China Minsheng Banking : 2019 Annual Results Announcement

China Minsheng Banking Corp., Ltd.

2019 Annual Results Announcement

March 2020

Disclaimer

This presentation contains forward-looking statements that involve risks and uncertainties. These statements are generally indicated by the use of forward- looking word such as believe, expect, anticipate, estimate, plan, predict, target, may, will or other similar word that express indications of actions or results of expectations or actions that may or are expected to occur in the future. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this presentation. These forward-looking statements are based on our own information and information from other sources we believe to be reliable. Our actual results may be materially less favorable than those expressed or implied by these forward-looking statements which could affect the share price of our shares.

1

Agenda

I

II

III

Overview

Operational Performance

Outlook

2

Overview of business

During 2019, the Group took proactive measures in coping with the adjustments and changes in the internal and external operating environment and continued to promote the three major strategic positioning of becoming "a bank for the non-state-owned enterprises ("NSOEs"), a fintech-based bank and a bank of comprehensive services". Operating efficiency improved steadily with continuous optimization of operation structure. The Company has seen more technology and innovations introduction, more effective risk prevention, stable asset quality and sound operation across business lines

1. Significant improvement in operating efficiency with steady growth in profits
2. • Operating efficiency continued to increase: operating income was RMB177,745 million, representing an increase of 15.30% yoy; net profit attributable to equity shareholders of the Company was RMB53,819 million, representing an increase of 6.94% yoy; net interest margin (restated) was 2.11%, representing an increase of 0.24ppts yoy; cost-to-income ratio was 27.14%1, representing a decrease of 3.44ppts yoy
   • Returns to shareholders remained steady: RoAA was 0.87%1，representing an increase of 0.02ppts yoy
   • Asset and liability scale maintained coordinated growth: total assets amounted to RMB6,681,841 million, representing an increase of 11.46% as compared with the end of the previous year; total loans and advances to customers amounted to RMB3,487,601 million, representing an increase of 14.10% as compared with the end of the previous year; total deposits from customers amounted to RMB3,604,088 million, representing an increase of 13.79% as compared with the end of the previous year
3. Focus on NSOEs and continuous improvement in comprehensive services
4. • Implemented strategies to support NSOEs and developed and promoted services for niche NSOE customers: By the end of reporting period, strategic NSOE customers amounted to 650, representing an increase of 83.62% as compared with the end of the previous year; daily average deposit amounted to RMB359,855 million, representing an increase of 86.20% as compared with the end of the previous year; total loans amounted to RMB 436,468 million, representing an increase of 113.00% as compared with the end of the previous year
   • Breakthrough in innovation for SME customers and enhanced value of customers of small business finance: During the reporting period, daily average deposits of SMEs amounted to RMB594,855 million, representing an increase of 12.83% as compared with the end of the previous year
5. Business development with technologies and achievements in digitalised transformation
6. • Transformed business models with technologies and steady progress of digitalised transformation: As at the end of the reporting period, public online platform users of the Company amounted to 2,310.3 thousand, representing an increase of 27.50% as compared with the end of the previous year; retail online platform users amounted to 70,411.8 thousand, representing an increase of 18.74% as compared with the end of the previous year; total number of direct bank customers was 29,203 thousand
7. Coordinated business development with continuous enhancement in comprehensive service capabilities
8. • Strengthened cross-selling among customers and products and enhanced synergy between the parent company and subsidiaries: during the reporting period, total operating income of subsidiaries amounted to RMB6,141 million, representing an increase of 9.45% yoy; net profit of subsidiaries amounted to RMB2,427 million and net profit attributable to shareholders of the Bank amounted to RMB1,331 million, with an increase of 100.75% yoy

5 Strengthened risk prevention and control and maintained generally stable asset quality

• The NPL ratio was 1.56%, representing a decrease of 0.20% yoy; the allowance to NPLs and the allowance to total loans were 155.50% and 2.43%, representing increases of 21.45 ppts and 0.07 ppts respectively as compared with the end of the previous year

6 Expanded channels to replenish capital and strengthened capital capabilities

• Actively grasped market opportunities and policy windows to replenish capital and successfully issued Tier-2capital bonds of RMB40 billion, undated capital bonds of RMB40 billion and preference shares of RMB20 billion
• At the end of the reporting period, net capital base amounted to RMB673,741 million 1, representing an increase of 23.11% yoy; capital adequacy ratio was 13.17%,

representing an increase of 1.42 ppts as compared with the end of the previous year

