the Home Ownership
Scheme and Private Sector
Participation Scheme 20,724 0.06 24,108 0.09 (14.04)
- loans for the purchase of
other residential properties 11,099,557 34.77 8,798,674 31.88 26.15
- others 966,775 3.03 675,206 2.45 43.18
Trade finance 2,400,267 7.52 1,852,329 6.71 29.58
Loans for use outside Hong Kong 2,342,391 7.34 2,347,765 8.50 (0.23)
---------- ------ ---------- ------ --------
TOTAL 31,925,836 100.00 27,603,561 100.00 15.66
========== ====== ========== ====== ========
(4) Loans on which interest is placed in suspense
The Group
------------------------------------------------------------
Specific
Pledge provision
amount for in respect
loans on of loans Amount
Total amount of which on which of
loans on which interest interest is interest
interest is placed is placed in placed in placed in
in suspense suspense suspense suspense
------------------ ------------- ------------ -----------
HK$'000 %* HK$'000 HK$'000 HK$'000
As at
31 December
2000 1,517,266 4.63 860,073 442,003 223,414
As at
31 December
1999 1,555,450 5.49 763,536 514,767 152,711
* Based on total loans and advances
There were no advances to banks and other financial institutions on which interest is being placed in suspense or on which interest accrual has ceased as at 31 December 2000 and 31 December 1999, nor were there any specific provisions made for them on these two days.
(5) Overdue loans and advances
The Group
--------------------------------------------------------------------
31/12/2000
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Amount of Amount of
collateral specific
held in provisions
Overdue gross respect of Amount Amount made against
advances to overdue of of overdue
customers (net of advances to secured unsecured advances
suspended interest) customers balance balance to customers
------------------- ----------- --------- --------- ------------
HK$'000 %* HK$'000 HK$'000 HK$'000 HK$'000
Three to six months
overdue 301,442 0.92 327,792 268,061 33,381 9,196
Six months to one
year overdue 232,717 0.71 364,339 177,243 55,474 33,260
Over one year
overdue 1,119,883 3.41 642,211 556,677 563,206 365,576
----------- ------ ----------- --------- --------- ------------
TOTAL 1,654,042 5.04 1,334,342 1,001,981 652,061 408,032
=========== ====== =========== ========= ========= ============
The Group
--------------------------------------------------------------------
31/12/1999
--------------------------------------------------------------------
Amount of Amount of
collateral specific
held in provisions
Overdue gross respect of Amount Amount made against
advances to overdue of of overdue
customers (net of advances to secured unsecured advances
suspended interest) customers balance balance to customers
------------------- ----------- --------- --------- ------------
HK$'000 %* HK$'000 HK$'000 HK$'000 HK$'000
Three to six months
overdue 409,613 1.45 205,124 75,939 333,674 51,662
Six months to one
year overdue 447,459 1.58 168,563 99,293 348,166 53,755
Over one year
overdue 1,104,267 3.90 642,972 489,537 614,730 411,175
----------- ------ ----------- --------- --------- ------------
TOTAL 1,961,339 6.93 1,016,659 664,769 1,296,570 516,592
=========== ====== =========== ========= ========= ============
* Based on total loans and advances
There were no advances to banks and other financial institutions which were overdue for over 3 months as at 31 December 2000 and 31 December 1999.
Reconciliation
The Group
----------------------
31/12/2000 31/12/1999
---------- ----------
HK$'000 HK$'000
Advances to customers overdue for more than 3 months 1,654,042 1,961,339
Less: Amount overdue for more than 3 months and
on which interest is still being accrued (250,418) (892,161)
Add: Amount overdue for 3 months or less and
on which interest is being placed in suspense
or on which interest accrual has ceased 4,926 37,839
Add: Rescheduled advances on which interest is being
placed in suspense or on which interest
accrual has ceased 91,469 413,852
Add: Amount not in overdue and on which interest
is being placed in suspense or on which
interest accrual has ceased 17,247 34,581
---------- ----------
Advances to customers on which interest is being
placed in suspense or on which interest accrual
has ceased 1,517,266 1,555,450
========== ==========
(6) Rescheduled loans
The Group
----------------------------------------------
31/12/2000 31/12/1999
-------------------- --------------------
HK$'000 %* HK$'000 %*
Rescheduled loans 238,068 0.73 738,981 2.61
* Based on total loans and advances
There were no advances to banks and other financial institutions which were rescheduled as at 31 December 2000 and 31 December 1999.
