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ICBC Announces 2010 Results

Industrial and Commercial Bank of China Limited (Stock Code: SH: 601398; HK: 1398) announced its 2010 results on March 30. In accordance with the International Financial Reporting Standards, ICBC's profit before tax was RMB 215.4 billion in 2010, up 28.8% from last year, after-tax profit rose 28.3% year-on-year to RMB 166 billion. Earnings per share and net assets per share were RMB 0.48 and RMB 2.35 respectively, up RMB 0.1 and RMB 0.33 over the end of 2009. Return on average assets and return on weighted average equity rose respectively 0.12 percentage points and 2.64 percentage points from a year earlier, to 1.32% and 22.79%.

Balanced business development and risk controls throughout the year positioned ICBC to move forward. This was reflected in the Bank's steady profitability growth while maintaining its healthy asset quality despite the economic volatility. At the end of 2010, bad loan balance and ratio "both declined" in its eleventh year, shown by the RMB 15.2 billion less in bad loan balance over the end of 2009 and 0.46 percentage point down from the end of 2009 in bad loan ratio to 1.08% .Provision coverage rate has soared 63.8 percentage points over the end of 2009 to reach an impressive 228.2%, an indication that allowance for impairment losses on loans was nearly 2.3-fold of all bad loan balance. This has enhanced the strength of ICBC's risk capabilities and provided solid financial base for the growth.

One market focus is ICBC's loans to local government financing vehicle and property lending. The Bank has maintained good quality of loan assets by executing strict review on every loan before release and taking all necessary measures to stop the potential risks. By the end of 2010, ICBC's bad loan rate on extending credit to local government financing vehicle was a meager 0.3%. Balance and ratio of non-performing loans to real estate developers continued to go down. Ratio of non-performing property loans and personal housing loans were 0.88% and 0.4% respectively.

The outstanding result of ICBC in 2010 particularly at a time when it was concerned with a complex and changing operating environment was largely a result of the Bank's assiduous effort in pushing business transformation, mechanism reform and service innovation. Not only made ICBC maintain its sustained growth, it also enabled ICBC to weather the economic volatility.

First, the continuous effort on asset structure optimization allowed ICBC to push for high profitability growth through lower credit growth, chasing less capital intensive in the path of development. ICBC's annual compound growth rate of loan in 2006-2009 period was only 16.4%, while annual compound growth rate of net profit reached 37.7%. In 2010, ICBC kept steady control over lending. New RMB loans in all domestic branches was RMB 898.1 billion in the year, or a jump of 16.9%, 3 percentage points lower than the average industry growth rate. Ratio of loan to total assets fell to 49.2% at the end of 2010. Percentage of loan interest spread income in business income moved down to 60.6% at the end of 2010. Source of income was much diversified.

In terms of loan recipient and credit structure, last year, ICBC focused on boosting its loan portfolio while maintaining a reasonable credit outlay at all times. There has been a significance increase in the percentage of loans to emerging industries of strategic importance, advanced manufacturing sector, modern service industry, green companies that save energy or reduce emission. By the year-end 2010, ICBC has disbursed more than RMB 500 billion of credit to finance the green economy. Another focus of ICBC was the financial services to small-and-medium corporate segment, over RMB 3 trillion in loans has been extended to small-and-medium enterprises as of the end of 2010, accounting for around half of all ICBC RMB loans in China and an increase of RMB 487.4 billion from the beginning of the year, or 19.3%. Among them, growth of small business loans reached to a tune of 51%, 34.1 percentage points higher than the average growth rate of all ICBC RMB loans in China. In 2010, thanks to the rising consumer spending among the residents, ICBC personal consumer loans shot up 70.7% over the end of previous year.

