2011-10-26

[Shenzhen, China] 　　18:00, October 25 2011

　　Shenzhen Development Bank (SZ Stock Exchange 000001) submitted its performance report for Q3 2011 to SZ Stock Exchange today. Please log in SDB official website www.sdb.com.cn or www.cninfo.com.cn for the whole report.

　　In July 2011, SDB acquired 90.75% of PingAn Bank’s (PAB) shares via non-public offering of shares (NPO), completing an important step of two banks asset restructuring. The press release summarizes statistics in the consolidated statement for Q3 2011 of the Bank (hereinafter called “SDB” or “the Bank”) and its holding company PAB (hereinafter called “the Consolidated”), as well as the Bank’s key financial data and management analysis for the first 3 quarters, with summary of income statement attached.

　　Facing the complex domestic and foreign economic and financial situation, the Consolidated steadily pushes forward business development strategy, achieving healthy and steady development of various businesses, steady growth of interest generating assets, and continuous improvement of non-interest income and fee income. Meantime the structure of assets and liabilities is adjusted to achieve good business performance, mainly:

　　■ For Jan-Sep 2011, the Consolidated net profit is RMB 7.687 billion with a YOY growth of 63%, basic earnings per share is RMB 2.01 with a YOY growth of 38%; among which SDB’s net profit is RMB 7.119 billion with a YOY growth of 51%;
　　■ As of Sep 30 2011, the Consolidated total asset is RMB 1.2072 trillion with a YOY growth of 66%, and market share largely up through stock acquisition; among which SDB’s total asset grows by 28% to RMB 930.5 billion over year beginning; 　
　　■ For Q1-Q3 2011, the Consolidated NIM slightly increases over previous year to 2.56%, among which SDB’s NIM is 2.58% and the Bank’s net fee and commission income largely grows by 71% over the same period of last year;
　　■ For Jan-Sep, the Consolidated cost income ratio is 38.4%, among which that of SDB is 37.2% and overall cost is under effective control;
　　■ As of Sep 30 2011, the Consolidated NPL ratio is 0.43% and provision coverage is 366%; among which SDB’s NPL ratio is 0.46% and provision coverage is 383%, both at a high level in the industry;
　　■ As of Sep 30 2011, the Consolidated CAR and core CAR are 11.46% and 8.38% respectively, both in line with regulatory requirements.

Good YOY growth of profit
　　For the first 3 quarters of 2011, the Bank’s business scale grows well and structure of assets and liabilities is further optimized, interest spread is basically steady, fee business increases largely, overall profitability gets further improved, and net profit reaches RMB 7.119 billion with a YOY growth of 51%. Q3 net profit is RMB 2.388 billion, with YOY and MOM growth of 41% and 2.5% respectively.

Summary of P&L items of SDB for Q1-Q3 2011

　　For Jan-Sep 2011, as size of interest generating asset grows and NIM grows by 9bp to 2.58% over the same period of last year, the Bank’s total net interest income grows by 38% to RMB 15.81 billion over the same period of last year; net fee and commission income grows largely by 71% to RMB 1.96 billion over the same period of last year, % of net fee income in operating income further increases to 10.7%. Operating income grows by 40% to RMB 18.39 billion over the same period of last year.

　　For Jan-Sep 2011, the Bank’s operating expense (excluding business tax) is RMB 6.83 billion with a YOY growth of 24%, mainly due to increase in number of outlets and staffs, growth of business scale, and continuous input for management improvement and IT system. For Jan-Sep 2011, cost income ratio (excluding business tax) is 37.2% with a YOY decrease of 4.6%. Jan-Sep asset impairment provision is RMB 1.039 billion with a YOY growth of 29%.

　　Weighted average ROA (annualized) of the Bank for Q1-Q3 2011 is 1.15%, up by 20bp over 2010 full year actual; weighted average ROE (annualized) is 18.9% with a decrease of 4.4% over 2010 full year actual, due to increase in shares and shareholder’s equity by acquiring 90.75% of PAB shares through NPO in July this year. Basic earnings per share is RMB 1.85 with a YOY growth of 27%. As of Sep 30 2011, the Bank’s total share numbers 5.123 billion.

Solid key advantages, good business performance
　　For the first 3 quarters, the Bank’s assets and liabilities grow well in term of size and the structure gets further optimized. As of Sep 30 2011, the Bank's total assets grows by 28% to RMB 930.5 billion over the end of last year, total ordinary loans (excluding discount) grow by 14% to RMB 443.7 billion, total deposits grow by 12% to RMB 628.6 billion. Retail deposits grow by 27%, with % to total deposits up from 15% to 17%. Due to completion of NPO and profit growth, owner’s equity grows by 109% to RMB 69.4 billion over year-beginning.
　　The Bank's liquidity status continues to be good and RMB liquidity ratio reaches 52.1% by end of Sep 2011, which is higher than the 25% required by regulators. The Bank controls asset liquidity with the ratio and other internal indicators.

Summary of SDB’s Balance Sheet on Sep 30 2011

RMB million

　　The Bank’s corporate business grows steadily during the report period. In Q3, the Bank’s “Online supply chain finance” gets directly connected with China Railway Modern Logistics Management System, which signifies the beginning of real-time data interaction between the first domestic commercial bank supply chain finance system and a logistics monitoring system. By end of Sep 2011, balance of corporate deposit grows by 9% to RMB 520.5 billion over year-beginning; balance of ordinary corporate loan grows by 14% to RMB 307.1 billion over year-beginning; net fee income sees a YOY growth of 64%; trade finance credit balance is RMB 213.6 billion with a growth of 22% over year-beginning. As of Sep 30 2011, the Bank’s trade finance NPL ratio is 0.20%, down by 0.09% over year beginning and still at a low level.

