GRC Bank Records a Net Profit of RMB3,391 Million in 2018IH

GRC Bank Records a Net Profit of RMB3,391 Million in 2018IH

HONG KONG, Aug 27, 2018 - (ACN Newswire) - Guangzhou Rural Commercial Bank Co., Ltd. ("GRC Bank" or the "Bank;" Stock Code: 1551.HK), a leading rural commercial bank in China, ranking first in this category in Guangdong Province, is pleased to announce its unaudited 2018 interim results for the six months ended 30 June 2018 (the "Period"). During the Period, the Bank has further enhanced its market position, and it has been assigned the long-term credit ratings of "Baa2 Investment Grade" and "BBB-Investment Grade" by Moody's and S&P respectively. The Bank has become the only regional bank in China that has been rated as investment grade by two world-renowned authoritative rating agencies.

Accelerating integration of Internet business and traditional business - Industry-leading profit growth

GRC Bank has consolidated the competitive advantages of traditional banking businesses while accelerating the development of electronic Internet finance business, resulting in a steady growth in business performance. During the Period, the Bank recorded a operating income of RMB8,175 million, representing a year-on-year increase of 30.98%. Net interest income amounted to RMB5,589 million, accounting for 68.37% of the total operating income. Net fee and commission income amounted to RMB966 million, accounting for 11.82% of the total operating income. The Bank recorded a profit before tax of RMB4,333 million and a net profit of RMB3,391 million, representing year-on-year increases of 26.90% and 28.49% respectively. Net profit attributable to equity holders of the Bank was RMB3,322 million, and the basic earnings per share were RMB0.34.

GRC Bank commented, "In the first half of 2018, faced with complicated economic situations both domestically and abroad, China's economy continued to grow steadily, along with continuous improvement in economic restructuring. Both the employment and consumer prices were generally stable, and replacement of old growth drivers with new ones was further promoted, with improvements in both quality and efficiency. Together with an accelerated pace of reform and opening up, and new industries and businesses have emerged as high-quality development has achieved a good start. Under the favorable macroeconomic situation, the Bank's operations, scale of assets and profitability grew steadily in step with continuous improvement in quality of its assets, thus the overall performance in the first half of 2018 remained stable and moving in a positive direction."

Asset scale grows steadily and non-performing loan ratio continues to decrease

In the first half of 2018, China's economy was experiencing gradual recovery and the real economy showed a strong credit demand, which led to a rapid growth in the scale of loans under the direction of national policies including the Belt and Road initiative and de-stocking. Against this backdrop, the asset scale of GRC Bank achieved steady growth. As at June 30, 2018, the bank's total assets amounted to RMB753,636 million, representing an increase of RMB17,923 million or 2.44% HoH as compared with the end of last year, and had exceeded the target of RMB750,000 million. Among which, total loans and advances to customers was RMB336,035 million, representing a increase of RMB50,333 million or 17.62% HoH as compared with the end of last year. The increase of the Bank's total assets, as well as the total loans and advances to customers, was mainly attributable to the recovery and the credit demand of the real economy in the region has continued to expand.

The Bank's profitability has continued to increase as a result of the steady growth in credit scale and the substantial increase in net trading income. In the first half of the year, the Bank recorded a profit before tax of RMB4,333 million, and a net profit of RMB3,391 million, representing a year-on-year increase of 26.90% and 28.49% respectively. Along with the rapid growth in net profit, the return on average total assets and the return on average equity were 0.91% and 13.64% respectively, up by 0.12 percentage points and 0.80 percentage points respectively. The net fee and commission income to operating income was 11.82% and the cost-to-income ratio remained at a low level of 33.64%.

Faced with the complicated and ever-changing external economic situation, the Bank continued to optimize its industry-specific credit access standard for customers. Therefore, the total non-performing loans remained stable and non-performing loan ratio continued to decrease, and the quality of assets was stable with overall risks under control. As at June 30, 2018, the Bank's non-performing loan ratio was 1.41%, dropping by 0.10 percentage points as compared to the end of last year. During the Period, GRC Bank's capital strength has remained strong. The core tier 1 capital adequacy ratio and the tier 1 capital adequacy ratio were 10.46% and 10.49% respectively.

