ANNOUNCEMENT OF 1998 FINAL RESULTS SUMMARY OF RESULTS The Board of Directors of CITIC Bank International Limited (the "Bank") announces the audited consolidated results of the Bank and its subsidiaries (the "Group") for the year ended 31 December 1998 as follows:- Notes: (1) The provision for Hong Kong profits tax is based on an estimate of the assessable profits for the year ended 31 December 1998 at 16% (1997: 16.5%). 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$103,272,000 (1997: HK$516,017,000) and on the weighted average of 2,383,580,927 (1997: 2,026,307,688) ordinary shares in issue during the year after adjustment of the bonus issue on 28 April 1998. Earnings per share for 1997 have been adjusted accordingly. (3) The calculation of diluted earnings per share is based on the profit attributable to shareholders of HK$103,272,000 (1997: HK$516,017,000) and the weighted average number of ordinary shares of 2,387,421,342 shares (1997: 2,038,584,493 shares) after adjusting for the effects of all dilutive potential ordinary shares. FINANCIAL INFORMATION (1) Summary of financial position (2) Advances and other accounts (3) Advances to customers - by industry segment (4) Loans on which interest is placed in suspense * As a percentage of loans and advances (5) Overdue loans and advances * As a percentage of loans and advances (6) Rescheduled loans * As a percentage of loans and advances BUSINESS REVIEW The difficulties that the Hong Kong banking industry have experienced in 1998 were unprecedented. In the midst of these challenges, the Bank adopted a prudent but nevertheless progressive strategy, on the basis that financial solidarity will not be sacrificed. Throughout the year the Bank actively participated in market competition, which saw the asset base enlarged and loan composition improved. At the same time, a number of the Bank's management policies had been refined, efficiency improved and the issue of problem loans being dealt with. The series of adjustments and reforms being undertaken had culminated in performance of various business activities exceeding expectations, and credible results achieved in problem loan recovery. Initial refinement was made to the management framework, whilst a new corporate culture has been nurtured. Reform and progress Both deposits and loans have been increased at relatively fast pace. At the end of 1998, total deposits amounted to HK$37.2 billion, increased by HK$9.74 billion, or 35.4%. Total loans and advances were put at approximately HK$25.9 billion, representing a rise of 29.6%, or HK$5.92 billion. Various significant financial benchmarks were maintained at healthy levels. At the end of 1998, the Bank's capital adequacy ratio was approximately 20%, whilst average liquidity ratio and loan-to-deposit ratio were approximately 50% and 69%, respectively. Effective and proactive measures have been taken in tackling the issue of problem loans which have come under control and are being substantially resolved. Consequently, as at the end of 1998, the ratio of overdue loans to total loans and advances, at 6.9%, was lower than the 7.5% as at the end of June 1998. Repositioning of the Bank has been successfully undertaken which has brought about a new name, a new corporate identity - the market has responded positively. Remodeling of individual branches as well as the structuring of the whole branch network has commenced. Two brand new and modern branches have already begun operation. Through structural adjustments, the Bank's loan portfolio has been gradually improved in quality. The Corporate Banking Group has focused on building relationships with reputable listed companies with significant financial strength. On the mortgage side, breakthroughs have been made especially in the primary market, resulting in higher market share. The launch of new consumer banking products also brought fruitful results. Higher calibre professionals have been recruited from the market, and the overall quality of the Bank's staff force, especially at the senior managerial level, has consequently been improved. In tandem with the Bank's longer term development needs, investments in the infrastructure have also been made, leading to a 25% increase in operating expenses in 1998. The management framework has gradually been made more rationalised, revolving around established systems, policies and guidelines. The Bank has, in November 1998, expanded its issued share capital by 10%, raising net proceeds of approximately HK$648 million. Difficulties and challenges A mixture of factors has led management to believe that controlling and resolving the Bank's problem loans remains an extremely difficult task. A decision has therefore been made to substantially increase the provision for bad and doubtful debts to approximately HK$570 million, an increase of 171%. The Bank's 1998 net profit has therefore been brought down to approximately HK$103 million, a decrease of 80%. Widening the interest rate spreads and controlling operating expenses remain special areas of focus in 1999. The key factors that whether the Bank can make further progress in 1999 are the abilities to explore new markets; to adjust asset structure and to find new growth areas. 1999 focus Maintaining various major financial benchmarks at stable levels forms the platform for further development, on which the four main tasks are: dedication in business development; restructuring in loan asset composition; stringent control on operating expenses and problem loan recovery. To continue on the re-modeling work of branches and restructuring of the branch network, and simultaneously exploring non-branch sales channels. To further absorb professionals that are suitable for the Bank's business development and to raise the staff force's overall quality. A comprehensive improvement on the Bank's computer and information technology application, most of the work is expected to be consummated within 1999. To place personnel in the mainland to strengthen our ability in dealing with PRC problem loans. YEAR 2000 COMPLIANCE A high level steering committee was set up in June 1997, in assessing the impacts of the millennium issue on the Bank's activities, and in formulating a working schedule to tackle problems pertinent to Year 2000 compliance. The modification and testing phase of the Bank's mainframe system was accomplished in June 1998. Furthermore, user acceptance tests, simulation run and system conversion were completed in September 1998. To ensure a smooth transition of the mainframe system during the millennium, a series of simulation tests will be performed, in phases, during the year. The new Business Resumption Plan, which is in the process of establishment, shall include in the Year 2000 Contingency Plan. Testing of the Contingency Plan is expected to be completed before 30 June 1999. Management of the Bank is aware that the counterparty achievement of Year 2000 compliance is crucial to our business relating to transition over Year 2000. Questionnaires had been sent to inquire as to their Year 2000 preparedness in July 1998. Visits by our account officers will be made in early 1999 to ensure that the Year 2000 counterparty assessment guidelines laid down by the Hong Kong Monetary Authority are followed. FINAL DIVIDEND At the forthcoming annual general meeting, the Board proposes to recommend a final dividend of HK$0.01 (1997: HK$0.025) per share which, if approved, will be paid on or about 6 May 1999 to shareholders whose names appear on the Register of Members on 28 April 1999. CLOSURE OF REGISTER OF MEMBERS The Register of Members of the Bank will be closed from Wednesday, 21 April 1999 to Wednesday, 28 April 1999, 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 4:00 p.m. on 20 April 1999. 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 26 February 1999, Hong Kong.