　　As for retail business, the Bank keeps improving customer dependency, develops customer marketing at various levels, allocates resources based on channel, and improves sales capacity. By end of Sep 2011, bank-wide retail deposit balance is RMB 108.1 billion, up by 27% over year-beginning; personal loan balance (excluding CC) is RMB 129.1 billion, up by 14% over year-beginning and most from personal entrepreneur loan; NPL ratio of personal loan is 0.17% and continues to be good; personal precious metal transaction grows by 13.6 times over the same of period of last year, with a YOY increase in custodian fee of 182% in total. The Bank’s WM product balance grows by 297% over the same period of last year, Q1-Q3 total WM income grows by 345% over the same period of last year.

　　In Q3, the Bank’s CC business grows fast with a stable profitability. Quality of new customers is steadily upgrading and all risk indicators are obviously improved. As of Sep 2011, the Bank’s newly issued credit card increases by 42% over the same period of last year, and number of effective cards is 4.94 million with a YOY growth of 22%. Two banks CIF exceeds 10 million for the first time; loan balance is 7.53 billion with a YOY growth of 12%; NPL ratio is 0.71% and down by 0.5% over year-beginning, which is at a low level in the industry. In Q3, the Banks keeps pushing establishment of micro finance business system. By end of Sep 2011, the Bank’s micro lending balance is RMB 39.4 billion, up by 84% over year-beginning and NPL ratio is 0.12%.

Asset quality continues to be optimized and capital replenishment plan is announced
　　In the first three quarters of 2011, as per national macro control policy and regulatory risk reminder, the Bank actively adjusted credit policy, further optimized credit structure, strictly controlled incremental loan risks, sharpened efforts in recovery and disposal of existing NPLs, and intervened in advance into asset protection and risk elimination of problematic loans.

　　As of Sept 30, 2011, NPL balance and NPL ratio of the Bank both dropped compared to the year beginning and the provision coverage of the Bank was raised further: the NPL balance was 2.1bn, down 266mn vs. year beginning; NPL ratio was 0.46%, down 0.12 percentage point vs. year beginning; the provision coverage was 383%, up 111 percentage points vs. year beginning. As of Sept 30 2011, CAR and CCAR of the Bank were 11.08％ and 9.97％ respectively, up 0.89 percentage point and 2.87 percentage points vs. year beginning.

　　In Jul 2011, the Bank issued about 1.638bn shares to Ping An Insurance (Group) Company Of China, Ltd. (PAG) at the price of 17.75 yuan per share via NPO, in exchange for about 7.825bil shares in PAB held by PAG (90.75% of all shares in PAB) and cash of about 2.69bn yuan. At present, SDB holds about 90.75% equity in PAB and PAB has become the subsidiary of SDB; PAG and its subsidiaries hold a total of 2.684bn shares in SDB, representing about 52.38% of all shares in SDB, and SDB has become a subsidiary of PAG. The completion of this deal symbolizes a solid progress of integration of SDB and PAB. For a period of time in the future, SDB and PAB will maintain their status as independent legal entity separately, which will not have any impact on customers and business.

　　In addition, the Bank signed the share subscription agreement with PAG in Aug 2011, according to which the Bank plans to issue no less than 890mn shares but no more than 1.19bn shares to PAG via NPO at a price of 16.81 yuan per share for raising funds of no more than 20bn yuan. This proposal was approved by a general meeting of shareholders of the Bank in Sept 2011, but is still subject to approval of regulators. If the deal goes smoothly, SDB’s CCAR and CAR will be effectively boosted and its capability of risk prevention will be enhanced, which is helpful to further expand its asset/business scale on the sufficient capital basis and realize sustainable profit growth.

Hope for success in the future and actively implement Best Bank Strategy
　　The Bank will actively implement the strategy of Best Bank, continue to persist in prudent business management philosophy, lay a solid foundation for the business, enhance risk management level, strengthen portfolio management, pay attention to fee-based business innovation and pricing management, future improve asset yields and control capital consumption; leverage cross-selling and the platform of integrated finance to gradually improve market share; intensify compliance, audit and operations management to ensure business management is on a healthy and compliance basis overall. In the meantime, the Bank will reply on the integrated finance platform of PAG to expand core value customer base and improve the market share in terms of number of cards and business volume; enhance risk prevention and management capability and improve asset quality; continue to tap the revenue growth potential of value-added business and further increase business profitability.

About SDB
　　Shenzhen Development Bank (SDB), a national bank headquartering in Shenzhen, is the first joint stock company listed on Shenzhen Stock Exchange (SZSE 000001). As of Sept 30, 2011, the Bank’s total assets reached RMB 930.5bn. Through 299 outlets in 22 main cities across China, SDB provides corporate/retail/government customers with various kinds of financial services. At present, Ping An Insurance (Group) Company of China, Ltd. and its subsidiaries hold 2.684bn SDB shares, representing about 52.38% of total shares of SDB after the NPO.

　　Key items on the consolidated balance sheet on Sept 30, 2011:
　　- Total deposits: RMB 832.2 billion
　　- Total loans: RMB 608.3 billion
　　- Total assets: RMB 1207.2 billion

　　Key items on the balance sheet of SDB on Sept 30, 2011:
　　- Total deposits: RMB 628.6 billion
　　- Total loans: RMB 459.7 billion
　　- Total assets: RMB 930.5 billion
 

Summary of income statement of SDB from January – September 2011 [unaudited]

(Except for the data of EPS, the unit for other data is million in RMB)

Summary of income statement of SDB from July – September 2011 [unaudited]

(Except for the data of EPS, the unit for other data is million in RMB)