Note:	3
1	Group level

Continuous improvement in profitability and stable shareholder return

Net profit attributable to equity shareholders of the Company

(RMB million)

60,000	50,327	53,819
50,000

40,000

30,000

20,000

10,000

0

2018

2019

Basic earnings per share

(RMB)

1.50
	1.14	1.22
1.20

0.90

0.60

0.30

0.00

2018

2019

Source:

Company's Annual Report

Return on weighted average equity

20.0%

12.94%12.40%

10.0%

0.0%

2018

2019

Return on average assets

1.0%	0.87%
0.85%

0.5%

0.0%

2018

2019

4

Stable revenue growth and improved operation efficiency

Operating income

(RMB million)

200,000

177,745

160,000154,161

120,000

80,000

40,000

	0
	2018	2019
Source:		Company's Annual Report
Note:

Net interest margin1

2.40%	2.11%

2.00%1.87%

1.60%

1.20%

0.80%

0.40%

0.00%

2018

2019

Cost-to-income ratio2

40.0%
	30.58%
30.0%	27.14%

20.0%

10.0%

0.0%

2018

2019

1	Restated net interest margin
2	Cost-to-income ratio = (operating and other operating expenses - tax and surcharges)/operating income	5

Proactive adjustment in business size and continuous optimisation of business structure

Total assets and total liabilities

(RMB million)
8,000,000			6,681,841
7,000,000
5,994,822	5,563,821	6,151,012
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
31 December 2018	31 December 2019

Total assets Total liabilities

Net investment in trading and banking books

(RMB million)
2,400,000		1,970,017	2,184,305
1,800,000
1,200,000
600,000
0
	31 December 2018	31 December 2019
As % of total	32.86%	32.69%
assets
Source:		Company's Annual Report

Total loans and advances to customers and deposits from customers

(RMB million)

4,000,000		3,487,601	3,604,088
	3,056,746	3,167,292
3,000,000
2,000,000
1,000,000
0

31 December 2018	31 December 2019
	Loans and advances to
		Deposits from customers
	customers

Total debt securities issued

(RMB million)

1,000,000		817,225
800,000	674,523
600,000
400,000
200,000
0
31 December 2018	31 December 2019
As % of total	12.12%	13.29%
liabilities

6

Continually enhanced risk management and stable asset quality

Enhanced overall risk management

• Established an overall risk management system to enhance risk management
• Enhanced money-launderingrisk management system to lay a sound foundation for business development and reform and transformation
• Further optimised internal control system and refined the operation mechanism of the internal control committee
• Revised collaborative administrative measures for audit, risk management and internal control and compliance management departments and effectively promoted collaboration of these departments on a day-to-daybasis
• Established and promoted a specialised operation and management mechanism for distressed assets to strengthen the efficiency of disposal of distressed assets; allocated additional resources to the collection and disposal of existing problem loans and non-performing assets. The assets quality remained generally stable and the allowance to NPLs has gradually improved
• Strengthened the internal control and compliance guidance and management of affiliated institutions to ensure the compliant operation of Minsheng Bank and its affiliated institutions

Source:

Company's Annual Report

NPL ratio

2.0%			1.76%	1.56%
1.5%
1.0%
0.5%
0.0%
			31 December 2018	31 December 2019
Allowance to NPLs
200.0%				134.05%	155.50%
100.0%
0.0%
		31 December 2019	31 December 2019
Allowance to total loans
3.0%				2.36%	2.43%
2.0%
1.0%
0.0%
		31 December 2018	31 December 2019

7

Capital adequacy ratio remains sound with improved liquidity

Core tier-one capital adequacy	Tier-one capital adequacy ratio1	Capital adequacy ratio1
ratio1
10.0%		8.93%	8.89%	12.0%		10.28%	15.0%		13.17%
								11.75%
8.0%				10.0%		9.16%	12.0%
6.0%				8.0%			9.0%
			6.0%
4.0%						6.0%
			4.0%
						3.0%
2.0%				2.0%
0.0%				0.0%			0.0%
						31 December 2018 31 December 2019
	31 December 2018 31 December 2019		31 December 2018 31 December 2019
Total equity to total assets ratio	Leverage ratio 2	Liquidity ratio1,3

10.0%		7.94%	8.0%		6.87%	75.0%
8.0%	7.19%			6.04%				54.06%
	6.0%				51.64%
					50.0%
6.0%
		4.0%
4.0%
					25.0%
			2.0%
2.0%
0.0%			0.0%			0.0%
31 December 2018 31 December 2019		31 December 2018 31 December 2019		31 December 2018 31 December 2019
Source:	Company's Annual Report
Note:	Calculated in accordance with the Capital Rules for Commercial Banks (Provisional) (《商业银行资本管理办法 (试行)》) and other relevant
1
	regulatory provisions
2	Group level								8
3	Bank standalone