(7) OFF-BALANCE SHEET EXPOSURES
(a) Contingent liabilities and commitments
The following is a summary of the contractual amounts of each significant class of contingent liabilities and commitments:
The Group
--------------------------
31/12/2000 31/12/1999
----------- -----------
HK$'000 HK$'000
Direct credit substitutes 609,289 435,501
Transaction-related contingencies 63,060 0
Trade-related contingencies 820,910 613,922
Other commitments:
with an original maturity of under 1 year
or which are unconditionally cancellable 7,403,679 7,668,932
with an original maturity of 1 year and over 387,652 326,672
----------- -----------
9,284,590 9,045,027
=========== ===========
The above amounts included the guarantees for credit facilities granted by third parties to certain subsidiaries amounting to HK$40 million as at 31 December 2000 (31 December 1999: HK$43 million).
(b) Derivatives
Derivatives refer to financial contracts whose value depends on the value of one or more underlying assets or indices.
The following is a summary of the notional amounts of each significant type of derivatives entered into by:
The Group
------------------------------------------------------------
31/12/2000 31/12/1999
----------------------------- -----------------------------
Trading Hedging Total Trading Hedging Total
------- ---------- ---------- ------- ---------- ----------
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Exchange rate contracts
Forwards 320,801 559,576 880,377 428,400 489,698 918,098
Swaps 0 42,189,304 42,189,304 0 17,484,727 17,484,727
Interest rate contracts
Swaps 0 510,918 510,918 0 427,679 427,679
Equity contracts
Options 0 7,904 7,904 0 0 0
------- ---------- ---------- ------- ---------- ----------
320,801 43,267,702 43,588,503 428,400 18,402,104 18,830,504
======= ========== ========== ======= ========== ==========
Management Discussion and Analysis
1. Work Initiatives
In 2000, the Bank continued to adopt the proven strategy that, over the two years plus period, has gained broad market recognition. That is, the Bank shall pursue simultaneously progressive business development and dealing with historic issues, under the guiding principle of reform and innovation. This is under such strategy that has enabled the Bank to successfully handle the severe challenges brought about by the financial crisis over the past two years. As a result, the Bank recorded satisfactory business performance in 2000 and made improvement in many aspects, with profit hitting record high level.
2. Business Performance
a. Earnings reached historic high levels
In 2000, a number of the Bank's profitability indicators reached historic heights. Operating profit before provision was HK$952 million, representing an increase of HK$283 million or 42% over the HK$669 million in 1999. Net profit was HK$532 million, a significant increase of HK$423 million or 390% over the HK$109 million recorded in 1999.
b. Sustained growth in loans and deposits
One of the factors leading to the Bank's earnings accretion is the ability to maintain commendable loan growth. At a time when the overall loan demand of Hong Kong was still shrinking, the Bank's loans increased in 2000 by HK$4.5 billion, or 15.8% from the 1999 level of HK$28.3 billion, putting the 2000 year-end figure at HK$32.8 billion. Apart from expansion in asset size, further improvements have been made in terms of asset quality. At 2000 year-end, various asset indicators pointed to a further improvement in the quality of the Bank's loan portfolio.
Continuous growth in loan assets has lifted the Bank's total assets to reach HK$56.7 billion as of 2000 year-end, representing an increase of HK$7.9 billion, or 16%, from 1999's HK$48.8 billion. On deposits, the outstanding figure as at year-end was HK$48.7 billion, which was an increase of HK$7 billion or 16.7% when versus the HK$41.7 billion for 1999.
