2011-02-25

[Shenzhen, China] 　　18:00 on February 24, 2011

　　Shenzhen Development Bank (SDB, SZSE 000001) submitted the 2010 Annual Report to SZSE today. In 2010, SDB achieved net profit of RMB 6.28bn, increasing by 25% on a YoY basis, which means a further enhancement of its fundamental profitability. In 2010, SDB kept inputting in the core business fields including supply chain finance, retail business, etc. to further enhance its competitive edge and the asset quality was improved continuously with NPL rate being maintained at 0.58% which is a very low level.

　　Please visit www.cninfo.com.cn to check the full 2010 Annual Report. This press release summarized the highlights in 2010 annual financial data and management analysis with P/L summary being attached. You can visit SDB’s official website www.sdb.com.cn for the full 2010 Annual Report.

　　In 2010, SDB’s asset/liability scale increased steadily with structure being further optimized. Deposit, loan and fee-based business all achieved healthy and good growth and the interest spread was basically flat with that of last year. In addition, SDB’s asset quality was stably maintained at a better level in the industry. Both the NPL amount and NPL rate decreased and the NPL rate was maintained at a very low level. The provision coverage was further enhanced which further strengthened the Bank’s risk resistance capability. Below please find the business highlights:

　　■ In 2010, the total asset, total deposit and common loan (excluding bill discount) all increased by 24%.
　　■ In 2010, the Bank’s NIM was 2.49%, which was flat with that of last year; the Bank achieved net interest income of RMB 15.83bn, increasing by 22% compared with last year; achieved net profit of RMB 6.28bn, increasing by 25% compared with last year.
　　■ In 2010, the Bank achieved good performance in net fee and commission income which reached RMB 1.585bn, increasing by 34% compared with last year and its percentage in operating income increased from 7.8% last year to 8.8%.
　　■ Realized EPS RMB1.91 in 2010, up 18% over 2009.
　　■ NPL ratio by end of 2010 was 0.58％, down 0.1% from year beginning; provision coverage increased to 271.5%, up 109.7% over 2009.
　　■ Collection achieved substantial results with totally RMB2.57bn NPAs recovered in the full year, including RMB2.25bn written-off and non-written-off NPLs.
　　■ In 2010, the Bank successfully issued approx. 380mn new NPO shares to Ping An Life and hence its core capital increased by RMB6.9bn. Plus its own capital accumulation and capital management, the capital adequacy ratio and core capital adequacy ratio of the Bank increased to 10.19% and 7.10% by end of 2010, respectively.
　　■ The Bank continued investment into IT, human resources, network expansion, process reengineering, business strategy, etc to achieve healthy and sustainable growth and forge ahead towards excellence up to a new dimension.

Fundamental profitability witnessed steady growth
Abstract of profit/loss performance in 2010

　　In 2010, the Bank booked 15.83bil Yuan of net interest income in total, which represented an increase of 22% on YoY basis, and the growth in net interest income was mainly a result of growth in interest-earning assets and optimization in asset/liability mix. The full-year net interest margin for 2010 was 2.49%, a slight rise of 2bp versus 2009. The reasons for small rise in NIS included: firstly, in 2009, NIM did not see a big drop mainly because all interest rate cuts were initiated during Sep. to Dec. 2008 and the impact on NIS in 2009 was shown gradually over time; secondly, the two interest rate rises in 2010 were all triggered in Q4, thus the improvement in spread has not been fully reflected in the year. In 2010, net non-interest income of the bank amounted to 2.19bil, representing a YoY increase of 3%, among which net fee and commission income was 1.585bil, up by 34%; other net operating income totaled 610mn Yuan, a reduction of 36% versus prior year mainly due to one-off price spread gain of 440mn Yuan earned after selling of some bonds in 1H 2009 when market interest rate tends to rise. In 2010, the Bank recorded a total of 18.02bn Yuan of operating income, an increase by 19% versus prior year.

　　In 2010, the operating expense of the Bank increased by 17% versus prior year mainly due to growth in staff number and business size and continued resources pooled for purpose of optimization of management process and IT systems. Cost/income ratio (business tax excluded) in the bank was 40.84%, which presented a reduction of 0.92% versus 41.76% in prior year. The Bank accrued 1.49bn of asset impairment provision in 2010, down by 5.5% on YoY basis. The operating profit of the Bank in 2010 increased by 27% on YoY basis to 7.85bn Yuan, and average income tax ratio was 21.4%, up by 2.69% YoY. Its after-tax net profit increased by 25% YoY to 6.28bn Yuan.

　　The weighted average ROE reached 23.22%, down by 3.37% versus prior year. During the reporting period the Bank issued 379.6mn new shares via NPO approach and the value of its net assets hence increased by 6.9bn, upon which the EPS and ROE were diluted. For 2010, EPS of the Bank was 1.91 Yuan, a YoY increase of 0.29 Yuan or 18%. And as of Dec. 31, 2010, the Bank issued 379mn new shares to Ping An Life and increase its total shares to 3.485bn shares.

Advantages of key businesses were consolidated and steady business growth was witnessed

　　In 2010 various businesses of SDB kept a healthy growth momentum. Continuous input into supply chain finance, SME and retail business further strengthened the bank’s competitive edge in key businesses.

　　By end of 2010, steady growth was witnessed with various deposits/loans. Total assets grew 24% to RMB727.6bn compared with end of last year, total loans (including discount) grew 13% to RMB407.4bn, common loans grew 24% to RMB388.7bn, total deposits grew 24% to RMB562.9bn. The bank had sufficient liquidity and by end of 2010 the liquidity ratio was 52.5%, which was far better than the regulatory requirement of 25%. In 2010 the bank opened 2 new sub-branches, one in South China and one in East China. By end of 2010 the bank had 304 outlets in total.