Agenda

I

II

III

Overview

Operational Performance

Outlook

9

Strengthened corporate banking business with further improvement in professional abilities

In active response to the new changes and challenges in market and regulatory environment, the Company captured the crucial opportunities arising from the shift in growth drivers of corporate banking business and adopted reform and business development as two major strategies, so as to promote development through transformation. It also pressed ahead with the NSOE strategy, strengthened segmented management of different customer groups, improved the quality and structure of liabilities and assets, accelerated product innovation and upgrading as well as facilitated the transformation from an extensive style to a capital- saving business model. As a result, the corporate banking business was continuously expanded

Total corporate loans1		Number of domestic corporate customers with
				deposits of the Company1
(RMB million)		(Thousands)
2,400,000		1,822,835	2,071,935	1,400		1,167.9	1,297.4
1,800,000			1,200
			1,000
1,200,000				800
			600
600,000				400
			200
0				0
	31 December 2018	31 December 2019		31 December 2018	31 December 2019

Further adoption of new investment banking business framework

3 Effectively promoted investment banking business system reform and further implemented new investment banking framework

3 Achievements have been witnessed in key areas with the establishment of a fundamental customer base and strengthened management based on project classifications

3 Ranked No.9 among lead underwriters in the interbank bond market1

3 In respect of asset securitisation, the Company introduced innovative products and successfully launched the first consolidated fund units securitisation project for enterprises owned by the central government/state- owned enterprises in China, the first utility corridor PPP + ABS project in China and the first scalable REITs project in China

Transformation and upgrading of corporate banking business driven by transaction banking

Focused on the financial demands from daily production and operation of

3 customers, improved and optimised the new transaction banking service solutions

3 Modified settlement and cash management business according to changes in customers' demands and further enriched its product offering

3 International business maintained sound development with remarkable improvements in market competitiveness

3 Continuous upgrading of digital service capabilities to effectively improve customers' experience

Source:	Company's Annual Report
Note:
1	Bank standalone

10

Rapid growth of retail banking business and customer base

In accordance with the strategic deployment of reform and transformation for its retail banking, the Company implemented reform and transformation measures in an orderly manner. With the successful implementation of various reforms, retail banking business recorded rapid income growth and high-quality development

Net operating income from retail business as % of operating income of the Company1

50%
40%	37.63%	39.15%

30%

20%

10%

0%

2018

2019

Balance of retail loans1
(RMB million)
1,600,000	1,397,216
1,217,894
1,200,000

800,000

400,000

0

31 December 2018

31 December 2019

Financial assets of retail customers1			# of retail customers with deposits1
(RMB million)						(Thousands)
2,000,000		1,650,120			1,836,975		50,000		38,394.5		41,859.7
						40,000
1,600,000
1,200,000							30,000
800,000							20,000
400,000							10,000
0							0
				31 December 2019
		31 December 2018
							31 December 2018		31 December 2019
Source:	Company's Annual Report
Note:
1		Bank standalone

11

Rapid expansion in small business finance activities with further promotion of new business model

The Company further promoted the new business model of small business finance, enhanced product and service innovation, consolidated customer base and further enhanced comprehensive financial services. Loans increased significantly and sources of income were diversified. Fintech support was strengthened to improve smart services and digital management

Loans to small and micro enterprises1

(RMB million)

Total savings deposits of the community (small business) outlets1

(RMB million)

500,000	444,560

406,938

400,000

120,000.0

100,000.0

103,179

300,000

200,000

100,000

80,000.0

60,000.0

40,000.0

20,000.0

78,732

0

31 December 2018

31 December 2019

0.0

31 December 2018	31 December 2019

Balance of financial assets of community outlets1	# of customers of community outlets1
(RMB million)					(Thousands)
300,000				284,060		8,000		6,267.2	6,696.5
		253,706				6,000
250,000						4,000
						2,000
200,000						0
	31 December 2018		31 December 2019				31 December 2018		31 December 2019
Source:	Company's Annual Report
Note:
1		Bank standalone							12

Innovations in credit card business and deepening transformation of private banking business

The Company targeted at millennial customers and took into account of features and preferences of the customer group in brand positioning, product design, business channels and scenarios. The private banking business of the Company was further reformed with enhanced efficiency as a result of the "three reforms" in respect of the classified customer management system for wealth management, comprehensive services for entrepreneurs and the cooperation between personal and corporate banking businesses, and the product system was in compliance with the new regulations on asset management. All major indicators achieved historical breakthroughs

