2011-04-27

[SZ, China]       18:00 Apr 26, 2011

　　Today SDB (SZSE: 000001) submitted 2011 Q1 performance report to SZSE. Please refer to www.sdb.com.cn or www.cninfo.com.cn for the whole text. This press release gives a summary of financial highlights and management analysis attached with simplified P&L for 2011 Q1.
　　The Q1 of 2011 saw sound growth in asset size, steady rise in spread, increase in fee income, further improvement in asset quality, and well enhanced overall profitability, with net profit up 52% YoY to RMB2.402bn. Highlights are as below:
　　■ 2011 Q1 saw net profit RMB2.402bn, up 52% YoY and 55% quarter-on-quarter (QoQ); EPS 0.69, up 35% YoY; annualized average ROE 25.07%.
　　■ Compared with end 2010, total assets increased 11% to 807.6bn by end Q1 of 2011; general loan balance increased 5% to 409.8bn; and total deposits grew 3.5% to 582.7bn.
　　■ NPLs and NPL ratio declined: By end Q1, NPL balance was 2.045bn, down 14% from year beginning; NPL ratio was 0.48%, down 10bps from year beginning; total NPAs recovered in Q1 were about 604mn.
　　■ Provision coverage increased from 272% at end 2010 to 332% at end Q1 of 2011.
　　■ By end Q1, CAR was 10.13% and CCAR 7.14%.
　　■ The bank continued input into IT, HR, process optimization, strategic focus, etc.

Profit realized significant growth on year-on-year basis
　　In 2011 Q1 driven by sound growth in interest-bearing asset size, SDB realized net profit 2.402bn, up 52% YoY and 55% QoQ thanks to good asset & liability structure and pricing management as well as effective cost control.

2011 Q1 P&L in simplified form

　　In Q1, driven by daily average interest-bearing assets growing 28% YoY and spread improving by 26bps to 2.68% YoY, the bank realized net interest income growth by 41% YoY to 5.104bn, up 17% QoQ. Spread improvement mainly attributed to the several times of interest rate rise by PBOC in last year, good asset & liability structure and pricing management as well as improvement in IB margin. Net fee and commission income largely grew 52% YoY to 482mn where WM fee income and agency business fee income realized multifold growth over the same period of last year. Other net operating income increased 46% to 229mn in Q1 mainly thanks to growth in bills price difference yield. Given significant growth in both interest income and non-interest income, the bank realized operating income 5.815bn in 2011 Q1, up 42% YoY.
　　Operating expense (excl. business tax) grew 23% to 2.068bn in Q1, far lower than the growth of net operating income (42%). Operating expense growth was the result of business scale growth as well as continued input into improvement of management and IT system. Cost to income ratio (excl. business tax) was 35.56% in Q1, down 5.69% YoY and 5.28% compared with the whole of last year. PPoP grew 56% YoY and 26% QoQ. Q1 saw remarkable collection and recovery performance and continuous good asset quality. Asset impairment provisions of 241mn were made, up 103% YoY and down 65% QoQ. Profit before tax grew 54% YoY to 3.069bn. Given the effective tax rate 21.7%, net profit after tax grew 52% YoY to 2.402bn.
The annualized weighted average ROE in 2011 Q1 was 25.07%, down 1.65% YoY, mainly due to NPO of 379.6mn new shares in 2010. Basic EPS was RMB0.69, up RMB0.18 YoY or 35%. Its average Return on Total Assets (un- annualized) was 0.31%, a YOY growth of 6 bps. As of March 31 of 2011, the total shares of SDB reached 3.485 bn.

Consolidated key advantages and delivered good growth momentum in various businesses
　　In Q1 of 2011, various businesses of the bank maintained sound growth momentum. Total assets reached 807.6bn by end of the quarter, up 11% over year beginning; total loan balance (incl. discount) was 422.5bn, up 4% over year beginning; general loan increased 21.1bn or 5% to 409.8bn over end of prior year; total deposits grew 3.5% to 582.7bn. The bank maintained a very strong liquidity with the liquidity ratio being 54.03% as of end Q1, far above the regulatory requirement of 25%. Good liquidity was kept thanks to BAU and IB business funds pool management, daily monitoring on fundraising (quick funds) capability within 1-month and other modern liquidity risk management approaches.

Simplified balance sheet

In RMB mn

　　In 2011 Q1 the corporate banking of the bank focused on widening trade finance field, improving corp. electronization, building up petty deposit customers, balancing loan growth and optimizing loan structure. By end Q1 corp. deposit balance was 489.1bn, up 2.4% over year beginning; general corp. loan balance was 284.2bn, up 5.8% over year beginning. Net corp. fee income grew 40% YoY; trade finance credit balance was 193.8bn, up 10.4% over year beginning; and NPL ratio was still at a very low level of 0.22%. In Q1 the online SCF successfully realized connection to business platform of multiple core enterprises with remarkably improved financing and settlement service efficiency. Cash management product functionalities were continuously improved and upgraded with increasing innovation in service.
　　In retail banking, the bank drove deposit growth through marketing activities that improved the positivity of branches in developing deposits and through excellent WM business and basic settlement business. By end Mar of 2011 retail deposit balance recorded 93.6bn, up 10% over year beginning. WM and agency businesses grew rapidly and by end Q1 retail WM product sales reached 65.6bn, up 434% YoY; personal noble metal single-quarter trading volume was 12.8bn, over 20 times that in the same period of last year; insurance and fund agency business scale steadily expanded. CC business grew steadily in Q1 and by end Mar 2011 CIF was 4.24mn cards, up 15% YoY and with the credit card accounts receivable being about 6bn, up 27% YoY and NPL ratio being 2.19%.

Asset quality continued to optimize and capital adequacy kept stable
　　In 2011 Q1 the bank, as per national macro control policy and regulatory risk reminder, actively adjusted credit policy, further optimized credit structure, strictly controlled risks for new loans, enhanced recovery and disposal of existing NPLs, and intervened in advance into asset protection and risk elimination of problematic loans. By Mar 31, 2011 the NPL balance of the bank was 2.045bn, down 322mn or 14% from year beginning; NPL ratio was 0.48%, down 10bps from year beginning. SM loans decreased further to 1.276bn compared with end of last year, accounting for 0.30% of total loans, down 3bps compared with end of last year.
　　In 2011 Q1 the bank recovered total NPAs of 604mn (incl. non-written off NPLs and written-off loans). In the principals of credit assets collected and recovered, 195mn were for written-off loans and 358mn for non-written off NPLs; 99% of recovered credit assets were in cash.
　　As of Mar 31, 2011, thanks to effective management of risk assets and good profitability supporting capital supplementation, CAR of the bank kept at 10.13%, and CCAR 7.14%, up 0.04% over year beginning.

About SDB
　　SDB is the first joint-stock company listed on SZSE (SZSE: 000001) and a national bank headquartered in SZ. By Mar 31, 2011 its total assets reached RMB807.6bn. The bank offers corporate, retail and PS customers multiple financial services through its 293 outlets distributed in 22 cities across the country. Currently PAG and its associated subsidiaries hold 1.045bn shares of SDB in totals, accounting for about 29.99% of total shares of SDB after NPO.
　　Key items of balance sheet as of Mar 31, 2011:
　　　　- Total deposit：582.7bn
　　　　- Total loan：422.5bn
　　　　- Total asset：807.6bn
 

Summary of P&L for Jan-Mar 2011 [Unaudited]

(In RMB mn except for EPS figures that are in RMB）