In the three years from 1998 to 2000, the Bank's loans had grown HK$12.8 billion, or 64.0%; deposits had increased HK$21.2 billion, or 76.9%; total assets had risen by HK$22.0 billion, or 63.6%.
c. Realignment in loans and deposits resulting in margin widening
The Bank's interest margins widened in 2000, a reversal of the margin squeeze situation experienced in 1998 and 1999. The prime rate in Hong Kong had been raised thrice in the first half by an aggregate of 1% to 9.5%. Despite rising interest rate and that loan return and yield were pressurized by market competition, the Bank was able to improve its average return on loans through a combination of loan asset reshuffling and development of high yield products. The improvement in loan asset return, coupled with stringent efforts on funding cost control, has resulted in a 38 basis point widening in the Bank's net interest margin in 2000.
d. Continuous launch of new products; hire purchase and leasing, and personal loan businesses established
To improve the overall yield of the Bank's loan portfolio, the Bank launched a series of new products and services during 2000, focusing on lifting overall return on the loan portfolio and providing customers with a more comprehensive range of products.
It is worth mentioning that hire purchase and leasing facilities on machinery and vehicles were introduced towards the end of September while Ka Wah Credit was established in early October to strengthen our efforts in building personal loan business and widening our customer base. At the end of 2000, hire purchase and leasing related facilities approximated HK$500 million, and the loan drawn down through Ka Wah Credit amounted to HK$40 million. These businesses are expected to provide more prominent return in 2001, helping to improve the yield on the Bank's overall loan portfolio.
e. Exploring non-interest income avenues
Current industry trend is that banks would have to develop non-interest income streams, apart from making spreads on granting of loan facilities. The Bank's non-interest income in 2000 was HK$449 million which was a major increase of HK$197 million, or 78%, over 1999's HK$252 million. Main impetus for the non-interest income growth was fees generated from new corporate facilities, bills, distribution of retail banking products, gains on equity and forex investments, as well as a HK$25 million profit from the disposal of Hong Kong Stock Exchange shares. In the long term, the Bank shall continue to explore additional non-interest income avenues, and intend to raise further the contribution of non-interest income towards overall earnings from the current level of 28%.
f. Securities and capital market businesses expanded
In 2000, Cargary Securities and Ka Wah Capital recruited additional professionals and strengthened the efforts in developing the securities and investment banking businesses. In the first half, Cargary Securities started to provide customers with margin financing and IPO financing. The first stand-alone securities distribution outlet was set up in October, aiming to strengthen customer contact and business development drive. The aggregate profit of Cargary Securities and Ka Wah Capital in 2000 exceeded HK$100 million, and separately increased by 113% and 26% from the 1999 levels.
g. Reform in Treasury Department initiated, aiming to enhance investment returns
The Bank's financial position was stable in 2000: the capital adequacy ratio was 17.1%; loans to deposits ratio was 67.4%; loans to total assets ratio was 57.9%; property related loan ratio was 48.3% and the average liquidity ratio was 42.1%.
Having ensured financial stability, the Bank started to initiate reforms on the Treasury Department, with restructuring on the department lineup, and re-examination on the investment management strategy. The results of reform have led to contact reinforcement between the Bank and other financial institutions; business referrals amongst departments; new product development; and better investment returns after the Bank's liquidity requirements are guaranteed. At the same time, the Department has successfully contained funding cost in the rising interest rate environment. The Department launched the Bank's certificate of deposit issuance facility in November, which was met with active market response and widened the Bank's funding sources, as well as lifting the proportion of institutional investors in the Bank's deposit base. The outstanding amount in issue as at year-end was HK$1.65 billion.
h. Back-office support functions improved
Current market competition is multi-faceted. Aside from business marketing at the front line, competition is also determined on the banks' capabilities in support functions such as information technology and financial analysis. Therefore, in 2000, the Bank has focused on strengthening its back office operations and financial management functions. Work has started to replace the Bank's core banking system in order to raise the standards in its information system, and to improve on its internal management capability and infrastructure including abilities in financial management, research and analysis, and operation flow. The new system has been designed to cope with the Bank's long-term business development needs.
i. Resolved HK$1.32 billion of problem loans
The Bank resolved a total of HK$3.77 billion of problem loans in 1998 and 1999, putting the situation basically under control and resolution. In 2000, the Risk Assets Management Department has adopted more flexible approaches, through cash collection and asset-for-debt swaps, resolved another HK$1.32 billion of problem loans. The classified exposure as at year-end, including sub-standard, doubtful and loss categories, was reduced to approximately HK$2.06 billion, representing 6.3% of total loans as of year-end. The further resolution of the problem loans issue has resulted in a substantial drop in loan loss provisions from HK$938 million in 1999 to HK$319 million in 2000.