Matrix of electronic Internet finance takes shape, to cover the entire country through the Zhujiang Banks network

In the first half of the year, GRC Bank continued to familiarize itself with the new business forms of the financial industry, to cope with the new policies and accelerate the penetration and integration of the transformative business with traditional banking. As such, the Bank has successfully built its electronic Internet financial matrix which includes direct banking, mobile banking, online mall (Sun Market), Internet banking, smart banking (VTM banking) and WeChat banking. This enables it to provide a variety of electronic Internet financial services, such as the cash management business, electronic commercial drafts, corporate settlement cards and corporate intelligent terminal and mobile marketing platform and more.

GRC Bank has continued its efforts in the field of electronic Internet finance and many of its businesses began to generate results during the Period. Direct banking and mobile banking has become the important distribution channels of the Bank. During the Period, with regard to direct banking, the Bank continued to enhance the accessibility and diversification of its platform services, with the number of direct banking clients reaching 610,000, and the transaction volume was about RMB9.724 billion, representing a spectacular increase of 1,063% YoY. As for mobile banking, the Bank launched scan code collection and payment functions in order to provide customers with comprehensive and convenient mobile services. The number of individual customers and corporate customers totaled about 3,440,000 and 12,300 respectively, with overall financial transactions increased by 29% to 5,753,800, while the value of transactions accumulated to RMB136.96 billion, a year-on-year surge of 55%. Among which, the financial transactions of corporate customers reached 67,700 and the accumulated transactions amounted to RMB3.141 billion. Meanwhile, the Bank had engaged in 153 million new-type payment transactions worth RMB112.433 billion, representing an increase of 30% and 60% respectively. Besides, Sun Market, the Bank's online mall, was undergoing healthy growth as it prudently enlarged its scale of business. During the Period, the number of online mall customers was approximately 130,000 while the number of orders increased by 48% to 52,000.

The Bank carried out extensive efforts exploring the local market of Guangzhou while actively implementing a cross-regional development strategy and achieved a national presence by launching Zhujiang County Banks and Zhujiang Financial Leasing Co., Ltd. and investing in rural commercial banks within and outside Guangdong Province. GRC Bank has acted as the main initiating bank of Zhujiang County Bank, which has established 25 Zhujiang County Banks across China, including Zhengzhou Zhujiang Rural Bank Co., Ltd. which, in turn, obtained a business license from the CBRC Henan Office and officially started operation on 16 May, 2018. As at 30 June, 2018, Zhujiang County Banks had aggregate assets of RMB43,807 million and the balance of deposits and loans totaled RMB35,852 million and RMB23,945 million, respectively. In 2014, the Bank had also registered and established Zhujiang Financial Leasing Co., Ltd., a dedicated financial leasing company owned by a rural commercial bank in China. As a pioneer in the cross-regional ownership of rural commercial banks, the Bank has invested in the controlling shares and participated in the restructuring of Hunan Zhuzhou Zhujiang Rural Commercial Bank Co., Ltd., which has commenced operation in December, 2017. As at June 30, 2018, the total assets of Hunan Zhuzhou Zhujiang Rural Commercial Bank Co., Ltd. reached RMB7.584 billion, with the balance of deposits and loans amounting to RMB6.089 billion and RMB1.443 billion respectively.

Looking ahead to the second half of the year, there remain challenges and opportunities at the same time. While focusing on the three tough battles, China is also facing some high-profile macroeconomic issues. These include geopolitics, the Fed's interest rate hike process, Sino-US trade friction and trends, and local crises in specific emerging markets, the trend of oil prices, structural deleveraging and financial risks, real estate market development uncertainties, rapidly falling investment growth, etc. Against the backdrop of so many unfavorable factors, downside risks for China's economy will increase in the second half of the year. In terms of investment, it is expected that the investment growth will remain low and the infrastructure investment growth may bottom out in the second half of the year. Along with the improving profitability of industrial enterprises, manufacturing investment is likely to rise in the second half of the year; under the influence of factors such as financing difficulty and tightening regulation, the investment of the real estate industry development may fall from the record high in the first half of the year. Consumption is expected to rebound slightly and export growth may slow down in the second half of the year. In the second half of the year, the Bank will continue to optimize its assets and liabilities structure and make continuous efforts towards improving its management capability and risk management levels, so as to better serve the real economy, achieve its strategic objectives and complete various business tasks, in striving for outstanding 2018 annual results.

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