Transaction volume of credit card business1		Balance of accounts receivable from credit card business1
(RMB million)										(RMB million)
3,000,000							2,480,530		500,000									445,881
								450,000
2,500,000			2,211,625							393,249
							400,000
2,000,000											350,000
										300,000
1,500,000											250,000
1,000,000											200,000
										150,000
500,000											100,000
										50,000
0												0
															31 December 2018			31 December 2019
				2018				2019
# of credit cards issued1						# of eligible private banking customers
(Thousands)
70,000							57,456			25,000					19,250				21,998
60,000			49,547
								20,000
50,000
										15,000
40,000
30,000											10,000
20,000											5,000
10,000
0											0
						31 December 2019						31 December 2018
		31 December 2018										31 December 2019
Source:	Company's Annual Report
Note:
1			Bank standalone															13
2			Represents the number of eligible private banking customers with financial assets of more than RMB8 million

Optimised financial markets business with continuous improvement in profitability

The interbank business continued to be dually driven by customer groups and products. The Company further strengthened interbank customer group management and optimised business structure, and achieved stable and healthy development with sound risk management and control

Balance of assets under custody1	Transaction volume of domestic
	spot settlement of the Company1
(RMB trillion)	(USD million)

Transaction volume of RMB foreign exchange options1

(USD million)

12	800,000
	736,758
10.0 +	700,000
10
8.7	600,000

120,000

100,000

112,308112,819

8						509,143
						500,000
6						400,000
4						300,000
						200,000
2						100,000
0							0
		31 December 2018
				31 December 2019				2018		2019
Source:	Company's Annual Report
Note:
1			Bank standalone

80,000

60,000

40,000

20,000

0

20182019

14

Promoting Internet finance business to build an Internet finance ecosystem

In accordance with the strategic positioning of "a fintech-based bank", the Company focused on the pain points in customer needs, fully leveraged emerging financial technologies, proactively explored new internet finance development models and continuously innovated platforms, products and services of direct bank, retail internet finance and online payment. as a result, customer experience was improved while the Company maintained first-tier status among commercial banks in terms of market share

# of direct banking customers1			# of mobile payment transactions via debit cards 1
(Thousands)				(Thousands)
32,000			29,203.0	80,000			63,253
28,000
24,000		19,171.3
20,000
			40,000
16,000
12,000
8,000
4,000
0					0
	31 December 2018	31 December 2019			31 December 2018	31 December 2019
# of retail online platform customers1		# of corporate users of online platform1
(Thousands)				(Thousands)
80,000			70,411.8	3,000			2,310.3
70,000		59,299.8
60,000						1,812.0
50,000				1,500
40,000
30,000
20,000
10,000
0				0
	31 December 2018	31 December 2019	31 December 2018	31 December 2019
Source:	Company's Annual Report
Note:
1		Bank standalone

15

Promotion of international development strategy and stable expansion of global network

The Hong Kong Branch actively followed the Company's development strategy, implemented reform and transformation as well as

the three-year development plan. Capitalising on the cross-border synergy with the Head Office and focusing on the strategic opportunities arising from the "Guangdong-HongKong-Macau Greater Bay Area" and others, the Hong Kong Branch served as an important overseas business platform of the Company and recorded steady business growth and continuous improvement in efficiency

Steady business growth of the Hong Kong Branch with continuous improvement in efficiency

• Capitalising on the cross-border synergy with the Head Office and grasping the strategic opportunities arising from the "Guangdong-HongKong-Macau Greater Bay Area" and others, the Hong Kong Branch focused on providing professional cross-borderfinancial solutions for quality customers and strengthened the professional services in capital market and new economic sectors
• The Hong Kong Branch focused on the capital market, expanded its featured business and recorded a remarkable income from investment banking businesses, such as syndicated loans, loans for merger and acquisition and structured financing. Cooperation with State Power Investment Corporation, China Duty Free International Limited and Mutual Fund of Greater Bay Area and other enterprises with high influence in the industry were successfully launched, giving full play to the overseas business platform
• Individual business of the Hong Kong Branch continued to grow rapidly. The number of customers who had opened accounts for personal wealth management exceeded 57,600, with total deposits of HKD4,120 million. The sales of "Minsheng Insurance", a high-end retail banking product series, recorded 440 transactions with the total insurance premium amount exceeding HKD10 billion, effectively driving the growth of high-end private banking customer base