3. Major Initiatives for 2001
a. Strive for further growth in scale
Although the Bank's business has undergone large-scale expansion in the past three years, it is vital to pursue further asset growth in order to cope with our long-term development. Therefore the Bank will continue to grow its assets in the future while maintaining an appropriate, healthy and above-market average growth rate. At the same time, the Bank will actively consider business expansion opportunities through mergers and acquisitions so as to elevate the Bank's scale of operations to a higher level and position the Bank as one of the leading operators amongst local medium-sized banks.
b. Further improve profitability and operational efficiency
Both the Bank's economic effectiveness and its ability to generate profits, such as return on equity, interest margins, return on assets and fee income, have room for improvement. Looking ahead, the Bank will strive to maximize shareholder return by focusing on the development of high yield products and services, and the enhancement of efficiency and profitability.
c. Stringent control on funding cost and operating expenses
In 2000, staff cost and other operating expenses have evidently increased resulting from the Bank's business development and the launch of new products. The Bank will in future exercise more stringent cost control in order to maintain operating expenses at a level that is in line with income growth. At the same time, the Bank is aware that there is a possibility for a further drop in interest rates. The Bank will closely monitor this trend and will take effective measures to control its impact.
d. Continue to launch new products and services including credit cards
The Bank will continue to enhance its range of products and services, encompassing credit card, personal loan, bancassurance and electronic banking services. The Bank currently plans to launch its credit card in 2001 and promote bancassurance so as to provide customers with a comprehensive range of quality products and services.
e. Further resolve problem loans issue
The Bank has made significant progress in the recovery of problem loans in the past three years. The Bank will continue to deal with the problem loans issue, aiming for whole resolution and improving the coverage ratio through the adoption of various approaches.
The Bank has grown from a small-sized bank to a medium-sized bank in Hong Kong as a result of vigorous efforts made in the past three years. With two more years of hard work, our goal is to position CITIC Bank International as one of Hong Kong's best managed medium-sized banks.
Retirement and Appointment of Chairman
Mr. Hong Yuncheng has relinquished the chairmanship of the Bank for retirement which was accepted by the Board on 12 January 2001. Mr. Kong Dan was elected as the Bank's new chairman on the same date.
The Board would like to express its most sincere gratitude to Mr. Hong for his valuable contribution and outstanding guidance extended to the Bank during his tenure of chairmanship and to welcome the election of Mr. Kong Dan as the new chairman.
Final Dividend
The Bank has achieved satisfactory results for the year with profits reached historic high level. The Board proposes to recommend a final dividend of HK$0.05(1999: HK$0.01)per share which, if approved by the shareholders at the annual general meeting, will be paid on or about 9 May 2001 to shareholders whose names appear on the Register of Members on 3 May 2001.
Together with the interim dividend of HK$0.02 per share, total dividend for 2000 will be HK$0.07 per share, representing a dividend payout ratio of 34%.
Closure of Register of Members
The Register of Members of the Bank will be closed from Thursday, 26 April 2001 to Thursday, 3 May 2001, both days inclusive. In order to qualify for the dividend, all transfers of shares must be lodged for registration with the Bank's Share Registrars, Central Registration Hong Kong Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong by no later than 4:00p.m. on Wednesday, 25 April 2001.
Purchase, Sale or Redemption of Securities
The Bank has not redeemed any of its listed securities during the year. Neither the Bank nor any of its subsidiaries has purchased or sold any of the Bank's listed securities during the year.
By Order of the Board
Cai Zhongzhi
President and Chief Executive Officer
Hong Kong, 12 February 2001
Remark: A detailed results announcement containing all the information required by paragraphs 45(1) to 45(3) of Appendix 16 of the Listing Rules will be subsequently published on the Stock Exchange's website in due course.
Please also refer to the published version of this announcement in Hong Kong iMail and Hong Kong Economic Times