Second, ICBC pushed for a shift in liability structure to achieve coordinated growth between the deposit business and the wealth management business. In terms of the total deposits, balance of deposit from customers was RMB 11.15 trillion as of the end of 2010, a jump of RMB 1.37 trillion over the end of 2009, or 14.1%. For the third consecutive year new deposits went beyond 1 trillion yuan, ICBC retained its place at the top of world ranking of deposit bank. In terms of deposit structure, percentage of low-cost current deposits rose 1.51 percentage points from the end of 2009, which effectively reduced the cost of interest payment. Meanwhile, ICBC sold RMB 4.02 trillion of independently-developed wealth management products, up 50% on the previous 12 months. The wealth management products of ICBC meet the demand of customers for diversified services, and help drive the healthy growth of ICBC liability business during re-orientation.

In 2010, ICBC's net interest margin (NIM) edged up 0.18 percentage points over the previous year to 2.44%, as a result of the measures taken in optimizing asset/liability structure, enhancement of interest rate management and investment management.

Third, the intermediary business of ICBC, another driver for the Bank's business development, also achieved robust growth. In 2010, ICBC pulled further away from the peers through the launch of innovative products and services. Net fee and commission income rose 32.1% from a year earlier to RMB 72.8 billion, accounting for 19.13% of the Bank's total revenue, up 1.31 percentage points year-on-year. Income structure has been further improved. Among them, RMB 15.5 billion was income generated from investment banking business, leading the peers by wider margin and became one of the important income sources. ICBC was the world's fourth largest credit card issuer with an issuance volume of over 60 million credit cards, over RMB 600 billion of cardholder expenditure volume, more than RMB 90 billion of overdraft from cardholders. ICBC is the No.1 credit card bank in China. ICBC also held top position in cumulative cross-border RMB trade settlements in terms of business volume and market shares, exceeding RMB 150 billion already. In asset custody, ICBC held the largest market share. The asset custody income jumped 53% year-on-year. Net asset under ICBC custody increased 59.2% over the end of 2009 to RMB 2.9 trillion. In precious metal business, ICBC is leading the peers by posting a turnover of 24,400 tons, an increase of 23.6-fold from 2009. Turnover of ICBC electronic banking transactions reached RMB 249 trillion. Ratio of electronic banking transactions to all ICBC transactions moved up 9 percentage points from previous year to 59.1%. Nearly 60% of ICBC transactions went through electronic channel.

Besides, the steady progress in internationalization and integration also contributed to more diversified profitability source and improved service capability. In 2010, 12 overseas branches of ICBC are either newly established or through M&A and consolidation. ICBC has established a global network encompassing 203 overseas subsidiaries located in 28 countries/regions, spreading over five continents worldwide. Nine product and service lines are available in overseas branches, namely, global cash management, bank card, electronic banking, funds clearing, trade finance, asset management, investment banking, professional financing and retail banking. FOVA, a system independently developed by ICBC, has been installed in 90% overseas branches. Branches around the world use one global unified platform for business operation, risk management and information sharing. By the year-end 2010, assets in ICBC overseas subsidiaries rose 45.1% year-on-year to USD 75.73 billion, profit before tax was USD 1.185 billion, a 37.1% jump on the same period a year ago. Meanwhile, ICBC pushed ahead an integrated strategy to drive diversified growth across different market segments. Businesses in non-banking subsidiaries have been moving in an impressive pace and gaining good momentum. ICBC Credit Suisse has been emerged as the largest fund company operated by a bank, and the platform for ICBC Group asset management business. ICBC Leasing is the No.1 leasing company in the country in terms of business scale specializing in aircraft leasing, vessel leasing and large equipment leasing. In 2010, ICBC International achieved new breakthrough in overseas investment banking business by successfully joining two IPOs of global influence- Brazilian Petrobras (world's largest offering) and AIA (world's third largest offering). Besides, ICBC also acquired Fortis Securities' Prime Dealer Services unit to set up ICBC Financial Services LLC, an important step of ICBC to establish its international financial market clearing and custody platform. ICBC acquired AXA-Minmetals to pave the way for the Bank to expand its domestic insurance market.