Bond investment balance of Hong Kong Branch	# of customers who had opened accounts for personal
				wealth management with Hong Kong Branch
(HKD million)			(Thousands)
70,000		54,668	63,031	70				57.6 +
60,000			60
50,000				50			40.0	+
40,000				40
30,000				30
20,000				20
10,000				10
0				0
	31 December 2018	31 December 2019			2018	2019
Source:	Company's Annual Report

16

Agenda

I

II

III

Overview

Operational Performance

Outlook

17

Prospects

In the coming three years, the Company will commit to becoming a benchmark bank with distinctive features, increased value and continuous innovation. It will also strategically position itself as a bank for NSOEs, a fintech-based bank and a bank with comprehensive services

A bank for NSOEs

A fintech-based bank

A bank with comprehensive services

• Focus on large- and medium-sizehigh-quality
  NSOEs, enterprises along the upstream and downstream of the supply chain of core enterprises and small and micro enterprises
• Serve as a financial butler of NSOEs and their senior management with integrated, customised and comprehensive financial services and strive to become the host bank and preferred bank of NSOEs

• Vigorously develop direct banking, online small business loans and credit card online customer acquisition to enhance fintech capabilities
• Enhance its scientific and technological strength to promote technology-empoweredbusinesses and build an Internet banking business with the best customer experience in China

•

• Expedite its business layout diversification and establish cross-sellingand business coordination mechanisms under its "One Minsheng" strategy
• Provide its customers with comprehensive financial services with the integration of commercial, investment and transaction banking and the combination of capital, intelligence and commerce
• Prioritise its customers and provide integrated and comprehensive services through the cooperation of front, middle and back offices

"3+3+5" strategy deployment

• Strengthen three primary businesses, namely direct banking, small business finance and investment banking
• Consolidate three leading businesses, namely credit card, supply chain finance and asset management
• Enhance five major business segments, namely corporate finance, retail finance, financial markets, Internet finance and comprehensive operation
• Transform into a benchmark bank of the industry principally engaging in digitalised, light-capital and comprehensive business in addition to the traditional business
• Make greater reform and innovation efforts, revitalise the structure by innovative mechanisms and systems of major management aspects, and establish a customer-oriented operation and management system and extensively enhance professional management to facilitate and support the implementation of business development strategies

18

Appendix: Overview of key financial indicators

Income statement highlights
(RMB million, except per share	2019	2018	Growth (%)
data)
Operating income	177,745	154,161	↑	15.30
			↑
Of which: Net interest income	97,943	76,680	27.73
			↑
Net non-interest income	79,802	77,481	3.00
			↑
Profit before income tax	64,738	58,785	10.13
Net profit attributable to equity			↑
53,819	50,327	6.94
shareholders of the Company
Basic earnings per share (RMB)	1.22	1.14	↑	7.02

Key profitability indicators (%)	2019	2018	Change (ppt)
Return on average assets	0.87	0.85	↑	0.02
Return on weighted average	12.40	12.94	↓	-0.54
equity
Net interest margin (restated)	2.11	1.87	↑	0.24
Net fee and commission income	29.42	31.22	↓	-1.80
to operating income ratio
Cost-to-income ratio1	27.14	30.58	↓	-3.44

	Balance sheet highlights	31 Dec	31 Dec
	(RMB million)	2019	2018	Growth (%)
	Total assets	6,681,841	5,994,822	↑	11.46
	Of which: Total loans and	3,487,601	3,056,746	↑	14.10
	advances to customers
	Total liabilities	6,151,012	5,563,821	↑	10.55
	Of which: Deposits from	3,604,088	3,167,292	↑	13.79
	customers
	Total equity attributable to			↑
	equity shareholders of the	518,845	420,074	23.51
	Company
		31 Dec	31 Dec
	Assets quality indicators (%)	2019	2018	Change (ppt)
	NPL ratio	1.56	1.76	↓	-0.20
	Allowance to total loans	2.43	2.36	↑	0.07
	Capital adequacy ratio
	indicators (%)2
	Core tier-one capital	8.89	8.93	↓	-0.04
	adequacy ratio
	Tier-one capital adequacy	10.28	9.16	↑	1.12
	ratio
	Capital adequacy ratio	13.17	11.75	↑	1.42

Source:	Company's Annual Report
Note:
1	Cost-to-income ratio = (operating and other operating expenses - tax and surcharges) / operating income
2	Calculated in accordance with the Capital Rules for Commercial Banks (Provisional) and other relevant regulatory provisions
	19

Thank you!

20