Outline of balance sheet

　　In 2010 SDB paid much attention to providing credit supports to domestic economic development, meanwhile, it focused on good loan quality and supports in SME and trade finance. It kept cautious attitude towards involvement in real estate development loans, project loans and others. Hence, it achieved good but not excess development in corporate general loans. In respect of retail loan business development, SDB insisted on following various policies and guidelines and strictly controlled personal credit investigation and full value of property and tried to properly give pricing based on risks.

　　By the end of 2011, SDB achieved 24% of growth in corporate general loan business versus that in the beginning of the year and obtained 24.5% in corporate loan during the whole year. In 2010, SDB further strengthened its corporate business innovation advantages and built online supply chain finance platform with customer experience, internal process and cooperation between different sectors. It successively built online business cooperation with nearly 60 core enterprises and the number of its online customers exceeds one thousand. Relying on the opportunity of rapid economic development of China, SDB’s trade finance business continued fast development. By the end of the year, Bank’s trade finance balance was up to 175.5bnyuan, increasing 52.9bnyuan (43% of growth rate, hitting the record high) versus previous year. Domestic trade finance business is still the main source of growth. By the end of 2010, credit facility balance was up to 162.7bnyuan, with 41% of growth rate. The number of customers increased 33% versus the end of 2009. With continuously positive turn of import and export, international trade finance credit facility scale increased 5.3bnyuan during the whole year, with 71% of growth rate versus previous year, accounting for 7% of total trade finance credit facility. Trade finance credit facility continued keeping excellent asset quality and NPL ratio of trade finance decreased 8 points versus previous year, keeping 0.29%.

　　SDB took retail customer as the core, improved retail customer operation and fundraising capability and promoted front-line sales model, achieved rapid expansion in the scale of retail valuable customers. Meanwhile, SDN continued deepening sort-out of personal loan business process, fully implemented "outlet leapfrog" project that covers 258 outlets; and its outlet retail sales improves obviously. By the end of 2010 SDB’s retail loan balance grew 23% while retail deposit balance grew 20% and retail net fee income increased 70.5% versus the same period of previous year; retail WM product sales was high up to 100.3bnyuan, indicating 247% of increase versus 2009. Agency fund and insurance emphasized introducing good-quality products and brand development and the sales volume increased 41% and 83% respectively versus 2009.

　　As of the end of reporting period, the CIF of the Bank reached 4.13 mn, YoY 13.5% up. The loan balance reached 6.34 bn, YoY 33.5% up. The NPL balance was 76 mn and NPL rate 1.21%, YoY 47% down. The Bank has successfully launched the first global CC with card-holder’s Chinese name through continuous business innovation, developed real-time dual marketing model based on mobile phone positioning, established industry-leading CC communication platform. SDB CC Center has passed the accreditation of ISO9001 in 2010, 2008 Quality Management System and ISO 14001. The Center was also awarded the Dual Certification of 2004 Environment Management System. It was the first business unit that fully implement and is awarded with Quality and Environment Management System Certification across the Bank and also the 1st domestic CC Center with the above dual certifications.

Assets quality indicator continued to be improved and CAR remained stable.

　　In 2010, credit assets quality of SDB continued to be improved. As of Dec 31 2010, NPL balance of the bank reached 2.37 bil yuan, 77 mil yuan less than the year beginning; NPL rate was 0.58%, 0.1 percentage point lower than the year beginning. Both NPL balance and NPL rate realized decline. The provision coverage was 271.5%, 109.7 percentage points higher than previous year, with risk resistance capability further strengthened. Meanwhile, the bank made outstanding achievements in collections. In the full year, its collection of NPA reached 2.57 bil yuan in total, of which 2.25 bil yuan was written-off and non-written-off NPLs.

　　In 2010, the bank successfully issued 380 mil new shares to Ping An Life Insurance Co., Ltd. (“PA Life”) via NPO, which increased its core capital by 6.9 bil yuan. Plus its own capital accumulation and capital management, CAR and Core CAR of the bank reached 10.19% and 7.10% respectively as of the end of 2010, reaching the regulatory requirement.

　　In 2011, the bank will strengthen its portfolio management, further optimize structure, promote ROA, take proactive actions in ALM, strengthen structure & pricing management, improve portfolio management capability and realize diversified capital utilizations; pay attention to fee-based business innovation & pricing management, promote fee income and improve income structure; in terms of business actions, persist in the key strategy of “focusing on SMEs & trade finance” for Corporate business, meanwhile fully leverage PA’s customer base, sales channel integrated finance platform, remote IT service, etc. to build differentiated competitive edge of Retail business; in terms of risk management, persist in the philosophy of prudent business management, continue to do a good job in credit risk prevention in three key areas including LGFV, real estate and over-productivity so as to ensure assets quality to remain at a good level; further replenish capital, implement prudent ALM policy, realize orderly growth of assets size under the strict capital constraints and strengthen capital management by means of appraisal and limit management.

About SDB
　　SDB is the first joint-stock firm listed on the Shenzhen Stock Exchange (000001 SZSE). As a national bank headquartered in Shenzhen, its total assets reached RMB724.4bn as of December 31, 2010. Through 304 outlets in 20 cities nationwide, SDB provides diversified financial service to its corporate, retail and public sector customers. Currently, Ping An Insurance (Group) Company of China, Ltd. and its related subsidiaries hold 1.045bn shares of SDB, accounting for around 29.99% of SDB post-NPO total equity.

　　Key items on the balance sheet as of December 31, 2010:
　　　　- Total deposit: RMB562.9bn
　　　　- Total loan: RMB407.4bn
　　　　- Total asset: RMB727.6bn

Summary of 2010 income statement (audited)

(The unit is in RMB mn except for the number of per share)